SUBSCRIPTION AGREEMENT
for
ES BANCSHARES, INC.
A MARYLAND CORPORATION
COMMON SHARES, PAR VALUE $0.01 PER SHARE
THE COMMON SHARES ("COMMON SHARES") REFERRED TO HEREIN HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), AND ARE BEING
OFFERED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE OFFERING OF COMMON SHARES HAS NOT BEEN
REVIEWED OR APPROVED BY ANY FEDERAL OR STATE REGULATORY AUTHORITIES AND IS NOT
REGISTERED UNDER APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
A PURCHASER OF THE COMMON SHARES MUST BE PREPARED TO BEAR THE ECONOMIC RISKS OF
THE INVESTMENT FOR AN INDEFINITE PERIOD OF TIME BECAUSE THE SHARES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT AND ARE RESTRICTED AS TO TRANSFERABILITY.
TABLE OF CONTENTS
Article I Purchase; Closing...................................................1
1.1 Purchase.....................................................1
1.2 Closing......................................................2
Article II Representations and Warranties.....................................3
2.1 Disclosure...................................................3
2.2 Representations and Warranties of the Company................4
2.3 Representations and Warranties of the Investor...............7
Article III Covenants.........................................................9
3.1 Commercially Reasonable Efforts..............................9
3.2 Expenses.....................................................9
3.3 Publicity....................................................9
3.4 Further Assurances...........................................9
Article IV Additional Agreements of the Investor.............................10
4.1 Transfer Restrictions.......................................10
4.2 Legend......................................................10
4.3 Registration Rights.........................................11
Article V Miscellaneous......................................................16
5.1 Survival....................................................16
5.2 Interpretation..............................................16
5.3 Amendment...................................................16
5.4 Waiver of Conditions........................................16
5.5 Counterparts and Facsimile..................................17
5.6 Governing Law; Submission to Jurisdiction, Etc..............17
5.7 Notices.....................................................17
5.8 Entire Agreement, Etc.......................................17
5.10 Definitions of "Subsidiary" and "Affiliate".................18
5.11 Severability................................................18
5.12 No Third Party Beneficiaries................................18
i
LIST OF ANNEXES
Annex A
Accredited Investor Questionnaire
ii
INDEX OF DEFINED TERMS
Location of
Term Definition
-------------------------------------------------------- ---------------------
Affiliate 5.9(b)
Agreement Preamble
Bankruptcy Exceptions 2.2(d)(1)
Closing 1.2(a)
Closing Date 1.2(a)
Common Shares Recital A
Company Preamble
Exchange Act 2.1(b)
FDIC 2.2(a)
Federal Reserve 2.2(h)(2)
GAAP 2.1(a)
Governmental Entities 2.1(a)
Hedging Transaction 4.1(a)
Investor Preamble
Knowledge 5.2
Material Adverse Effect 2.1(a)
Offering Recital B
Payment 1.1(b)
Previously Disclosed 2.1(b)
Purchase 1.1
Purchased Securities Recital B
Register 4.3(h)
Registrable Securities 4.3(h)
Registration Expenses 4.3(h)
SEC 2.1(b)
SEC Reports 2.1(b)
Securities Act 2.2(a)
Selling Expenses 4.3(h)
Shelf Registration Statement 4.3(a)(2)
Significant Subsidiaries 2.2(a)
Significant Subsidiary 2.2(a)
Stock Option Plan 2.2(b)(4)
Subsidiary 5.9(a)
Transaction Documents Recital B
Transfer 4.1(a)
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Subscription Agreement, dated June ___, 2009 (together with any
attachments, annexes or exhibits hereto, collectively, this "Agreement"),
between ES Bancshares, Inc., a corporation organized under the laws of the State
of Maryland (the "Company"), and the Investor listed on the signature page
hereof (the "Investor").
Recitals:
A. The Company. As of the date hereof, the Company has (i) 5,000,000
authorized Common Shares, par value $0.01 per share (the "Common Shares"), of
which 1,868,505 shares are outstanding, and (ii) 5,000,000 authorized Preferred
Shares, par value $0.01 per share, of which no shares are outstanding.
B. The Issuance. The Company intends to issue Common Shares in a private
placement (the "Offering"), and the Investor intends to purchase from the
Company the number of Common Shares indicated on the signature page hereof
(collectively, the "Purchased Securities"). For purposes of this Agreement, the
term "Transaction Documents" refers collectively to this Agreement and any other
documents, agreements and instruments delivered in connection herewith
(including prior to the date hereof), in each case, as amended, modified or
supplemented from time to time in accordance with their respective terms.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
Article I
Purchase; Closing
1.1 Purchase.
--------
(a) Subscription. The Investor hereby irrevocably subscribes to
purchase the number of Purchased Securities indicated on the signature page
hereof for a period of 30 days from the subscription date, in accordance with
the terms of this Subscription Agreement (the "Purchase"). To effect such
subscription, the Investor shall deliver an executed counterpart of this
Agreement, including all Annexes hereto, to the Company or its authorized
representative.
(b) Payment. Together with delivery of an executed counterpart of
this Agreement, including all Annexes hereto, the Investor shall deliver and pay
in full the aggregate purchase price for the Purchased Securities specified on
the signature page hereof (the "Payment") in United States funds, to ES
Bancshares, Inc. in the form of (1) a certified or bank cashier's check, in
immediately available funds, made payable to "ES Bancshares, Inc." or (2) an
immediately available wire transfer to the following account: Empire State Bank
ABA #000000000, for credit to ES Bancshares, Inc. #190001150.
(c) Acceptance. This Agreement shall be effective immediately
upon acceptance by the Company of the Investor's executed counterpart of this
Agreement and shall thereupon be binding upon the Company. Such acceptance by
the Company shall be evidenced only by counter-execution and delivery of this
Agreement by the Company, and the Company shall have no obligation hereunder
until the Company shall have executed and delivered to the Investor an executed
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counterpart of this Agreement. The Investor acknowledges and agrees that the
Company, in its sole discretion, reserves the right to accept or reject the
Purchase, in whole or in part; provided, however, that if the Company rejects
the Purchase by notice to the Investor, such rejection shall serve as a
termination of this Agreement, and the Investor shall have no further rights or
obligations under this Agreement (but any other Transaction Document that
expires by its terms as of a different date shall remain in full force and
effect).
(d) Termination.
-----------
(1) This Agreement may not be terminated by the Investor
at any time following the Investor's delivery of an
executed counterpart of this Agreement to the Company
(even if the Company has not yet accepted or rejected
the Purchase).
(2) Notwithstanding the foregoing, this Agreement may be
terminated by either the Company or the Investor upon
written notice to the other if the Closing shall not
have occurred on or before ________________, 2009.
(3) In the event of termination of this Agreement as
provided in this Section 1.1(c) or (d), (A) this
Agreement shall forthwith become void, and there shall
be no liability on the part of either party hereto,
except that nothing herein shall relieve either party
from liability for any willful breach of this
Agreement, and (B) the Company shall promptly return
any previously delivered Payment to the Investor,
without interest.
1.2 Closing.
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(a) On the terms and subject to the conditions set forth in this
Agreement, the closing of the Purchase (the "Closing") will take place at the
offices of special counsel to the Company, Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, PC,
0000 Xxxxxxxxx Xxxxxx, XX, Xxxxx 000, Xxxxxxxxxx, X.X. 00000, at 10:00 a.m.,
Washington, D.C. time, on June 29, 2009 or as soon as practicable thereafter, or
at such other place, time and date as shall be agreed between the Company and
the Investor. The time and date on which the Closing occurs is referred to in
this Agreement as the "Closing Date."
(b) At the Closing, the Company will deliver to the Investor the
Purchased Securities, as evidenced by one or more certificates dated the Closing
Date and bearing appropriate legends as hereinafter provided for, registered on
the books and records of the Company in such Investor's name.
(c) The obligation of the Investor to consummate the Closing is
also subject to the fulfillment (or waiver by the Investor) at or prior to the
Closing of the following condition: the representations and warranties of the
Company set forth in this Agreement shall be true and correct as though made on
and as of the Closing Date (other than representations and warranties that by
their terms speak as of another date, which representations and warranties shall
be true and correct as of such date), except to the extent that the failure of
such representations and warranties to be so true and correct (without giving
effect to any qualifiers or exceptions relating to materiality), individually or
in the aggregate, does not have and would not reasonably be expected to have a
2
Material Adverse Effect and (B) the Company shall have performed in all material
respects all obligations required to be performed by it under this Agreement at
or prior to the Closing.
(d) The obligation of the Company to consummate the Closing is
also subject to the fulfillment (or waiver by the Company) at or prior to the
Closing of each of the following conditions:
(1) (A) the representations and warranties of the Investor
set forth in this Agreement shall be true and correct
as though made on and as of the Closing Date (other
than representations and warranties that by their
terms speak as of another date, which representations
and warranties shall be true and correct as of such
date), except to the extent that the failure of such
representations and warranties to be so true and
correct (without giving effect to any qualifiers or
exceptions relating to materiality or Material Adverse
Effect (as hereinafter defined)), individually or in
the aggregate, does not have and would not reasonably
be expected to have a Material Adverse Effect and (B)
the Investor shall have performed in all material
respects all obligations required to be performed by
it under this Agreement at or prior to the Closing;
and
(2) the Company shall have received a certificate dated as
of the Closing Date signed by the Investor or an
authorized representative of the Investor certifying
compliance with Section 1.2(d)(1).
Article II
Representations and Warranties
2.1 Disclosure.
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(a) "Material Adverse Effect" means a material adverse effect on
(1) the business, results of operation or financial condition of the Company and
its subsidiaries taken as a whole; provided that Material Adverse Effect shall
not be deemed to include the effects of (A) any facts, circumstances, events,
changes or occurrences generally affecting businesses and industries in which
the Company operates, companies engaged in such businesses or industries or the
economy, or the financial or securities markets and credit markets in the United
States or elsewhere in the world, including effects on such businesses,
industries, economy or markets resulting from any regulatory or political
conditions or developments, or any outbreak or escalation of hostilities,
declared or undeclared acts of war, terrorism, or work stoppages, (B) changes or
proposed changes in generally accepted accounting principles in the United
States ("GAAP") or regulatory accounting requirements applicable to depository
institutions and their holding companies generally (or authoritative
interpretations thereof), (C) changes or proposed changes in banking and other
laws of general applicability or related policies or interpretations of all
United States governmental or regulatory authorities (collectively,
"Governmental Entities"), or (D) changes in the market price or trading volume
of Common Shares (it being understood and agreed that the exception set forth in
this clause (D) does not apply to the underlying reason giving rise to or
3
contributing to any such change), or (2) the ability of the Company timely to
consummate the Purchase and the other transactions contemplated by the
Transaction Documents.
(b) "Previously Disclosed" means information contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 2008, or
its other reports and forms filed with the Securities and Exchange Commission
(the "SEC") under Sections 13(a), 14(a) or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") on or after January 1, 2009 (the "SEC Reports") and
prior to the execution and delivery of this Agreement.
(c) Each party acknowledges that it is not relying upon any
representation or warranty not set forth in the Transaction Documents. The
Investor acknowledges that it has conducted a review and analysis of the
business, assets, condition, operations and prospects of the Company and its
subsidiaries, together with the representations and warranties of the Company
set forth in the Transaction Documents, which the Investor considers sufficient
for purposes of the Purchase.
2.2 Representations and Warranties of the Company. Except as Previously
Disclosed, the Company represents and warrants to the Investor that as of the
date hereof and the Closing Date (or such other date specified herein):
(a) Organization, Authority and Significant Subsidiaries. The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Maryland, with corporate power and
authority to own its properties and conduct its business in all material
respects as currently conducted, and, except as has not had or would not
reasonably be expected to have a Material Adverse Effect, has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such qualification;
and each Subsidiary (as defined in Section 5.10(a)) of the Company that is a
"significant subsidiary" within the meaning of Rule 1-01(w) of Regulation S-X
under the Securities Act of 1933, as amended (the "Securities Act") (each, a
"Significant Subsidiary" and, collectively, the "Significant Subsidiaries") has
been duly organized and is validly existing in good standing under the laws of
its jurisdiction of organization. The Company's principal depository institution
Subsidiary is duly organized and validly existing as a New York State chartered
bank, and its deposit accounts are insured up to applicable limits by the
Federal Deposit Insurance Corporation (the "FDIC").
(b) Capitalization.
--------------
(1) As of the date hereof, the authorized and outstanding
capital stock of the Company is as set forth in
Recital A.
(2) All of the outstanding shares of capital stock of the
Company have been duly and validly authorized and
issued and are fully paid and non-assessable and were
not issued in violation of any preemptive rights,
resale rights, rights of first refusal or similar
rights.
4
(3) All of the outstanding shares of capital stock of each
Significant Subsidiary have been duly and validly
authorized and issued, are fully paid and
non-assessable and were not issued in violation of any
preemptive rights, resale rights, rights of first
refusal or similar rights, and are owned directly or
indirectly by the Company, free and clear of all
security interests, liens, encumbrances, equities or
claims.
(4) Except for the options issued pursuant to Empire State
Bank's (the "Bank") 2004 Stock Option Plan (the "Stock
Option Plan") and 92,652 warrants issued to organizers
of the Bank in connection with the opening of the
Bank, there are no options, warrants or other rights,
agreements, arrangements or commitments to which the
Company is a party or by which the Company is bound
relating to the issued or unissued Common Shares of
the Company.
(c) The Purchased Securities. The Purchased Securities will be,
as of the Closing Date, duly authorized by all necessary corporate action on the
part of the Company and, when issued and delivered as provided in this
Agreement, will be duly and validly issued, fully paid and non-assessable, and
the issuance thereof will not be subject to any preemptive or similar rights.
(d) Authorization and Enforceability of Transaction Documents.
---------------------------------------------------------
(1) The Company has the corporate power and authority to
execute and deliver the Transaction Documents to which
it is a party and to carry out its obligations
hereunder and thereunder (which includes the issuance
of the Purchased Securities). The execution, delivery
and performance by the Company of the Transaction
Documents to which it is a party and the consummation
of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate
action on the part of the Company and its
shareholders, and no further approval or authorization
is required on the part of the Company or its
shareholders. The Transaction Documents to which the
Company is a party are or will be valid and binding
obligations of the Company enforceable against the
Company in accordance with their respective terms,
except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors'
rights generally and general equitable principles,
regardless of whether such enforceability is
considered in a proceeding at law or in equity
("Bankruptcy Exceptions").
(3) Other than in connection or in compliance with the
provisions of the Securities Act and the securities or
"blue sky" laws of the various states, to the
Company's Knowledge without inquiry, no notice to,
filing with, exemption or review by, or authorization,
consent or approval of, any Governmental Entity is
required to be made or obtained by the Company in
connection with the Purchase and the other
transactions contemplated by the Transaction
Documents.
5
(e) Company Financial Statements. The consolidated financial
statements of the Company and its subsidiaries (including the related notes and
supporting schedules) contained in the SEC Reports present fairly in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates indicated therein and the consolidated
results of their operations for the periods specified therein; and except as
stated therein, such financial statements were prepared in conformity with GAAP
applied on a consistent basis.
(f) No Material Adverse Effect. Since March 31, 2009, no fact,
circumstance, event, change, occurrence, condition or development has occurred
that, individually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect.
(g) Proceedings. As of the date of this Agreement, there is no
litigation or similar proceeding or governmental proceeding pending or, to the
Company's Knowledge, threatened to which the Company or any of its subsidiaries
is a party or of which any property of the Company or any of its subsidiaries is
the subject that the Company's management believes, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect.
(h) Reports.
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(1) Since December 31, 2007, the Company has timely filed
all documents required to be filed with the SEC
pursuant to Sections 13(a), 14(a) and 15(d) of the
Exchange Act.
(2) Since December 31, 2007, the Company and each
Subsidiary have filed all material reports,
registrations and statements, together with any
required amendments thereto, that it was required to
file with the Board of Governors of the Federal
Reserve System (the "Federal Reserve"), the FDIC, the
New York State Banking Department and any other
applicable federal or state securities or banking
authorities, except where the failure to file any such
report, registration or statement, individually or in
the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect. As of
their respective dates, each of the foregoing reports
complied with all applicable rules and regulations
promulgated by the Federal Reserve, the FDIC, the New
York State Banking Department and any other applicable
foreign, federal or state securities or banking
authorities, as the case may be, except for any
failures that, individually or in the aggregate, have
not had and would not reasonably be expected to have a
Material Adverse Effect.
(i) No General Solicitation or General Advertising. Neither the
Company nor any person acting on its behalf has engaged or will engage in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with any offer or sale of
the Purchased Securities.
6
(j) No Integration. The Company has not, directly or indirectly,
solicited any offer to buy or offer to sell any Common Shares in a manner that
would require the registration of the Purchased Securities pursuant to the
Securities Act and has no present intention to solicit any offer to buy or offer
to sell any Purchased Securities or any other securities of the Company other
than pursuant to (1) this form of Subscription Agreement, (2) pursuant to a
registered public offering of the Purchased Securities and other Common Shares
offered and sold in the Offering as contemplated by this form of Subscription
Agreement or (3) pursuant to the Company's Stock Option Plan or outstanding
warrant agreements.
2.3 Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company that as of the date hereof and the
Closing Date:
(a) Organization and Authority. The Investor (1) is a natural
person, or (2) has been duly organized and is validly existing in good standing
under the laws of the jurisdiction of its organization, with the requisite power
and authority to own its properties and conduct its business as currently
conducted.
(b) Authorization and Enforceability of Transaction Documents.
The Investor has the requisite power and authority to execute and deliver the
Transaction Documents to which it is a party and to carry out its obligations
hereunder and thereunder. The execution, delivery and performance by the
Investor of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Investor, and no further
approval or authorization is required on the part of the Investor. The
Transaction Documents to which the Investor is a party are or will be valid and
binding obligations of the Investor enforceable against the Investor in
accordance with their respective terms, except as the same may be limited by
Bankruptcy Exceptions.
(c) Ownership. Giving effect to the Purchase, as of the Closing
Date, the Investor and all of its Affiliates on an aggregate basis will not
beneficially own, control or have the power to vote 10% or more of the
outstanding Common Shares. The Investor does not have any agreement, arrangement
or understanding with any person (other than the Company and any Permitted
Transferee (as defined in Section 4.1(b)(1))) to acquire, dispose of or vote any
securities of the Company.
(d) No Registration; Purchase for Investment; Accredited
Investor; Sophistication. The Investor:
(1) understands that the Purchased Securities have not
been registered under the Securities Act and,
therefore, cannot be resold unless they are registered
under the Securities Act or (without limitation on the
restrictions set forth in Article IV) unless an
exemption from registration is available;
(2) understands that the Purchased Securities have not
been registered under any United States state
securities laws;
7
(3) is acquiring the Purchased Securities pursuant to an
exemption from registration under the Securities Act
solely for investment and not with a view to any
resale or transfer of any of the Purchased Securities
to any person;
(4) confirms that it is aware of the transfer restrictions
on the Purchased Securities described in Article IV
and will not sell or otherwise dispose of any of the
Purchased Securities, except in compliance with the
registration requirements of the Securities Act and
any applicable United States state securities laws or
in compliance with all of the requirements of Section
4.1;
(5) confirms that all information that the Investor has
provided to the Company concerning the Investor in
this Agreement or otherwise is correct and complete;
(6) is an Accredited Investor (as that term is defined in
Rule 501 under the Securities Act) and has certified
to the Company the basis for qualifying as an
Accredited Investor on Annex A;
(7) has such knowledge and experience in financial and
business matters and in investments of this type that
it is capable of (A) evaluating the merits and risks
of the Purchase and of making an informed investment
decision and (B) bearing the financial risks of an
investment in the Purchased Securities for an
indefinite period of time;
(8) has conducted a review of the business and affairs of
the Company and the Bank that it considers sufficient
and reasonable for purposes of making the Purchase;
(9) has been provided the opportunity to ask questions of
and receive answers from representatives of the
Company concerning the terms and conditions of the
Purchase and to obtain any additional information that
the Company possesses or can acquire without
unreasonable effort or expense that is necessary to
verify the accuracy of the information contained in
the SEC Reports;
(10) has read the SEC Reports carefully, is fully familiar
with and understands the contents of the SEC Reports;
and
(11) has not relied on any representation or warranty in
connection with the Purchase other than those
contained in the Transaction Documents.
(e) Financial Capability. The Investor has or will have available
funds to make the Purchase on the terms and conditions contemplated by this
Agreement.
(f) No Legal, Tax, Accounting or Business Advice. The Investor
understands that neither the Company nor any of its agents has given any legal,
8
tax, accounting or business advice regarding the consequences of the Purchase,
and the Investor has consulted the Investor's own legal, tax, accounting and
business advisors with respect to the Purchase.
(g) No General Solicitation or General Advertising. Neither the
Investor, any of its Affiliates (as defined in Section 5.10(b)) nor any person
acting on its or their behalf, has made or will make offers or sales of the
Purchased Securities by means of any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act).
(h) Possible Dilutive Effect of Private Placement. The Investor
understands that the Company is currently involved in discussions to sell up to
$2.0 million of its common stock to up to 35 investors on a private placement
basis. Any such sale may have a dilutive effect on the ownership of the
Investor. There can be no assurance as to whether the Company will be able to
sell any or all of these shares.
(i) Confidentiality Agreement. The Investor understands and
acknowledges that unless expressly set forth in this Agreement, nothing in this
Agreement shall supersede the provisions of the Confidentiality Agreement, dated
June ___, 2009, entered into between the Company and the Investor.
Article III
Covenants
3.1 Commercially Reasonable Efforts. Subject to the terms and conditions of
this Agreement, each of the parties will use its commercially reasonable efforts
in good faith to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Purchase as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party to that end,
including cooperating in seeking to obtain any consent, authorization or
approval that might be required from Governmental Entities.
3.2 Expenses. Except to the extent otherwise provided in any Transaction
Document executed by the Company and the Investor, each of the parties hereto
will bear and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated under the Transaction Documents,
including fees and expenses of its own financial or other consultants,
investment bankers, accountants and counsel.
3.3 Publicity. No public release or announcement concerning the
transactions contemplated hereby shall be issued by the Investor without the
prior consent of the Company. The Company shall use commercially reasonable
efforts to file with the SEC, as promptly as practicable after counter-execution
and delivery of this Agreement by the Company, but no later than the time
required by SEC Form 8-K, the material terms of this Agreement and the Offering
if that constitutes material non-public information with respect to the Company
within the meaning of United States federal securities laws.
3.4 Further Assurances. Within three days of receipt of a written request
from the Company, the Investor agrees to provide such information relevant to
9
the Purchase and to execute and deliver such documents as the Company determines
in good faith to be necessary or advisable to comply with any and all laws,
regulations and ordinances to which the Company is subject.
Article IV
Additional Agreements of the Investor
4.1 Transfer Restrictions.
---------------------
(a) Restrictions on Transfer. The Investor shall not, directly or
indirectly, transfer, sell, assign, pledge, convey, hypothecate or otherwise
encumber or dispose of, or engage in a Hedging Transaction (as hereinafter
defined) with respect to (collectively, "Transfer"), any of the Purchased
Securities. For purposes of this Agreement, "Hedging Transaction" means any
short sale (whether or not against the box) or any purchase, sale or grant of
any right (including any put or call option) with respect to any security (other
than a broad-based market basket or index) that includes, relates to or derives
any significant part of its value from the Purchased Securities.
(b) Permitted Transfers. Notwithstanding Section 4.1(a), the
Investor and Permitted Transferees (as hereinafter defined) shall be permitted
to Transfer any Purchased Securities:
(1) at any time a Shelf Registration Statement (as defined
in Section 4.3(a)(2)) shall be effective and in
compliance with the Securities Act and usable for
resale of the Purchased Securities as permitted by and
subject to the limitations set forth in Section 4.3;
and
(2) at times or under circumstances not contemplated by
clause (1) of this Section 4.1(b) if in compliance
with Rule 144A or Rule 144 under the Securities Act;
provided that, if the Investor is an Affiliate of the
Company or has been an Affiliate of the Company during
the three months preceding the date of such Transfer,
any such Transfer shall be subject to approval by the
Company in its sole discretion, which approval may be
conditioned on the receipt by the Company or its
agents or representatives of such information,
documentation, opinions or assurances or other
agreements as the Company may determine in its sole
discretion to be necessary or advisable.
4.2 Legend. The Investor agrees that all certificates or other instruments
representing Purchased Securities will bear a legend substantially to the
following effect:
"THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A
REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AS PERMITTED BY, AND IN ACCORDANCE WITH, A
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SUBSCRIPTION AGREEMENT, DATED JUNE ___, 2009, BETWEEN THE ISSUER OF THESE
SECURITIES AND THE INVESTOR REFERRED TO THEREIN, IN A TRANSACTION COMPLYING WITH
RULE 144A OR RULE 144 UNDER SUCH ACT AND AN EXEMPTION UNDER SUCH LAWS. THIS
INSTRUMENT IS ISSUED PURSUANT TO AND SUBJECT TO THE RESTRICTIONS ON TRANSFER AND
OTHER PROVISIONS OF THE SUBSCRIPTION AGREEMENT, A COPY OF WHICH IS ON FILE WITH
THE ISSUER. THE SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH SAID AGREEMENT. ANY SALE OR
OTHER TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENT WILL BE VOID."
4.3 Registration Rights.
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(a) Registration.
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(1) Subject to the terms and conditions of this Agreement,
the Company covenants and agrees to use commercially
reasonable efforts to (A) prepare and file with the
SEC a Shelf Registration Statement (as hereinafter
defined) covering all Registrable Securities no later
than August 15, 2009, (B) cause such Shelf
Registration Statement to become effective no later
than November 15, 2009, and (C) keep such Shelf
Registration Statement continuously effective and in
compliance with the Securities Act and usable for
resale of such Registrable Securities (including by
filing post-effective amendments to such Shelf
Registration Statement (or a new Shelf Registration
Statement if the initial Shelf Registration Statement
expires)) for a period from the date of its initial
effectiveness until the earlier of (x) the second
anniversary of the Closing Date and (y) such time as
there are no Registrable Securities remaining.
(2) Any registration pursuant to this Section 4.3(a) shall
be effected by means of a shelf registration under the
Securities Act (a "Shelf Registration Statement"), and
any such registration (including a resale of
Registrable Securities from an effective Shelf
Registration Statement) shall be effected in
accordance with the methods of distribution set forth
in the Shelf Registration Statement and Rule 415 under
the Securities Act.
(3) The Company shall not be required to effect a
registration (including a resale of Registrable
Securities from an effective Shelf Registration
Statement) pursuant to this Section 4.3(a): (A) with
respect to securities that are not Registrable
Securities; or (B) if the Company has notified the
Investor that in the good faith judgment of the Chief
Executive Officer of the Company, it would be
materially detrimental to the Company or its
securityholders for such registration to be effected
at such time until the Chief Executive Officer of the
Company shall have withdrawn such determination;
provided that the Company may not exercise its right
pursuant to this clause (B) for a continuous period of
more than 45 days or for more than 90 days in any
calendar year.
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(b) Expenses of Registration. All Registration Expenses incurred
in connection with any registration, qualification or compliance under this
Section 4.3 shall be borne by the Company. All Selling Expenses incurred in
connection with any registrations hereunder, shall be borne by the Investor and
any Permitted Transferees pro rata on the basis of the aggregate offering or
sale price of the securities so registered.
(c) Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities or facilitate the resale of
Registrable Securities from an effective Shelf Registration Statement, the
Company shall, as expeditiously as reasonably practicable, use commercially
reasonable efforts to:
(1) (A) Prepare and file with the SEC a prospectus
supplement with respect to a proposed offering of
Registrable Securities pursuant to an effective Shelf
Registration Statement and (B) subject to this Section
4.3(c), keep such Shelf Registration Statement
effective or such prospectus supplement current for
the period reasonably required to complete the
distribution of such Registrable Securities.
(2) Prepare and file with the SEC such amendments and
supplements to the applicable Shelf Registration
Statement and the prospectus or prospectus supplement
used in connection with such Shelf Registration
Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the
disposition of all of such Registrable Securities.
(3) Furnish to the Investor or a Permitted Transferee and
any underwriters such number of copies of the
applicable Shelf Registration Statement and each such
amendment or supplement thereto (including in each
case all exhibits) and of a prospectus, including any
preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other
documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities
to be resold by them.
(4) Register and qualify the securities covered by such
Shelf Registration Statement under such other
securities or Blue Sky laws of such jurisdictions in
the United States as shall be reasonably requested by
the Investor or a Permitted Transferee, to keep such
registration or qualification in effect for so long as
such Shelf Registration Statement remains in effect,
and to take any other action which may be reasonably
necessary to enable such seller to consummate the
disposition in such jurisdictions of the securities
owned by the Investor; provided that the Company shall
not be required in connection therewith or as a
condition thereto to qualify to do business or to file
a general consent to service of process in any such
states or jurisdictions.
(5) Notify the Investor, at any time when a prospectus
relating to any Registrable Securities is required to
be delivered under the Securities Act, of the
happening of any event as a result of which the
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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.
(6) Give prompt notice to the Investor:
(A) when any Shelf Registration Statement filed
pursuant to Section 4.3(a) or any amendment
thereto has been filed with the SEC and when
such Shelf Registration Statement or any
post-effective amendment thereto has become
effective;
(B) of any request by the SEC for amendments or
supplements to any Shelf Registration Statement
or the prospectus included therein or for
additional information;
(C) of the issuance by the SEC of any stop order
suspending the effectiveness of any Shelf
Registration Statement or the initiation of any
proceedings for that purpose;
(D) of the receipt by the Company or its legal
counsel of any notification with respect to the
suspension of the qualification of the Common
Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for
such purpose; or
(E) of the happening of any event that requires the
Company to make changes in any effective
registration statement or the prospectus related
to such registration statement in order to make
the statements therein not misleading.
(7) Use its commercially reasonable efforts to prevent the
issuance or obtain the withdrawal of any order
suspending the effectiveness of any Shelf Registration
Statement referred to in Section 4.3(c)(6)(C) at the
earliest practicable time.
(8) Except under the circumstances described in clause
(A), (B) or (C) of Section 4.3(a)(3), upon the
occurrence of any event contemplated by Section
4.3(c)(5) or 4.3(c)(6)(E), prepare and furnish to the
Investor, as soon as reasonably practicable, a
reasonable number of copies of a prospectus
supplemented or amended so that such prospectus shall
conform in all material respects to the applicable
requirements of the Securities Act and the rules and
regulations of the SEC thereunder and shall not
include an untrue statement of a material fact or omit
to state a material fact required to be stated therein
or necessary to make the statements therein not
misleading in light of the circumstances then
existing.
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(9) Procure the cooperation of the Company's transfer
agent in settling any offering or sale of Registrable
Securities.
(10) Cause all such Registrable Securities to be listed on
each securities exchange, if any, on which Common
Shares of the Company are then listed.
(11) Timely provide to its securityholders earning
statements satisfying the provisions of Section 11(a)
of the Securities Act (which the Company may do by
complying with Rule 158 under the Securities Act).
(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 to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that circumstances exist that make use of
such registration statement, prospectus or prospectus supplement inadvisable,
the Investor and any Permitted Transferee shall discontinue disposition of
Registrable Securities until the Investor has received copies of a supplemented
or amended prospectus or prospectus supplement, or until the Investor is advised
in writing by the Company that the use of the prospectus and, if applicable,
prospectus supplement may be resumed, and, if so directed by the Company, the
Investor and any Permitted Transferee shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in the
Investor's or such Permitted Transferee's possession, of the prospectus and, if
applicable, prospectus supplement covering such Registrable Securities current
at the time of receipt of such notice.
(e) The Investor's registration rights as to any securities held
by the Investor (and its Affiliates, partners, members and former members) shall
not be available unless such securities are Registrable Securities.
(f) Furnishing Information.
(1) Neither the Investor nor any Permitted Transferees
shall use any free writing prospectus (as defined in
Rule 405 under the Securities Act) in connection with
the sale of Registrable Securities without the prior
written consent of the Company.
(2) It shall be a condition precedent to the obligations
of the Company to take any action pursuant to Section
4.3 that the Investor, any Permitted Transferees and
their underwriters, if any, shall furnish to the
Company a reasonable time before the Company's
proposed filing date for the Shelf Registration
Statement 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) Rule 144 Reporting. With a view to making available to the
Investor or a Permitted Transferee the benefits of certain rules and regulations
of the SEC which may permit the sale of the Registrable Securities to the public
without registration, the Company agrees to use commercially reasonable efforts
to:
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(1) remain in compliance with the reporting obligations
under the Exchange Act; and
(2) so long as the Investor or such Permitted Transferee
owns any Registrable Securities, furnish to the
Investor or such Permitted Transferee promptly upon
request a written statement by the Company as to its
compliance with the reporting requirements under
Exchange Act.
(h) As used in this Section 4.3, the following terms shall have
the following respective meanings:
"Register," "registered" and "registration" shall refer to a registration
effected by preparing and (1) filing a registration statement in compliance with
the Securities Act and applicable rules and regulations thereunder, and the
declaration or ordering of effectiveness of such registration statement, or (2)
filing a prospectus and/or prospectus supplement in respect of an appropriate
effective registration statement on Form S-3.
"Registrable Securities" means the Purchased Securities (and any Common
Shares issued or issuable to the Investor with respect to such Purchased
Securities by way of stock dividends or stock splits or in connection with a
combination of shares, recapitalization, merger or other reorganization);
provided that the Investor is not an Affiliate of the Company and has not been
an Affiliate for a period of at least three months; and provided, further, that,
once issued, such Purchased Securities will not be Registrable Securities when
(1) they are sold pursuant to an effective registration statement under the
Securities Act, (2) they may be sold pursuant to Rule 144 under the Securities
Act, (3) they shall have ceased to be outstanding or (4) they have been sold in
a private transaction in which the transferor's rights under this Agreement are
not assigned to the transferee of the securities. No Registrable Securities may
be registered under more than one registration statement at any one time.
"Registration Expenses" means all expenses incurred by the Company in
effecting any registration pursuant to this Agreement (whether or not any
registration or prospectus becomes effective or final) or otherwise complying
with its obligations under this Section 4.3, including all registration, filing
and listing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, expenses incurred in connection with any
"road show" and expenses of the Company's independent accountants in connection
with any regular or special reviews or audits incident to or required by any
such registration, but shall not include Selling Expenses and the compensation
of regular employees of the Company, which shall be paid in any event by the
Company.
"Selling Expenses" means all discounts, selling commissions, stock transfer
taxes and fees and disbursements of counsel for the Investor and any Permitted
Transferee applicable to the sale of Registrable Securities.
(i) At any time, the Investor may elect to forfeit its rights set
forth in this Section 4.3 from that date forward; provided that no such
forfeiture shall terminate the Investor's rights or obligations under Section
4.3(f).
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Article V
Miscellaneous
5.1 Survival. The representations and warranties of the Company contained
in this Agreement shall survive until the date two years after the Closing Date,
at which time such representations and warranties shall expire. The
representations and warranties of the Investor contained in this Agreement shall
survive until the date two years after the Closing Date, at which time such
representations and warranties shall expire; provided that the representations
and warranties made in Sections 2.3(a) and (b) shall survive the Closing until
the expiration of the applicable statute of limitations.
5.2 Interpretation. When a reference is made in this Agreement to
"Recitals," "Articles," "Sections" or "Annexes," such reference shall be to a
Recital, Article or Section of, or Annex to, this Agreement unless otherwise
indicated. The terms defined in the singular have a comparable meaning when used
in the plural, and vice versa. The table of contents and headings contained in
this Agreement are for reference purposes only and are not part of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "contained in" shall be deemed to mean "set forth in or
incorporated by reference into," and the words "contain" and "contains" shall
have corresponding meanings. No rule of construction against the draftsperson
shall be applied in connection with the interpretation or enforcement of this
Agreement, as this Agreement is the product of negotiation between sophisticated
parties advised by counsel. Except as expressly stated in this Agreement, all
references to any statute, rule or regulation are to the statute, rule or
regulation as amended, modified, supplemented or replaced from time to time
(and, in the case of statutes, include any rules and regulations promulgated
under the statute) and to any section of any statute, rule or regulation
including any successor to the section. All references to the "Knowledge" of the
Company mean the actual knowledge of the Chief Executive Officer or Chief
Financial Officer of the Company; all references to the "Knowledge" of the
Investor mean the actual knowledge of the "executive officers" (as defined in
Rule 3b-7 under the Exchange Act) of the Investor (or, if the Investor is a
natural person, the Investor himself or herself). For the avoidance of doubt, at
any time when this Agreement requires a calculation of the number or percentage
of shares of Common Shares owned or controlled by a person, the number of shares
of Common Shares underlying any convertible or exchangeable securities
beneficially owned or controlled by such person are to be included as if such
securities were fully converted in the hands of such person as of that time.
5.3 Amendment. No amendment of any provision of this Agreement will be
effective unless made in writing and signed by an officer of a duly authorized
representative of each party.
5.4 Waiver of Conditions. The conditions to the Company's obligation to
consummate the Purchase are for the sole benefit of the Company and may be
waived by the Company in whole or in part to the extent permitted by applicable
law. No waiver will be effective unless it is in a writing signed by a duly
authorized officer of the Company that makes express reference to the provision
or provisions subject to such waiver.
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5.5 Counterparts and Facsimile. This 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 Agreement may be delivered by
facsimile or electronically scanned, and such facsimiles or electronic scans
will be deemed as sufficient as if actual signature pages had been delivered.
5.6 Governing Law; Submission to Jurisdiction, Etc. This Agreement shall 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. In
connection with any dispute, controversy or claim arising out of or relating to
the Transaction Documents, or the validity, interpretation, breach or
termination of any such Transaction Documents, including claims seeking redress
or asserting rights under any law, each of the parties hereto agrees (a) to
submit to the personal jurisdiction of the State or Federal courts in the New
York Counties of Orange and Ulster, (b) that exclusive jurisdiction and venue
shall lie in the State or Federal courts in the State of New York and (c) that
notice may be served upon such party at the address and in the manner set forth
for such party in Section 5.8.
5.7 Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested). All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice.
(A) If to the Investor, to the person and the address indicated on
the signature page to this Agreement.
(B) If to the Company:
ES Bancshares, Inc.
00 Xxxxx Xxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx, President and Co-Chief
Executive Officer
E-Mail: xxxxxxxxxx@xxxxx.xxx
Facsimile: (000) 000-0000
with a copy to:
Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, PC
0000 Xxxxxxxxx Xxxxxx, XX, Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxx Xxxxxxxx, Esq.
E-Mail: xxxxxxxxx@xxxxxxx.xxx
Facsimile: (000) 000-0000
5.8 Entire Agreement, Etc. (a) This Agreement, the other Transaction
Documents executed and delivered on the date hereof and the confidentiality
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letter agreement, as amended, and entered into between the Company and the
Investor, constitute the entire agreement, and supersede all other prior
agreements, understandings, representations and warranties, both written and
oral, between the parties, with respect to the subject matter hereof, and (b)
this Agreement will not be assignable by any party without the prior written
consent of the other party (any attempted assignment in contravention hereof
being null and void ab initio). The Investor agrees to treat all confidential
information provided by the Company in connection with the transactions
contemplated by the Transaction Documents as Proprietary Information under the
confidentiality provisions of the aforementioned confidentiality letter
agreement.
5.9 Definitions of "Subsidiary" and "Affiliate".
(a) When a reference is made in this Agreement to a Subsidiary of
a person, the term "Subsidiary" means those corporations, banks, savings banks,
associations and other entities of which such person owns or controls more than
50% of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which more than 50% of the outstanding equity
securities is owned directly or indirectly by its parent.
(b) The term "Affiliate" means, with respect to any person, any
person directly or indirectly controlling, controlled by or under common control
with, such other person. For purposes of this definition, "control" when used
with respect to any person, means the possession, directly or indirectly, of the
power to cause the direction of management and/or policies of such person,
whether through the ownership of voting securities, by contract or otherwise.
5.10 Severability. If any provision of this Agreement or a Transaction
Document, or the application thereof to any person 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.
5.11 No Third Party Beneficiaries. Nothing contained in this Agreement,
expressed or implied, is intended to confer upon any person or entity other than
the Company and the Investor, any benefits, rights, or remedies.
[The next page is the signature page.]
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In Witness Whereof, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first herein
above written.
ES Bancshares, Inc.
By:
-----------------------------------
Name:
Title:
INVESTOR:
-----------------------------
Address:
By:
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Name:
Title:
Common Shares Subscribed For:
----------------------------------
Aggregate Purchase Price Delivered Herewith:
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