Exhibit 10.1

SUBORDINATED NOTE PURCHASE AGREEMENT

This SUBORDINATED NOTE PURCHASE AGREEMENT (this “Agreement”) is dated as of
June 27, 2019, and is made by and among BANKGUAM HOLDING COMPANY, a Guam
corporation (“Company”), and the several purchasers of the Subordinated Notes
named on Schedule I hereto (each a “Purchaser” and collectively, the
“Purchasers”).

RECITALS

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

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

WHEREAS, each of the Purchasers is an “accredited investor” as such term is
contemplated by Rule 501 of Regulation D (“Regulation D”) promulgated under the
Securities Act of 1933, as amended (the “Securities Act”).

WHEREAS, the sale of the Subordinated Notes by Company is being made pursuant to
Rule 506(b) of Regulation D.

WHEREAS, each Purchaser is willing to purchase from Company a Subordinated Note
in the principal amount set forth in Schedule I (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 generally 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.

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

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“Bank” means BANK OF GUAM, a Guam chartered commercial bank and a 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 Territory of Guam are permitted or required by
any applicable law or executive order to close.

“Closing” has the meaning set forth in Section 2.4.

“Closing Date” means June 27, 2019.

“Company” has the meaning set forth in the preamble hereto and shall include any
successor to Company by merger or otherwise.

“Company’s Liabilities” means Company’s obligations under the Transaction
Documents.

“Company’s Reports” means (a) Bank’s audited financial statements for the years
ended December 31, 2017 and 2018, and (b) Bank’s Consolidated Report of
Condition and Income as filed with or furnished to the FDIC for the period ended
March 31, 2019.

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

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

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

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and the regulations of the SEC, as incorporated into regulations of the
FDIC, promulgated thereunder.

“FDIC” means the Federal Deposit Insurance Corporation.

“FRB” means the Federal Reserve Board.

“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 Company or any of its Subsidiaries.

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

 

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“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.

“Holder” has the meaning set forth in the Subordinated Notes.

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

“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.

“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 position, results of operations or business of such Person, or
(ii) would materially impair the ability of any 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

 

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market conditions affecting financial institutions or their market prices
generally and not specifically related to Company or Purchasers, (4) direct
effects of compliance with this Agreement on the operating performance of
Company or Purchasers, including expenses incurred by Company or Purchasers in
consummating the transactions contemplated by this Agreement, and (5) the
effects of any action or omission taken by Company with the prior written
consent of Purchasers, and vice versa, or as otherwise contemplated by this
Agreement and the Subordinated Notes.

“Maturity Date” means June 30, 2029.

“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 Company or any Affiliate
or Subsidiary of Company.

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

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

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

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

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

“SEC” means the Securities and Exchange Commission.

“Subordinated Note” means the Subordinated Note (or collectively, the
“Subordinated Notes”) in the form attached as Exhibit B hereto and issued
pursuant to the terms of this Agreement, 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 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 and 12 C.F.R. Part 250, as amended, modified and supplemented and in
effect from time to time or any replacement thereof.

 

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“Transaction Documents” has the meaning set forth in Section 3.2.1.

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 the 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 replacement, extension or other
modification thereof.

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

2.    SUBORDINATED DEBT.

2.1    General Matters.

2.1.1    Certain Terms. Subject to the terms and conditions herein contained,
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. 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 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
Purchasers in accordance with the terms of the Subordinated Notes and this
Agreement or (ii) Company’s delivery of a notice of redemption or repayment in
accordance with the terms of the Subordinated Notes.

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

2.2    Maturity Date. On the Maturity Date, all sums due and owing under this
Agreement and the Subordinated Notes shall be repaid in full. Company
acknowledges and agrees that 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
Company and Purchasers hereafter specifically otherwise agree in writing.

2.3    Unsecured Obligations; No Sinking Fund. The obligations of Company to
Purchasers under the Subordinated Notes shall be unsecured. The Subordinated
Notes are not entitled to the benefit of any sinking fund.

 

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2.4    The Closing. The execution and delivery of the Transaction Documents (the
“Closing”) shall occur at the offices of 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.

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

2.6    Right of Offset. Each Purchaser hereby expressly waives any right of
offset it may have against Company.

2.7    Use of Proceeds. Company shall use the net proceeds from the sale of
Subordinated Notes for general corporate purposes.

3.    DISBURSEMENT.

3.1    Disbursement. On the Closing Date, assuming all of the terms and
conditions set forth in Section 3.2 have been satisfied by Company and Company
has executed and delivered to Purchasers each of the Agreement and the
Subordinated Notes and any other related documents in form and substance
reasonably satisfactory to Purchasers, each Purchaser shall disburse the
Subordinated Note Amount set forth next to its name in Schedule I in immediately
available funds to 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 Purchaser),
registered in such names and denominations as such Purchasers may request.

3.2    Conditions Precedent to Disbursement. In conjunction with and as
additional (but independent) supporting evidence for certain of the covenants,
representations and warranties made by Company herein, prior to and as a
condition of each Purchaser’s obligation to consummate the purchase of the
Subordinated Note and to effect the Disbursement, Company shall deliver or cause
to be delivered to Purchasers each of the following (or Purchaser shall waive,
in writing, such delivery, which written waiver shall be binding only on the
Purchaser granting such waiver):

3.2.1    Transaction Documents. This Agreement and the Subordinated Notes
(collectively, the “Transaction Documents”), each duly authorized and executed
by Company.

3.2.2    Authority Documents.

3.2.2.1    A copy, certified by the Secretary or Assistant Secretary of Company,
of the Articles of Incorporation of Company;

3.2.2.2    A certificate of existence of Company issued by the Department of
Revenue and Taxation, Territory of Guam;

3.2.2.3    A copy, certified by the Secretary or Assistant Secretary, of the
Bylaws of Company;

 

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3.2.2.4    A copy, certified by the Secretary or Assistant Secretary of Company,
of the resolutions of the board of directors of Company authorizing the
execution, delivery and performance of the Transaction Documents; and

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

3.2.3    Other Requirements. Such other additional information regarding the
Company, the Bank and any other Subsidiary of Company and their respective
assets, liabilities (including any liabilities arising from, or relating to,
legal proceedings) and contracts as a Purchaser may reasonably require.

3.2.4    Officer’s Certificate. A certificate signed on behalf of Company by a
senior executive officer certifying that the representations and warranties of
Company set forth in this Agreement are true and correct in all respects on and
as of the date of this Agreement and on and as of the Closing Date as though
made on and as of the Closing Date, except where the failure to be true and
correct (without regard to any materiality or Material Adverse Effect
qualifications contained therein), individually or in the aggregate, would not
be reasonably likely to have a Material Adverse Effect (and except that
(i) representations and warranties made as of a specified date shall only be
required to be true and correct as of such date and (ii) the representations and
warranties of Company set forth in Sections 4.2.1, 4.2.3 and 4.5 shall be true
and correct in all respects).

3.2.5    Opinion of Counsel. Purchasers and Placement Agent shall have received
the opinion of (i) Danilo M. Rapadas, General Counsel for the Company, dated the
Closing Date, in the form annexed hereto as Exhibit C-1 and (ii) Arriola Cowan &
Arriola, outside counsel for the Company, dated the Closing Date, in the form
annexed hereto as Exhibit C-2.

3.2.6    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.

3.2.7    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.

4.    REPRESENTATIONS AND WARRANTIES OF COMPANY.

Company hereby represents and warrants to each Purchaser as follows:

4.1    Organization and Authority.

4.1.1    Organization Matters of Company and Its Subsidiaries.

4.1.1.1     Company is validly existing and in good standing under the laws of
the Territory of Guam 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

 

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under the Transaction Documents. Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect. Company is duly registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended.

4.1.1.2    Bank is validly existing as a Guam chartered commercial bank and has
all requisite corporate power and authority to conduct its business and
activities as presently conducted and to own its properties. Bank 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 deposit accounts of Bank are insured by
the FDIC up to applicable limits. Neither Company nor Bank has received any
notice or other information indicating that Bank is not an “insured depository
institution” as defined in 12 U.S.C. Section 1813, nor has any event occurred
which could reasonably be expected to adversely affect the status of Bank as an
FDIC-insured institution.

4.1.1.3    SCHEDULE 4.1.1.3 lists each Subsidiary of Company (other than the
Bank) or Bank, and each has been duly organized and is validly existing as a
corporation or limited liability company, in each case in good standing under
the laws of the jurisdiction of its incorporation or formation, has corporate
power and authority to own, lease and operate its properties and to conduct its
business and is duly qualified as a foreign entity to transact business and is
in good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing would
not result in a Material Adverse Effect. All of the issued and outstanding
shares of capital stock or other equity interests in each Subsidiary have been
duly authorized and validly issued, are fully paid and non-assessable and are
owned by Company or Bank, directly or through Subsidiaries, 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 were issued in violation of the preemptive or similar rights of any
security holder of such Subsidiary or any other entity.

4.1.2    Capital Stock and Related Matters. The Articles of Incorporation of
Company authorizes Company to issue forty eight million shares of common stock,
$0.208 1/3 par value. As of the date of this Agreement, there are 9,660,046
shares of the Company’s common stock issued and outstanding. All of the
outstanding capital stock of Company has been duly authorized and validly issued
and is fully paid and nonassessable. Except as set forth on Schedule 4.1.2,
there are, as of the date hereof, no outstanding options, rights, warrants or
other agreements or instruments obligating Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of the capital stock of
Company or obligating Company to grant, extend or enter into any such agreement
or commitment to any Person except pursuant to Company’s equity incentive or
employee stock purchase plans duly adopted by 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 Amounts, the
execution of the Transaction Documents and compliance by Company with all of the
provisions of the Transaction Documents are within the corporate and other
powers of Company.

4.2.2    Agreement. The Agreement has been duly authorized, executed and
delivered, and, assuming due authorization, execution and delivery by the other
parties thereto, constitutes the legal, valid and binding obligations of
Company, enforceable in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors’ rights generally or by general
equitable principles.

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

4.2.4    Exemption from Registration. Neither 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).

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

 

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any of the terms, obligations, covenants, conditions or provisions contained in
any indenture or other agreement creating, evidencing or securing Indebtedness
of any kind or pursuant to which any such Indebtedness is issued, or any other
agreement or instrument to which Company or Bank is a party or by which Company
or Bank 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 Company or Bank.

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

4.3    Possession of Licenses and Permits. Each of Company, Bank and their
respective 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 it except where the failure to possess such Governmental Licenses would not,
singularly or in the aggregate, have a Material Adverse Effect on Company or
such applicable Subsidiary; Company and each Subsidiary of Company is in
compliance with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect on Company or such applicable Subsidiary of
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 Company or such applicable Subsidiary of Company; and
neither Company nor any Subsidiary of Company has received any notice of
proceedings relating to the revocation or modification of any such Governmental
Licenses.

4.4    Financial Condition.

4.4.1    Financial Statements. The financial statements of Bank, included in
Company’s Reports (including the related notes, where applicable), which have
been provided to Purchasers (i) have been prepared from, and are in accordance
with, the books and records of Bank; (ii) fairly present in all material
respects the results of operations, changes in stockholders’ equity and
financial condition of Bank and its consolidated Subsidiaries, for the
respective fiscal periods or as of the respective dates therein set forth
(subject in the case of unaudited statements to recurring year-end audit
adjustments normal in nature and amount), as applicable; (iii) complied as to
form, as of their respective dates of filing in all material respects with
applicable accounting and banking requirements as applicable, with respect
thereto; and (iv) have been prepared in accordance with GAAP consistently
applied during the periods involved, except, in each case, as required by any
regulatory accounting practices. The books and records of Company and Bank have
been, and are being, maintained in all material respects in accordance with GAAP
and any other applicable legal and accounting requirements. Neither Company nor
Bank has any material liability of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether due or to become due), except for
those liabilities that are reflected or reserved against on the consolidated
balance sheet of Company and Bank contained in Company’s Reports for the 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.

 

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4.4.2    Controls. The records, systems, controls, data and information of
Company and the Bank are recorded, stored, maintained and operated under means
(including any electronic, mechanical or photographic process, whether
computerized or not) that are under the exclusive ownership and direct control
of it or its accountants including all means of access thereto and therefrom,
except for any non-exclusive ownership and non-direct control that would not
reasonably be expected to have a Material Adverse Effect on the system of
internal accounting controls described in the following sentence. Each of
Company and the Bank has devised and maintained a system of internal accounting
controls sufficient to provide reasonable assurances (i) that the assets of
Company and the Bank are properly recorded and (ii) regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP.

4.4.3    Absence of Default. Since the date of the latest audited financial
statements, no event has occurred which either of itself or with the lapse of
time or the giving of notice or both, would give any creditor of Company or Bank
the right to accelerate the maturity of any material Indebtedness of Company or
Bank. Neither Company nor Bank is in default under any 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 Company.

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

4.4.5    Ownership of Property. 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 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 Company’s Reports or acquired subsequent thereto (except to
the extent that such assets and properties have been disposed of in the ordinary
course of business, since the date of such balance sheet), subject to no
encumbrances, liens, mortgages, security interests or pledges, except (i) those
items which secure liabilities for public or statutory obligations or any
discount with, borrowing from or other obligations to the Federal Home Loan
Bank, inter-bank credit facilities, reverse repurchase agreements or any
transaction by 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, singly or in the aggregate, materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property by Company or any of its Subsidiaries. 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 Company or such Subsidiary, as
applicable, in the conduct of its business to occupy or use all such properties
as are 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 and the lease expense and minimum rental
commitments with respect to such Leases and lease commitments are as disclosed
in all material respects in Company’s Reports.

 

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4.4.6    No Material Adverse Change. Since the date of the latest audited
financial statements included in Company’s Reports, there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect on Company or Bank.

4.5    Legal Matters.

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

4.5.2    Regulatory Enforcement Actions. Company and its Subsidiaries are in
compliance in all material respects with all laws administered by and
regulations of any Governmental Agency applicable to it or to them, the failure
to comply with which would have a Material Adverse Effect. None of Company,
Company’s Subsidiaries nor any of their officers or directors is now operating
under any formal regulatory enforcement action, nor are, to Company’s knowledge,
any such actions threatened.

4.5.3    Pending Litigation. There are no actions, suits, proceedings or written
agreements pending, or, to Company’s knowledge, threatened or proposed, against
Company, Bank 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 Company or any of its Subsidiaries or affect issuance or payment of the
Subordinated Notes; and neither 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 Company or any of its Subsidiaries.

 

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

4.5.5    Brokerage Commissions. Other than with respect to the Placement Agent,
neither Company nor any Affiliate of Company is obligated to pay any brokerage
commission or finder’s fee to any Person in connection with the transactions
contemplated by this Agreement.

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

4.6    No Misstatement. No information, exhibit, report, schedule or document,
when viewed together as a whole, furnished by Company to 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 Closing
Date.

4.7    Tax Matters. Each of Company and Bank has (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.

4.8    Offering of Securities. Neither Company nor any Person acting on its
behalf has taken any action which would subject the offering, issuance or sale
of the Notes to the registration requirements of the Securities Act. Neither the
Company nor any Person acting on its behalf has engaged or will engage in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with any offer or sale of the Subordinated Notes
pursuant to the transactions contemplated by the Transaction Documents. Assuming
the accuracy of 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 Purchasers.

4.9    Representations and Warranties Generally. The representations and
warranties of the Company set forth in this Agreement and in any certificate
signed by an officer and delivered to the Purchasers pursuant to or in
connection with this Agreement (to the extent provided prior to Closing) 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 or therein. None of
the representations, warranties, covenants and agreements made in this Agreement
or in any certificate or other document delivered to Purchasers by or on behalf
of Company pursuant to or in connection with this Agreement contains any untrue
statement of a material fact or omits to state a material fact or any fact
necessary to make the statements contained therein not misleading in light of
the circumstances when made and as of the Closing Date.

 

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5.    GENERAL COVENANTS, CONDITIONS AND AGREEMENTS.

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

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

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

5.3    Compliance with Laws.

5.3.1    Generally. Company shall comply and cause each of its 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 Company.

5.3.2    Regulated Activities. Company shall not itself, nor shall it cause,
permit or allow Bank or any other Subsidiary 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 Company, Bank and/or such Subsidiary or (ii) make any loan or advance
secured by the capital stock of another bank or depository institution, or
acquire the capital stock, assets or obligations of or any interest in another
bank or depository institution, in each case other than in accordance with
applicable laws and regulations and safe and sound banking practices.

5.3.3    Taxes. Company shall and shall cause Bank and any other Subsidiary to
promptly pay and discharge all taxes, assessments and other governmental charges
imposed upon Company, Bank or any other Subsidiary or upon the income, profits,
or property of 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 Company, Bank or any other Subsidiary. Notwithstanding the
foregoing, none of Company, Bank or any other Subsidiary 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 Company, Bank and such
other Subsidiary.

 

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

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

5.3.6    Tier 2 Capital. If all or any portion of the Subordinated Notes ceases
to qualify as Tier 2 Capital, other than due to the limitation imposed on the
capital treatment of subordinated debt during the five (5) years immediately
preceding the Maturity Date of the Subordinated Notes, Company will immediately
notify the Holders thereof, and thereafter Company and the Holders 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, if requested
by Company.

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

5.5    Secondary Market Transactions. Each Holder 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, use
all reasonable efforts and cooperate fully and in good faith with Holders and
otherwise assist Holders in satisfying the market standards to which Holders
customarily adhere or which may be reasonably required in the marketplace or by
applicable rating agencies in connection with any such Secondary Market
Transactions, but in no event shall the Company be

 

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required to incur more than $10,000 (without reimbursement) in costs or expenses
in connection therewith. Subject to any written confidentiality obligation, all
information regarding the Company may be furnished, without liability except in
the case of gross negligence or willful misconduct, to any Holder and to any
Person reasonably deemed necessary by Holder in connection with such Secondary
Market Transaction. All documents, financial statements, appraisals and other
data relevant to Company or the Subordinated Notes may be retained by any such
Person.

5.6    Bloomberg. Within 30 days after Closing, Company will utilize its
commercially reasonable efforts to have the Subordinated Notes 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.

6.    REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASERS.

Each Purchaser hereby represents and warrants to Company, and covenants with
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 this Agreement, assuming due authorization, execution and
delivery by the Company, 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 the passage of time or
otherwise) 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.

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.

 

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6.5    Accredited Investor. It is and will be on the Closing Date an “accredited
investor” as such term is defined in Rule 501(a) of Regulation D and (i) 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) as contemplated by
subsections (5) and (6) of Rule 501(a) of Regulation D, and has a current net
worth, exclusive of Purchaser’s primary residence, of over $1,000,000 and income
of over $200,000 in each of the two most recent years, and a reasonable
expectation of reaching the same income level in the current year.

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 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
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
Company to the extent it deems necessary to make its decision to purchase the
Subordinated Notes. It has reviewed the information set forth in Company’s
Reports and the exhibits and schedules hereto.

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 Company that have been requested of it or its advisors and have been given
the opportunity to ask questions of, and to receive answers from, persons acting
on behalf of Company concerning terms and conditions of the transactions
contemplated by this Agreement in order to make an informed and voluntary
decision to enter into this Agreement.

6.10    Investment Decision. 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 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 Company, including the Placement Agent, except for the
express statements, representations and warranties of Company made or contained
in this Agreement. Furthermore, it acknowledges that nothing in this Agreement
or any other materials presented by or on behalf of Company to it in connection
with the purchase of the Subordinated Notes constitutes legal, tax or investment
advice.

 

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6.11    Private Placement; No Registration; Restricted Legends. It understands
and acknowledges that the Subordinated Notes are being sold by 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
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. Purchaser will purchase the Subordinated Note directly
from 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 all or any portion of the Subordinated Notes ceases
to qualify as Tier 2 Capital, other than due to the limitation imposed on the
capital treatment of subordinated debt during the five (5) years immediately
preceding the Maturity Date of the Subordinated Notes, Company will immediately
notify the Purchasers, and thereafter Company and the Purchasers 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, if requested
by Company.

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

6.15    Representations and Warranties Generally. The representations and
warranties of 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 Purchaser and delivered to the Company or to
counsel for Company shall be deemed to be a representation and warranty by
Purchaser to Company as to the matters set forth therein.

 

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7.    TERMINATION. Purchasers may terminate this Agreement (i) at any time prior
to the Closing Date by written notice signed by all Purchasers to Company if
Purchasers shall decline to purchase the Subordinated Notes for any reason
permitted by this Agreement or (ii) on the Closing Date if any condition
described in Section 3.2 is not fulfilled by the Company or waived in writing by
the Purchasers on or prior to the Closing Date. Any termination pursuant to this
Section shall be without liability on the part of (i) Company to Purchasers or
(ii) Purchasers to Company.

8.    MISCELLANEOUS.

8.1    Prohibition on Assignment by Company. Except as described in Section 4
(Merger and Sale of Assets) of the Subordinated Notes, 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 Purchasers. In
addition, in accordance with the terms of the Subordinated Notes, any transfer
of such Subordinated Notes must be made in accordance with the Assignment Form
attached thereto and the requirements and restrictions thereof.

8.2    Time of the Essence. Time is of the essence of this Agreement.

8.3    Waiver or Amendment. 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 holders of not less than more than
fifty percent (50%) in aggregate principal amount (excluding any Subordinated
Notes held by 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 Company under this Agreement and the Subordinated Notes are to be
made; or (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 9 (Failure to Make a
Payment) of the Subordinated Notes that adversely affects the rights of any
holder of a Subordinated Note; or (vii) disproportionately affect any of the
holders of the then outstanding Subordinated Notes. Notwithstanding the
foregoing, 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 Company in any
case shall, in itself, entitle Company to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of
Purchasers to any other or further action in any circumstances without notice or
demand. No consent or waiver, expressed or implied, by Purchasers to or of any
breach or default by Company in the performance of its obligations hereunder
shall be deemed or construed to be a consent or waiver to or of any other breach
or default in the performance of the same or any other obligations of Company
hereunder. Failure on the part of 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 Purchasers of their rights hereunder
or impair any rights, powers or remedies on account of any breach or default by
Company.

 

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8.4    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.

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

 

if to Company:   

BANKGUAM HOLDING COMPANY

P.O. Box BW

Hagatna, Guam 96932

Attention: Joaquin P.L.G. Cook, President & CEO

with a copy to:   

Danilo M. Rapadas

SVP & General Counsel

BankGuam Holding Company

P.O. Box BW

Hagatna, Guam 96932

if to Purchasers:    To the addresses indicated on Schedule I.

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).

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

 

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8.7    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 Company.

8.8    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.

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

8.10    Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the territory of Guam 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.

8.11    No Third Party Beneficiary. This Agreement is made for the sole benefit
of 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, except
that Placement Agent has the right to rely on the representations and warranties
of Company set forth in Section 4 of this Agreement.

8.12    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.

8.13    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.

 

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8.14    Knowledge; Discretion. All references herein to Purchaser’s or Company’s
knowledge shall be deemed to mean the knowledge of such party based on the
actual knowledge of such party’s Chief Executive Officer and Chief Financial
Officer or such other persons holding equivalent offices. 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.

8.15    Waiver Of Right To Jury Trial. TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, COMPANY AND PURCHASERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT THAT EITHER MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION
ARISING IN ANY WAY IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS, OR ANY
OTHER STATEMENTS OR ACTIONS OF COMPANY OR PURCHASERS. COMPANY AND PURCHASERS
EACH ACKNOWLEDGE THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT
AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS
OWN FREE WILL. COMPANY AND PURCHASERS EACH FURTHER ACKNOWLEDGE THAT (i) IT HAS
READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (ii) THIS
WAIVER HAS BEEN REVIEWED BY EACH OF THEM AND THEIR COUNSEL AND IS A MATERIAL
INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS AGREEMENT AND THE
SUBORDINATED NOTES AND (iii) THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH
TRANSACTION DOCUMENTS AS IF FULLY INCORPORATED THEREIN.

8.16    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.

8.17    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]

 

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

 

BANKGUAM HOLDING COMPANY By:       JOAQUIN P.L.G. COOK  

PRESIDENT AND CHIEF

EXECUTIVE OFFICER

 

[Company Signature Page to Subordinated Note Purchase Agreement]

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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: By:     Its: