Attached files
file | filename |
---|---|
EX-10.1 - SUBORDINATED NOTE PURCHASE AGREEMENT - F&M BANK CORP | fmbm_ex101.htm |
EX-4.1 - 2027 SUBORDINATED NOTE - F&M BANK CORP | fmbm_ex41.htm |
8-K - CURRENT REPORT - F&M BANK CORP | fmbm_8k.htm |
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.
|
F & M BANK CORP. |
|
|
|
|
|
|
|
By:
|
/s/ Mark C.
Hanna
|
|
|
|
Name: Mark C.
Hanna
|
|
|
|
Title:
Chief
Executive Officer
|
|
ATTEST:
|
__________________________________
|
|
Name: __________________________________
|
|
Title: __________________________________
|
[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:
□
|
(1)
|
acquired for the
undersigned’s own account, without transfer;
|
□
|
(2)
|
transferred to the
Company;
|
□
|
(3)
|
transferred in
accordance and in compliance with Rule 144A under the Securities
Act of 1933, as amended (the “Securities
Act”);
|
□
|
(4)
|
transferred under
an effective registration statement under the Securities
Act;
|
□
|
(5)
|
transferred in
accordance with and in compliance with Regulation S under the
Securities Act;
|
□
|
(6)
|
transferred to an
institutional “accredited investor” (as defined in Rule
501(a)(1), (2), (3), (5), or (7) under the Securities
Act);
|
□
|
(7)
|
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
|
□
|
(8)
|
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.: ___________________________