Document:

Document

Exhibit 10.2

CONFIDENTIAL SEPARATION AND GENERAL RELEASE AGREEMENT

In consideration of the covenants undertaken and releases contained in this Confidential Separation and General Release Agreement (this “Agreement”), Mike Cordano (“Executive”) and Western Digital Technologies, Inc., a Delaware corporation, including its parent company and any related entities and subsidiaries (collectively referred to as “Western Digital”), agree as follows:
1.Separation from and Termination of Employment.  Executive’s employment with Western Digital and its affiliated and subsidiary businesses is terminated for all purposes effective August 14, 2020 (“Separation Date”). All salary, compensation, benefits and perquisites of employment ceased as of the Separation Date.  Executive represents and agrees that he submitted his final expense report, if any, prior to the Separation Date, which Western Digital shall reimburse (to the extent not previously paid) in the ordinary course of business.  Within thirty (30) days following the Separation Date, Executive shall receive payment in an amount equal to (a) all final amounts owed to Executive for Executive’s regular and usual base salary (if any), and (b) all final amounts owed to Executive for Executive’s earned and accrued but unpaid bonuses (if any), in accordance with the terms of the applicable bonus plan (in each case to the extent not previously paid).  Executive is not required to sign this Agreement in order to receive the compensation and expense reimbursement described in this Section 1.  All payments due to Executive from Western Digital after the Separation Date shall be determined under this Agreement.
2.Separation Benefits.  
(a)    The benefits (“Separation Benefits”) provided under Section 2 of this Agreement are intended to be consistent with the Western Digital Corporation Executive Severance Plan, as such plan may be amended from time to time.  Provided that Executive executes and delivers this Agreement to Western Digital and does not revoke this Agreement within the seven (7) day revocation period following the date Executive signs this Agreement, Western Digital shall pay or provide, as the case may be, the following Separation Benefits:
A.Severance Benefit.  Executive will receive a payment of $1,600,000, less standard withholdings and authorized deductions, representing twenty-four (24) months of pay, which payment shall be made on or within thirty (30) days following the Separation Date (“Severance Payment”). 
B.COBRA Payment. Executive shall receive a cash lump sum payment of $36,375, less required tax withholdings and authorized deductions, which represents a payment equal to the equivalent of eighteen (18) months’ payment for health care continuation costs under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) (“COBRA Payment”).  Such payment shall be made on or within thirty (30) days following the Separation Date.  Executive understands that Executive remains responsible for working with Western Digital’s outside benefits administrator to elect COBRA benefits and must timely elect coverage in order to be eligible for COBRA benefits, should Executive elect COBRA. A COBRA election form and enrollment package will be mailed to Executive’s home address approximately two weeks after the end of the month in which Executive’s Separation Date occurs. Enrollment is not automatic. Executive understands that Executive must apply within sixty (60) days after the Separation Date or the date of Executive’s notification letter, whichever is later, or Executive will forfeit Executive’s right to COBRA coverage.
C.Incentive Payment.  Executive acknowledges and agrees that, except as set forth in this Section 2(a).C., he has been paid all incentive payments he is owed by Western Digital through the Separation Date.  Although Executive has not earned the Short Term Incentive (STI) compensation pursuant to the Western Digital Corporation Executive Short Term Incentive Plan fiscal year 2021 ( FY21), the Company will pay the Executive the amount of $115,384.62, less applicable taxes and withholdings, which payment assumes a 100% achievement of Executive’s Target Incentive under the STI plan for FY21 prorated through the Separation Date. 

D.Options.  Executive’s then outstanding stock options, if any, shall vest and become exercisable as to any such stock options that would have vested if Executive had remained employed with Western Digital through February 14, 2021.  Notwithstanding anything to the contrary herein, the exercisability of Executive’s outstanding stock options shall continue to be governed by the stock incentive plans and stock option agreements applicable to such options.  To the extent that any stock option is exercisable by the Executive on the Executive’s Severance Date, it may be exercised by the Executive at any time within three months following the Executive’s Severance Date (subject to earlier termination at the end of the option term or in connection with a change in control of Western Digital as provided in the applicable option documentation).  Any stock option, to the extent it is exercisable for the three-month period following the Executive’s Severance Date and not exercised during such period, shall terminate at the close of business on the last day of the three-month period. Notwithstanding anything to the contrary herein, Executive shall not be entitled to any further continued vesting under any stock option award following the Severance Date, and the Severance Date shall be deemed to be Executive’s “Severance Date” for purposes of any outstanding stock option award agreements.
E.Restricted Stock Units.  Executive’s then outstanding and unvested time-based restricted stock units granted prior to August 30, 2018, if any, shall vest and become payable as to any such units that would have vested if Executive had remained employed with Western Digital through February 14, 2021.  Executive’s restricted stock units granted on August 30, 2018 that are subject to only time-based vesting requirements and are outstanding and unvested on the Separation Date shall vest and become payable on March 1, 2021 as to any such units that would have vested after the Separation Date if Executive had remained employed with Western Digital through February 14, 2021.  Executive’s restricted stock units granted on September 4, 2019, that are subject to only time-based vesting requirements and are outstanding and unvested on the Separation Date shall vest on a pro rata basis and become payable on March 1, 2021 in accordance with the Notice of Grant of Restricted Stock Units and Restricted Stock Unit Award Agreement – Vice President and Above and Standard Terms and Conditions for Restricted Stock Unit Award – Vice President and Above.  Executive will be subject to any applicable tax withholdings on this income.  Any restricted stock unit that remains unvested as of the Separation Date (and is not to vest upon  March 1, 2021 ) after giving effect to the acceleration contemplated by the preceding provisions of this Section 2(a).E shall terminate as of the Separation Date and Executive shall have no further right with respect thereto or in respect thereof.  Notwithstanding anything to the contrary herein, Executive shall not be entitled to any further continued vesting under any restricted stock unit award following the Severance Date, and the Severance Date shall be deemed to be Executive’s “Severance Date” for purposes of any outstanding restricted stock unit award agreements. 
F.Performance Stock Units. Executive’s performance stock units (“PSUs”) granted on August 30, 2018 that are outstanding and unvested on the Separation Date shall be prorated and will become vested on August 30, 2021 (the scheduled vesting date) with respect to the number of stock units credited by the Compensation and Talent Committee of the Board of Directors of Western Digital in the ordinary course (as well as any accrued dividend equivalents thereon, to the extent applicable), and prorated as referenced above, in accordance with the Notice of Grant of Performance Stock Units and Performance Stock Unit Award Agreement (for each Financial and TSR Measures) and Standard Terms and Conditions for Performance Stock Unit Award (for each Financial and TSR Measures). In addition, Executive’s PSUs granted on September 4, 2019 that are outstanding and unvested on the Separation Date shall be prorated and will become vested on September 4, 2022 (the scheduled vesting date) with respect to the number of stock units credited by the Compensation and Talent Committee of the Board of Directors of Western Digital in the ordinary course (as well as any accrued dividend equivalents thereon, to the extent applicable), and prorated as referenced above, in accordance with the Notice of Grant of Performance Stock Units and Performance Stock Unit Award Agreement (for each Financial and TSR Measures) and Standard Terms and Conditions for Performance Stock Unit Award (for each Financial and TSR Measures). PSU payments will be subject to applicable tax withholding in accordance with the 

applicable award terms and conditions.  Any PSUs that remain unvested as of the Separation Date (and are not to vest on August 30, 2021 and September 4, 2022, respectively) after giving effect to the acceleration contemplated by the preceding provisions of this Section 2(a).F shall terminate as of the Separation Date and Executive shall have no further right with respect thereto or in respect thereof.
G.Outplacement Services. Executive shall receive Tier I Executive Outplacement Services for a period of 12 months to be provided by a vendor approved by Western Digital, at Western Digital’s sole discretion, for the use of Executive only (“Outplacement Services”).  These services are not transferable or assignable to any other person.  Executive is not entitled to the cash value of these services, which must be commenced within 30 days of the Separation Date.  If tax withholding is required with respect to the Outplacement Services, Executive will make arrangements satisfactory to Western Digital to satisfy such withholding obligations.
Notwithstanding anything to the contrary herein or in any other plan, agreement or arrangement, Executive shall not be entitled to any further additional or continued vesting as to any stock option, stock unit, RSU or other equity or equity-based award on or following the Separation Date except as expressly provided in Sections 2(a).D-G above, and the Separation Date shall be deemed to be Executive’s “Separation Date” (or any similar applicable defined term) for purposes of any outstanding stock option, stock unit, PSU, or other equity or equity-based award agreements.

    (b)    By signing this Agreement, Executive acknowledges and agrees that Executive shall not accrue or be entitled to any payments or benefits beyond the Separation Date except for the Separation Benefits listed in Section 2(a) of the Agreement.  Executive acknowledges that the Separation Benefits are an additional benefit beyond that to which Executive is entitled to, and given in consideration for Executive’s promises in this Agreement, and that such Separation Benefits are contingent upon Executive’s execution of and not revoking this Agreement. The Separation Benefits are inclusive of any and all of Executive’s incurred or alleged fees, expenses, and/or costs which relate in any way to Western Digital, including attorney’s fees. 

(c)    The amount of the Severance Payment, COBRA Payment, and the Incentive Payment provided for in Section 2(a).A-C and (if required under applicable tax law) the amounts paid or provided as the Outplacement Services, will be reported on Executive’s Form W-2 as income for Executive in the applicable year.  In addition, amounts relating to the vesting or payment of stock units and PSUs, as well as amounts relating to the exercise of certain stock options, will be reported on Executive’s Form W-2 as income in the applicable year.
3.General Release By Executive
A.Executive understands and agrees that, by signing this Agreement, in exchange for the Separation Benefits that Executive will receive under Section 2(a) above, Executive is waiving, releasing and discharging, and promising not to sue, Western Digital Corporation and each and all of its divisions, subsidiaries, parents, predecessors, successors, assigns, and affiliated or related corporations and entities, past and present, including but not limited to Western Digital Technologies, Inc., Western Digital (Fremont), LLC, WD Media, LLC, and HGST, Inc., as well as each and all of its and their owners, trustees, officers, directors, managers, shareholders, members, partners, administrators, fiduciaries, representatives, attorneys, assignees, successors, insurers, benefit plans, agents and employees, past and present, and each of them (collectively, “Released Parties”), from and with respect to any and all claims, wages, demands, actions, class actions, rights, liens, agreements, contracts, covenants, suits, causes of action, charges, grievances, obligations, debts, costs, expenses, penalties, attorneys’ fees, damages, judgments, orders and liabilities of any kind, known or unknown, suspected or unsuspected, and whether or not concealed or hidden, arising out of or in any way connected with Executive’s employment relationship with, or the termination of Executive’s employment with, any of the Released Parties, including but in no way limited to, any act or omission committed or omitted prior to the date of execution of this Agreement.  This general release of claims includes, but is in no way limited to, 

any and all wage and hour claims, claims for wrongful discharge, breach of contract, violation of public policy, tort, or violation of any statute, constitution or regulation, including but not limited to any claim under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, as amended (“ADEA”), the Employee Retirement Income Security Act of 1974 (“ERISA”), the Americans with Disabilities Act of 1990, the Older Workers Benefits Protection Act (“OWBPA”), the Fair Labor Standards Act (“FLSA”), the federal Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and Cal-COBRA, the Immigration and Nationality Act section 1324a, the federal Worker Adjustment and Retraining Notification Act (“WARN”), California WARN Labor Code sections 1400 et seq., the California Fair Employment and Housing Act (“FEHA”), the Family and Medical Leave Act of 1993 (“FMLA”), the California Family Rights Act (“CFRA”), the California Labor Code and Industrial Welfare Commission Wage Orders, or any other federal, state or local laws, regulations or ordinances, and any claim for severance pay, bonus, sick leave, holiday pay, vacation pay, life insurance, health or medical insurance or any other fringe benefit, or disability, and every type of relief (legal, equitable and otherwise) available to Executive, from the beginning of time to the date Executive signs this Agreement. 
B.The foregoing release does not extend to Executive’s right to receive (i) any vested rights or benefits under the terms of any “employee benefit plan,” as defined in Section 3(3) of ERISA or any Western Digital nonqualified deferred compensation plan; (ii) Executive’s vested rights, if any, under any stock option grant or stock award pursuant to the terms of such grant agreement or applicable equity award plan; (iii) indemnification under California Labor Code § 2802 California Corporations Code §317, Western Digital’s by-laws, any indemnification agreement between Western Digital and Executive, or any other federal or state statute, law, regulation or provision that confers upon Executive a right to defense or indemnification arising out of the services he performed for Western Digital or any of the Releasees; or (iv) any other rights or claims under applicable federal, state or local law that cannot be waived or released by private agreement as a matter of law. Executive understands that nothing in the release shall preclude Executive from filing a claim for unemployment or workers compensation insurance. Executive further understands that nothing in this Release or Agreement, including the provisions addressing General Release by Executive, Litigation and Investigation Cooperation, and/or confidentiality obligations, is intended to or shall limit, prevent, impede or interfere with Executive’s participation in government investigations, testifying in proceedings brought by a government agency regarding the Company’s past or future conduct, or voluntarily communicating, without prior notice to or approval by the Company, with the government (including, but not limited to, government agencies such as the Securities and Exchange Commission, Equal Employment Opportunity Commission, and the National Labor Relations Board) about a potential violation of law or regulation. Notwithstanding the above, unless otherwise prohibited by law, by signing this Agreement, Executive expressly acknowledges and agrees to release and waive any right to claim or recover, and will not accept, any form of monetary or other damages or any other form of relief from Western Digital in connection with any charge, complaint, or lawsuit filed by Executive or by anyone else on Executive’s behalf, for any released claims.
C.This general release applies to claims or rights that Executive may possess either individually or as a class member, and Executive waives and releases any right to participate in or receive money or benefits from any class action settlement or judgment after the date this Agreement is signed that relates in any way to Executive’s employment with Western Digital.
D.This general release is binding on Executive’s heirs, family members, dependents, beneficiaries, executors, administrators, successors and assigns.
E.The obligations stated in this general release are intended as full and complete satisfaction of any and all claims the Executive has now or has had in the past.  By signing this general release, Executive specifically represents that Executive has made reasonable effort to become fully 

apprised of the nature and consequences of this general release, and that Executive understands that if any facts with respect to any matter covered by this release are found to be different from the facts Executive now believes to be true, Executive accepts and assumes that risk and agrees that this general release shall be effective notwithstanding such differences.  Executive expressly agrees that this release shall extend and apply to all unknown, unsuspected and unanticipated injuries and damages.
F.Executive represents and warrants that neither Medicare nor Medicaid has made any payment for medical services or items pursuant to 42 U.S.C. § 1395y and the corresponding regulations, or otherwise, relating to the Released Matter.  “Released Matter” means any released accident, occurrence, injury, illness, disease, loss, claim, demand, damages, or matter that is subject to this Agreement and the releases herein.  Executive acknowledges and agrees that neither Western Digital nor any of the Released Parties has any obligation or responsibility to reimburse Medicare, Medicaid, the Centers for Medicare and Medicaid Services, or any other entity or person for any past or future injury related medical expenses that have arisen or may hereafter arise out or relate in any way to the Released Matters.  Executive acknowledges and agrees that it is Executive’s responsibility alone to reimburse such entities for any payments made on their behalf for such past or future medical expenses, if any, and Executive agrees to indemnify and hold harmless Western Digital and the Released Parties from any and all claims, demands, liens, subrogated interests and/or causes of action of any nature or character that have been or may in the future be asserted by Medicare and/or Medicaid and/or persons acting on behalf of Medicare and/or Medicaid concerning medical, hospital, or other expenses arising of the Released Matters, or concerning any claim based on inaccurate or inadequate information provided by Executive concerning Executive’s status as a Medicare or Medicaid beneficiary.    

G.Executive promises not to pursue any claim that Executive has settled by this release.  If Executive breaks this promise, Executive agrees to pay all of Western Digital’s costs and expenses (including reasonable attorneys’ fees) related to the defense of any claims.  Executive understands that nothing in this Agreement shall be deemed to preclude Executive from challenging the knowing and voluntary nature of this release before a court or the Equal Employment Opportunity Commission (“EEOC”), or from filing a charge with the EEOC, the National Labor Relations Board, or any other federal, state or local agency charged with the enforcement of any employment laws.  Executive expressly acknowledges and agrees, however, that, by signing this release, Executive is waiving the right to, and will not accept, any form of monetary or other damages or any other form of relief from Western Digital based on claims asserted in such a charge or complaint. 
4.1542 Waiver.  It is Executive’s intention in signing this Agreement that the general release of claims should be effective as a bar to each and every claim, demand and cause of action stated above.  In furtherance of this intention, Executive hereby expressly waives any and all rights and benefits conferred upon Executive by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE and expressly consents that this Agreement shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action referred to above.  SECTION 1542 provides:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, AND, THAT IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”

Executive acknowledges and understands the significance and consequence of such release and such specific waiver of SECTION 1542

5.Acknowledgements.  Executive acknowledges and agrees that Executive has not suffered any on-the-job injury for which Executive has not already filed a claim.  Executive has not been retaliated against for reporting any allegations of wrongdoing by Western Digital or its officers, including any allegations of corporate fraud. 
6.Waiver of Rights Under Age Discrimination in Employment Act of 1967.  Executive expressly acknowledges and agrees that, by entering into this General Release, Employee is waiving and releasing any rights or claims that Executive may have arising under the Age Discrimination in Employment Act of 1967 (“ADEA”), as amended, which may have arisen on or before the date of execution of this General Release, and that this waiver and release is knowing and voluntary.  Executive also expressly acknowledges and agrees that: 
(a) In return for this waiver and release, Executive will receive consideration, i.e., something of value, beyond that to which Executive was already entitled before entering into this General Release; 
(b) Executive is hereby advised in writing by this General Release to consult with an attorney before signing this General Release; 
(c) When given a copy of this General Release, Executive was informed that Executive had twenty-one (21) days within which to consider it; and 
(d) Executive was informed that Executive has seven (7) days following Executive’s execution of this General Release in which to revoke its execution, in writing to Western Digital’s Executive Vice President and Chief Legal Officer, and that this General Release will not become effective or enforceable until the revocation period has expired.  
In the event Executive signs this General Release and returns it to Western Digital in less than the 21-day period identified above, Executive hereby acknowledges that Executive has freely and voluntarily chosen to waive the time period allotted for consideration of this General Release.   This General Release will become effective and enforceable seven (7) days following execution by Employee, unless Executive revokes it during the seven-day period consistent with the terms of this Section.  The parties agree that no change to this General Release, whether material or immaterial, will restart the running of the twenty-one (21) day period.  In the event that Executive exercises Executive’s right of revocation during the seven-day revocation period, neither Western Digital nor Executive will have any obligations under this General Release.  Nothing in this Paragraph prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law. 

7.Denial of Liability.  This Agreement does not constitute an admission by Western Digital of any violation of federal, state or local law, ordinance or regulation or of any liability or wrongdoing whatsoever.  Neither this Agreement nor anything in this Agreement shall be construed to be or shall be admissible in any proceeding as evidence of liability or wrongdoing by Western Digital.  This Agreement may be introduced, however, in any proceeding to enforce the Agreement.  
8.Confidentiality.  Executive agrees that the terms and conditions of this Agreement shall remain confidential as between the parties and, unless required by law, Executive shall not disclose them to any other person, other than to Executive’s legal and financial advisors or members of Executive’s immediate family, who shall also be advised of its confidentiality and who shall agree to be bound by this confidentiality agreement.  Without limiting the generality of the foregoing, Executive specifically agrees not to disclose information regarding this Agreement to any current or former employee of Western Digital.  Executive agrees that disclosure by Executive in violation of the foregoing shall constitute and be treated as a material breach of this Agreement.
9.Confidential and Proprietary Information.  Executive acknowledges that by reason of Executive’s position with Western Digital, Executive has been given access to confidential, trade secret, proprietary or private materials or information regarding Western Digital’s business.  Executive represents that Executive has held all 

such information confidential and will continue to do so, and that Executive will not use such information without the prior written consent of Western Digital.  Executive may continue to receive and be entrusted with confidential material through the Separation Date. In addition, Executive agrees that Executive’s obligations under the Employee Invention and Confidentiality Agreement, if Executive is subject to one, or any other similar Western Digital or Released Party agreement or policy relating to confidential information, employee inventions, nonsolicitation, noncompetition, or similar matters to which Executive is now subject (“Surviving Agreements”) continue in effect per the terms of those agreements.  Executive represents that Executive has returned all confidential, proprietary and trade secret information within Executive’s possession or control to Western Digital or will make best efforts to do so on or before the Separation Date. Executive understands that confidential trade secrets, proprietary information and confidential business information of Western Digital affects the successful conduct of Western Digital’s business and its goodwill. Executive hereby acknowledges that the sale or unauthorized use or disclosure of any confidential, trade secret, proprietary or private materials or information regarding Western Digital’s business by any means whatsoever shall constitute “Unfair Competition.”  Executive agrees that Executive shall not engage in Unfair Competition at any time.  Executive also understands that pursuant to the Defend Trade Secrets Act of 2016, 18 USC § 1833(b), Executive shall not be held criminally or civilly liable under any Federal or State Trade secret law for the disclosure of a trade secret that is made (a) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law; or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
10.Return of Company Property. Executive warrants and represents that Executive will return all company equipment, including, but not limited to, keys or means of access to Western Digital’s facilities or parking structures, computers, cell phones, personal data assistants, and notebooks within Executive’s possession or control, and not previously delivered to Western Digital, on or before Executive’s Separation Date.  Executive will also return all information, materials, documents, memoranda, reports, files, samples, books, correspondence, lists, programs, documentation, and/or other related materials produced as a result of Executive’s employment with Western Digital (including copies) within Executive’s possession or control, and not previously delivered to Western Digital, no later than Executive’s Separation Date.  
11.Non-Solicitation.  Executive promises and agrees that she will not, during the twelve (12) months following the Separation Date, directly or indirectly (a) solicit or recruit any individual causing them to terminate employment with Western Digital in order to become an employee, consultant or independent contractor for Executive or any other person or entity; or (b) solicit for competitive business purposes any customer of Western Digital or its affiliates (who is or became a customer during the term of Executive’s employment and whose information constitutes Western Digital’s trade secret under applicable law). Executive acknowledges that the restrictions contained in this paragraph are reasonable to protect the stability of Western Digital’s workforce and to protect the confidential, proprietary and trade secret information of Western Digital, and that Western Digital would suffer irreparable harm if Executive fails to comply with the promises in this paragraph.
12.Litigation and Investigation Cooperation.  Executive agrees to cooperate with Western Digital regarding any threatened, pending or subsequently filed litigation, claims, or other disputes, or in any investigation or proceeding by any governmental agency or body, involving Western Digital that relate to matters within Executive’s knowledge or responsibility during Executive’s employment with Western Digital.  Executive has disclosed to Western Digital’s General Counsel all information within Executive’s knowledge as of the date of this Agreement related to any pending or threated legal matter with which Executive has had any direct or indirect involvement.  Furthermore, Executive agrees to cooperate in the prosecution of any claims and lawsuits brought by Western Digital that are currently outstanding or that may in the future be brought relating to matters which occurred during or prior to the term of Executive’s employment with Western Digital. Without limiting the foregoing, Executive agrees (a) to meet with Western Digital representatives, its counsel, or other designees at mutually convenient times and places with respect to any items with the scope of this provision; (b) to provide truthful testimony regarding same to any court, agency, or other adjudicatory body; and (c) to provide Western Digital with notice of contact by any adverse party or such adverse party’s representative, except as may be required by law. Western Digital will reimburse Executive for all reasonable expenses in connection with the assistance and cooperation described in this paragraph.

13.Intellectual Property Assistance.  Executive agrees to execute every lawful document that Western Digital requests her to execute (whether or not during Executive’s employment with Western Digital) in connection with the protection of Western Digital’s intellectual property rights.  Such lawful documents include, but are not limited to, declarations and assignments including declarations of inventorship for filing and prosecuting patent applications on inventions, assignments to show title to such inventions and patent applications in Western Digital or Western Digital’s designee, and assignments to show title to works of authorship and applications for copyright registration. Executive agrees that Executive shall give such further assistance, including but not limited to information and testimony pursuant to Western Digital’s request (whether or not after Executive’s Separation Date) in connection with its defense, assertion, or protection of Western Digital’s intellectual property rights.  Western Digital shall reimburse Executive for all reasonable out of pocket expenses incurred in providing assistance pursuant to this provision.
14.Non-Disparagement.  Executive agrees that Executive shall not (a) directly or indirectly, make or ratify any statement, public or private, oral or written, to any person that disparages, either professionally or personally, Western Digital, as well as its directors, officers, and employees, past and present, and each of them, in each such case in his or her capacity as a service provider to Western Digital, or (b) make any statement or engage in any conduct that has the purpose of materially disrupting the business of Western Digital. In the event Western Digital receives inquiries from potential employers regarding Executive, Western Digital will provide only Executive’s dates of employment, position history, and compensation.  Executive agrees that Executive will direct all reference inquiries to HR department (HR Central at 866-823-8775). Nothing herein shall in any way prohibit Executive or Western Digital from disclosing such information as may be required by law, or by judicial or administrative process or order or the rules of any securities exchange or similar self-regulatory organization applicable to Executive or Western Digital.
15.Repayment Provision Upon Re-employment.  Executive agrees to repay Western Digital a pro rata portion of the Separation Benefits paid to Executive under Section 2 of this Agreement if Executive obtains re-employment with Western Digital, including any of its related entities, within the period of time after execution of the Agreement as set forth in Section 2 for which Western Digital contemplates paying Executive Separation Benefits. For example, if Executive is paid two weeks of Separation Benefits, but is reemployed by Western Digital one week after Executive’s Separation Date, Executive must repay one week of Separation Benefits to Western Digital.
16.Warranty Regarding Non-Assignment.  Executive warrants and represents that Executive has not heretofore assigned or transferred to any person not a party to this Agreement any released matter or any part or portion thereof and Executive shall defend, indemnify and hold harmless Western Digital from and against any claim (including the payment of attorneys’ fees and costs actually incurred whether or not litigation is commenced) based on or in connection with or arising out of any such assignment or transfer made, purported or claimed.
17.Termination of Relationship.  Executive and Western Digital acknowledge that any employment or contractual relationship between them shall terminate on the Separation Date, and that they have no further employment or contractual relationship except as may arise out of this Agreement and Executive’s continued obligations under the Surviving Agreements. 
18.Warranty Regarding Taxes.  Executive agrees that Executive shall be exclusively and fully liable for the payment of any and all federal, state, and local taxes which may be due, and tax consequences, including interest and penalties, if any, as the result of the consideration received as set forth herein.  Executive agrees to indemnify Western Digital for, and to hold Western Digital harmless from, any obligation, liability, taxes, penalties, costs or attorney’s fees (collectively, the “Tax Liability”) it may incur in connection with the failure to withhold any tax, social security, FICA, or any other amounts associated with the above-referenced payment, except to the extent such Tax Liability directly results from Western Digital’s gross negligence in connection with the failure to properly withhold or report any tax, social security, FICA or other amounts associated with the above-referenced payment. Executive has not relied upon any advice from Western Digital as to the taxability of any payments hereunder, whether pursuant to federal, state or local income tax statutes or otherwise.  Executive acknowledges that Western Digital does not make and has not made any representations regarding the taxability of 

the payment to Executive, and Executive has not relied upon any representation or advice by Western Digital on that subject.  It is intended that the terms of this Agreement will not result in the imposition of any tax liability pursuant to Section 409A of the Internal Revenue Code of 1986, as amended. This Agreement shall be construed and interpreted consistent with that intent so as to avoid the imputation of any additional tax, penalty or interest under Section 409A of the Internal Revenue Code yet preserve (to the nearest extent possible) the intended benefit payable to the Executive.
19.Severability and Enforceability.  If any provision of this Agreement or its application is held invalid, the invalidity shall not affect other provisions or applications of the Agreement which can be given effect without the invalid provision or application and, therefore, the provisions of this Agreement are declared to be severable.  The parties agree that a waiver of a breach by the other party shall not operate or be construed as a waiver by that party of any subsequent breach of like or similar kind. No waiver shall be binding unless in writing and signed by the party waiving the breach.
20.Integration Clause.  This Agreement, the Surviving Agreements, and the applicable equity award plans and award agreements governing outstanding equity awards (collectively, the “Integrated Agreements”) constitute and contain the entire agreement and understanding concerning Executive’s employment and the other matters addressed herein.  The parties intend the Integrated Agreements to be a complete and exclusive statement of the terms of their agreement.  The parties represent and acknowledge that they do not rely and have not relied upon any representation or statement not set forth in this Agreement. The Integrated Agreements supersede and replace all prior negotiations and agreements, proposed or otherwise, whether written or oral, between the parties concerning the subject matters contained herein.  This is a fully integrated document.  This Agreement may be modified only with a written instrument executed by both parties.
21.Counterparts.  This Agreement may be executed in counterparts, and each counterpart, when executed, shall have the efficacy of a signed original.  Photographic and facsimile copies of such signed counterparts may be used in lieu of the originals for any purpose.
22.Advice of Counsel.  In entering this Agreement, the parties represent that they have had the opportunity to seek the advice of counsel of their choosing prior to executing this Agreement.
23.Attorney’s Fees. The parties agree that each side shall bear their own costs and any attorney’s fees incurred in connection with this Agreement, other than as may be set forth in Section 2 above. However, should Executive breach any of the provisions or obligations of this Agreement, all of which are deemed material for purposes of this Section 23, Western Digital shall be entitled to recover from Executive the reasonable attorney fees and costs that Western Digital incurs in connection with any legal dispute over Executive’s breach of the Agreement.
24.Supplementary Documents.  All parties agree to cooperate fully and to execute any and all supplementary documents and to take all additional actions that may be necessary or appropriate to give full force to the basic terms and intent of this Agreement and which are not inconsistent with its terms.
25.Cooperation in Drafting.  Executive and Western Digital have cooperated in the drafting and preparation of this Agreement.  Hence, in any construction to be made of this Agreement, the same shall not be construed against any party on the basis that the party was the drafter.
26.Headings.  The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 
27.Arbitration and Governing Law.  This Agreement is made and entered into in the State of California and shall in all respects be interpreted, enforced and governed under the laws of said State without regard to principles of conflict of laws.  

A.Provided that Executive has exhausted the claims and appeals procedure of the Plan with respect to any claim for benefits or for breach of fiduciary duty, any dispute regarding Executive’s employment with Western Digital or termination of such employment, and any aspect of this Agreement (including but not limited to the enforceability, unconscionability, interpretation, construction, or breach of this Agreement), shall be governed by the Western Digital Dispute Resolution Agreement, in the event an enforceable one exists between Executive and Western Digital.  
B.In the event that an enforceable Western Digital Dispute Resolution Agreement between Executive and Western Digital does not exist, and provided that Executive has exhausted the claims and appeals procedure previously mentioned in this paragraph with respect to any claims for benefits or for breach of fiduciary duty, the following shall apply:  Any dispute regarding Executive’s employment with Western Digital or its termination, and any aspect of this Agreement (including but not limited to the enforceability, unconscionability, interpretation, construction, or breach of this Agreement, except as expressly provided otherwise herein) shall be settled by final and binding arbitration before a single arbitrator in the county in which Executive worked in accordance with the JAMS Employment Arbitration Rules and Procedures (“Rules”) as the exclusive remedy for such dispute, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  A copy of the Rules can be found at:  http://www.jamsadr.com/rules-employment-arbitration. The arbitration proceedings do not provide for jury trials, but for a hearing before one independent, neutral arbitrator. Therefore, in agreeing to arbitrate claims, both Executive and Western Digital and its affiliates are waiving a trial or hearing before a jury.  Any claim shall be brought in the parties’ individual capacity, and not as a plaintiff or class member in any purported or actual class or collective action proceeding, and accordingly Executive waives all purported and actual class and collective action claims, unless applicable law prohibits such waiver, which itself, notwithstanding the foregoing, shall be a question for a court of competent jurisdiction to resolve.  In the event of (1) a California Private Attorney General Action claim; (2) a purported or actual class or collective action claim determined to be non-waivable pursuant to applicable law; or (3) any claim determined to be non-arbitrable pursuant to applicable law, such claim(s) shall be brought as a civil action and the parties shall seek such civil action to be stayed pending resolution of all arbitrable claims in arbitration.  
C.This arbitration provision shall be viewed as a post-employment agreement, with both Executive and Western Digital splitting equally any fees of the arbitrator and JAMS.
28.Injunctive Relief.   Either party may apply to the arbitrator for preliminary injunctive relief until the arbitration award is rendered or the controversy is otherwise resolved.  Either party also may, without waiving any remedy under this paragraph, seek from any court having jurisdiction any interim or provisional relief that is necessary to protect the rights of that party, pending the establishment of the arbitral tribunal.

IN WITNESS WHEREOF, the undersigned have read and understand the consequences of this Agreement and voluntarily sign it. The undersigned declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

																		
	EXECUTED this	14th
	day of	August	, 2020	
						
						
						
						

																		
					"EXECUTIVE"	
					Print Name:	Mike Cordano
					Signature: 	/s/Michael D. Cordano

																		
	EXECUTED this	14th
	day of	August	, 2020	
						
						
						
						

																		
					"WESTERN DIGITAL"	
					Print Name:	Lori Sundberg
					Title:	Chief Human Resources Officer, HR
					Signature: 	/s/Lori Sundbergfisi-ex101_45.htm

Exhibit 10.1

 

SUBORDINATED NOTE PURCHASE AGREEMENT

This SUBORDINATED NOTE PURCHASE AGREEMENT (this “Agreement”) is dated as of October 7, 2020, and is made by and among  Financial Institutions, Inc., a New York corporation (the “Company”), and the several purchasers of the Subordinated Notes (as defined herein) identified on the signature pages hereto (each a “Purchaser” and collectively, the “Purchasers”).

RECITALS

WHEREAS, the Company has requested that the Purchasers purchase from the Company up to $35.0 million in aggregate principal amount of Subordinated Notes, which aggregate amount is intended to qualify as Tier 2 Capital (as defined herein).

WHEREAS, the Company has engaged Piper Sandler & Co., as its exclusive placement agent (“Placement Agent”) for the offering of the Subordinated Notes.

WHEREAS, each of the Purchasers is an institutional accredited investor as such term is defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D (“Regulation D”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”) or a QIB as such term is defined in Rule 144A(a)(1) promulgated under the Securities Act (“QIB”).

WHEREAS, the offer and sale of the Subordinated Notes by the Company is being made in reliance upon the exemptions from registration available under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated under the Securities Act.

WHEREAS, each Purchaser is willing to purchase from the Company a Subordinated Note in the principal amount set forth on such Purchaser’s respective signature page hereto (the “Subordinated Note Amount”) in accordance with the terms, subject to the conditions and in reliance on, the recitals, representations, warranties, covenants and agreements set forth herein and in the Subordinated Notes.

WHEREAS, at Closing, the Company and the Purchasers shall execute and deliver a Registration Rights Agreement, substantially in the form attached hereto as Exhibit B  (the “Registration Rights Agreement”), pursuant to which, among other things, the Company will agree to provide certain registration rights with respect to the Securities under the Securities Act and the rules and regulations promulgated thereunder and applicable state securities laws.

NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

AGREEMENT

1.DEFINITIONS.

1.1Defined Terms.  The following capitalized terms used in this Agreement and in the Subordinated Notes have the meanings defined or referenced below.  Certain other capitalized terms used only in specific sections of this Agreement may be defined in such sections.  Terms used herein and not defined below shall have the meaning set forth in the Indenture.

 

 

“Affiliate(s)” means, with respect to any Person, such Person’s immediate family members, partners, members or parent and subsidiary corporations, and any other Person directly or indirectly controlling, controlled by, or under common control with said Person and their respective Affiliates.

“Agreement” has the meaning set forth in the preamble hereto.

“Bank” means Five Star Bank, a New York chartered bank, and wholly owned subsidiary of the Company.

“Business Day” means any day other than a Saturday, Sunday or any other day on which banking institutions in the State of New York are permitted or required by any applicable law or executive order to close; provided that banking institutions shall not be deemed to be authorized or obligated to be closed due to a “shelter in place,” “non-essential employee” or similar closure of physical branch locations at the direction of any governmental authority if such banking institutions’ electronic funds transfer systems (including for wire transfers) are open for use by customers on such day.

“Bylaws” means the Bylaws of the Company, as in effect on the Closing Date.

“Charter” means the Certificate of Incorporation of the Company, as in effect on the Closing Date. 

“Closing” has the meaning set forth in Section 2.5.

“Closing Date” means October 7, 2020

“Company” has the meaning set forth in the preamble hereto and shall include any successors to the Company.

“Company Covered Person” has the meaning set forth in Section 4.2.4.

“Company’s Reports” means (i) the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC, including the audited financial statements contained therein; (ii) the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, as filed with the SEC, including the unaudited financial statements contained therein, and (iii) the Company’s public reports for the year ended December 31, 2019 and the period ended June 30, 2020, as filed with the FRB as required by regulations of the FRB.  

“Disbursement” has the meaning set forth in Section 3.1.

“Disqualification Event” has the meaning set forth in Section 4.2.4.

“DTC” has the meaning set forth in Section 3.1.

“Equity Interest” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person which is not a corporation, and any and all warrants, options or other rights to purchase any of the foregoing.

“Event of Default” has the meaning set forth in the Subordinated Notes.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“FDIC” means the Federal Deposit Insurance Corporation.

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“FRB” means the Board of Governors of the Federal Reserve System.

“GAAP” means generally accepted accounting principles in effect from time to time in the United States of America.

“Global Note”  has the meaning set forth in Section 3.1.

“Governmental Agency(ies)” means, individually or collectively, any federal, state, county or local governmental department, commission, board, regulatory authority or agency (including, without limitation, each applicable Regulatory Agency) with jurisdiction over the Company or a Subsidiary of the Company.

“Governmental Licenses” has the meaning set forth in Section 4.3.

“Hazardous Materials” means flammable explosives, asbestos, urea formaldehyde insulation, polychlorinated biphenyls, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances which are “hazardous substances,” “hazardous wastes,” “hazardous materials” or “toxic substances” under the Hazardous Materials Laws and/or other applicable environmental laws, ordinances or regulations.

“Hazardous Materials Laws” mean any laws, regulations, permits, licenses or requirements pertaining to the protection, preservation, conservation or regulation of the environment which relates to real property, including:  the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (including the Superfund Amendments and Reauthorization Act of 1986), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651, the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and all comparable state and local laws, laws of other jurisdictions or orders and regulations.

“Indebtedness” means:  (i) all items arising from the borrowing of money that, according to GAAP as in effect from time to time, would be included in determining total liabilities as shown on the consolidated balance sheet of the Company; and (ii) all obligations secured by any lien in property owned by the Company or any Subsidiary whether or not such obligations shall have been assumed; provided, however, Indebtedness shall not include deposits or other indebtedness created, incurred or maintained in the ordinary course of the Company’s or the Bank’s business (including, without limitation, federal funds purchased, advances from any Federal Home Loan Bank, secured deposits of municipalities, letters of credit issued by the Company or the Bank and repurchase arrangements) and consistent with customary banking practices and applicable laws and regulations.

“Indenture” means the indenture, dated as of the date hereof, by and between the Company and Wilmington Trust, N.A., as trustee, substantially in the form attached hereto as Exhibit A, as the same may be amended or supplemented from time to time in accordance with the terms thereof.

“Leases” means all leases, licenses or other documents providing for the use or occupancy of any portion of any Property, including all amendments, extensions, renewals, supplements, modifications, sublets and assignments thereof and all separate letters or separate agreements relating thereto.

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“Material Adverse Effect” means, with respect to any Person, any change or effect that (i) is or would be reasonably likely to be material and adverse to the financial condition, results of operations or business of such Person and its Affiliates, or (ii) would materially impair the ability of such Person to perform its respective obligations under any of the Transaction Documents, or otherwise materially impede the consummation of the transactions contemplated hereby; provided, however, that “Material Adverse Effect” shall not be deemed to include the impact of (1) changes in banking and similar laws, rules or regulations of general applicability or interpretations thereof by Governmental Agencies, (2) changes in GAAP or regulatory accounting requirements applicable to financial institutions and their holding companies generally, (3) changes in general economic or capital market conditions affecting financial institutions or their market prices generally and not specifically related to the Company, the Bank or the Purchasers, (4) the effects of the COVID-19 pandemic that do not disproportionately affect the operations or business of the Company in comparison to other banking institutions with similar operations, (5) direct effects of compliance with this Agreement on the operating performance of the Company, the Bank or the Purchasers, including expenses incurred by the Company, the Bank or the Purchasers in consummating the transactions contemplated by this Agreement, and (6) the effects of any action or omission taken by the Company with the prior written consent of the Purchasers, and vice versa, or as otherwise contemplated by this Agreement and the Subordinated Notes.

“Maturity Date” means October 15, 2030.

“Person” means an individual, a corporation (whether or not for profit), a partnership, a limited liability company, a joint venture, an association, a trust, an unincorporated organization, a government or any department or agency thereof (including a Governmental Agency) or any other entity or organization.

“Placement Agent” has the meaning set forth in the Recitals.

“Property” means any real property owned or leased by the Company or any Affiliate or Subsidiary of the Company.

“Purchaser” or “Purchasers” has the meaning set forth in the preamble hereto.

“QIB” has the meaning set forth in the Recitals.

“Registration Rights Agreement” has the meaning set forth in the Recitals.

“Regulation D” has the meaning set forth in the Recitals.

“Regulatory Agency” means any federal or state agency charged with the supervision or regulation of depository institutions or holding companies of depository institutions, or engaged in the insurance of depository institution deposits, or any court, administrative agency or commission or other authority, body or agency having supervisory or regulatory authority with respect to the Company, the Bank or any of their Subsidiaries.

“SEC” means the Securities and Exchange Commission.

“Secondary Market Transaction” has the meaning set forth in Section 5.5.

“Securities Act” has the meaning set forth in the Recitals.

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“Subordinated Note” means the Subordinated Note (or collectively, the “Subordinated Notes”) in the form attached as an exhibit to the Indenture, as amended, restated, supplemented or modified from time to time, and each Subordinated Note delivered in substitution or exchange for such Subordinated Note.

“Subordinated Note Amount” has the meaning set forth in the Recitals.

“Subsidiary” means with respect to any Person, any corporation or entity (other than a trust) in which a majority of the outstanding Equity Interest is directly or indirectly owned by such Person.

“Tier 2 Capital” has the meaning given to the term “Tier 2 capital” in 12 C.F.R. Part 217, as amended, modified and supplemented and in effect from time to time or any replacement thereof.

“Tier 2 Capital Event” has the meaning set forth in the Indenture.

“Transaction Documents” has the meaning set forth in Section 3.2.1.1.

“Trustee” means the trustee or successor in accordance with the applicable provisions of the Indenture.

1.2Interpretations.  The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined.  The words “hereof”, “herein” and “hereunder” and words of like import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The word “including” when used in this Agreement without the phrase “without limitation,” shall mean “including, without limitation.” All references to time of day herein are references to Eastern Time unless otherwise specifically provided.  All references to this Agreement, the Subordinated Notes and the Indenture shall be deemed to be to such documents as amended, modified or restated from time to time.  With respect to any reference in this Agreement to any defined term, (i) if such defined term refers to a Person, then it shall also mean all heirs, legal representatives and permitted successors and assigns of such Person, and (ii) if such defined term refers to a document, instrument or agreement, then it shall also include any amendment, replacement, extension or other modification thereof.

1.3Exhibits Incorporated.  All Exhibits attached hereto are hereby incorporated into this Agreement.

2.SUBORDINATED DEBT.

2.1Certain Terms.  Subject to the terms and conditions herein contained, the Company proposes to issue and sell to the Purchasers, severally and not jointly, Subordinated Notes, which will be issued pursuant to the Indenture, in an aggregate principal amount equal to the aggregate of the Subordinated Note Amounts.  The Purchasers, severally and not jointly, each agree to purchase the Subordinated Notes, which will be issued pursuant to the Indenture, from the Company on the Closing Date in accordance with the terms of, and subject to the conditions and provisions set forth in, this Agreement, the Subordinated Notes and the Indenture.  The Subordinated Note Amounts shall be disbursed in accordance with Section 3.1.

2.2Subordination.  The Subordinated Notes shall be subordinated in accordance with the subordination provisions set forth therein.

2.3Maturity Date.  On the Maturity Date, all sums due and owing under this Agreement and the Subordinated Notes shall be repaid in full.  The Company acknowledges and agrees that the Purchasers have not made any commitments, either express or implied, to extend the terms of the Subordinated Notes 

5

 

past their Maturity Date, and shall not extend such terms beyond the Maturity Date unless the Company and the Purchasers hereafter specifically otherwise agree in writing.

2.4Unsecured Obligations.  The obligations of the Company to the Purchasers under the Subordinated Notes shall be unsecured.

2.5The Closing.  The execution and delivery of the Transaction Documents (the “Closing”) shall occur on the Closing Date at such place or time or on such other date as the parties hereto may agree.

2.6Payments.  The Company agrees that matters concerning payments and application of payments shall be as set forth in this Agreement, the Indenture and the Subordinated Notes.

2.7No Right of Offset.  Each Purchaser hereby expressly waives any right of offset it may have against the Company or any of its Subsidiaries.

2.8Use of Proceeds.  The Company shall use the net proceeds from the sale of Subordinated Notes for general corporate purposes, organic growth and to support the Bank’s regulatory capital ratios. 

3.DISBURSEMENT.

3.1Disbursement.  On the Closing Date, assuming all of the terms and conditions set forth in Section 3.2 have been satisfied by the Company and the Company has executed and delivered to each of the Purchasers this Agreement and any other related documents in form and substance reasonably satisfactory to the Purchasers, each Purchaser shall disburse to the Company in immediately available funds the Subordinated Note Amount set forth on each Purchaser’s respective signature page hereto to the Company in exchange for an electronic securities entitlement through the facilities of the Depository Trust Company (“DTC”) with a principal amount equal to such Subordinated Note Amount (the “Disbursement”).  The Company will deliver to the Trustee a global certificate (the “Global Note”) representing the Subordinated Notes, registered in the name of Cede & Co. as nominee for DTC.

3.2Conditions Precedent to Disbursement.  

3.2.1Conditions to the Purchasers’ Obligation. The obligation of each Purchaser to consummate the purchase of the Subordinated Notes to be purchased by such Purchaser at Closing and to effect the Disbursement is subject to delivery by or at the direction of the Company to such Purchaser (or, with respect to the Indenture, the Trustee) each of the following (or written waiver of delivery by such Persons prior to the Closing):

3.2.1.1Transaction Documents.  This Agreement, the Indenture, the Global Note and the Registration Rights Agreement (collectively, the “Transaction Documents”), each duly authorized and executed by the Company, and the delivery of written instruction to the Trustee (with respect to the Indenture).

3.2.1.2Authority Documents.

(a)A copy, certified by the Secretary or Assistant Secretary of the Company, of the Charter of the Company;

(b)A certificate of good standing of the Company issued by the Secretary of State of the State of New York; and a certificate of good standing of the Bank issued by the New York State Department of Financial Services;

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(c)A copy, certified by the Secretary or Assistant Secretary, of the Bylaws of the Company;

(d)A copy, certified by the Secretary or Assistant Secretary of the Company, of the resolutions of the board of directors of the Company, and any committee thereof, authorizing the issuance of the Subordinated Note and the execution, delivery and performance of the Transaction Documents;

(e)An incumbency certificate of the Secretary or Assistant Secretary of the Company certifying the names of the officer or officers of the Company authorized to sign the Transaction Documents and the other documents provided for in this Agreement; and

(f)The opinion of Harter Secrest & Emery LLP, counsel to the Company, dated as of the Closing Date, substantially in the form set forth at Exhibit C attached hereto addressed to the Purchasers and Placement Agent.

3.2.1.3Other Documents and Information.  Such other certificates, affidavits, schedules, resolutions, notes and/or other documents which are provided for hereunder or as a Purchaser may reasonably request.

3.2.1.4Aggregate Investments.  Prior to, or contemporaneously with the Closing, each Purchaser shall have actually subscribed for the Subordinated Note Amount set forth on such Purchaser’s signature page to this Agreement.

3.2.2Conditions to the Company’s Obligation.  With respect to a given Purchaser, the obligation of the Company to consummate the sale of the Subordinated Notes and to effect the Closing is subject to delivery by or at the direction of such Purchaser to the Company of this Agreement and the Registration Rights Agreement, duly authorized and executed by such Purchaser.

4.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company hereby represents and warrants to each Purchaser as follows:

4.1Organization and Authority.

4.1.1Organization Matters of the Company and Its Subsidiaries.

4.1.1.1The Company is a duly organized corporation, is validly existing and in good standing under the laws of the State of New York and has all requisite corporate power and authority to conduct its business and activities as presently conducted, to own its properties, and to perform its obligations under the Transaction Documents.  The Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect.  The Company is duly registered as a financial holding company under the Bank Holding Company Act of 1956, as amended.

4.1.1.2Schedule 4.1.1.2 sets forth the only direct or indirect Subsidiaries of the Company.  Each Subsidiary of the Company, other than the Bank, either has been duly organized and is validly existing as a corporation or limited liability company, or, in the case of the Bank, has been duly chartered and is validly existing as a commercial bank, in each case in good standing under the laws 

7

 

of the jurisdiction of its incorporation, has corporate, trust or limited liability company power, as applicable, and authority to own, lease and operate its properties and to conduct its business and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not reasonably be expected to result in a Material Adverse Effect.  All of the issued and outstanding shares of capital stock or other equity interests in each Subsidiary of the Company have been duly authorized and validly issued, are fully paid and non-assessable (to the extent such concepts apply to entities other than corporations) and are owned by the Company, directly or through Subsidiaries of the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim; none of the outstanding shares of capital stock of, or other Equity Interests in, any Subsidiary of the Company were issued in violation of the preemptive or similar rights of any security holder of such Subsidiary of the Company or any other entity.

4.1.1.3The deposit accounts of the Bank are insured by the FDIC up to applicable limits.  The Bank has not received any notice or other information indicating that the Bank is not an “insured depository institution” as defined in 12 U.S.C. Section 1813, nor has any event occurred which could reasonably be expected to adversely affect the status of the Bank as an FDIC-insured institution.  

4.1.2Capital Stock and Related Matters.  The Charter of the Company authorizes the Company to issue: (i) 50,000,000 shares of common stock, par value $0.01 per share, and (ii) 210,000 shares of preferred stock, par value $100 per share, (a) 10,000 of which are designated as Class A Preferred Stock, with 1,533 designated as Series A 3% Preferred Stock and 7,503 designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A and (b) 200,000 of which are designated as Series B-1 8.48% Preferred Stock. As of the date of this Agreement, 16,038,220 shares of the Company’s common stock, 1,435 shares of Series A 3% Preferred Stock and 171,847 shares of the Series B-1 8.48% Preferred Stock are issued and outstanding. All of the outstanding capital stock of the Company has been duly authorized and validly issued and is fully paid and non-assessable.  There are, as of the date hereof, no outstanding options, rights, warrants or other agreements or instruments obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of the capital stock of the Company or obligating the Company to grant, extend or enter into any such agreement or commitment to any Person, other than in the ordinary course of business, consistent with past practice, pursuant to the Company’s equity compensation programs duly adopted by the Company’s Board of Directors.

4.2No Impediment to Transactions.

4.2.1Transaction is Legal and Authorized.  The issuance of the Subordinated Notes pursuant to the Indenture, the borrowing of the aggregate of the Subordinated Note Amount, the execution of the Transaction Documents, and the compliance by the Company with all of the provisions of the Transaction Documents are within the corporate and other powers of the Company.  

4.2.2Agreement, Indenture, and Registration Rights Agreement.  This Agreement, the Indenture, and the Registration Rights Agreement have been duly authorized, executed and delivered by the Company, and, assuming due authorization, execution and delivery by the other parties hereto, including the Trustee for purposes of the Indenture, constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

4.2.3Subordinated Notes.  The Subordinated Notes have been duly authorized by the Company and when executed by the Company and completed and authenticated by the Trustee in accordance with, and in the forms contemplated by, the Indenture and issued to, delivered to and paid for 

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by the Purchasers in accordance with the terms of the Agreement, will have been duly executed, authenticated, issued and delivered, under the Indenture and will constitute legal, valid and binding obligations of the Company, entitled to the benefits of the Indenture, and enforceable in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.  When executed and delivered, the Subordinated Notes will be substantially in the forms attached as exhibits to the Indenture.

4.2.4Exemption from Registration; No Disqualification Event.  Neither the Company, nor any of its Subsidiaries or Affiliates, nor, to the Company’s knowledge, any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Subordinated Notes.  Assuming the accuracy of the representations and warranties of each Purchaser set forth in this Agreement, the Subordinated Notes will be issued in a transaction exempt from the registration requirements of the Securities Act.  No “bad actor” disqualifying event described in Rule 506(d)(1)(i)-(viii) of the Securities Act (a “Disqualification Event”) is applicable to the Company or, to the Company’s knowledge, any Person described in Rule 506(d)(1) (each, a “Company Covered Person”).  The Company has exercised reasonable care to determine whether any Company Covered Person is subject to a Disqualification Event.  The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e).

4.2.5No Defaults or Restrictions. Neither the execution and delivery of the Transaction Documents by the Company nor compliance by the Company with their respective terms and conditions will (whether with or without the giving of notice or lapse of time or both) (i) violate, conflict with or result in a breach of, or constitute a default under:  (1) the Charter or Bylaws of the Company; (2) any of the terms, obligations, covenants, conditions or provisions of any corporate restriction or of any contract, agreement, indenture, mortgage, deed of trust, pledge, bank loan or credit agreement, or any other agreement or instrument to which the Company or the Bank, as applicable, is now a party or by which it or any of its properties may be bound or affected; (3) any judgment, order, writ, injunction, decree or demand of any court, arbitrator, grand jury, or Governmental Agency applicable to the Company or the Bank; or (4) any statute, rule or regulation applicable to the Company, except, in the case of items (2), (3) or (4), for such violations, conflicts, breaches or defaults that would not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect on the Company and its Subsidiaries taken as a whole, or (ii) result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any property or asset of the Company.  Neither the Company nor the Bank is in default in the performance, observance or fulfillment of any of the terms, obligations, covenants, conditions or provisions contained in any indenture or other agreement creating, evidencing or securing Indebtedness of any kind or pursuant to which any such Indebtedness is issued, or any other agreement or instrument to which the Company or the Bank, as applicable, is a party or by which the Company or the Bank, as applicable, or any of its properties may be bound or affected, except, in each case, only such defaults that would not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect on the Company.

4.2.6Governmental Consent.  No governmental orders, permissions, consents, approvals or authorizations are required to be obtained by the Company that have not been obtained, and no registrations or declarations are required to be filed by the Company that have not been filed in connection with, or, in contemplation of, the execution and delivery of, and performance under, the Transaction Documents, except for applicable requirements, if any, of the Securities Act, the Exchange Act or state securities laws or “blue sky” laws of the various states and any applicable federal or state banking laws and regulations.

4.3Possession of Licenses and Permits.  The Company and its Subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) 

9

 

issued by the appropriate Governmental Agencies necessary to conduct the business now operated by them except where the failure to possess such Governmental Licenses would not, singularly or in the aggregate, have a Material Adverse Effect on the Company or such applicable Subsidiary; the Company and each Subsidiary of the Company is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure to so comply would not, individually or in the aggregate, have a Material Adverse Effect on the Company or such applicable Subsidiary of the Company; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect on the Company or such applicable Subsidiary of the Company.  Neither the Company nor any Subsidiary of the Company has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses since December 31, 2015.

4.4Financial Condition.

4.4.1Company Financial Statements.  The financial statements of the Company included in the Company’s Reports (including the related notes, where applicable), which have been made available to the Purchasers (i) have been prepared from, and are in accordance with, the books and records of the Company; (ii) fairly present in all material respects the results of operations, cash flows, changes in stockholders’ equity and financial position of the Company and its consolidated Subsidiaries, for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to recurring year-end audit adjustments normal in nature and amount), as applicable; (iii) complied as to form, as of their respective dates of filing in all material respects with applicable accounting and banking requirements as applicable, with respect thereto; and (iv) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, (x) as indicated in such statements or in the notes thereto, (y) for any statement therein or omission therefrom that was corrected, amended, or supplemented or otherwise disclosed or updated in a subsequent Company’s Report, and (z) to the extent that any unaudited interim financial statements do not contain the footnotes required by GAAP, and were or are subject to normal and recurring year-end adjustments, which were not or are not expected to be material in amount, either individually or in the aggregate.  The books and records of the Company have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements.  The Company does not have any material liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due) required to be reflected on or reserved against in a balance sheet in accordance with GAAP, except for those liabilities that are reflected or reserved against on the consolidated balance sheet of the Company contained in the Company’s Reports for the Company’s most recently completed quarterly or annual fiscal period, as applicable, and for liabilities incurred in the ordinary course of business consistent with past practice or in connection with this Agreement and the transactions contemplated hereby.

4.4.2Absence of Default.  Since December 31, 2019, no event has occurred which either of itself or with the lapse of time or the giving of notice or both, would give any creditor of the Company the right to accelerate the maturity of any material Indebtedness of the Company.  The Company is not in default under any Lease, agreement or instrument, or any law, rule, regulation, order, writ, injunction, decree, determination or award, non-compliance with which could reasonably be expected to result in a Material Adverse Effect on the Company.

4.4.3Solvency.  After giving effect to the consummation of the transactions contemplated by this Agreement, the Company has capital sufficient to carry on its business and transactions and is solvent and able to pay its debts as they mature.  No transfer of property is being made and no Indebtedness is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud either present or future creditors of the Company or any Subsidiary of the Company.

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4.4.4Ownership of Property.  The Company and each of its Subsidiaries has good and marketable title as to all real property owned by it and good title to all assets and properties owned by the Company and such Subsidiary in the conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the most recent balance sheet contained in the Company’s Reports or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such balance sheet), subject to no encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to the Federal Home Loan Bank, inter-bank credit facilities, reverse repurchase agreements or any transaction by the Bank acting in a fiduciary capacity, (ii) statutory liens for amounts not yet delinquent or which are being contested in good faith,  (iii) such as would not be expected, individually or in the aggregate, to result in a Material Adverse Effect on the Company, and (iv) as disclosed in the Company’s Reports.  The Company and each of its Subsidiaries, as lessee, has the right under valid and existing Leases of real and personal properties that are material to the Company or such Subsidiary, as applicable, in the conduct of its business to occupy or use all such properties as presently occupied and used by it.  

4.5No Material Adverse Effect.  Except as set forth in the Company’s Reports, since December 31, 2019, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries.

4.6Legal Matters.

4.6.1Compliance with Law.  The Company and each of its Subsidiaries (i) has complied with and, (ii) is not under investigation with respect to, and, to the Company’s knowledge, has not been threatened to be charged with or given any notice of any material violation of any applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any instrumentality or agency thereof, having jurisdiction over the conduct of its business or the ownership of its properties, except where any such failure to comply or violation would not reasonably be expected to have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole.  The Company and each of its Subsidiaries is in compliance with, and has been in compliance with, (x) all statutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any Governmental Agency, applicable to it, and (y) its own privacy policies and written commitments to customers, consumers and employees, concerning data protection, the privacy and security of personal data, and the nonpublic personal information of its customers, consumers and employees, in each case except where any such failure to comply, would not result, either individually or in the aggregate, in a Material Adverse Effect.  At no time during the two years prior to the date hereof has the Company or any of its Subsidiaries received any written notice asserting any violations of any of the foregoing.

4.6.2Regulatory Enforcement Actions.  The Company, the Bank and its other Subsidiaries are in compliance in all material respects with all laws administered by and regulations of any Governmental Agency applicable to it or to them, except where the failure to comply would not have a Material Adverse Effect.  None of the Company, the Bank, the Company’s or the Bank’s Subsidiaries nor any of their officers or directors is now operating under any restrictions, agreements, memoranda, commitment letter, supervisory letter or similar regulatory correspondence, or other commitments (other than restrictions of general application) imposed by any Governmental Agency, nor are, to the Company’s knowledge, (a) any such restrictions threatened, (b) any agreements, memoranda or commitments being sought by any Governmental Agency, or (c) any legal or regulatory violations previously identified by, or penalties or other remedial action previously imposed by, any Governmental Agency remains unresolved.

4.6.3Pending Litigation.  Except as set forth in the Company’s Reports, there are no actions, suits, proceedings or written agreements pending, or, to the Company’s knowledge, threatened or 

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proposed, against the Company or any of its Subsidiaries at law or in equity or before or by any federal, state, municipal, or other governmental department, commission, board, or other administrative agency, domestic or foreign, that, either separately or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company and any of its Subsidiaries, taken as a whole, or affect issuance or payment of the Subordinated Notes; and neither the Company nor any of its Subsidiaries is a party to or named as subject to the provisions of any order, writ, injunction, or decree of, or any written agreement with, any court, commission, board or agency, domestic or foreign, that either separately or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company and any of its Subsidiaries, taken as a whole.

4.6.4Environmental.  No Property is or, to the Company’s knowledge, has been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any Hazardous Materials and neither the Company nor any of its Subsidiaries has engaged in such activities.  There are no claims or actions pending or, to the Company’s knowledge, threatened against the Company or any of its Subsidiaries by any Governmental Agency or by any other Person relating to any Hazardous Materials or pursuant to any Hazardous Materials Law.

4.6.5Brokerage Commissions.  Except for commissions paid to the Placement Agent, neither the Company nor any Affiliate of the Company is obligated to pay any brokerage commission or finder’s fee to any Person in connection with the transactions contemplated by this Agreement.

4.6.6Investment Company Act.  Neither the Company nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

4.7No Misstatement or Omission.  As of the date of this Agreement, none of the representations, warranties, covenants and agreements contained in this Agreement or in any certificate or other document delivered to the Purchasers by or on behalf of the Company pursuant to, or in connection with, this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances when made or furnished to Purchasers.

4.8Internal Accounting Controls and Disclosure Controls.  The Company, the Bank and each other Subsidiary has established and maintains a system of internal control over financial reporting that pertains to the maintenance of records that accurately and fairly reflect the transactions and dispositions of the Company’s assets (on a consolidated basis), provides reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s and the Bank’s receipts and expenditures and receipts and expenditures of each of the Company’s other Subsidiaries are being made only in accordance with authorizations of the Company management and Board of Directors, and provides reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the Company on a consolidated basis that could have a Material Adverse Effect.  Such internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with GAAP.  Since the conclusion of the Company’s last completed fiscal year there has not been and there currently is not (i) any significant deficiency or material weakness in the design or operation of its internal control over financial reporting which is reasonably likely to adversely affect its ability to record, process, summarize and report financial information, or (ii) any fraud, whether or not material, that involves management or other employees who have a role in the Company’s or the Bank’s internal control over financial reporting.  The Company (A) has implemented and maintains disclosure controls and procedures reasonably designed and maintained to ensure that material information relating to the Company is made known to the Chief 

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Executive Officer and the Chief Financial Officer of the Company by others within the Company and (B) has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s outside auditors and the audit committee of the Company’s Board of Directors any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s internal controls over financial reporting.  Such disclosure controls and procedures are effective for the purposes for which they were established.

4.9Tax Matters.  The Company, the Bank and each Subsidiary of the Company have (i) filed all material foreign, U.S. federal, state and local tax returns, information returns and similar reports that are required to be filed, and all such tax returns are true, correct and complete in all material respects, and (ii) paid all material taxes required to be paid by it and any other material assessment, fine or penalty levied against it other than taxes (x) currently payable without penalty or interest, or (y) being contested in good faith by appropriate proceedings.

4.10Exempt Offering.  Assuming the accuracy of the Purchasers’ representations and warranties set forth in this Agreement, no registration under the Securities Act is required for the offer and sale of the Subordinated Notes by the Company to the Purchasers.

4.11Representations and Warranties Generally.  The representations and warranties of Company set forth in this Agreement and in any certificate or other document delivered to the Purchasers by or on behalf of Company, Bank or any of their Subsidiaries pursuant to or in connection with this Agreement that do not contain a “Material Adverse Effect” qualification or other express materiality or similar qualification are true and correct as of the date hereof and as of the Closing Date, except where the failure of such representations and warranties to be so true and correct does not have a Material Adverse Effect; provided, however, that any such representations and warranties made as of a specified date need only be true and correct as of such date.  The representations and warranties of Company set forth in this Agreement and in any certificate or other document delivered to Purchaser by or on behalf of Company, Bank or any of their Subsidiaries pursuant to or in connection with this Agreement that contain a “Material Adverse Effect” qualification or any other express materiality or similar qualification are true and correct as of the date hereof and as of the Closing Date; provided, however, that any such representations and warranties made as of a specified date need only be true and correct as of such date.

5.GENERAL COVENANTS, CONDITIONS AND AGREEMENTS.

The Company hereby further covenants and agrees with each Purchaser as follows:

5.1Compliance with Transaction Documents.  The Company shall comply with, observe and timely perform each and every one of the covenants, agreements and obligations of the Company under the Transaction Documents.

5.2Affiliate Transactions.  The Company shall not itself, nor shall it cause, permit or allow any of its Subsidiaries to enter into any material transaction, including, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate of the Company except upon terms consistent with applicable laws and regulations and reasonably found by the appropriate board(s) of directors to be fair and reasonable and, except for those transactions set forth in Schedule 5.2, no less favorable to the Company or such Affiliate than would be obtained in a comparable arm’s length transaction with a Person not an Affiliate. 

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5.3Compliance with Laws.

5.3.1Generally.  The Company shall comply and cause the Bank and each of its other Subsidiaries to comply in all material respects with all applicable statutes, rules, regulations, orders and restrictions in respect of the conduct of its business and the ownership of its properties, except, in each case, where such noncompliance would not reasonably be expected to have a Material Adverse Effect on the Company.

5.3.2Regulated Activities.  The Company shall not itself, nor shall it cause, permit or allow the Bank or any other of its Subsidiaries to (i) engage in any business or activity not permitted by all applicable laws and regulations, except where such business or activity would not reasonably be expected to have a Material Adverse Effect on the Company, the Bank and/or its other Subsidiaries or (ii) make any loan or advance secured by the capital stock of another bank or depository institution, or acquire the capital stock, assets or obligations of or any interest in another bank or depository institution, in each case other than in accordance with applicable laws and regulations and safe and sound banking practices.

5.3.3Taxes.  The Company shall and shall cause the Bank and any other of its Subsidiaries to promptly pay and discharge all taxes, assessments and other governmental charges imposed upon the Company, the Bank or any other of its Subsidiaries or upon the income, profits, or property of the Company or any Subsidiary and all claims for labor, material or supplies which, if unpaid, might by law become a lien or charge upon the property of the Company, the Bank or any other of its Subsidiaries, except as would not be reasonably expected to have a Material Adverse Effect on the Company.  Notwithstanding the foregoing, none of the Company, the Bank or any other of its Subsidiaries shall be required to pay any such tax, assessment, charge or claim, so long as the validity thereof shall be contested in good faith by appropriate proceedings, and appropriate reserves therefor shall be maintained on the books of the Company, the Bank and such other Subsidiary.

5.3.4Corporate Existence.  The Company shall do or cause to be done all things reasonably necessary to maintain, preserve and renew its corporate existence and that of the Bank and the other Subsidiaries and its and their rights and franchises, and comply in all material respects with all related laws applicable to the Company, the Bank or the other Subsidiaries.

5.3.5Dividends, Payments, and Guarantees During Event of Default.  Upon the occurrence of an Event of Default (as defined under the Indenture), until such Event of Default is cured by the Company or waived by the Holders  in accordance with the terms of the Indenture and except as required by any federal or state Governmental Agency, the Company shall not (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock; (b) make any payment of principal of, or interest or premium, if any, on, or repay, repurchase or redeem any of the Company’s Indebtedness that ranks equal with or junior to the Subordinated Notes; or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Notes, other than (i) any dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, any class of the Company’s common stock; (ii) any declaration of a non-cash dividend in connection with the implementation of a shareholders’ rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto; (iii) as a result of a reclassification of the Company’s capital stock or the exchange or conversion of one class or series of the Company’s capital stock for another class or series of the Company’s capital stock; (iv) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; or (v) purchases of any class of the Company’s common stock related to the issuance of common stock or rights under any benefit plans for the Company’s directors, officers or employees or any of the Company’s dividend reinvestment plans.

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5.3.6Tier 2 Capital.  If all or any portion of the Subordinated Notes ceases to be deemed to be Tier 2 Capital, other than due to the limitation imposed on the capital treatment of subordinated debt during the five (5) years immediately preceding the Maturity Date of the Subordinated Notes, the Company will immediately notify the Holder, and thereafter, subject to the terms of the Indenture, the Company and the Holder will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital; provided, however, that nothing contained in this Agreement shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event as described in the Subordinated Notes and the Indenture.

5.4Absence of Control.  It is the intent of the parties to this Agreement that in no event shall the Purchasers, by reason of any of the Transaction Documents, be deemed to control, directly or indirectly, the Company, and the Purchasers shall not exercise, or be deemed to exercise, directly or indirectly, a controlling influence over the management or policies of the Company.

5.5Secondary Market Transactions.  Each Purchaser shall have the right at any time and from time to time to securitize its Subordinated Notes or any portion thereof in a single asset securitization or a pooled loan securitization of rated single or multi-class securities secured by or evidencing ownership interests in the Subordinated Notes (each such securitization is referred to herein as a “Secondary Market Transaction”).  In connection with any such Secondary Market Transaction, the Company, at the Company’s expense, shall cooperate with the Purchasers and otherwise reasonably assist the Purchasers in satisfying the market standards to which Purchasers customarily adhere or which may be reasonably required in the marketplace or by applicable rating agencies in connection with any such Secondary Market Transaction, but in no event shall the Company be required to incur any costs or expenses in excess of $10,000 in connection therewith. Subject to any written confidentiality obligation, all information regarding the Company may be furnished, without liability except in the case of gross negligence or willful misconduct, to any the Purchaser and to any Person reasonably deemed necessary by Purchaser in connection with participation in such Secondary Market Transaction. The Purchaser shall cause any Person to whom the Purchaser wishes to deliver confidential Company information related to the Secondary Market Transaction (which shall not include the Transaction Documents) to execute and deliver to the Company a non-disclosure agreement reasonably acceptable to the Company unless such Person is a party to a commercially reasonable confidentiality agreement to which the Company is a third party beneficiary. All documents, financial statements, appraisals and other data relevant to the Company or the Subordinated Notes may be retained by any such Person, subject to the terms of any applicable confidentiality agreements.

5.6Bloomberg.  The Company shall use commercially reasonable efforts to cause the Subordinated Notes to be quoted on Bloomberg.

5.7Rule 144A Information.  While any Subordinated Notes remain “restricted securities” within the meaning of the Securities Act, the Company will make available, upon request of any Purchaser or subsequent holder of any Subordinated Notes the information specified in Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to Section 13 or 15(d) of the Exchange Act.

5.8NRSRO Rating.  The Company will use commercially reasonable efforts to maintain a rating by a nationally recognized statistical rating organization (“NRSRO”) while any Subordinated Notes remain outstanding.

5.9Resale Registration Statement.  Subject to the terms and conditions of this Agreement, the Company will provide to the Purchasers the resale registration rights described in the Registration Rights Agreement.

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6.REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS.

Each Purchaser hereby represents and warrants to the Company, and covenants with the Company, severally and not jointly, as follows:

6.1Legal Power and Authority.  The Purchaser has all necessary power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.  It is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.

6.2Authorization and Execution.  The execution, delivery and performance of this Agreement and the Registration Rights Agreement have been duly authorized by all necessary action on the part of such Purchaser, and, assuming due authorization, execution and delivery by the other parties thereto, this Agreement and the Registration Rights Agreement are each a legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

6.3No Conflicts.  Neither the execution, delivery of or performance under the Transaction Documents nor the consummation of any of the transactions contemplated thereby will conflict with, violate, or constitute a breach of or a default under (whether with or without the giving of notice or lapse of time or both) (i) the Purchaser’s organizational documents, (ii) any agreement to which the Purchaser is party, (iii) any law applicable to Purchaser or (iv) any order, writ, judgment, injunction, decree, determination or award binding upon or affecting the Purchaser.

6.4Purchase for Investment.  The Purchaser is purchasing the Subordinated Note for its own account and not with a view to distribution and with no present intention of reselling, distributing or otherwise disposing of the same.  The Purchaser has no present or contemplated agreement, undertaking, arrangement, obligation, Indebtedness or commitment providing for, or which is likely to compel, a disposition of the Subordinated Notes in any manner.

6.5Institutional Accredited Investor.  The Purchaser is and will be on the Closing Date either (i) an institutional “accredited investor” as such term is defined in Rule 501(a) of Regulation D and as contemplated by subsections (1), (2), (3) and (7) of Rule 501(a) of Regulation D, and has no less than $5,000,000 in total assets, or (ii) a QIB.

6.6Financial and Business Sophistication.  The Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the prospective investment in the Subordinated Notes.  The Purchaser has relied solely upon its own knowledge of, and/or the advice of its own legal, financial or other advisors with regard to, the legal, financial, tax and other considerations involved in deciding to invest in the Subordinated Notes.

6.7Ability to Bear Economic Risk of Investment.  The Purchaser recognizes that an investment in the Subordinated Notes involves substantial risk.  The Purchaser has the ability to bear the economic risk of the prospective investment in the Subordinated Notes, including the ability to hold the Subordinated Notes indefinitely, and further including the ability to bear a complete loss of all of the Purchaser’s investment in the Company.

6.8Information.  The Purchaser acknowledges that (i) it is not being provided with the disclosures that would be required if the offer and sale of the Subordinated Notes were registered under the Securities Act, nor is it being provided with any offering circular or prospectus prepared in connection with 

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the offer and sale of the Subordinated Notes; (ii) it has conducted its own examination of the Company and the terms of the Indenture and the Subordinated Notes to the extent it deems necessary to make its decision to invest in the Subordinated Notes; and (iii) it has availed itself of publicly available financial and other information concerning the Company to the extent it deems necessary to make its decision to purchase the Subordinated Notes.  The Purchaser has reviewed the information set forth in the Company’s Reports, the exhibits hereto and the information contained in the data room established by the Company in connection with the transactions contemplated by this Agreement.

6.9Access to Information.  The Purchaser acknowledges that it and its advisors have been furnished with all materials relating to the business, finances and operations of the Company that have been requested by it or its advisors and have been given the opportunity to ask questions of, and to receive answers from, persons acting on behalf of the Company concerning the terms and conditions of the transactions contemplated by this Agreement in order to make an informed and voluntary decision to enter into this Agreement.

6.10Investment Decision.  The Purchaser has made its own investment decision based upon its own judgment, due diligence and advice from such advisors as it has deemed necessary and not upon any view expressed by any other Person or entity, including the Placement Agent (or with respect to the Indenture, the Trustee).  Neither any inquiries nor any other due diligence investigations conducted by the Purchaser  or its advisors or representatives, if any, shall modify, amend or affect its right to rely on the Company’s representations and warranties contained herein.  The Purchaser is not relying upon, and has not relied upon, any advice, statement, representation or warranty made by any Person by or on behalf of the Company, including, without limitation, the Placement Agent (or with respect to the Indenture, the Trustee), except for the express statements, representations and warranties of the Company made or contained in this Agreement.  Furthermore, the Purchaser acknowledges that (i) the Placement Agent has not performed any due diligence review on behalf of it and (ii) nothing in this Agreement or any other materials presented by or on behalf of the Company to the Purchaser in connection with the purchase of the Subordinated Notes constitutes legal, tax, accounting or investment advice.

6.11Private Placement; No Registration; Restricted Legends.  The Purchaser understands and acknowledges that the Subordinated Notes are being sold by the Company without registration under the Securities Act in reliance on the exemption from federal and state registration set forth in, respectively, Rule 506(b) of Regulation D promulgated under Section 4(a)(2) of the Securities Act and Section 18 of the Securities Act, or any state securities laws, and accordingly, may be resold, pledged or otherwise transferred only if exemptions from the Securities Act and applicable state securities laws are available to it.  It is not subscribing for the Subordinated Notes as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television, radio, the Internet or social media, or presented at any seminar or meeting.  The Purchaser  further acknowledges and agrees that all certificates or other instruments representing the Subordinated Notes will bear the restrictive legend set forth in the form of Subordinated Note, which are attached to the Indenture.  The Purchaser further acknowledges its primary responsibilities under the Securities Act and, accordingly, will not sell or otherwise transfer the Subordinated Notes or any interest therein without complying with the requirements of the Securities Act and the rules and regulations promulgated thereunder and the requirements set forth in this Agreement. 

6.12Placement Agent.  The Purchaser will purchase the Subordinated Note(s) directly from the Company and not from the Placement Agent and understands that neither the Placement Agent nor any other broker or dealer has any obligation to make a market in the Subordinated Notes.

6.13Tier 2 Capital.  If the Company provides notice as contemplated in Section 5.3.6 of the occurrence of the event contemplated in such section, thereafter the Company and the Purchasers will work 

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together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes so that the Subordinated Notes qualify as Tier 2 Capital; provided, however, that nothing contained in this Agreement shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event as described in the Subordinated Notes.  

6.14Accuracy of Representations.  The  Purchaser understands that each of the Placement Agent and the Company are relying upon the truth and accuracy of the foregoing representations, acknowledgements and agreements in connection with the transactions contemplated by this Agreement, and agrees that if any of the representations or acknowledgements made by it are no longer accurate as of the Closing Date, or if any of the agreements made by it are breached on or prior to the Closing Date, it shall promptly notify the Company.

6.15Representations and Warranties Generally.  The representations and warranties of the Purchaser set forth in this Agreement are true and correct as of the date hereof and will be true and correct as of the Closing Date and as otherwise specifically provided herein.  Any certificate signed by a duly authorized representative of the Purchaser and delivered to the Company or to counsel for the Company shall be deemed to be a representation and warranty by the Purchaser to the Company as to the matters set forth therein.

7.MISCELLANEOUS.

7.1Prohibition on Assignment by the Company.  Except as described in Article VII of the Indenture, the Company may not assign, transfer or delegate any of its rights or obligations under this Agreement or the Subordinated Notes without the prior written consent of all the Purchasers.

7.2Time of the Essence.  Time is of the essence for this Agreement.

7.3Waiver or Amendment.  No waiver or amendment of any term, provision, condition, covenant or agreement herein shall be effective unless in writing and signed by all of the parties hereto.  No failure to exercise or delay in exercising, by a Purchaser or any Holder of the Subordinated Notes, of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right or remedy provided by law.  The rights and remedies provided in this Agreement are cumulative and not exclusive of any right or remedy provided by law or equity.  

7.4Severability.  Any provision of this Agreement which is unenforceable or invalid or contrary to law, or the inclusion of which would adversely affect the validity, legality or enforcement of this Agreement, shall be of no effect and, in such case, all the remaining terms and provisions of this Agreement shall subsist and be fully effective according to the tenor of this Agreement the same as though any such invalid portion had never been included herein.  Notwithstanding any of the foregoing to the contrary, if any provisions of this Agreement or the application thereof are held invalid or unenforceable only as to particular Persons or situations, the remainder of this Agreement, and the application of such provision to Persons or situations other than those to which it shall have been held invalid or unenforceable, shall not be affected thereby, but shall continue valid and enforceable to the fullest extent permitted by law.

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7.5Notices.  Any notice which any party hereto may be required or may desire to give hereunder shall be deemed to have been given if in writing and if delivered personally, or if mailed, postage prepaid, by United States registered or certified mail, return receipt requested, or if delivered by a responsible overnight commercial courier promising next Business Day delivery, addressed:

 

		
	
if to the Company:
	
Financial Institutions, Inc.

220 Liberty Street

Warsaw, NY  14569

Attention:  General Counsel

	
with a copy to:
	
Harter Secrest & Emery LLP

1600 Bausch & Lomb Place

Rochester, NY  14604-2711

Attention:  Alexander R. McClean

	
if to the Purchasers:
	
To the address indicated on such Purchaser’s signature page.

 

or to such other address or addresses as the party to be given notice may have furnished in writing to the party seeking or desiring to give notice, as a place for the giving of notice; provided that no change in address shall be effective until five (5) Business Days after being given to the other party in the manner provided for above.  Any notice given in accordance with the foregoing shall be deemed given when delivered personally or, if mailed, three (3) Business Days after it shall have been deposited in the United States mail as aforesaid or, if sent by overnight courier, the Business Day following the date of delivery to such courier (provided next Business Day delivery was requested).

7.6Successors and Assigns.  This Agreement shall inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns; except that, unless a Purchaser consents in writing, no assignment made by the Company in violation of this Agreement shall be effective or confer any rights on any purported assignee of the Company.  The term “successors and assigns” will not include a purchaser of any of the Subordinated Notes from any Purchaser merely because of such purchase.

7.7No Joint Venture.  Nothing contained herein or in any document executed pursuant hereto and no action or inaction whatsoever on the part of a Purchaser, shall be deemed to make a Purchaser a partner or joint venturer with the Company.

7.8Documentation.  All documents and other matters required by any of the provisions of this Agreement to be submitted or furnished to a Purchaser shall be in form and substance satisfactory to such Purchaser.

7.9Entire Agreement.  This Agreement, the Indenture, the Registration Rights Agreement and the Subordinated Notes, along with any exhibits thereto, constitute the entire agreement between the parties hereto with respect to the subject matter hereof and may not be modified or amended in any manner other than by supplemental written agreement executed by the parties hereto.  No party, in entering into this Agreement, has relied upon any representation, warranty, covenant, condition or other term that is not set forth in this Agreement, the Indenture, the Registration Rights Agreement or the Subordinated Notes.

7.10Choice of Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York  without giving effect to its laws or principles of conflict of laws.  Nothing herein shall be deemed to limit any rights, powers or privileges which a Purchaser may have pursuant to 

19

 

any law of the United States of America or any rule, regulation or order of any department or agency thereof and nothing herein shall be deemed to make unlawful any transaction or conduct by a Purchaser which is lawful pursuant to, or which is permitted by, any of the foregoing.

7.11No Third Party Beneficiary.  This Agreement is made for the sole benefit of the Company and the Purchasers, and no other Person shall be deemed to have any privity of contract hereunder nor any right to rely hereon to any extent or for any purpose whatsoever, nor shall any other Person have any right of action of any kind hereon or be deemed to be a third party beneficiary hereunder; provided, that the Placement Agent may rely on the representations and warranties contained herein to the same extent as if it were a party to this Agreement.

7.12Legal Tender of United States.  All payments hereunder shall be made in coin or currency which at the time of payment is legal tender in the United States of America for public and private debts.

7.13Captions; Counterparts.  Captions contained in this Agreement in no way define, limit or extend the scope or intent of their respective provisions.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.  In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

7.14Knowledge; Discretion.  All references herein to a Purchaser’s or the Company’s knowledge shall be deemed to mean the knowledge of such party based on the actual knowledge of such party’s Chief Executive Officer and Chief Financial Officer or such other persons holding equivalent offices.  Unless specified to the contrary herein, all references herein to an exercise of discretion or judgment by a Purchaser, to the making of a determination or designation by a Purchaser, to the application of a Purchaser’s discretion or opinion, to the granting or withholding of a Purchaser’s consent or approval, to the consideration of whether a matter or thing is satisfactory or acceptable to a Purchaser, or otherwise involving the decision making of a Purchaser, shall be deemed to mean that such Purchaser shall decide using the reasonable discretion or judgment of a prudent lender.

7.15Waiver of Right to Jury Trial.  TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OF THE COMPANY OR THE PURCHASERS.  THE PARTIES HERETO ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL SELECTED OF THEIR OWN FREE WILL.  THE PARTIES FURTHER HERETO ACKNOWLEDGE THAT (I) THEY HAVE READ AND UNDERSTAND THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (II) THIS WAIVER HAS BEEN REVIEWED BY THE PARTIES HERETO AND THEIR COUNSEL AND IS A MATERIAL INDUCEMENT FOR ENTRY INTO THIS AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT AND (III) THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH TRANSACTION DOCUMENTS AS IF FULLY INCORPORATED THEREIN.

7.16Expenses.  Except as otherwise provided in this Agreement, each of the parties hereto will bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated by this Agreement.

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7.17Survival.  Each of the representations and warranties set forth in this Agreement shall survive the Closing for a period of one year after the date hereof.  Except as otherwise provided herein, all covenants and agreements contained herein shall survive until, by their respective terms, they are no longer operative, other than those which by their terms are to be performed in whole or in part prior to or on the Closing Date, which shall terminate as of the Closing Date.

 

[Signature Pages Follow]

 

 

 

21

 

IN WITNESS WHEREOF, the Company has caused this Subordinated Note Purchase Agreement to be executed by its duly authorized representative as of the date first above written.

 

						
	
COMPANY:

	
 

	
FINANCIAL INSTITUTIONS, INC.

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
/s/ Justin K. Bigham

	
 
	
 
	
Name:
	
 
	
Justin K. Bigham

	
 
	
 
	
Title:
	
 
	
Executive Vice President and Chief Financial Officer

	
 
	
 
	
 
	
 
	
 
	
 

 

 

 

 

[Company Signature Page to Subordinated Note Purchase Agreement]

 

IN WITNESS WHEREOF, the Purchaser has caused this Subordinated Note Purchase Agreement to be executed by its duly authorized representative as of the date first above written.

 

						
	
PURCHASER:

	
 

	
[INSERT PURCHASER’S NAME]

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
 

	
 
	
 
	
Name:
	
 
	
[●]

	
 
	
 
	
Title:
	
 
	
[●]

	
 
	
 
	
 
	
 
	
 

	
Address of Purchaser:

	
 

	
[●]

	
 

	
Principal Amount of Purchased Subordinated Note:

	
 

	
$[●]

	
 
	
 
	
 
	
 
	
 
	
 

 

 

 

 

 

 

SCHEDULE 4.1.1.2

 

Subsidiaries

 

   

SCHEDULE 5.2

 

Affiliate Transactions

 

 

 

 

 

EXHIBIT A

FORM OF INDENTURE (INCLUDING FORM OF SUBORDINATED NOTE)

 

 

 

 

EXHIBIT B

 

REGISTRATION RIGHTS AGREEMENT

 

 

EXHIBIT C

OPINION OF COUNSEL

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