F&M Bank Corp 8-K, filed Jul 31, 2020
F&M Bank Corp (FMBM)
8-K
2020-07-31
For: 2020-07-29
View Original
Added on
April 06, 2026
About this 8-K
F&M Bank Corp filed this 8-K on July 31, 2020, reporting on events of July 29, 2020.
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.03: New debt or off-balance-sheet obligation
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): July 29,
2020
_________________________
F & M Bank Corp.
(Exact
name of registrant as specified in its charter)
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Virginia
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000-13273
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54-1280811
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(State or other
jurisdiction of
incorporation)
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(Commission File
Number)
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(IRS
Employer Identification
No.)
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P.O. Box 1111
Timberville, Virginia 22853
(540) 896-8941
(Address
including zip code, and telephone number, including area code, of
registrant’s principal executive offices)
Not Applicable
(Former
name or former address, if changed since last report.)
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under
the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
☐Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Securities
registered pursuant to Section 12(b) of the Act:
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Title
of each class
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Trading
Symbol(s)
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Name of
each exchange
on
which registered
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None
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Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2
of the Securities Exchange Act of 1934.
Emerging growth company
☐
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the
Exchange Act. ☐
Item 1.01
Entry into a Material Definitive Agreement
On
July 29, 2020, F & M Bank Corp. (the “Company”)
entered into Subordinated Note Purchase Agreements (collectively,
the “Purchase Agreement”) with certain institutional
accredited investors pursuant to which the Company sold and issued
$5.0 million in aggregate principal amount of 5.75% fixed rated
subordinated notes due July 31, 2027 (the “2027 Notes”)
and $7.0 million in aggregate principal amount of 6.00% fixed to
floating rate subordinated notes due July 31, 2030 (the “2030
Notes and, together with the 2027 Notes, the “Notes”).
Raymond James & Associates, Inc. served as the sole placement
agent.
The
2027 Notes will bear interest at 5.75% per annum, payable
semi-annually in arrears. Beginning on July 31, 2022 through
maturity, the Notes may be redeemed, at the Company’s option,
on any scheduled interest payment date. The Notes will mature on
July 31, 2027.
The
2030 Notes will initially bear interest at 6.00% per annum,
beginning July 29, 2020 to but excluding July 31, 2025, payable
semi-annually in arrears. From and including July 31, 2025 through
July 30, 2030, or up to an early redemption date, the interest rate
shall reset quarterly to an interest rate per annum equal to the
then current three-month SOFR plus 593 basis points, payable
quarterly in arrears. Beginning on July 31, 2025 through maturity,
the Notes may be redeemed, at the Company’s option, on any
scheduled interest payment date. The Notes will mature on July 31,
2030.
If
certain events of default occur, such as the bankruptcy of the
Company, the holder of a Note may declare the principal amount of
the Note to be due and immediately payable. The Notes will be
unsecured, subordinated obligations of the Company and will rank
junior in right of payment to the Company’s existing and
future senior indebtedness. The Notes are not convertible into
common stock or preferred stock and are not callable by the
holders.
The
Notes have been structured to qualify as Tier 2 capital under bank
regulatory guidelines, and the proceeds from the sale of the Notes
will be utilized for general corporate purposes, including funding
corporate growth, repaying outstanding indebtedness and supporting
the capital of Farmers & Merchants Bank, the Company’s
subsidiary bank.
The
Notes were offered and sold in reliance on the exemptions from
registration provided by Section 4(a)(2) of the Securities Act of
1933, as amended (the “Securities Act”).
The
Purchase Agreement contains certain customary representations,
warranties and covenants made by the Company, on the one hand, and
the Purchasers, severally and not jointly, on the other
hand.
The
foregoing descriptions of the Notes and the Purchase Agreement do
not purport to be complete and are qualified in their entirety by
reference to the forms of the Notes and the Purchase Agreement
which are attached hereto as Exhibits 4.1, 4.2 and 10.1,
respectively, and are incorporated herein by
reference.
Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The
information set forth under Item 1.01 above is incorporated by
reference into this Item 2.03.
Item 9.01
Financial Statements and Exhibits.
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Exhibit
No.
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Description
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Form
of 2027 Subordinated Note
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Form
of 2030 Subordinated Note
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Form
of Subordinated Note Purchase Agreement
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
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F
& M Bank Corp.
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Date: July
31, 2020
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By:
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/s/ Carrie
A. Comer
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Carrie
A. Comer
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Executive Vice President and Chief Financial Officer |
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Exhibit
4.1
FORM OF 2027 SUBORDINATED NOTE
F
& M BANK CORP.
5.75%
FIXED RATE SUBORDINATED NOTE DUE JULY 31, 2027
THE
INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS NOT A DEPOSIT
AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY OR FUND.
THE
INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS SUBORDINATED
AND JUNIOR IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS (AS DEFINED
IN SECTION 3
(SUBORDINATION) OF THIS SUBORDINATED NOTE) OF F & M BANK CORP.,
A VIRGINIA CORPORATION (THE “COMPANY”), INCLUDING
OBLIGATIONS OF THE COMPANY TO ITS GENERAL AND SECURED CREDITORS AND
IS UNSECURED. IT IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION OF
CREDIT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES.
IN THE
EVENT OF LIQUIDATION, ALL HOLDERS OF SENIOR INDEBTEDNESS OF THE
COMPANY SHALL BE ENTITLED TO BE PAID IN FULL WITH SUCH INTEREST AS
MAY BE PROVIDED BY LAW BEFORE ANY PAYMENT SHALL BE MADE ON ACCOUNT
OF PRINCIPAL OF OR INTEREST ON THIS SUBORDINATED NOTE. AFTER
PAYMENT IN FULL OF ALL SUMS OWING TO SUCH HOLDERS OF SENIOR
INDEBTEDNESS, THE HOLDER OF THIS SUBORDINATED NOTE, TOGETHER WITH
THE HOLDERS OF ANY OBLIGATIONS OF THE COMPANY RANKING ON A PARITY
WITH THE SUBORDINATED NOTES, SHALL BE ENTITLED TO BE PAID FROM THE
REMAINING ASSETS OF THE COMPANY THE UNPAID PRINCIPAL AMOUNT OF THIS
SUBORDINATED NOTE PLUS ACCRUED AND UNPAID INTEREST THEREON BEFORE
ANY PAYMENT OR OTHER DISTRIBUTION, WHETHER IN CASH, PROPERTY OR
OTHERWISE, SHALL BE MADE (I) WITH RESPECT TO ANY OBLIGATION THAT BY
ITS TERMS EXPRESSLY IS JUNIOR IN THE RIGHT OF PAYMENT TO THE
SUBORDINATED NOTES, (II) WITH RESPECT TO ANY INDEBTEDNESS BETWEEN
THE COMPANY AND ANY OF ITS SUBSIDIARIES OR AFFILIATES OR (III) ON
ACCOUNT OF ANY SHARES OF CAPITAL STOCK OF THE COMPANY.
THIS
SUBORDINATED NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
MINIMUM DENOMINATIONS OF $100,000 AND MULTIPLES OF $100,000 IN
EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SUBORDINATED NOTE IN
A DENOMINATION OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND
OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL
BE DEEMED NOT TO BE THE HOLDER OF THIS SUBORDINATED NOTE FOR ANY
PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PAYMENTS ON
THIS SUBORDINATED NOTE, AND SUCH PURPORTED TRANSFEREE SHALL BE
DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SUBORDINATED
NOTE.
THIS
SUBORDINATED NOTE MAY BE SOLD ONLY IN COMPLIANCE WITH APPLICABLE
FEDERAL AND STATE SECURITIES LAWS. THIS SUBORDINATED NOTE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES
LAWS, OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS
SUBORDINATED NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
CERTAIN
ERISA CONSIDERATIONS:
THE
HOLDER OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, BY ITS
ACCEPTANCE HEREOF OR THEREOF AGREES, REPRESENTS AND WARRANTS THAT
IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT
OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
(“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE “CODE”) (EACH, A
“PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE
“PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT
IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF
ANY PLAN MAY ACQUIRE OR HOLD THIS SUBORDINATED NOTE OR ANY INTEREST
HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR
84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING
OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, ARE NOT
PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH
RESPECT TO SUCH PURCHASE AND HOLDING. ANY PURCHASER OR HOLDER OF
THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO
HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER:
(I) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE
I OF ERISA OR SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR
OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR
OTHER PLAN, OR ANY OTHER PERSON OR ENTITY USING THE “PLAN
ASSETS” OF ANY SUCH PLAN OR OTHER PLAN TO FINANCE SUCH
PURCHASE OR (II) SUCH PURCHASE OR HOLDING WILL NOT RESULT IN A
PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975
OF THE CODE FOR WHICH FULL EXEMPTIVE RELIEF IS NOT AVAILABLE UNDER
APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
ANY
FIDUCIARY OF ANY PLAN WHO IS CONSIDERING THE ACQUISITION OF THIS
SUBORDINATED NOTE OR ANY INTEREST HEREIN SHOULD CONSULT WITH HIS OR
HER LEGAL COUNSEL PRIOR TO ACQUIRING THIS SUBORDINATED NOTE OR ANY
INTEREST HEREIN.
No. [ ] CUSIP: 30237P
AA4
F &
M BANK CORP.
5.75%
FIXED RATE SUBORDINATED NOTE DUE JULY 31, 2027
1. Subordinated
Notes. This subordinated note is one of an issue of notes of
F & M Bank Corp., a Virginia corporation (the “Company”), designated as
the “5.75% Fixed Rate Subordinated Notes due July 31,
2027” (the “Subordinated Notes”)
issued pursuant to that Subordinated Note Purchase Agreement, dated
as of the date upon which this Subordinated Note was originally
issued (the “Issue
Date”), between the Company and the one or more
purchasers of the Subordinated Notes identified in the signature
pages thereto (the “Purchase
Agreement”).
2. Payment.
(a) The Company, for
value received, promises to pay to [ ], or its registered assigns,
the principal sum of [ ] (U.S.) ($[ ]), plus accrued but unpaid
interest on July 31, 2027 (the “Maturity Date”) and to
pay interest thereon from and including the original issue date of
the Subordinated Notes to but excluding the Maturity Date or the
earlier redemption date contemplated by Section 4 (Redemption) of this
Subordinated Note at the rate of 5.75% per annum, computed on the
basis of a 360-day year consisting of twelve 30-day months and
payable semi-annually in arrears on January 31 and July 31 of each
year (each payment date, an “Interest Payment Date”),
beginning January 31, 2021. Dollar amounts resulting from this
calculation shall be rounded to the nearest cent, with one-half
cent being rounded up.
(b) In the event that
any Interest Payment Date falls on a day that is not a Business Day
(as defined below), the interest payment due on that date shall be
postponed to the next day that is a Business Day and no additional
interest shall accrue as a result of that postponement. The term
“Business Day” means any day other than a Saturday or
Sunday or any other day on which banking institutions in the
Commonwealth of Virginia are generally authorized or required by
law or executive order to be closed.
3. Subordination.
(a) The indebtedness of
the Company evidenced by this Subordinated Note, including the
principal and interest on this Subordinated Note, shall be
subordinate and junior in right of payment to the prior payment in
full of all existing claims of creditors of the Company whether now
outstanding or subsequently created, assumed, guaranteed or
incurred (collectively, “Senior Indebtedness”),
which shall consist of principal of (and premium, if any) and
interest, if any, on: (i) all indebtedness and obligations of, or
guaranteed or assumed by, the Company for money borrowed, whether
or not evidenced by bonds, debentures, securities, notes or other
similar instruments; (ii) any deferred obligations of the Company
for the payment of the purchase price of property or assets
acquired other than in the ordinary course of business; (iii) all
obligations, contingent or otherwise, of the Company in respect of
any letters of credit, bankers’ acceptances, security
purchase facilities and similar direct credit substitutes; (iv) any
capital lease obligations of the Company; (v) all obligations of
the Company in respect of interest rate swap, cap or other
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts, commodity
contracts and other similar arrangements or derivative products;
(vi) all obligations that are similar to those in clauses (i)
through (v) of other Persons for the payment of which the Company
is responsible or liable as obligor, guarantor or otherwise arising
from an off-balance sheet guarantee; (vii) all obligations of the
types referred to in clauses (i) through (vi) of other Persons
secured by a lien on any property or asset of the Company; and
(viii) in the case of (i) through (vii) above, all amendments,
renewals, extensions, modifications and refundings of such
indebtedness and obligations; except “Senior
Indebtedness” does not include (A) the Subordinated Notes,
(B) any obligation that by its terms expressly is junior to, or
ranks equally in right of payment with, the Subordinated Notes, or
(C) any indebtedness between the Company and any of its
subsidiaries or Affiliates. This Subordinated Note is not secured
by any assets of the Company or any of its subsidiaries or
Affiliates. The term “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. The term “Person” as used in this
Subordinated Note 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 or
any other entity or organization. The term “control” (including the
terms “controlling,” “controlled by,” and
“under common control with”) means the possession,
direct or indirect, of the power to direct or cause the direction
of the management and policies of a person, whether through the
ownership of voting securities, by contract, or
otherwise.
(b) In the event of any
liquidation of the Company, holders of Senior Indebtedness of the
Company shall be entitled to be paid in full with such interest as
may be provided by law before any payment shall be made on account
of principal of or interest on this Subordinated Note.
Additionally, in the event of any insolvency, dissolution,
assignment for the benefit of creditors or any liquidation or
winding up of or relating to the Company, whether voluntary or
involuntary, holders of Senior Indebtedness shall be entitled to be
paid in full before any payment shall be made on account of the
principal of or interest on the Subordinated Notes, including this
Subordinated Note. In the event of any such proceeding, after
payment in full of all sums owing with respect to the Senior
Indebtedness, the registered holders of the Subordinated Notes from
time to time (each a “Noteholder” and,
collectively, the “Noteholders”), together
with the holders of any obligations of the Company ranking on
parity with the Subordinated Notes, shall be entitled to be paid
from the remaining assets of the Company the unpaid principal
thereof, and the unpaid interest thereon before any payment or
other distribution, whether in cash, property or otherwise, shall
be made (i) with respect to any obligation that by its terms
expressly is junior to in the right of payment to the Subordinated
Notes, (ii) with respect to any indebtedness between the Company
and any of its subsidiaries or Affiliates or (iii) on account of
any capital stock.
(c) If there shall have
occurred and be continuing (i) a default in any payment with
respect to any Senior Indebtedness or (ii) an event of default with
respect to any Senior Indebtedness as a result of which the
maturity thereof is accelerated, unless and until such payment
default or event of default shall have been cured or waived or
shall have ceased to exist, no payments shall be made by the
Company with respect to the Subordinated Notes. The provisions of
this paragraph shall not apply to any payment with respect to which
the immediately preceding paragraph of this Section 3 (Subordination) would
be applicable.
(d) Nothing herein
shall act to prohibit, limit or impede the Company from issuing
additional debt of the Company having the same rank as the
Subordinated Notes or which may be junior or senior in rank to the
Subordinated Notes. Each Noteholder, by its acceptance hereof,
agrees to and shall be bound by the provisions of this Section 3.
Each Noteholder, by its acceptance hereof, further acknowledges and
agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration for each holder
of any Senior Indebtedness, whether such Senior Indebtedness was
created or acquired before or after the issuance of the
Subordinated Notes, to acquire and continue to hold, or to continue
to hold, such Senior Indebtedness, and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold or in
continuing to hold such Senior Indebtedness.
4.
Redemption.
(a) Redemption Prior to Second
Anniversary. This Subordinated Note shall not be redeemable
by the Company in whole or in part prior to July 31, 2022, except
in the event of a: (i) Tier 2 Capital Event (as defined below);
(ii) Tax Event (as defined below); or (iii) Investment Company
Event (as defined below). Upon the occurrence of a Tier 2 Capital
Event, a Tax Event or an Investment Company Event, the Company may
redeem this Subordinated Note, subject to Section 4(f) (Regulatory
Approvals) hereof, in whole or in part at any time, upon giving not
less than 10 Business Days’ notice to the holder of this
Subordinated Note at an amount equal to 100% of the outstanding
principal amount being redeemed plus accrued but unpaid interest,
to but excluding the redemption date. “Tier 2 Capital Event”
means the receipt by the Company of an opinion of counsel to the
Company to the effect that there is, or within one hundred twenty (120)
days after receipt of such opinion there will be, a material risk
that this Subordinated Note does not qualify as “Tier
2” Capital (as defined by the Board of Governors of the
Federal Reserve System (the “Federal Reserve”)) (or
its then equivalent) as a result of a change in law or regulation,
or interpretation or application thereof, by any judicial,
legislative or regulatory authority that becomes effective after
the Issue Date. “Tax
Event” means the receipt by the Company of an opinion
of counsel to the Company that as a result of any amendment to, or
change (including any final and adopted (or enacted) prospective
change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such
laws or regulations, there exists a material risk that interest
payable by the Company on the Subordinated Notes is not, or within
one hundred twenty (120) days after the receipt of such opinion
will not be, deductible by the Company, in whole or in part, for
United States federal income tax purposes. “Investment Company Event”
means the receipt by the Company of an opinion of counsel to the
Company to the effect that there is a material risk that the
Company is or, within one hundred twenty (120) days after the
receipt of such opinion will be, required to register as an
investment company pursuant to the Investment Company Act of 1940,
as amended.
(b) Redemption on or after Second
Anniversary. On or after July 31, 2022, subject to the
provisions of Section
4(f) (Regulatory Approvals) hereof, this Subordinated Note
shall be redeemable at the option of and by the Company, in whole
or in part from time to time upon any Interest Payment Date, at an
amount equal to 100% of the outstanding principal amount being
redeemed plus accrued but unpaid interest, to but excluding the
redemption date, but in all cases in a principal amount with
integral multiples of $1,000. In addition, the Company may redeem
all or a portion of the Subordinated Notes, at any time upon the
occurrence of a Tier 2 Capital Event, Tax Event or an Investment
Company Event. The redemption referenced in this Section 4(b) (Redemption on or
after Second Anniversary) shall be subject to the receipt of any
required regulatory approval.
(c) Partial Redemption. If less
than the then-outstanding principal amount of this Subordinated
Note is redeemed, (i) a new Subordinated Note shall be issued
representing the unredeemed portion without charge to the holder
thereof and (ii) such redemption shall be effected on a pro rata
basis as to the Noteholders. For purposes of clarity, upon a
partial redemption, a like percentage of the principal amount of
every Subordinated Note held by every Noteholder shall be redeemed
and, to the extent applicable and for purposes of a redemption
processed through The Depository Trust Company, such redemption
shall be made on a “Pro Rata Pass-Through Distribution of
Principal” basis, among all of the Subordinated Notes
outstanding at the time thereof.
(d) No Redemption at Option of
Noteholder. This Subordinated Note is not subject to
redemption at the option of the holder of this Subordinated
Note.
(e) Effectiveness of Redemption. If
notice of redemption has been duly given and notwithstanding that
this Subordinated Note has been called for redemption but has not
yet been surrendered for cancellation, on and after the date fixed
for redemption interest shall cease to accrue on the portion of
this Subordinated Note called for redemption, this Subordinated
Note shall no longer be deemed outstanding with respect to the
portion called for redemption and all rights with respect to the
portion of this Subordinated Note called for redemption shall
forthwith on such date fixed for redemption cease and terminate
unless the Company shall default in the payment of the redemption
price, except only the right of the holder hereof to receive the
amount payable on such redemption, without interest.
(f) Regulatory Approvals. Any such
redemption shall be subject to receipt of any and all required
federal and state regulatory approvals or non-objections,
including, but not limited to, the consent of the Federal Reserve.
In the case of any redemption of this Subordinated Note pursuant to
paragraphs (b) or (c) of this Section 4, the Company will
give the holder hereof notice of redemption, which notice shall
indicate the aggregate principal amount of Subordinated Notes to be
redeemed, not less than thirty (30) nor more than forty-five (45)
calendar days prior to the redemption date.
(g) Purchase and Resale of the
Subordinated Notes. Subject to any required federal and
state regulatory approvals and the provisions of this Subordinated
Note, the Company shall have the right to purchase any of the
Subordinated Notes at any time in the open market, private
transactions or otherwise. If the Company purchases any
Subordinated Notes, it may, in its discretion, hold, resell or
cancel any of the purchased Subordinated Notes.
5. Events
of Default; Acceleration; Compliance
Certificate.
Notwithstanding any
cure periods provided for below, the Company shall promptly (but in
no event later than five (5) Business Days following the Company
becoming aware of the occurrence of such event) notify the
Noteholders in writing when the Company becomes aware of the
happening of any event described below. Regardless of whether the
Company has provided the forgoing notice, each of the following
events shall constitute an “Event of
Default”:
(a) the entry of a
decree or order for relief in respect of the Company by a court
having jurisdiction in the premises in an involuntary case or
proceeding under any applicable bankruptcy, insolvency, or
reorganization law, now or hereafter in effect of the United States
or any political subdivision thereof, and such decree or order will
have continued unstayed and in effect for a period of sixty (60)
consecutive calendar days;
(b) the commencement by
the Company of a voluntary case under any applicable bankruptcy,
insolvency or reorganization law, now or hereafter in effect of the
United States or any political subdivision thereof, or the consent
by the Company to the entry of a decree or order for relief in an
involuntary case or proceeding under any such law;
(c) the Company (i)
becomes insolvent or is unable to pay its debts as they mature,
(ii) makes an assignment for the benefit of creditors, (iii) admits
in writing its inability to pay its debts as they mature or (iv)
ceases to be a bank holding company under the Bank Holding Company
Act of 1956, as amended;
(d) the failure of the
Company to pay any installment of interest on any of the
Subordinated Notes as and when the same will become due and
payable, and the continuation of such failure for a period of
fifteen (15) calendar days;
(e) the failure of the
Company to pay all or any part of the principal of any of the
Subordinated Notes as and when the same will become due and
payable;
(f) the liquidation of
the Company (for the avoidance of doubt, “liquidation”
does not include any merger, consolidation, sale of equity or
assets or reorganization (exclusive of a reorganization in
bankruptcy) of the Company or any of its
subsidiaries);
(g) the failure of the
Company to perform any other covenant or agreement on the part of
the Company contained in this Subordinated Note, and the
continuation of such failure for a period of thirty (30) days after
the date on which notice specifying such failure, stating that such
notice is a “Notice of Default” hereunder and demanding
that the Company remedy the same, will have been given, in the
manner set forth in Section 21 (Notices), to the
Company by a Noteholder;
(h) the default by the
Company under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company having an aggregate
principal amount outstanding of at least $1,000,000, whether such
indebtedness now exists or is created or incurred in the future,
which default (i) constitutes a failure to pay any portion of the
principal of such indebtedness when due and payable after the
expiration of any applicable grace period or (ii) results in such
indebtedness becoming due or being declared due and payable prior
to the date on which it otherwise would have become due and payable
without, in the case of clause (i), such indebtedness having been
discharged or, in the case of clause (ii), without such
indebtedness having been discharged or such acceleration having
been rescinded or annulled; or
(i) any certification
made to any Noteholder pursuant to the Purchase Agreement by the
Company or otherwise made in writing to any Noteholder in
connection with or as contemplated by the Purchase Agreement or
this Subordinated Note by the Company shall be materially incorrect
or false as of the delivery date of such certification, or any
representation to any Noteholder by the Company as to the financial
condition or credit standing of the Company is or proves to be
materially false or misleading.
Unless
the principal amount of this Subordinated Note already shall have
become due and payable, if an Event of Default set forth in
subsections (a),
(b) or (f) of this Section 5 shall have occurred
and be continuing, then the principal amount of this Subordinated
Note, and accrued and unpaid interest, if any, on the Subordinated
Note will become and be immediately due and payable without any
declaration or other act on the part of the Noteholder, and the
Company waives demand, presentment for payment, notice of
nonpayment, notice of protest, and all other notices.
Notwithstanding the foregoing, because the Company treats the
Subordinated Notes as Tier 2 Capital, upon the occurrence of an
Event of Default other than an Event of Default described in
subsections (a),
(b) or (f) of this Section 5, no Noteholder may
accelerate the Maturity Date of the Subordinated Notes and make the
principal of, and any accrued and unpaid interest on, the
Subordinated Notes, immediately due and payable. The Company, within forty-five
(45) calendar days after the receipt of written notice from any
Noteholder of the occurrence of an Event of Default with respect to
this Subordinated Note, shall mail to all Noteholders, at their
addresses shown on the Security Register (as defined in
Section 13
(Registration of Transfer, Security Register) below), such written
notice of Event of Default, unless such Event of Default shall have
been cured or waived before the giving of such notice as certified
by the Company in writing.
6. Failure
to Make Payments. In the event of an Event of Default under
Section 5(d) or
Section 5(e) above,
the Company will, upon demand of the Noteholder, pay to the
Noteholder the amount then due and payable on this Subordinated
Note for principal and interest (without acceleration of the
Subordinated Note in any manner), with interest on the overdue
principal and interest at the per annum rate borne by this
Subordinated Note, to the extent permitted by applicable law. If
the Company fails to pay such amount upon such demand, the
Noteholder may, among other things, institute a judicial proceeding
for the collection of the sums so due and unpaid, may prosecute
such proceeding to judgment or final decree and may enforce the
same against the Company and collect the amounts adjudged or
decreed to be payable in the manner provided by law out of the
property of the Company.
Upon
the occurrence of a failure by the Company to make any required
payment of principal or interest on this Subordinated Note or an
Event of Default, until such failure or Event of Default is cured
by the Company or waived by the Noteholders in accordance with
Section 17 (Waiver
and Consent) hereof, except as may be required by any federal or
state bank regulatory 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 the
Company’s capital stock; (b) make any payment of principal or
interest or premium, if any, on or repay, repurchase or redeem any
indebtedness of the Company 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 (including, without
limitation, any repurchases or acquisitions in connection with the
forfeiture of any stock award, cashless or net exercise of any
option, or acceptance of common stock in lieu of an award
recipient’s tax obligations under any equity award) (the
foregoing clauses (i) through (v) are collectively referred to as
the “Permitted
Dividends”). The
limitations imposed by the provisions of this Section 6
shall apply whether or not the
Noteholder has notified the Company of
the occurrence of a failure by the Company to make any required
payment of principal or interest on this Subordinated Note or an
Event of Default.
7. Affirmative
Covenants of the Company; Compliance
Certificate.
(a) Notice of Certain Events. To
the extent permitted by applicable statute, rule or regulation, the
Company shall provide written notice to the Noteholder, at its
addresses shown on the Security Register (as defined in
Section 13
(Registration of Transfer, Security Register) below), of the
occurrence of any of the following events as soon as practicable,
but in no event later than fifteen
(15) Business Days following the Company becoming aware of
the occurrence of such event:
(i) The total
risk-based capital ratio, Tier 1 risk-based capital ratio, common
equity Tier 1 risk-based capital ratio or leverage ratio of Farmers
& Merchants Bank, Timberville, Virginia, the Company’s
subsidiary bank (the “Bank”), becomes less than
ten percent (10.0%), eight percent (8.0%), six and one-half percent
(6.50%) or five percent (5.0%), respectively, as of the end of any
calendar quarter (provided, that, to the extent the Bank has opted
into the community bank leverage ratio framework, no notice need be
given until the Bank ceases to be a qualifying community banking
organization, as defined under 12 CFR § 3.12);
(ii) The
Company, or any of the Company’s subsidiaries, or any officer
of the Company (in such capacity), becomes subject to any formal,
written regulatory enforcement action (as defined by the applicable
state or federal bank regulatory authority);
(iii) The
ratio of non-performing assets to total assets of Bank, as
calculated by the Company in the ordinary course of business and
consistent with past practices, becomes greater than five percent
(5.0%), as of the end of any calendar quarter;
(iv) There
is a known change in ownership of twenty-five percent (25%) or more
of the outstanding securities of the Company entitled to vote for
the election of directors; or
(v) The
Company undertakes the issuance of any additional Indebtedness (as
such term is defined in the Purchase Agreement).
(b) Payment of Principal and
Interest. The Company covenants and agrees for the benefit
of the Noteholder that it will duly and punctually pay the
principal of, and interest on, this Subordinated Note, in
accordance with the terms hereof.
(c) Maintenance of Office. The
Company will maintain an office or agency in the City of
Timberville, Virginia, where Subordinated Notes may be surrendered
for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Subordinated Notes
may be served.
The
Company may also from time to time designate one or more other
offices or agencies where the Subordinated Notes may be presented
or surrendered for any or all such purposes and may from time to
time rescind such designations; provided that no such designation
or rescission will in any manner relieve the Company of its
obligation to maintain an office or agency in the Commonwealth of
Virginia. The Company will give prompt written notice to the
Noteholders of any such designation or rescission and of any change
in the location of any such other office or agency.
(d) Corporate Existence. Except as
contemplated by Section
8(b), the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect: (i) the
corporate existence of the Company; (ii) the existence (corporate
or other) of each subsidiary of the Company and the Bank; and (iii)
the rights (constituent governing documents and statutory),
licenses and franchises of the Company and each subsidiary of the
Company and the Bank; provided,
however, that the Company will not be required to preserve
the existence (corporate or other) of any of its subsidiaries
(other than the Bank) or any such right, license or franchise of
the Company or any of its subsidiaries (other than the Bank) if the
Board of Directors of the Company determines that the preservation
thereof is no longer desirable in the conduct of the business of
the Company and its subsidiaries taken as a whole and that the loss
thereof will not be disadvantageous in any material respect to the
Noteholders.
(e) Maintenance of Properties. The
Company will, and will cause each subsidiary of the Company or the Bank to,
cause all its properties used or useful in the conduct of its
business to be maintained and kept in good condition, repair and
working order, ordinary wear and tear excepted, and supplied with
all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that nothing in this
Section 7(e) will
prevent the Company or any subsidiary from discontinuing the
operation and maintenance of any of their respective properties if
such discontinuance is, in the reasonable judgment of the Board of
Directors of the Company or of any subsidiary, as the case may be,
desirable in the conduct of its business and that the
discontinuance thereof will not be disadvantageous in any material
respect to the Noteholders.
(f) Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Section 7(c) (Maintenance of
Office), Section
7(d) (Corporate Existence), or Section 7(e) (Maintenance of
Properties) above, with respect to this Subordinated Note if before
the time for such compliance the Noteholders of at least a majority
in aggregate principal amount of the outstanding Subordinated
Notes, by act of such Noteholders, either will waive such
compliance in such instance or generally will have waived
compliance with such term, provision or condition, but no such
waiver will extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver
will become effective, the obligations of the Company in respect of
any such term, provision or condition will remain in full force and
effect.
(g) Tier 2 Capital. If all or any
portion of the Subordinated Notes ceases to qualify for inclusion
as 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 Noteholders and thereafter
the Company and the Noteholders 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
Section 7(g) (Tier
2 Capital) shall limit the Company’s right to redeem the
Subordinated Notes upon the occurrence of a Tier 2 Capital Event
pursuant to Section
4(a) (Redemption Prior to Second Anniversary) or
Section 4(b)
(Redemption on or after Second Anniversary).
(h) Compliance with Laws. The
Company and each subsidiary of the
Company and the Bank shall comply with the requirements of
all laws, regulations, orders and decrees applicable to it or its
properties, except for such noncompliance that would not reasonably
be expected to have a Material Adverse Effect (as such term is
defined in the Purchase Agreement).
(i) Taxes and Assessments. The
Company shall punctually pay and discharge all material taxes,
assessments, and other governmental charges or levies imposed upon
it or upon its income or upon any of its properties; provided, that
no such taxes, assessments or other governmental charges need be
paid if they are being contested in good faith by the
Company.
(j) Financial Statements; Access to
Records.
(i) Not later than
forty-five (45) days following the end of each of the quarterly
periods ended March 31, June 30 and September 30 for which the
Company has not timely filed a Quarterly Report on Form 10-Q with
the SEC, upon request, the Company shall provide the Noteholder
with a copy of the Company’s unaudited consolidated balance
sheet and statement of income (loss) for and as of the end of such
immediately preceding fiscal quarter, prepared in accordance with
past practice. Quarterly financial statements, if required herein,
shall be unaudited and need not comply with GAAP.
(ii) Not
later than one hundred twenty (120) days from the end of each
fiscal year for which the Company has not filed an Annual Report on
Form 10-K with the SEC, upon request the Company shall provide the
Noteholder with copies of the Company’s audited financial
statements consisting of the consolidated balance sheet of the
Company as of the fiscal year end and the related statements of
income (loss) and retained earnings, stockholders’ equity and
cash flows for the fiscal year then ended. Such financial
statements shall be prepared in accordance with GAAP applied on a
consistent basis throughout the period involved.
(k) Company Statement as to
Compliance. The Company will deliver to Noteholder, within
one hundred twenty (120) days after the end of each fiscal year, an
Officer’s Certificate covering the preceding calendar year,
stating whether or not, to the best of his or her knowledge, the
Company is in default in the performance and observance of any of
the terms, provisions and conditions of this Subordinated Note
(without regard to notice requirements or periods of grace) and if
the Company will be in default, specifying all such defaults and
the nature and status thereof of which he or she may have
knowledge; and any event or events have occurred that in the
reasonable judgment of the management of the Company would have a
Material Adverse Effect.
8. Negative
Covenants of the Company.
(a) Limitation on Dividends. The
Company shall not declare or pay any dividend or make any
distribution on capital stock or other equity securities of any
kind of the Company if the Company is not “well
capitalized” (as that term is defined in 12 C.F.R. Part
225.2(r)) immediately prior to the declaration of such dividend or
distribution, except for Permitted Dividends.
(b) Merger, Share Exchange or Sale of
Assets. The Company shall not merge into another entity,
consummate a share exchange or convey, transfer or lease
substantially all of its properties and assets to any Person,
unless:
(i) the continuing
entity into which the Company is merged, the acquiring entity in
connection with a share exchange or the Person which acquires by
conveyance or transfer or which leases substantially all of the
properties and assets of the Company shall be a corporation,
association or other legal entity organized and existing under the
laws of the United States of America, any State thereof or the
District of Columbia and expressly assumes the due and punctual
payment of the principal of and any premium and interest on the
Subordinated Notes according to their terms, and the due and
punctual performance of all covenants and conditions hereof on the
part of the Company to be performed or observed; provided, however, that no express
assumption shall be required by any successor by merger to the
Company to the extent such legal successor assumes the
Company’s obligations hereunder by operation of law;
and
(ii) immediately
after giving effect to such transaction, no Event of Default, and
no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be
continuing.
(a) Continuance of Business. Other
than in connection with a transaction which complies with Section
8(b), the Company shall not take any action, omit to take any
action or enter into any other transaction that would have the
effect of: (i) the Company ceasing to be a bank holding company
under the Bank Holding Company Act of 1956, as amended
(provided, however, for the
avoidance of doubt, nothing herein is intended to prohibit the
Company from electing to be a financial holding company or,
following such an election, exiting financial holding company
status), (ii) the liquidation or dissolution of the Company or the
Bank, (iii) the Bank ceasing to be an “insured depository
institution” under Section 3(c)(2) of the Federal Deposit
Insurance Act, as amended, or (iv) the Company owning less than one
hundred percent (100%) of the capital stock of the
Bank.
9. Denominations.
The Subordinated Notes are issuable only in registered form without
interest coupons in minimum denominations of $100,000 and integral
multiples of $100,000 in excess thereof.
10. Charges
and Transfer Taxes. No service charge will be made for any
registration of transfer or exchange of this Subordinated Note, or
any redemption or repayment of this Subordinated Note, or any
conversion or exchange of this Subordinated Note for other types of
securities or property, but the Company may require payment of a
sum sufficient to pay all taxes, assessments or other governmental
charges that may be imposed in connection with the transfer or
exchange of this Subordinated Note from the Noteholder requesting
such transfer or exchange.
11. Payment
Procedures. Payment of the principal and interest payable on
the Maturity Date will be made by check, by wire transfer or by
Automated Clearing House (ACH) transfer in immediately available
funds to a bank account in the United States designated by the
registered Noteholder if such Noteholder shall have previously
provided wire or ACH instructions to the Company, upon presentation
and surrender of this Subordinated Note at the Payment Office (as
defined in Section
21 (Notices) below) or at such other place or places as the
Company shall designate by notice to the registered Noteholders as
the Payment Office, provided that this Subordinated Note is
presented to the Company in time for the Company to make such
payments in such funds in accordance with its normal procedures.
Payments of interest (other than interest payable on the Maturity
Date) shall be made on each Interest Payment Date by wire transfer
in immediately available funds or check mailed to the registered
Noteholder, as such Person’s address appears on the Security
Register (as defined in Section 13 below). Interest
payable on any Interest Payment Date shall be payable to the
Noteholder in whose name this Subordinated Note is registered at
the close of business on the fifteenth (15th) calendar day prior
to the applicable Interest Payment Date, without regard to whether
such date is a Business Day, except that interest not paid on the
Interest Payment Date, if any, will be paid to the holder in whose
name this Subordinated Note is registered at the close of business
on a special record date fixed by the Company (a
“Special Record
Date”), notice of which shall be given to the
Noteholder not less than ten (10) calendar days prior to such
Special Record Date. To the extent permitted by applicable law,
interest shall accrue, at the rate at which interest accrues on the
principal of this Subordinated Note, on any amount of principal or
interest on this Subordinated Note not paid when due. All payments
on this Subordinated Note shall be applied first against costs and
expenses of the Noteholder, if any, for which the Company is liable
under this Subordinated Note; then against interest due hereunder;
and then against principal due hereunder. The Noteholder
acknowledges and agrees that the payment of all or any portion of
the outstanding principal amount of this Subordinated Note and all
interest hereon shall be pari
passu in right of payment and in all other respects to the
other Subordinated Notes. In the event that the Noteholder receives
payments in excess of the Noteholder’s pro rata share of the
Company’s payments to the holders of all of the Subordinated
Notes, then the Noteholder shall hold in trust all such excess
payments for the benefit of the other Noteholders and shall pay
such amounts held in trust to such other holders upon demand by
such holders.
12. Form
of Payment. Payments of principal and interest on this
Subordinated Note shall be made in such coin or currency of the
United States of America as at the time of payment shall be legal
tender for the payment of public and private debts.
13. Registration
of Transfer, Security Register. Except as otherwise provided
herein, or in the Purchase Agreement between Noteholder and the
Company, and subject to limitations on transfer under applicable
state and federal securities laws, this Subordinated Note is
transferable in whole or in part, and may be exchanged for a like
aggregate principal amount of Subordinated Notes of other
authorized denominations, by the Noteholder in person, or by its
attorney duly authorized in writing, at the Payment Office or the
offices of the Registrar. The Company or its agent (the
“Registrar”) shall
maintain a register providing for the registration of the
Subordinated Notes and any exchange or transfer thereof (the
“Security
Register”). Upon surrender or presentation of this
Subordinated Note for exchange or registration of transfer, the
Company or the Registrar shall execute and deliver in exchange
therefor a Subordinated Note or Subordinated Notes of like
aggregate principal amount, each in a minimum denomination of
$100,000 or any amount in excess thereof which is an integral
multiple of $100,000 (and, in the absence of an opinion of counsel
satisfactory to the Company to the contrary, bearing the
restrictive legend(s) set forth hereinabove) and that is or are
registered in such name or names requested by the Noteholder. Any
Subordinated Note presented or surrendered for registration of
transfer or for exchange shall be duly endorsed and accompanied by
a written instrument of transfer in such form as is attached hereto
and incorporated herein, duly executed by the Noteholder or its
attorney duly authorized in writing, with such tax identification
number (including, without limitation, an appropriate and properly
executed Internal Revenue Service Form W-9 or appropriate type of
Form W-8) or other information for each Person in whose name a
Subordinated Note is to be issued, and accompanied by evidence of
compliance with any restrictive legend(s) appearing on such
Subordinated Note or Subordinated Notes as the Company may
reasonably request to comply with applicable law. No exchange or
registration of transfer of this Subordinated Note shall be made on
or after (i) the fifteenth (15th) day immediately
preceding the Maturity Date or (ii) the due delivery of notice of
redemption.
14. Successors
and Assigns. This Subordinated Note shall be binding upon
the Company and inure to the benefit of the Noteholder and its
respective successors and permitted assigns. The Noteholder may
assign all, or any part of, or any interest in, the
Noteholder’s rights and benefits hereunder only to the extent
and in the manner permitted by the terms of this Subordinated Note,
the Purchase Agreement, and under applicable securities laws and
regulations. To the extent of any such assignment, such assignee
shall have the same rights and benefits against the Company and
shall agree to be bound by and to comply with the terms and
conditions of the Purchase Agreement as it would have had if it
were the Noteholder hereunder.
15. Priority.
The Subordinated Notes rank pari
passu among themselves and pari passu, in the event of any
insolvency proceeding, dissolution, assignment for the benefit of
creditors, reorganization, restructuring of debt, marshaling of
assets and liabilities or similar proceeding or any liquidation or
winding up of the Company, with all other present or future
unsecured subordinated debt obligations of the Company (including,
without limitation, the Company’s 6.00% Fixed to Floating
Rate Subordinated Notes due July 31, 2030), except any unsecured
subordinated debt that, pursuant to its express terms, is senior or
subordinate in right of payment to the Subordinated
Notes.
16. Ownership.
Prior to due presentment of this Subordinated Note for registration
of transfer, the Company may treat the holder in whose name this
Subordinated Note is registered in the Security Register as the
absolute owner of this Subordinated Note for receiving payments of
principal and interest on this Subordinated Note and for all other
purposes whatsoever, whether or not this Subordinated Note be
overdue, and the Company shall not be affected by any notice to the
contrary.
17. Waiver
and Consent.
(a) This Subordinated
Note may be amended or waived pursuant to, and in accordance with,
the provisions set forth herein and as set forth in Section 7.3 of
the Purchase Agreement. Any such consent or waiver given by the
Noteholder shall be conclusive and binding upon such Noteholder and
upon all subsequent holders of this Subordinated Note and of any
Subordinated Note issued upon the registration of transfer hereof
or in exchange therefor or in lieu hereof, whether or not notation
of such consent or waiver is made upon this Subordinated Note. No
delay or omission of the Noteholder to exercise any right or remedy
accruing upon any Event of Default shall impair such right or
remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Any insured depository institution that shall
be a Noteholder or that otherwise shall have any beneficial
ownership interest in this Subordinated Note shall, by its
acceptance of such Subordinated Note (or beneficial interest
therein), be deemed to have waived any right of offset with respect
to the indebtedness evidenced thereby.
(b) No waiver or
amendment of any term, provision, condition, covenant or agreement
in the Subordinated Notes shall be effective except with the
consent of the Noteholders holding more than fifty percent (50%) in
aggregate principal amount (excluding any Subordinated Notes held
by the Company or any of its Affiliates) of the Subordinated Notes
at the time outstanding; provided, however, that without the consent of
each Noteholder of an affected Subordinated Note, no such amendment
or waiver may: (i) reduce the principal amount of the Subordinated
Note; (ii) reduce the rate of or change the time for payment of
interest on any Subordinated Note; (iii) extend the maturity of any
Subordinated Note; (iv) change the currency in which payment of the
obligations of the Company under the Subordinated Notes are to be
made; (v) lower the percentage of aggregate principal amount of
outstanding Subordinated Notes required to approve any amendment of
the Subordinated Notes; (vi) make any changes to Section 4(c)
(Partial Redemption), Section 5 (Events of Default; Acceleration),
Section 6 (Failure to Make Payments), Section 15 (Priority), or
Section 17 (Waiver and Consent) of the Subordinated Notes that
adversely affects the rights of any Noteholder; or (vii)
disproportionately and adversely affect the rights of any of the
holders of the then outstanding Subordinated Notes. Notwithstanding
the foregoing, the Company may amend or supplement the Subordinated
Notes without the consent of the Noteholders to cure any ambiguity,
defect or inconsistency or to provide for uncertificated
Subordinated Notes in addition to or in place of certificated
Subordinated Notes, or to make any change that does not adversely
affect the rights of any Noteholder of any of the Subordinated
Notes. No failure to exercise or delay in exercising, by any
Noteholder 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 Subordinated Note are cumulative and not exclusive
of any right or remedy provided by law or equity. No notice or
demand on the Company in any case shall, in itself, entitle the
Company to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the
Noteholders to any other or further action in any circumstances
without notice or demand. No consent or waiver, express or implied,
by the Noteholders to or of any breach or default by the Company in
the performance of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or
default in the performance of the same or any other obligations of
the Company hereunder. Failure on the part of the Noteholders to
complain of any acts or failure to act or to declare an Event of
Default, irrespective of how long such failure continues, shall not
constitute a waiver by the Noteholders of their rights hereunder or
impair any rights, powers or remedies on account of any breach or
default by the Company.
18. Absolute
and Unconditional Obligation of the Company. No provisions
of this Subordinated Note shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the
principal and interest on this Subordinated Note at the times,
places and rate, and in the coin or currency, herein prescribed. No
delay or omission of the Noteholder to exercise any right or remedy
accruing upon any Event of Default shall impair such right or
remedy or constitute a waiver of any such Event of Default or an
acquiescence therein.
19. No
Sinking Fund; Convertibility. This Subordinated Note is not
entitled to the benefit of any sinking fund. This Subordinated Note
is not convertible into or exchangeable for any of the equity
securities, other securities or assets of the Company or any
subsidiary of the Company.
20. No
Recourse Against Others. No recourse under or upon any
obligation, covenant or agreement contained in this Subordinated
Note, or for any claim based thereon or otherwise in respect
thereof, will be had against any past, present or future
shareholder, employee, officer, or director, as such, of the
Company or of any predecessor or successor, either directly or
through the Company or any predecessor or successor, under any rule
of law, statute or constitutional provision or by the enforcement
of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released
by the acceptance of this Subordinated Note by the Noteholder and
as part of the consideration for the issuance of this Subordinated
Note.
21. Notices.
All notices to the Company under this Subordinated Note shall be in
writing and addressed to the Company at 205 South Main Street,
Timberville, Virginia 22853, Attention: Mark C. Hanna, Chief
Executive Officer, or to such other address as the Company may
notify to the Noteholder (the “Payment Office”). All
notices to the Noteholders shall be in writing and sent by
first-class mail to each Noteholder at his or its address as set
forth in the Security Register.
22. Further
Issues. The Company may, without the consent of the
Noteholders, create and issue additional notes having the same
terms and conditions of the Subordinated Notes (except for the
Issue Date and issue price) so that such further notes shall be
consolidated and form a single series with the Subordinated
Notes.
23. Governing
Law; Interpretation. THIS SUBORDINATED NOTE WILL BE DEEMED
TO BE A CONTRACT MADE UNDER THE LAWS OF THE COMMONWEALTH OF
VIRGINIA AND WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT REGARD TO CONFLICT
OF LAW PRINCIPLES THEREOF. IT IS INTENDED THAT THIS SUBORDINATED
NOTE SHALL MEET THE CRITERIA FOR QUALIFICATION OF THE OUTSTANDING
PRINCIPAL AS TIER 2 CAPITAL UNDER THE REGULATORY GUIDELINES OF THE
FEDERAL RESERVE, AND THE TERMS HEREOF SHALL BE INTERPRETED IN A
MANNER TO SATISFY SUCH INTENT.
[Signature Page Follows]
IN
WITNESS WHEREOF, the undersigned has caused this Subordinated Note
to be duly executed and attested.
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F
& M BANK CORP.
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By:
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/s/ Mark C.
Hanna
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Name:
Mark C.
Hanna
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Title:
Chief
Executive Officer
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ATTEST:
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__________________________________
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Name: __________________________________
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Title: __________________________________
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[Signature Page to Subordinated Note]
ASSIGNMENT
FORM
[Capitalized terms
used herein but not defined have the meanings assigned in the
Subordinated Note]
To
assign this Subordinated Note of F & M Bank Corp., a Virginia
corporation, fill in the form below: (I) or (we) assign and
transfer this Subordinated Note to:
____________________________________________________________________________
(Print
or type assignee’s name, address and zip code)
____________________________________________________________________________
(Insert
assignee’s social security or tax I.D. No.)
and irrevocably appoint _______________
agent to transfer this Subordinated
Note on the books of the
Company. The agent may substitute another to act for
him.
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Date:
_______________________
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Your signature: _______________________
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(Sign
exactly as your name appears on the face of this Subordinated
Note)
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FOR
EXECUTION BY AN ENTITY:
Entity name:
_______________________
By:
_______________________
Name:
_______________________
Title:
_______________________
Tax Identification No: _______________________
Signature Guarantee: ____________________________________________________________________________
(Signatures must be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion
program), pursuant to Rule 17Ad-15 promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”)).
The undersigned certifies that he/she/it [is / is
not] (circle one) an Affiliate of the Company and that, to its
knowledge, the proposed transferee [is / is not]
(circle
one) an Affiliate of the
Company.
In
connection with any transfer or exchange of this Subordinated Note
occurring prior to the date that is one year after the later of the
date of original issuance of this Subordinated Note and the last
date, if any, on which this Subordinated Note was owned by the
Company or any Affiliate of the Company, the undersigned confirms
that this Subordinated Note is being:
CHECK
ONE BOX BELOW:
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□
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(1)
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acquired for the
undersigned’s own account, without transfer;
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□
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(2)
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transferred to the
Company;
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□
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(3)
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transferred in
accordance and in compliance with Rule 144A under the Securities
Act of 1933, as amended (the “Securities
Act”);
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□
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(4)
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transferred under
an effective registration statement under the Securities
Act;
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□
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(5)
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transferred in
accordance with and in compliance with Regulation S under the
Securities Act;
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□
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(6)
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transferred to an
institutional “accredited investor” (as defined in Rule
501(a)(1), (2), (3), (5), or (7) under the Securities
Act);
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□
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(7)
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transferred to an
“accredited investor” (as defined in Rule 501(a)(4)
under the Securities Act), not referred to in item (6) that has
been provided with the information designated under Section 4(d) of
the Securities Act; or
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□
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(8)
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transferred in
accordance with another available exemption from the registration
requirements of the Securities Act.
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Unless
one of the boxes is checked, the Company will refuse to register
this Subordinated Note in the name of any person other than the
registered holder thereof; provided, however, that if box (5), (6),
(7) or (8) is checked, the Company may require, prior to
registering any such transfer of this Subordinated Note, in its
sole discretion, such legal opinions, certifications and other
information as the Company may reasonably request to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act such as the exemption provided by Rule 144 under
such Act.
Signature:
(Sign
exactly as your name appears on the face of this Subordinated
Note)
FOR
EXECUTION BY AN ENTITY:
Entity name:
_______________________
By:
_______________________
Name:
_______________________
Title:
_______________________
Tax Identification
No.: _______________________
Signature Guarantee: ____________________________________________________________________________
(Signatures must be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion
program), pursuant to Exchange Act Rule 17Ad-l5).
TO
BE COMPLETED BY PURCHASER IF BOX (1) OR (3) ABOVE IS
CHECKED.
The
undersigned represents and warrants that it is purchasing this
Subordinated Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any
such account is a “qualified institutional buyer”
within the meaning of Rule 144A under the Securities Act and is
aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A
or has determined not to request such information and that it is
aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date:_______________________
Signature:
_______________________
Print
name: _______________________
FOR
EXECUTION BY AN ENTITY:
Entity
name: _______________________
By: _______________________
Name:
_______________________
Title:
_______________________
Tax Identification
No.: _______________________
Exhibit
4.2
FORM OF 2030 SUBORDINATED NOTE
F
& M BANK CORP.
6.00%
FIXED TO FLOATING RATE SUBORDINATED NOTE DUE JULY 31,
2030
THE
INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS NOT A DEPOSIT
AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY OR FUND.
THE
INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS SUBORDINATED
AND JUNIOR IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS (AS DEFINED
IN SECTION 3
(SUBORDINATION) OF THIS SUBORDINATED NOTE) OF F & M BANK CORP.,
A VIRGINIA CORPORATION (THE “COMPANY”), INCLUDING
OBLIGATIONS OF THE COMPANY TO ITS GENERAL AND SECURED CREDITORS AND
IS UNSECURED. IT IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION OF
CREDIT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES.
IN THE
EVENT OF LIQUIDATION, ALL HOLDERS OF SENIOR INDEBTEDNESS OF THE
COMPANY SHALL BE ENTITLED TO BE PAID IN FULL WITH SUCH INTEREST AS
MAY BE PROVIDED BY LAW BEFORE ANY PAYMENT SHALL BE MADE ON ACCOUNT
OF PRINCIPAL OF OR INTEREST ON THIS SUBORDINATED NOTE. AFTER
PAYMENT IN FULL OF ALL SUMS OWING TO SUCH HOLDERS OF SENIOR
INDEBTEDNESS, THE HOLDER OF THIS SUBORDINATED NOTE, TOGETHER WITH
THE HOLDERS OF ANY OBLIGATIONS OF THE COMPANY RANKING ON A PARITY
WITH THE SUBORDINATED NOTES, SHALL BE ENTITLED TO BE PAID FROM THE
REMAINING ASSETS OF THE COMPANY THE UNPAID PRINCIPAL AMOUNT OF THIS
SUBORDINATED NOTE PLUS ACCRUED AND UNPAID INTEREST THEREON BEFORE
ANY PAYMENT OR OTHER DISTRIBUTION, WHETHER IN CASH, PROPERTY OR
OTHERWISE, SHALL BE MADE (I) WITH RESPECT TO ANY OBLIGATION THAT BY
ITS TERMS EXPRESSLY IS JUNIOR IN THE RIGHT OF PAYMENT TO THE
SUBORDINATED NOTES, (II) WITH RESPECT TO ANY INDEBTEDNESS BETWEEN
THE COMPANY AND ANY OF ITS SUBSIDIARIES OR AFFILIATES OR (III) ON
ACCOUNT OF ANY SHARES OF CAPITAL STOCK OF THE COMPANY.
THIS
SUBORDINATED NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
MINIMUM DENOMINATIONS OF $100,000 AND MULTIPLES OF $100,000 IN
EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SUBORDINATED NOTE IN
A DENOMINATION OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND
OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL
BE DEEMED NOT TO BE THE HOLDER OF THIS SUBORDINATED NOTE FOR ANY
PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PAYMENTS ON
THIS SUBORDINATED NOTE, AND SUCH PURPORTED TRANSFEREE SHALL BE
DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SUBORDINATED
NOTE.
THIS
SUBORDINATED NOTE MAY BE SOLD ONLY IN COMPLIANCE WITH APPLICABLE
FEDERAL AND STATE SECURITIES LAWS. THIS SUBORDINATED NOTE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES
LAWS, OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS
SUBORDINATED NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
CERTAIN
ERISA CONSIDERATIONS:
THE
HOLDER OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, BY ITS
ACCEPTANCE HEREOF OR THEREOF AGREES, REPRESENTS AND WARRANTS THAT
IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT
OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
(“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE “CODE”) (EACH, A
“PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE
“PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT
IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF
ANY PLAN MAY ACQUIRE OR HOLD THIS SUBORDINATED NOTE OR ANY INTEREST
HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR
84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING
OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, ARE NOT
PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH
RESPECT TO SUCH PURCHASE AND HOLDING. ANY PURCHASER OR HOLDER OF
THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO
HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER:
(I) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE
I OF ERISA OR SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR
OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR
OTHER PLAN, OR ANY OTHER PERSON OR ENTITY USING THE “PLAN
ASSETS” OF ANY SUCH PLAN OR OTHER PLAN TO FINANCE SUCH
PURCHASE OR (II) SUCH PURCHASE OR HOLDING WILL NOT RESULT IN A
PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975
OF THE CODE FOR WHICH FULL EXEMPTIVE RELIEF IS NOT AVAILABLE UNDER
APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
ANY
FIDUCIARY OF ANY PLAN WHO IS CONSIDERING THE ACQUISITION OF THIS
SUBORDINATED NOTE OR ANY INTEREST HEREIN SHOULD CONSULT WITH HIS OR
HER LEGAL COUNSEL PRIOR TO ACQUIRING THIS SUBORDINATED NOTE OR ANY
INTEREST HEREIN.
No. [ ] CUSIP: 30237P
AB2
F &
M BANK CORP.
6.00%
FIXED TO FLOATING RATE SUBORDINATED NOTE DUE JULY 31,
2030
1. Subordinated
Notes. This subordinated note is one of an issue of notes of
F & M Bank Corp., a Virginia corporation (the “Company”), designated as
the “6.00% Fixed to Floating Rate Subordinated Notes due July
31, 2030” (the “Subordinated Notes”)
issued pursuant to that Subordinated Note Purchase Agreement, dated
as of the date upon which this Subordinated Note was originally
issued (the “Issue
Date”), between the Company and the one or more
purchasers of the Subordinated Notes identified in the signature
pages thereto (the “Purchase
Agreement”).
2. Payment.
The Company, for value received, promises to pay to [ ], or its
registered assigns, the principal sum of [ ] (U.S.) ($[ ]), plus
accrued but unpaid interest on July 31, 2030 (the
“Maturity
Date”) and to pay interest thereon (i) from and
including the original issue date of the Subordinated Notes to but
excluding July 31, 2025 or the earlier redemption date contemplated
by Section 4
(Redemption) of this Subordinated Note (the “Fixed Rate Period”), at
the rate of 6.00% per annum, computed on the basis of a 360-day
year consisting of twelve 30-day months and payable semi-annually
in arrears on January 31 and July 31 of each year (each payment
date, a “Fixed
Interest Payment Date”), beginning January 31, 2021,
and (ii) from and including July 31, 2025 to but excluding the
Maturity Date or earlier redemption date contemplated by
Section 4
(Redemption) of this Subordinated Note (the “Floating Rate Period”),
at the rate per annum, reset quarterly, equal to the Floating
Interest Rate (as defined below) determined on the Floating
Interest Determination Date (as defined below) of the applicable
interest period plus 593 basis points, computed on the basis of a
360-day year and the actual number of days elapsed and payable
quarterly in arrears (each quarterly period, a “Floating Interest
Period”) on January 31, April 30, July 31 and October
31 of each year (each payment date, a “Floating Interest Payment
Date”), beginning October 31, 2025. Dollar amounts
resulting from this calculation shall be rounded to the nearest
cent, with one-half cent being rounded up. The term
“Floating Interest
Determination Date” means the date upon which the
Floating Interest Rate is determined by the Calculation Agent (as
defined below) pursuant to the Three-Month Term SOFR Conventions
(as defined below).
(a) An
“Interest Payment
Date” is either a Fixed Interest Payment Date or a
Floating Interest Payment Date, as applicable.
(b) The
“Floating Interest
Rate” means:
(i) initially
Three-Month Term SOFR (as defined below).
(ii) Notwithstanding
the foregoing clause
(i) of this Section
2(b):
(1) If the Calculation
Agent, reasonably determines in good faith prior to the relevant
Floating Interest Determination Date that a Benchmark Transition
Event and its related Benchmark Replacement Date (each of such
terms as defined below) have occurred with respect to Three-Month
Term SOFR, then the Company shall promptly provide notice of such
determination to the Noteholders and Section 2(c) (Effect of
Benchmark Transition Event) will thereafter apply to all
determinations, calculations and quotations made or obtained for
the purposes of calculating the Floating Interest Rate payable on
the Subordinated Notes during a relevant Floating Interest
Period.
(2) However, if the
Calculation Agent reasonably determines in good faith that a
Benchmark Transition Event and its related Benchmark Replacement
Date have occurred with respect to Three-Month Term SOFR, but for
any reason the Benchmark Replacement has not been determined as of
the relevant Floating Interest Determination Date, the Floating
Interest Rate for the applicable Floating Interest Period will be
equal to the Floating Interest Rate on the last Floating Interest
Determination Date for the Subordinated Notes, as determined by the
Calculation Agent.
(iii) If
the then-current Benchmark (as defined below) is Three-Month
Term SOFR and any of the foregoing provisions concerning the
calculation of the interest rate and the payment of interest during
the Floating Rate Period are inconsistent with any of the
Three-Month Term SOFR Conventions determined by the Company, then
the relevant Three-Month Term SOFR Conventions will
apply.
(c) Effect of Benchmark Transition
Event.
(i) If the Calculation
Agent reasonably determines in good faith that a Benchmark
Transition Event and its related Benchmark Replacement Date have
occurred prior to the Reference Time (as defined below) in respect
of any determination of the Benchmark (as defined below) on any
date, the Benchmark Replacement will replace the then-current
Benchmark for all purposes relating to the Subordinated Notes
during the relevant Floating Interest Period in respect of such
determination on such date and all determinations on all subsequent
dates.
(ii) In
connection with the implementation of a Benchmark Replacement, the
Company will have the right to make Benchmark Replacement
Conforming Changes from time to time, and such changes shall become
effective without consent from the relevant Noteholders (as defined
below) or any other party.
(iii) Any
determination, decision or election that may be made by the Company
or by the Calculation Agent pursuant to the benchmark transition
provisions set forth herein, including any determination with
respect to a tenor, rate or adjustment or of the occurrence or
non-occurrence of an event, circumstance or date, and any decision
to take or refrain from taking any action or any
selection:
(1) will be conclusive
and binding absent manifest error;
(2) if made by the
Company, will be made in the Company’s sole
discretion;
(3) if made by the
Calculation Agent, will be made after consultation with the
Company, and the Calculation Agent will not make any such
determination, decision or election to which the Company reasonably
objects; and
(4) notwithstanding
anything to the contrary in this Subordinated Note or the Purchase
Agreement, shall become effective without consent from the relevant
Noteholders (as defined below) or any other party.
(iv) For
the avoidance of doubt, after a Benchmark Transition Event and its
related Benchmark Replacement Date have occurred, interest payable
on this Subordinated Note for the Floating Rate Period will be an
annual rate equal to the sum of the applicable Benchmark
Replacement and the spread specified on the face
hereof.
(v) As used in this
Subordinated Note, the following terms have the meanings as set
forth below:
(1) “Benchmark” means,
initially, Three-Month Term SOFR; provided that if a Benchmark
Transition Event and its related Benchmark Replacement Date have
occurred with respect to Three-Month Term SOFR or the then-current
Benchmark, then “Benchmark” means the
applicable Benchmark Replacement.
(2) “Benchmark Replacement”
means the Interpolated Benchmark (as defined below) with respect to
the then-current Benchmark; provided that if (a) the Calculation
Agent cannot determine the Interpolated Benchmark as of the
Benchmark Replacement Date or (b) the then-current Benchmark is
Three-Month Term SOFR and a Benchmark Transition Event and its
related Benchmark Replacement Date have occurred with respect to
Three-Month Term SOFR (in which event no Interpolated Benchmark
with respect to Three-Month Term SOFR shall be determined), then
“Benchmark
Replacement” means the first alternative set forth in
the order below that can be determined by the Calculation Agent, as
of the Benchmark Replacement Date:
a. The sum of (i)
Compounded SOFR and (ii) the Benchmark Replacement Adjustment (as
defined below);
b. the sum of:
(i) the alternate rate of interest that has been selected or
recommended by the Relevant Governmental Body as the replacement
for the then-current Benchmark for the applicable Corresponding
Tenor and (ii) the Benchmark Replacement
Adjustment;
c. the sum of:
(i) the ISDA Fallback Rate and (ii) the Benchmark
Replacement Adjustment;
d. the sum of:
(i) the alternate rate of interest that has been selected by
the Company as the replacement for the then-current Benchmark for
the applicable Corresponding Tenor giving due consideration to any
industry-accepted rate of interest as a replacement for the
then-current Benchmark for U.S. dollar denominated floating rate
notes at such time and (ii) the Benchmark Replacement
Adjustment.
(3) “Benchmark Replacement
Adjustment” means the first alternative set forth in
the order below that can be determined by the Calculation Agent, as
of the Benchmark Replacement Date:
a. the spread
adjustment, or method for calculating or determining such spread
adjustment, (which may be a positive or negative value or zero)
that has been selected or recommended by the Relevant Governmental
Body for the applicable Unadjusted Benchmark
Replacement;
b. if the applicable
Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback
Rate, then the ISDA Fallback Adjustment;
c. the spread
adjustment (which may be a positive or negative value or zero) that
has been selected by the Company giving due consideration to any
industry-accepted spread adjustment, or method for calculating or
determining such spread adjustment, for the replacement of the
then-current Benchmark with the applicable Unadjusted Benchmark
Replacement for U.S. dollar denominated floating rate notes at such
time.
(4) “Benchmark Replacement Conforming
Changes” means, with respect to any Benchmark
Replacement, any technical, administrative or operational changes
(including changes to the definition of “Floating Interest
Period,” timing and frequency of determining rates
with respect to each Floating Interest Period and making payments
of interest, rounding of amounts or tenors and other administrative
matters) that the Company reasonably decides in good faith may be
appropriate to reflect the adoption of such Benchmark Replacement
in a manner substantially consistent with market practice (or, if
the Company reasonably decides in good faith that adoption of any
portion of such market practice is not administratively feasible or
if the Company reasonably determines in good faith that no market
practice for use of the Benchmark Replacement exists, in such other
manner as the Company determines in good faith is reasonably
necessary).
(5) “Benchmark Replacement
Date” means the earliest to occur of the following
events with respect to the then-current Benchmark:
a. in the case of
clause (a) of the definition of “Benchmark Transition
Event,” the relevant Reference Time in respect of any
determination;
b. in the case of
clause (b) or
(c) of the
definition of “Benchmark Transition
Event,” the later of (i) the date of the public
statement or publication of information referenced therein and
(ii) the date on which the administrator of the Benchmark
permanently or indefinitely ceases to provide the Benchmark;
or
c. in the case of
clause (d) of the
definition of “Benchmark Transition
Event,” the date of such public statement or
publication of information referenced therein.
For the
avoidance of doubt, if the event giving rise to the Benchmark
Replacement Date occurs on the same day as, but earlier than, the
Reference Time in respect of any determination, the Benchmark
Replacement Date will be deemed to have occurred prior to the
Reference Time for purposes of such determination.
(6) “Benchmark Transition
Event” means the occurrence of one or more of the
following events with respect to the then-current
Benchmark:
a. if the Benchmark is
Three-Month Term SOFR, (i) the Relevant Governmental Body has not
selected or recommended a forward-looking term rate for a tenor of
three months based on SOFR, (ii) the development of a
forward-looking term rate for a tenor of three months based on SOFR
that has been recommended or selected by the Relevant Governmental
Body is not complete or (iii) the Company reasonably determines in
good faith that the use of a forward-looking rate for a tenor of
three months based on SOFR is not administratively
feasible;
b. a public statement
or publication of information by or on behalf of the administrator
of the Benchmark announcing that such administrator has ceased or
will cease to provide the Benchmark, permanently or indefinitely,
provided that, at the time of such statement or publication, there
is no successor administrator that will continue to provide the
Benchmark;
c. a public statement
or publication of information by the regulatory supervisor for the
administrator of the Benchmark, the central bank for the currency
of the Benchmark, an insolvency official with jurisdiction over the
administrator for the Benchmark, a resolution authority with
jurisdiction over the administrator for the Benchmark or a court or
an entity with similar insolvency or resolution authority over the
administrator for the Benchmark, which states that the
administrator of the Benchmark has ceased or will cease to provide
the Benchmark permanently or indefinitely, provided that, at the
time of such statement or publication, there is no successor
administrator that will continue to provide the Benchmark;
or
d. a public statement
or publication of information by the regulatory supervisor for the
administrator of the Benchmark announcing that the Benchmark is no
longer representative.
(7) “Calculation Agent” means
such bank or other entity (which may be the Company or an affiliate
of the Company) as may be appointed by the Company to act as
Calculation Agent for the Subordinated Notes during the Floating
Rate Period.
(8) “Compounded SOFR” means
the compounded average of SOFRs for the applicable Corresponding
Tenor, with the rate, or methodology for this rate, and conventions
for this rate being established by the Company or its designee in
accordance with:
a. the rate, or
methodology for this rate, and conventions for this rate selected
or recommended by the Relevant Governmental Body for determining
compounded SOFR; provided
that:
b. if, and to the
extent that, the Company or its designee reasonably determines in
good faith that Compounded SOFR cannot be determined in accordance
with clause
(a) above, then the rate, or methodology for this rate,
and conventions for this rate that have been selected by the
Company or its designee giving due consideration to any
industry-accepted market practice for U.S. dollar denominated
floating rate notes at such time.
For the
avoidance of doubt, the calculation of Compounded SOFR will exclude
the Benchmark Replacement Adjustment.
(9) “Corresponding Tenor” with
respect to a Benchmark Replacement means a tenor (including
overnight) having approximately the same length (disregarding
Business Day adjustment) as the applicable tenor for the
then-current Benchmark.
(10) “FRBNY”
means the Federal Reserve Bank of New York.
(11) “FRBNY’s
Website” means the website of the FRBNY at
http://www.newyorkfed.org, or any successor source.
(12) “Interpolated
Benchmark” with respect to the Benchmark means the
rate determined for the Corresponding Tenor by interpolating on a
linear basis between: (1) the Benchmark for the longest period
(for which the Benchmark is available) that is shorter than the
Corresponding Tenor and (2) the Benchmark for the shortest
period (for which the Benchmark is available) that is longer than
the Corresponding Tenor.
(13) “ISDA”
means the International Swaps and Derivatives Association, Inc. or
any successor thereto.
(14) “ISDA
Definitions” means the 2006 ISDA Definitions published
by the ISDA or any successor thereto, as amended or supplemented
from time to time, or any successor definitional booklet for
interest rate derivatives published from time to time.
(15) “ISDA
Fallback Adjustment” means the spread adjustment
(which may be a positive or negative value or zero) that would
apply for derivatives transactions referencing the ISDA Definitions
to be determined upon the occurrence of an index cessation event
with respect to the Benchmark for the applicable
tenor.
(16) “ISDA
Fallback Rate” means the rate that would apply for
derivatives transactions referencing the ISDA Definitions to be
effective upon the occurrence of an index cessation date with
respect to the Benchmark for the applicable tenor excluding the
applicable ISDA Fallback Adjustment.
(17) “Reference
Time” with respect to any determination of a Benchmark
means (1) if the Benchmark is Three-Month Term SOFR, the time
determined by the Calculation Agent after giving effect to the
Three-Month Term SOFR Conventions, and (2) if the Benchmark is not
Three-Month Term SOFR, the time determined by the Calculation Agent
after giving effect to the Benchmark Replacement Conforming
Changes.
(18) “Relevant
Governmental Body” means the Board of Governors of the
Federal Reserve System (the “Federal Reserve”) and/or
the FRBNY, or a committee officially endorsed or convened by the
Federal Reserve and/or the FRBNY or any successor
thereto.
(19) “SOFR”
means the daily Secured Overnight Financing Rate provided by the
FRBNY, as the administrator of the benchmark (or a successor
administrator), on the FRBNY’s Website.
(20) “Term
SOFR” means the forward-looking term rate for the
Corresponding Tenor based on SOFR that has been selected or
recommended by the Relevant Governmental Body.
(21) “Term
SOFR Administrator” means any entity designated by the
Relevant Governmental Body as the administrator of Term SOFR (or a
successor administrator).
(22) “Three-Month
Term SOFR” means the rate for Term SOFR for a tenor of
three months that is published by the Term SOFR Administrator at
the Reference Time for any Floating Interest Period, as determined
by the Calculation Agent after giving effect to the Three-Month
Term SOFR Conventions; provided,
however,
that in the event Three-Month Term SOFR calculated as described in
the foregoing clause is less than zero, Three-Month Term SOFR shall
be deemed to be zero.
(23) “Three-Month
Term SOFR Conventions” means any determination,
decision or election with respect to any technical, administrative
or operational matter (including with respect to the manner and
timing of the publication of Three-Month Term SOFR, or changes to
the definition of “Floating Interest Period”, timing
and frequency of determining Three-Month Term SOFR with respect to
each Floating Interest Period and making payments of interest,
rounding of amounts or tenors, and other administrative matters)
that the Company reasonably decides in good faith may be
appropriate to reflect the use of Three-Month Term SOFR as the
Benchmark in a manner substantially consistent with market practice
(or, if the Company reasonably decides in good faith that adoption
of any portion of such market practice is not administratively
feasible or if the Company reasonably determines in good faith that
no market practice for the use of Three-Month Term SOFR exists, in
such other manner as the Company determines in good faith is
reasonably necessary).
(24) “Unadjusted
Benchmark Replacement” means the Benchmark Replacement
excluding the Benchmark Replacement Adjustment.
(d) In the event that
any Fixed Interest Payment Date during the Fixed Rate Period falls
on a day that is not a Business Day (as defined below), the
interest payment due on that date shall be postponed to the next
day that is a Business Day and no additional interest shall accrue
as a result of that postponement. In the event that any Floating
Interest Payment Date during the Floating Rate Period falls on a
day that is not a Business Day (as defined below), the interest
payment due on that date shall be postponed to the next day that is
a Business Day and interest shall accrue to but excluding the date
interest is paid. However, if the postponement would cause the day
to fall in the next calendar month during the Floating Interest
Period, the Floating Interest Payment Date shall instead be brought
forward to the immediately preceding Business Day. The term
“Business Day” means any day other than a Saturday or
Sunday or any other day on which banking institutions in the
Commonwealth of Virginia are generally authorized or required by
law or executive order to be closed.
3. Subordination.
(a) The indebtedness of
the Company evidenced by this Subordinated Note, including the
principal and interest on this Subordinated Note, shall be
subordinate and junior in right of payment to the prior payment in
full of all existing claims of creditors of the Company whether now
outstanding or subsequently created, assumed, guaranteed or
incurred (collectively, “Senior Indebtedness”),
which shall consist of principal of (and premium, if any) and
interest, if any, on: (i) all indebtedness and obligations of, or
guaranteed or assumed by, the Company for money borrowed, whether
or not evidenced by bonds, debentures, securities, notes or other
similar instruments; (ii) any deferred obligations of the Company
for the payment of the purchase price of property or assets
acquired other than in the ordinary course of business; (iii) all
obligations, contingent or otherwise, of the Company in respect of
any letters of credit, bankers’ acceptances, security
purchase facilities and similar direct credit substitutes; (iv) any
capital lease obligations of the Company; (v) all obligations of
the Company in respect of interest rate swap, cap or other
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts, commodity
contracts and other similar arrangements or derivative products;
(vi) all obligations that are similar to those in clauses (i)
through (v) of other Persons for the payment of which the Company
is responsible or liable as obligor, guarantor or otherwise arising
from an off-balance sheet guarantee; (vii) all obligations of the
types referred to in clauses (i) through (vi) of other Persons
secured by a lien on any property or asset of the Company; and
(viii) in the case of (i) through (vii) above, all amendments,
renewals, extensions, modifications and refundings of such
indebtedness and obligations; except “Senior
Indebtedness” does not include (A) the Subordinated Notes,
(B) any obligation that by its terms expressly is junior to, or
ranks equally in right of payment with, the Subordinated Notes, or
(C) any indebtedness between the Company and any of its
subsidiaries or Affiliates. This Subordinated Note is not secured
by any assets of the Company or any of its subsidiaries or
Affiliates. The term “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. The term “Person” as used in this
Subordinated Note 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 or
any other entity or organization. The term “control” (including the
terms “controlling,” “controlled by,” and
“under common control with”) means the possession,
direct or indirect, of the power to direct or cause the direction
of the management and policies of a person, whether through the
ownership of voting securities, by contract, or
otherwise.
(a) In the event of any
liquidation of the Company, holders of Senior Indebtedness of the
Company shall be entitled to be paid in full with such interest as
may be provided by law before any payment shall be made on account
of principal of or interest on this Subordinated Note.
Additionally, in the event of any insolvency, dissolution,
assignment for the benefit of creditors or any liquidation or
winding up of or relating to the Company, whether voluntary or
involuntary, holders of Senior Indebtedness shall be entitled to be
paid in full before any payment shall be made on account of the
principal of or interest on the Subordinated Notes, including this
Subordinated Note. In the event of any such proceeding, after
payment in full of all sums owing with respect to the Senior
Indebtedness, the registered holders of the Subordinated Notes from
time to time (each a “Noteholder” and,
collectively, the “Noteholders”), together
with the holders of any obligations of the Company ranking on
parity with the Subordinated Notes, shall be entitled to be paid
from the remaining assets of the Company the unpaid principal
thereof, and the unpaid interest thereon before any payment or
other distribution, whether in cash, property or otherwise, shall
be made (i) with respect to any obligation that by its terms
expressly is junior to in the right of payment to the Subordinated
Notes, (ii) with respect to any indebtedness between the Company
and any of its subsidiaries or Affiliates or (iii) on account of
any capital stock.
(b) If there shall have
occurred and be continuing (i) a default in any payment with
respect to any Senior Indebtedness or (ii) an event of default with
respect to any Senior Indebtedness as a result of which the
maturity thereof is accelerated, unless and until such payment
default or event of default shall have been cured or waived or
shall have ceased to exist, no payments shall be made by the
Company with respect to the Subordinated Notes. The provisions of
this paragraph shall not apply to any payment with respect to which
the immediately preceding paragraph of this Section 3 (Subordination) would
be applicable.
(c) Nothing herein
shall act to prohibit, limit or impede the Company from issuing
additional debt of the Company having the same rank as the
Subordinated Notes or which may be junior or senior in rank to the
Subordinated Notes. Each Noteholder, by its acceptance hereof,
agrees to and shall be bound by the provisions of this Section 3.
Each Noteholder, by its acceptance hereof, further acknowledges and
agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration for each holder
of any Senior Indebtedness, whether such Senior Indebtedness was
created or acquired before or after the issuance of the
Subordinated Notes, to acquire and continue to hold, or to continue
to hold, such Senior Indebtedness, and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold or in
continuing to hold such Senior Indebtedness.
4.
Redemption.
(a) Redemption Prior to Fifth
Anniversary. This Subordinated Note shall not be redeemable
by the Company in whole or in part prior to July 31, 2025, except
in the event of a: (i) Tier 2 Capital Event (as defined below);
(ii) Tax Event (as defined below); or (iii) Investment Company
Event (as defined below). Upon the occurrence of a Tier 2 Capital
Event, a Tax Event or an Investment Company Event, the Company may
redeem this Subordinated Note, subject to Section 4(f) (Regulatory
Approvals) hereof, in whole or in part at any time, upon giving not
less than 10 Business Days’ notice to the holder of this
Subordinated Note at an amount equal to 100% of the outstanding
principal amount being redeemed plus accrued but unpaid interest,
to but excluding the redemption date. “Tier 2 Capital Event”
means the receipt by the Company of an opinion of counsel to the
Company to the effect that there is, or within one hundred twenty
(120) days after receipt of such opinion there will be, a material
risk that this Subordinated Note does not qualify as “Tier
2” Capital (as defined by the Federal Reserve) (or its then
equivalent) as a result of a change in law or regulation, or
interpretation or application thereof, by any judicial, legislative
or regulatory authority that becomes effective after the Issue
Date. “Tax
Event” means the receipt by the Company of an opinion
of counsel to the Company that as a result of any amendment to, or
change (including any final and adopted (or enacted) prospective
change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such
laws or regulations, there exists a material risk that interest
payable by the Company on the Subordinated Notes is not, or within
one hundred twenty (120) days after the receipt of such opinion
will not be, deductible by the Company, in whole or in part, for
United States federal income tax purposes. “Investment Company Event”
means the receipt by the Company of an opinion of counsel to the
Company to the effect that there is a material risk that the
Company is or, within one hundred twenty (120) days after the
receipt of such opinion will be, required to register as an
investment company pursuant to the Investment Company Act of 1940,
as amended.
(b) Redemption on or after Fifth
Anniversary. On or after July 31, 2025, subject to the
provisions of Section
4(f) (Regulatory Approvals) hereof, this Subordinated Note
shall be redeemable at the option of and by the Company, in whole
or in part from time to time upon any Interest Payment Date, at an
amount equal to 100% of the outstanding principal amount being
redeemed plus accrued but unpaid interest, to but excluding the
redemption date, but in all cases in a principal amount with
integral multiples of $1,000. In addition, the Company may redeem
all or a portion of the Subordinated Notes, at any time upon the
occurrence of a Tier 2 Capital Event, Tax Event or an Investment
Company Event. The redemption referenced in this Section 4(b) (Redemption on or
after Fifth Anniversary) shall be subject to the receipt of any
required regulatory approval.
(c) Partial Redemption. If less
than the then-outstanding principal amount of this Subordinated
Note is redeemed, (i) a new Subordinated Note shall be issued
representing the unredeemed portion without charge to the holder
thereof and (ii) such redemption shall be effected on a pro rata
basis as to the Noteholders. For purposes of clarity, upon a
partial redemption, a like percentage of the principal amount of
every Subordinated Note held by every Noteholder shall be redeemed
and, to the extent applicable and for purposes of a redemption
processed through The Depository Trust Company, such redemption
shall be made on a “Pro Rata Pass-Through Distribution of
Principal” basis, among all of the Subordinated Notes
outstanding at the time thereof.
(d) No Redemption at Option of
Noteholder. This Subordinated Note is not subject to
redemption at the option of the holder of this Subordinated
Note.
(e) Effectiveness of Redemption. If
notice of redemption has been duly given and notwithstanding that
this Subordinated Note has been called for redemption but has not
yet been surrendered for cancellation, on and after the date fixed
for redemption interest shall cease to accrue on the portion of
this Subordinated Note called for redemption, this Subordinated
Note shall no longer be deemed outstanding with respect to the
portion called for redemption and all rights with respect to the
portion of this Subordinated Note called for redemption shall
forthwith on such date fixed for redemption cease and terminate
unless the Company shall default in the payment of the redemption
price, except only the right of the holder hereof to receive the
amount payable on such redemption, without interest.
(f) Regulatory Approvals. Any such
redemption shall be subject to receipt of any and all required
federal and state regulatory approvals or non-objections,
including, but not limited to, the consent of the Federal Reserve.
In the case of any redemption of this Subordinated Note pursuant to
paragraphs (b) or (c) of this Section 4, the Company will
give the holder hereof notice of redemption, which notice shall
indicate the aggregate principal amount of Subordinated Notes to be
redeemed, not less than thirty (30) nor more than forty-five (45)
calendar days prior to the redemption date.
(g) Purchase and Resale of the
Subordinated Notes. Subject to any required federal and
state regulatory approvals and the provisions of this Subordinated
Note, the Company shall have the right to purchase any of the
Subordinated Notes at any time in the open market, private
transactions or otherwise. If the Company purchases any
Subordinated Notes, it may, in its discretion, hold, resell or
cancel any of the purchased Subordinated Notes.
5. Events
of Default; Acceleration; Compliance
Certificate.
Notwithstanding any
cure periods provided for below, the Company shall promptly (but in
no event later than five (5) Business Days following the Company
becoming aware of the occurrence of such event) notify the
Noteholders in writing when the Company becomes aware of the
happening of any event described below. Regardless of whether the
Company has provided the forgoing notice, each of the following
events shall constitute an “Event of
Default”:
(a) the entry of a
decree or order for relief in respect of the Company by a court
having jurisdiction in the premises in an involuntary case or
proceeding under any applicable bankruptcy, insolvency, or
reorganization law, now or hereafter in effect of the United States
or any political subdivision thereof, and such decree or order will
have continued unstayed and in effect for a period of sixty (60)
consecutive calendar days;
(b) the commencement by
the Company of a voluntary case under any applicable bankruptcy,
insolvency or reorganization law, now or hereafter in effect of the
United States or any political subdivision thereof, or the consent
by the Company to the entry of a decree or order for relief in an
involuntary case or proceeding under any such law;
(c) the Company (i)
becomes insolvent or is unable to pay its debts as they mature,
(ii) makes an assignment for the benefit of creditors, (iii) admits
in writing its inability to pay its debts as they mature or (iv)
ceases to be a bank holding company under the Bank Holding Company
Act of 1956, as amended;
(d) the failure of the
Company to pay any installment of interest on any of the
Subordinated Notes as and when the same will become due and
payable, and the continuation of such failure for a period of
fifteen (15) calendar days;
(e) the failure of the
Company to pay all or any part of the principal of any of the
Subordinated Notes as and when the same will become due and
payable;
(f) the liquidation of
the Company (for the avoidance of doubt, “liquidation”
does not include any merger, consolidation, sale of equity or
assets or reorganization (exclusive of a reorganization in
bankruptcy) of the Company or any of its
subsidiaries);
(g) the failure of the
Company to perform any other covenant or agreement on the part of
the Company contained in this Subordinated Note, and the
continuation of such failure for a period of thirty (30) days after
the date on which notice specifying such failure, stating that such
notice is a “Notice of Default” hereunder and demanding
that the Company remedy the same, will have been given, in the
manner set forth in Section 21 (Notices), to the
Company by a Noteholder;
(h) the default by the
Company under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company having an aggregate
principal amount outstanding of at least $1,000,000, whether such
indebtedness now exists or is created or incurred in the future,
which default (i) constitutes a failure to pay any portion of the
principal of such indebtedness when due and payable after the
expiration of any applicable grace period or (ii) results in such
indebtedness becoming due or being declared due and payable prior
to the date on which it otherwise would have become due and payable
without, in the case of clause (i), such indebtedness having been
discharged or, in the case of clause (ii), without such
indebtedness having been discharged or such acceleration having
been rescinded or annulled; or
(i) any certification
made to any Noteholder pursuant to the Purchase Agreement by the
Company or otherwise made in writing to any Noteholder in
connection with or as contemplated by the Purchase Agreement or
this Subordinated Note by the Company shall be materially incorrect
or false as of the delivery date of such certification, or any
representation to any Noteholder by the Company as to the financial
condition or credit standing of the Company is or proves to be
materially false or misleading.
Unless
the principal amount of this Subordinated Note already shall have
become due and payable, if an Event of Default set forth in
subsections (a),
(b) or (f) of this Section 5 shall have occurred
and be continuing, then the principal amount of this Subordinated
Note, and accrued and unpaid interest, if any, on the Subordinated
Note will become and be immediately due and payable without any
declaration or other act on the part of the Noteholder, and the
Company waives demand, presentment for payment, notice of
nonpayment, notice of protest, and all other notices.
Notwithstanding the foregoing, because the Company treats the
Subordinated Notes as Tier 2 Capital, upon the occurrence of an
Event of Default other than an Event of Default described in
subsections (a),
(b) or (f) of this Section 5, no Noteholder may
accelerate the Maturity Date of the Subordinated Notes and make the
principal of, and any accrued and unpaid interest on, the
Subordinated Notes, immediately due and payable. The Company, within forty-five
(45) calendar days after the receipt of written notice from any
Noteholder of the occurrence of an Event of Default with respect to
this Subordinated Note, shall mail to all Noteholders, at their
addresses shown on the Security Register (as defined in
Section 13
(Registration of Transfer, Security Register) below), such written
notice of Event of Default, unless such Event of Default shall have
been cured or waived before the giving of such notice as certified
by the Company in writing.
6. Failure
to Make Payments. In the event of an Event of Default under
Section 5(d) or
Section 5(e) above,
the Company will, upon demand of the Noteholder, pay to the
Noteholder the amount then due and payable on this Subordinated
Note for principal and interest (without acceleration of the
Subordinated Note in any manner), with interest on the overdue
principal and interest at the per annum rate borne by this
Subordinated Note, to the extent permitted by applicable law. If
the Company fails to pay such amount upon such demand, the
Noteholder may, among other things, institute a judicial proceeding
for the collection of the sums so due and unpaid, may prosecute
such proceeding to judgment or final decree and may enforce the
same against the Company and collect the amounts adjudged or
decreed to be payable in the manner provided by law out of the
property of the Company.
Upon
the occurrence of a failure by the Company to make any required
payment of principal or interest on this Subordinated Note or an
Event of Default, until such failure or Event of Default is cured
by the Company or waived by the Noteholders in accordance with
Section 17 (Waiver
and Consent) hereof, except as may be required by any federal or
state bank regulatory 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 the
Company’s capital stock; (b) make any payment of principal or
interest or premium, if any, on or repay, repurchase or redeem any
indebtedness of the Company 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 (including, without
limitation, any repurchases or acquisitions in connection with the
forfeiture of any stock award, cashless or net exercise of any
option, or acceptance of common stock in lieu of an award
recipient’s tax obligations under any equity award) (the
foregoing clauses (i) through (v) are collectively referred to as
the “Permitted
Dividends”). The
limitations imposed by the provisions of this Section 6
shall apply whether or not the
Noteholder has notified the Company of
the occurrence of a failure by the Company to make any required
payment of principal or interest on this Subordinated Note or an
Event of Default.
7. Affirmative
Covenants of the Company; Compliance
Certificate.
(a) Notice of Certain Events. To
the extent permitted by applicable statute, rule or regulation, the
Company shall provide written notice to the Noteholder, at its
addresses shown on the Security Register (as defined in
Section 13
(Registration of Transfer, Security Register) below), of the
occurrence of any of the following events as soon as practicable,
but in no event later than fifteen
(15) Business Days following the Company becoming aware of
the occurrence of such event:
(i) The total
risk-based capital ratio, Tier 1 risk-based capital ratio, common
equity Tier 1 risk-based capital ratio or leverage ratio of Farmers
& Merchants Bank, Timberville, Virginia, the Company’s
subsidiary bank (the “Bank”), becomes less than
ten percent (10.0%), eight percent (8.0%), six and one-half percent
(6.50%) or five percent (5.0%), respectively, as of the end of any
calendar quarter (provided, that, to the extent the Bank has opted
into the community bank leverage ratio framework, no notice need be
given until the Bank ceases to be a qualifying community banking
organization, as defined under 12 CFR § 3.12);
(ii) The
Company, or any of the Company’s subsidiaries, or any officer
of the Company (in such capacity), becomes subject to any formal,
written regulatory enforcement action (as defined by the applicable
state or federal bank regulatory authority);
(iii) The
ratio of non-performing assets to total assets of Bank, as
calculated by the Company in the ordinary course of business and
consistent with past practices, becomes greater than five percent
(5.0%), as of the end of any calendar quarter;
(iv) There
is a known change in ownership of twenty-five percent (25%) or more
of the outstanding securities of the Company entitled to vote for
the election of directors; or
(v) The
Company undertakes the issuance of any additional Indebtedness (as
such term is defined in the Purchase Agreement).
(b) Payment of Principal and
Interest. The Company covenants and agrees for the benefit
of the Noteholder that it will duly and punctually pay the
principal of, and interest on, this Subordinated Note, in
accordance with the terms hereof.
(c) Maintenance of Office. The
Company will maintain an office or agency in the City of
Timberville, Virginia, where Subordinated Notes may be surrendered
for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Subordinated Notes
may be served.
The
Company may also from time to time designate one or more other
offices or agencies where the Subordinated Notes may be presented
or surrendered for any or all such purposes and may from time to
time rescind such designations; provided that no such designation
or rescission will in any manner relieve the Company of its
obligation to maintain an office or agency in the Commonwealth of
Virginia. The Company will give prompt written notice to the
Noteholders of any such designation or rescission and of any change
in the location of any such other office or agency.
(d) Corporate Existence. Except as
contemplated by Section
8(b), the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect: (i) the
corporate existence of the Company; (ii) the existence (corporate
or other) of each subsidiary of the Company and the Bank; and (iii)
the rights (constituent governing documents and statutory),
licenses and franchises of the Company and each subsidiary of the
Company and the Bank; provided,
however, that the Company will not be required to preserve
the existence (corporate or other) of any of its subsidiaries
(other than the Bank) or any such right, license or franchise of
the Company or any of its subsidiaries (other than the Bank) if the
Board of Directors of the Company determines that the preservation
thereof is no longer desirable in the conduct of the business of
the Company and its subsidiaries taken as a whole and that the loss
thereof will not be disadvantageous in any material respect to the
Noteholders.
(e) Maintenance of Properties. The
Company will, and will cause each subsidiary of the Company or the Bank to,
cause all its properties used or useful in the conduct of its
business to be maintained and kept in good condition, repair and
working order, ordinary wear and tear excepted, and supplied with
all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that nothing in this
Section 7(e) will
prevent the Company or any subsidiary from discontinuing the
operation and maintenance of any of their respective properties if
such discontinuance is, in the reasonable judgment of the Board of
Directors of the Company or of any subsidiary, as the case may be,
desirable in the conduct of its business and that the
discontinuance thereof will not be disadvantageous in any material
respect to the Noteholders.
(f) Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Section 7(c) (Maintenance of
Office), Section
7(d) (Corporate Existence), or Section 7(e) (Maintenance of
Properties) above, with respect to this Subordinated Note if before
the time for such compliance the Noteholders of at least a majority
in aggregate principal amount of the outstanding Subordinated
Notes, by act of such Noteholders, either will waive such
compliance in such instance or generally will have waived
compliance with such term, provision or condition, but no such
waiver will extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver
will become effective, the obligations of the Company in respect of
any such term, provision or condition will remain in full force and
effect.
(g) Tier 2 Capital. If all or any
portion of the Subordinated Notes ceases to qualify for inclusion
as 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 Noteholders and thereafter
the Company and the Noteholders 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
Section 7(g) (Tier
2 Capital) shall limit the Company’s right to redeem the
Subordinated Notes upon the occurrence of a Tier 2 Capital Event
pursuant to Section
4(a) (Redemption Prior to Fifth Anniversary) or Section 4(b) (Redemption on or
after Fifth Anniversary).
(h) Compliance with Laws. The
Company and each subsidiary of the
Company and the Bank shall comply with the requirements of
all laws, regulations, orders and decrees applicable to it or its
properties, except for such noncompliance that would not reasonably
be expected to have a Material Adverse Effect (as such term is
defined in the Purchase Agreement).
(i) Taxes and Assessments. The
Company shall punctually pay and discharge all material taxes,
assessments, and other governmental charges or levies imposed upon
it or upon its income or upon any of its properties; provided, that
no such taxes, assessments or other governmental charges need be
paid if they are being contested in good faith by the
Company.
(j) Financial Statements; Access to
Records.
(i) Not later than
forty-five (45) days following the end of each of the quarterly
periods ended March 31, June 30 and September 30 for which the
Company has not timely filed a Quarterly Report on Form 10-Q with
the SEC, upon request, the Company shall provide the Noteholder
with a copy of the Company’s unaudited consolidated balance
sheet and statement of income (loss) for and as of the end of such
immediately preceding fiscal quarter, prepared in accordance with
past practice. Quarterly financial statements, if required herein,
shall be unaudited and need not comply with GAAP.
(ii) Not
later than one hundred twenty (120) days from the end of each
fiscal year for which the Company has not filed an Annual Report on
Form 10-K with the SEC, upon request the Company shall provide the
Noteholder with copies of the Company’s audited financial
statements consisting of the consolidated balance sheet of the
Company as of the fiscal year end and the related statements of
income (loss) and retained earnings, stockholders’ equity and
cash flows for the fiscal year then ended. Such financial
statements shall be prepared in accordance with GAAP applied on a
consistent basis throughout the period involved.
(k) Company Statement as to
Compliance. The Company will deliver to Noteholder, within
one hundred twenty (120) days after the end of each fiscal year, an
Officer’s Certificate covering the preceding calendar year,
stating whether or not, to the best of his or her knowledge, the
Company is in default in the performance and observance of any of
the terms, provisions and conditions of this Subordinated Note
(without regard to notice requirements or periods of grace) and if
the Company will be in default, specifying all such defaults and
the nature and status thereof of which he or she may have
knowledge; and any event or events have occurred that in the
reasonable judgment of the management of the Company would have a
Material Adverse Effect.
8. Negative
Covenants of the Company.
(a) Limitation on Dividends. The
Company shall not declare or pay any dividend or make any
distribution on capital stock or other equity securities of any
kind of the Company if the Company is not “well
capitalized” (as that term is defined in 12 C.F.R. Part
225.2(r)) immediately prior to the declaration of such dividend or
distribution, except for Permitted Dividends.
(a) Merger, Share Exchange or Sale of
Assets. The Company shall not merge into another entity,
consummate a share exchange or convey, transfer or lease
substantially all of its properties and assets to any Person,
unless:
(i) the continuing
entity into which the Company is merged, the acquiring entity in
connection with a share exchange or the Person which acquires by
conveyance or transfer or which leases substantially all of the
properties and assets of the Company shall be a corporation,
association or other legal entity organized and existing under the
laws of the United States of America, any State thereof or the
District of Columbia and expressly assumes the due and punctual
payment of the principal of and any premium and interest on the
Subordinated Notes according to their terms, and the due and
punctual performance of all covenants and conditions hereof on the
part of the Company to be performed or observed; provided, however, that no express
assumption shall be required by any successor by merger to the
Company to the extent such legal successor assumes the
Company’s obligations hereunder by operation of law;
and
(ii) immediately
after giving effect to such transaction, no Event of Default, and
no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be
continuing.
(a) Continuance of Business. Other
than in connection with a transaction which complies with Section
8(b), the Company shall not take any action, omit to take any
action or enter into any other transaction that would have the
effect of: (i) the Company ceasing to be a bank holding company
under the Bank Holding Company Act of 1956, as amended
(provided, however, for the
avoidance of doubt, nothing herein is intended to prohibit the
Company from electing to be a financial holding company or,
following such an election, exiting financial holding company
status), (ii) the liquidation or dissolution of the Company or the
Bank, (iii) the Bank ceasing to be an “insured depository
institution” under Section 3(c)(2) of the Federal Deposit
Insurance Act, as amended, or (iv) the Company owning less than one
hundred percent (100%) of the capital stock of the
Bank.
9. Denominations.
The Subordinated Notes are issuable only in registered form without
interest coupons in minimum denominations of $100,000 and integral
multiples of $100,000 in excess thereof.
10. Charges
and Transfer Taxes. No service charge will be made for any
registration of transfer or exchange of this Subordinated Note, or
any redemption or repayment of this Subordinated Note, or any
conversion or exchange of this Subordinated Note for other types of
securities or property, but the Company may require payment of a
sum sufficient to pay all taxes, assessments or other governmental
charges that may be imposed in connection with the transfer or
exchange of this Subordinated Note from the Noteholder requesting
such transfer or exchange.
11. Payment
Procedures. Payment of the principal and interest payable on
the Maturity Date will be made by check, by wire transfer or by
Automated Clearing House (ACH) transfer in immediately available
funds to a bank account in the United States designated by the
registered Noteholder if such Noteholder shall have previously
provided wire or ACH instructions to the Company, upon presentation
and surrender of this Subordinated Note at the Payment Office (as
defined in Section
21 (Notices) below) or at such other place or places as the
Company shall designate by notice to the registered Noteholders as
the Payment Office, provided that this Subordinated Note is
presented to the Company in time for the Company to make such
payments in such funds in accordance with its normal procedures.
Payments of interest (other than interest payable on the Maturity
Date) shall be made on each Interest Payment Date by wire transfer
in immediately available funds or check mailed to the registered
Noteholder, as such Person’s address appears on the Security
Register (as defined in Section 13 below). Interest
payable on any Interest Payment Date shall be payable to the
Noteholder in whose name this Subordinated Note is registered at
the close of business on the fifteenth (15th) calendar day prior
to the applicable Interest Payment Date, without regard to whether
such date is a Business Day, except that interest not paid on the
Interest Payment Date, if any, will be paid to the holder in whose
name this Subordinated Note is registered at the close of business
on a special record date fixed by the Company (a
“Special Record
Date”), notice of which shall be given to the
Noteholder not less than ten (10) calendar days prior to such
Special Record Date. To the extent permitted by applicable law,
interest shall accrue, at the rate at which interest accrues on the
principal of this Subordinated Note, on any amount of principal or
interest on this Subordinated Note not paid when due. All payments
on this Subordinated Note shall be applied first against costs and
expenses of the Noteholder, if any, for which the Company is liable
under this Subordinated Note; then against interest due hereunder;
and then against principal due hereunder. The Noteholder
acknowledges and agrees that the payment of all or any portion of
the outstanding principal amount of this Subordinated Note and all
interest hereon shall be pari
passu in right of payment and in all other respects to the
other Subordinated Notes. In the event that the Noteholder receives
payments in excess of the Noteholder’s pro rata share of the
Company’s payments to the holders of all of the Subordinated
Notes, then the Noteholder shall hold in trust all such excess
payments for the benefit of the other Noteholders and shall pay
such amounts held in trust to such other holders upon demand by
such holders.
12. Form
of Payment. Payments of principal and interest on this
Subordinated Note shall be made in such coin or currency of the
United States of America as at the time of payment shall be legal
tender for the payment of public and private debts.
13. Registration
of Transfer, Security Register. Except as otherwise provided
herein, or in the Purchase Agreement between Noteholder and the
Company, and subject to limitations on transfer under applicable
state and federal securities laws, this Subordinated Note is
transferable in whole or in part, and may be exchanged for a like
aggregate principal amount of Subordinated Notes of other
authorized denominations, by the Noteholder in person, or by its
attorney duly authorized in writing, at the Payment Office or the
offices of the Registrar. The Company or its agent (the
“Registrar”) shall
maintain a register providing for the registration of the
Subordinated Notes and any exchange or transfer thereof (the
“Security
Register”). Upon surrender or presentation of this
Subordinated Note for exchange or registration of transfer, the
Company or the Registrar shall execute and deliver in exchange
therefor a Subordinated Note or Subordinated Notes of like
aggregate principal amount, each in a minimum denomination of
$100,000 or any amount in excess thereof which is an integral
multiple of $100,000 (and, in the absence of an opinion of counsel
satisfactory to the Company to the contrary, bearing the
restrictive legend(s) set forth hereinabove) and that is or are
registered in such name or names requested by the Noteholder. Any
Subordinated Note presented or surrendered for registration of
transfer or for exchange shall be duly endorsed and accompanied by
a written instrument of transfer in such form as is attached hereto
and incorporated herein, duly executed by the Noteholder or its
attorney duly authorized in writing, with such tax identification
number (including, without limitation, an appropriate and properly
executed Internal Revenue Service Form W-9 or appropriate type of
Form W-8) or other information for each Person in whose name a
Subordinated Note is to be issued, and accompanied by evidence of
compliance with any restrictive legend(s) appearing on such
Subordinated Note or Subordinated Notes as the Company may
reasonably request to comply with applicable law. No exchange or
registration of transfer of this Subordinated Note shall be made on
or after (i) the fifteenth (15th) day immediately
preceding the Maturity Date or (ii) the due delivery of notice of
redemption.
14. Successors
and Assigns. This Subordinated Note shall be binding upon
the Company and inure to the benefit of the Noteholder and its
respective successors and permitted assigns. The Noteholder may
assign all, or any part of, or any interest in, the
Noteholder’s rights and benefits hereunder only to the extent
and in the manner permitted by the terms of this Subordinated Note,
the Purchase Agreement, and under applicable securities laws and
regulations. To the extent of any such assignment, such assignee
shall have the same rights and benefits against the Company and
shall agree to be bound by and to comply with the terms and
conditions of the Purchase Agreement as it would have had if it
were the Noteholder hereunder.
15. Priority.
The Subordinated Notes rank pari
passu among themselves and pari passu, in the event of any
insolvency proceeding, dissolution, assignment for the benefit of
creditors, reorganization, restructuring of debt, marshaling of
assets and liabilities or similar proceeding or any liquidation or
winding up of the Company, with all other present or future
unsecured subordinated debt obligations of the Company (including,
without limitation, the Company’s 5.75% Fixed Rate
Subordinated Notes due July 31, 2027), except any unsecured
subordinated debt that, pursuant to its express terms, is senior or
subordinate in right of payment to the Subordinated
Notes.
16. Ownership.
Prior to due presentment of this Subordinated Note for registration
of transfer, the Company may treat the holder in whose name this
Subordinated Note is registered in the Security Register as the
absolute owner of this Subordinated Note for receiving payments of
principal and interest on this Subordinated Note and for all other
purposes whatsoever, whether or not this Subordinated Note be
overdue, and the Company shall not be affected by any notice to the
contrary.
17. Waiver
and Consent.
(a) This Subordinated
Note may be amended or waived pursuant to, and in accordance with,
the provisions set forth herein and as set forth in Section 7.3 of
the Purchase Agreement. Any such consent or waiver given by the
Noteholder shall be conclusive and binding upon such Noteholder and
upon all subsequent holders of this Subordinated Note and of any
Subordinated Note issued upon the registration of transfer hereof
or in exchange therefor or in lieu hereof, whether or not notation
of such consent or waiver is made upon this Subordinated Note. No
delay or omission of the Noteholder to exercise any right or remedy
accruing upon any Event of Default shall impair such right or
remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Any insured depository institution that shall
be a Noteholder or that otherwise shall have any beneficial
ownership interest in this Subordinated Note shall, by its
acceptance of such Subordinated Note (or beneficial interest
therein), be deemed to have waived any right of offset with respect
to the indebtedness evidenced thereby.
(b) No waiver or
amendment of any term, provision, condition, covenant or agreement
in the Subordinated Notes shall be effective except with the
consent of the Noteholders holding more than fifty percent (50%) in
aggregate principal amount (excluding any Subordinated Notes held
by the Company or any of its Affiliates) of the Subordinated Notes
at the time outstanding; provided, however, that without the consent of
each Noteholder of an affected Subordinated Note, no such amendment
or waiver may: (i) reduce the principal amount of the Subordinated
Note; (ii) reduce the rate of or change the time for payment of
interest on any Subordinated Note; (iii) extend the maturity of any
Subordinated Note; (iv) change the currency in which payment of the
obligations of the Company under the Subordinated Notes are to be
made; (v) lower the percentage of aggregate principal amount of
outstanding Subordinated Notes required to approve any amendment of
the Subordinated Notes; (vi) make any changes to Section 4(c)
(Partial Redemption), Section 5 (Events of Default; Acceleration),
Section 6 (Failure to Make Payments), Section 15 (Priority), or
Section 17 (Waiver and Consent) of the Subordinated Notes that
adversely affects the rights of any Noteholder; or (vii)
disproportionately and adversely affect the rights of any of the
holders of the then outstanding Subordinated Notes. Notwithstanding
the foregoing, the Company may amend or supplement the Subordinated
Notes without the consent of the Noteholders to cure any ambiguity,
defect or inconsistency or to provide for uncertificated
Subordinated Notes in addition to or in place of certificated
Subordinated Notes, or to make any change that does not adversely
affect the rights of any Noteholder of any of the Subordinated
Notes. No failure to exercise or delay in exercising, by any
Noteholder 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 Subordinated Note are cumulative and not exclusive
of any right or remedy provided by law or equity. No notice or
demand on the Company in any case shall, in itself, entitle the
Company to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the
Noteholders to any other or further action in any circumstances
without notice or demand. No consent or waiver, express or implied,
by the Noteholders to or of any breach or default by the Company in
the performance of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or
default in the performance of the same or any other obligations of
the Company hereunder. Failure on the part of the Noteholders to
complain of any acts or failure to act or to declare an Event of
Default, irrespective of how long such failure continues, shall not
constitute a waiver by the Noteholders of their rights hereunder or
impair any rights, powers or remedies on account of any breach or
default by the Company.
18. Absolute
and Unconditional Obligation of the Company. No provisions
of this Subordinated Note shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the
principal and interest on this Subordinated Note at the times,
places and rate, and in the coin or currency, herein prescribed. No
delay or omission of the Noteholder to exercise any right or remedy
accruing upon any Event of Default shall impair such right or
remedy or constitute a waiver of any such Event of Default or an
acquiescence therein.
19. No
Sinking Fund; Convertibility. This Subordinated Note is not
entitled to the benefit of any sinking fund. This Subordinated Note
is not convertible into or exchangeable for any of the equity
securities, other securities or assets of the Company or any
subsidiary of the Company.
20. No
Recourse Against Others. No recourse under or upon any
obligation, covenant or agreement contained in this Subordinated
Note, or for any claim based thereon or otherwise in respect
thereof, will be had against any past, present or future
shareholder, employee, officer, or director, as such, of the
Company or of any predecessor or successor, either directly or
through the Company or any predecessor or successor, under any rule
of law, statute or constitutional provision or by the enforcement
of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released
by the acceptance of this Subordinated Note by the Noteholder and
as part of the consideration for the issuance of this Subordinated
Note.
21. Notices.
All notices to the Company under this Subordinated Note shall be in
writing and addressed to the Company at 205 South Main Street,
Timberville, Virginia 22853, Attention: Mark C. Hanna, Chief
Executive Officer, or to such other address as the Company may
notify to the Noteholder (the “Payment Office”). All
notices to the Noteholders shall be in writing and sent by
first-class mail to each Noteholder at his or its address as set
forth in the Security Register.
22. Further
Issues. The Company may, without the consent of the
Noteholders, create and issue additional notes having the same
terms and conditions of the Subordinated Notes (except for the
Issue Date and issue price) so that such further notes shall be
consolidated and form a single series with the Subordinated
Notes.
23. Governing
Law; Interpretation. THIS SUBORDINATED NOTE WILL BE DEEMED
TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NORTH CAROLINA
AND WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NORTH CAROLINA WITHOUT REGARD TO CONFLICT OF LAW
PRINCIPLES THEREOF. IT IS INTENDED THAT THIS SUBORDINATED NOTE
SHALL MEET THE CRITERIA FOR QUALIFICATION OF THE OUTSTANDING
PRINCIPAL AS TIER 2 CAPITAL UNDER THE REGULATORY GUIDELINES OF THE
FEDERAL RESERVE, AND THE TERMS HEREOF SHALL BE INTERPRETED IN A
MANNER TO SATISFY SUCH INTENT.
[Signature Page Follows]
IN
WITNESS WHEREOF, the undersigned has caused this Subordinated Note
to be duly executed and attested.
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F & M BANK CORP. |
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By:
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/s/ Mark C.
Hanna
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Name: Mark C.
Hanna
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Title:
Chief
Executive Officer
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ATTEST:
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__________________________________
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Name: __________________________________
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Title: __________________________________
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[Signature Page to Subordinated Note]
ASSIGNMENT
FORM
[Capitalized terms
used herein but not defined have the meanings assigned in the
Subordinated Note]
To
assign this Subordinated Note of F & M Bank Corp., a Virginia
corporation, fill in the form below: (I) or (we) assign and
transfer this Subordinated Note to:
________________________________________________________________
(Print
or type assignee’s name, address and zip code)
________________________________________________________________
(Insert
assignee’s social security or tax I.D. No.)
and irrevocably appoint ______________
agent to transfer this Subordinated
Note on the books of the
Company. The agent may substitute another to act for
him.
Date:___________________________
Your signature: ___________________________
(Sign
exactly as your name appears on the face of this Subordinated
Note)
FOR
EXECUTION BY AN ENTITY:
Entity name:
___________________________
By: ___________________________
Name: ___________________________
Title: ___________________________
Tax Identification No: ___________________________
Signature Guarantee: ________________________________________________________________
(Signatures
must be guaranteed by an eligible guarantor institution (banks,
stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program),
pursuant to Rule 17Ad-15 promulgated under the Securities Exchange
Act of 1934, as amended (the “Exchange
Act”)).
The undersigned certifies that he/she/it [is / is
not] (circle one) an Affiliate of the Company and that, to its
knowledge, the proposed transferee [is / is not]
(circle
one) an Affiliate of the
Company.
In
connection with any transfer or exchange of this Subordinated Note
occurring prior to the date that is one year after the later of the
date of original issuance of this Subordinated Note and the last
date, if any, on which this Subordinated Note was owned by the
Company or any Affiliate of the Company, the undersigned confirms
that this Subordinated Note is being:
CHECK
ONE BOX BELOW:
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□
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(1)
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acquired for the
undersigned’s own account, without transfer;
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□
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(2)
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transferred to the
Company;
|
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□
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(3)
|
transferred in
accordance and in compliance with Rule 144A under the Securities
Act of 1933, as amended (the “Securities
Act”);
|
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□
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(4)
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transferred under
an effective registration statement under the Securities
Act;
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□
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(5)
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transferred in
accordance with and in compliance with Regulation S under the
Securities Act;
|
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□
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(6)
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transferred to an
institutional “accredited investor” (as defined in Rule
501(a)(1), (2), (3), (5), or (7) under the Securities
Act);
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□
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(7)
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transferred to an
“accredited investor” (as defined in Rule 501(a)(4)
under the Securities Act), not referred to in item (6) that has
been provided with the information designated under Section 4(d) of
the Securities Act; or
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□
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(8)
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transferred in
accordance with another available exemption from the registration
requirements of the Securities Act.
|
Unless
one of the boxes is checked, the Company will refuse to register
this Subordinated Note in the name of any person other than the
registered holder thereof; provided, however, that if box (5), (6),
(7) or (8) is checked, the Company may require, prior to
registering any such transfer of this Subordinated Note, in its
sole discretion, such legal opinions, certifications and other
information as the Company may reasonably request to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act such as the exemption provided by Rule 144 under
such Act.
Signature:________________________________________________________________
(Sign
exactly as your name appears on the face of this Subordinated
Note)
FOR
EXECUTION BY AN ENTITY:
Entity name:
___________________________
By: ___________________________
Name: ___________________________
Title:
___________________________
Tax Identification
No.: ___________________________
Signature Guarantee:
________________________________________________________________
(Signatures must be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion
program), pursuant to Exchange Act Rule 17Ad-l5).
TO
BE COMPLETED BY PURCHASER IF BOX (1) OR (3) ABOVE IS
CHECKED.
The
undersigned represents and warrants that it is purchasing this
Subordinated Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any
such account is a “qualified institutional buyer”
within the meaning of Rule 144A under the Securities Act and is
aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A
or has determined not to request such information and that it is
aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date:___________________________
Signature:
___________________________
Print
name: ___________________________
FOR
EXECUTION BY AN ENTITY:
Entity
name: ___________________________
By:
___________________________
Name:
___________________________
Title:
___________________________
Tax Identification
No.: ___________________________
Exhibit
10.1
FORM
OF SUBORDINATED NOTE PURCHASE AGREEMENT
This
SUBORDINATED NOTE PURCHASE AGREEMENT (this “Agreement”)
is dated as of July 29, 2020, and is made by and among F & M
Bank Corp., a Virginia corporation (“Company”),
and the purchaser of the Subordinated Note identified on the
signature page hereto (“Purchaser”).
RECITALS
WHEREAS, Company has requested that
Purchaser purchase from Company a Subordinated Note (as defined
herein) in the principal amount set forth on Purchaser’s
signature page (the “Subordinated Note
Amount”), which amount is intended to meet the
qualifications for inclusion as Tier 2 Capital (as defined
herein);
WHEREAS, Purchaser is an institutional
“accredited investor” as such term is defined in Rule
501 of Regulation D promulgated under the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder
(the “Securities
Act”), as well as a “qualified institutional
buyer” as such term is defined in Rule 144A promulgated under
the Securities Act (“QIB”);
WHEREAS, the offer and sale of the
Subordinated Note by Company is being made pursuant to one or more
available exemptions from the registration requirements of the
Securities Act, including Section 4(a)(2) of the Securities Act;
and
WHEREAS, Purchaser is willing to
purchase from Company a Subordinated Note in 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
Note.
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.
1.1 Defined
Terms. The following capitalized terms generally used in
this Agreement and in the Subordinated Note 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.
“Affiliate(s)”
means, with respect to any Person (as defined herein), 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.
“Articles”
has the meaning set forth in Section
3.2.1.2(a).
“Bank”
means Farmers & Merchants Bank, Timberville,
Virginia.
“Bank Holding
Company Act” has the meaning set forth in Section 3.2.1.6.
“Business Day”
means any day other than a Saturday, Sunday or any other day on
which banking institutions in the Commonwealth of Virginia are
permitted or required by any applicable law or executive order to
close.
“Bylaws”
has the meaning set forth in Section
3.2.1.2(c).
“Closing”
has the meaning set forth in Section 2.5.
“Closing Date”
means July 29, 2020.
“Common
Stock” means Company’s common stock, $5 par
value per share.
“Company”
has the meaning set forth in the preamble hereto and shall include
any successors to Company.
1
“Company’s Reports”
means (i) Company’s annual report on Form 10-K for the year
ended December 31, 2019 filed with the SEC, (ii) Company’s
quarterly report on Form 10-Q for the quarter ended March 31, 2020
filed with the SEC, (iii) any Current Report on Form 8-K, as filed
or furnished by the Company since January 1, 2020, (iv)
Company’s Parent Company Only Financial Statements for Small
Holding Companies (FR Y-9SP) as of and for the year ended December
31, 2019 filed with the FRB, and (v) Bank’s consolidated
reports of condition and income (or call report) as of and for the
year ended December 31, 2019 filed with the Federal Financial
Institutions Examination Council’s Central Data
Repository.
“Condition or
Release” means any presence, use, storage,
transportation, discharge, disposal, release or threatened release
of any Hazardous Materials.
“Control”
(including the terms “controlling,” “controlled
by,” and “under common control with”) means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or
otherwise.
“Disbursement”
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 Note.
“Exchange
Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated
thereunder.
“FDIC”
means the Federal Deposit Insurance Corporation.
“Financial
Advisor” means Raymond James & Associates, Inc.,
independent financial advisor to Company in connection with the
transactions contemplated by this Agreement.
“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.
“Governmental Agency(ies)”
means, individually or collectively, any federal, state, county or
local governmental department, commission, board, regulatory
authority or agency (including each applicable Regulatory Agency)
with jurisdiction over Company, Bank
or any of their Subsidiaries.
“Governmental Licenses”
has the meaning set forth in Section 4.3.
“Hazardous Materials”
means oil, flammable explosives, asbestos, urea formaldehyde
insulation, polychlorinated biphenyls, radioactive materials,
hazardous wastes, toxic or contaminated substances or similar
materials, including 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 Company or any Subsidiary of Company; and (ii) all
obligations secured by any lien on property owned by 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 Company’s or Bank’s business
(including federal funds purchased, advances from any Federal Home
Loan Bank, secured deposits of municipalities, letters of credit
issued by Company or Bank and repurchase arrangements) and
consistent with customary banking practices and applicable laws and
regulations.
2
“Leases”
means all leases, licenses or other documents providing for the use
or occupancy of any portion of any Property (as defined herein),
including all amendments, extensions, renewals, supplements,
modifications, sublets and assignments thereof and all separate
letters or separate agreements relating thereto.
“Material Adverse
Effect” means any change or effect that (i) is or
would be reasonably likely to be material and adverse to the
financial condition, results of operations, business or assets of
Company, Bank and/or their respective Subsidiaries, or (ii) would
materially impair the ability of Company, Bank and/or their
respective Subsidiaries to perform its respective obligations under
any of the Transaction Documents (as defined herein), or otherwise
materially impede the consummation of the transactions contemplated
hereby or thereby; 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 after the date of this Agreement in general
economic or capital market conditions affecting financial
institutions or their market prices generally and not specifically
related to Company, Bank, or Purchaser, (4) pandemics, epidemics,
disease outbreaks, and other public health emergencies, including
the Coronavirus disease (COVID-19), (5) direct effects of
compliance with this Agreement on the operating performance of
Company, Bank, or Purchaser, including expenses incurred by
Company, Bank, or Purchaser in consummating the transactions
contemplated by this Agreement, and (6) the effects of any action
or omission taken by Company or Bank with the prior written consent
of Purchaser, and vice versa, or as otherwise contemplated by this
Agreement and the Subordinated Note.
“Maturity
Date” has the meaning set forth in the Subordinated
Note.
“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.
“Property”
means any real property owned or leased by Company or any Affiliate
or Subsidiary of Company.
“Purchaser”
has the meaning set forth in the preamble hereto.
“QIB”
has the meaning set forth in the Recitals.
“Regulation
D” means Regulation D promulgated under the Securities
Act.
“Regulatory
Agencies” 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
Company, Bank or any of their Subsidiaries.
“SEC”
means the Securities and Exchange Commission.
“Securities
Act” has the meaning set forth in the
Recitals.
“Subordinated
Note” means the Subordinated Note in the form attached
as Exhibit A
hereto, as amended, restated, supplemented or modified from time to
time, and each Subordinated Note delivered in substitution or
exchange for such Subordinated Note (any one or more Subordinated
Notes into which this Subordinated Note may be subdivided,
exchanged, or substituted in the future referred to, collectively,
with this Subordinated Note, as the “Subordinated
Notes”).
“Subordinated Note
Amount” has the meaning set forth in the
Recitals.
“Subsidiary”
means with respect to any Person, any corporation or entity 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, 12 C.F.R. Part 225, and 12
C.F.R. Part 250, as amended, modified and supplemented and in
effect from time to time or any replacement thereof.
“Transaction
Documents” has the meaning set forth in Section 3.2.1.1.
1.2 Interpretations.
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 and the Subordinated Note 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.
1.3 Exhibits
Incorporated. All Exhibits attached are hereby incorporated
into this Agreement.
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2. SUBORDINATED
DEBT.
2.1 Certain
Terms. Subject to the terms and conditions herein contained,
Company proposes to issue and sell to Purchaser a Subordinated Note
in an amount equal to the Subordinated Note Amount. Purchaser
agrees to purchase the Subordinated Note from Company on the
Closing Date in accordance with the terms of, and subject to the
conditions and provisions set forth in, this Agreement and the
Subordinated Note. The Subordinated Note Amount shall be disbursed
in accordance with Section
3.1. The Subordinated Note shall bear interest per annum as
set forth in the Subordinated Note. The unpaid principal balance of
the Subordinated Note plus all accrued but unpaid interest thereon
shall be due and payable on the Maturity Date, or such earlier date
on which such amount shall become due and payable on account of (i)
acceleration by Purchaser in accordance with the terms of the
Subordinated Note and this Agreement or (ii) Company’s
delivery of a notice of redemption or repayment in accordance with
the terms of the Subordinated Note.
2.2 Subordination.
The Subordinated Note shall be subordinated in accordance with the
subordination provisions set forth therein.
2.3 Maturity
Date. On the Maturity Date, all sums due and owing under
this Agreement and the Subordinated Note shall be repaid in full.
Company acknowledges and agrees that Purchaser has not made any
commitments, either express or implied, to extend the terms of the
Subordinated Note past its Maturity Date, and shall not extend such
terms beyond the Maturity Date unless Company and Purchaser
hereafter specifically otherwise agree in writing.
2.4 Unsecured
Obligations. The obligations of Company to Purchaser under
the Subordinated Note shall be unsecured and not covered by a
guarantee of Company or an Affiliate of Company.
2.5 The
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.
2.6 Payments.
Company agrees that matters concerning payments and application of
payments shall be as set forth in this Agreement and in the
Subordinated Note.
2.7 Right
of Offset. Purchaser hereby expressly waives any right of
offset Purchaser may have against Company, Bank or any of their
Subsidiaries.
2.8 Use
of Proceeds. Company shall use the net proceeds from the
sale of the Subordinated Note for general corporate purposes, which
may include, but not be limited to, funding corporate growth,
repaying outstanding indebtedness and supporting the capital of
Bank.
3. DISBURSEMENT.
3.1 Disbursement.
On the Closing Date, assuming all of the terms and conditions set
forth in Section
3.2 have been satisfied by Company or waived by Purchaser
and Company has executed and delivered to Purchaser this Agreement
and Purchaser’s Subordinated Note and any other related
documents in form and substance reasonably satisfactory to
Purchaser, Purchaser shall disburse the Subordinated Note Amount,
which is set forth on Purchaser’s signature page, in
immediately available funds to Company in exchange for a
Subordinated Note with a principal amount equal to such
Subordinated Note Amount (the “Disbursement”).
Company will deliver to Purchaser one or more certificates
representing the Subordinated Note in definitive form (or provide
evidence of the same with the original to be delivered by Company
by overnight delivery on the next business day in accordance with
the delivery instructions of Purchaser), registered in such names
and denominations as Purchaser may request.
3.2 Conditions
Precedent to Disbursement.
3.2.1 Conditions
to Purchaser’s Obligation. The obligation of Purchaser to
consummate the purchase of the Subordinated Note to be purchased by
it at Closing and to effect the Disbursement is subject to the
fulfillment of or delivery by or at the direction of Company to
Purchaser, on or prior to the Closing Date, of each of the
following (or written waiver by Purchaser prior to the Closing of
such delivery):
3.2.1.1 Transaction
Documents. This Agreement and the Subordinated Note
(collectively, the “Transaction
Documents”), each duly authorized and executed by
Company.
4
3.2.1.2 Authority
Documents.
(a)
A copy, certified
by the Secretary or Assistant Secretary of Company, of the articles
of incorporation of Company and all amendments thereto as in effect
as of the Closing Date (the “Articles”);
(b)
A certificate of
good standing of Company issued by the State Corporation Commission
of the Commonwealth of Virginia;
(c)
A copy, certified
by the Secretary or Assistant Secretary, of the bylaws of Company
and all amendments thereto as in effect as of the Closing Date (the
“Bylaws”);
(d)
A copy, certified
by the Secretary or Assistant Secretary of Company, of the
resolutions of the board of directors of Company, and any committee
thereof, authorizing the execution, delivery and performance of the
Transaction Documents;
(e)
An incumbency
certificate of the Secretary or Assistant Secretary of Company
certifying the names of the officer or officers of Company
authorized to sign the Transaction Documents and the other
documents provided for in this Agreement; and
(f)
The opinion of
Williams Mullen, counsel to Company, dated as of the Closing Date,
substantially in the form set forth at Exhibit B attached hereto
addressed to Purchaser and the Financial Advisor.
3.2.1.3 Representations
and Warranties. The representations and warranties
of Company set forth in Section 4 of this Agreement
that do not contain a “Material Adverse Effect”
qualification or other express materiality or similar qualification
shall have been true and correct as of the date hereof and shall be
true and correct 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
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 Section 4 of this Agreement
that contain a “Material Adverse Effect” qualification
or any other express materiality or similar qualification shall
have been true and correct as of the date hereof and shall be true
and correct as of the Closing Date; provided, however, that
representations and warranties made as of a specified date need
only be true and correct as of such date.
3.2.1.4 Covenants.
All covenants, agreements and conditions contained in this
Agreement to be performed by Company on or prior to the Closing
Date shall have been performed or complied with in all material
respects.
3.2.1.5 Other
Requirements. Such other additional information regarding
Company, Bank and any other Subsidiary of Company or Bank and their
respective assets, liabilities (including any liabilities arising
from, or relating to, legal proceedings) and contracts as Purchaser
may reasonably require.
3.2.1.6 Consents
and Approvals. Company shall file any required applications,
filings and notices required in connection with this Agreement, as
applicable, with (i) the FRB (under the Bank Holding Company Act of
1956, as amended (“Bank Holding Company
Act”)) and (ii) the Bureau of Financial Institutions
of the Virginia State Corporation Commission, and receive approval
of, or consent or nonobjection to, the foregoing applications,
filings and notices.
3.2.2 Conditions
to Company’s Obligation. The obligation of Company to
consummate the sale of the Subordinated Note and to effect the
Closing is subject to delivery by Purchaser to Company of this
Agreement, duly authorized and executed by Purchaser, and the
purchase price in an amount equal to the Subordinated Note
Amount.
4. REPRESENTATIONS AND
WARRANTIES OF COMPANY.
Company
hereby represents and warrants to Purchaser as
follows:
4.1 Organization
and Authority.
4.1.1 Organization
Matters of Company and Its Subsidiaries.
4.1.1.1 Company
is a bank holding company registered with the FRB under the Bank
Holding Company Act. Company is a business corporation validly
existing and in good standing under the laws of the Commonwealth of
Virginia 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. 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 so to qualify or to be in good
standing would not result in a Material Adverse
Effect.
5
4.1.1.2 Each
Subsidiary of Company and Bank either has been duly organized and
is validly existing as a corporation or limited liability company,
or has been duly chartered and is validly existing as a Virginia
state-chartered bank, in each case in
good standing under the laws of the jurisdiction of its
incorporation or formation, has corporate or limited
liability company power and authority
to own, lease and operate its properties and to conduct its
business and is duly qualified as a foreign entity 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 so to qualify or to be in good standing would not result in
a Material Adverse Effect. All of the issued and outstanding
shares of capital stock or other equity interests in each
Subsidiary of Company have been duly authorized and validly issued,
are fully paid and non-assessable and are owned by Company,
directly or through Subsidiaries of 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 Company were issued in violation of
the preemptive or similar rights of any security holder of such
Subsidiary of Company or any other Person.
4.1.1.3 The
deposit accounts of Bank are insured by the FDIC up to applicable
limits. Neither Company nor Bank has received any notice or other
information indicating that 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 Bank as an FDIC-insured institution.
Company and its Subsidiaries have made payment of all franchise and
similar taxes in all of the respective jurisdictions in which they
are incorporated, chartered or qualified, except for any such taxes
(i) where the failure to pay such taxes will not have a Material
Adverse Effect, (ii) the validity of which is being contested in
good faith or (iii) for which proper reserves have been set aside
on the books of Company or any applicable Subsidiary of Company, as
the case may be.
4.1.2 Capital
Stock and Related Matters. The Articles of Company authorize
Company to issue 6,000,000 shares of Common Stock and 2,000,000
shares of preferred stock. As of the date of this Agreement, there
are 3,196,103 shares of Common Stock issued and outstanding and
206,660 shares of Company’s preferred stock issued and
outstanding. All of the outstanding capital stock of Bank is owned
beneficially and of record by Company and has been duly authorized
and validly issued and is fully paid and non-assessable. All of the
outstanding capital stock of Company has been duly authorized and
validly issued and is fully paid and non-assessable. Other than
pursuant to Company’s outstanding preferred stock or equity
incentive and other benefit plans duly adopted by Company’s
Board of Directors, as of the date hereof, there are no outstanding
options, rights, warrants or other agreements or instruments
obligating Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock
of Company or obligating Company to grant, extend or enter into any
such agreement or commitment to any Person other than
Company.
4.2 No
Impediment to Transactions.
4.2.1 Transaction
is Legal and Authorized. The issuance of the Subordinated
Note, the borrowing of the Subordinated Note Amount, the execution
of the Transaction Documents and compliance by Company with all of
the provisions of the Transaction Documents are within the
corporate and other powers of Company.
4.2.2 Agreement.
This Agreement has been duly authorized, executed and delivered,
and, assuming due authorization, execution and delivery by
Purchaser, constitutes the legal, valid and binding obligation of
Company, enforceable 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.
4.2.3 Subordinated
Note. The
Subordinated Note has been duly authorized by Company and when
executed by Company and issued, delivered to and paid for by
Purchaser in accordance with the terms of the Agreement, will have
been duly executed,
issued and delivered, and will constitute legal, valid and binding
obligations of Company, 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.
4.2.4 Exemption
from Registration.
Neither Company, nor any of its Subsidiaries or Affiliates, nor 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 Note. Assuming the accuracy of the representations and
warranties of Purchaser set forth in this Agreement, the
Subordinated Note will be issued in a transaction exempt from the
registration requirements of the Securities Act.
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4.2.5 No
Defaults or Restrictions. Neither the execution and delivery of the
Transaction Documents nor compliance 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 Articles or Bylaws of 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 Company or 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 Company or Bank; or (4) any
statute, rule or regulation applicable to Company, except, in the
case of items (2), (3) or (4), for such violations and conflicts
that would not reasonably be expected to have, singularly or in the
aggregate, a Material Adverse Effect, or (ii) result in the
creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any property or asset of Company, Bank or
any of their Subsidiaries. Neither Company, Bank nor any of their
Subsidiaries 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 Company, Bank or any of their
Subsidiaries, as applicable, is
a party or by which Company, Bank or any of their Subsidiaries, as
applicable, or any of their 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.
4.2.6 Governmental
Consent. Except as contemplated under Section 3.2.1.6. above, no
governmental orders, permissions, consents, approvals or
authorizations are required to be obtained by Company that have not
been obtained, and no registrations or declarations are required to
be filed by 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. Company and Bank have received from the Regulatory
Agencies any required approval of, or consent or nonobjection to,
the issuance and sale of the Subordinated Note contemplated by this
Agreement.
4.3 Possession
of Licenses and Permits. Each of Company, Bank and their
Subsidiaries possess such permits, licenses, approvals, consents
and other authorizations (collectively, “Governmental
Licenses”) 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; Company and each Subsidiary of Company are in compliance
with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, individually or in
the aggregate, have a Material Adverse Effect; 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; and neither
Company nor any Subsidiary of Company has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses.
4.4 Financial
Condition.
4.4.1 Company
Financial Statements. The financial statements of Company
included in the Company’s Reports (including the related
notes, where applicable), which have been provided to Purchaser or
are otherwise publicly available, (i) have been prepared from, and
are in accordance with, the books and records of Company; (ii)
fairly present in all material respects the results of operations,
cash flows, changes in stockholders’ equity and financial
position of 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, as indicated in
such statements or in the notes thereto. The books and records of
Company and Bank have been, and are being, maintained in all
material respects in accordance with GAAP and any other applicable
legal and accounting requirements. Neither Company nor Bank has any
material liability of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether due or to become due),
except for those liabilities that are reflected or reserved against
on the consolidated balance sheet (or notes thereto) of Company
contained in the Company’s Reports for 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.
4.4.2 Absence
of Default. Since March 31, 2020, 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 Company or Bank
the right to accelerate the maturity of any material Indebtedness
of Company or Bank. Neither
Company nor Bank is 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.
4.4.3 Solvency.
After giving effect to the consummation of the transactions
contemplated by this Agreement, 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
Company or any Subsidiary of Company.
7
4.4.4 Ownership
of Property. Company, Bank and each of their Subsidiaries
have good and marketable title as to all real property owned by
such entity and good title to all assets and properties owned by
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 consolidated 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 consolidated balance
sheet), subject to no encumbrances, liens, mortgages, security
interests or pledges, except (i) those items which secure
liabilities for public deposits or statutory obligations or any
discount with, borrowing from or other obligations to the Federal
Home Loan Bank or FRB, inter-bank credit facilities, reverse
repurchase agreements or any transaction by Bank acting in a
fiduciary capacity, (ii) statutory liens for amounts not yet due or
delinquent or that are being contested in good faith and (iii) such
liens that do not, individually or in the aggregate, materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by
Company, Bank or any of their
Subsidiaries. Company, Bank and each of their Subsidiaries,
as lessee, has the right under valid and existing Leases of real
and personal properties that are material to 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.
Such existing Leases and commitments to Lease constitute or will
constitute operating Leases for both tax and financial accounting
purposes except as otherwise disclosed in the Company’s
Reports and the Lease expense and minimum rental commitments with
respect to such Leases and Lease commitments are as disclosed in
all material respects in the Company’s Reports.
4.5 No
Material Adverse Change. Since March 31, 2020, there has
been no development or event which has
had or could reasonably be expected to have a Material Adverse
Effect.
4.6 Legal
Matters.
4.6.1 Compliance
with Law. Except as otherwise disclosed in the
Company’s Reports, Company, Bank and each of their
Subsidiaries (i) has complied with and (ii) is not under
investigation with respect to, and, to Company’s knowledge,
have 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. Company, Bank and each of their Subsidiaries are in
compliance with, and at all times prior to the date hereof have
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) their own
privacy policies and written commitments to their respective
customers, consumers and employees, concerning data protection, the
privacy and security of personal data, and the nonpublic personal
information of their respective customers, consumers and employees,
in each case except where any such failure to comply, would not
result, individually or in the aggregate, in a Material Adverse
Effect. Except as otherwise disclosed in the Company’s
Reports, at no time during the two years prior to the date hereof
has Company, Bank or any of their
Subsidiaries received any notice asserting any violations of
any of the foregoing, except for any violations that (A) have been
resolved or (B) that have not had, and are not reasonably expected
to have, a Material Adverse Effect.
4.6.2 Regulatory
Enforcement Actions. Company and its 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, the failure to comply with which would have a Material
Adverse Effect. None of Company, its Subsidiaries, nor any of their
respective 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 Company’s knowledge, (i) any
such restrictions threatened, (ii) any agreements, memoranda, commitment letters,
supervisory letters or similar regulatory correspondence, or other
commitments being sought by any Governmental Agency, or
(iii) any legal or regulatory violations previously identified by,
or penalties or other remedial action previously imposed by, any
Governmental Agency that remain unresolved.
4.6.3 Pending
Litigation. Except as otherwise disclosed in the
Company’s Reports, there are no actions, suits, proceedings
or written agreements pending, or, to Company’s knowledge,
threatened or proposed, against Company, Bank or any of their 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 or affect issuance or payment of the
Subordinated Note; and neither
Company, Bank nor any of their 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, will have a Material Adverse Effect.
4.6.4 Environmental.
No Property is or, to 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 Company, Bank nor any of their
Subsidiaries has engaged in such activities. There are no
claims or actions pending or, to Company’s knowledge,
threatened against Company, Bank or
any of their Subsidiaries by any Governmental Agency or by
any other Person relating to any Hazardous Materials or pursuant to
any Hazardous Materials Law.
8
4.6.5 Brokerage
Commissions. Except for fees payable to its Financial
Advisor, neither Company nor any Affiliate of Company is obligated
to pay any brokerage commission or finder’s fee to any Person
in connection with the transactions contemplated by this
Agreement.
4.6.6 Investment
Company Act. Neither Company,
Bank nor any of their 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.
4.7 No Material
Misstatement or Omission. None of the representations,
warranties, covenants and agreements contained in this Agreement or
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, when taken together as a whole with the Company’s
Reports, contains any untrue statement of a material fact or omits
to state a material fact or any fact necessary to make the
statements contained therein not materially misleading in light of
the circumstances when made or furnished to Purchaser.
4.8 Internal Accounting
Controls. Each of Company and Bank 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 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
Company’s and Bank’s receipts and expenditures are
being made only in accordance with authorizations of Company
management and Board of Directors, and provides reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of assets of 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 Company’s
financial reporting and the preparation of Company’s
financial statements for external purposes in accordance with GAAP.
Since the conclusion of 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 Company’s or
Bank’s internal control over financial reporting. Company
(A) has implemented and maintains disclosure controls and
procedures reasonably designed and maintained to ensure that
material information relating to Company is made known to the Chief
Executive Officer and the Chief Financial Officer of Company by
others within Company and (B) has disclosed, based on its most
recent evaluation prior to the date hereof, to Company’s
outside auditors and the audit committee of 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
Company’s internal controls over financial reporting. Such
disclosure controls and procedures are effective for the purposes
for which they were established.
4.9 Tax Matters.
Company and Bank have (i) filed all material foreign, U.S. federal,
state and local tax returns, information returns and similar
reports that they are required to file (taking into account
extensions) with governmental tax agencies, 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 them
(taking into account extensions) and any other material tax
assessment, fine or penalty levied against them other than taxes
(x) currently payable without penalty or interest, or (y) being
contested in good faith by appropriate proceedings.
4.10 Exempt
Offering. Assuming the accuracy of Purchaser’s
representations and warranties set forth in this Agreement, no
registration under the Securities Act is required for the offer and
sale of the Subordinated Note by Company to Purchaser.
4.11 Representations
and Warranties Generally. 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 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.
Company
hereby further covenants and agrees with Purchaser as
follows:
5.1 Compliance
with Transaction Documents. Company shall comply with,
observe and timely perform each and every one of the covenants,
agreements and obligations under the Transaction
Documents.
9
5.2 Affiliate
Transactions. Company shall not itself, nor shall it cause,
permit or allow any of its Subsidiaries to enter into any
transaction, including the purchase, sale or exchange of property
or the rendering of any service, with any Affiliate of Company
except in the ordinary course of business and pursuant to the
reasonable requirements of Company’s or such
Affiliate’s business and upon terms consistent with
applicable laws and regulations and reasonably found by the
appropriate board(s) of directors to be fair and reasonable and no
less favorable to Company or such Affiliate than would be obtained
in a comparable arm’s length transaction with a Person not an
Affiliate.
5.3 Compliance
with Laws.
5.3.1 Generally.
Company shall comply and cause Bank and each of their Subsidiaries
to comply in all 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.
5.3.2 Regulated
Activities. Company shall not
itself, nor shall it cause, permit or allow Bank or any of their
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 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.
5.3.3 Taxes.
Company shall, and shall cause Bank and any of their Subsidiaries to, promptly pay and
discharge (i) all taxes, assessments and other governmental charges
imposed upon Company, Bank or any of
their Subsidiaries or upon the income, profits, or property
of Company, Bank or any of their
Subsidiaries and (ii) all claims for labor, material or
supplies that, if unpaid, might by law become a lien or charge upon
the property of Company, Bank or any
of their Subsidiaries. Notwithstanding the foregoing, none
of Company, Bank or any of their
Subsidiaries shall be required to pay any such tax,
assessment, charge or claim, so long as the validity thereof is
being contested in good faith by appropriate proceedings, and
appropriate reserves therefor shall be maintained on the books of
Company, Bank and such other Subsidiary.
5.3.4 Corporate
Existence. Company shall do or cause to be done all things
reasonably necessary to maintain, preserve and renew its corporate
existence and that of Bank and the other Subsidiaries and its and
their rights, licenses and franchises, and comply in all material
respects with all related laws applicable to Company, Bank or the
other Subsidiaries; provided, however, that (i) Company may
consummate the transactions described in Section 8(b) of the
Subordinated Note in accordance with the provisions of that section
and (ii) Company will not be required to preserve the existence
(corporate or other) of any of its Subsidiaries (other than Bank)
or any such right, license or franchise of Company or any of its
Subsidiaries (other than the Bank) if the Board of Directors of
Company determines that the preservation thereof is no longer
desirable in the conduct of the business of Company and its
Subsidiaries taken as a whole and that the loss thereof will not be
disadvantageous in any material respect to Purchaser.
5.3.5 Dividends,
Payments, and Guarantees During Event of Default. Upon the occurrence of an Event of
Default (as defined under the Subordinated Note), until such
failure or Event of Default is cured by Company or waived by
Purchaser in accordance with Section 17 of the Subordinated Notes,
Company shall not, except as may be required by any federal or
state Governmental Agency, (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 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 Note, 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
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 Company’s capital stock or the exchange
or conversion of one class or series of Company’s capital
stock for another class or series of Company’s capital stock;
(iv) the purchase of fractional interests in shares of
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
Company’s Common Stock related to the issuance of Common
Stock or rights under any benefit plans for Company’s
directors, officers or employees or any of Company’s dividend
reinvestment plans (including any repurchases or acquisitions in
connection with the forfeiture of any stock award, cashless or net
exercise of any option, or acceptance of Common Stock in lieu of an
award recipient’s tax obligations under any equity
award).
10
5.3.6 Tier
2 Capital. If all or
any portion of the Subordinated Note ceases to qualify for
inclusion as 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 Note, Company will immediately notify Purchaser, and
thereafter, Company and Purchaser 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 Note to qualify as Tier 2 Capital;
provided, however, that nothing contained in this Section 5.3.6 shall limit
Company’s right to redeem the Subordinated Note upon the
occurrence of a Tier 2 Capital Event (as defined in the
Subordinated Note) pursuant to Section 4(a) or Section 4(b) of the
Subordinated Note.
5.3.7 Environmental
Matters. Except as
would not, singly or in the aggregate, reasonably be expected to
result in a Material Adverse Effect, Company shall: (a) exercise,
and cause Bank and each of their Subsidiaries to exercise,
commercially reasonable efforts in order to comply in all material
respects with all Hazardous Materials Laws; and (b) promptly take
any and all necessary remedial action in connection with any
Condition or Release or threatened Condition or Release on, under
or about any Property in order to comply in all material respects
with all applicable Hazardous Materials Laws; provided, however, that Company shall
not be deemed to be in breach of the foregoing covenant if and to
the extent it has not taken such remedial actions due to (x) its
diligent pursuit of an available statutory or administrative
exemption from compliance with the relevant Hazardous Materials Law
from the appropriate Governmental Agency (and no penalties for
non-compliance with the relevant Hazardous Materials Law(s) shall
accrue as a result of such non-compliance, without rebate or waiver
if such exemption or waiver is granted), or (y) is actively and
diligently contesting in good faith any Governmental Agency’s
order, determination or decree with respect to the applicability or
interpretation of any such relevant Hazardous Materials Law and/or
the actions required under such laws or regulations in respect of
such Condition or Release. In the event Company, Bank or any other
Subsidiary of Company or Bank undertakes any remedial action with
respect to such Hazardous Material on, under or about any Property,
Company, Bank or such other Subsidiary shall conduct and complete
such remedial action in compliance with all applicable Hazardous
Materials Laws and in accordance with the policies, orders and
directives of all Governmental Agencies.
5.4 Absence
of Control. It is the intent of the parties to this
Agreement that in no event shall Purchaser, by reason of any of the
Transaction Documents, be deemed to control, directly or
indirectly, Company, and Purchaser shall not exercise, or be deemed
to exercise, directly or indirectly, a controlling influence over
the management or policies of Company.
5.5 Rule 144A
Information. While
the Subordinated Note remains a “restricted security”
within the meaning of the Securities Act, Company will make
available, upon request, to any seller of such Subordinated Note
the information specified in Rule 144A(d)(4) under the Securities
Act, unless Company is then subject to Section 13 or 15(d) of
the Exchange Act.
6. REPRESENTATIONS,
WARRANTIES AND COVENANTS OF PURCHASER.
Purchaser hereby
represents and warrants to Company, and covenants with Company, as
follows:
6.1 Legal
Power and Authority. Purchaser has all necessary power and
authority to execute, deliver and perform Purchaser’s
obligations under this Agreement and to consummate the transactions
contemplated hereby. Purchaser is an entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization or incorporation.
6.2 Authorization
and Execution. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary action on
the part of Purchaser, and this Agreement has been duly authorized,
executed and delivered, and, assuming due authorization, execution
and delivery by Company, is a legal, valid and binding obligation
of Purchaser, enforceable against 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.
6.3 No
Conflicts. Neither the execution, delivery or performance of
the Transaction Documents nor the consummation of any of the
transactions contemplated thereby will conflict with, violate,
constitute a breach of or a default (whether with or without the
giving of notice or lapse of time or both) under (i)
Purchaser’s organizational documents, (ii) any agreement to
which Purchaser is party, (iii) any law applicable to Purchaser or
(iv) any order, writ, judgment, injunction, decree, determination
or award binding upon or affecting Purchaser.
6.4 Purchase
for Investment. Purchaser is purchasing the Subordinated
Note for Purchaser’s own account and not with a view to
distribution and with no present intention of reselling,
distributing or otherwise disposing of the same. 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 Note in any
manner.
6.5 Institutional
Accredited Investor. Purchaser is and will be on the Closing
Date (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 and (ii) a
QIB.
11
6.6 Financial
and Business Sophistication. Purchaser has such knowledge
and experience in financial and business matters that Purchaser is
capable of evaluating the merits and risks of Purchaser’s
prospective investment in the Subordinated Note. Purchaser has
relied solely upon Purchaser’s own knowledge of, and/or the
advice of Purchaser’s own legal, financial or other advisors
with regard to, the legal, financial, tax and other considerations
involved in deciding to invest in the Subordinated
Note.
6.7 Ability
to Bear Economic Risk of Investment. Purchaser recognizes
that an investment in the Subordinated Note involves substantial
risk. Purchaser has the ability to bear the economic risk of
Purchaser’s prospective investment in the Subordinated Note,
including the ability to hold the Subordinated Note indefinitely,
and further including the ability to bear a complete loss of all of
Purchaser’s investment in Company.
6.8 Information.
Purchaser acknowledges that: (i) Purchaser is not being provided
with the disclosures that would be required if the offer and sale
of the Subordinated Note were registered under the Securities Act,
nor is Purchaser being provided with any offering circular or
prospectus prepared in connection with the offer and sale of the
Subordinated Note; (ii) Purchaser has conducted Purchaser’s
own examination of Company and the terms of the Subordinated Note
to the extent Purchaser deems necessary to make Purchaser’s
decision to invest in the Subordinated Note; (iii) Purchaser has
availed itself of publicly available financial and other
information concerning Company to the extent Purchaser deems
necessary to make Purchaser’s decision to purchase the
Subordinated Note; and (iv) Purchaser has not received or relied on
any form of general solicitation or general advertising (within the
meaning of Regulation D) from Company or any party acting on
Company’s behalf in connection with the offer and purchase of
the Subordinated Note.
6.9 Access
to Information. Purchaser acknowledges that Purchaser and
Purchaser’s advisors have been furnished with all materials
relating to the business, finances and operations of Company that
have been requested by Purchaser and Purchaser’s advisors and
have been given the opportunity to ask questions of, and to receive
answers from, Persons acting on behalf of Company concerning terms
and conditions of the transactions contemplated by this Agreement
in order to make an informed and voluntary decision to enter into
this Agreement.
6.10 Investment
Decision. Purchaser has made Purchaser’s own
investment decision based upon Purchaser’s own judgment, due
diligence, and advice from such advisors as Purchaser has deemed
necessary and not upon any view expressed by any other Person,
including the Financial Advisor. Neither such inquiries nor any
other due diligence investigations conducted by it or its advisors
or representatives, if any, shall modify, amend or affect its right
to rely on Company’s representations and warranties contained
herein. 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 Company, including the Financial Advisor, except
for the express statements, representations and warranties of
Company made or contained in this Agreement. Furthermore, Purchaser
acknowledges that (i) the Financial Advisor has not performed any
due diligence review on behalf of Purchaser and (ii) nothing in
this Agreement or any other materials presented by or on behalf of
Company to Purchaser in connection with the purchase of the
Subordinated Note constitutes legal, tax or investment
advice.
6.11 Private
Placement; No Registration; Restricted Legends. Purchaser
understands and acknowledges that the Subordinated Note comes
within the definition of “restricted securities” under
Rule 144 of the Securities Act and is being sold by Company without
registration under the Securities Act in reliance on the exemption
from federal registration set forth in Section 4(a)(2) of the
Securities Act or any state securities laws, and accordingly, may
be resold, pledged or otherwise transferred only in compliance with
the registration requirements of federal and state securities laws
or if exemptions from the Securities Act and applicable state
securities laws are available to Purchaser. Purchaser further
understands and acknowledges that Company will not be obligated in
the future to register the Subordinated Note under the Securities
Act, the Exchange Act or any state securities laws. Purchaser is
not subscribing for the Subordinated Note 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 or radio, or presented at any seminar
or meeting. Purchaser further acknowledges and agrees that all
certificates or other instruments representing the Subordinated
Note will bear the restrictive legend set forth in the form of
Subordinated Note. Purchaser further acknowledges Purchaser’s
primary responsibilities under the Securities Act and, accordingly,
will not sell or otherwise transfer the Subordinated Note 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. Neither Company
nor its Financial Advisor have or has made or are or is making any
representation, warranty or covenant, express or implied, as to the
availability of any exemption from registration under the
Securities Act or any applicable state securities laws for the
resale, pledge or other transfer of the Subordinated Note, or that
the Subordinated Note purchased by Purchaser will ever be able to
be lawfully resold, pledged or otherwise transferred.
6.12 Role
of Financial Advisor. Purchaser will purchase the
Subordinated Note directly from Company and not from the Financial
Advisor, and Purchaser understands that neither the Financial
Advisor nor any other broker or dealer has any obligation to make a
market in the Subordinated Notes. Purchaser understands that the
Financial Advisor has acted solely as a financial advisor to
Company and not as placement agent or underwriter in connection
with offer and sale of the Subordinated Note.
6.13 Tier
2 Capital. If all or any portion of the Subordinated Note
ceases to qualify for inclusion as 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 Note, Company will immediately notify
Purchaser, and thereafter, Company and Purchaser 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 Note to qualify as Tier 2
Capital; provided, however, that nothing contained in this
Section 6.13 shall
limit Company’s right to redeem the Subordinated Note upon
the occurrence of a Tier 2 Capital Event pursuant to Section 4(a) or Section 4(b) of the
Subordinated Note.
12
6.14 Accuracy
of Representations. Purchaser understands that Company is
relying and will rely 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 Company.
7. MISCELLANEOUS.
7.1 Prohibition
on Assignment by Company. Except as described in
Section 8(b)
(Merger or Sale of Assets) of the Subordinated Note, Company may
not assign, transfer or delegate any of its rights or obligations
under this Agreement or the Subordinated Note without the prior
written consent of Purchaser. In addition, in accordance with the
terms of the Subordinated Note, any transfer of such Subordinated
Note must be made in accordance with the Assignment Form attached
thereto and the requirements and restrictions thereof.
7.2 Time
of the Essence. Time is of the essence with respect to this
Agreement.
7.3 Waiver
or Amendment. No waiver or amendment of any term, provision,
condition, covenant or agreement herein shall be effective except
with the prior written consent of Purchaser. No failure to exercise
or delay in exercising, by Purchaser, 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 at law or in equity. No notice or demand
on Company in any case shall, in and of itself, entitle Company to
any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of Purchaser to
any other or further action in any circumstances without notice or
demand. No consent or waiver, express or implied, by Purchaser to
or of any breach or default by Company in the performance of its
obligations hereunder shall be deemed or construed to be a consent
or waiver to or of any other breach or default in the performance
of the same or any other obligations of Company hereunder. Failure
on the part of Purchaser to complain of any acts or failure to act
or to declare an Event of Default, irrespective of how long such
failure continues, shall not constitute a waiver by Purchaser of
its rights hereunder or impair any rights, powers or remedies on
account of any breach or default by Company.
7.4 Severability.
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.
7.5 Notices. 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
Company:
|
F &
M Bank Corp.
205
South Main Street
Timberville,
Virginia 22853
Attention: Mark C.
Hanna
Chief
Executive Officer
|
|
with a
copy to:
|
Williams
Mullen
200
South 10th Street, Suite 1600
Richmond, Virginia
23219
Attention: Lee G.
Lester
|
|
if to
Purchaser:
|
To the
address indicated on 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 mails 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).
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7.6 Successors and
Assigns. This Agreement shall inure to the benefit of the
parties and their respective heirs, legal representatives,
successors and assigns; except that, (i) unless Purchaser consents
in writing, no assignment made by Company in violation of this
Agreement shall be effective or confer any rights on any purported
assignee of Company and (ii) unless such assignment complies with
the Assignment Form attached to the Subordinated Note, no
assignment made by Purchaser shall be effective or confer any
rights on any purported assignee of Purchaser. The term
“successors and assigns” will not include a purchaser
of the Subordinated Note from Purchaser merely because of such
purchase but shall include a purchaser of the Subordinated Note
pursuant to an assignment complying with the Assignment Form
attached to the Subordinated Note.
7.7 No
Joint Venture. Nothing contained herein or in any document
executed pursuant hereto and no action or inaction whatsoever on
the part of Purchaser, shall be deemed to make Purchaser a partner
or joint venturer with Company.
7.8 Documentation.
All documents and other matters required by any of the provisions
of this Agreement to be submitted or furnished to Purchaser shall
be in form and substance satisfactory to Purchaser.
7.9 Entire
Agreement. This Agreement and the Subordinated Note along
with the 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 or in the Subordinated
Note.
7.10 Choice
of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina 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 Purchaser may have pursuant to 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 Purchaser which is
lawful pursuant to, or which is permitted by, any of the
foregoing.
7.11 No
Third Party Beneficiary. This Agreement is made for the sole
benefit of Company and Purchaser, 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, however, that the Financial
Advisor may rely on the representations and warranties contained
herein to the same extent as if it were a party to this
Agreement.
7.12 Legal
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.
7.13 Reinstatement
of Obligations. To the extent that Purchaser receives any
payment on account of Company’s obligations under the
Subordinated Note and any such payment and/or any part thereof is
subsequently invalidated, declared to be fraudulent or
preferential, set aside, subordinated and/or required to be repaid
to a trustee, receiver or any other Person under any bankruptcy
act, state or federal law, common law or equitable cause, then to
the extent of such payment received, Company’s obligations
under the Subordinated Note or part thereof intended to be
satisfied shall be revived and continue in full force and effect,
as if such payment(s) had not been received by Purchaser and
applied on account of Company’s obligations; provided, however, if Purchaser
successfully contests any such invalidation, declaration, set
aside, subordination or other order to pay any such payment to any
third party, Company’s obligations to Purchaser that
otherwise would have been revived pursuant to this subsection shall
be deemed satisfied.
7.14 Captions;
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.
7.15 Knowledge;
Discretion. All references herein to Purchaser’s or
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, and such knowledge as would
reasonably be expected to come to the attention of such officers in
the performance of their respective duties. Unless specified to the
contrary herein, all references herein to an exercise of discretion
or judgment by Purchaser, to the making of a determination or
designation by Purchaser, to the application of Purchaser’s
discretion or opinion, to the granting or withholding of
Purchaser’s consent or approval, to the consideration of
whether a matter or thing is satisfactory or acceptable to
Purchaser, or otherwise involving the decision making of Purchaser,
shall be deemed to mean that Purchaser shall decide using the
reasonable discretion or judgment of a prudent lender.
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7.16 Waiver
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
COMPANY OR PURCHASER. THE PARTIES 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 ACKNOWLEDGE THAT (I) THEY HAVE READ AND
UNDERSTAND THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (II) THIS
WAIVER HAS BEEN REVIEWED BY THE PARTIES AND THEIR COUNSEL AND IS A
MATERIAL INDUCEMENT FOR ENTRY INTO THIS AGREEMENT AND (III) THIS
WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH TRANSACTION DOCUMENTS
AS IF FULLY INCORPORATED THEREIN.
7.17 Expenses.
Except as otherwise provided in this Agreement, each of the parties
will bear and pay all other costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated
pursuant to this Agreement.
7.18 Survival.
Each of the representations and warranties set forth in this
Agreement shall survive the consummation of the transactions
contemplated hereby 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.
[Signature Pages Follow]
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IN WITNESS WHEREOF, Company has caused
this Subordinated Note Purchase Agreement to be executed by its
duly authorized representative as of the date first above
written.
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COMPANY:
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F
& M BANK CORP.
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By:
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/s/
Mark C.
Hanna
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Name: Mark C.
Hanna
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Title:
Chief
Executive Officer
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IN WITNESS WHEREOF, Purchaser has caused
this Subordinated Note Purchase Agreement to be executed by its
duly authorized representative as of the date first above
written.
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PURCHASER: |
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[ ] |
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By:
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/s/
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Name
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Title
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Address of
Purchaser:
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[
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Principal Amount of Subordinated Note
Purchased:
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$ [
]
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EXHIBIT A
FORM OF SUBORDINATED NOTE
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EXHIBIT B
FORM OF OPINION OF COUNSEL
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