[Signature page follows]

 

Sun Bancorp, Inc.

226 Landis Avenue

Vineland, New Jersey  08360

Ladies and Gentlemen:

 

Reference is hereby made to (i) the Securities Purchase Agreement, dated as of July 7, 2010 (the “Securities Purchase Agreement”), between Sun Bancorp, Inc., a New Jersey corporation (the “Company”), and WLR SBI AcquisitionCo, LLC, a Delaware limited liability company (“WLR”); (ii) the notice given by the Company to WLR, dated as of June 30, 2011, notifying WLR of its gross-up right under Section 4.7 of the Securities Purchase Agreement (the “Gross-Up Right”) in connection with a proposed private placement (the “Placement”) by the Company to Anchorage Capital Master Offshore, Ltd. (“Anchorage”) of 996,705 shares of its common stock, par value $1.00 per share (“Common Stock”), for $2.85 per share of Common Stock (the “Offering Price”); (iii) the notice given by WLR, dated as of July 11, 2011, notifying the Company of WLR’s intention to exercise the Gross-Up Right with respect to the Common Stock issued in the Placement; and (iv) the completion on April 11, 2011 of a private placement to WLR of 2,002,054 shares of Common Stock in connection with the exercise of the Gross-Up Right in connection with the underwriters’ exercise of their over-allotment option with respect to 3,750,000 shares of Common Stock in connection with a public offering of the Common Stock completed on March 22, 2011 (the “Option Securities”).  Certain capitalized terms used herein have the meanings set forth in the Securities Purchase Agreement.  This letter agreement (this “Letter Agreement”) confirms the mutual understanding and agreement of the parties hereto regarding the exercise by WLR of the Gross-Up Right with respect to the Placement.

 

1.   Transaction and Purchase Price. On the terms and subject to the conditions set forth herein, WLR hereby agrees to purchase from the Company, and the Company agrees to issue and sell to WLR, an aggregate of 622,073 shares of Common Stock (the “Purchased Shares”) at a price per share equal to $2.85, for an aggregate purchase price of  $1,772,908.05 (the “Purchase Price”). The transactions contemplated by the preceding sentence will be consummated on August 10, 2011 (the “Closing Date”). WLR will pay the Purchase Price on the Closing Date by wire transfer of immediately available funds to the account previously designated by the Company. The Company will deliver one or more certificates evidencing the Purchased Shares to WLR within one business day following the Closing Date. The Purchased Shares will bear the legend set forth in Section 4.3(a) of the Securities Purchase Agreement.

 

2.   Representations and Warranties of the Company. The Company represents and warrants as of the date of this Letter Agreement (except to the extent made only as of a specified date, in which case as of such date) to WLR that:

 

 

(a)

Organization and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey, 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 failure to be so qualified would have a Material Adverse Effect on the Company and the Company has corporate power and authority to own its properties and assets and to carry on its business as it is now being conducted.

 

(b)	Authorization.

 

 

 

(c)

Status of Securities. The Purchased Shares have been duly authorized by all necessary corporate action of the Company. When issued and sold against receipt of the consideration therefor as provided in this Letter Agreement, the Purchased Shares will be validly issued, fully paid and nonassessable and will not subject the holders thereof to personal liability and, except as to certain other investors referred to in Section 3(e) hereof, will not be subject to preemptive rights of any other stockholder of the Company, nor will such issuance result in the violation or triggering of any price-based antidilution adjustments under any agreement to which the Company or any Company Subsidiary is a party.

 

(d)

Capitalization.  As of August 8, 2011, and immediately prior to the completion of the transactions contemplated hereby, there were 83,080,567 shares of Common Stock outstanding and no shares of Company Preferred Stock outstanding.  Simultaneously with the purchase of Common Stock to be made hereunder, the Company will also issue 1,756,159 shares of Common Stock in the aggregate to other investors not including WLR, allocated as set forth on Appendix A attached hereto, in respect of their contractual gross-up rights with respect to the Placement and the Option Securities, as applicable (the “Additional Share Issuances”).  Immediately following the completion of the transactions contemplated hereby and the Additional Share Issuances, (i) there will be 85,458,799 shares of Common Stock and no shares of Company Preferred Stock outstanding and (ii) no person will have contractual gross-up or other preemptive rights with respect to the Placement, the Option Securities or any other securities issued by the Company on or prior to the date hereof.

 

3.    Representations and Warranties of WLR. WLR hereby represents and warrants as of the date of this Letter Agreement (except to the extent made only as of a specified date, in which case as of such date) to the Company that:

 

(a)

Organization and Authority. WLR 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 failure to be so qualified would have a Material Adverse Effect on WLR and WLR has power and authority to own its properties and assets and to carry on its business as it is now being conducted.

 

 

(b)	Authorization.

 

(c)	Accredited Investor.  WLR is an accredited investor within the meaning of Rule 501(a) of Regulation D (“Regulation D”) under the Securities Act of 1933, as

 

 

 

(d)

Status of Purchased Shares.  WLR acknowledges that the Purchased Shares (i) have not been registered under the Securities Act; (ii) are “restricted securities” within the meaning of Rule 144 under the Securities Act; (iii) may not be offered and sold unless they are subsequently registered or qualified under the Securities Act and any other applicable securities law or exemptions from such registration and qualification are available; and (iv) will bear the legend set forth in Section 4.3(a) of the Securities Purchase Agreement restricting their resale for so long as such Purchased Shares are so restricted.

 

(e)	Other Gross-Up Investors.  WLR acknowledges that certain other investors have similar gross-up rights and, concurrent with its purchase of the Purchased Shares, such other investors will be purchasing additional shares of Common Stock as set forth in Appendix A attached hereto.

 

4.    Survival. Each of the representations and warranties set forth in this Letter Agreement shall survive the closing indefinitely. Except as otherwise provided herein, all covenants and agreements contained herein shall survive for the duration of any statutes of limitations applicable thereto or until, by their respective terms, they are no longer operative.

 

5.    Registrable Securities. The parties hereto agree that, for the avoidance of doubt, the definition of the term “Registrable Securities” under the Securities Purchase Agreement shall be deemed to include the Purchased Shares.

 

6.    Amendment. No amendment or waiver of this Letter Agreement will be effective with respect to any party unless made in writing and signed by an officer of a duly authorized representative of such party.

 

7.   Waivers. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No waiver of any party to this Letter Agreement will be effective unless it is in a writing signed by a duly authorized officer of the waiving party that makes express reference to the provision or provisions subject to such waiver.

 

 

8.   Counterparts and Facsimile. For the convenience of the parties hereto, this Letter Agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. Executed signature pages to this Letter Agreement may be delivered by facsimile or other comparable electronic means and as so delivered will be deemed as sufficient as if actual signature pages had been delivered.

 

9.   GOVERNING LAW. THIS LETTER AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.  THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS LETTER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY WILL BE TRIED EXCLUSIVELY IN THE U.S. DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR, IF THAT COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION, IN ANY STATE COURT LOCATED IN THE CITY AND COUNTY OF NEW YORK AND THE PARTIES AGREE TO SUBMIT TO THE JURISDICTION OF, AND TO VENUE IN, SUCH COURTS.

 

10.    WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS LETTER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

11.    Notices. The provisions of Section 6.7 of the Securities Purchase Agreement are incorporated herein by reference as if set out in full herein.

 

12.    Expenses.  The Company shall reimburse WLR up to $10,000 for all out-of-pocket fees and expenses (including fees and expenses of legal counsel) incurred in connection with the transactions contemplated hereby.

 

13.    Entire Agreement, Etc. (a) This Letter Agreement, together with Sections 4.6 and 4.7 of the Securities Purchase Agreement, constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, between the parties, with respect to the subject matter hereof; (b) the terms and conditions of this Letter Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors, and with respect to WLR, its permitted assigns; and (c) this Letter Agreement will not be assignable by operation of law or otherwise (any attempted assignment in contravention hereof being null and void), except that WLR shall be permitted to assign its rights or obligations hereunder to (i) any Affiliate entity (any such transferee shall be included in the term “WLR”); provided, further, that no such assignment shall relieve WLR of any of its obligations under this Letter Agreement.

 

 

14.    Severability. If any provision of this Letter Agreement or the application thereof to any person (including, the officers and directors of WLR and the Company) or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.

 

 

15.    No Third Party Beneficiaries. Nothing contained in this Letter Agreement, expressed or implied, is intended to confer upon any person other than the parties hereto, any benefit, right or remedies.

 

 

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