WARRANT TO PURCHASE COMMON
STOCK
THE SECURITIES
REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF
EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS. THIS
INSTRUMENT IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER AND
OTHER PROVISIONS OF A SECURITIES PURCHASE AGREEMENT BETWEEN THE
ISSUER OF THESE SECURITIES AND THE INVESTOR REFERRED TO THEREIN, A
COPY OF WHICH IS ON FILE WITH THE ISSUER. THE SECURITIES
REPRESENTED BY THIS INSTRUMENT MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT IN COMPLIANCE WITH SAID AGREEMENT. ANY SALE OR
OTHER TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENT WILL BE
VOID.
WARRANT
to Purchase
154,354
Shares of Common
Stock
Of
Pathfinder Bancorp,
Inc
Issue Date: September 11,
2009
1. Definitions. Unless the context
otherwise requires, when used herein the following terms shall have
the meanings indicated.
“Affiliate” has the meaning ascribed to it in the Purchase
Agreement.
“Appraisal Procedure”
means a procedure whereby two
independent appraisers, one chosen by the Company and one by the
Original Warrantholder, shall mutually agree upon the
determinations then the subject of appraisal. Each party shall
deliver a notice to the other appointing its appraiser within 15
days after the Appraisal Procedure is invoked. If within 30 days
after appointment of the two appraisers they are unable to agree
upon the amount in question, a third independent appraiser shall be
chosen within 10 days thereafter by the mutual consent of such
first two appraisers. The decision of the third appraiser so
appointed and chosen shall be given within 30 days after the
selection of such third appraiser. If three appraisers shall be
appointed and the determination of one appraiser is disparate from
the middle determination by more than twice the amount by which the
other determination is disparate from the middle determination,
then the determination of such appraiser shall be excluded, the
remaining two determinations shall be averaged and such average
shall be binding and conclusive upon the Company and the Original
Warrantholder; otherwise, the average of all three determinations
shall be binding upon the Company and the Original Warrantholder.
The costs of conducting any Appraisal Procedure shall be borne by
the Company.
“Board of Directors”
means the board of directors of the
Company, including any duly authorized committee
thereof.
“Business Combination”
means a merger, consolidation,
statutory share exchange or similar transaction that requires the
approval of the Company’s stockholders.
“business day”
means any day except Saturday,
Sunday and any day on which banking institutions in the State of
New York generally are authorized or required by law or other
governmental actions to close.
“Capital Stock”
means (A) with respect to any Person
that is a corporation or company, any and all shares, interests,
participations or other equivalents (however designated) of capital
or capital stock of such Person and (B) with respect to any Person
that is not a corporation or company, any and all partnership or
other equity interests of such Person.
“Charter” means, with respect to any Person, its
certificate or articles of incorporation, articles of association,
or similar organizational document.
“Common Stock”
has the meaning ascribed to it in
the Purchase Agreement.
“ Company” means the Person
whose name, corporate or other organizational form and jurisdiction
of organization is set forth in Item 1 of Schedule A
hereto.
“conversion” has the meaning set forth in Section
13(B).
“convertible securities”
has the meaning set forth in Section
13(B).
“CPP” has the meaning ascribed to it in the Purchase
Agreement.
“Exchange Act”
means the Securities Exchange Act of
1934, as amended, or any successor statute, and the rules and
regulations promulgated thereunder.
“Exercise Price”
means the amount set forth in Item 2
of Schedule A hereto.
“ Expiration Time “ has the meaning set forth in Section
3.
“Fair Market Value”
means, with respect to any security
or other property, the fair market value of such security or other
property as determined by the Board of Directors, acting in good
faith or, with respect to Section 14, as determined by the Original
Warrantholder acting in good faith. For so long as the Original
Warrantholder holds this Warrant or any portion thereof, it may
object in writing to the Board of Director’s calculation of
fair market value within 10 days of receipt of written notice
thereof. If the Original Warrantholder and the Company are unable
to agree on fair market value during the 10-day period following
the delivery of the Original Warrantholder’s objection, the
Appraisal Procedure may be invoked by either party to determine
Fair Market Value by delivering written notification thereof not
later than the 30 th day after delivery of the Original
Warrantholder’s objection.
“Governmental Entities”
has the meaning ascribed to it in
the Purchase Agreement.
“Initial Number”
has the meaning set forth in Section
13(B).
“Issue Date” means the date set forth in Item 3 of Schedule A
hereto.
“Market Price”
means, with respect to a particular
security, on any given day, the last reported sale price regular
way or, in case no such reported sale takes place on such day, the
average of the last closing bid and ask prices regular way, in
either case on the principal national securities exchange on which
the applicable securities are listed or admitted to trading, or if
not listed or admitted to trading on any national securities
exchange, the average of the closing bid and ask prices as
furnished by two members of the Financial Industry Regulatory
Authority, Inc. selected from time to time by the Company for that
purpose. “Market Price” shall be determined
without reference to after hours or extended hours trading. If such
security is not listed and traded in a manner that the quotations
referred to above are available for the period required hereunder,
the Market Price per share of Common Stock shall be deemed to be
(i) in the event that any portion of the Warrant is held by the
Original Warrantholder, the fair market value per share of such
security as determined in good faith by the Original Warrantholder
or (ii) in all other circumstances, the fair market value per share
of such security as determined in good faith by the Board of
Directors in reliance on an opinion of a nationally recognized
independent investment banking corporation retained by the Company
for this purpose and certified in a resolution to the
Warrantholder. For the purposes of determining the Market Price of
the Common Stock on the “ trading day “ preceding, on or following the occurrence of an
event, (i) that trading day shall be deemed to commence immediately
after the regular scheduled closing time of trading on the New York
Stock Exchange or, if trading is closed at an earlier time, such
earlier time and (ii) that trading day shall end at the next
regular scheduled closing time, or if trading is closed at an
earlier time, such earlier time (for the avoidance of doubt, and as
an example, if the Market Price is to be determined as of the last
trading day preceding a specified event and the closing time of
trading on a particular day is 4:00 p.m. and the specified event
occurs at 5:00 p.m. on that day, the Market Price would be
determined by reference to such 4:00 p.m. closing
price).
“Ordinary Cash Dividends”
means a regular quarterly cash
dividend on shares of Common Stock out of surplus or net profits
legally available therefor (determined in accordance with generally
accepted accounting principles in effect from time to time),
provided that Ordinary Cash Dividends shall not include any
cash dividends paid subsequent to the Issue Date to the extent the
aggregate per share dividends paid on the outstanding Common Stock
in any quarter exceed the amount set forth in Item 4 of Schedule A
hereto, as adjusted for any stock split, stock dividend, reverse
stock split, reclassification or similar transaction.
“Original Warrantholder”
means the United States Department
of the Treasury. Any actions specified to be taken by the Original
Warrantholder hereunder may only be taken by such Person and not by
any other Warrantholder.
“Permitted Transactions”
has the meaning set forth in Section
13(B).
“Person” has the meaning given to it in Section 3(a)(9)
of the Exchange Act and as used in Sections 13(d)(3) and I4(d)(2)
of the Exchange Act.
“Per Share Fair Market
Value” has the
meaning set forth in Section 13(C).
“Preferred Shares”
means the perpetual preferred stock
issued to the Original Warrantholder on the Issue Date pursuant to
the Purchase Agreement.
“Pro Rata Repurchases”
means any purchase of shares of
Common Stock by the Company or any Affiliate thereof pursuant to
(A) any tender offer or exchange offer subject to Section 13(e) or
I4(e) of the Exchange Act or Regulation 14E promulgated thereunder
or (B) any other offer available to substantially all holders of
Common Stock, in the case of both (A) or (B), whether for cash,
shares of Capital Stock of the Company, other securities of the
Company, evidences of indebtedness of the Company or any other
Person or any other property (including, without limitation, shares
of Capital Stock, other securities or evidences of indebtedness of
a subsidiary), or any combination thereof, effected while this
Warrant is outstanding. The “Effective Date” of
a Pro Rata Repurchase shall mean the date of acceptance of shares
for purchase or exchange by the Company under any tender or
exchange offer which is a Pro Rata Repurchase or the date of
purchase with respect to any Pro Rata Repurchase that is not a
tender or exchange offer.
“Purchase Agreement”
means the Securities Purchase
Agreement - Standard Terms incorporated into the Letter Agreement,
dated as of the date set forth in Item 5 of Schedule A hereto, as
amended from time to time, between the Company and the United
States Department of the Treasury (the “Letter
Agreement”), including all annexes and schedules
thereto.
“Qualified Equity
Offering” has the
meaning ascribed to it in the Purchase Agreement.
“Regulatory Approvals”
with respect to the Warrantholder,
means, to the extent applicable and required to permit the
Warrantholder to exercise this Warrant for shares of Common Stock
and to own such Common Stock without the Warrantholder being in
violation of applicable law, rule or regulation, the receipt
of any necessary approvals and authorizations of, filings and
registrations with, notifications to, or expiration or termination
of any applicable waiting period under, applicable law, rule or
regulation, including, without limitation, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder.
“ SEC” means the U.S. Securities and Exchange
Commission.
“Securities Act”
means the Securities Act of 1933, as
amended, or any successorstatute, and the rules and regulations
promulgated thereunder.
“Shares”
has the meaning set forth in Section
2.
“trading day”
means (A) if the shares of Common
Stock are not traded on any national or regional securities
exchange or association or over-the-counter market, a business day
or (B) if the shares of Common Stock are traded on any national or
regional securities exchange or association or over-the-counter
market, a business day on which such relevant exchange or quotation
system is scheduled to be open for business and on which the shares
of Common Stock (1) are not suspended from trading on any national
or regional securities exchange or association or over-the-counter
market for any period or periods aggregating one half hour or
longer; and (ii) have traded at least once on the national or
regional securities exchange or association or over-the-counter
market that is the primary market for the trading of the shares of
Common Stock.
“U. S. GAAP” means United States generally accepted
accounting principles.
“Warrantholder”
has the meaning set forth in Section
2.
“Warrant” means this Warrant, issued pursuant to the
Purchase Agreement.
2. Number of
Shares; Exercise Price. This certifies that, for
value received, the United States Department of the Treasury or its
permitted assigns (the “Warrantholder” )
is entitled, upon the terms and subject to the conditions
hereinafter set forth, to acquire from the Company, in whole or in
part, after the receipt of all applicable Regulatory Approvals, if
any, up to an aggregate of the number of fully paid and
nonassessable shares of Common Stock set forth in Item 6 of
Schedule A hereto, at a purchase price per share of Common Stock
equal to the Exercise Price. The number of shares of Common Stock
(the “Shares” ) and the Exercise Price are
subject to adjustment as provided herein, and all references to
“Common Stock,” “Shares” and
“Exercise Price” herein shall be deemed to include any
such adjustment or series of adjustments.
3. Exercise of
Warrant: Term. Subject to Section 2, to the extent
permitted by applicable laws and regulations, the right to purchase
the Shares represented by this
Warrant is exercisable, in whole or in part by
the Warrantholder, at any time or from time to time after the
execution and delivery of this Warrant by the Company on the date
hereof, but in no event later than 5:00 p.m., New York City time on
the tenth anniversary of the Issue Date (the “Expiration
Time” ) , by (A) the surrender of this Warrant and
Notice of Exercise annexed hereto, duly completed and executed on
behalf of the Warrantholder, at the principal executive office of
the Company located at the address set forth in Item 7 of Schedule
A hereto (or such other office or agency of the Company in the
United States as it may designate by notice in writing to the
Warrantholder at the address of the Warrantholder appearing on the
books of the Company), and (B) payment of the Exercise Price for
the Shares thereby purchased:
(i) by having
the Company withhold, from the shares of Common Stock that would
otherwise be delivered to the Warrantholder upon such exercise,
shares of Common stock issuable upon exercise of the Warrant equal
in value to the aggregate Exercise Price as to which this Warrant
is so exercised based on the Market Price of the Common Stock on
the trading day on which this Warrant is exercised and the Notice
of Exercise is delivered to the Company pursuant to this Section 3,
or
(ii) with the
consent of both the Company and the Warrantholder, by tendering in
cash, by certified or cashier’s check payable to the order of
the Company, or by wire transfer of immediately available funds to
an account designated by the Company.
If the Warrantholder does not exercise this
Warrant in its entirety, the Warrantholder will be entitled to
receive from the Company within a reasonable time, and in any event
not exceeding three business days, a new warrant in substantially
identical form for the purchase of that number of Shares equal to
the difference between the number of Shares subject to this Warrant
and the number of Shares as to which this Warrant is so exercised.
Notwithstanding anything in this Warrant to the contrary, the
Warrantholder hereby acknowledges and agrees that its exercise of
this Warrant for Shares is subject to the condition that the
Warrantholder will have first received any applicable Regulatory
Approvals.
4, Issuance of Shares:
Authorization: Listing. Certificates for Shares issued upon
exercise of this Warrant will be issued in such name or names as
the Warrantholder may designate and will be delivered to such named
Person or Persons within a reasonable time, not to exceed three
business days after the date on which this Warrant has been duly
exercised in accordance with the terms of this Warrant. The Company
hereby represents and warrants that any Shares issued upon the
exercise of this Warrant in accordance with the provisions of
Section 3 will be duly and validly authorized and issued, fully
paid and nonassessable and free from all taxes, liens and charges
(other than liens or charges created by the Warrantholder, income
and franchise taxes incurred in connection with the exercise of the
Warrant or taxes in respect of any transfer occurring
contemporaneously therewith). The Company agrees that the Shares so
issued will be deemed to have been issued to the Warrantholder as
of the close of business on the date on which this Warrant and
payment of the Exercise Price are delivered to the Company in
accordance with the terms of this Warrant, notwithstanding that the
stock transfer books of the Company may then be closed or
certificates representing such Shares may not be actually delivered
on such date. The Company will at all times reserve and keep
available, out of its authorized but unissued Common Stock, solely
for the purpose of providing for the exercise of this Warrant, the
aggregate number of shares of Common Stock then issuable upon
exercise of this Warrant at any time. The Company will (A) procure,
at its sole expense, the listing of the Shares issuable upon
exercise of this Warrant at any time, subject to issuance or notice
of issuance, on all principal stock exchanges on which the Common
Stock is then listed or traded and (B) maintain such listings of
such Shares at all times after issuance. The Company will use
reasonable best efforts to ensure that the Shares may be issued
without violation of any applicable law or regulation or of any
requirement of any securities exchange on which the Shares are
listed or traded.
5. No Fractional Shares or Scrip.
No fractional Shares or scrip representing fractional
Shares shall be issued upon any exercise of this Warrant. In lieu
of any fractional Share to which the Warrantholder would otherwise
be entitled, the Warrantholder shall be entitled to receive a cash
payment equal to the Market Price of the Common Stock on the last
trading day preceding the date of exercise less the pro-rated
Exercise Price for such fractional share.
6. No Rights as Stockholders: Transfer
Books. This Warrant does not entitle the
Warrantholder to any voting rights or other rights as a stockholder
of the Company prior to the date of exercise hereof. The Company
will at no time close its transfer books against transfer of this
Warrant in any manner which interferes with the timely exercise of
this Warrant.
7. Charges. Taxes and Expenses.
Issuance of certificates for Shares to the
Warrantholder upon the exercise of t
