SUBSCRIPTION AGREEMENT

 

 

 

Central Pacific Financial Corp.

220 South King Street

Honolulu, HI 96813

 

Ladies and Gentlemen:

 

The undersigned (the “Investor”) hereby confirms its agreement with you as follows:

 

1. This Subscription Agreement (this “Agreement”) is between Central Pacific Financial Corp., a Hawaii corporation (the “Company”), and the Investor listed on the signature page hereto and is made as of the date of the Company’s acceptance hereof (the “Acceptance Date”).

 

2. The Company is proposing to issue and sell to certain investors in a private offering shares of the Company’s common stock, no par value per share (the “Common Stock” or “Common Shares”), at a purchase price of U.S. $0.50 per share or, following a 1-for-20 reverse stock split to be effected by the Company (the “Reverse Stock Split”), $10 per share (the “Per Sha re Purchase Price”). The Common Shares are being offered only to persons who are accredited investors within the meaning of Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to a private placement exemption from registration under the Securities Act.

 

3. The Company and the Investor agree that, upon the terms and subject to the conditions set forth herein, the Investor will purchase from the Company and the Company will issue and sell to the Investor, the number of Common Shares equal to one of the following as indicated on the signature page hereto:  (i) 4.9% of the Common Shares outstanding at the Closing Date on a basis assuming the issuance of Common Shares in the Other Private Placements and in the TARP Exchange but excluding any issuance of Common Shares pursuant to outstanding Company Options, Company Stock Appreciation Rights and the TARP Warrant (“Pro Forma Basis” ;) (rounded down to the nearest whole share) or (ii) the dollar amount subscribed as indicated on the signature page hereto divided by the Per Share Purchase Price, in each case pursuant to the Terms and Conditions for the Purchase of Common Shares attached hereto as Annex A and incorporated herein by reference as if fully set forth herein. The Common Shares purchased by the Investor will be delivered in certificated form, registered in the Investor’s name and address as set forth below, and will be released by Wells Fargo Bank, National Association, the Company’s transfer agent (the “Transfer Agent”), to the Investor at the Closing (as defined in the Terms and Conditions for the Purchase of Common Shares), or if uncertificated, the Transfer Agent for the Common Shares will register such shares in the name of the Investor and deliver evidence of such registration to the Investor.

 

4. In agreeing to purchase Common Shares pursuant hereto, the Investor is making the representations and warranties set forth in the Terms and Conditions for the Purchase of Common Shares, including a representation and warranty that the Investor does not own Common Shares in excess of specified levels as set forth in Section 2.3(h) and has not taken certain actions regarding a coordinated acquisition as set forth in Section 2.3(k).

 

 Please confirm that the foregoing correctly sets forth the agreement between us by signing in the space provided below for that purpose.

 

Please select one of the following to indicate the Investor’s subscription:

£

4.9% of the Common Shares outstanding at the Closing Date on a Pro Forma Basis (rounded down to the nearest whole share)

£

a subscription amount in U.S. dollars of U.S.$_______________________

Name of Investor:  _______________________

By:  _______________________

Print Name:  _______________________

Title:  _______________________

Mailing Address:  _______________________
_____________________________________

_____________________________________

 

Type of Entity:  _______________________

 

Jurisdiction of Organization:  _______________________

Tax ID No.:  _______________________

Contact Name:  _______________________

Telephone:  _______________________

Facsimile:  _______________________

Email Address:  _______________________

 

Name under which Common Shares should be issued (if different from above):  _______________________

 

Address to which share certificates or statement of ownership should be sent (if different from mailing address above):  _______________________

 

 

Agreed and Accepted as of December __, 2010:
CENTRAL PACIFIC FINANCIAL CORP.
By: ___________________________
Name:         John C. Dean
Title:           Executive Chairman

 

 

 

 

(to be read in conjunction with the entire Agreement)

 

Complete the following items in the Agreement:

 

1. Provide the information regarding the Investor requested on the signature page to the Agreement. The Agreement must be executed by an individual authorized to bind the Investor.

 

2. If the Investor is purchasing Common Shares for more than one investor account, it may either (i) complete a separate Agreement for each such account, in which case a separate wire transfer (or other acceptable forms of payment) must be made by or on behalf of such account for the Common Shares it will purchase and a separate issuance of Common Shares will be made by the Transfer Agent to each account, or (ii) complete a single Agreement for all such accounts, in which case only one wire transfer (or other acceptable forms of payment) need be made for the Common Shares to be purchased for all such accounts (but all such Common Shares will be issued to a single account specified by the Investor) and the information called for on the signature page hereof must be completed for each account.

 

3. Return the signed Agreement to:

 

Sandler O’Neill + Partners, L.P.

Email: ***@***

 

4. Please note that all payments must be made in U.S. dollars by wire transfer of immediately available funds to the account provided to the Investor by the Company at least one (1) Business Day prior to the Closing Date pursuant to Section 1.2(b)(ii) of the attached Terms and Conditions for the Purchase of Common Shares.

 

An executed Agreement or a facsimile transmission thereof must be received by such time on such date as you are advised. The Company reserves all rights to reject any subscription before it is accepted by the Company.

 

 

ARTICLE 1 PURCHASE; CLOSING

1.1

Issuance, Sale and Purchase

1.2

Closing; Deliverables for the Closing; Conditions of the Closing

 

ARTICLE 2 REPRESENTATIONS AND WARRANTIES

2.1

Certain Terms

2.2

Representations and Warranties of the Company

2.3

Representations and Warranties of the Investor

 

ARTICLE 3 COVENANTS

3.1

Conduct of Business Prior to Closing

3.2

Confidentiality

3.3

Avoidance of Control

3.4

Commercially Reasonable Efforts

3.5

Preemptive Rights

3.6

Most Favored Nation

3.7

Transfer Taxes

3.8

Legend

3.9

Reverse Stock Split

3.10

Certain Other Transactions

3.11

Exchange Listing

3.12

Registration Rights

 

ARTICLE 4 TERMINATION

4.1

Termination

4.2

Effects of Termination

 

ARTICLE 5 INDEMNITY 

5.1

Indemnification by the Company

5.2

Indemnification by the Investor

5.3

Notification of Claims

5.4

Indemnification Payment

5.5

Exclusive Remedies

 

ARTICLE 6 MISCELLANEOUS

6.1

Survival

6.2

Other Definitions

6.3

Amendment and Waivers

6.4

Counterparts and Facsimile

6.5

Governing Law

6.6

Jurisdiction

6.7

WAIVER OF JURY TRIAL

6.8

Notices

6.9

Entire Agreement

6.10

Successors and Assigns

6.11

Captions

6.12

Severability

6.13

Third Party Beneficiaries

6.14

Public Announcements

6.15

Specific Performance

6.16

No Recourse

 

APPENDIX I                          Selling Shareholder Questionnaire

Acceptance Date

Subscription Agreement

Action

2.2(f)

Affiliate

6.2(a)

Agency

6.2(b)

Agreement

Subscription Agreement

Agreements

Recitals

Anchorage

Recitals

Anchorage Investment

Recitals

Anchorage Investment Agreement

Recitals

Bank

2.2(a)

Benefit Plans

2.2(v)(i)

BHC Act

2.2(a)

Board of Directors

6.2(c)

Business Combination

6.2(f)(B)

Business Day

6.2(d)

Capital Stock

6.2(e)

Capitalization Date

2.2(c)

Carlyle

Recitals

Carlyle Investment

Recitals

Carlyle Investment Agreement

Recitals

Change in Control

6.2(f)

Closing

1.2(a)

Closing Date

1.2(a)

Code

6.2(g)

Common Shares

Subscription Agreement

Common Stock

Subscription Agreement

Company

Subscription Agreement

Company Employees

2.2(v)(i)

Company Financial Statements

2.2(g)

Company Indemnified Parties

5.2(a)

Company Insurance Policies

2.2(s)

Company Option

2.2(c)

Company Preferred Stock

2.2(c)

Company Reports

2.2(h)

Company Restricted Stock

2.2(c)

Company Specified Representations

6.2(h)

Company Stock Appreciation Right

2.2(c)

Company Subsidiaries

2.2(b)

Company Subsidiary

2.2(b)

Confidentiality Agreement

3.2

Continuing Directors

6.2(i)

control, controlling, controlled by and under common control with

6.2(a)

Controlled Group Liability

6.2(j)

De Minimis Amount

5.1(b)

Deductible

5.1(b)

DFI

2.2(p)

Disclosure Schedule

6.2(k)

EESA	2.2(v)(ix)

Effective Date

3.12(j)(i)

Effectiveness Deadline

3.12(j)(ii)

employee benefit plan

2.2(v)(i)

Environmental Laws

6.2(l)

ERISA

2.2(v)(i)

Exchange Act

2.2(h)

Exchange Agreement

Recitals

FDI Act

2.2(b)

FDIC

2.2(b)

Federal Reserve

2.2(p)

Filing Deadline

3.12(a)(i)

finally determined

5.4

GAAP

6.2(m)

Governmental Consent

6.2(n)

Governmental Entity

6.2(o)

Hazardous Substance

6.2(p)

Holder

3.12(j)(iii)

Indemnified Party

5.3(a)

Indemnifying Party

5.3(a)

Indemnitee

3.12(g)(i)

Insider

2.2(dd)

Insurer

6.2(q)

Intellectual Property Rights

2.2(u)

Interim Financials

2.2(g)

Investment

Recitals

Investment Agreements

Recitals

Investment Manager

2.3(f)

Investor

Subscription Agreement

Investor Indemnified Parties

5.1(a)

Investor Specified Representations

6.2(r)

Investors

Recitals

Knowledge

6.2(s)

Law

2.2(p)

Lead Investor

2.3(k)

Liens

2.2(d)(ii)

Loan Investor

6.2(t)

Losses

6.2(u)

Material Adverse Effect

2.1(a)

Material Contract

2.2(r)

New Security

3.5(a)

New TARP Preferred Stock

Recitals

Non-Qualifying Transaction

6.2(f)(B)

NYSE	1.2(c)(ii)(E)

NYSE Exception Application

2.2(d)(i)

OFAC

2.2(m)

Other Investors

Recitals

Other Private Placements

Recitals

Parent Corporation

6.2(f)(B)

PBGC	2.2(v)(vi)

Per Share Purchase Price

Subscription Agreement

Person

6.2(v)

Placement Agent

2.2(z)

Potential Investor

2.3(k)

Previously Disclosed

2.1(b)

Pro Forma Basis

Subscription Agreement

Purchase Price

1.1

Register, registered and registration

3.12(j)(iv)

Registrable Securities

3.12(j)(v)

Registration Expenses

3.12(j)(vi)

Registration Termination Date

3.12(a)(i)

Regulatory Agreement

2.2(q)

Regulatory Order or Regulatory Orders

2.2(p)

Reverse Stock Split

Subscription Agreement

Rights Offering

Recitals

Rights Plan

2.3(h)

Rule 158, Rule 159A, Rule 405 and Rule 415

3.12(j)(vii)

SEC

2.1(b)

Securities Act

Subscription Agreement

Selling Expenses

3.12(j)(viii)

Shelf Registration Statement

3.12(a)(ii)

Stock Plans

2.2(c)

Subsidiary

6.2(w)

Surviving Corporation

6.2(f)(B)

Suspension Period

3.12(d)

TARP Exchange

Recitals

TARP Preferred Stock

Recitals

TARP Warrant

Recitals

Tax or Taxes

6.2(x)

Tax Return

6.2(y)

Third Party Claim

5.3(a)

Threshold Holder

2.3(h)

Transfer Agent

Subscription Agreement

Treasury

Recitals

Voting Debt

2.2(c)

Voting Securities

6.2(z)

 

 

A. The Investment. The Company intends to issue and sell to the Investor, and the Investor intends to purchase from the Company, on the terms and conditions described herein, the number of Common Shares set forth on such Investor’s signature page hereto at the aggregate purchase price set forth on such signature page (the “Investment”).

 

B. Carlyle Investment. The Company also intends to sell a number of shares of Common Stock specified in the Carlyle Investment Agreement (as defined below) to Carlyle Financial Services Harbor, L.P. (“Carlyle”) pursuant to the Investment Agreement between Carlyle and the Company dated as of November 4, 2010 (the “Carlyle Investment Agreement”), with the closing of such transaction to occur simultaneously with the Closing (the “Carlyle Investment”).

 

C. Anchorage Investment. The Company also intends to sell a number of shares of Common Stock specified in the Anchorage Investment Agreement (as defined below) to ACMO-CPF, LLC ( “Anchorage”) pursuant to the Investment Agreement between Anchorage and the Company dated as of November 4, 2010 (the “Anchorage Investment Agreement” and, together with the Carlyle Investment Agreement, the “Investment Agreements”), with the closing of such transaction to occur simultaneously with the Closing (the “Anchorage Investment”).

 

D. Other Private Placements. The Company also intends to enter into agreements similar to this Agreement with certain other investors (together with Carlyle and Anchorage, the “Other Investors”) and expects to complete sales of Common Shares to them, with the closing of such sales to occur simultaneous with the Closing (together with the Carlyle Investment and the Anchorage Investment, the “Other Private Placements”). The Investor and the Other Investors are hereinafter sometimes collectively referred to as the “Investors”, and this Agreement and the subscription agreements executed by the Other Investors are hereinafter sometimes collectively referred to as the “Agreements.”

 

E. TARP Exchange. The United States Department of Treasury (the “Treasury”) holds (i) 135,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, no par value per share and liquidation preference $1,000 per share (the “TARP Preferred Stock”) and (ii) a warrant, dated January 9, 2009, to purchase 1,585,748 shares of the Common Stock at an exercise price of $12.77 per share (the “TARP Warrant”). On the terms and subject to the conditions to be set forth in an Exchange Agreement to be executed by the Company and the Treasury (the “Exchange Agreement”), the Company intends to exchange the TARP Preferred Stock for a new series of mandatorily convertible preferred stock (the “New TARP Preferred Stock”), which shares the Company shall then convert into Common Shares having an aggregate value (valuing the Common Shares at $0.50 per share) of the sum of (x) 32.5% of the aggregate liquidation preference of the TARP Preferred Stock and (y) 100% of the amount of accrued and unpaid dividends on the TARP Preferred Stock as of the Closing Date, and to amend the TARP Warrant to, among other things, modify the exercise price thereof to $0.50 per share (or , following the Reverse Stock Split, $10 per share) (collectively, the “TARP Exchange”), each to occur simultaneously with the Closing.

 

F. The Rights Offering. Following the Closing, the Company will commence a rights offering (the “Rights Offering”) providing holders of record of the Common Stock as of the close of business on the Business Day immediately preceding the Closing Date with the right to purchase Common Stock at the same price per share paid by the Investor. The rights will be transferable and will provide for the purchase of up to $20,000,000 of Common Stock by such existing shareholders.

 

ARTICLE 1

 

 

1.1 Issuance, Sale and Purchase. On the terms and subject to the conditions set forth herein, the Company agrees to issue and sell to the Investor, and the Investor agrees to purchase from the Company, free and clear of any Liens, a number of Common Shares (including any associated preferred share purchase rights issuable with respect to such Common Shares pursuant to the Rights Plan) equal to one of the following as indicated on the signature page hereto:  (i) 4.9% of the Common Shares outstanding at the Closing Date on a Pro Forma Ba sis (rounded down to the nearest whole share) or (ii) the dollar amount subscribed as indicated on the signature page hereto divided by the Per Share Purchase Price, in each case at a purchase price of $0.50 per share (or, following the Reverse Stock Split, $10 per share) payable by the Investor to the Company (the aggregate purchase price payable pursuant to this Section 1.1, the “Purchase Price”).

 

1.2 Closing; Deliverables for the Closing; Conditions of the Closing.

 

(a) Closing. Unless this Agreement has been terminated pursuant to Article 4, and subject to the satisfaction (or, to the extent permitted, the waiver) of the conditions set forth in Section 1.2(c), the closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Sullivan & Cromwell LLP, located at 1888 Century Park East, Los Angeles, California 90067, or remotely via the electronic or other exchange of documents and signature pages, on a date to be specified by the Company on no less than five Business Days’ notice to the Investor (which date shall be the same date as the date of closing of the Carlyle Investment, the Anchorage Investment and the TARP Exchange), or at such other place or such other date as agreed to in writing by the parties hereto (the “Closing Date”).

 

(b) Closing Deliverables. Subject to the satisfaction or waiver on the Closing Date of the conditions to the Closing in Section 1.2(c) at the Closing, the parties shall make the following deliveries:

 

(i) the Company shall deliver to the Investor one or more certificates evidencing the Common Shares to be purchased pursuant to Section 1.1 registered in the name of the Investor (or if shares of the Company’s capital stock are uncertificated, cause the transfer agent for the Common Shares to register such shares in the name of the Investor and deliver evidence of such registration to the Investor); and

 

(ii) the Investor shall deliver the Purchase Price, by wire transfer of immediately available funds to the account set forth in the Instruction Sheet for Investor provided with this Agreement.

 

(c) Closing Conditions.

 

(i) The obligations of the Investor, on the one hand, and the Company, on the other hand, to consummate the Closing are each subject to the satisfaction or written waiver by the Company and the Investor of the following conditions prior to the Closing:

 

(A) No provision of any Law and no judgment, injunction, order or decree shall prohibit the Closing or shall prohibit or restrict the Investor from owning or voting any Common Shares to be purchased pursuant to this Agreement; and

 

(B) All Governmental Consents required to have been obtained at or prior to the Closing Date in connection with the execution, delivery or performance of this Agreement and the consummation of the transactions contemplated hereby shall have been obtained and shall be in full force and effect.

 

(ii) The obligation of the Investor to consummate the Closing is also subject to the satisfaction or written waiver by the Investor of the following conditions prior to the Closing:

 

(A) The representations and warranties of the Company set forth in this Agreement shall be true and correct in all respects on and as of the date of this Agreement and on and as of the Closing Date as though made on and as of the Closing Date, except where the failure to be true and correct (without regard to any materiality or Material Adverse Effect qualifications contained therein), would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (and except that representations and warranties made as of a specified date shall be true and correct as of such date);

 

(B) The Company shall have performed and complied with, in all material respects, all agreements, covenants and conditions required by this Agreement to be performed by it on or prior to the Closing Date;

 

(C) The Investor shall have received a certificate, dated as of the Closing Date, signed on behalf of the Company by a senior executive officer certifying to the effect that the conditions set forth in Section 1.2(c)(ii)(A) and Section 1.2(c)(ii)(B) have been satisfied on and as of the Closing Date;

 

(D) Since the date of this Agreement, a Material Adverse Effect shall not have occurred and no change or other event shall have occurred that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

 

(E) The Common Shares to be purchased pursuant to this Agreement shall have been authorized for listing on the New York Stock Exchange (the “NYSE”) or such other market on which the Common Shares are then listed or quoted, subject to official notice of issuance;

 

(F) The Company shall have received (or shall receive concurrently with the Closing) gross proceeds from the Other Private Placements in an aggregate amount, together with the Purchase Price, of not less than $325,000,000; and

 

(G) The Company shall have completed the TARP Exchange in accordance in all material respects with the terms and conditions set forth in the Exchange Agreement.

 

(iii) The obligation of the Company to consummate the Closing is also subject to the satisfaction or written waiver by the Company of the following conditions prior to the Closing:

 

(A) The representations and warranties of the Investor set forth in this Agreement shall be true and correct in all respects on and as of the date of this Agreement and on and as of the Closing Date as though made on and as of the Closing Date except where the failure to be true and correct (without regard to any materiality qualifications contained therein) would not materially adversely affect the ability of the Investor to perform its obligations hereunder (and except that (1) representations and warranties made as of a specified date shall be true and correct as of such date and (2) the representations and warranties of the Investor set forth in Sections 2.3(d), 2.3(h) and 2.3(k) shall be true and correct in all respects);

 

(B) The Investor shall have performed and complied with, in all material respects, all agreements, covenants and conditions required by this Agreement to be performed by it on or prior to the Closing Date;

 

(C) The Company shall have received a certificate, dated as of the Closing Date, signed on behalf of the Investor by a duly authorized person certifying to the effect that the conditions set forth in Section 1.2(c)(iii)(A) and Section 1.2(c)(iii)(B) have been satisfied on and as of the Closing Date; and

 

(D) The Investor would not own or control in excess of 4.9% of the outstanding Common Shares (or securities or other instruments that are immediately convertible at the option of the Investor into Common Shares) immediately following the Closing.

 

ARTICLE 2

 

 

2.1 Certain Terms.

 

(a) As used in this Agreement, the term “Material Adverse Effect” means any circumstance, event, change, development or effect that, individually or in the aggregate, would reasonably be expected to (i) result in a material adverse effect on the assets, liabilities, business, financial condition or results of operations of the Company and the Company Subsidiaries, taken as a whole, or (ii) materially impair or delay the ability of the Company or any of the Company Subsidiaries to perform its or their obligations under this Agreement to consummate the Closing or any of the transactions contemplated hereby; provided, however, that in determining whether a Material Adverse Effect has occurred under clause (i), there shall be excluded any effect to the extent resulting from (A) actions or omissions of the Company or any Company Subsidiary expressly required or contemplated by the terms of this Agreement, (B) changes after the date hereof in general economic conditions in the United States, including financial market volatility or downturn, (C) changes after the date hereof affecting generally the industries or markets in which the Company and the Company Subsidiaries operate, (D) acts of war, sabotage or terrorism, military actions or the escalation thereof, or outbreak of hostilities, (E) any changes after the date hereof in applicable Laws or accounting rules or principles, including changes in GAAP, (F) the announcement or pendency of the transactions contemplated by this Agreement, (G) changes in the market price or trading volume of the Common Stock or the Company’s other outstanding securities (but not the underlying causes of such changes) or (H) any failure by the Company or any of the Company Subsidiaries to meet any internal projections or forecasts with regard to the assets, liabilities, business, financial condition or results of operations of the Company and the Company Subsidiaries, taken as a whole (but not the underlying causes of such failure), in each case to the extent that such circumstance, event, change, development or effect referred to in clauses (B), (C), (D) and (E) do not have a disproportionate effect on the Company and the Company Subsidiaries compared to other participants in the industries or markets in which the Company and the Company Subsidiaries operate.

 

(b) As used in this Agreement, the term “Previously Disclosed” (i) with regard to any party, means information set forth on its Disclosure Schedule corresponding or responsive to the provision of this Agreement to which such information relates; provided, however, that if such information is disclosed in such a way as to make its relevance or applicability to another provision of this Agreement reasonably apparent on its face, such information shall be deemed to be responsive to such other provision of this Agreement and (ii) with regard to the Company, includes information publicly disclosed by the Company in (A) the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as filed by it with the Securities and Exchange Commission (the “SEC”), (B) the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010, June 30, 2010 and September 30, 2010 as filed by it with the SEC, (C) the Company’s Definitive Proxy Statement on Schedule 14A, as filed by it with the SEC on March 29, 2010, or (D) any Current Report on Form 8-K filed or furnished by it with the SEC since January 1, 2010, in each case available prior to the date of this Agreement (excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or other statements that are similarly non-specific and are predictive or forward-looking in nature). Notwithstanding anything in this Agreement to the contrary, the mere inclusion of an item in a Disclosure Schedule shall not be deemed an admission that such item represents a material exception or material fact, event or circumstance or that such item has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

2.2 Representations and Warranties of the Company. Except as Previously Disclosed, the Company hereby represents and warrants to the Investor, as of the date of this Agreement and as of the Closing Date (except for the representations and warranties that are as of a specific date which shall be made as of that date) that:

 

(a) Organization and Authority. Each of the Company and the Company Subsidiaries is a corporation or other entity duly organized and validly existing under the laws of the jurisdiction of its incorporation or organization, is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified except where any failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and has the corporate or other organizational power and authority to own its properties and assets and to carry on its business as it is now being conducted. The Company has furnished to the Investor correct and complete copies of the articles of incorporation and bylaws (or similar governing documents) as amended through the date of this Agreement for the Company and Central Pacific Bank (the “Bank”).  The Company is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”).

 

(b) Company Subsidiaries. The Company has Previously Disclosed a true, complete and correct list of all of its subsidiaries as of the date of this Agreement (each, a “Company Subsidiary” and, collectively, the “Company Subsidiaries”). Except for the Company Subsidiaries, the Company does not own beneficially, directly or indirectly, more than 5% of any class of equity securities or similar interests of any corporation, bank, business trust, association or similar organization, and is not, directly or indirectly, a partner in any partnership or party to any joint venture. The Company owns, directly or indirectly, all of its interests in each Company Subsidiary free and clear of any and all Liens. The deposit accounts of the Bank are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the fullest extent permitted by the Federal Deposit Insurance Act, as amended (the “FDI Act”), and the rules and regulations of the FDIC thereunder, and all premiums and assessments required to be paid in connection therewith have been paid when due (after giving effect to any applicable extensions). The Company beneficially owns all of the outstanding capital securities of, and has sole control of, the Bank.

 

(c) Capitalization. As of the date hereof, the authorized Capital Stock of the Company consists of (i) 185,000,000 shares of Common Stock and (ii) 1,000,000 shares of preferred stock, no par value (including shares of TARP Preferred Stock) (the “Company Preferred Stock”). As of the close of business on October 29, 2010 (the “Capitalization Date”), there were 30,364,809 shares of Common Stock outstanding and 135,000 shares of TARP Preferred Stock an d no other Company Preferred Stock outstanding. In addition, the TARP Warrant allows for the purchase of 1,585,748 shares of Common Stock by the Treasury at an exercise price of $12.77 per share. Since the Capitalization Date and through the date of this Agreement, except in connection with this Agreement and the transactions contemplated hereby, including the Investment, the Other Private Placements, the TARP Exchange, and the Rights Offering, the Company has not (i) issued or authorized the issuance of any shares of Common Stock or Company Preferred Stock, or any securities convertible into or exchangeable or exercisable for shares of Common Stock or Company Preferred Stock, (ii) reserved for issuance any shares of Common Stock or Company Preferred Stock or (iii) repurchased or redeemed, or authorized the repurchase or redemption of, any shares of Common Stock or Company Preferred Stock. As of the close of business on the Capitalization Date, other than in respect of the TARP Warrant and awa rds outstanding under or pursuant to the Benefit Plans in respect of which an aggregate of 2,875,729 shares of Common Stock have been reserved for issuance, no shares of Common Stock or Company Preferred Stock were reserved for issuance. All of the issued and outstanding shares of Common Stock and Company Preferred Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. None of the outstanding shares of Capital Stock or other securities of the Company or any of the Company Subsidiaries was issued, sold or offered by the Company or any Company Subsidiary in violation of the Securities Act or the securities or blue sky laws of any state or jurisdiction, or any applicable securities laws in the relevant jurisdictions outside of the United States. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which the shareholders of the Company may vote (“Voting Debt”) are issued and outstanding. Section 2.2(c) of the Disclosure Schedule sets forth the following information with respect to each outstanding option to purchase shares of Common Stock (a “Company Option”), stock appreciation right to receive shares of Common Stock (a “Company Stock Appreciation Right”) or right (or unit) to acquire shares of Common Stock (“Company Restricted Stock”) under the Central Pacific Financial Corp. 1997 Stock Option Plan, as amended and the Central Pacific Financial Corp. 2004 Stock Compensation Plan, as amended (the “Stock Plans”): (A) the name of each holder of Company Options, Company Stock Appreciation Rights or Company Restricted Stock; (B) the number of shares of Common Stock subject to such Company Option, Company Stock Appreciation Right or the number of shares of Company Restricted Stock held by such holder, and as applicable for each Company Option, Company Stock Appreciation Rights or Company Restricted Stock, the date of grant, exercise or reference price, number of shares vested or not otherwise subject to repurchase rights, reacquisition rights or other applicable restrictions as of the date of this Agreement, vesting schedule or schedule providing for the lapse of repurchase rights, reacquisition rights or other applicable restrictions, the type of Company Option and the Stock Plan or other plan under which such Company Options, Company Stock Appreciation Rights or shares of Company Restricted Stock were granted or purchased; and (C) whether, in the case of a Company Option, such Company O ption is an Incentive Stock Option (within the meaning of the Code). The Company has made available to the Investor copies of each form of stock option agreement, stock appreciation rights agreement or stock award agreement evidencing outstanding Company Options, Company Stock Appreciation Rights or Company Restricted Stock, as applicable, and has also delivered any other stock option agreements, stock appreciation rights agreement or stock award agreements to the extent there are variations from the applicable form of agreement, specifically identifying the holder(s) to whom such variant forms apply. As of the date of this Agreement, except for (x) the outstanding Company Options and Company Stock Appreciation Rights described in this Section 2.2(c) and listed on Section 2.2(c) of the Disclosure Schedule, (y) as set forth elsewhere in this Section 2.2(c) and (z) the Carlyle Investment Agreement, the Anchorage Investment Agreement, the other Agreements and the Exchange Agreement, the Company does not ha ve and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of, or securities or rights convertible into or exchangeable or exercisable for, any shares of Common Stock or Company Preferred Stock or any other equity securities of the Company or Voting Debt or any securities representing the right to purchase or otherwise receive any shares of Capital Stock of the Company (including any rights plan or agreement).  Each Company Option and Company Stock Appreciation Right under the Stock Plans (i) was granted in compliance with all applicable Laws and all of the terms and conditions of the Stock Plans pursuant to which it was issued, (ii) has an exercise or reference price equal to or greater than the fair market value of a share of Common Stock at the close of business on the date of such grant, (iii) has a grant date identical to or following the date on which the Board of Directors or compensation com mittee actually awarded such Company Option or Company Stock Appreciation Right, (iv) otherwise is exempt from or complies with Section 409A of the Code so that the recipient of such Company Option or Company Stock Appreciation Right is not subject to the additional taxes and interest pursuant to Section 409A of the Code and (v) except for disqualifying dispositions, qualifies for the tax and accounting treatment afforded to such Company Option and Company Stock Appreciation Right in the Company’s Tax Returns and the Company’s financial statements, respectively.

 

(d) Authorization; No Conflicts; Shareholder Approval.

 

(i) The Company has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  Except for the approval by the NYSE of the Company’s application pursuant to Section 312.05 of the NYSE Listed Company Manual to issue Common Shares in the Investment, the Other Private Placements and the TARP Exchange without prior shareholder approval (the “NYSE Exception Application”), which approval has been received, the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no further approval or authorization is required on the part of the Company or its shareholders.  The Board of Directors has unanimously approved the transactions contemplated by this Agreement, including the Investment, the Other Private Placements, the TARP Exchange and the Rights Offering. No other corporate proceedings are necessary for the execution and delivery by the Company of this Agreement, the performance by it of its obligations hereunder or the consummation by it of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery by the Investor, is the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability re lating to or affecting creditors’ rights or by general equity principles (whether applied in equity or at law).

 

(ii) Neither the execution and delivery by the Company of this Agreement nor the consummation of the transactions contemplated hereby, nor compliance by the Company with any of the provisions hereof, will (A) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or result in the loss of any benefit or creation of any right on the part of any third party under, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of any liens, charges, adverse rights or claims, pledges, covenants, title defects, securit y interests and other encumbrances of any kind (“Liens”) upon any of the properties or assets of the Company or any Company Subsidiary, under any of the terms, conditions or provisions of (1) the articles of incorporation or bylaws (or similar governing documents) of the Company and each Company Subsidiary or (2) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Company or any of the Company Subsidiaries is a party or by which it may be bound, or to which the Company or any of the Company Subsidiaries, or any of the properties or assets of the Company or any of the Company Subsidiaries may be subject, or (B) violate any Law applicable to the Company or any of the Company Subsidiaries or any of their respective properties or assets except in the case of clauses (A)(2) and (B) for such violations, conflicts and breaches as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(e) Governmental Consents. No Governmental Consents are necessary for the execution and delivery of this Agreement or for the sale by the Company of the Common Shares to the Investor pursuant to this Agreement.

 

(f) Litigation and Other Proceedings. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there is no pending or, to the Knowledge of the Company, threatened claim, action, suit, arbitration, complaint, charge or investigation or proceeding (each an “Action”) against the Company or any Company Subsidiary or any of its assets, rights or properties, nor is the Company or any Company Subsidiary a party or named as subject to the provisions of any order, writ, injunction, settlement, judgment or decre e of any court, arbitrator or government agency, or instrumentality.  There has not been, and to the Knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company or any current or former director or officer of the Company in his or her capacity as such.

 

(g) Financial Statements. Each of the consolidated balance sheets of the Company and the Company Subsidiaries and the related consolidated statements of income, operations, changes in shareholders’ equity and cash flows, together with the notes thereto, for the last five (5) years included in any Company Report filed with the SEC and the unaudited consolidated balance sheets of the Company and the Company Subsidiaries as of September 30, 2010 and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the period ending September 30, 2010, together with the notes thereto, included in the Co mpany’s Form 10-Q filed with the SEC (the “Interim Financials” and, collectively, the “Company Financial Statements”), (i) have been prepared from, and are in accordance with, the books and records of the Company and the Company Subsidiaries, (ii) complied, as of their respective date of such filing, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, (iii) have been prepared in accordance with GAAP applied on a consistent basis and (iv) present fairly in all material respects the consolidated financial position of the Company and the Company Subsidiaries at the dates and the consolidated results of operations, changes in shareholders’ equity and cash flows of the Company and the Company Subsidiaries for the periods st ated therein (subject to the absence of notes and normal and recurring year-end audit adjustments not material to the financial condition of the Company and the Company Subsidiaries in the case of the Interim Financials).

 

(h) Reports. Since December 31, 2007, the Company and each Company Subsidiary have filed all material reports, registrations, documents, filings, statements and submissions, together with any required amendments thereto, that they were required to file with any Governmental Entity (the foregoing, collectively, the “Company Reports”) and have paid all material fees and assessments due and payable in connection therewith.  As of their respective filing dates, the Company Reports complied in all material respects with all statutes and applicable rules and regulations of the applicable Governmental Entities, as the case may be. As of the date of this Agreement, there are no outstanding comments from the SEC or any other Governmental Entity with respect to any Company Report that were enumerated within such report or otherwise were the subject of written correspondence with respect thereto. The Company Reports, including the documents incorporated by reference in each of them, each contained all the information required to be included in it and, when it was filed and, as of the date of each such Company Report filed with or furnished to the SEC, or if amended prior to the date of this Agreement, as of the date of such amendment, did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made in it, in light of the circumstances under which they were made, not misleading and complied as to form in all material respects with the applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). No executive officer of the Company has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002. Copies of all of the Company Reports not otherwise publicly filed have, to the extent allowed by applicable Law, been made available to the Investor by the Company.

 

(i) Internal Accounting and Disclosure Controls. The records, systems, controls, data and information of the Company and the Company Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Company or the Company Subsidiaries or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the system of intern al accounting controls described below in this Section 2.2(i). The Company (i) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the chief executive officer or executive chairman and the chief financial officer of the Company by others within those entities, and (ii) has disclosed, based on its most recent evaluation prior to the date of this Agreement, to the Company’s outside auditors and the audit committee of the Board of Directors (A) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information, and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. As of the date of this Agreement, the Company has no Knowledge of any reason that its outside auditors and its chief executive officer or executive chairman and chief financial officer shall not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, without qualification, when next due. Since December 31, 2007, (1) neither the Company nor any Company Subsidiary nor, to the Knowledge of the Company, any director, officer, employee, auditor, accountant or representative of the Company or any Company Subsidiary has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any Company Subsidiary or their respect ive internal accounting controls, including any material complaint, allegation, assertion or claim that the Company or any Company Subsidiary has engaged in questionable accounting or auditing practices, and (2) no attorney representing the Company or any Company Subsidiary, whether or not employed by the Company or any Company Subsidiary, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Board of Directors or any committee thereof or to any director or officer of the Company.

 

(j) Risk Management Instruments. All material derivative instruments, including swaps, caps, floors and option agreements entered into for the Company’s or any of the Company Subsidiaries’ own account were entered into (i) only in the ordinary course of business, (ii) in accordance with prudent practices and in all material respects with all applicable Laws and (iii) with counterparties believed to be financially responsible at the time; and each of them constitutes the valid and legally binding obligation of the Company or any Company Subsidiary, as applicable, enforceable in accordance with its terms. Neither the Company nor, to the Know ledge of the Company, any other party thereto is in breach of any of its material obligations under any such agreement or arrangement.

 

(k) No Undisclosed Liabilities. There are no liabilities of the Company or any of the Company Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, except for (i) liabilities adequately reflected or reserved against in accordance with GAAP in the Company’s audited balance sheet as of December 31, 2009 and (ii) liabilities that have arisen in the ordinary and usual course of business and consistent with past practice since December 31, 2009 and that have not or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(l) Mortgage Banking Business. The Company and each of the Company Subsidiaries have complied with, and all documentation in connection with the origination, processing, underwriting and credit approval of any mortgage loan originated, purchased or serviced by the Company or any Company Subsidiary has satisfied, in all material respects (i) all Laws with respect to the origination, insuring, purchase, sale, pooling, servicing, subservicing, or filing of claims in connection with mortgage loans, including all Laws relating to real estate settlement procedures, consumer credit protection, truth in lending laws, usury limitations, fair housing, tran sfers of servicing, collection practices, equal credit opportunity and adjustable rate mortgages, (ii) the responsibilities and obligations relating to mortgage loans set forth in any agreement between the Company and any Agency, Loan Investor or Insurer, (iii) the applicable rules, regulations, guidelines, handbooks and other requirements of any Agency, Loan Investor or Insurer and (iv) the terms and provisions of any mortgage or other collateral documents and other loan documents with respect to each mortgage loan. No Agency, Loan Investor or Insurer has (x) claimed in writing that the Company or any of the Company Subsidiaries has violated or has not complied with the applicable underwriting standards with respect to mortgage loans sold by the Company or any of the Company Subsidiaries to a Loan Investor or Agency, or with respect to any sale of mortgage servicing rights to a Loan Investor, (y) imposed in writing material restrictions on the activities (including commitment author ity) of the Company or any of the Company Subsidiaries or (z) indicated in writing to the Company or any of the Company Subsidiaries that it has terminated or intends to terminate its relationship with the Company or any of the Company Subsidiaries for poor performance, poor loan quality or concern with respect to the Company’s or any of the Company Subsidiaries’ compliance with Laws.

 

(m) Bank Secrecy Act; Anti-Money Laundering; OFAC; and Customer Information. The Company is not aware of, has not been advised of, and, to the Knowledge of the Company, has no reason to believe that any facts or circumstances exist that would cause it or any Company Subsidiary to be deemed to be not operating in compliance, in all material respects, with the Bank Secrecy Act of 1970, as amended, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (also known as the USA PATRIOT Act), any order or regulation issued by the U.S. Department of the Treasury’s Office of Foreign A ssets Control (“OFAC”), or any other applicable anti-money laundering or anti-terrorist-financing statute, rule or regulation.  The Company is not aware of any facts or circumstances that would cause it to believe that any nonpublic customer information has been disclosed to or accessed by an unauthorized third party in a manner that would cause it to undertake any material remedial action.  The Company and each of the Company Subsidiaries have adopted and implemented an anti-money laundering program that contains adequate and appropriate customer identification verification procedures that comply with the USA PATRIOT Act and such anti-money laundering program meets the requirements in all material respects of Section 352 of the USA PATRIOT Act and the regulations thereunder, and they have complied in all respects with any requirements to file reports and other necessary documents as required b y the USA PATRIOT Act and the regulations thereunder. The Company will not knowingly directly or indirectly use the proceeds of the sale of the Common Shares pursuant to transactions contemplated by this Agreement, or lend, contribute or otherwise make available such proceeds to any Company Subsidiary, joint venture partner or other Person, towards any sales or operations in any country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.

 

(n) Certain Payments. Neither the Company nor any of the Company Subsidiaries, nor any directors, officers, nor to the Knowledge of the Company, employees or any of their Affiliates or any other Person who to the Knowledge of the Company is associated with or acting on behalf of the Company or any of the Company Subsidiaries has directly or indirectly (i) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment in material violation of any Law to any Person, private or public, regardless of form, whether in money, property, or services (A) to obtain favorable treatment in securing business for the Company or any of the Company Subsidiaries, (B) to pay for favorable treatment for business secured by the Company or any of the Company Subsidiaries, or (C) to obtain special concessions or for special concessions already obtained, for or in respect of the Company or any of the Company Subsidiaries or (ii) established or maintained any fund or asset with respect to the Company or any of the Company Subsidiaries that was required by Law or GAAP to have been recorded and was not recorded in the books and records of the Company or any of the Company Subsidiaries.

 

(o) Absence of Certain Changes. Since December 31, 2009 and except as Previously Disclosed, (i) the Company and the Company Subsidiaries have conducted their respective businesses in all material respects in the ordinary and usual course of business consistent with past practices, (ii) none of the Company or any Company Subsidiary has issued any securities (other than Common Stock and Company Options and other equity-based awards issued prior to the date of this Agreement pursuant to Benefit Plans and reflected in the numbers set forth in Section 2.2(c)) or incurred any liability or obligation, direct or contingent, for borrowed money, except borrowin gs in the ordinary course of business, (iii) the Company has not made or declared any distribution in cash or in kind to its shareholders or issued or repurchased any shares of its Capital Stock (other than pursuant to the Rights Plan or the Rights Offering), (iv) through (and including) the date of this Agreement, no fact, event, change, condition, development, circumstance or effect has occurred that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (v) no material default (or event which, with notice or lapse of time, or both, would constitute a material default) exists on the part of the Company or any Company Subsidiary or, to the Knowledge of the Company, on the part of any other party, in the due performance and observance of any term, covenant or condition of any agreement to which the Company or any Company Subsidiary is a party and which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(p) Compliance with Laws. The Company and each Company Subsidiary have all material permits, licenses, franchises, authorizations, orders and approvals of, and have made all filings, applications and registrations with, Governmental Entities that are required in order to permit them to own or lease their properties and assets and to carry on their business as presently conducted and that are material to the business of the Company and each Company Subsidiary. The Company and each Company Subsidiary have complied in all material respects and (i) are not in default or violation in any respect of, (ii) are not under investigation with respect t o, and (iii) have not been threatened to be charged with or given notice of any material violation of, any applicable material domestic (federal, state or local) or foreign law, statute, ordinance, license, rule, regulation, policy or guideline, order, demand, writ, injunction, decree or judgment of any Governmental Entity (each, a “Law”), other than such noncompliance, defaults or violations that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Except for statutory or regulatory restrictions of general application, restrictions applicable to recipients of funds under the Troubled Asset Relief Program, the written agreement of the Company with the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Hawaii Division of Financial Instit utions (the “DFI”) entered into on July 2, 2010, and the Consent Order between the Bank and the FDIC and the DFI entered into on December 8, 2009 (each, individually a “Regulatory Order” and, together, the “Regulatory Orders”), no Governmental Entity has placed any material restriction on the business or properties of the Company or any of the Company Subsidiaries.  As of the date hereof, the Bank has a Community Reinvestment Act rating of “satisfactory” or better.

 

(q) Agreements with Regulatory Agencies. Except for the Regulatory Orders, (i) the Company and the Company Subsidiaries (A) are not subject to any cease-and-desist or other similar order or enforcement action issued by, (B) are not a party to any written agreement, consent agreement or memorandum of understanding with, (C) are not a party to any commitment letter or similar undertaking to, and (D) are not subject to any capital directive by, and (ii) since December 31, 2009, each of the Company and the Company Subsidiaries has not adopted any board resolutions at the request of, any Governmental Entity that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends, its credit, risk management or compliance policies, its internal controls, its management or its operations or business (each item in this sentence, a “Regulatory Agreement”), nor has the Company nor any of the Company Subsidiaries been advised since December 31, 2009 by any Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such Regulatory Agreement. Except as set forth in the Disclosure Schedule, the Company and the Company Subsidiaries are in compliance in all material respects with each Regulatory Agreement to which they are party or subject, and the Company and the Company Subsidiaries have not received any notice from any Governmental Entity indicating that either the Compan y or any of the Company Subsidiaries is not in compliance in all material respects with any such Regulatory Agreement.

 

(r) Contracts. The Company has Previously Disclosed or provided (by hard copy, electronic data room or otherwise) to the Investor or its representatives true, correct and complete copies of each of the following to which the Company or any Company Subsidiary is a party (each, a “Material Contract”):

 

(i) any contract or agreement relating to indebtedness for borrowed money, letters of credit, capital lease obligations, obligations secured by a Lien or interest rate or currency hedging agreements (including guarantees in respect of any of the foregoing, but in any event excluding trade payables, securities transactions and brokerage agreements arising in the ordinary course of business, intercompany indebtedness and immaterial leases for telephones, copy machines, facsimile machines and other office equipment) in excess of $500,000, except for those issued in the ordinary course of business;

 

(ii) any contract or agreement that constitutes a collective bargaining or other arrangement with any labor union;

 

(iii) any contract or agreement that is a “material contract” within the meaning of Item 601(b)(10) of Regulation S-K;

 

(iv) any lease or agreement under which the Company or any of the Company Subsidiaries is lessee of, or holds or operates, any property owned by any other Person with annual rent payments in excess of $500,000;

 

(v) any lease or agreement under which the Company or any of the Company Subsidiaries is lessor of, or permits any Person to hold or operate, any property owned or controlled by the Company or any of the Company Subsidiaries;

 

(vi) any contract or agreement limiting, in any material respect, the ability of the Company or any of the Company Subsidiaries to engage in any line of business or to compete, whether by restricting territories, customers or otherwise, or in any other material respect, with any Person;

 

(vii) any settlement, conciliation or similar agreement, the performance of which will involve payment after the Closing Date of consideration in excess of $500,000;

 

(viii) any contract or agreement that relates to Intellectual Property Rights (other than a license granted to the Company for commercially available software licensed on standard terms with a total replacement cost of less than $500,000);

 

(ix) any contract or agreement that concerns the sale or acquisition of any material portion of the Company’s business;

 

(x) any alliance, cooperation, joint venture, shareholders, partnership or similar agreement involving a sharing of profits or losses relating to the Company or any Company Subsidiary;

 

(xi) any contract or agreement involving annual payments in excess of $500,000 that cannot be cancelled by the Company or a Company Subsidiary without penalty on not more than 90 days’ notice;

 

(xii) any material hedge, collar, option, forward purchasing, swap, derivative or similar agreement, understanding or undertaking;

 

(xiii) any contract or agreement with respect to the employment or service of any current or former directors, officers, employees or consultants of the Company or any of the Company Subsidiaries other than, with respect to non-executive employees and consultants, in the ordinary course of business;

 

(xiv) any contract or agreement containing any (x) non-competition or exclusive dealing obligations or other obligation which purports to limit or restrict in any respect the ability of the Company or any Company Subsidiary to solicit customers or the manner in which, or the localities in which, all or any portion of the business of the Company or the Company Subsidiaries is or can be conducted, or (y) right of first refusal or right of first offer or similar right or that limits or purports to limit the ability of the Company or any of the Company Subsidiaries to own, operate, sell, transfer, pledge or otherwise dispose of any material assets or business; and

 

(xv) any material contract or agreement that would require any consent or approval of a counterparty as a result of the consummation of the transactions contemplated by this Agreement.

 

Each Material Contract (A) is legal, valid and binding on the Company and the Company Subsidiaries which are a party to such contract, (B) is in full force and effect and enforceable in accordance with its terms and (C) will continue to be legal, valid, binding, enforceable, and in full force and effect in all material respects following the consummation of the transactions contemplated by this Agreement. Neither the Company nor any of the Company Subsidiaries, nor to the Knowledge of the Company, any other party thereto is in material violation or default under any Material Contract.  No benefits under any Material Contract will be increased, and no vesting of any benefits under any Material Contract will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement, nor will the val ue of any of the benefits under any Material Contract be calculated on the basis of any of the transactions contemplated by this Agreement.  The Company and the Company Subsidiaries, and to the Knowledge of the Company, each of the other parties thereto, have performed in all material respects all material obligations required to be performed by them under each Material Contract, and to the Knowledge of the Company, no event has occurred that with notice or lapse of time would constitute a material breach or default or permit termination, modification, or acceleration, under the Material Contracts.

 

(s) Insurance. The Company and each of the Company Subsidiaries are presently insured, and have been insured for at least the past two years, for reasonable amounts with financially sound and reputable insurance companies against such risks as companies engaged in a similar business would, in accordance with good business practice, customarily be insured.  All of the policies, bonds and other arrangements providing for the foregoing (the “Company Insurance Policies”) are in full force and effect, the premiums due and payable thereon have been or w ill be timely paid through the Closing Date, and there is no material breach or default (and no condition exists or event has occurred that, with the giving of notice or lapse of time or both, would constitute such a material breach or default) by the Company or any of the Company Subsidiaries under any of the Company Insurance Policies or, to the Knowledge of the Company, by any other party to the Company Insurance Policies.  Neither the Company nor any of the Company Subsidiaries has received any written notice of cancellation or non-renewal of any Company Insurance Policy nor, to the Knowledge of the Company, is the termination of any such policies threatened in writing by the insurer, and there is no material claim for coverage by the Company, or any of the Company Subsidiaries, pending under any of such Company Insurance Policies as to which coverage has been denied or disputed by the underwriters of such Company Insurance Policies or in respect of which such underwriters have reserved their r ights.

 

(t) Title. The Company and the Company Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and valid title to all material personal property owned by them, in each case free and clear of all Liens, except for Liens which do not materially affect the value of such property or do not interfere with the use made and proposed to be made of such property by the Company or any Company Subsidiary. Any real property and facilities held under lease by the Company or the Company Subsidiaries are valid, subsisting and enforceable leases with such exceptions that are not material and do not interfere with the use made and proposed to be made of such property and facilities by the Company or the Company Subsidiaries.

 

(u) Intellectual Property Rights. The Company and the Company Subsidiaries own or possess adequate rights or licenses to use all trademarks, service marks and all applications and registrations therefor, trade names, patents, patent rights, copyrights, original works of authorship, inventions, trade secrets and other intellectual property rights (“Intellectual Property Rights”) used in their businesses as conducted on the date of this Agreement, except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.& #160; To the Knowledge of the Company, no product or service of the Company or the Company Subsidiaries infringes the Intellectual Property Rights of others, except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the Company and the Company Subsidiaries have not received notice of any claim being made or brought, or, to the Knowledge of the Company, being threatened, against the Company or any of the Company Subsidiaries regarding (i) their Intellectual Property Rights, or (ii) that the products or services of the Company or the Company Subsidiaries infringe the Intellectual Property Rights of others. To the Knowledge of the Company, there are no facts or circumstances that would reasonably be expected to give rise to any of the claims in the preceding sentence.  The computers, computer software, firmware, middlewar e, servers, workstations, routers, hubs, switches, data communications lines, and all other information technology equipment, and all associated documentation used in the business of the Company and the Company Subsidiaries operate and perform in all material respects in accordance with their documentation and functional specifications and otherwise as required in connection with the business of the Company and the Company Subsidiaries. The Company and the Company Subsidiaries have implemented reasonable backup and disaster recovery technology consistent with industry practices. The Company and the Company Subsidiaries take reasonable measures, directly or indirectly, to ensure the confidentiality, privacy and security of customer, employee and other confidential information.

 

(v) Employee Benefits.

 

(i) Section 2.2(v) of the Disclosure Schedule sets forth a correct and complete list of each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including, without limitation, multiemployer plans within the meaning of Section 3(37) of ERISA), and all stock purchase, stock option, severance, employment, change-in-control, fringe benefit, bonus, incentive, deferred compensation and all other employee benefit plans, agreements, programs, policies or other arrange ments, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise), whether formal or informal, oral or written, under which (A) any current or former employee or director of the Company or any of the Company Subsidiaries (the “Company Employees”) has any present or future right to benefits and which are contributed to, sponsored by or maintained by the Company or any of the Company Subsidiaries or (B) the Company or any Company Subsidiary has had or has any present or future liability. All such plans, agreements, programs, policies and arrangements shall be collectively referred to as the “Benefit Plans.”

 

(ii) With respect to each Benefit Plan, the Company has provided to the Investor a current, correct and complete copy (or, to the extent no such copy exists, an accurate description) thereof and, to the extent applicable: (A) any related trust agreement or other funding instrument; (B) the most recent determination letter, if applicable; (C) any summary plan description and other written communications, other than individual pension benefit statements provided in accordance with Section 105 of ERISA, (or a description of any oral communications) by the Company and the Company Subsidiaries to the Company Employees or other beneficiaries concerning the extent of the benefits provided under a Benefit Plan; (D) a summary of any proposed material amendments or material changes anticipated to be made to the Benefit Plans at any time within the twelve months immediately following the date hereof; and (E) for the three most recent years (x) the Form 5500 and attached schedules, (y) audited financial statements and (z) actuarial valuation reports.

 

(iii) (A) Each Benefit Plan has been established and administered in all material respects in accordance with its terms, and in compliance with the applicable provisions of ERISA, the Code and other Laws; (B) each Benefit Plan which is intended to be qualified within the meaning of Section 401(a) of the Code has received a favorable determination letter as to its qualification, and nothing has occurred, whether by action or failure to act, that could reasonably be expected to cause the loss of such qualification; (C) no “reportable event” (as such term is defined in Section 4043 of ERISA) that could reasonably be expected to result in liability has occurred with respect to any Benefit Plan, no non-exempt “prohibite d transaction” (as such term is defined in Section 406 of ERISA and Section 4975 of the Code) has been engaged in by the Company or any Company Subsidiary with respect to any Benefit Plan that has or is expected to result in any material liability or “accumulated funding deficiency” (as such term is defined in Section 302 of ERISA and Section 412 of the Code (whether or not waived)) has occurred with respect to any Benefit Plan; no liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by the Company or any Company Subsidiary with respect to any ongoing, frozen or terminated “single-employer plan,” within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the single-employer plan of any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code; (D) there does not now exist, nor do any circumstances exist that would reasonably be expected to res ult in, any Controlled Group Liability that would be a liability of the Company or any Company Subsidiary; (E) for each Benefit Plan with respect to which a Form 5500 has been filed, no material change has occurred with respect to the matters covered by the most recent Form 5500 since the end of the period covered by such Form 5500; (F) except as expressly contemplated by this Agreement, there is no present intention that any Benefit Plan be materially amended, suspended or terminated, or otherwise modified to change benefits (or the levels thereof) in a manner that results in an increased cost to the Company or any Company Subsidiary (other than an immaterial increase in administrative costs)  under any Benefit Plan at any time within the twelve months immediately following the date hereof; and (G) the Company and the Company Subsidiaries have not incurred any current or projected liability in respect of post-employment or post-retirement health, medical or life insurance benefits for current, for mer or retired employees of the Company or the Company Subsidiaries, except as required to avoid an excise tax under Section 4980B of the Code or otherwise except as may be required pursuant to any other Laws.

 

(iv) With respect to each of the Benefit Plans that is not a multiemployer plan within the meaning of Section 4001(a)(iii) of ERISA but is subject to Title IV of ERISA, as of the Closing Date, the assets of each such Benefit Plan are at least equal in value to the present value of the accrued benefits (vested and unvested) of the participants in such Benefit Plan on a termination and projected benefit obligation basis, based on the actuarial methods and assumptions indicated in the most recent applicable actuarial valuation reports.

 

(v) No Benefit Plan is a “multiemployer plan” within the meaning of Section 4001(a)(iii) of ERISA) or a plan that has two or more contributing sponsors, at least two of whom are not under common control, within the meaning of Section 4063 of ERISA.  Neither the Company nor any member of any organization which is a member of a controlled group of organizations within the meaning of Section 414(b), (c), (m) or (o) of the Code has at any time sponsored or contributed to, or has or had any liability or obligation in respect of, any multiemployer plan.

 

(vi) With respect to any Benefit Plan, (A) no material actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the Knowledge of the Company, threatened, (B) no facts or circumstances exist that could give rise to any such actions, suits or claims, (C) no written or oral communication has been received from the Pension Benefit Guaranty Corporation (the “PBGC”) in respect of any Benefit Plan subject to Title IV of ERISA concerning the funded status of any such plan or any transfer of assets and liabilities from any such plan in connection with the transactions contemplated h erein and (D) no administrative investigation, audit or other administrative proceeding by the Department of Labor, the PBGC, the Internal Revenue Service or other governmental agencies are pending, threatened or in progress (including, without limitation, any routine requests for information from the PBGC).  With respect to each Benefit Plan that is subject to Title IV or Section 302 of ERISA or Section 412, 430 or 4971 of the Code: (i) no Benefit Plan has failed to satisfy minimum funding standards (within the meaning of Section 412 or 430 of the Code or Section 302 of ERISA), whether or not waived; and (ii) there has been no determination that any Benefit Plan is, or is expected to be, in “at risk” status (within the meaning of Section 430 of the Code or Section 303 of ERISA).

 

(vii) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, taking into account any other related event, including the Other Private Placements, could (A) result in any payment (including severance, unemployment compensation or “excess parachute payment” (within the meaning of Section 280G of the Code), forgiveness of indebtedness or otherwise) becoming due to any current or former employee, officer or director of the Company or any Company Subsidiaries from the Company or any of the Company Subsidiaries under any Benefit Plan or otherwise, (B) increase any compensation or benefits otherwise payable under any Benefit Plan, (C) result in any acceleration of the time of payment or vesting of any such benefits, (D) require the funding or increase in the funding of any such benefits (through a grantor trust or otherwise), (E) result in any limitation on the right of the Company or any of the Company Subsidiaries to (1) amend, merge or terminate any Benefit Plan or related trust or (2) receive a reversion of assets from any Benefit Plan or related trust, or (F) result in payments under any of the Benefit Plans or otherwise which would not be deductible under Section 280G of the Code. Neither the Company nor any of the Company Subsidiaries have taken, or permitted to be taken, any action that required, and no circumstances exist that will require, the funding, or the increase in the funding, of any benefits or resulted, or will result, in any limitation on the right of the Company or any of the Company Subsidiaries to amend, merge, terminate or receive a reversion of assets from any Benefit Plan or related trust.

 

(viii) Each Benefit Plan that is in any part a “nonqualified deferred compensation plan” subject to Section 409A of the Code (A) materially complies and, at all times after December 31, 2008 has materially complied, both in form and operation, with the requirements of Section 409A of the Code and the final regulations thereunder and (B) between January 1, 2005 and December 31, 2008 was operated in good faith compliance with Section 409A of the Code, as determined under applicable guidance of the Treasury and the Internal Revenue Service. No compensation payable by the Company or any of the Company Subsidiaries has been reportable as nonqualified deferred compensation in the gross income of any individual or ent ity as a result of the operation of Section 409A of the Code.

 

(ix) The Company and the Company Subsidiaries will be in compliance, as of the Closing Date, with Sections 111 and 302 of the Emergency Economic Stabilization Act of 2008, as amended by the U.S. American Recovery and Reinvestment Act of 2009, including all guidance issued thereunder by a Governmental Entity (collectively “EESA”).

 

(w) Environmental Laws. The Company and the Company Subsidiaries (i) are in compliance with any and all Environmental Laws, (ii) have received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct their business, (iii) are in compliance with all terms and conditions of any such permit, license or approval, (iv) have not owned or operated any property that has been contaminated with any Hazardous Substance that would reasonably be expected to result in liability pursuant to any Environmental Law, (v) to the Knowledge of the Company, are not liable for Hazardous Substance disposal or contam ination on any third party property, (vi) have received any notice, demand, letter, claim or request for information indicating that it may be in violation of or subject to liability under any Environmental Law and (vii) are not subject to any circumstances or conditions that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use or transfer of any property in connection with any Environmental Law, except where, in each of the foregoing clauses, the failure to so comply would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(x) Taxes.  All material Tax Returns required to be filed by, or on behalf of, Company or the Company Subsidiaries have been timely filed, or will be timely filed, in accordance with all Laws, and all such Tax Returns are, or shall be at the time of filing, complete and correct in all material respects. The Company and the Company Subsidiaries have timely paid all material Taxes due and payable (whether or not shown on such Tax Returns), or, where payment is not yet due, have made adequate provisions in accordance with GAAP. There are no Liens with respect to Taxes upon any of the assets or properties of either the Company or the Company Sub sidiaries other than with respect to Taxes not yet due and payable.

 

(y) Labor.

 

(i) Employees of the Company and the Company Subsidiaries are not represented by any labor union nor are any collective bargaining agreements otherwise in effect with respect to such employees. No labor organization or group of employees of the Company or any Company Subsidiary has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority, nor have there been in the last three years. There are no strikes, work stoppages, slowdowns, labor picketing lockouts, material arbitrations or m aterial grievances, or other material labor disputes pending or, to the Knowledge of the Company, threatened against or involving the Company or any Company Subsidiary, nor have there been any in the past year.

 

(ii) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the Company and the Company Subsidiaries are in compliance with all federal and state Laws and requirements respecting employment and employment practices, terms and conditions of employment, collective bargaining, disability, immigration, health and safety, wages, hours and benefits, non-discrimination in employment, workers’ compensation and the collection and payment of withholding and/or payroll taxes and similar taxes.

 

(iii) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there is no charge or complaint pending or threatened before any Governmental Entity alleging unlawful discrimination in employment practices, unfair labor practices or other unlawful employment practices by the Company or any Company Subsidiary.

 

(z) Brokers and Finders. Except for Sandler O’Neill & Partners, L.P. (“Placement Agent”) and the fees payable thereto (which fees are to be paid by the Company), neither the Company nor any of its officers, directors, employees or agents has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder’s fees, and no broker or finder has acted directly or indirectly for the Company in connection with this Agreement or the transactions contemplated hereby. A copy of the Company& #8217;s agreement with Sandler O’Neill & Partners, L.P. has been made available to the Investor.

 

(aa) Loan Portfolio. As of the date of this Agreement, the characteristics of the loan portfolio of the Company have not materially and adversely changed from the characteristics of the loan portfolio as of September 30, 2010.

 

(bb) Offering of Securities. Neither the Company nor any Person acting on its behalf has taken any action (including any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of any of the Common Shares to be issued pursuant to this Agreement under the Securities Act and the rules and regulations of the SEC promulgated thereunder) which would subject the offering, issuance or sale of any of such securities to the registration requirements of the Securities Act. Neither the Company nor any Person acting on its behalf has engaged or will engage in any form of general solicita tion or general advertising (within the meaning of Regulation D under the Securities Act) in connection with any offer or sale of the Common Shares pursuant to the transactions contemplated by this Agreement.  Assuming the accuracy of the Investor’s representations and warranties set forth in this Agreement, no registration under the Securities Act is required for the offer and sale of the Common Shares by the Company to the Investor.

 

(cc) Investment Company Status. The Company is not, and upon consummation of the transactions contemplated by this Agreement will not be, an “investment company,” a company controlled by an “investment company” or an “affiliated Person” of, or “promoter” or “principal underwriter” of, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.

 

(dd) Affiliate Transactions. No officer, director, five percent (5%) shareholder or other Affiliate of the Company (or any Company Subsidiary), or any individual who, to the Knowledge of the Company, is related by marriage or adoption to or shares the same home as any such Person, or any entity which, to the Knowledge of the Company, is controlled by any such Person (collectively, an “Insider”), is a party to any contract or transaction with the Company (or any Company Subsidiary) which pertains to the business of the Company (or any Company Subsidiary) or has any interest in any property, real or personal or mixed, tangible or intangible, used in or pertaining to the business of the Company (or any Company Subsidiary). The foregoing representation and warranty does not cover deposits at the Company (or any Company Subsidiary) or loans of $250,000 or less made in the ordinary course of business in compliance with Regulation O and other applicable Law.

 

(ee) Anti-takeover Provisions Not Applicable. The Board of Directors has taken all necessary action to ensure that the transactions contemplated by this Agreement and the consummation of the transactions contemplated hereby will be exempt from any anti-takeover or similar provisions of the Company’s articles of incorporation and bylaws, and any other provisions of any applicable “moratorium”, “control share”, “fair price”, “interested shareholder” or other anti-takeover Laws and regulations of any jurisdiction.

 

(ff) Issuance of the Common Shares. The issuance of the Common Shares in connection with the transactions contemplated by this Agreement has been duly authorized and such Common Shares, when issued and paid for in accordance with the terms of this Agreement, will be duly and validly issued, fully paid and nonassessable and free and clear of all Liens, other than restrictions on transfer imposed by applicable securities Laws, and shall not be subject to preemptive or similar rights.

 

2.3 Representations and Warranties of the Investor. Except as Previously Disclosed, the Investor hereby represents and warrants to the Company, as of the date hereof and as of the Closing Date (except for the representations and warranties that are as of a specific date which shall be made as of that date) that:

 

(a) Organization and Authority. The Investor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and where failure to be so qualified would be reasonably expected to materially and adversely impair or delay its ability to perform its obligations under this Agreement or to consummate the transactions contemplated hereby.

 

(b) Authorization; No Conflicts.

 

(i) The Investor has the necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by its board of directors, general partner or managing members, investment committee, investment adviser or other authorized person, as the case may be, and no further approval or authorization by any of its shareholders, partners or other equity owners, as the case may be, is required. This Agreement has been duly and validly executed and delivered by the Investor and, assuming due authorization, execution and delivery by the Company is the valid and bindin g obligation of the Investor enforceable against the Investor in accordance with its terms (except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).

 

(ii) Neither the execution, delivery and performance by the Investor of this Agreement nor the consummation of the transactions contemplated hereby, nor compliance by the Investor with any of the provisions hereof, will (A) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of any Liens upon any of the properties or assets of the Investor under any of the terms, conditions or provisions of (1) its articles of incorporation or bylaws, its cert ificate of limited partnership or partnership agreement or its similar governing documents or (2) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Investor is a party or by which the Investor may be bound, or to which the Investor or any of the properties or assets of the Investor may be subject, or (B) violate any Law applicable to the Investor or any of its properties or assets except in the case of clauses (A)(2) and (B) for such violations, conflicts and breaches as would not reasonably be expected to materially adversely affect the Investor’s ability to perform its obligations under this Agreement or consummate the transactions contemplated hereby on a timely basis.

 

(c) Governmental Consents. No Governmental Consents are necessary for the execution and delivery of this Agreement or for the purchase by the Investor of the Common Shares pursuant to this Agreement.

 

(d) Purchase for Investment. The Investor acknowledges that the Common Shares have not been registered under the Securities Act or under any state securities laws. The Investor (i) is acquiring the Common Shares pursuant to an exemption from registration under the Securities Act and other applicable securities laws solely for investment with no present intention to distribute any of the Common Shares to any Person, (ii) will not sell or otherwise dispose of any of the Common Shares, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws, (iii) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of its investment in the Common Shares and of making an informed investment decision and (iv) is an “accredited investor” (as that term is defined by Rule 501 of the Securities Act).

 

(e) Brokers and Finders. Neither the Investor, nor its respective Affiliates nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder’s fees, and no broker or finder has acted directly or indirectly for the Investor in connection with this Agreement or the transactions contemplated hereby. The Investor acknowledges that it is purchasing the Common Shares directly from the Company and not from the Placement Agent.

 

(f) Investment Decision. The Investor, or the duly appointed investment manager to the Investor (the “Investment Manager”), if applicable, has independently evaluated the merits of its decision to purchase the Common Shares pursuant to this Agreement, and the Investor confirms that neither it, nor its Investment Manager (if applicable), has relied on the advice of any other person’s business and/or legal counsel in making such decision. The Investor understands that nothing in this Agreement or any other materials presented by or on behalf of the Comp any to the Investor in connection with the purchase of the Common Shares constitutes legal, tax or investment advice. The Investor has consulted such accounting, legal, tax and investment advisors as it has deemed necessary or appropriate in connection with its purchase of the Common Shares. The Investor understands that the Placement Agent has acted solely as the agent of the Company in this placement of the Common Shares and the Investor has not relied on the business or legal advice of the Placement Agent or any of its agents, counsel or Affiliates in making its investment decision hereunder, and confirms that none of such persons has made any representations or warranties to the Investor in connection with the transactions contemplated by this Agreement. Except as Previously Disclosed and except for this Agreement, there are no agreements or understandings with respect to the transactions contemplated by this Agreement between the Investor or any of its Affiliates, on the one hand, and (i) any of th e Other Investors or any of their respective Affiliates, (ii) the Company or (iii) the Company Subsidiaries, on the other hand.

 

(g) Financial Capability. At the Closing, the Investor shall have available funds necessary to consummate the Closing on the terms and conditions contemplated by this Agreement.

 

(h) Ownership. Giving effect to the Investment, the Other Private Placements and the TARP Exchange and assuming the Company has not and will not have repurchased any Common Shares since the Capitalization Date, as of the Closing Date, the Investor, together with its "Affiliates" (as such term is defined in the Rights Plan), will not be a “Threshold Holder" pursuant to the Tax Benefits Preservation Plan adopted by the Company on November 23, 2010 (the “Rights Plan”), for the avoidance of doubt taking into account (i) any formal or informal understandin g with any Other Investor to acquire Common Stock that would cause the Investor and such other person to be treated as an “entity” described in Treasury Regulations Section 1.382-3(a) and (ii) any direct or indirect investment in any Other Investor.

 

(i) Access to Information. The Investor acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Common Shares and the merits and risks of investing in the Common Shares; (ii) access to information about the Company and the Company Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; (iii) the opportunity to obtain such additional information t hat the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the Investment; and (iv) the opportunity to ask questions of management.

 

(j) No Reliance. The Investor has not relied on any representation or warranty in connection with the Investment other than those contained in this Agreement.

 

(k) No Coordinated Acquisition. The Investor (i) is not affiliated with Carlyle or Anchorage (for purposes of this section only, a “Lead Investor”), (ii) reached its decision to invest in the Common Shares independently from any Lead Investor and any other Person known by the Investor to be a potential investor in the Company, other than any Affiliates of the Investor that are also investing in the Other Private Placements (any such person, a “Potential Investor”), (iii) is not advised or managed by an advisor or manager that advises or manages any Lead Investor or any other Potential Investor, other than any Affiliates of the Investor that are also investing in the Other Private Placements, (iv) has not entered into any agreement or understanding with any Lead Investor or any other Potential Investor to act in concert for the purpose of exercising a controlling influence over the Company or any Company Subsidiaries, including, but not limited to, any agreements or understandings regarding the voting or transfer of shares of the Company, (v) has not shared due diligence materials prepared by such Investor or any of its advisors or representatives with respect to the Company or any Company Subsidiaries with any Lead Investor or any other Potential Investor, (vi) has not been induced, nor has induced any Lead Investor or any other Potential Investor, to enter into the transactions contemplated by this Agreement by any Lead Investor or any other Potential Investor, (vii) was not notified of or provided the opportunity to enter into the transactions contemplated by this Agreement pursuant to the terms of any agreement or informal understanding with any Lead Investor or any other Potential Investor and was not required by the terms of any agreement or informal understanding to so notify any Lead Investor or other Potential Investor, (viii) is not a party to any formal or informal understanding with any Lead Investor or other Potential Investor to make a coordinated acquisition of stock of the Company, and the investment decision of the Investor is not based on the investment decision of any Lead Investor or any other Potential Investor, (ix) is not a party to any formal or informal agreement or understanding concerning the appointment of any individual to the Board of Directors, (x) will not, by reason of the Investment, file, be required to file, or be required to be included in a Schedule 13D or Schedule 13G pursuant to the United States federal securities laws, (xi) has not engaged as part of a group consisting of substantially the same entities as the Potential Investors, in substantially the same combination of interests, in any additional banking or nonbanking activities or business ventures in the United States and (xii) will not pay any Lead Investor or any other Potential Investor any fee in connection with the transactions contemplated hereby. The Investor does not presently hold any capital stock of the Company.

 

(l) Offering of Securities.  The Investor was not contacted by means of any general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer and sale of the Common Shares to be purchased pursuant to this Agreement.

 

ARTICLE 3

 

 

3.1 Conduct of Business Prior to Closing. Except as otherwise expressly required by this Agreement or applicable Law or by the performance of any Material Contract that was Previously Disclosed, or with the prior written consent of the Investor, between the date of this Agreement and the Closing, the Company shall, and the Company shall cause each Company Subsidiary to:

 

(a) use commercially reasonable efforts to conduct its business only in the ordinary course of business; and

 

(b) use commercially reasonable efforts to (i) preserve the present business operations, organization (including officers and employees) and goodwill of the Company and any Company Subsidiary and (ii) preserve business relationships with customers, suppliers, consultants and others having business dealings with the Company; provided, however, that nothing in this clause (b) shall limit or require any actions that the Board of Directors may, in good faith, determine to be inconsistent with their duties or the Company’s obligations under applicable Law or imposed by any Governmental Entity.

 

3.2 Confidentiality. The Investor acknowledges that the information being provided to it in connection with the transactions contemplated hereby is subject to the terms of the Confidentiality Agreement heretofore entered into between the Investor and the Company (the “Confidentiality Agreement”), the terms of which are incorporated herein by reference.

 

3.3 Avoidance of Control.

 

(a) Notwithstanding anything to the contrary in this Agreement, neither the Company nor any Company Subsidiary shall take any action (including any redemption, repurchase, or recapitalization of Common Stock, or securities or rights, options or warrants to purchase Common Stock, or securities of any type whatsoever that are, or may become, convertible into or exchangeable into or exercisable for Common Stock in each case, where the Investor is not given the right to participate in such redemption, repurchase or recapitalization to the extent of the Investor’s pro rata proportion), that would cause the Investor’s ownership of Voting Securities (together with the ownership by the Investor’s Affiliates (as such term is used under the BHC Act) of Voting Securities) to increase to an amount that would constitute “control” under the BHC Act, or otherwise cause the Investor to “control” the Company under and for purposes of the BHC Act; provided, however, that the Company shall not be deemed to have violated this Section 3.3(a) if it has given the Investor the opportunity to participate in such redemption, repurchase or recapitalization to the extent of the Investor’s pro rata proportion on the same terms as the other participants in such redemption, repurchase or recapitalization and the Investor fails to so participate.

 

(b) In the event that the Company breaches its obligations under this Section 3.3 or believes that it is reasonably likely to breach such obligations, it shall notify the Investor as promptly as practicable and shall cooperate in good faith with the Investor to modify any ownership or other arrangements or take any other action, in each case, as is necessary to cure or avoid such breach.

 

3.4 Commercially Reasonable Efforts. Upon the terms and subject to the conditions herein provided, except as otherwise provided in this Agreement, each of the parties hereto agrees to use its commercially reasonable efforts to take or cause to be taken all action, to do or cause to be done and to assist and cooperate with the other parties hereto in doing all things necessary, proper or advisable under Laws to consummate and make effective the transactions contemplated hereby, including but not limited to: (a) the satisfaction of the conditions precedent to the obligations of the parties hereto; (b) the obtaining of applicable Governmental Consents, and consents, waivers and approvals of any third parties; (c) the defending of any claim, action, suit, investigation or proceeding, whether judicial or administrative, challenging this Agreement or the performance of the obligations hereunder; and (d) the execution and delivery of such instruments, and the taking of such other actions as the other parties hereto may reasonably request in order to carry out the intent of this Agreement. Notwithstanding the foregoing, under no circumstances will the Investor be required to disclose to the Company, the Company Subsidiaries or any third party any information pertaining to the Investor’s beneficial owners or any information the disclosure of which is prohibited by Law.

 

3.5 Preemptive Rights.

 

(a) Sale of New Securities.  After the Closing, until the earlier of (x) the date on which the Investor no longer owns, in the aggregate with its Affiliates, one and one-half percent (1.5%) of the outstanding Common Shares (as adjusted from time to time for any reorganization, recapitalization, stock dividend, stock split, reverse stock split, or other like changes in the Company’s capitalization) (before giving effect to any issuances triggering provisions of this Section 3.5) and (y) the second anniversary of the Closing Date, at any time that the Company proposes to make any public or nonpublic offering or sale of any equity (i ncluding Common Stock, preferred stock or restricted stock), or any securities, options or debt that is convertible or exchangeable into equity or that includes an equity component (such as an “equity” kicker) (including any hybrid security) (any such security, a “New Security”) (other than the issuance and sale of securities (i) in connection with the Rights Offering; (ii) upon conversion of convertible securities issued in compliance with this Section 3.5, (iii) to employees, officers, directors or consultants of the Company pursuant to employee benefit plans or compensatory arrangements approved by the Board of Directors (including upon the exercise of employee stock options granted pursuant to any such plans or arrangements), (iv) pursuant to any rights plan or (v) as consideration in connection with any bona fide, arm’s-length, direct or indirect merger, acquisition or similar transaction or joint venture, strategic alliance, license agreement or other similar commercial transactions) the Investor shall first be afforded the opportunity to acquire from the Company for the same price (net of any underwriting discounts or sales commissions) and on the same terms as such securities are proposed to be offered to others, up to the amount of such New Securities to be offered in the aggregate required to enable it to maintain its proportionate equivalent interest in the Common Stock immediately prior to any such issuance of New Securities.  The New Securities that the Investor shall be entitled to purchase in the aggregate shall be determined by multiplying (x) the total number or principal amount of such offered New Securities by (y) a fraction, the numerator of which is the number of Common Shares held by the Investor and the denominator of which is the number of shares of Common Stock then outstanding.

 

(b) Notice.  In the event the Company proposes to offer or sell New Securities that are subject to the Investor’s rights under Section 3.5(a), it shall give the Investor written notice of its intention, specifying the price (or range of prices), anticipated amount of securities, timing and other terms upon which the Company proposes to offer the same (including, in the case of a registered public offering and to the extent possible, a copy of the prospectus included in the registration statement filed with respect to such offering), at least ten (10) Business Days prior to the proposed offer, issuance or sale.  The Investor s hall have five (5) Business Days from the date of receipt of such a notice to notify the Company in writing that it intends to exercise its rights provided in this Section 3.5 and as to the amount of New Securities the Investor desires to purchase, up to the maximum amount calculated pursuant to Section 3.5(a).  Such notice shall constitute a nonbinding agreement of the Investor to purchase the amount of New Securities so specified at the price and other terms set forth in the Company’s notice to it.  The failure of the Investor to respond within such five (5) Business Day period shall be deemed to be a waiver of the Investor’s rights under this Section 3.5 only with respect to the offering described in the applicable notice.

 

(c) Purchase Mechanism.  If the Investor exercises its rights provided in this Section 3.5, the closing of the purchase of the New Securities with respect to which such right has been exercised shall take place within thirty (30) days after the giving of notice of such exercise; provided that, if such issuance is subject to regulatory approval, such thirty (30)-day period shall be extended until the expiration of ten (10) Business Days after all such approvals have been received, but in no event later than 90 days from the date of the Company’s initial notice pursuant to Section 3.5(b).  Each of the Company and the Investor a grees to use commercially reasonable efforts to secure any regulatory or shareholder approvals or other consents, and to comply with any Law necessary in connection with the offer, sale and purchase of such New Securities.

 

(d) Failure of Purchase.  In the event the Investor fails to exercise its rights provided in this Section 3.5 within the five (5) Business Day period described in Section 3.5(b) or, if so exercised, the Investor is unable to consummate such purchase within the time period specified in Section 3.5(c) because of its failure to obtain any required regulatory or shareholder consent or approval, the Company shall thereafter be entitled (during the period of 120 days following the conclusion of the applicable period) to sell or enter into an agreement (pursuant to which the sale of the New Securities covered thereby shall be consummated, if at all, within 120 days from the date of said agreement) to sell the New Securities not elected to be purchased pursuant to this Section 3.5 or that the Investor is unable to purchase because of such failure to obtain any such consent or approval, at a price and upon terms, taken together in the aggregate, no more materially favorable to the purchasers of such New Securities than were specified in the Company’s notice to the Investor.  Notwithstanding the foregoing, if such sale is subject to the receipt of any regulatory or shareholder approval or consent or the expiration of any waiting period, the time period during which such sale may be consummated shall be extended until the expiration of ten (10) Business Days after all such approvals or consents have been obtained or waiting periods expired, but in no event shall such time period exceed 150 days from the date of the applicable agreement with respect to such sale.  In the event the Company has not sold the New Securi ties or entered into an agreement to sell the New Securities within said 120-day period (or sold and issued New Securities in accordance with the foregoing within 120 days from the date of said agreement (as such period may be extended in the manner described above for a period not to exceed 150 days from the date of said agreement)), the Company shall not thereafter offer, issue or sell such New Securities without first offering such securities to the Investor in the manner provided above.

 

(e) Non-Cash Consideration.  In the case of the offering of securities for consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value thereof as determined by the Board of Directors; provided, however, that such fair value as reasonably determined by the Board of Directors shall not exceed the aggregate market price of the securities being offered as of the date the Board of Directors authorizes the offering of such securities.

 

(f) Cooperation.  The Company and the Investor shall cooperate in good faith to facilitate the exercise of the Investor’s rights under this Section 3.5, including securing any required approvals or consents.

 

3.6 Most Favored Nation. The Company shall not offer any investors in the Other Private Placements, or any other capital raising transaction occurring at the same time as the transactions contemplated by this Agreement (excluding the Carlyle Investment and the Anchorage Investment), terms more favorable, in form or substance, than those offered in connection with the Investment, unless the Investor is also provided with such terms.

 

3.7 Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) that are required to be paid in connection with the sale and transfer of the Common Shares to be sold to the Investor hereunder will be, or will have been, fully paid or provided for by the Company, and all Laws imposing such taxes will be or will have been complied with.

 

3.8 Legend.

 

(a) The Investor agrees that all certificates or other instruments representing the Common Shares subject to this Agreement shall bear a legend substantially to the following effect, until such time as they are not required under Section 3.8(b):

 

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR 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.”

 

(b) Upon request of the Investor, the Company shall promptly cause such legend to be removed from any certificate for any Common Shares to be so transferred if (i) such Common Shares are being transferred pursuant to a registration statement in effect thereto or (ii) such Common Shares are being transferred pursuant to an exemption from registration under the Securities Act and applicable state laws subject to receipt by the Company of an opinion of counsel for the Investor reasonably satisfactory to the Company to the effect that such legend is no longer required under the Securities Act and applicable state laws.  The Investor acknowledges that the Common Shares have not been registered under the Securities Act or under any state securities laws and agrees that it shall not sell or otherwise dispose of any of the Common Shares, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws.

 

3.9 Reverse Stock Split. No later than the Closing Date, the Company shall file an amendment to its articles of incorporation to effect the Reverse Stock Split, for which shareholder approval was obtained on May 24, 2010.

 

3.10 Certain Other Transactions.

 

(a) Prior to the Closing, notwithstanding anything in this Agreement to the contrary, the Company shall not directly or indirectly effect or cause to be effected any transaction with a third party that would reasonably be expected to result in a Change in Control unless such third party shall have provided prior assurance in writing to the Investor (in a form that is reasonably satisfactory to the Investor) that the terms of this Agreement shall be fully performed (i) by the Company or (ii) by such third party if it is the successor of the Company or if the Company is its direct or indirect Subsidiary. For the avoidance of doubt, it is understood and agreed that, in the event that a Change in Control occurs on or prior to the Closing , the Investor shall maintain the right under this Agreement to acquire, pursuant to the terms and conditions of this Agreement, the Common Shares (or such other securities or property (including cash) into which the Common Shares may have become exchangeable as a result of such Change in Control), as if the Closing had occurred immediately prior to such Change in Control.

 

(b) In the event that, at or prior to the Closing, (i) the number of shares of Common Stock or securities convertible or exchangeable into or exercisable for shares of Common Stock issued and outstanding is changed as a result of any reclassification, stock split (including reverse split), stock dividend or distribution (including any dividend or distribution of securities convertible or exchangeable into or exercisable for shares of Common Stock), merger, tender or exchange offer or other similar transaction, including the Reverse Stock Split, or (ii) the Company fixes a record date that is at or prior to the Closing Date for the payment of any non-stock dividend or distribution on the Common Stock, then the number of Comm on Shares to be issued to the Investor at the Closing under this Agreement, together with the applicable implied per share price (and the number of shares and per share price pursuant to the Rights Offering), shall be equitably adjusted and/or the shares of Common Stock to be issued to the Investor at the applicable Closing under this Agreement shall be equitably substituted with shares of other stock or securities or property (including cash), in each case, to provide the Investor with substantially the same economic benefit from this Agreement as the Investor had prior to the applicable transaction. Notwithstanding anything in this Agreement to the contrary, in no event shall the Purchase Price or any component thereof, or the aggregate percentage of shares to be purchased by the Investor, be changed by the foregoing.

 

(c) Notwithstanding anything in the foregoing, the provisions of this Section 3.10 shall not be implicated by (i) the transactions contemplated by this Agreement, the Other Private Placements and the TARP Exchange (other than the Reverse Stock Split and related matters) or (ii) any issuances of options, restricted stock units or other equity-based awards granted to newly-appointed directors, employees or consultants of the Company at or around the same time as the transactions contemplated by this Agreement to such Persons, including upon exercise of any such options.

 

3.11 Exchange Listing. The Company shall use its reasonable best efforts to cause the Common Shares to be issued pursuant to this Agreement to be approved for listing on the NYSE or such other market on which the Common Shares are then listed or quoted, subject to official notice of issuance, as promptly as possible and in any event prior to the Closing.

 

3.12 Registration Rights.

 

(a) Registration.

 

(i) Subject to the terms and conditions of this Agreement, the Company covenants and agrees that as promptly as practicable after (and in any event no more than thirty (30) days after) the Closing Date (the “Filing Deadline”), the Company shall have prepared and filed with the SEC one or more Shelf Registration Statements covering the resale of all of the Registrable Securities (or, if permitted by the rules of the SEC, otherwise designated an existing Shelf Registration Statement filed with the SEC to cover such Registrable Securities), and, to the extent the Shelf Registration Statemen t has not theretofore been declared effective or is not automatically effective upon such filing, the Company shall use reasonable best efforts to cause such Shelf Registration Statement to be declared or become effective as soon as practicable (and in any event no later than the Effectiveness Deadline) and to keep such Shelf Registration Statement continuously effective and in compliance with the Securities Act and usable for resale of such Registrable Securities until the date that is six months from the Closing Date (the “Registration Termination Date”) (including by refiling such Shelf Registration Statement (or a new Shelf Registration Statement) if the initial Shelf Registration Statement expires).  The Company shall register the resale of the Registrable Securities on Form S-1 or such other form it is eligible to use.

 

(ii) Any registration pursuant to this Section 3.12(a) shall be effected by means of a shelf registration under the Securities Act (a “Shelf Registration Statement”) in accordance with the methods and distribution set forth in the Shelf Registration Statement and Rule 415.

 

(b) Expenses of Registration. All Registration Expenses incurred in connection with any registration, qualification or compliance hereunder shall be borne by the Company. All Selling Expenses incurred in connection with any registrations hereunder shall be borne by the Holders selling in such registration pro rata on the basis of the aggregate number of securities or shares being sold.

 

(c) Obligations of the Company. The Company shall use its reasonable best efforts, for so long as there are Registrable Securities outstanding, to take such actions as are under its control to not become an ineligible issuer (as defined in Rule 405 under the Securities Act). In addition, whenever required to effect the registration of any Registrable Securities or facilitate the distribution of Registrable Securities pursuant to an effective Shelf Registration Statement, the Company shall, as expeditiously as reasonably practicable:

 

(i) Prepare and file with the SEC a prospectus supplement with respect to a proposed offering of Registrable Securities pursuant to an effective registration statement and, subject to this Section 3.12(c), keep such registration statement effective or such prospectus supplement current.

 

(ii) Prepare and file with the SEC such amendments and supplements to the applicable registration statement and the prospectus or prospectus supplement used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

 

(iii) Furnish to the Holders such number of correct and complete copies of the applicable registration statement and each such amendment and supplement thereto (including in each case all exhibits) and of a prospectus, including a 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 owned or to be distributed by them.

 

(iv) Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders, to keep such registration or qualification in effect for so long as such 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 such Holder; 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.

 

(v) Notify each Holder of Registrable Securities at any time when a prospectus relating thereto 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 (which notice shall not contain any material non-public information).

 

(vi) Give written notice to the Holders (which notice shall not contain any material, non-public information):

 

(A) when any registration statement filed pursuant to Section 3.12(a) or any amendment thereto has been filed with the SEC (except for any amendment effected by the filing of a document with the SEC pursuant to the Exchange Act) and when such registration statement or any post-effective amendment thereto has become effective;

 

(B) of any request by the SEC for amendments or supplements to any registration statement or the prospectus included therein or for additional information;

 

(C) of the issuance by the SEC of any stop order suspending the effectiveness of any registration statement or the initiation of any proceedings for that purpose;

 

(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 Stock for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

 

(E) of the happening of any event that requires the Company to make changes in any effective registration statement or the prospectus related to the 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).

 

(vii) Use its reasonable best efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of any registration statement referred to in Section 3.12(c)(vi)(C) at the earliest practicable time.

 

(viii) Upon the occurrence of any event contemplated by Section 3.12(c)(v) or 3.12(c)(vi)(E) and subject to the Company’s rights under Section 3.12(d), the Company shall promptly prepare a post-effective amendment to such registration statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to the Holders, the prospectus shall not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(ix) Cause all such Registrable Securities to be listed on each securities exchange on which the same class of securities issued by the Company are then listed or, if the same class of securities is not then listed on any securities exchange, use its reasonable best efforts to cause all such Registrable Securities of such class to be listed on the NYSE.

 

(x) If requested by Holders of a majority of the Registrable Securities being registered and/or sold in connection therewith, promptly include in a prospectus supplement or amendment such information as the Holders of a majority of the Registrable Securities being registered and/or sold in connection therewith may reasonably request in order to permit the intended method of distribution of such securities and make all required filings of such prospectus supplement or such amendment as soon as practicable after the Company has received such request.

 

(xi) Timely provide to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

(d) Suspension of Sales. 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 or may omit 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 inadvisable use of such registration statement, prospectus or prospectus supplement, each Holder of Registrable Securities shall forthwith discontinue disposition of Registrable Securities pursuant to such registration statement until such Holder has received copies of a supplemente d or amended prospectus or prospectus supplement, or until such Holder 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, such Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the prospectus and, if applicable, prospectus supplement covering such Registrable Securities current at the time of receipt of such notice (each such suspension, a “Suspension Period”). No single Suspension Period shall exceed thirty (30) consecutive days and the aggregate of all Suspension Periods shall not exceed ninety (90) days during any twelve (12) month period.

 

(e) Termination of Registration Rights. A Holder’s registration rights as to any securities held by such Holder (and its Affiliates, partners, members and former members) shall not be available unless such securities are Registrable Securities.

 

(f) Furnishing Information.

 

(i) Neither the Investor nor any Holder shall use any free writing prospectus (as defined in Rule 405) in connection with the sale of Registrable Securities without the prior written consent of the Company.

 

(ii) It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 3.12(c) as to a selling Holder that such selling Holder shall furnish to the Company 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.

 

(g) Indemnification.

 

(i) The Company agrees to indemnify each Holder and, if a Holder is a person other than an individual, such Holder’s officers, directors, employees, agents, representatives and Affiliates, and each Person, if any, that controls a Holder within the meaning of the Securities Act (each, an “Indemnitee”), against any and all Losses, joint or several, arising out of or based upon any untrue statement or alleged untrue statement of material fact contained in any registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplem ents thereto or any documents incorporated therein by reference or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto), or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided that the Company shall not be liable to such Indemnitee in any such case to the extent that any such Loss is based solely upon (i) an untrue statement or omission made in such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto), in reliance upon and in conformity with information regarding such Indemnitee or its plan of distribution or ownership interests which was furnished in writing to the Company by such Indemnitee expressly for use in connection with such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto, or (ii) offers or sales effected by or on behalf such Indemnitee “by means of” (as defined in Rule 159A) a “free writing prospectus” (as defined in Rule 405) that was not authorized in writing by the Company. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an Indemnitee and shall survive the transfer of the Registrable Securities by the Holders.

 

(ii) If any proceeding shall be brought or asserted against any Indemnitee, such Indemnitee shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnitee and the payment of all reasonable fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnitee to give such notice shall not relieve the Company of its obligations or liabilities pursuant to this Agreement, except to the extent that it shall be finally determined by a court of competent jurisdiction that such failure shall have materially and adversely prejudiced the Company.  An Indemnitee shall h ave the right to employ separate counsel in any such proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnitee or Indemnitees unless: (1) the Company has agreed in writing to pay such fees and expenses; (2) the Company shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Indemnitee in any such proceeding; or (3) the named parties to any such proceeding (including any impleaded parties) include both such Indemnitee and the Company, and such Indemnitee shall have been advised by counsel that a conflict of interest exists if the same counsel were to represent such Indemnitee and the Company; provided, that the Company shall not be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnitees. The Company shall not be liable for any settlement of any such proceeding effected without its written consent, which consent s hall not be unreasonably withheld or delayed. The Company shall not, without the prior written consent of the Indemnitee, effect any settlement of any pending proceeding in respect of which any Indemnitee is a party, unless such settlement includes an unconditional release of such Indemnitee from all liability on claims that are the subject matter of such proceeding.  Subject to the terms of this Agreement, all fees and expenses of the Indemnitee (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such proceeding in a manner not inconsistent with this Section 3.12(g)(ii)) shall be paid to the Indemnitee, as incurred, within thirty (30) days of written notice thereof to the Company; provided, that the Indemnitee shall promptly reimburse the Company for that portion of such fees and expenses applicable to such actions for which such Indemnitee is finally judicially determined to not be entitled to indemnification hereunder).  0;The failure to deliver written notice to the Company within a reasonable time of the commencement of any such action shall not relieve the Company of any liability to the Indemnitee under this Section 3.12(g), except to the extent that the Company is materially and adversely prejudiced in its ability to defend such action.

 

(iii) If the indemnification provided for in Section 3.12(g)(i) is unavailable to an Indemnitee with respect to any Losses or is insufficient to hold the Indemnitee harmless as contemplated therein, then the Company, in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the Company, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. The relative fault of the Company, on the one hand, and of the Indemnitee, on the other hand, shall be determined by re ference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company or by the Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; the Company and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 3.12(g)(iii) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 3.12(g)(i). No Indemnitee guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Company if the Company was not guilty of such fraudulent misrepresentation.

 

(iv) The indemnity and contribution agreements contained in this Section 3.12(g) are in addition to any liability that the Company may have to the Indemnitees and are not in diminution or limitation of the indemnification provisions under Article 5 of this Agreement.

 

(h) Assignment of Registration Rights. The rights of the Investor to registration of Registrable Securities pursuant to Section 3.12(a) may be assigned by the Investor to a transferee or assignee of Registrable Securities to which (i) there is transferred to such transferee no less than $1,000,000 in Registrable Securities and (ii) such transfer is permitted under the terms hereof; provided, however, that the transferor shall, within ten (10) days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the number and type of Registrable Securities that are being assigned.