Exhibit 10.1

 

 

SUBORDINATED NOTE PURCHASE AGREEMENT

 

This SUBORDINATED NOTE PURCHASE AGREEMENT (this “Agreement”) is dated as of June
10, 2020, and is made by and among Eagle Bancorp Montana, Inc., a Delaware
corporation (the “Company”), and the several purchasers of the Subordinated
Notes (as defined herein) identified on the signature pages hereto (each a
“Purchaser” and collectively, the “Purchasers”).

 

RECITALS

 

WHEREAS, the Company has requested that the Purchasers purchase from the Company
up to $15,000,000 in aggregate principal amount of Subordinated Notes, which
aggregate amount is intended to qualify as Tier 2 Capital (as defined herein).

 

WHEREAS, the Company has engaged Brean Capital, LLC, as its exclusive placement
agent (“Placement Agent”) for the offering of the Subordinated Notes.

 

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

 

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

 

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

 

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 used in this Agreement
and in the Subordinated Notes have the meanings defined or referenced below.
Certain other capitalized terms used only in specific sections of this Agreement
may be defined in such sections.

 

“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.

 

 

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

 

“Bank” means Opportunity Bank of Montana, a Montana-chartered commercial bank
and wholly owned subsidiary of the Company.

 

“Business Day” means any day other than a Saturday, Sunday or any other day on
which banking institutions in the State of Montana are permitted or required by
any applicable law or executive order to close.

 

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

 

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

 

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

 

“Closing Date” means June 10, 2020.

 

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

 

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

 

“Company’s SEC Reports” means (i) Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2019, as filed with the SEC, (ii) Company’s
Definitive Proxy Statement on Schedule 14A related to its 2020 Annual Meeting of
Shareholders, as filed with the SEC, (iii) any Current Report on Form 8-K, as
filed or furnished by Company with the SEC since April 1, 2020, or (iv)
Company’s Quarterly Reports on Form 10-Q for the quarterly period ended on March
31, 2020, as filed with the SEC pursuant to the requirements of the Exchange
Act.

 

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

 

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

 

“DTC” has the meaning set forth in Section 5.8.

 

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

 

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

 

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

 

“FDIC” means the Federal Deposit Insurance Corporation.

 

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

 

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“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, without limitation, each applicable Regulatory
Agency) with jurisdiction over the Company or a Subsidiary.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Maturity Date” means July 1, 2030.

 

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

 

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

 

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

 

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

 

“QIB” has the meaning set forth in Section 5.8.

 

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

 

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

 

“SEC” means the Securities and Exchange Commission.

 

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

 

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

 

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“Subordinated Note” means the Subordinated Note (or collectively, the
“Subordinated Notes”) in the form attached as 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.

 

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

 

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

 

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

 

“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 Subordinated Notes
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.

 

2.           SUBORDINATED DEBT.

 

2.1     Certain Terms. Subject to the terms and conditions herein contained, the
Company proposes to issue and sell to the Purchasers, severally and not jointly,
Subordinated Notes in an aggregate principal amount equal to the aggregate of
the Subordinated Note Amounts. The Purchasers, severally and not jointly, each
agree to purchase the Subordinated Notes from the Company on the Closing Date in
accordance with the terms of, and subject to the conditions and provisions set
forth in, this Agreement and the Subordinated Notes. The Subordinated Note
Amounts shall be disbursed in accordance with Section 3.1. The Subordinated
Notes shall bear interest per annum as set forth in the Subordinated Notes. The
unpaid principal balance of the Subordinated Notes 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 the Purchasers in accordance with the terms of the Subordinated
Notes and this Agreement or (ii) the Company’s delivery of a notice of
redemption or repayment in accordance with the terms of the Subordinated Notes.

 

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2.2     Subordination. The Subordinated Notes 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 Notes shall be repaid in full. The Company
acknowledges and agrees that the Purchasers have not made any commitments,
either express or implied, to extend the terms of the Subordinated Notes past
their Maturity Date, and shall not extend such terms beyond the Maturity Date
unless the Company and the Purchasers hereafter specifically otherwise agree in
writing.

 

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

 

2.5    The Closing. The closing of the sale and purchase of the Subordinated
Notes (the “Closing”) shall occur at the offices of the Company at 10:00 a.m.
(local time) on the Closing Date, or at such other place or time or on such
other date as the parties hereto may agree.

 

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

 

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

 

2.8     Use of Proceeds. The Company shall use the net proceeds from the sale of
Subordinated Notes for general corporate purposes, including but not limited to
the prepayment of $10.0 million of outstanding subordinated notes.

 

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 the Company and the
Company has executed and delivered to each of the Purchasers this Agreement and
such Purchaser’s Subordinated Note and any other related documents in form and
substance reasonably satisfactory to the Purchasers, each Purchaser shall
disburse in immediately available funds the Subordinated Note Amount set forth
on each Purchaser’s respective signature page hereto to the Company in exchange
for a Subordinated Note with a principal amount equal to such Subordinated Note
Amount (the “Disbursement”). The Company will deliver to the respective
Purchaser one or more certificates representing the Subordinated Notes in
definitive form (or provide evidence of the same with the original to be
delivered by the Company by overnight delivery on the next calendar day in
accordance with the delivery instructions of the Purchaser), registered in such
names and denominations as such Purchasers may request.

 

3.2     Conditions Precedent to Disbursement.

 

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

 

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3.2.1.1     Transaction Documents. This Agreement and such Purchaser’s
Subordinated Note (collectively, the “Transaction Documents”), each duly
authorized and executed by the Company.

 

3.2.1.2     Authority Documents.

 

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

 

(b)     A certificate of existence of the Company issued by the Secretary of
State of the State of Delaware;

 

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

 

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

 

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

 

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

 

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

 

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

 

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4.           REPRESENTATIONS AND WARRANTIES OF COMPANY.

 

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

 

4.1     Organization and Authority.

 

4.1.1     Organization Matters of the Company and Its Subsidiaries.

 

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

 

4.1.1.2     The Bank, Eagle Bancorp Statutory Trust I and Western Financial
Services, Inc. are the only direct or indirect Subsidiaries of the Company. Each
Subsidiary of the Company other than the Bank either has been duly organized and
is validly existing as a corporation or limited liability company, or, in the
case of the Bank, has been duly chartered and is validly existing as a
Montana-chartered commercial bank, in each case in good standing under the laws
of the jurisdiction of its incorporation, has corporate power and authority to
own, lease and operate its properties and to conduct its business and is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business, except where
the failure so to qualify or to be in good standing would not reasonably be
expected to result in a Material Adverse Effect. All of the issued and
outstanding shares of capital stock or other equity interests in each Subsidiary
of the Company have been duly authorized and validly issued, are fully paid and
non-assessable and are owned by the Company, directly or through Subsidiaries of
the Company, free and clear of any security interest, mortgage, pledge, lien,
encumbrance or claim; none of the outstanding shares of capital stock of, or
other Equity Interests in, any Subsidiary of the Company were issued in
violation of the preemptive or similar rights of any security holder of such
Subsidiary of the Company or any other entity.

 

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

 

4.1.2     Capital Stock and Related Matters. The Charter of the Company
authorizes the Company to issue 20,000,000 shares of common stock and 1,000,000
shares of preferred stock. As of the date of this Agreement, there are 6,818,883
shares of the Company’s common stock issued and outstanding and no shares of the
Company’s preferred stock issued and outstanding. All of the outstanding capital
stock of the Company has been duly authorized and validly issued and is fully
paid and non-assessable. There are, as of the date hereof, no outstanding
options, rights, warrants or other agreements or instruments obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of the Company or obligating the Company
to grant, extend or enter into any such agreement or commitment to any Person
other than the Company except pursuant to the Company’s equity incentive plans
duly adopted by the Company’s Board of Directors.

 

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4.2     No Impediment to Transactions.

 

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

 

4.2.2     Agreement. This Agreement has been duly authorized, executed and
delivered by the Company, and, assuming due authorization, execution and
delivery by the other parties hereto, constitutes the legal, valid and binding
obligations of the Company, enforceable against the Company 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 Notes. The Subordinated Notes have been duly authorized
by the Company and when executed by the Company and issued, delivered to and
paid for by the Purchasers in accordance with the terms of the Agreement, will
have been duly executed, authenticated, issued and delivered, and will
constitute legal, valid and binding obligations of the Company and enforceable
in accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors’ rights generally or by general equitable
principles.

 

4.2.4     Exemption from Registration. Neither the 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 Notes. Assuming the accuracy of the representations and warranties
of each Purchaser set forth in this Agreement, the Subordinated Notes will be
issued in a transaction exempt from the registration requirements of the
Securities Act. No “bad actor” disqualifying event described in Rule
506(d)(1)(i)-(viii) of the Securities Act (a “Disqualification Event”) is
applicable to the Company or, to the Company’s knowledge, any Person described
in Rule 506(d)(1) (each, a “Company Covered Person”). The Company has exercised
reasonable care to determine whether any Company Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent applicable, with
its disclosure obligations under Rule 506(e).

 

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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 Charter or Bylaws of the Company; (2) any of the terms, obligations,
covenants, conditions or provisions of any corporate restriction or of any
contract, agreement, indenture, mortgage, deed of trust, pledge, bank loan or
credit agreement, or any other agreement or instrument to which the Company or
Bank, as applicable, is now a party or by which it or any of its properties may
be bound or affected; (3) any judgment, order, writ, injunction, decree or
demand of any court, arbitrator, grand jury, or Governmental Agency applicable
to the Company or the Bank; or (4) any statute, rule or regulation applicable to
the Company, except, in the case of items (2), (3) or (4), for such violations
and conflicts that would not reasonably be expected to have, singularly or in
the aggregate, a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole, or (ii) result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any property or asset of the
Company. Neither the Company nor the Bank is in default in the performance,
observance or fulfillment of any of the terms, obligations, covenants,
conditions or provisions contained in any indenture or other agreement creating,
evidencing or securing Indebtedness of any kind or pursuant to which any such
Indebtedness is issued, or any other agreement or instrument to which the
Company or the Bank, as applicable, is a party or by which the Company or the
Bank, as applicable, or any of its properties may be bound or affected, except,
in each case, only such defaults that would not reasonably be expected to have,
singularly or in the aggregate, a Material Adverse Effect on the Company.

 

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

 

4.3     Possession of Licenses and Permits. The Company and its 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 on the Company or such applicable
Subsidiary; the Company and each Subsidiary of the Company is in compliance with
the terms and conditions of all such Governmental Licenses, except where the
failure so to comply would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or such applicable Subsidiary of the
Company; all of the Governmental Licenses are valid and in full force and
effect, except where the invalidity of such Governmental Licenses or the failure
of such Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect on the Company or such applicable Subsidiary of the
Company; and neither the Company nor any Subsidiary of the Company has received
any notice of proceedings relating to the revocation or modification of any such
Governmental Licenses.

 

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4.4     Financial Condition.

 

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

 

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

 

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

 

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

 

4.5     No Material Adverse Change. Since the end of the Company’s last fiscal
year ended December 31, 2019, there has been no development or event which has
had or could reasonably be expected to have a Material Adverse Effect on the
Company or any of its Subsidiaries.

 

4.6     Legal Matters.

 

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

 

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4.6.2     Regulatory Enforcement Actions. The Company, the Bank and its other
Subsidiaries are in compliance in all material respects with all laws
administered by and regulations of any Governmental Agency applicable to it or
to them, the failure to comply with which would have a Material Adverse Effect.
None of the Company, the Bank, the Company’s or the Bank’s Subsidiaries nor any
of their officers or directors is now operating under any restrictions,
agreements, memoranda, commitment letter, supervisory letter or similar
regulatory correspondence, or other commitments (other than restrictions of
general application) imposed by any Governmental Agency, nor are, to the
Company’s knowledge, (a) any such restrictions threatened, (b) any agreements,
memoranda or commitments being sought by any Governmental Agency , or (c) any
legal or regulatory violations previously identified by, or penalties or other
remedial action previously imposed by, any Governmental Agency remains
unresolved.

 

4.6.3     Pending Litigation. There are no actions, suits, proceedings or
written agreements pending, or, to the Company’s knowledge, threatened or
proposed, against the Company or any of its Subsidiaries at law or in equity or
before or by any federal, state, municipal, or other governmental department,
commission, board, or other administrative agency, domestic or foreign, that,
either separately or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Company and any of its Subsidiaries, taken as a
whole, or affect issuance or payment of the Subordinated Notes; and neither the
Company nor any of its Subsidiaries is a party to or named as subject to the
provisions of any order, writ, injunction, or decree of, or any written
agreement with, any court, commission, board or agency, domestic or foreign,
that either separately or in the aggregate, will have a Material Adverse Effect
on the Company and any of its Subsidiaries, taken as a whole.

 

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

 

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

 

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

 

4.7     No Misstatement. No information, exhibit, report, schedule or document,
when viewed together as a whole, furnished by the Company to the Purchasers in
connection with the negotiation, execution or performance of this Agreement
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements contained therein not misleading in light
of the circumstances when made or furnished to Purchasers and as of the date of
this Agreement.

 

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4.8     Reporting Compliance. The Company is subject to, and is in compliance in
all material respects with, the reporting requirements of Section 13 and Section
15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and
the rules and the regulations of the SEC thereunder (collectively, the “Exchange
Act”). The Company’s SEC Reports at the time they were or hereafter are filed
with the SEC, complied in all material respects with the requirements of the
Exchange Act and did not and do not include any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

 

4.9      Internal Control Over Financial Reporting. The Company maintains
systems of “internal control over financial reporting” (as defined in Rule
13a-15(f) of the Exchange Act) that comply with the requirements of the Exchange
Act and have been designed by, or under the supervision of, their respective
principal executive and principal financial officers, or persons performing
similar functions, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP, including, but not limited to, a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Since the conclusion of the Company’s most recently completed
fiscal year, (y) Company has no knowledge of (A) any material weakness in
Company’s internal control over financial reporting (whether or not remediated)
except as otherwise disclosed in the Company’s SEC Reports, or (B) any fraud,
whether or not material, that involves management or other employees who have a
significant role in Company’s internal controls or any Subsidiaries’ internal
controls, and (z) except as otherwise disclosed in the Company’s SEC Reports,
there has been no change in the Company’s internal control over financial
reporting that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.

 

4.10     Disclosure Controls and Procedures. The Company maintains an effective
system of disclosure controls and procedures (as defined in Rule 13a-15 and Rule
15d-15 of the Exchange Act), that (i) are designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and that material
information relating to the Company and its Subsidiaries is made known to the
Company’s principal executive officer and principal financial officer by others
within the Company and its Subsidiaries to allow timely decisions regarding
disclosure, and (ii) are effective in all material respects to perform the
functions for which they were established. As of the date hereof, the Company
has no knowledge that would reasonably cause it to believe that the evaluation
to be conducted of the effectiveness of the Company’s disclosure controls and
procedures for the most recently completed fiscal quarter period will result in
a finding that such disclosure controls and procedures are ineffective for such
quarter ended. Based on the evaluation of the Company’s and each Subsidiary’s
disclosure controls and procedures described above, the Company is not aware of
(1) any significant deficiency in the design or operation of internal controls
which could adversely affect the Company’s ability to record, process, summarize
and report financial data or any material weaknesses in internal controls,
except as disclosed in the Company’s SEC Reports, or (2) any fraud, whether or
not material, that involves management or other employees who have a significant
role in the Company’s internal controls or any Subsidiaries’ internal controls.
Except as disclosed in the Company’s SEC Reports, since the most recent
evaluation of the Company’s disclosure controls and procedures described above,
there have been no significant changes in internal controls or in other factors
that could significantly affect internal controls.

 

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

 

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

 

4.13     Representations and Warranties Generally. The representations and
warranties of the Company set forth in this Agreement or in any other document
delivered to the Purchasers by or on behalf of the Company pursuant to or in
connection with this Agreement are true and correct as of the date hereof and as
otherwise specifically provided herein or therein.

 

5.           GENERAL COVENANTS, CONDITIONS AND AGREEMENTS.

 

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

 

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

 

5.2      Affiliate Transactions. Except with respect to a reorganization or
merger of one or more of the Company’s acquired FDIC insured Subsidiary banks
with and into the Bank so that the Bank is the survivor of such merger(s), the
Company shall not itself, nor shall it cause, permit or allow any of its
Subsidiaries to enter into any material transaction, including, the purchase,
sale or exchange of property or the rendering of any service, with any Affiliate
of the Company except in the ordinary course of business and pursuant to the
reasonable requirements of the 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 the Company or such Affiliate than would be obtained in a
comparable arm’s length transaction with a Person not an Affiliate.

 

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5.3     Compliance with Laws.

 

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

 

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

 

5.3.3     Taxes. The Company shall and shall cause Bank and any other of its
Subsidiaries to promptly pay and discharge all taxes, assessments and other
governmental charges imposed upon the Company, the Bank or any other of its
Subsidiaries or upon the income, profits, or property of the Company or any
Subsidiary and all claims for labor, material or supplies which, if unpaid,
might by law become a lien or charge upon the property of the Company, the Bank
or any other of its Subsidiaries. Notwithstanding the foregoing, none of the
Company, the Bank or any other of its Subsidiaries shall be required to pay any
such tax, assessment, charge or claim, so long as the validity thereof shall be
contested in good faith by appropriate proceedings, and appropriate reserves
therefor shall be maintained on the books of the Company, the Bank and such
other Subsidiary.

 

5.3.4     Corporate Existence. The Company shall do or cause to be done all
things reasonably necessary to preserve and keep in full force and effect: (i)
the corporate existence of the Company; (ii) the existence (corporate or
otherwise) of each of its Subsidiaries; and (iii) the rights (charter and
statutory), licenses and franchises of the Company and each of its Subsidiaries;
provided, however, that the Company will not be required to preserve the
existence (corporate or otherwise) of any of its Subsidiaries or any such right,
license or franchise of the Company or any of its Subsidiaries 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 impair the Company’s ability
to repay the Subordinated Notes in any material respect.

 

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5.3.5     Dividends, Payments, and Guarantees During Event of Default. Upon the
occurrence of an Event of Default (as defined under the Subordinated Notes),
until such Event of Default is cured by the Company or waived by the Noteholders
(as defined under the Subordinated Notes) in accordance with Section 18 (Waiver
and Consent) of the Subordinated Notes and except as required by any federal or
state Governmental Agency, the Company shall not (a) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock; (b) make any
payment of principal of, or interest or premium, if any, on, or repay,
repurchase or redeem any of the Company’s Indebtedness that ranks equal with or
junior to the Subordinated Notes; or (c) make any payments under any guarantee
that ranks equal with or junior to the Subordinated Notes, other than (i) any
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, any class of the Company’s common stock;
(ii) any declaration of a non-cash dividend in connection with the
implementation of a shareholders’ rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto; (iii) as a result of a reclassification of the Company’s
capital stock or the exchange or conversion of one class or series of the
Company’s capital stock for another class or series of the Company’s capital
stock; (iv) the purchase of fractional interests in shares of the Company’s
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged; or (v) purchases of any
class of the Company’s common stock related to the issuance of common stock or
rights under any benefit plans for the Company’s directors, officers or
employees or any of the Company’s dividend reinvestment plans.

 

5.3.6     Tier 2 Capital. If all or any portion of the Subordinated Notes ceases
to be deemed to be Tier 2 Capital, other than due to the limitation imposed on
the capital treatment of subordinated debt during the five (5) years immediately
preceding the Maturity Date of the Subordinated Notes, the Company will
immediately notify the Noteholder (as defined in the Subordinated Note), and
thereafter the Company and the Noteholder (as defined in the Subordinated Note)
will work together in good faith for a reasonable period of time not to exceed
one hundred twenty (120) days to execute and deliver all agreements as
reasonably necessary in order to restructure the applicable portions of the
obligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital;
provided, however, that nothing contained in this Agreement shall limit the
Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2
Capital Event as described in the Subordinated Notes.

 

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

 

5.5     Secondary Market Transactions. Each Purchaser shall have the right at
any time and from time to time to securitize its Subordinated Notes or any
portion thereof in a single asset securitization or a pooled loan securitization
of rated single or multi-class securities secured by or evidencing ownership
interests in the Subordinated Notes (each such securitization is referred to
herein as a “Secondary Market Transaction”). In connection with any such
Secondary Market Transaction, the Company shall, at the Company’s expense,
cooperate with the Purchasers and otherwise reasonably assist the Purchasers in
satisfying the market standards to which Purchasers customarily adhere or which
may be reasonably required in the marketplace or by applicable rating agencies
in connection with any such Secondary Market Transaction. Subject to any written
confidentiality obligation, all information regarding the Company may be
furnished, without liability except in the case of gross negligence or willful
misconduct, to any Purchaser and to any Person reasonably deemed necessary by
the Purchaser in connection with participation in such Secondary Market
Transaction. All documents, financial statements, appraisals and other data
relevant to the Company or the Subordinated Notes may be retained by any such
Person, subject to the terms of any applicable confidentiality agreements.

 

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

 

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

 

5.8     DTC Registration. Upon the request of a holder of a Subordinated Note
that is either (a) a Qualified Institutional Buyer, as defined in Rule 144A
under the Securities Act (each, a “QIB”), or (b) an institutional “accredited
investor,” as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act, the Company shall use commercially reasonable efforts to cause the
Subordinated Notes held by such QIB to be registered in the name of Cede & Co.
as nominee of The Depository Trust Company (“DTC”) or a nominee of DTC. For
purposes of clarity and pursuant to (and as further described in) the terms of
the Subordinated Notes, any redemption made pursuant to the terms of the
Subordinated Notes shall be made on a pro rata basis, and, for purposes of a
redemption processed through DTC, on a “Pro Rata Pass-Through Distribution of
Principal” basis, among all of the Subordinated Notes outstanding at the time
thereof.

 

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

 

6.           REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS.

 

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

 

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

 

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
such Purchaser, and, assuming due authorization, execution and delivery by the
other parties hereto, this Agreement is a legal, valid and binding obligation of
such Purchaser, enforceable against such Purchaser in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors’ rights generally or by general equitable principles.

 

6.3    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) its organizational documents, (ii) any agreement to which it is party,
(iii) any law applicable to it or (iv) any order, writ, judgment, injunction,
decree, determination or award binding upon or affecting it.

 

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

 

6.5     Institutional Accredited Investor. It 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,
or (ii) a QIB.

 

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

 

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

 

6.8     Information. It acknowledges that (i) it is not being provided with the
disclosures that would be required if the offer and sale of the Subordinated
Notes were registered under the Securities Act, nor is it being provided with
any offering circular or prospectus prepared in connection with the offer and
sale of the Subordinated Notes; (ii) it has conducted its own examination of the
Company and the terms of the Subordinated Notes to the extent it deems necessary
to make its decision to invest in the Subordinated Notes; and (iii) it has
availed itself of publicly available financial and other information concerning
the Company to the extent it deems necessary to make its decision to purchase
the Subordinated Notes. It has reviewed the information set forth in the
Company’s SEC Reports, the exhibits hereto and the information contained in the
data room established by the Company in connection with the transactions
contemplated by this Agreement.

 

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

 

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6.10     Investment Decision. It has made its own investment decision based upon
its own judgment, due diligence and advice from such advisors as it has deemed
necessary and not upon any view expressed by any other Person or entity,
including the Placement Agent. 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 the Company’s
representations and warranties contained herein. It is not relying upon, and has
not relied upon, any advice, statement, representation or warranty made by any
Person by or on behalf of the Company, including, without limitation, the
Placement Agent, except for the express statements, representations and
warranties of the Company made or contained in this Agreement. Furthermore, it
acknowledges that (i) the Placement Agent has not performed any due diligence
review on behalf of it and (ii) nothing in this Agreement or any other materials
presented by or on behalf of the Company to it in connection with the purchase
of the Subordinated Notes constitutes legal, tax or investment advice.

 

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

 

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

 

6.13     Tier 2 Capital. If the Company provides notice as contemplated in
Section 5.3.6 of the occurrence of the event contemplated in such section,
thereafter the Company and the Purchasers will work together in good faith for a
reasonable period of time not to exceed one hundred twenty (120) days to execute
and deliver all agreements as reasonably necessary in order to restructure the
applicable portions of the obligations evidenced by the Subordinated Notes to
qualify as Tier 2 Capital; provided, however, that nothing contained in this
Agreement shall limit the Company’s right to redeem the Subordinated Notes upon
the occurrence of a Tier 2 Capital Event as described in the Subordinated Notes.

 

6.14     Accuracy of Representations. It understands that each of the Placement
Agent and the Company are relying upon the truth and accuracy of the foregoing
representations, acknowledgements and agreements in connection with the
transactions contemplated by this Agreement.

 

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

 

7.           MISCELLANEOUS.

 

7.1     Prohibition on Assignment by the Company. Except as described in Section
9(b) (Merger or Sale of Assets) of the Subordinated Notes, the Company may not
assign, transfer or delegate any of its rights or obligations under this
Agreement or the Subordinated Notes without the prior written consent of all the
Noteholders (as defined in the Subordinated Note). In addition, in accordance
with the terms of the Subordinated Notes, any transfer of such Subordinated
Notes by the Noteholders (as defined in the 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 for this Agreement.

 

7.3     Waiver or Amendment. Except as may apply to any particular waiving or
consenting Noteholder, no waiver or amendment of any term, provision, condition,
covenant or agreement herein or 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 holder 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 this Agreement and 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 this
Agreement or the Subordinated Notes; (vi) make any changes to Section 4(c)
(Partial Redemption), Section 6 (Events of Default; Acceleration), Section 7
(Failure to Make Payments), Section 16 (Priority), or Section 18 (Waiver and
Consent) of the Subordinated Notes that adversely affects the rights of any
holder of a Subordinated Note; (vii) make any changes to this Section 7.3
(Waiver or Amendment) that adversely affects the rights of any holder of a
Subordinated Note; or (viii) disproportionately 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 holders of the Subordinated Notes 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 holder of any of the
Subordinated Notes. No failure to exercise or delay in exercising, by a
Purchaser or any holder of the Subordinated Notes, of any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude any other or further
exercise thereof, or the exercise of any other right or remedy provided by law.
The rights and remedies provided in this Agreement are cumulative and not
exclusive of any right or remedy provided by law or equity. 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 Purchasers to any other or further action in any
circumstances without notice or demand. No consent or waiver, expressed or
implied, by the Purchasers 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 Purchasers 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 Purchasers of their rights hereunder or impair any
rights, powers or remedies on account of any breach or default by the Company.

 

21

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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 the Company:

Eagle Bancorp Montana, Inc.

1400 Prospect Avenue

Helena, Montana 59601

Attention: Laura F. Clark, Executive Vice

President, Chief Financial Officer and

Chief Operating Officer

 

with a copy to:

Holland & Knight LLP

1801 California Street, Suite 5000

Denver, Colorado 80202

Attention: Shawn Turner

 

if to the Purchasers:

To the address indicated on such Purchaser’s

signature page.

 

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

 

22

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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
permitted assigns. The term “successors and assigns” will not include a
purchaser of any of the Subordinated Notes from any Purchaser merely because of
such purchase.

 

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

 

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

 

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

 

7.10     Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to its
laws or principles of conflict of laws. Nothing herein shall be deemed to limit
any rights, powers or privileges which a Purchaser may have pursuant to any law
of the United States of America or any rule, regulation or order of any
department or agency thereof and nothing herein shall be deemed to make unlawful
any transaction or conduct by a Purchaser which is lawful pursuant to, or which
is permitted by, any of the foregoing.

 

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

 

7.12     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.

 

23

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7.13     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.

 

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

 

7.15     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 THE COMPANY OR THE PURCHASERS. 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.

 

7.16     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.

 

7.17     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]

 

24

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

 

 

COMPANY:

 

EAGLE BANCORP MONTANA, INC.

 

 

  By:      

Name:

Title:

Laura F. Clark

Executive Vice President, Chief Financial Officer

and Chief Operating Officer 

 

 

[Company Signature Page to Subordinated Note Purchase Agreement]

 

--------------------------------------------------------------------------------

 

 

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

 

 

 

 

PURCHASER:

 

[INSERT PURCHASER’S NAME]

 

 

 

  By:      

Name:

Title:

[●]

[●]

       

Address of Purchaser:

 

[●]

 

 

 

Principal Amount of Purchased Subordinated Note:

 

$[●]

 

 

--------------------------------------------------------------------------------

 
 

 

EXHIBIT A

 

EAGLE BANCORP MONTANA, INC.

 

5.5% FIXED TO FLOATING RATE SUBORDINATED NOTE DUE JULY 1, 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 EAGLE BANCORP MONTANA, INC. (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 the existing junior subordinated
debentures of the Company (underlying the outstanding trust preferred
securities) as of the date of the issuance of this Subordinated Note to which
this Subordinated Note shall be senior, (iii) WITH RESPECT TO any indebtedness
between the Company and any of its subsidiaries or affiliates or (iv) 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 $1,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED
TRANSFER OF THIS SUBORDINATED NOTE IN A DENOMINATION OF LESS THAN $1,000 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.

 

A-1

--------------------------------------------------------------------------------

 

 

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.

 

A-2

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No. [●]

CUSIP [●]

ISIN [●]

     

EAGLE BANCORP MONTANA, INC.

 

5.5% FIXED TO FLOATING RATE SUBORDINATED NOTE DUE JULY 1, 2030

 

1.          Subordinated Notes. This Subordinated note is one of an issue of
notes of Eagle Bancorp Montana, Inc., a Delaware corporation (the “Company”),
designated as the “5.5% Fixed to Floating Rate Subordinated Notes due 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 several 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 [●] Dollars (U.S.)
($[●],000,000), plus accrued but unpaid interest on July 1, 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 1, 2025 or the earlier
redemption date contemplated by Section 4 (Redemption) of this Subordinated Note
(the “Fixed Rate Period”), at the rate of 5.5% 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 1 and July 1 of each year (each payment date, a “Fixed
Interest Payment Date”), beginning July 1, 2020 and (ii) from and including July
1, 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 509
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”); provided that if Three-Month Term SOFR (or other applicable
Benchmark) is less than zero for any Floating Interest Period, then Three-Month
Term SOFR (or other such Benchmark) shall be deemed to be zero for such Floating
Interest Period.  During the Floating Rate Period, interest on the Notes will be
payable on January 1, April 1, July 1 and October 1 of each year (each payment
date, a “Floating Interest Payment Date”). 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 pursuant
to the Three-Month Term SOFR Conventions.

 

(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, determines 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.

 

A-3

--------------------------------------------------------------------------------

 

 

(2)     However, if the Calculation Agent, determines 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 (as
defined below).

 

(iii)     If the then-current Benchmark 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 (as defined below) 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 determines 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;

 

A-4

--------------------------------------------------------------------------------

 

 

(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:

 

(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 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;

 

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.

 

A-5

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(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 decides may be appropriate to reflect
the adoption of such Benchmark Replacement in a manner substantially consistent
with market practice (or, if the Company decides that adoption of any portion of
such market practice is not administratively feasible or if the Company
determines that no market practice for use of the Benchmark Replacement exists,
in such other manner as the Company determines 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.

 

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(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
determines 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 determines 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.

 

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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.

 

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(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.

 

(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 decides
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
decides that adoption of any portion of such market practice is not
administratively feasible or if the Company determines that no market practice
for the use of Three-Month Term SOFR exists, in such other manner as the Company
determines 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 State
of Delaware are generally authorized or required by law or executive order to be
closed.

 

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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, and including, but
not limited to all obligations to the Company’s general and secured creditors,
including but not limited to the Company’s 5.75% Senior Notes due 2022; (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, (C) the existing junior subordinated debentures of the
Company (underlying the outstanding trust preferred securities) as of the date
of the issuance of this Subordinated Note to which this Subordinated Note shall
be senior, or (D) 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 (as such term is defined in the Purchase
Agreement), 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.

 

(b)     In the event of 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 the
existing junior subordinated debentures of the Company (underlying the
outstanding trust preferred securities) as of the date of the issuance of this
Subordinated Note to which this Subordinated Note shall be senior, (iii) with
respect to any indebtedness between the Company and any of its subsidiaries or
Affiliates or (iv) on account of any capital stock.

 

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(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, 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 1, 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 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 a material risk that this Subordinated Note no
longer qualifies 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 date of issuance of this Subordinated Note.
“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 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.

 

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(b)     Redemption on or after Fifth Anniversary. On or after July 1, 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.

 

(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. For purposes of clarity, any redemption made
pursuant to the terms of this Subordinated Note shall be made on a pro rata
basis, and, for purposes of a redemption processed through DTC, on a “Pro Rata
Pass-Through Distribution of Principal” basis, among all of the Subordinated
Notes outstanding at the time thereof.

 

(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 paragraph (b) of this
Section 4 (Redemption), 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.

 

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(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.            Global Subordinated Notes.

 

(a)     Provided that applicable depository eligibility requirements are met,
upon the written election of any Noteholder that is either (i) a Qualified
Institutional Buyer, as defined in Rule 144A under the Securities Act, or (ii)
an institutional “accredited investor,” as defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act, the Company shall use its commercially
reasonable efforts to provide that the Subordinated Notes owned by Noteholders
that are Qualified Institutional Buyers and/or institutional “accredited
investors” shall be issued in the form of one or more Global Subordinated Notes
(each a “Global Subordinated Note”) registered in the name of The Depository
Trust Company or another organization registered as a clearing agency under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and designated
as Depositary by the Company or any successor thereto (the “Depositary”) or a
nominee thereof and delivered to such Depositary or a nominee thereof.

 

(b)     Notwithstanding any other provision herein, no Global Subordinated Note
may be exchanged in whole or in part for Subordinated Notes registered, and no
transfer of a Global Subordinated Note in whole or in part may be registered, in
the name of any person other than the Depositary for such Global Subordinated
Note or a nominee thereof unless (i) such Depositary advises the Company in
writing that such Depositary is no longer willing or able to properly discharge
its responsibilities as Depositary with respect to such Global Subordinated
Note, and no qualified successor is appointed by the Company within ninety (90)
days of receipt by the Company of such notice, (ii) such Depositary ceases to be
a clearing agency registered under the Exchange Act and no successor is
appointed by the Company within ninety (90) days after obtaining knowledge of
such event, (iii) the Company elects to terminate the book-entry system through
the Depositary or (iv) an Event of Default (as defined in Section 6 (Events of
Default; Acceleration)) shall have occurred and be continuing. Upon the
occurrence of any event specified in clause (i), (ii), (iii) or (iv) of this
Section 5(b), the Company or its agent shall notify the Depositary and instruct
the Depositary to notify all owners of beneficial interests in such Global
Subordinated Note of the occurrence of such event and of the availability of
Subordinated Notes to such owners of beneficial interests requesting the same.

 

(c)     If any Global Subordinated Note is to be exchanged for other
Subordinated Notes or canceled in part, or if another Subordinated Note is to be
exchanged in whole or in part for a beneficial interest in any Global
Subordinated Note, then either (i) such Global Subordinated Note shall be so
surrendered for exchange or cancellation as provided in this Section 5 or (ii)
the principal amount thereof shall be reduced or increased by an amount equal to
the portion thereof to be so exchanged or canceled, or equal to the principal
amount of such other Subordinated Note to be so exchanged for a beneficial
interest therein, as the case may be, by means of an appropriate adjustment made
on the records of the Company or, if applicable, the Company’s registrar and
transfer agent (“Registrar”), whereupon the Company or, if applicable, the
Registrar, in accordance with the applicable rules and procedures of the
Depositary (“Applicable Depositary Procedures”), shall instruct the Depositary
or its authorized representative to make a corresponding adjustment to its
records. Upon any such surrender or adjustment of a Global Subordinated Note by
the Depositary, accompanied by registration instructions, the Company shall
execute and deliver any Subordinated Notes issuable in exchange for such Global
Subordinated Note (or any portion thereof) in accordance with the instructions
of the Depositary.

 

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(d)     Every Subordinated Note executed and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Subordinated Note or any
portion thereof shall be executed and delivered in the form of, and shall be, a
Global Subordinated Note, unless such Subordinated Note is registered in the
name of a person other than the Depositary for such Global Subordinated Note or
a nominee thereof.

 

(e)     The Depositary or its nominee, as the registered owner of a Global
Subordinated Note, shall be the holder of such Global Subordinated Note for all
purposes under this Subordinated Note, and owners of beneficial interests in a
Global Subordinated Note shall hold such interests pursuant to Applicable
Depositary Procedures. Accordingly, any such owner’s beneficial interest in a
Global Subordinated Note shall be shown only on, and the transfer of such
interest shall be effected only through, records maintained by the Depositary or
its nominee or its Depositary participants. If applicable, the Registrar shall
be entitled to deal with the Depositary for all purposes relating to a Global
Subordinated Note (including the payment of principal and interest thereon and
the giving of instructions or directions by owners of beneficial interests
therein and the giving of notices) as the sole holder of the Subordinated Note
and shall have no obligations to the owners of beneficial interests therein. The
Registrar shall have no liability in respect of any transfers undertaken by the
Depositary.

 

(f)     The rights of owners of beneficial interests in a Global Subordinated
Note shall be exercised only through the Depositary and shall be limited to
those established by law and agreements between such owners and the Depositary
and/or its participants.

 

(g)     No holder of any beneficial interest in any Global Subordinated Note
held on its behalf by a Depositary shall have any rights with respect to such
Global Subordinated Note, and such Depositary may be treated by the Company and
any agent of the Company as the owner of such Global Subordinated Note for all
purposes whatsoever. Neither the Company nor any agent of the Company will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of a Global
Subordinated Note or maintaining, supervising or reviewing any records relating
to such beneficial ownership interests. Notwithstanding the foregoing, nothing
herein shall prevent the Company or any agent of the Company from giving effect
to any written certification, proxy or other authorization furnished by a
Depositary or impair, as between a Depositary and such holders of beneficial
interests, the operation of customary practices governing the exercise of the
rights of the Depositary (or its nominee) as holder of any Subordinated Note.

 

(h)     The Company, within thirty (30) calendar days after the receipt of
written notice from the Noteholder or any other holder of the Subordinated Notes
of the occurrence of an Event of Default with respect to this Subordinated Note,
shall mail to all the Noteholders, at their addresses shown on the Security
Register (as defined in Section 14 (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
Company in writing.

 

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6.            Events of Default; Acceleration.

 

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 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 or financial 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 thirty (30) 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 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 the Subordinated Notes, 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 22 (Notices), to the Company by a
Noteholder; or

 

(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 $20,000,000, 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.

 

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Unless the principal amount of this Subordinated Note already shall have become
due and payable, if an Event of Default set forth in Section 6(a) or Section
6(b) above shall have occurred and be continuing, the Noteholder, by notice in
writing to the Company, may declare the principal amount of this Subordinated
Note to be due and payable immediately and, upon any such declaration, the same
shall become and shall be immediately due and payable, and the Company waives
demand, presentment for payment, notice of nonpayment, notice of protest, and
all other notices. Notwithstanding the foregoing, because the Company will treat
the Subordinated Notes as Tier 2 Capital, upon the occurrence of an Event of
Default other than an Event of Default described in Section 6(a) or
Section 6(b), no Noteholder may accelerate the Stated Maturity 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 14 (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.

 

7.           Failure to Make Payments. In the event of an Event of Default under
Section 6(c), Section 6(d) or Section 6(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 holder of this Subordinated Note may, among other things, institute
a judicial proceeding for the collection of the sums so due and unpaid and such
amount as shall be sufficient to cover the reasonable costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of such Noteholder, its agents and counsel, 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 Event of Default is cured by the Company or waived by the Noteholders in
accordance with Section 18 (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 (the foregoing
clauses (i) through (v) are collectively referred to as the “Permitted
Dividends”).

 

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8.            Affirmative Covenants of the Company.

 

(a)     Notice of Certain Events. To the extent permitted by applicable statute,
rule or regulation, the Company shall provide written notice to the Noteholder
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 the Company
(but only to the extent that the Company is required to measure and report such
ratios on a consolidated basis under applicable law) or any of the Company’s
banking subsidiaries becomes less than ten percent (10.0%), eight percent (8.0%)
six and one-half percent (6.5%), or five percent (5.0%), respectively, as of the
end of any calendar quarter;

 

(ii)     The Company, the Bank, or any officer of the Company or Bank (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 dollar amount of any nonperforming assets of the Company on a
consolidated basis as of the end of a given fiscal quarter as a percentage of
the Company’s total assets increases by three percent (3%) or more from the end
of the preceding fiscal quarter;

 

(iv)    The appointment, resignation, removal or termination of the chief
executive officer, president, chief operating officer, chief financial officer,
chief credit officer, chief lending officer or any director of the Company or
the Bank; or

 

(v)     There is a change in ownership of 25% or more of the outstanding
securities of the Company entitled to vote for the election of directors.

 

(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 State of Montana 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.

 

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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 State of Montana. 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. 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; and (iii) the rights (constituent governing documents and
statutory), licenses and franchises of the Company and each of its subsidiaries;
provided, however, that the Company will not be required to preserve the
existence (corporate or other) of any of its subsidiaries or any such right,
license or franchise of the Company or any of its subsidiaries 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 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
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 8(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.

 

(f)     Transfer of Voting Stock. The Company will not, nor will it permit the
Bank to, directly or indirectly, sell, assign, transfer or otherwise dispose of
any shares of, securities convertible into, or options, warrants or rights to
subscribe for or purchase shares of, Voting Stock (as defined below) of the Bank
or any successor thereof or any subsidiary of the Company that is a depository
institution and that has consolidated assets equal to 30% or more of the
Company’s consolidated assets (“Material Subsidiary”), nor will the Company
permit the Material Subsidiary to issue any shares of, or securities convertible
into, or options, warrants or rights to subscribe for or purchase shares of,
Voting Stock of the Material Subsidiary if, in each case, after giving effect to
any such transaction and to the issuance of the maximum number of shares of
Voting Stock of the Material Subsidiary issuable upon the exercise of all such
convertible securities, options, warrants or rights, the Company would cease to
own, directly or indirectly, at least 80% of the issued and outstanding Voting
Stock of the Material Subsidiary. “Voting Stock” means outstanding shares of
capital stock having voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power because
of default in dividends or other default.

 

(g)     Waiver of Certain Covenants. The Company may omit in any particular
instance to comply with any term, provision or condition set forth in Section
8(c) (Maintenance of Office), Section 8(d) (Corporate Existence), Section 8(e)
(Maintenance of Properties), or Section 8(f) (Transfer of Voting Stock) 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.

 

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(h)     Tier 2 Capital. Whether or not the Company is subject to consolidated
capital requirements under applicable regulations of the Federal Reserve, if all
or any portion of the Subordinated Notes ceases to be deemed to be Tier 2
Capital, other than due to the limitation imposed on the capital treatment of
subordinated debt during the five (5) years immediately preceding the Stated
Maturity of the Subordinated Notes, the Company will promptly 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 8(i) (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).

 

(i)    Compliance with Laws. The Company 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) on
the Company and its subsidiaries taken as a whole.

 

(j)     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.

 

(k)     Financial Statements; Access to Records.

 

(i)     Not later than forty-five (45) days following the end of each
semi-annual or quarterly period, as applicable, for which the Company has not
submitted a Consolidated Financial Statements for Holding Companies Reporting
Form FR Y-9C to the Federal Reserve, upon request, the Company shall provide the
Noteholder with a copy of the Company’s unaudited parent company only 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 ninety (90) days from the end of each fiscal year, 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.

 

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(iii)     In addition to the foregoing Sections 8(k)(i) and (ii), if a
Noteholder holds at least twenty five percent (25%) in aggregate principal
amount (excluding any Subordinated Notes held by Company or any of its
Affiliates) of the Subordinated Notes at the time outstanding, the Company
agrees to furnish to such Noteholder, upon request, with such financial and
business information of the Company and the Bank as such Noteholder may
reasonably request as may be reasonably necessary or advisable to allow such
Noteholder to confirm compliance by the Company with this Note.

 

(l)     Company Statement as to Compliance. The Company will deliver to the
Noteholders, within (i) forty-five (45) days after the end of each of the first
three fiscal quarters and (ii) one hundred twenty (120) days after the end of
each fiscal year, an Officer’s Certificate covering the preceding fiscal quarter
or fiscal year, as applicable, 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.

 

9.            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” for regulatory
purposes immediately prior to the declaration of such dividend or distribution,
except for Permitted Dividends.

 

(b)    Merger or Sale of Assets. The Company shall not merge into another
entity, effect a Change in Bank Control (as defined below) 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 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; and

 

(ii)     immediately after giving effect to such transaction, no Event of
Default (as defined above), and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have occurred and be continuing.

 

“Change in Bank Control” means the sale, transfer, lease or conveyance by the
Company, or an issuance of equity securities by the Bank other than to the
Company, in either case resulting in ownership by the Company of less than 50%
of the Bank.

 

10.         Denominations. The Subordinated Notes are issuable only in
registered form without interest coupons in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof.

 

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11.         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.

 

12.         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 instructions to the Company, upon
presentation and surrender of this Subordinated Note at the Payment Office (as
defined in Section 22 (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. 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 its 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.

 

13.          Form of Payment. Payments of principal of 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.

 

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14.         Registration of Transfer, Security Register. Except as otherwise
provided herein, 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 $1,000 or any amount in excess thereof which is an integral
multiple of $1,000 (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 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.

 

15.         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 Note. 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.

 

16.         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, except any unsecured subordinated
debt that, pursuant to its express terms, is senior or subordinate in right of
payment to the Subordinated Notes.

 

17.        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.

 

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18.          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 which shall be a Noteholder or which 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 any
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 6 (Events of Default; Acceleration), Section 7
(Failure to Make Payments), Section 16 (Priority), or Section 18 (Waiver and
Consent) of the Subordinated Notes that adversely affects the rights of any
Noteholder; or (vii) disproportionately 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, except as restricted hereby. 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, expressed 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.

 

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19.          Absolute and Unconditional Obligation of the Company.

 

(a)     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.

 

(b)     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.

 

(c)     Any insured depository institution which shall be a Noteholder or which
otherwise shall have any beneficial ownership interest in this Subordinated Note
shall, by its acceptance of such Note (or beneficial interest therein), be
deemed to have waived any right of offset with respect to the indebtedness
evidenced thereby.

 

20.          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.

 

21.          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.

 

22.         Notices. All notices to the Company under this Subordinated Note
shall be in writing and addressed to the Company at 1400 Prospect Avenue,
Helena, Montana 59601, Attention: Laura F. Clark, Executive Vice President,
Chief Financial Officer and Chief Operating 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.

 

23.          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.

 

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24.        Governing Law; Interpretation. THIS SUBORDINATED NOTE WILL BE DEEMED
TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND WILL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF. THIS SUBORDINATED NOTE IS
INTENDED TO 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]

 

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IN WITNESS WHEREOF, the undersigned has caused this Subordinated Note to be duly
executed and attested.

 

 

EAGLE BANCORP MONTANA, INC.

 

By:_______________________________________
Name: Laura F. Clark
Title: Executive Vice President, Chief Financial Officer

and Chief Operating Officer

 

 

ATTEST:

 

__________________________________
Name:   Chantelle Nash
Title:     Corporate Secretary

 

 

[Signature Page to Subordinated Note]

 

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ASSIGNMENT FORM

 

To assign this Subordinated Note, fill in the form below: (I) or (we) assign and
transfer this Subordinated Note to:

 

 

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(Print or type assignee’s name, address and zip code)

 

 

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(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)

 

  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 it [is / is not] an Affiliate of the Company and
that, to its knowledge, the proposed transferee [is / is not] 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;

 

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☐

(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) 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:  

 

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

 

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