Document:

EMPLOYMENT
AGREEMENT

     

    This
EMPLOYMENT AGREEMENT is made as of June 30, 2009 by and between RINO
International Corporation, a Nevada corporation (the "Company"), and Yi (Jenny)
Liu (“Employee”).

     

    WITNESSETH:

     

    WHEREAS,
Employee wishes to be employed by the Company with the duties and
responsibilities as hereinafter described, and the Company desires to assure
itself of the availability of Employee’s services in such capacity.

     

    NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
Company and Employee hereby agree as follows:

     

    1.         EMPLOYMENT. The
Company hereby agrees to employ Employee, and Employee hereby agrees to serve
the Company, upon the terms and conditions hereinafter set forth.

     

    2.         TERM. The employment
of Employee by the Company pursuant to this Agreement shall be for a thirty-six
(36) month period commencing on June 30, 2009 (the “Employment Term”).

     

    3.         DUTIES. Employee
shall, subject to overall direction consistent with the legal authority of the
Chief Executive Officer and Chairman of the Board, serve as, and have all power
and authority inherent in the offices of Chief Financial Officer of the Company
and shall be responsible for those areas in the conduct of the business
reasonably assigned to her by the Chief Executive Officer and the Chairman of
the Board. Employee shall devote substantially all her business time and efforts
to the business of the Company; provided, however, that it is understood and
agreed that, while Employee may devote time to other business matters in which
she may have an interest, in the event of a conflict, Employee’s first and
primary responsibility shall be to the performance of her duties for the
Company.

     

    4.         RESPONSIBILITIES. The
general responsibilities of the chief financial officer (CFO) include but are
not limited to the responsibilities set forth in Exhibit A attached
hereto.

    

    5.         COMPENSATION AND OTHER PROVISIONS.
Employee shall be entitled to the compensation and benefits hereinafter
described in subparagraphs (A) through (G) (such compensation and benefits being
hereinafter referred to as “Compensation Benefits”).

     

    A.  ANNUAL BASE SALARY. The
Company shall pay to Employee a base salary (the “Base Salary”) as
follows:

     

              A
gross amount of USD120, 000 per annum or USD10, 000 per month, paid on the first
business day of each month for the prior month’s employment.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    B.  EQUITY COMPENSATION. The
Company shall grant to Employee 50,000 options to purchase common stock at the
exercise price of $6.15 per share, vesting in the following
schedule:

    

    ● 10,000
shares will vest on June 30, 2010;

    ● 20,000
shares will vest on June 30, 2011 and

    ● 20,000
shares will vest on June 30, 2012

    

    C.  BONUS COMPENSATION. The
Company may, at the discretion of and subject to approval of the
Compensation Committee of the Board of Directors, award the Employee a bonus.
The Bonus Compensation may be in the form of securities or cash. The
Company guarantees that the Employee’s annual base salary, bonus compensation
and equity compensation would be no less than USD146,000 (RMB1, 000,000) per
annum commencing on June [1], 2009.

    

    D.  COMPENSATION ADJUSTMENT.
The Base Salary and Employee’s other compensation will be reviewed by the Board
of Directors of the Company (the “Board”) at least annually and may be increased
(but not decreased) from time to time as the Board may determine.

     

    E.  PARTICIPATION IN BENEFIT
PLANS. During the Employment Term, Employee shall be eligible to
participate in all Employee benefit plans and arrangements now in effect or
which may hereafter be established, including, without limitation, all group
insurance and medical care plans and all disability, retirement and other
Employee benefit plans of the Company. Should the Employee not want to
participate in the Company’s health plan, with Board approval, the company will
reimburse the Employee for the expense incurred in participating in another
plan.

     

    F.  OTHER PROVISIONS.
During the Employment Term, Employee shall be entitled to four (4) weeks paid
vacation per annum. Employee shall make herself available via email and an
enabled mobile phone during periods in which she is not in the offices of
the Company. Employee shall be reimbursed for all reasonable expenses incurred
by her in the performance of her duties, including, but not limited to,
entertainment, travel and other expenses incurred in connection with such
duties.

      

    G.  INDEMNIFICATION. The
Company shall indemnify and hold harmless the Employee to the fullest extent
permitted by law for any action or inaction of the Employee while serving as an
officer and director of the Company or, at the Company’s request, as an officer
or director of any other entity affiliated with the Company, or as a fiduciary
of any benefit plan. The Company shall include the Employee under the Company’s
directors’ and officers’ liability insurance in the same amount and to the same
extent as the Company covers its other officers and directors both (i) during
the Employment Term, and (ii) for a five (5) year period after the Employment
Term.

     

    6.         TERMINATION.
Employee’s employment hereunder shall terminate as a result of any of the
following events: 

    

    A.  Employee’s
death;

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    B.  Employee
shall be unable to perform her duties hereunder by reason of illness, accident
or other physical or mental disability for a continuous period of at least three
(3) months or an aggregate of nine (9) months during any continuous eighteen
(18) month period (“
Disability ”);

     

    C.  Voluntary
resignation by the Employee;

    

    D.  Termination for Good
Reason. If any of the following events occurs after the Effective Date,
the Employee may resign from her employment for Good Reason by giving written
notice of resignation within 60 days following such event:

     

    
      (i)
a
material reduction in the scope of the Employee's assigned duties and
responsibilities from those in effect under this Agreement on the Effective Date
or the assignment of duties or responsibilities that are inconsistent with the
Employee's status in the Company;

    

     

    (ii)
the
failure by the Company to continue to provide the Employee with benefits
substantially similar to those specified in Section 5 of this Agreement unless
the new owner of the Company or the Company deem it necessary to change such
benefits in order to conform to applicable law; or

     

    Any
written notice of resignation for Good Reason shall describe in reasonable
detail the circumstances believed to constitute Good Reason. Notwithstanding
Employee's provision of a notice of resignation for Good Reason, the Company has
a right to remedy or cure for a period of 30 days following its receipt of such
notice the circumstances described by the Employee as constituting Good Reason
and Employee's resignation shall become effective on the 31st day following
notice to the Company if the Company fails to remedy or cure the circumstances
constituting Good Reason within such 30-day period.

    

    E.  Termination
by the Company with Cause, where “Cause” shall mean:
(i) final non-appealable adjudication of the Employee of a felony, which would
have a material or adverse effect on the business of the Company; or (ii) the
determination of the Board (other than the Employee) that the Employee has
engaged in intentional misconduct or the gross neglect of her duties, which has
a continuing material adverse effect on the business of the Company;
or

     

    F.  Termination
by the Company for any reason other than Cause.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Any
termination pursuant to subparagraph B, C, D, E or F of this Section shall
be communicated by a written notice (“Notice of Termination”); such
notice will set forth with specificity the grounds for termination if
termination is for “Cause”. The Employee’s employment under this Agreement shall
be deemed to have terminated as follows: (i) if the Employee’s employment is
terminated pursuant to subparagraph A above, on the date of her death; (ii) if
the Employee’s employment is terminated pursuant to subparagraph B, E, or F
above, on the date the Notice of Termination is received by the Employee; and
(iii) if the Employee’s employment is terminated pursuant to subparagraph C
above, thirty (30) days after the date on which the Company receives the Notice
of Termination from the Employee. The date on which termination is deemed to
have occurred pursuant to this paragraph is hereinafter referred to as the
“ Date of
Termination ”. If the Notice of Termination is sent to the Employee by
the Company, then it shall be sent to the Employee pursuant to the terms set
forth in Section 15 of this Agreement.

     

    7.         PAYMENTS ON
TERMINATION. In the event that the Employee’s employment is terminated
pursuant to Sections 6 A, B, D or F above, the Company shall pay to the Employee
and/or her estate, (i) all the Compensation Benefits the Employee is entitled to
through the Date of Termination, (ii) all benefits and other compensation, if
any, due and owing as of the Date of Termination, and (iii) any Severance
Payments that the Employee may be entitled to pursuant to Section
16.

     

    8.         LIFE INSURANCE. If
requested by the Company, the Employee shall submit to such physical
examinations and otherwise take such actions and execute and deliver such
documents as may be reasonably necessary to enable the Company to obtain life
insurance on the life of the Employee for the benefit of the
Company.

     

    9.         REPRESENTATIONS AND
WARRANTIES. The Employee represents and warrants to the Company that she
is under no contractual or other restriction or obligation that would prevent
the performance of her duties hereunder or interfere with the rights of the
Company hereunder.

     

    10.         DISCLOSURE AND PROTECTION OF
CONFIDENTIAL INFORMATION.

     

    A.  For
purposes of this Agreement, “Confidential
Information” means knowledge, information and material which is
proprietary to the Company, of which the Employee may obtain knowledge or access
through or as a result of her employment by the Company (including information
conceived, originated, discovered or developed in whole or in part by the
Employee). Confidential Information includes, but is not limited to, (i)
technical knowledge, information and material such as trade secrets, processes,
formulas, data, know-how, improvements, inventions, computer programs, drawings,
patents, and experimental and development work techniques, and (ii)
marketing and other information, such as supplier lists, customer lists,
marketing and business plans, business or technical needs of customers,
consultants, licensees or suppliers and their methods of doing business,
arrangements with customers, consultants, licensees or suppliers, manuals and
personnel records or data. Confidential Information also includes any
information described above which the Company obtains from another party and
which the Company treats as proprietary or designates as confidential, whether
or not owned or developed by the Company. Notwithstanding the foregoing, any
information which is or becomes available to the general public other than by
breach of this Section 10 shall not constitute Confidential Information for
purposes of this Agreement.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    B.  During
the period in which the Employee is employed by the Company and for two (2)
years thereafter, the Employee agrees, to hold in confidence all Confidential
Information and not to use such information for the Employee’s own benefit or to
reveal, report, publish, disclose or transfer, directly or indirectly, any
Confidential Information to any person or entity, or to utilize any Confidential
Information for any purpose, except in the course of Employee’s work for the
Company, or as required by law.

     

    C.  The
Employee will abide by any and all policies and procedures, whether formal or
informal, that may from time to time be imposed by the Company for the
protection of Confidential Information, and will inform the Company of any
defects in, or improvements that could be made to, such policies and
procedures.

     

    D.  The
Employee will notify the Company in writing immediately upon receipt of any
subpoena, notice to produce, or other compulsory order or process of any court
of law or government agency which requires or may require the disclosure or
other transfer of Confidential Information.

     

    E.  Upon
termination of Employee’s employment with the Company, Employee will deliver to
the Company or destroy (at Employee’s election) any and all records and tangible
property that contain Confidential Information that are in her possession or
under her control.

     

    11.       COVENANT NOT TO
COMPETE.

     

    A.  In
consideration for the Company entering into this Agreement, Employee covenants
and agrees that during the period in which the Employee is employed by the
Company and for one (1) year thereafter, Employee will not, without the express
prior written consent of the Company, directly or indirectly, compete with the
business of the Company anywhere within the United States of America or the
Peoples Republic of China. Employee will not undertake any activities that are
competitive with or acquire interests in an entity which is competitive with the
business of the Company, whether alone, as a partner, or as an officer,
director, Employee, independent contractor, consultant or shareholder holding 5%
or more of the outstanding voting stock of any other corporation, or as a
trustee, fiduciary or other representative of any other person or
entity.

     

    B.  During
the period in which the Employee is employed by the Company and for one (1) year
thereafter, Employee will not, directly or indirectly, solicit or induce any
Employee of the Company or any Employee of a subsidiary of the Company to leave
her or her employment, or solicit or induce any consultant or independent
contractor to sever that person’s relationship with the Company.

     

    C.  If
any court shall determine that the duration or geographical limit of any
covenant contained in this Section 11 is unenforceable, it is the intention of
the parties that covenant shall not be terminated but shall be deemed amended to
the extent required to render it valid and enforceable, such amendment to apply
only in the jurisdiction of the court that has made such
adjudication.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    D. 
The Employee acknowledges and agrees that (i) the covenants contained in
Sections 10 and 11 hereof are the essence of this Agreement and that such
covenants are reasonable and necessary to protect and preserve the interests,
properties, and business of the Company, and (ii) irreparable loss and damage
will be suffered by the Company should the Employee breach any of such
covenants.

    

    12.       AVAILABILITY OF INJUNCTIVE
RELIEF. The Employee acknowledges and agrees that any breach by her of
the provisions of Sections 10 or 11 hereof will cause the Company irreparable
injury and damage for which it cannot be adequately compensated in damages. The
Employee therefore expressly agrees that the Company shall be entitled to seek
injunctive and/or other equitable relief, on a temporary or permanent basis to
prevent an anticipatory or continuing breach of this Agreement. Nothing herein
shall be construed as a waiver by the Company of any right it may have, or
hereafter acquire, to monetary damages by reason of any injury to its property,
business or reputation or otherwise arising out of any wrongful act or omission
of it.

     

    13.       SURVIVAL. The
covenants, agreements, representations and warranties contained in or made
pursuant to this Agreement shall survive the Employee’s termination of
employment, irrespective of any investigation made by or on behalf of any
party.

     

    14.       MODIFICATION. This
Agreement sets forth the entire understanding of the parties with respect to the
subject matter hereof, supersedes all existing agreements between them
concerning such subject matter, and may be modified only by a written instrument
duly executed by each party.

     

    15.       NOTICES. Any notice
required or permitted hereunder shall be deemed validly given if delivered by
hand, verified overnight delivery, or by first class, certified mail to the
following addresses (or to such other address as the addressee shall notify in
writing to the other party):

     

    
      
        	
                If
      to the Employee:

              	
                 
      Yi (Jenny) Liu

              
	 
      	 
      
	
                If
      to the Company:

              	
                 
      11 Youquan Road, Zhanqian Street, Jinzhou District

              
	 
      	
                Dalian,
      China 116100

              

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    16.      SEVERANCE UPON TERMINATION
WITHOUT CAUSE OR FOR GOOD REASON. If, during the Term, Company terminates
the Employee's employment with the Company and its subsidiaries for any reason
other than for Cause or the Employee's death or disability, or the Employee
terminates her employment for Good Reason (not including Company's or the
Employee's non-renewal of the Term) and the Employee executes and delivers to
the Company a valid and effective release of all claims against the Company and
its affiliates in a form and format as prepared and provided by the Company, the
Employee shall be entitled to receive (i) a lump sum cash payment in the amount
of any accrued and unpaid salary as of her date of termination, (ii) a lump sum
cash payment equal to any accrued and unpaid bonus for any prior fiscal year,
(iii) a lump sum cash payment equal to the pro rata amount of any bonus payable
with respect to the fiscal year in which termination occurs (such pro rata
amount determined by multiplying the bonus that would have been paid for the
full fiscal year had the Employee continued to render service to the Company as
of the last day of the fiscal year multiplied by a ratio, the numerator of which
is the number of days since the beginning of the fiscal year until the date of
termination and the denominator of which is 365), (iv) an amount equal to the
sum of (a) 50% of her then current annual base salary and (b) 50% of the average
annual cash bonus payments paid by the Company to the Employee during the
current year of the Company, and such sum shall be payable in six (6)
substantially equal monthly payments; provided that each payment is intended to
constitute a separate payment within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended ("Code"). Further, the Company shall continue
the medical and life insurance benefits which Employee was receiving on the date
of her termination, with any related costs to be paid by the Employee being no
more than what Employee had been paying prior to the date of termination, for a
period of six (6) months after the date of her termination; provided such
continued coverage shall end on the date the Employee has commenced employment
elsewhere and becomes eligible for participation in a similar type of benefit
program of her successor employer.

    

    17.       WAIVER. Any waiver by
either party of a breach of any provision of this Agreement shall not operate as
or be construed to be a waiver of any other breach of such provision or of any
breach of any other provision of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement. All waivers must be in writing.

     

    18.       BINDING EFFECT. The
Company’s rights and obligations under this Agreement shall not be transferable
by assignment or otherwise, and any attempt to do any of the foregoing shall be
void. The provisions of this Agreement shall be binding upon the Employee and
her heirs and personal representatives, and shall be binding upon and inure to
the benefit of the Company, its successors and assigns.

     

    19.       HEADINGS. The
headings in this Agreement are solely for convenience of reference and shall be
given no effect in the construction or interpretation of this
Agreement.

     

    20.       GOVERNING LAW; VENUE.
This Agreement is to be performed in the State of Nevada, and the validity,
construction and enforcement of, and the remedies under, this Agreement shall be
governed in accordance with the laws of the State of Nevada, without giving
effect to any choice of laws or principles.

     

    21.       INVALIDITY. The
invalidity or unenforceability of any term of this Agreement shall not
invalidate, make unenforceable or otherwise affect any other term of this
Agreement, which shall remain in full force and effect.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    22.       ATTORNEYS’ FEES. Except for any
disputes arising pursuant to Section 16 of this Agreement, if any dispute or
litigation arises hereunder between any of the parties hereto, then the
prevailing party shall be entitled to all reasonable costs and expenses incurred
by it in connection therewith (including, without limitation, all
reasonable attorneys’ fees and costs incurred before and at any trial or other
proceeding and at all tribunal levels), as well as all other relief granted in
any suit or other proceeding. As used herein, a party shall be deemed
“prevailing” when it recovers (i) as to a damage claim, an aggregate of more
than fifty percent (50%) of the damages which it seeks among its various
asserted claims exclusive of interest, attorney’s fees, costs incurred and
exemplary damages, and (ii) as to an equity claim, substantial injunctive or
other equitable relief upon its asserted claim. Either of the parties herein
shall be entitled to request the trier of fact in any dispute, litigation or
arbitration between them, to determine which of the parties is
“prevailing”.

     

    23.       REGISTRATION OF OPTION
SHARES. When and if the Company files an registration statement of Form
S-8 for registration under Securities Act of 1933, as amended (the “Securities
Act”), of securities issued pursuant to any employee benefit plan (as such term
is defined under Rule 405 promulgated under the Securities Act) of the Company,
the parent, any subsidiary, any controlled affiliate or variable interest entity
of the Company, the Company shall include in such registration statement on Form
S-8 shares issuable upon exercise of the options granted to the Employee under
Section 5.B.  

    

    WITNESS
WHEREOF, the parties have executed this Agreement as of the date first
hereinabove written.

     

    
      
        	
                RINO
      International Corporation, a Nevada corporation

              
	 
      
	
                By:       /s/ Zou
      Dejun

              
	
                Name:
      Zou Dejun

              
	
                Title:  Chief
      Executive Officer

              
	 
      
	
                Employee

              
	 
      
	
                Yi
      (Jenny) Liu

              
	 
      
	
                /s/ Yi (Jenny)
  LiuBANK
OF SMITHTOWN

    SUBORDINATED
NOTES

    DUE
JULY 1, 2019

    

    SMITHTOWN
BANCORP, INC.

    WARRANTS
TO PURCHASE COMMON SHARES

    

    SUBSCRIPTION
AGREEMENT

     

    THIS SUBSCRIPTION AGREEMENT (this “Subscription
Agreement”)
dated as of June 29, 2009 is made by and among the undersigned subscriber or
subscribers (the “Purchaser”),
Bank of Smithtown, a New York state-chartered bank (the “Bank”),
and Smithtown Bancorp, Inc., a corporation organized under the laws of the State
of New York (the “Company”,
and together with the Bank, the “Offerors”).

     

    RECITALS:

     

    A.           The
Bank desires to issue 11% Subordinated Notes due July 1, 2019 (the “Notes”) in
an aggregate principal amount of $5,000,000, to be issued pursuant to one or
more Fiscal and Paying Agency Agreements (each a “Fiscal
Agreement”) by and between the Bank and Wilmington Trust Company, not in
its individual capacity, but solely as fiscal and paying agent (“WTC”);
and

     

    B.           The
Company proposes to issue warrants to purchase 125,000 shares of its common
stock, par value $0.01 per share (the “Common
Shares”), at a price of $11.50 per Common Share for a period of seven (7)
years, which issuance of Warrants, together with the issuance of the Notes, is
referred to in this Subscription Agreement as the “Offering”;
and

     

    C.           The
Purchaser understands that the Offerors may in the future issue additional
securities similar to those sold in the Offering as well as other capital
raising instruments although the Offerors have not made any agreements to do so
as of the date hereof; and

     

    D.           In
consideration of the premises and the mutual representations and covenants
hereinafter set forth, the parties hereto agree as follows:

     

    ARTICLE
I

     

    PURCHASE
AND SALE OF SECURITIES

     

    1.1           The
Purchaser hereby purchases from the Bank, Notes for an aggregate purchase price
(the “Notes
Purchase
Price”) all as set forth by the Purchaser on the signature page hereto
and the Bank hereby sells such Notes to the Purchaser for said Notes Purchase
Price.  The Company further hereby agrees to issue warrants (the
“Warrants”)
to the Purchaser all as set forth on the signature page hereto.  The
Notes and Warrants purchased pursuant to this Subscription Agreement are
referred to as the “Purchased
Securities”.  The rights and preferences of the Notes are set
forth in the applicable Fiscal Agreement, including the form of Note appended
thereto.  The terms of the Warrants are set forth in the applicable
form of Warrant.  The purchase of the Notes and the issuance of the
Warrants is referred to in this Subscription Agreement as the “Purchase.”

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    1.2           The
Purchaser has provided to the Bank by wire transfer immediately available funds
representing the aggregate Note Purchase Price.

    

    1.3           This
Subscription Agreement shall be effective immediately upon acceptance by the
Company and the Bank of the Purchaser’s executed counterpart of this
Subscription Agreement.

     

    
      ARTICLE
II

    

     

    REPRESENTATIONS
AND WARRANTIES

     

    2.1           Disclosure.

     

    (a)           “Material Adverse Effect”
means a material adverse effect on (1) the business, results of operation
or financial condition of the Company and its subsidiaries taken as a whole;
provided that Material
Adverse Effect shall not be deemed to include the effects, to the extent such
effects do not have a disproportionate impact on the Company as compared to
other depository institution holding companies, of (A) any facts,
circumstances, events, changes or occurrences generally affecting businesses and
industries in which the Company operates, companies engaged in such businesses
or industries or the economy, or the financial or securities markets and credit
markets in the United States or elsewhere in the world, including effects on
such businesses, industries, economy or markets resulting from any regulatory or
political conditions or developments, or any outbreak or escalation of
hostilities, declared or undeclared acts of war, terrorism, or work stoppages,
(B) changes or proposed changes in generally accepted accounting principles
in the United States (“GAAP”) or
regulatory accounting requirements applicable to depository institutions and
their holding companies generally (or authoritative interpretations thereof),
(C) changes or proposed changes in banking and other laws of general
applicability or related policies or interpretations of all United States
governmental or regulatory authorities (collectively, “Governmental
Entities”), or (D) changes in the market price or trading volume of
Common Shares (it being understood and agreed that the exception set forth in
this clause (D) does not apply to the underlying reason giving rise to or
contributing to any such change), or (2) the ability of the Company to
consummate timely the Purchase and the other transactions contemplated by this
Subscription Agreement and any other documents, agreements and instruments
delivered in connection herewith, including the Notes and Warrants
(collectively, the “Transaction
Documents”).

    

    (b)           “Previously Disclosed” means
(1) information contained in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2008, or its other reports and forms
filed with the Securities and Exchange Commission (the “SEC”)
under Sections 13(a), 14(a) or 15(d) of the Securities Exchange Act of 1934
(the “Exchange
Act”) on or after January 1, 2009 (the “SEC
Reports”) and prior to the execution and delivery of this Agreement, (2)
information contained in the Company’s Registration Statement on Form S-3, as
amended (No. 333-153897), and any related prospectus or prospectus supplement,
filed with the SEC under the Securities Act of 1933, as amended (the “Securities
Act”), (including, without limitation, the prospectus supplement dated
May 14, 2009 and the prospectus dated December 1, 2008) (collectively, the
“Securities Act Filings”) and, if applicable, (3) information provided pursuant to any
confidentiality agreement between the Company and the Purchaser.

    

    (c)           Each
party acknowledges that it is not relying upon any representation or warranty
not set forth in the Transaction Documents. The Purchaser is aware that it will
bear the economic risk of an investment in the Purchased
Securities.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (d)           All
references to the “Knowledge” of the Company
mean the actual knowledge after due inquiry of the Chief Executive Officer or
Chief Financial Officer of the Company; all references to the “Knowledge” of the Purchaser
mean the actual knowledge of the “executive officers” (as defined in Rule 3b-7
under the Exchange Act) of the Purchaser.

    

    2.2           Representations and
Warranties of the Company and the Bank. Except as Previously
Disclosed, the Company and the Bank, jointly and severally, represent and
warrant to the Purchaser that as of the date hereof (or such other date
specified herein):

    

    (a)           Organization, Authority and
Significant Subsidiaries. The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of New York, with corporate power and authority to own its properties and
conduct its business in all material respects as currently conducted, and,
except as has not had or would not reasonably be expected to have a Material
Adverse Effect, has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification; and each Subsidiary (as defined below) of the
Company that is a “significant subsidiary” within the meaning of
Rule 1-01(w) of Regulation S-X under the Securities Act of 1933, as
amended (the “Securities
Act”) (each, a “Significant
Subsidiary” and, collectively, the “Significant
Subsidiaries”) has been duly organized and is validly existing in good
standing under the laws of its jurisdiction of organization.  The Bank
is duly organized and validly existing as a New York State chartered bank, and
its deposit accounts are insured up to applicable limits by the Federal Deposit
Insurance Corporation (the “FDIC”).  When
a reference is made in this Subscription Agreement to a Subsidiary of a person,
the term “Subsidiary” means those corporations, banks, savings banks,
associations and other entities of which such person owns or controls more than
50% of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which more than 50% of the outstanding equity
securities is owned directly or indirectly by its parent.

    

    (b)           Capitalization.

    

    (1)           As
of the date hereof, the Company has (i) 35,000,000 authorized Common
Shares, par value $0.01 per share, of which 14,858,522 shares are outstanding,
and (ii) 1,000,000 authorized shares of preferred stock, par value $0.01
per share, of which no shares are outstanding.

    

    (2)           All
of the outstanding shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable and were not
issued in violation of any preemptive rights, resale rights, rights of first
refusal or similar rights.

    

    (3)           All
of the outstanding shares of capital stock of each Significant Subsidiary have
been duly and validly authorized and issued, are fully paid and non-assessable
and were not issued in violation of any preemptive rights, resale rights, rights
of first refusal or similar rights, and are owned directly or indirectly by the
Company, free and clear of all security interests, liens, encumbrances, equities
or claims.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (4)           Except
for the Rights (as hereinafter defined) issued pursuant to the Rights Agreement
(as hereinafter defined) and awards of restricted Common Shares pursuant to the
Company’s equity compensation and/or employee stock purchase plans, there are no
options, warrants or other rights, agreements, arrangements or commitments to
which the Company is a party or by which the Company is bound relating to the
issued or unissued Common Shares of the Company. For purposes of this Agreement,
“Rights” means the
rights to purchase Common Shares of the Company issued pursuant to the Rights
Agreement, and “Rights
Agreement” means the Shareholder Protection Rights Agreement, dated as of
September 23, 1997 and last amended as of February 6, 2008, by and between the
Company and Mellon Investor Services LLC, setting forth the rights of the
holders of Rights.

    

    (c)           Authorization of Common
Shares.  The Common Shares  to be issued upon the
exercise of the Warrants have been duly authorized for issuance by the Company
and, when duly issued and delivered by the Company against payment therefor in
accordance with the Warrant, will be duly and validly issued, fully paid and
nonassessable, and the issuance thereof will not be subject to any preemptive or
other similar rights.

    

    (d)           Authorization of
Warrants. The Warrants have been duly authorized for issuance by the
Company and, when issued and delivered as provided in this Subscription
Agreement, will be duly and validly issued, fully paid and non-assessable, and
the issuance thereof will not be subject to any preemptive or other similar
rights.

    

    (e)           Authorization of
Subordinated Note Securities.  The Subordinated Note Securities
have been duly authorized for issuance by the Bank, and, when duly issued,
executed and authenticated in accordance with the Fiscal Agreement against
payment therefor as provided in this Subscription Agreement and in the Fiscal
Agreement, will constitute valid, legal and binding obligations of the Bank,
enforceable against the Bank in accordance with their terms, except to the
extent that enforceability may be limited by the Enforceability Exceptions (as
defined below).

    

    (f)           Authorization of this
Subscription Agreement.  This Subscription Agreement has been
duly authorized, executed and delivered by each of the Offerors, and assuming
due authorization, execution and delivery of this Subscription Agreement by the
Purchaser, this Subscription Agreement will constitute a valid, legal and
binding agreement of each of the Offerors, enforceable against each of the
Offerors in accordance with its terms, except to the extent that enforceability
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect relating
to creditors’ rights generally and (b) general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity)
(collectively, the “Enforceability
Exceptions”).

    

    (g)           Authorization of Fiscal
Agreement.  The Fiscal Agreement has been duly authorized,
executed and delivered by the Bank, and assuming due authorization, execution
and delivery of the Fiscal Agreement by the Fiscal and Paying Agent, the Fiscal
Agreement will constitute a valid, legal and binding agreement of the Bank,
enforceable against the Bank in accordance with its terms, except to the extent
that enforceability may be limited by the Enforceability
Exceptions.

    

    (h)           Company Financial
Statements. The consolidated financial statements of the Company and its
subsidiaries (including the related notes and supporting schedules) contained in
the SEC Reports 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.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (i)           No Material Adverse
Effect. Since December 31, 2008, 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.

    

    (j)           Proceedings. As of
the date of this Agreement, there is no litigation or similar proceeding or
governmental proceeding pending or, to the Company’s Knowledge, threatened to
which the Company or any of its subsidiaries is a party or of which any property
of the Company or any of its subsidiaries is the subject that the Company’s
management believes, individually or in the aggregate, has had or would
reasonably be expected to have a material adverse effect on the business,
results of operation or financial condition of the Company and its subsidiaries
taken as a whole.  Neither the Company nor the Bank is subject to or
party to, or has received any notice or advice that either of them may become
subject to,  any material cease and desist order, consent decree,
memorandum of understanding or other regulatory enforcement action, proceeding
or order with or by any bank regulatory authority.

    

    (k)           Compliance with Laws;
Permits.

    

    (1)           The
Company is a bank holding company registered under the Bank Holding Company Act
of 1956 (the “BHC Act”);
the Company and each of its subsidiaries have conducted their businesses in
compliance with all applicable federal, state and foreign laws, orders,
judgments, decrees, rules, regulations and applicable stock exchange
requirements, including all laws and regulations restricting activities of bank
holding companies and banking organizations, except for any noncompliance that,
individually or in the aggregate, has not had and would not be reasonably
expected to have a Material Adverse Effect.

    

    (2)           The
Company and each Subsidiary have all permits, licenses, authorizations, orders
and approvals of, and have made all filings, applications and registrations
with, any Governmental Entities that are required in order to carry on their
business as presently conducted, except where the failure to have such permits,
licenses, authorizations, orders and approvals or the failure to make such
filings, applications and registrations, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect;
and all such permits, licenses, certificates of authority, orders and approvals
are in full force and effect and, to the Knowledge of the Company, no suspension
or cancellation of any of them is threatened, and all such filings, applications
and registrations are current, except where such absences, suspensions or
cancellations, individually or in the aggregate, have not had or would not
reasonably be expected to have a Material Adverse Effect.

    

    (l)           Reports.

    

    (1)           Since
December 31, 2008, the Company has timely filed all SEC Reports and, as of
their respective filing dates, such reports did not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading.

    

    (2)           Since
December 31, 2008, the Company and each Subsidiary have filed all reports,
registrations and statements, together with any required amendments thereto,
that it was required to file with the Board of Governors of the Federal Reserve
System (the “Federal
Reserve”), the FDIC, the New York State Banking Department and any other
applicable federal or state securities or banking authorities, except where the
failure to file any such report, registration or statement, individually or in
the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect. As of their respective dates, each of the foregoing
reports complied with all applicable rules and regulations promulgated by the
Federal Reserve, the FDIC, the New York State Banking Department and any other
applicable foreign, federal or state securities or banking authorities, as the
case may be, except for any failures that, individually or in the aggregate,
have not had and would not reasonably be expected to have a Material Adverse
Effect.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (m)           No General Solicitation or
General Advertising. Neither the Company nor any person acting on its
behalf has engaged or will engage in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act)
in connection with any offer or sale of the Purchased Securities.

    

    (n)           Properties.  The
Company and its subsidiaries have good and marketable title in fee simple to all
real property and good and marketable title to all personal property owned by
them, in each case free and clear of all mortgages, pledges, security interests,
claims, restrictions, liens, encumbrances and defects except such as are
described in the SEC Reports or such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.  Except as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, (i) the Company and each of its subsidiaries owns or
otherwise has the right to use, all intellectual property rights, including all
trademarks, trade names, service marks, domain names, patents, inventions, trade
secrets, know-how, works of authorship and copyrights therein, that are used in
the conduct of their existing business (“Proprietary
Rights”) and (ii) neither the Company nor any of its subsidiaries is
materially infringing, diluting, misappropriating or violating, nor has the
Company or any of its subsidiaries received any written (or, to the knowledge of
the Company, oral) communications alleging that any of them has materially
infringed, diluted, misappropriated or violated, any of the Proprietary Rights
owned by any other person.

    

    (o)           Non-contravention.  The
issue and sale of the Purchased Securities by the Company and the Bank and the
compliance by the Company and the Bank with all of the provisions of this
Subscription Agreement and the consummation of the transactions herein
contemplated do not and will not, whether with or without the giving of notice
or passage of time or both, conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default or result in a
Repayment Event (as defined below) under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, nor will such action result in any
violation of the provisions of the certificate of incorporation or
organizational certificate (as applicable) or bylaws of the Company or any
statute or any order, rule or regulation of any federal, state, local or foreign
court or governmental agency (each a “Governmental Entity”) or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties, except for such conflicts, breaches, violations, defaults or
Repayment Events that would not result in a Material Adverse
Effect.  As used herein, a “Repayment Event” means any event or
condition that gives the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder’s behalf) the right to require
the repurchase, redemption or repayment of all or a portion of such indebtedness
by the Company or any subsidiary.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (p)           Tax
Matters.  The Bank and Company have timely filed (taking into
account any extensions of time within which to file) all federal, state and
local tax returns required to be filed by either of them on or prior to the date
hereof (all such returns being accurate and correct in all material respects)
and have duly paid or made provisions for the payment of all federal, state and
local taxes which have been incurred by or are due or claimed to be due from the
Bank and the Company by any taxing authority on or prior to the date hereof
other than taxes or other charges which (i) are not delinquent, (ii) are being
contested in good faith, or (iii) have not yet been fully
determined.  As of the date of this Subscription Agreement, there is
no audit examination, deficiency assessment, tax investigation or refund
litigation with respect to any taxes of the Bank and the Company.  The
Bank and the Company have not received written notice from any authority in a
jurisdiction where the Bank and the Company do not file tax returns that the
Bank and the Company are subject to taxation in that jurisdiction.

    

    (q)           Brokers.  Except
for a placement agent fee payable to Sandler O’Neill & Partners, L.P., there
are no contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or the Bank for
a brokerage commission, finder’s fee or other like payment as a result of the
transactions contemplated by this Subscription Agreement.

    

    2.3           Representations And
Warranties Of The Purchaser. The Purchaser hereby represents and warrants
to the Offerors that as of the date hereof:

     

    (a)           The
Purchaser understands and acknowledges that the Notes and Warrants have not been
registered under the Securities Act of 1933, as amended (the “Securities
Act”), or any other applicable securities law, are being offered for sale
by the Offerors in one or more transactions not requiring registration under the
Securities Act and may not be offered, sold, pledged or otherwise transferred by
the Purchaser except in compliance with (i) the transfer restrictions set forth
in Article IV of this Subscription Agreement, and, in the case of the
Warrants,  (ii) the registration requirements of the Securities Act or
any other applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.

     

    (b)           The
Purchaser represents and warrants that it is purchasing the Notes and Warrants
for its own account, for investment, and not with a view to, or for offer or
sale in connection with, any distribution thereof in violation of the Securities
Act or other applicable securities laws, subject to any requirement of law that
the disposition of its property be at all times within its control and subject
to its ability to resell such Notes and Warrants pursuant to an exemption from
registration available under the Securities Act or any other applicable
securities law.

     

    (c)           The
Purchaser represents and warrants that Sandler O’Neill & Partners, L.P.
(“Sandler
O’Neill” or the “Placement
Agent”) is not acting as a fiduciary or financial or investment adviser
for the Purchaser.  The Purchaser represents and warrants that the
Offerors are not acting as a fiduciary or financial or investment adviser for
the Purchaser.

     

    (d)           The
Purchaser represents and warrants that it is not relying (for purposes of making
any investment decision or otherwise) upon any advice, counsel or
representations (whether written or oral) of the Offerors or of the Placement
Agent or their respective advisors and agents.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (e)           The
Purchaser acknowledges that it has conducted a review and analysis of the
business, assets, condition, operations and prospects of the Offerors and their
subsidiaries, together with the representations and warranties of the Offerors
set forth in the Transaction Documents, that the Purchaser considers sufficient
for purposes of the Purchase.  The Purchaser represents and warrants
that (a) it has consulted with its own legal, regulatory, tax, business,
investment, financial and accounting advisers in connection herewith to the
extent it has deemed necessary, (b) it has had a reasonable opportunity to
ask questions of and receive answers from officers and representatives of the
Bank and the Company concerning the Bank’s and the Company’s financial condition
and results of operations and the purchase of the Notes and Warrants, and any
such questions have been answered to its satisfaction, (c) it has had the
opportunity to review all publicly available records and filings concerning the
Offerors and it has carefully reviewed such records and filings that it
considers relevant to making an investment decision, and (d) it has made
its own investment decisions based upon its own judgment, due diligence and
advice from such advisers as it has deemed necessary.

     

    (f)           The
Purchaser represents and warrants that it is an institutional “accredited
investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under Regulation
D promulgated under the Securities Act, and that:

     

    (1)           the
information contained in the Purchaser’s Confidential Purchaser Questionnaire is
complete, accurate, and true in all respects.

     

    (2)           the
Purchaser has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of an investment in the
Purchased Securities.

     

    (3)           the
Purchaser understands that no securities administrator of any state has made any
finding or determination relating to the fairness of this investment and that no
securities administrator of any state has recommended or endorsed, or will
recommend or endorse, the offering of the securities purchased
hereby.

     

    (4)           the
Purchaser acknowledges that no general solicitation or general advertising
(including communications published in any newspaper, magazine or other
broadcast) has been received by it and that no public solicitation or
advertisement with respect to the offering of the securities purchased hereby
has been made to it.

     

    (5)           no
person has made any direct or indirect representation or warranty of any kind to
the Purchaser with respect to the economic return which may accrue to the
Purchaser.

     

    (6)           the
Purchaser is not a participant-directed employee plan, such as a 401(k) plan, or
any other type of plan referred to in paragraph (a)(1)(i)(D) or
(a)(1)(i)(E) of Rule 144A promulgated under the Securities Act, or a trust
fund referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the
assets of such a plan, unless investment decisions with respect to the plan are
made solely by the fiduciary, trustee or sponsor of such plan.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (g)           The
Purchaser represents and warrants that on each day from the date on which it
acquires any Purchased Securities through and including the date on which it
disposes of all such interests, either (i) it is not (a) an “employee
benefit plan” (as defined in Section 3(3) of the United States Employee
Retirement Income Security Act of 1974, as amended (“ERISA”))
which is subject to the provisions of Part 4 of Subtitle B of
Title I of ERISA, or any entity whose underlying assets include the assets
of any such plan (an “ERISA
Plan”), (b) any other “plan” (as defined in Section 4975(e)(1)
of the United States Internal Revenue Code of 1986, as amended (the “Code”))
which is subject to the provisions of Section 4975 of the Code or any
entity whose underlying assets include the assets of any such plan (a “Plan”),
(c) an entity whose underlying assets include the assets of any such ERISA
Plan or other Plan by reason of Department of Labor regulation
section 2510.3-101 or otherwise, or (d) a governmental or church plan
that is subject to any federal, state or local law which is substantially
similar to the provisions of Section 406 of ERISA or Section 4975 of
the Code (a “Similar
Law”); or (ii) the purchase, holding and disposition of any such
Notes by it will satisfy the requirements for exemptive relief under Prohibited
Transaction Class Exemption (“PTCE”)
84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 or a similar exemption, or,
in the case of a plan subject to a Similar Law, will not result in a non-exempt
violation of such Similar Law.

     

    (h)           The
Purchaser represents and warrants that the execution, delivery, and performance
by the Purchaser of this Subscription Agreement are within the powers of the
Purchaser, have been duly authorized by all necessary action on the part of the
Purchaser, and will not constitute or result in a breach or default under, or
conflict with, any order, ruling or regulation of any court or other tribunal or
of any governmental commission or agency, or any agreement or other undertaking,
to which the Purchaser is a party or by which the Purchaser is bound; and, if
the Purchaser is not an individual, will not violate any provision of the
charter documents, bylaws, indenture of trust, or partnership agreement, as
applicable, of the Purchaser. The signatures on the Subscription Agreement are
genuine, and the signatory, if the Purchaser is an individual, has legal
competence and capacity to execute the same, or, if the Purchaser is not an
individual, the signatory has been duly authorized to execute the same; and the
Subscription Agreement constitutes the legal, valid and binding obligations of
the Purchaser, enforceable in accordance with its terms.  To the
Purchaser’s Knowledge no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any Governmental Entity is required to be
made or obtained by the Purchaser in connection with the consummation by the
Purchaser of the Purchase and the other transactions contemplated by the
Transaction Documents.

     

    (i)           The
Purchaser certifies that, after giving effect to the Purchase, as of the date
hereof, the Purchaser and all of its affiliates on an aggregate basis will not,
assuming the immediate exercise of the Warrants beneficially own, control or
have the power to vote 10% or more of the outstanding Common
Shares.  The Purchaser does not have any agreement, arrangement or
understanding with any person (other than the Company and any Permitted
Transferee) to acquire, dispose of or vote any securities of the
Company.

     

    (j)           The
Purchaser represents and warrants that it has been given access to information
regarding the Offerors (including the opportunity to meet with officers of the
Offerors) and have utilized such access to its satisfaction for the purpose of
obtaining such information concerning the Offerors and the Purchased Securities
as the Purchaser has deemed necessary to make an investment
decision.

     

    
      ARTICLE
III

    

     

    SURVIVAL

     

    3.1           All
representations, warranties, and covenants contained in this Subscription
Agreement shall survive the delivery of the Purchased Securities to the
Purchaser.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    
       

      ARTICLE
IV

    

     

    TRANSFER
RESTRICTIONS

     

    4.1           The
Purchaser shall not, directly or indirectly, transfer, sell, assign, pledge,
convey, hypothecate or otherwise encumber or dispose of, or engage in a Hedging
Transaction (as hereinafter defined) with respect to (collectively, “Transfer”),
any of the Purchased Securities. For purposes of this Agreement, “Hedging
Transaction” means any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including any put or call option) with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the
Purchased Securities; provided, however, that the foregoing prohibition on any
Hedging Transaction shall not apply to transactions in the Company’s Common
Shares after the first anniversary of the date hereof.

     

    4.2           Notwithstanding
Section 4.1, the Purchaser, and any other holder of the Purchased
Securities pursuant to a Transfer permitted hereunder (a “Permitted
Transferee”), shall be permitted to Transfer the Note or the Warrant only
to persons who are institutional “accredited investors” as defined in Rule
501(a)(1), (2), (3) or (7) (“Institutional
Accredited Investors”) of Regulation D promulgated by the Securities
Exchange Commission under the Securities Act.  Any such Transfer must
be made in compliance with the registration requirements of the Securities Act
or any other applicable securities laws, pursuant to an exemption therefrom or
in a transaction not subject thereto.  Any such Transfer shall be
subject to the requirement that the Purchaser provide evidence to the reasonable
satisfaction of the Offerors that the proposed transferee is an Institutional
Accredited Investor.  A holder of Warrants must transfer such Warrants
only in whole, and not in part.

     

    4.3           The
Purchaser understands and agrees that legends to the following effect will be
placed on any certificate evidencing Notes issued to the Purchaser:

     

    THIS
OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION (THE “FDIC”) OR ANY OTHER GOVERNMENT AGENCY OR FUND.

     

    THIS
OBLIGATION IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT TO THE OBLIGATIONS OF
BANK OF SMITHTOWN (THE “ISSUER”) TO ITS DEPOSITORS AND TO THE ISSUER’S OTHER
OBLIGATIONS TO ITS GENERAL AND SECURED CREDITORS, IS UNSECURED AND IS INELIGIBLE
AS COLLATERAL FOR A LOAN BY THE ISSUER.

     

    THE
ISSUER MAY NOT RETIRE ANY PART OF THIS OBLIGATION WITHOUT THE PRIOR WRITTEN
CONSENT OF THE FDIC AND THE SUPERINTENDENT OF THE NEW YORK BANKING
DEPARTMENT.

     

    ANY
INSURED DEPOSITORY INSTITUTION WHICH SHALL BE A NOTEHOLDER OR WHICH OTHERWISE
SHALL HAVE ANY BENEFICIAL INTEREST IN THIS NOTE SHALL BY ITS ACCEPTANCE HEREOF
BE DEEMED TO HAVE WAIVED ANY RIGHT OF OFFSET WITH RESPECT TO THE INDEBTEDNESS
EVIDENCED HEREBY.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    THE NOTES
WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $250,000
AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF NOTES IN A
DENOMINATION OF LESS THAN $250,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL
EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE
HOLDER OF SUCH NOTES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT
OF PAYMENTS ON SUCH NOTES, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE
NO INTEREST WHATSOEVER IN SUCH NOTES.

     

    THE NOTES
REPRESENTED BY THIS INSTRUMENT MAY BE SOLD ONLY IN COMPLIANCE WITH APPLICABLE
FEDERAL AND STATE SECURITIES LAWS. THIS INSTRUMENT IS ISSUED SUBJECT TO THE
RESTRICTIONS ON TRANSFER, EXERCISE AND OTHER PROVISIONS OF A SUBSCRIPTION
AGREEMENT DATED JUNE 29, 2009 BETWEEN THE ISSUER OF THESE NOTES AND THE INVESTOR
REFERRED TO THEREIN, AND A FISCAL AND PAYING AGENCY AGREEMENT BETWEEN THE ISSUER
AND WILMINGTON TRUST COMPANY DATED JUNE 29, 2009, COPIES OF WHICH ARE ON FILE
WITH THE ISSUER. THE NOTES REPRESENTED BY THIS INSTRUMENT MAY NOT BE TRANSFERRED
OR EXERCISED EXCEPT IN COMPLIANCE WITH SAID AGREEMENTS. ANY SALE OR OTHER
TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENTS WILL BE VOID.

     

    CERTAIN ERISA
CONSIDERATIONS:

    THE
HOLDER OF THIS NOTE, OR ANY INTEREST HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF
ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN,
INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH
A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON
OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF
ANY PLAN MAY ACQUIRE OR HOLD THIS NOTE OR ANY INTEREST HEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS NOTE, OR ANY INTEREST HEREIN, ARE NOT PROHIBITED BY SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE AND
HOLDING.  ANY PURCHASER OR HOLDER OF THIS NOTE OR ANY INTEREST HEREIN
WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT
EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE I OF
ERISA OR SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON
ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON
OR ENTITY USING THE “PLAN ASSETS” OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN TO
FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE OR HOLDING WILL NOT RESULT IN A
PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE
FOR WHICH FULL EXEMPTIVE RELIEF IS NOT AVAILABLE UNDER APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    ANY FIDUCIARY OF ANY PLAN
WHO IS CONSIDERING THE ACQUISITION OF ANY OF THESE SUBORDINATED NOTES SHOULD
CONSULT WITH HIS OR HER LEGAL COUNSEL PRIOR TO ACQUIRING SUCH SUBORDINATED
NOTES.

     

    4.4           The
Purchaser understands and agrees that a legend to the following effect will be
placed on any certificate or other instrument evidencing Warrants issued to the
Purchaser:

     

    THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION
STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR
SUCH LAWS. THIS INSTRUMENT IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER,
EXERCISE AND OTHER PROVISIONS OF A SUBSCRIPTION AGREEMENT DATED JUNE 29, 2009
BETWEEN THE ISSUER OF THESE SECURITIES AND THE PURCHASER REFERRED TO THEREIN, A
COPY OF WHICH IS ON FILE WITH THE ISSUER. THE SECURITIES REPRESENTED BY THIS
INSTRUMENT MAY NOT BE TRANSFERRED OR EXERCISED EXCEPT IN COMPLIANCE WITH SAID
AGREEMENT. ANY SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENT WILL
BE VOID AB INITIO.

     

    4.5           The
Offerors may impose stop-transfer instructions with regard to the Notes and
Warrants subject to compliance by the Purchaser with the restrictions on
transfer set forth in foregoing sections of this Article IV.

     

    
      ARTICLE
V

    

     

    REGISTRATION
RIGHTS

     

    5.1           Subject
to the terms and conditions of this Subscription 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)
including a “base” prospectus covering the resale of all Registrable Securities
no later than three months following the date hereof, (B) use its best
efforts to cause such Shelf Registration Statement to become effective no later
than six months following the date hereof, and (C) use its best efforts to keep
such Shelf Registration Statement continuously effective and in compliance with
the Securities Act and usable for resale of such Registrable Securities
(including by filing post-effective amendments to such Shelf Registration
Statement (or a new Shelf Registration Statement if the initial Shelf
Registration Statement expires)) for a period from the date of its initial
effectiveness until the earlier of (x) six months following the seventh
anniversary of the date hereof and (y) such time as there are no
Registrable Securities remaining.  For the purpose of this Article V
only, the term “Purchaser” shall include any person to whom the Warrants have
been validly transferred under the terms of this Subscription Agreement and such
Warrants.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    5.1.1           Any
registration pursuant to this Section 5.1 shall be effected by means of a
shelf registration under the Securities Act (a “Shelf Registration
Statement”), and any such registration shall be effected in accordance
with the methods of distribution set forth in the Shelf Registration Statement
and Rule 415 under the Securities Act.

     

    5.1.2           The
Company shall not be required to effect a registration pursuant to this
Section 5.1: (A) with respect to securities that are not Registrable
Securities; (B) with respect to the issuance of the Registrable Securities
pursuant to the exercise of the Warrant; or (C) if the Company has notified the
Purchaser that in the good faith judgment of the Chief Executive Officer of the
Company, it would be materially detrimental to the Company or its
securityholders for such registration to be effected at such time until the
Chief Executive Officer of the Company shall have withdrawn such determination;
provided that the Company may not exercise its right pursuant to this clause
(C) for a continuous period of more than 45 days or for more than 90 days
in any calendar year.

     

    5.2           All
Registration Expenses incurred in connection with any registration,
qualification or compliance under Section 5.1 shall be borne by the
Company. All Selling Expenses incurred in connection with any registrations
hereunder, shall be borne by the Purchaser.

     

    5.3           Whenever
required to facilitate the resale of Registrable Securities from an effective
Shelf Registration Statement, the Company shall, as expeditiously as reasonably
practicable, use commercially reasonable efforts to:

     

    5.3.1           (A) Prepare
and file with the SEC a prospectus supplement with respect to a proposed
offering of Registrable Securities pursuant to an effective Shelf Registration
Statement and (B) subject to this Section 5.3, keep such prospectus
supplement current for the period reasonably required to complete the
distribution of such Registrable Securities.

     

    5.3.2           Prepare
and file with the SEC such amendments and supplements to the applicable Shelf
Registration Statement and the prospectus or prospectus supplement used in
connection with such Shelf Registration Statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of all
such Registrable Securities.

     

    5.3.3           Furnish
to the Purchaser and any underwriters such number of copies of the applicable
Shelf Registration Statement and each such amendment or supplement thereto
(including in each case all exhibits) and of a prospectus, including if
required, any preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities to be resold by
them.

     

    5.3.4           Register
and qualify the securities covered by such Shelf Registration Statement under
such other securities or Blue Sky laws of such jurisdictions in the United
States as shall be reasonably requested by the Purchaser or any managing
underwriter, to keep such registration or qualification in effect for so long as
such Shelf Registration Statement remains in effect, and to take any other
action which may be reasonably necessary to enable such seller to consummate the
disposition in such jurisdictions of the securities owned by the Purchaser;
provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    5.3.5           Notify
the Purchaser at any time when a prospectus relating to any Registrable
Securities is required to be delivered under the Securities Act of the happening
of any event as a result of which the applicable prospectus, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.

     

    5.3.6           Give
prompt written notice to the Purchaser:

     

    
      	
               
      

            	
              (A)

            	
              when
      any Shelf Registration Statement filed pursuant to Section 5.1 or any
      amendment thereto has been filed with the SEC and when such Shelf
      Registration Statement or any post-effective amendment thereto has become
      effective;

            

    

     

    
      	
               
      

            	
              (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 (which notice shall be accompanied by an instruction to suspend
      the use of the prospectus until the requisite changes have been
      made).

            

    

     

    5.3.7           Use
its commercially reasonable efforts to prevent the issuance or obtain the
withdrawal of any order suspending the effectiveness of any Shelf Registration
Statement referred to in Section 5.3.6 (C) at the earliest practicable
time.

     

    5.3.8           Except
under the circumstances described in clause (A), (B) or (C) of
Section 5.1.2, upon the occurrence of any event contemplated by
Section 5.3.5 or 5.3.6 (E), prepare and furnish to the Purchaser, as soon
as reasonably practicable, a reasonable number of copies of a prospectus
supplemented or amended so that such prospectus shall conform in all material
respects to the applicable requirements of the Securities Act and the rules and
regulations of the SEC thereunder and shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    5.3.9      Procure
the cooperation of the Company’s transfer agent in settling any offering or sale
of Registrable Securities.

     

    5.3.10    Cause all
such Registrable Securities to be listed on each securities exchange, if any, on
which Common Shares of the Company are then listed.

     

    5.3.11    Timely
provide to its securityholders earning statements satisfying the provisions of
Section 11(a) of the Securities Act (which the Company may do by complying
with Rule 158 under the Securities Act).

     

    5.4           Upon
receipt of written notice from the Company that a registration statement,
prospectus or prospectus supplement contains or may contain an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that
circumstances exist that make use of such registration statement, prospectus or
prospectus supplement inadvisable, the Purchaser shall discontinue disposition
of Registrable Securities until the Purchaser has received copies of a
supplemented or amended prospectus or prospectus supplement, or until the
Purchaser is advised in writing by the Company that the use of the prospectus
and, if applicable, prospectus supplement may be resumed, and, if so directed by
the Company, the Purchaser shall deliver to the Company (at the Company’s
expense) all copies, other than permanent file copies then in the Purchaser’s
possession, of the prospectus and, if applicable, prospectus supplement covering
such Registrable Securities current at the time of receipt of such
notice.

     

    5.5           The
Purchaser’s registration rights as to any securities held by the Purchaser (and
its Affiliates, partners, members and former members) shall not be available
unless such securities are Registrable Securities.

     

    5.6           The
Purchaser shall not use any free writing prospectus (as defined in Rule 405
under the Securities Act) in connection with the sale of Registrable Securities
without the prior written consent of the Company.

     

    5.7           It
shall be a condition precedent to the obligations of the Company to take any
action pursuant to Section 5.1 that the Purchaser, and its underwriters, if
any, shall furnish to the Company a reasonable time before the Company’s
proposed filing date for the Shelf Registration Statement and any required
prospectus supplements such information regarding themselves, the Registrable
Securities held by them and the intended method of disposition of such
securities as shall be required to effect the registered offering of their
Registrable Securities.

     

    5.8           Indemnification Related to
Registration.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    5.8.1      If
the Purchaser has any Registrable Securities included in a Shelf Registration
Statement, the Company shall indemnify the Purchaser, each person who
participates as a sales or placement agent or as an underwriter and each person,
if any, that controls the Purchaser (including its directors and officers),
sales or placement agent or underwriter within the meaning of the Securities Act
(each, an “Investor
Indemnitee”), against any losses, claims, damages or liabilities, joint
or several, to which such Investor Indemnitee may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
such Shelf Registration Statement or any preliminary, final or summary
prospectus contained therein or furnished by the Company to any such Investor
Indemnitee, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact necessary
to make the statements therein not misleading, and will reimburse such Investor
Indemnitee for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any of such
documents in reliance upon and in conformity with written information furnished
to the Company by such Investor Indemnitee expressly for use therein; and provided, further, that the
foregoing indemnity agreement contained in this Section 5.8.1 with respect
to such Shelf Registration Statement or any preliminary, final or summary
prospectus contained therein or furnished by the Company, or any amendment or
supplement thereto, shall not inure to the benefit of any Investor Indemnitee
from whom the person asserting any such losses, claims, damages or liabilities
purchased Registrable Securities, where (A) prior to the written confirmation of
the sale of Registrable Securities to such person (the “Applicable
Time”), the Company shall have notified such Investor Indemnitee that
such Shelf Registration Statement or prospectus contains an untrue statement of
a material fact or omits to state therein a material fact necessary in order to
make the statements therein not misleading, (B) such untrue statement or
omission of a material fact was corrected in a further amendment or supplement
to such Shelf Registration Statement or prospectus and such Shelf Registration
Statement or prospectus was provided to such Investor Indemnitee prior to the
Applicable Time, (C) such corrected Shelf Registration Statement or prospectus
(excluding any document incorporated by reference therein) was not conveyed by
the Investor Indemnitee to such person at or prior to the contract for sale of
the Registrable Securities to such person and (D) such loss, claim, damage or
liability would not have occurred had such corrected Shelf Registration
Statement or prospectus, or any amendment or supplement thereto (excluding any
document incorporated by reference therein) been conveyed to such person as
provided for in clause (C) above.

     

    5.8.2      The
Purchaser agrees to, and the Company may require, as a condition to including
any Registrable Securities in any Shelf Registration Statement filed pursuant to
Section 5.1 or to entering into any underwriting agreement with respect
thereto, that the Company shall have received an undertaking reasonably
satisfactory to it from each underwriter named in any such underwriting
agreement, severally and not jointly, to (A) indemnify and hold harmless
the Company, each of its directors, each of its officers who have signed any
Shelf Registration Statement and each person, if any, who controls the Company
within the meaning of the Securities Act and all other holders of Registrable
Securities (each, a “Company
Indemnitee”), against any and all losses, claims, damages or liabilities
to which any Company Indemnitee may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Shelf Registration
Statement, or any preliminary, final or summary prospectus contained therein or
furnished by the Company to the Purchaser or its agent or underwriter, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by the Purchaser, or such agent or
underwriter expressly for use therein, and (B) reimburse such Company
Indemnitee for any legal or other expenses reasonably incurred by such Company
Indemnitee in connection with investigating or defending any such loss, claim,
damage, liability or action.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    5.8.3.     If
the indemnification provided for in Section 5.8.1 or 5.8.2 is unavailable
to an Investor Indemnitee or Company Indemnitee (each, an “Indemnitee”)
with respect to any losses, claims, damages, actions, liabilities, costs or
expenses referred to therein or is insufficient to hold such Indemnitee harmless
as contemplated therein, then each indemnifying party shall contribute to the
amount paid or payable by such Indemnitee as a result of such losses, claims,
damages, actions, liabilities, costs or expenses (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party and the Indemnitee in connection with the statements or
omissions that resulted in such losses, claims, damages, actions, liabilities,
costs or expenses (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
Indemnitee shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by such
indemnifying party or by such Indemnitee, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 5.8.3 were determined
by pro rata allocation
(even if the indemnifying party or any agents or underwriters or all of them
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in this Section 5.8.3 The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, actions, liabilities, costs or
expenses (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
Indemnitee in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 5.8.3, neither the
Purchaser nor the Company shall be required to contribute any amount in excess
of the amount by which the dollar amount of the proceeds received by it from the
sale of any Registrable Securities (after deducting any fees, discounts and
commissions applicable thereto) exceeds the amount of any damages which it has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no underwriter shall be required
to contribute any amount in excess of the amount by which the total price at
which the Registrable Securities underwritten and distributed by it exceeds the
amount of any damages which such underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
Purchaser’s, the Company’s and any underwriters’ obligations in this
Section 5.8.3 to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by or on behalf of them and not joint.

     

    5.9           Rule 144
Reporting. With a view to making available to the Purchaser or a
Permitted Transferee the benefits of certain rules and regulations of the SEC
which may permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use commercially reasonable efforts
to:

     

    
      	
               
      

            	
              (1)

            	
              remain
      in compliance with the reporting obligations under the Exchange Act;
      and

            

    

     

    
      	
               
      

            	
              (2)

            	
              so
      long as the Purchaser or such Permitted Transferee owns any Registrable
      Securities, furnish to the Purchaser or such Permitted Transferee promptly
      upon request a written statement by the Company as to its compliance with
      the reporting requirements under Exchange
Act.

            

    

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    5.10         As
used in this Article V, the following terms shall have the following respective
meanings:

     

    “Register,” “registered” and “registration” shall refer to
a registration effected by preparing and (1) filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of effectiveness of such
registration statement, or (2) filing a prospectus and/or prospectus
supplement in respect of an appropriate effective registration statement on
Form S-3.

     

    “Registrable Securities” means
Common Shares issuable upon the exercise of the Warrants; provided that, once
issued, such Common Shares 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. 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 Article V,
including all registration, filing and listing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, expenses
incurred in connection with any “road show” and expenses of the Company’s
independent accountants (including a commercially reasonable comfort letter to
the extent the Registrable Securities are sold in an underwritten public
offering), but shall not include Selling Expenses and the compensation of
regular employees of the Company, which shall be paid in any event by the
Company.

     

    “Selling Expenses” means all
discounts, selling commissions, stock transfer taxes and fees and disbursements
of counsel for the Purchaser applicable to the sale of Registrable
Securities.

     

    5.11         At
any time, the Purchaser may elect to forfeit its rights set forth in this
Article V from that date forward; provided that no such
forfeiture shall terminate the Purchaser’s rights or obligations under
Section 5.6 or Section 5.7.

     

    5.12         The rights of the Purchaser to
registration of Registrable Securities pursuant to this Article V may be
assigned by the Purchaser to any person to whom the Warrants have been validly
transferred under the terms of such Warrants.

     

    
      ARTICLE
VII

    

     

    MISCELLANEOUS

     

    6.1           Any
notice or other communication given hereunder shall be deemed sufficient if in
writing and sent by registered or certified mail, return receipt requested,
international courier or delivered by hand against written receipt therefor, or
by confirmed facsimile transmission, to the following addresses, or such other
address as may be furnished to the other parties as herein
provided:

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    

    
      
        
          
            
              
                	
                        To
      the Offeror :

                      	
                        Bank
      of Smithtown

                      
	 
      	
                        100
      Motor Parkway

                      
	 
      	
                        Hauppauge,
      New York 11788

                      
	 
      	
                        Attention:  

                      	
                        Anita
      M. Florek

                      
	 
      	 
      	
                        Chief Financial Officer

                      
	 
      	
                        Fax:   (631)
      360-9399

                      
	 	 
	
                        To
      the Purchaser:

                      	
                        At
      the address set forth on the signature page
  hereto.

                      

              

            

          

        

      

    

     

    Unless
otherwise expressly provided herein, notices shall be deemed to have been given
on the date of mailing, except notice of change of address, which shall be
deemed to have been given when received.

     

    6.2           This
Subscription Agreement shall not be changed, modified or amended except in
writing and signed by the parties to be charged, and this Subscription Agreement
may not be discharged except by performance in accordance with its terms or by a
writing signed by the party to be
charged.

     

    6.3           Except
as otherwise provided herein, this Subscription Agreement shall be binding upon
and inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and assigns. If the Purchaser
is more than one person, the obligation of such Purchaser shall be joint and
several and the agreements, representations, warranties, covenants and
acknowledgments herein contained shall be deemed to be made by and be binding
upon each such person and his or her heirs, executors, administrators,
successors and legal representatives.  The obligations of the parties
may not be assigned except in the event of a merger, consolidation or other
reorganization undertaken for a reason other than to assign a party’s
obligation, under this Agreement.

     

    6.4           This
Subscription Agreement, together with the Note and the Warrant issued to the
Purchaser, contains the entire agreement of the parties with respect to the
matters set forth herein and there are no representations, covenants or other
agreements except as stated or referred to herein; provided, however, that, if
applicable, any confidentiality agreement between the Company and/or the Bank
and the Purchaser shall remain in full force and effect except to the extent
inconsistent with this Subscription Agreement.

     

    6.5           The
parties irrevocably consent to the jurisdiction of the courts of the State of
New York and of any Federal court in or for the Eastern District of New York in
connection with any action or proceeding arising out of or relating to this
Subscription Agreement.

     

    6.6           The
Offerors will use their best efforts to keep the information provided in the
Confidential Purchaser Questionnaire and this Subscription Agreement strictly
confidential. The Offerors may present this Subscription Agreement and the
information provided in the Confidential Purchaser Questionnaire to such parties
as it deems advisable if compelled by law or called upon to establish the
availability under any Federal or state securities laws of an exemption from
registration of the Offering or if the contents hereof are relevant to any issue
in any action, suit, or proceeding to which the Offerors are parties or by which
the Offerors are or may be bound.

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    6.7           In
the event of a dispute regarding this Subscription Agreement that results in
litigation or arbitration, the prevailing party, as determined by the finder of
facts, shall be entitled to an award of reasonable attorneys’ fees.

     

    6.8           NOTWITHSTANDING
THE PLACE WHERE THIS SUBSCRIPTION AGREEMENT MAY BE EXECUTED BY ANY OF THE
PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS
HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATION LAW.

     

    6.9           The
parties agree to execute and deliver all such further documents, agreements and
instruments and take such other and further action as may be necessary or
appropriate to carry out the purposes and intent of this Subscription
Agreement.

     

    6.10         This
Subscription Agreement may be executed in one or more counterparts each of which
shall be deemed an original, but all of which shall together constitute one and
the same instrument.

     

    6.11         In
the event that any one or more of the provisions contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that the Offerors’ and the Purchaser’s rights and privileges shall be
enforceable to the fullest extent permitted by law.

     

    6.12         Except
as required by law, no public release or announcement concerning the
transactions contemplated hereby shall be issued by the Purchaser without the
prior consent of the Company.  The Company shall use commercially
reasonable efforts to file with the SEC, as promptly as practicable after
counter-execution and deliver of this Agreement by the Company, but no later
than the time required by SEC Form 8-K, the material terms of this Agreement if
that constitutes material non-public information with respect to the Company
within the meaning of United States federal securities laws.

     

    6.13         The
Bank and the Company each agree that if, prior to August 1, 2009, the Bank and
the Company shall issue (a “Subsequent Issuance”) to any unaffiliated investor a
package of subordinated notes and warrants which includes either (i)
subordinated notes carrying an interest rate in excess of 11% or (ii) warrants
carrying an exercise price lower than $11.50, then the Bank and Company shall
notify the Purchaser within five business days of such issuance that a
Subsequent Issuance has occurred and provide the Purchaser with the opportunity
during the 10-business day period following such notice to instruct the Offerors
to modify Purchaser’s Notes and Warrants so that they contain terms which are
substantially similar to those in the Notes and Warrants issued in the
Subsequent Issuance.

     

    Signatures
appear on the following page

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
undersigned has executed this Subscription Agreement as of the ___ day of
_____________, 2009.

     

    Total
principal amount of Notes subscribed for: $
_________________.           

     

    
      
        	
                (fill
      in dollar amount)

              
	
                (minimum
      subscription $250,000)

              

      

    

     

    Total
Warrants to be issued based upon 25,000 Warrants per $1,000,000 of
Notes:  ________

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              	 
      	 
      	 
      
	
                                      Signature
      of Purchaser

                                    	 
      	
                                      Signature
      of Co-Purchaser, if any

                                    
	
                                      (By
      Authorized Representative)

                                    	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                                      Typed/Printed
      Name of Purchaser

                                    	 
      	
                                      Typed/Printed
      Name of Co-Purchaser

                                    
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                                      Address

                                    	 
      	
                                      Address

                                    
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                                      City,
      State and Zip Code

                                    	 
      	
                                      City,
      State and Zip Code

                                    
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                                      Social
      Security or Federal Tax

                                    	 
      	 
      
	
                                      Identification
      Number of Purchaser

                                    	 
      	 
      

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    Type
of Ownership

    (Check
One):

    

    Entities:

    

    ______ Corporation

    ______ Limited
Liability Company

    ______ Limited
Partnership

    ______ Trust

    ______ Pension
or Profit Sharing Plan or Trust

    ______ Individual
Retirement Account

    ______ Tax
Exempt Organization

    ______ Estate

    ______ Other
(Specify):

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    Subscription
as to Notes having an aggregate principal amount of ________________ accepted as
of the ___ day of ___________, 2009.                    (fill in
dollar amount)

     

    
      Total
Warrants to be issued based upon 25,000 Warrants per $1,000,000 of
Notes:  _____________

    

     

    
      
        
          
            	
                    BANK
      OF SMITHTOWN

                  
	 
      	 
      
	
                    By:

                  	 
      
	 
      	
                    Bradley
      E. Rock

                  
	 
      	
                    Chairman,
      President and Chief Executive Officer

                  
	 
      	 
      
	
                    SMITHTOWN
      BANCORP, INC.

                  
	 
      	 
      
	
                    By:

                  	 
      
	 
      	
                    Bradley
      E. Rock

                  
	 
      	
                    Chairman,
      President and Chief Executive
Officer

                  

          

        

      

    

     

    
      
         

      

      
        22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00160-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00160-of-00352.parquet"}]]