Exhibit 10.1

SUBORDINATED LOAN AGREEMENT

THIS SUBORDINATED LOAN AGREEMENT (this “Agreement”) is dated as of October 30,
2015 (the “Agreement Date”), and is made by and between First National
Corporation, a Virginia corporation (“Borrower”), and Community Funding CLO,
Ltd., a Cayman Islands exempted company incorporated with limited liability
(“Initial Lender”).

RECITALS

A. Borrower is the holding company for its wholly-owned subsidiary bank, First
Bank, a commercial bank organized under the laws of the Commonwealth of Virginia
(the “Bank”).

B. Borrower has requested that Initial Lender provide it with a term loan (the
“Term Loan”) in the principal amount of $5,000,000 pursuant to the terms of this
Agreement, evidenced by a term note due October 1, 2025 substantially in the
form attached hereto as Exhibit A (the “Note”).

C. Borrower and Initial Lender intend that, for so long as Borrower is subject
to the capital adequacy requirements of the Federal Reserve, the Term Loan will
qualify as Tier 2 capital under the applicable capital adequacy rules and
regulations promulgated by the Federal Reserve.

D. This obligation is not a deposit and is not insured by the federal deposit
insurance corporation or any other government agency. This obligation is
subordinated to the claims of general creditors, is unsecured, and is ineligible
as collateral for a loan by Borrower.

NOW, THEREFORE, in consideration of the foregoing recitals, which are
incorporated herein by this reference, and the mutual representations, covenants
and agreements of the parties herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:

AGREEMENTS

Section 1. THE TERM LOAN.

Section 1.1 Aggregate Principal Loan Amount. The Initial Lender agrees to extend
the Term Loan to Borrower in an aggregate principal amount of $5,000,000, in
accordance with the terms of, and subject to the conditions set forth in this
Agreement. The definitive principal amount of the Term Loan to be extended shall
be provided in Schedule C, which shall be delivered by the Initial Lender to
Borrower on or prior to the Closing Date, as a condition to closing under
Section 1.9(b). The unpaid principal balance plus all accrued but unpaid
interest on the Term Loan shall be due and payable on October 1, 2025 (the
“Maturity Date”), or such earlier date on which such amount shall become due and
payable on account of acceleration by the Lenders in accordance with the terms
of this Agreement. The obligations of Borrower to the Lenders under the Term
Loan shall be unsecured.

Section 1.2 Maturity Date. On the Maturity Date, all sums due and owing under
this Agreement with respect to the Term Loan shall be repaid in full. Borrower
acknowledges and agrees that the Initial Lender has not made any commitments,
either express or implied, to extend the terms of the Term Loan past the
Maturity Date, and the Term Loan shall not be extended unless Borrower and the
Initial Lender hereafter specifically otherwise agree in writing.

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

Section 1.3 Closing.

(a) Closing. Subject to the terms of this Agreement, and provided that all of
the conditions in 0 and Section 1.1(f) have been satisfied (disregarding for
this purpose those conditions that are to be satisfied at the Closing), the
completion of the funding of the Term Loan (the “Closing”) shall be held on a
date (i) determined by the Initial Lender in a written notice to the Borrower
indicating the date that a CLO Transaction, as defined herein, for which Initial
Lender is the issuer; is closing or has closed; or (ii) such other time as may
be mutually agreed upon by the parties to this Agreement after the closing of a
CLO Transaction (the “CLO Closing Date”), at such location or by such other
method (including exchange of signed documents) as may be mutually agreed upon
by the parties to this Agreement.

(b) Closing Fee. There shall be no closing fee.

(c) Termination. In the event that the Closing has not occurred by the Outside
Date, due to Borrower not having received the requisite regulatory approvals
pursuant to Sections 1.6 and 4.2(b), the Borrower shall have no further
obligation to borrow the Term Loan, the Initial Lender shall have no further
obligation to fund the Term Loan, and this Agreement shall be of no further
force and effect.

Section 1.4 Interest Rate.

(a) Applicable Rate. The Term Loan shall bear interest at a fixed rate of 6.75%
provided in Schedule C.

(b) Interest Payments. Interest accrued on the Term Loan shall be payable by
Borrower quarterly in arrears on January 1, April 1, July 1 and October 1 of
each year, commencing on the first such date following the Closing Date, and on
the Maturity Date.

(c) Computation of Interest. Interest shall be computed on the basis of the
actual number of days elapsed in the period during which interest accrues and a
year of 360 days. In computing interest, the date of funding shall be included
and, subject to Section 1.1(a), the date of payment shall be excluded; provided,
however, that if any funding is repaid on the same day on which it is made, one
day’s interest shall be paid thereon. Interest shall commence accrual on the
Closing Date, when Borrower has received the Term Loan funds.

Section 1.5 Optional Prepayment.

(a) Prepayment Prior to Fifth Anniversary. The Term Loan shall not be prepaid by
Borrower prior to the fifth anniversary of its date of borrowing, which shall be
the Closing Date, except that in the event (i) of a Tier 2 Capital Event (as
defined below); provided that, on the Closing Date and prior to the occurrence
of such Tier 2 Capital Event (x) the Term Loan qualified as Tier 2 Capital, and
(y) the Borrower was and is subject to risk-based capital requirements and
ratios as promulgated under BASEL III or any successor policy; (ii) of a Tax
Event (as defined below), or (iii) the Borrower is required to register as an
investment company pursuant to the Investment Company Act of 1940 (each of the
foregoing, a “Qualified Prepayment Event”), Borrower may prepay the Term Loan,
subject to the Lenders’ amendment right pursuant to Section 6.2(c), on any
interest payment date upon giving not less than 45 days’ notice to Lenders and
Servicer, in whole but not in part, by paying the Prepayment Price (as defined
below), together with unpaid accrued interest thereon to but excluding the date
of prepayment. Any such prepayment notice shall be accompanied by an explanation
or description of the applicable Qualified Prepayment Event and (x) if such
Qualified Prepayment Event is a Tier 2 Capital Event, by delivery to Lenders or
Servicer of a copy of the opinion of independent bank regulatory counsel
received by Borrower in connection with such Tier 2 Capital Event, or (y) if
such Qualified Prepayment Event is a Tax Event, by delivery to Lenders or
Servicer of a copy of any opinion of counsel of Borrower received by Borrower in
connection with such Tax Event. Any prepayment made in connection with a Tier 2
Capital Event or a Tax Event will be subject to the Borrower obtaining the prior
approval of the Federal Reserve and any additional requirements that the Federal
Reserve (or any successor regulatory authority with jurisdiction over bank
holding companies) may impose with respect to prepayment of the Term Loan. “Tax
Event” means the receipt by Borrower of an opinion of counsel to Borrower 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 Borrower on the Term Loan is no longer deductible by Borrower, in
whole or in part, for United States federal income tax purposes. “Tier 2 Capital
Event” shall mean receipt by the Borrower of an opinion of independent bank
regulatory counsel experienced in such matters to the effect that, as a result
of (x) any event (including 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 rules, guidelines or policies of an
applicable regulatory authority for the Borrower or (y) any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the Closing Date, the Term
Loan does not constitute, or no longer constitutes, for the Borrower, Tier 2
Capital (or its then-equivalent if the Borrower were subject to such capital
requirement) for purposes of capital adequacy guidelines of the Federal Reserve
(or any successor regulatory authority with jurisdiction over bank holding
companies), as then in effect and applicable to the Borrower.

(b) Prepayment on or After Fifth Anniversary. At any time on an interest payment
date on or after the fifth anniversary of the Closing Date, Borrower may, upon
at least 45 days’ notice to Lenders, prepay all or a portion of the principal
amount outstanding under the Term Loan, in a minimum aggregate amount of
$100,000 or any larger integral multiple of $100,000 (unless the Borrower is
prepaying the Term Loan in full), by paying the Prepayment Price, together with
unpaid accrued interest thereon but excluding the date of prepayment. In a case
where the Borrower is making a voluntary prepayment with respect to less than
the aggregate amount of the principal amount then outstanding under the Term
Loan, the Borrower shall select, in such manner as in its sole discretion it
shall reasonably deem appropriate and fair, the amounts of the Term Loan (in
integral multiples of $100,000) to be prepaid.

Section 1.6 Receipt of Regulatory Approval. Borrower shall obtain any requisite
approval of the Federal Reserve or other regulatory approval, and Lenders shall
have no responsibility to verify whether Borrower has obtained any requisite
approval of the Federal Reserve or other regulatory approval, for the payment of
principal (including payment at maturity or prepayment prior to maturity).
Borrower shall use commercially reasonable efforts to seek and maintain any and
all regulatory or other approvals necessary to allow Borrower to make each
scheduled interest payment on the Term Loan.

Section 1.7 Payments.

(a) Manner and Time of Payment. All payments of principal and interest hereunder
payable to Lenders shall be made, without condition or reservation of right and
free of set-off or counterclaim, in U.S. dollars and by wire transfer (pursuant
to Lenders’ or Servicer’s written wire transfer instructions) of immediately
available funds delivered to Lenders not later than 11:00 a.m. (New York, New
York time) on the date due. Funds received by Lenders after that time and date
shall be deemed to have been paid on the next succeeding Business Day. Interest
payable on any Interest Payment Date shall be payable to the Lenders whose names
are recorded in the Register at the close of business on the Record Date
immediately preceding such Interest Payment Date.

(b) Payments on Non-Business Days. Whenever any payment to be made by Borrower
hereunder shall be stated to be due on a day which is not a Business Day,
payments shall be made on the next succeeding Business Day without change in any
computation of interest with respect to such payment (or any succeeding
payment).

(c) Application of Payments. All payments, excluding any amounts paid pursuant
to (b), 0, 0, or to the extent any amounts are paid to reimburse the holders for
any costs incurred in conjunction with enforcing the Agreement or the
obligations of Borrower under this Agreement or the Note, received by Lenders or
Servicer from or on behalf of this or with respect to this Agreement or the Note
shall be applied first to amounts due to Lenders or Servicer for any unpaid fees
and expenses incurred, second to accrued interest under the Term Loan, and third
to principal amounts outstanding under the Term Loan; provided, however, subject
to the provisions of 0 of this Agreement, that after the date on which the final
payment of principal with respect to the Term Loan is due or following and
during any Event of Default, all payments received on account of Borrower’s
liabilities shall be

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

applied in whatever order, combination and amounts as each Lender, in its sole
and absolute discretion, decides, to all costs, expenses and other indebtedness
owing to such Lender. No amount paid or prepaid on the Term Loan may be
reborrowed.

Section 1.8 Subordination. The rights of the Lenders to the principal sum and to
any accrued interest shall remain subject and subordinate in right of payment
(in accordance with 12 C.F.R. § 217.20(d), as supplemented by the Federal
Reserve’s subordinated debt policy statement, 12 C.F.R. 250.166, and Federal
Reserve Supervisory Letter SR 92-37 (October 15, 1992)) to the claims of:
(a) creditors of Borrower holding senior indebtedness, which shall include, at a
minimum, the following: (i) all borrowed and purchased money (except such
borrowed or purchased money that by its terms expressly ranks pari passu with,
or junior to, the Term Loan); (ii) similar obligations arising from off-balance
sheet guarantees and direct credit substitutes; and (iii) obligations associated
with derivative products such as interest and foreign exchange rate contracts,
commodity contracts, and similar arrangements; and (b) general creditors
(collectively, “Senior Claims”). Upon dissolution or liquidation of Borrower, no
payment of principal, interest or premium (including post-default interest)
shall be due and payable under the terms of the Term Loan until all Senior
Claims shall have been paid in full. The Term Loan ranks equally with all of
Borrower’s other present or future Unsecured Subordinated Debt whenever issued,
except any of its Unsecured Subordinated Debt which may be expressly stated to
be subordinated to the Term Loan. The Term Loan ranks senior to all current and
future junior subordinated debt obligations, preferred stock and common stock of
Borrower. “Unsecured Subordinated Debt” means unsecured subordinated debt of
Borrower whether or not such debt is intended to qualify as Tier 2 capital under
the applicable capital adequacy rules and regulations promulgated by the Federal
Reserve.

Section 1.9 Closing Deliveries.

(a) At least five (5) Business Days prior to the Closing (except as noted
below), Borrower shall issue, deliver or cause to be delivered to Initial Lender
the following:

the Note, free and clear of all restrictive and other legends (except as
provided in the form of Note attached hereto as Exhibit A), duly executed by
Borrower, to be held in escrow and released upon the Closing;

a notice of borrowing, substantially in the form attached hereto as Exhibit B,
delivered by 10:00 a.m. (New York, New York time) (the “Notice of Borrowing”).

a legal opinion of Borrower’s counsel, dated as of the Closing Date and
substantially in the form attached hereto as Exhibit C, executed by such counsel
and addressed to Lenders, to be released upon the Closing;

a certificate of the Secretary of Borrower, in the form attached hereto as
Exhibit D, dated as of the Closing Date, to be held in escrow and released upon
the Closing, certifying: (A) the resolutions adopted by the board of directors
of Borrower (the “Board”) or a duly authorized committee thereof approving the
borrowing of the Term Loan and approving the other transactions contemplated by
this Agreement; (B) the current versions of the organizational documents and
bylaws of Borrower; and (C) as to the signatures and authority of persons
signing this Agreement and related documents on behalf of Borrower;

a certificate of the Chief Executive Officer, President or Chief Financial
Officer of Borrower, in the form attached hereto as Exhibit E, dated as of the
Closing Date, to be held in escrow and released upon the Closing, certifying to
the fulfillment of the conditions specified in 0(a), 0(b) and 0(d);

a certificate of existence or good standing for Borrower from each of the
jurisdictions of Borrower’s incorporation and Borrower’s principal place of
business, each as of a recent date;

a certificate of existence or good standing for the Bank from the jurisdiction
of the Bank’s formation as of a recent date; and

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

a transfer to Initial Lender or its designee, in immediately available funds,
of: (A) the closing fee indicated in (b); and (B) a reimbursement to Lender of
all of Lender’s reasonable transactional expenses in excess of $5,000; provided,
however, that the maximum amount of transactional expenses for which Borrower
shall reimburse Lender shall be $5,000; provided further, that the amounts
payable hereunder may be paid through a net settlement of the Term Loan amount
to be transferred to Borrower pursuant to Section 1.1 and Section 1.9(b)(ii)
below.

(b) On or prior to the Closing, Initial Lender shall deliver or cause to be
delivered to Borrower the following:

Schedule C, indicating the principal amount of the Term Loan and the applicable
interest rate, either attached to this Agreement, duly executed by the Initial
Lender, or, if this Agreement has previously been delivered, in a separate
written notice to Borrower; and

a transfer to Borrower, in immediately available funds, of an amount equal to
the principal value of the Term Loan extended (at the option of Initial Lender,
net of any amounts due to Initial Lender pursuant to Section 1.9(a)), in
accordance with written wire transfer instructions indicated in the Notice of
Borrowing delivered by Borrower to Initial Lender at least five Business Days
prior to the Closing.

Section 2. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower acknowledges
that the representations and warranties of Borrower contained herein are a
material inducement for Lenders to enter into this Agreement. Except as set
forth on Schedule B to this Agreement, Borrower hereby covenants, represents and
warrants to Lenders as of the date hereof and as of the Closing Date (except for
the representations and warranties that speak as of a specific date, which are
made as of such date) as follows:

Section 2.1 Organization. Borrower: (a) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; (b) is in good standing in each other jurisdiction in which the
nature of business conducted or the properties or assets owned or leased by it
makes such qualification necessary, except where the failure to be so qualified
would not reasonably be expected to have a Material Adverse Effect; (c) is duly
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended; and (d) has full power and authority, corporate and otherwise, to
own, operate and lease its properties as presently owned, operated and leased,
and to carry on its business as it is now being conducted.

Section 2.2 Subsidiary Organization. The Bank is the sole banking subsidiary of
Borrower and is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and is also in good standing in
each other jurisdiction in which the nature of business conducted or the
properties or assets owned or leased by it makes such qualification necessary,
except where the failure to be so qualified would not reasonably be expected to
have a Material Adverse Effect. All of the issued and outstanding shares of
capital stock of or other equity interests in each Subsidiary have been duly
authorized and validly issued, are fully paid and non-assessable and are
directly owned by Borrower, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity, except as otherwise disclosed in
Schedule B. Each Subsidiary has full power and authority, corporate and
otherwise, to own, operate and lease its properties as presently owned, operated
and leased, and to carry on its business as it is now being conducted. The
deposit accounts offered by the Bank are insured by the FDIC to the fullest
extent permitted under applicable law. No event attributable to Borrower or the
Bank has occurred which would reasonably be expected to adversely affect the
status of the Bank as FDIC-insured institution.

Section 2.3 Authorization; Enforceability. Borrower has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement by Borrower
have been authorized by all necessary corporate action, and no further corporate
action is required by Borrower. This Agreement constitutes a legal, valid and
binding obligation of Borrower enforceable in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency, reorganization or
other laws (including laws and regulations specifically applicable to bank
holding companies registered with the Federal Reserve) and subject to general
principles of equity.

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

Section 2.4 No Conflicts. Neither the execution nor delivery of this Agreement
nor the consummation or performance of any of the Contemplated Transactions
will, directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of any provision of the
organizational documents or bylaws of Borrower or the organizational documents
or bylaws of any Subsidiary, as each is in effect on the Agreement Date, or any
currently effective resolution adopted by the boards of directors or
shareholders of Borrower or any Subsidiary; (b) contravene, conflict with or
result in a violation of, or give any Governmental Agency or other Person the
valid and enforceable right to exercise any remedy or obtain any relief under,
any Legal Requirement to which Borrower or any Subsidiary, or any of their
respective assets that are owned or used by them, is subject; (c) contravene,
conflict with or result in a violation or breach of any provision of, or give
any Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate or modify any
contract or other binding agreement, verbal or written, to which Borrower or any
Subsidiary is a party or by which any of their respective assets is bound; or
(d) result in the creation of any lien, charge or encumbrance upon or with
respect to any of the assets owned or used by Borrower or any Subsidiary;
except, in the case of (b) or (c), for such conflicts and violations that would
not reasonably be expected to have a Material Adverse Effect.

Section 2.5 Filings, Consents and Approvals. Borrower is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any Governmental Agency or other Person in
connection with the execution, delivery and performance by Borrower of this
Agreement (including, without limitation, the issuance of the Note), other than
regulatory approvals required by the Federal Reserve or any other regulatory
agency or body having jurisdiction over the Borrower and obtained pursuant to 0
or 4.2, except as otherwise disclosed in Schedule B (which consents have been
obtained).

Section 2.6 Capitalization. The authorized capital stock of Borrower consists of
8,000,000 shares of common stock, of which 4,912,662 are issued and outstanding,
and 1,000,000 shares of preferred stock, 14,595 of which are issued or
outstanding. All outstanding shares of capital stock have been validly issued
and are fully paid and nonassessable. None of Borrower’s currently outstanding
shares of capital stock have been issued in violation of any federal or state
securities laws or any other Legal Requirement, or in violation of the
preemptive or other similar rights of any shareholder of Borrower or any other
entity. None of Borrower’s shares of capital stock are subject to preemptive or
other similar rights of any shareholder of Borrower or any other entity, except
as otherwise disclosed in Schedule B.

Section 2.7 Financial Statements. The Borrower has filed an Annual Report on
Form 10-K for the year ended December 31, 2014 and Quarterly Report on Form 10-Q
for the period ended June 30, 2015 (collectively, the “Financial Statements”)
with the Commission pursuant to the Exchange Act and has been delivered the
following to Lenders: (a) FR Y-9SP Parent Company Only Financial Statements for
Small Bank Holding Companies of Borrower for period ended June 30, 2015
(b) Borrower’s audited financial statements for periods ended December 31, 2013
and 2014; and (c) Consolidated Report of Condition and Income for A Bank With
Domestic Offices Only – FFIEC 041 of the Bank for period ended June 30, 2015.
The Financial Statements present fairly the financial position of Borrower and
its consolidated Subsidiaries including the Bank, as applicable, at the dates
and for the periods of such statements. The Financial Statements have been
prepared in conformity with the requirements of the applicable Governmental
Agency and with GAAP applied on a consistent basis throughout the periods
involved.

Section 2.8 Books and Records. The financial statements, books of account,
minute books, stock record books and other records of Borrower and its
Subsidiaries are complete and correct in all material respects and have been
maintained in accordance with Borrower’s and each Subsidiary’s respective
business practices and all applicable Legal Requirements, including the
maintenance of an adequate system of internal controls required by applicable
Legal Requirements. The minute books of Borrower and its Subsidiaries contain
accurate and complete records in all material respects of all meetings held of,
and all material corporate action taken by, their respective shareholders, board
of directors and committees of the board of directors.

Section 2.9 Title to Properties. Borrower and each Subsidiary have good and
marketable title to all material assets and properties, whether real or
personal, tangible or intangible, that they purport to own, including all real
property carried by the Bank as well as other real estate owned, subject to
exceptions that, individually and in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.

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

Section 2.10 Loan Portfolio.

(a) Other than as would not be reasonably expected to have a Material Adverse
Effect, to the Knowledge of Borrower, Borrower and each Subsidiary have complied
in all material respects with, and all documentation in connection with the
origination, processing, servicing, underwriting and credit approval of any
loan, lease or other extension of credit or commitment to extend credit
(“Loans”) originated, purchased or serviced by Borrower or any of its
Subsidiaries and have satisfied in all material respects: (i) all applicable
laws with respect to the origination, insuring, purchase, sale, pooling,
servicing, subservicing or filing of claims in connection with Loans, including
all laws relating to real estate settlement procedures, consumer credit
protection, truth in lending laws, usury limitations, fair housing, transfers of
servicing, collection practices, equal credit opportunity and adjustable rate
mortgages; (ii) the responsibilities and obligations relating to Loans set forth
in any contract or agreement between Borrower or any of its Subsidiaries and any
Agency, Loan Investor or Insurer (each as defined below); (iii) the applicable
rules, regulations, guidelines, handbooks and other requirements of any Agency,
Loan Investor or Insurer; (iv) the terms and provisions of any mortgage or other
collateral documents and other Loan documents with respect to each Loan; and
(v) the underwriting guidelines and other loan policies and procedures of
Borrower or its applicable Subsidiary.

(b) During the past five (5) years, no Agency, Loan Investor or Insurer has:
(i) claimed in writing that Borrower or any Subsidiary has violated or has not
complied with the applicable underwriting standards with respect to Loans sold
by Borrower or any of its Subsidiaries to a Loan Investor or Agency, or with
respect to any sale of Loan servicing rights to a Loan Investor; (ii) imposed in
writing restrictions on the activities (including commitment authority) of
Borrower or any of its Subsidiaries; or (iii) indicated in writing to Borrower
or any of its Subsidiaries that it has terminated or intends to terminate its
relationship with Borrower or any of its Subsidiaries for poor performance, poor
Loan quality or concern with respect to Borrower’s or any Subsidiary’s
compliance with laws.

(c) The characteristics of the loan portfolio of the Bank have not materially
changed from the characteristics of the loan portfolio of the Bank as of
October 20, 2015.

(d) For purposes of this 0: (i) “Agency” means the Small Business
Administration, the Federal Housing Administration, the Federal Home Loan
Mortgage Corporation, the Farmers Home Administration (now known as Rural
Housing and Community Development Services), the Federal National Mortgage
Association, the United States Department of Veterans’ Affairs, the Government
National Mortgage Association, the Rural Housing Service of the United States
Department of Agriculture or any other federal or state agency with authority to
(A) determine any investment, origination, lending or servicing requirements
with regard to Loans originated, purchased or serviced by Borrower or any
Subsidiary or (B) originate, purchase, or service Loans, or otherwise promote
lending, including state and local housing finance authorities; (ii) “Loan
Investor” means any person (including an Agency) having a beneficial interest in
any Loan originated, purchased or serviced by Borrower or any Subsidiary or a
security backed by or representing an interest in any such Loan; and
(iii) “Insurer” means a person who insures or guarantees for the benefit of the
Loan holder all or any portion of the risk of loss upon borrower default on any
of the Loans originated, purchased or serviced by Borrower or any Subsidiary,
including the Federal Housing Administration, the United States Department of
Veterans’ Affairs, the Rural Housing Service of the United States, the United
States Department of Agriculture and any private mortgage insurer, and providers
of hazard, title or other insurance with respect to such Loans or the related
collateral.

Section 2.11 Allowance for Loan and Lease Losses. The Bank’s allowance for loan
and lease losses, as reflected in the Financial Statements, was determined on
the basis of the Bank’s continuing review and evaluation of the portfolio of the
loans owned by the Bank under the requirements of GAAP consistently applied and
Legal Requirements, was established in a manner consistent with the Bank’s
internal policies, and, in the reasonable judgment of the Bank, was adequate in
all material respects as of such date under the requirements of GAAP and all
Legal Requirements to provide for (i) estimated credit losses for specifically
identified loans that are determined to be impaired and (ii) estimated probable
credit losses inherent in the remainder of the Bank’s loan portfolio.

Section 2.12 Undisclosed Liabilities; Adverse Changes. Neither Borrower nor any
Subsidiary has any material liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise), except for

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

liabilities or obligations reflected or reserved against in its respective most
recent quarterly Financial Statements and current liabilities incurred in the
ordinary course of business since the respective dates thereof. Since the date
of the latest consolidated quarterly Financial Statements of Borrower and its
Subsidiaries, there has not been any change in the business, operations,
properties, prospects, assets or condition of Borrower or any Subsidiary, and,
no event has occurred or circumstance exists, that has had or would reasonably
be expected to have a Material Adverse Effect.

Section 2.13 Taxes.

(a) Borrower and each Subsidiary have duly and timely filed, or will duly and
timely file, each return (including any informational return), report,
statement, schedule, notice, form or other document or information filed with or
submitted to, or required to be filed with or submitted to, any Governmental
Agency (collectively, “Tax Returns”) in connection with the determination,
assessment, collection or payment of any tax, levy, assessment, tariff, duty
(including any customs duty), deficiency or other fee, and any related charge or
amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Agency
(a “Tax”) that is required to be filed by it on or before the Closing Date for
all taxable or reporting periods ending on or before the Closing Date, and each
such Tax Return is true, correct and complete in all material respects. In all
material respects, Borrower and each Subsidiary have paid, or made adequate
provision for the payment of, all Taxes (whether or not reflected in Tax Returns
as filed or to be filed) due and payable by Borrower and/or any Subsidiary, or
claimed to be due and payable by any Governmental Agency, and are not delinquent
in the payment of any Tax, except such Taxes set forth on Schedule B as are
being contested in good faith and as to which adequate reserves have been
provided.

(b) There is no claim or assessment pending or, to the Knowledge of Borrower,
threatened against Borrower or any Subsidiary for any Taxes that it owes. No
audit, examination or investigation related to Taxes paid or payable by Borrower
or any Subsidiary is presently being conducted or, to the Knowledge of Borrower,
threatened by any Governmental Agency. Neither Borrower nor any Subsidiary is
the beneficiary of any extension of time within which to file any Tax Return,
and there are no liens for Taxes (other than Taxes not yet due and payable) upon
any of Borrower’s or any Subsidiary’s assets.

Section 2.14 Compliance with Legal Requirements. Borrower and each Subsidiary
holds all licenses, certificates, permits, franchises and rights from all
appropriate Governmental Agencies necessary and material for the conduct of its
respective business, except where failure to possess such licenses,
certificates, permits, franchises or rights, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect. Borrower and
each Subsidiary is in compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its respective businesses or
the ownership or use of any of its respective assets, except where the failure
to comply would not reasonably be expected to have a Material Adverse Effect. No
event has occurred or circumstance exists that (with or without notice or lapse
of time): (a) may constitute or result in a violation by Borrower or any
Subsidiary of, or a failure on the part of Borrower or any Subsidiary to comply
with, any Legal Requirement; or (b) may give rise to any obligation on the part
of Borrower or any Subsidiary to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature in connection with a failure to
comply with any Legal Requirement; except, in either case, where, in the case of
either clause (a) or (b), the failure to comply or the violation would not
reasonably be expected to have a Material Adverse Effect.

Section 2.15 Regulatory Matters. Neither Borrower nor any Subsidiary is subject
or is party to, or has received any notice or advice from any Governmental
Agency, including any domestic and any foreign government entities, that any of
them may become subject or party to any investigation with respect to, any
corrective, suspension or cease-and-desist order, agreement, consent agreement,
memorandum of understanding or other regulatory enforcement action, proceeding
or order with or by, or is a party to any commitment letter or similar
undertaking to, or is subject to any directive by, or has been a recipient of
any supervisory letter from, or has adopted any board resolutions at the request
of, any Governmental Agency that currently relates to or restricts the conduct
of their business or that in any manner relates to their capital adequacy,
credit policies, interest payments, dividend distributions, management or
business (each, a “Regulatory Agreement”), nor has Borrower or any Subsidiary
been advised by any Governmental Agency that it is considering issuing or
requesting any Regulatory Agreement. There is no unresolved violation, criticism
or exception by any Governmental Agency with respect to any report or statement
relating to any examinations of Borrower or any Subsidiary, that if adversely
determined would reasonably be expected to have a Material Adverse Effect.
Borrower and its Subsidiaries are in material compliance with all laws
administered by the Governmental Agencies.

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

Section 2.16 Pending Litigation. There are no actions, suits, proceedings or
arbitrations pending, or, to the Knowledge of Borrower, threatened against
Borrower or any Subsidiary at law or in equity or before or by any Governmental
Agency, domestic or foreign, that if adversely determined would reasonably be
expected to have a Material Adverse Effect. Neither Borrower nor any Subsidiary
is in default with respect to any material order, writ, injunction, or decree
of, or any Regulatory Agreement with, any Governmental Agency, domestic or
foreign.

Section 2.17 No Defaults. Each Material Contract to which Borrower or a
Subsidiary is a party is in full force and effect and is valid and enforceable
in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights
generally and subject to general principles of equity. The execution and
delivery by Borrower of this Agreement and the consummation and performance of
the Contemplated Transactions do not and will not, and no other event has
occurred or circumstance exists that may (with or without notice or lapse of
time) contravene, conflict with or result in a material violation or breach of,
or give any counterparty to any Material Contract the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate or modify, such Material Contract. Other than in the
ordinary course of business in connection with workouts and restructured loans,
there are no renegotiations of, attempts to renegotiate, or outstanding rights
to renegotiate, any material amounts paid or payable to Borrower or a Subsidiary
under current or completed Material Contracts with any Person and no such Person
has made written demand for such renegotiation.

Section 2.18 Insurance. Borrower and each Subsidiary have such insurance in
place as Borrower’s management deems reasonable with respect to their respective
businesses (including bankers’ blanket bond and insurance providing benefits for
employees). Set forth in 0 of Schedule B is a complete and correct list of
insurance policies maintained by Borrower and each Subsidiary (each, a
“Policy”). Each Policy is in full force and effect (except for any expiring
policy which is replaced by coverage at least as extensive). All premiums due on
each Policy have been paid in full.

Section 2.19 Regulatory Filings. During the past five (5) years, Borrower and
each Subsidiary have filed in a timely manner all required filings with all
Governmental Agencies. All such filings were accurate and complete in all
material respects as of the dates of the filings, and no such filing made any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading. In the event Borrower or any
Subsidiary has restated any filings with any Governmental Agency during such
period, Borrower has disclosed the nature of such restatement to Lender in
writing.

Section 2.20 Indemnification Claims. No action or failure to take action by any
director or executive officer, or, to the Knowledge of Borrower, any employee or
agent of Borrower or any Subsidiary has occurred that has given rise, or may be
expected to give rise, to a claim or a potential claim by any such Person for
indemnification against Borrower or any Subsidiary under any contract with, or
the corporate indemnification provisions of, Borrower or any Subsidiary, or
under any Legal Requirements.

Section 2.21 Registration Rights. No Person has any right to cause Borrower or
any Subsidiary to effect the registration under the Securities Act of any
securities of Borrower or any Subsidiary.

Section 2.22 Prohibition on Dividends or Interest. Neither Borrower nor any
Subsidiary is currently prohibited, directly or indirectly, under any order of
any Governmental Agency (other than orders applicable to bank or savings and
loan holding companies and their subsidiaries generally), under any applicable
law, under any adopted policy or under any agreement or other instrument to
which it is a party or is subject, from paying any dividends on any of its
capital stock (including any dividends to Borrower in the case of the Bank) or
any interest on any of its debt instruments in the case of Borrower, from making
any other distribution on Borrower’s or any Subsidiary’s capital stock, or in
the case of the Bank, from repaying to Borrower or any other Subsidiary any
loans or advances to such Bank or from transferring any of the Bank’s
properties, assets or operations to Borrower or any other Subsidiary. As of the
date of this Agreement, Borrower would not be prohibited from paying the amount
of a regularly scheduled interest payment on the Term Loan, except as otherwise
disclosed in Schedule B.

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

Section 2.23 Investment Company. Neither Borrower nor any of its Subsidiaries is
required to be registered as, and is not an Affiliate of, and immediately
following the Closing will not be required to register as, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended,
and neither Borrower nor any Subsidiary sponsors any Person that is required to
be registered as an investment company.

Section 2.24 Use of Proceeds. Borrower shall use the proceeds of the Term Loan
for general corporate purposes, including but not limited to, in the sole
discretion of the Borrower, the redemption or repurchase of the Borrower’s
outstanding Fixed Rate Cumulative Perpetual Preferred Stock, Series A and Fixed
Rate Cumulative Perpetual Preferred Stock, Series B. Borrower does not own any
“margin security” as such term is defined in Regulation G of the Federal Reserve
Board. Borrower will not use any part of the proceeds (a) directly or indirectly
to purchase or carry any margin security or reduce or retire any indebtedness
originally incurred to purchase any such margin security within the meaning of
Regulation U of the Federal Reserve Board or (b) so as to involve Borrower or
any Lender in a violation of Regulation U of the Federal Reserve Board. Borrower
agrees to execute, or cause to be executed, all instruments necessary to comply
with all of the requirements of Regulation U of the Federal Reserve Board. The
amount to be received by Lenders as interest under the Term Loan is not usurious
or illegal under applicable law.

Section 2.25 Accuracy of Information Furnished. The following information
furnished to Initial Lender by Borrower in connection with Initial Lender’s
examination of Borrower is correct in all material respects, and does not
contain any untrue statement of a material fact, or omit to state a material
fact necessary to make the statements contained therein not misleading: loan
tape and reports, responses to Due Diligence Questionnaire, and responses to
Legal Diligence Request.

Section 2.26 Source of Funds. The proceeds of the Term Loan have not been
provided, directly or indirectly (including through any CLO Transaction), by the
Bank, the Borrower or any affiliate of the Bank or Borrower.

Section 3. OTHER COVENANTS AND AGREEMENTS OF THE PARTIES.

Section 3.1 Corporate Existence. Borrower shall at all times preserve and
maintain, and cause each Subsidiary to preserve and maintain, its corporate
existence, rights, franchises and privileges as necessary to conduct its
business and own and control its Subsidiaries.

Section 3.2 Conduct of Business; Notifications.

(a) Prior to the Closing Date, and for the duration of this Agreement, Borrower
shall, and shall cause each of its Subsidiaries to, use commercially reasonable
efforts to carry on its business in the ordinary course of business and use
reasonable best efforts to maintain and preserve its and each Subsidiary’s
business (including its organization, assets, properties, goodwill and insurance
coverage) and preserve its business relationships with customers, strategic
partners, suppliers, distributors and others having business dealings with it;
provided, that nothing in this sentence shall limit or require any actions that
the Board may, in good faith, determine to be inconsistent with their duties or
Borrower’s obligations under applicable Legal Requirements.

(b) Borrower shall immediately notify the Lenders in writing when Borrower
obtains knowledge of (i) the occurrence of any default under 5.1, (ii) any event
that would reasonably be expected to have a Material Adverse Effect, and
(iii) the occurrence of any event described under 5.1(a), (b), (c) or (d) with
respect to any Subsidiary of Borrower that is not a Major Bank Subsidiary.

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

Section 3.3 Financial Statements; Shareholder Information. Borrower shall, and
cause its Subsidiaries to, at all times maintain a system of accounting, on the
accrual basis of accounting and in accordance with the requirements of the
applicable Governmental Agency and with GAAP, and shall simultaneously provide
to Lenders or their Representatives any notices, financial statements and other
financial information related to Borrower or any Subsidiary that are provided to
the holders of Borrower’s common stock.

Section 3.4 Inspection Rights.

(a) From the date hereof until the Maturity Date, Borrower will furnish to
Servicer (and its financial and professional advisors and Representatives), and
permit Servicer and its Representatives access during Borrower’s or the Bank’s
normal business hours and upon reasonable advance notice, to such information
and materials relating to the financial, business and legal condition of
Borrower and the Bank[s] as may be reasonably necessary or advisable to allow
Servicer and its Representatives to remain familiar with Borrower and the
Bank[s] and confirm compliance by Borrower with the terms of this Agreement. Any
investigation pursuant to this Section 1.1(a) shall be conducted during normal
business hours and in such manner as not to interfere unreasonably with the
conduct of the business of Borrower, and nothing herein shall require Borrower
or any Subsidiary to disclose any information to the extent (i) prohibited by
applicable Legal Requirement, (ii) that Borrower reasonably believes such
information to be competitively sensitive proprietary information, or (iii) that
such disclosure would reasonably be expected to cause a violation of any
agreement to which Borrower or any Subsidiary is a party or would cause a risk
of a loss of privilege to Borrower or any Subsidiary; provided, that the types
of information disclosed to Servicer pursuant to its investment made hereby
shall not be withheld pursuant to clause (ii); provided further, that Borrower
shall use commercially reasonable efforts to make appropriate substitute
disclosure arrangements under circumstances where the restrictions in this
clause (iii) apply. Under no circumstances shall Confidential Customer
Information be disclosed to any Lender or its Representatives.

(b) In consideration of the rights granted under Section 1.1(a), the Servicer
and each Lender each agrees that it will hold, will cause its Affiliates and
Representatives (collectively with the Lenders and Servicer, the “Lender
Entities”) to hold, in confidence, unless disclosure to a Governmental Agency is
necessary or appropriate in connection with any necessary regulatory approval,
or request for information or similar process, or unless compelled to disclose
by judicial or administrative process or, in the written opinion of its counsel,
by other requirement of law or the applicable requirements of any Governmental
Agency (in which case, such Lender or Servicer, as the case may be, shall, to
the extent legally permissible and reasonably practicable, provide Borrower with
prior written notice of such permitted disclosure, except to the extent such
disclosure is in connection with a routine audit by a Governmental Agency that
does not expressly reference Borrower or this Agreement), all nonpublic records,
books, contracts, instruments, computer data and other data and information
(collectively, “Confidential Information”) concerning Borrower or the Bank
furnished to the Lender Entities pursuant to this Agreement or in connection
with the rights granted hereunder (except to the extent that such information
can be shown to have been: (i) previously known by such party on a
non-confidential basis; (ii) in the public domain through no fault of such
party; or (iii) later lawfully acquired from other sources by the party to which
it was furnished), and the Lender Entities shall not release or disclose such
Confidential Information to any other person, except to potential third-party
buyers of the Term Loan (subject to execution of a non-disclosure agreement
between such buyer and Borrower in a form substantially similar to the
Confidentiality Agreement entered into October 23, 2015 by and between Borrower
and Servicer), with the express understanding that such parties will maintain
the confidentiality of the Confidential Information pursuant to the terms
herein.

Section 3.5 [Reserved]

Section 3.6 Assignments and Participations of Term Loan.

(a) Subject to compliance with applicable laws, each Lender shall be permitted,
at any time without the consent of the Borrower, to transfer, sell, assign or
otherwise dispose of (“Assign” or “Assignment”, as applicable) all or a portion
of the Term Loan at any time, and Borrower shall take all steps as may be
reasonably requested by each Lender to facilitate the Assignment of the Term
Loan. Each Lender shall also be permitted, at any time without the consent of
the Borrower, to sell participations in all or a portion of the Term Loan;
provided, that (in the case of participations only) the Borrower shall continue
to deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under this Agreement. In furtherance of the foregoing,

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

Borrower shall provide reasonable cooperation to facilitate any Assignments or
participations of the Term Loan, including, as is reasonable under the
circumstances, by (i) amending this Agreement as reasonably necessary to
incorporate an administrative agent and other provisions relevant to a
syndicated loan facility, or to facilitate a CLO Transaction, (ii) furnishing
such information concerning Borrower and its business as a proposed assignee or
participant may reasonably request and (iii) in the event Confidential
Information is being provided to a third-party, making management of Borrower
reasonably available to respond to questions of a proposed assignee in
accordance with customary practice, subject in all cases in which Confidential
Information is provided to the proposed assignee agreeing to a customary
non-disclosure agreement between such assignee and Borrower in a form
substantially similar to the Confidentiality Agreement entered into on
October 23, 2015 by and between Borrower and Servicer.

(b) The Servicer (or in the event the Initial Lender shall no longer hold any
principal amount of the Term Loan, the Agent), acting solely for this purpose as
an agent of the Borrower, shall maintain at Servicer’s or Agent’s (as
applicable) place of business, a copy of each agreement evidencing an
Assignment, and a register for the recordation of the names and addresses of
each of the assignee lenders, and the principal amounts (and related interest
amounts) of the Term Loan owing to each assignee lender from time to time (the
“Register”). The entries in the Register shall be conclusive, absent manifest
error, and the Borrower and Servicer or Agent, as the case may be, shall treat
each Person whose name is recorded in the Register pursuant to the terms hereof
as a applicable Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower, and with respect to
its own Term Loan, any assignee lender, at any reasonable time and from time to
time upon reasonable prior notice. Each Lender shall maintain at its place of
business, a copy of each agreement evidencing a participation interest, and a
register for the recordation of the names and addresses of each of participants
holding a portion of the Term Loan, and the principal amounts (and related
interest amounts) of the Term Loan owing to each participant from time to time
(the “Participant Register”). Each Lender shall provide a copy of its
Participant Register to the Servicer and the Agent, upon request from Servicer
or the Agent.

Section 3.7 CLO Transactions. Any Lender shall have the right at any time and
from time to time to securitize the portion of the Term Loan that such Lender
holds or any portion thereof in a single asset securitization or one or more
pooled loan securitizations of rated single or multi-class securities secured by
or evidencing ownership interests in the Term Loan (each such securitization is
referred to herein as a “CLO Transaction”). Borrower acknowledges that this Term
Loan may be, at the CLO Closing Date or sometime in the future, pooled with
other term loans held by Initial Lender or by an assignee of Initial Lender as
part of a CLO Transaction issued by the Initial Lender or such assignee, and
managed and serviced by the Servicer, as an agent of the Initial Lender or
assignee. In connection with this CLO Transaction and any other CLO Transaction,
if any, that may occur in the future, Borrower shall use all reasonable efforts
and cooperate fully and in good faith with the applicable Lender and otherwise
assist such Lender in satisfying the market standards to which such Lender
customarily adheres or which may be reasonably required in the marketplace or by
applicable rating agencies in connection with any such CLO Transactions. Subject
to Section 3.4(b), all information regarding Borrower may be furnished, without
liability to any Lender furnishing such information, to any Person deemed
necessary by the applicable Lender in connection with such CLO Transaction. All
documents, financial statements, appraisals and other data relevant to Borrower
or the Term Loan may be exhibited to and retained by any such Person.

Section 3.8 Transfer Taxes. On the Closing Date, any transfer or other similar
Taxes which are required to be paid in connection with the borrowing of the Term
Loan by the Borrower from the Initial Lender hereunder will be, or will have
been, fully paid or provided for by Borrower, and all Legal Requirements
imposing such taxes will be or will have been complied with.

Section 3.9 Indemnification.

(a) Indemnification of Lenders. Borrower will indemnify and hold the Lenders,
the Servicer, the Lender Advisors and their respective advisors, directors,
officers, shareholders, members, partners, employees, agents and Affiliates (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls a Lender (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners, employees or Affiliates (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling person (each,
a “Borrower Indemnified Person”) harmless from and against any and all losses,
liabilities, obligations, claims,

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

damages, costs and expenses actually and reasonably incurred by such Borrower
Indemnified Person, including all judgments, amounts paid in settlements, court
costs and reasonable attorneys’ fees and costs of investigation (collectively,
“Losses”) that any such Borrower Indemnified Person may suffer or incur as a
result of: (i) non- payment of any principal amount of interest on the Loan when
due, non-performance by Borrower of any other obligation under this Agreement,
or any breach of any of the representations, warranties, covenants or agreements
made by Borrower in this Agreement, or (ii) any action instituted against a
Borrower Indemnified Person in any capacity, or any of them or their respective
Affiliates, by any shareholder of Borrower or other third party who is not a
Lender, an Affiliate of a Lender, Servicer, a Lender Advisor or an Affiliate of
such Borrower Indemnified Person, with respect to any of the transactions
contemplated by this Agreement; provided, however, that a Lender or any
Affiliate of a Lender shall not have any right under this Section to accelerate
any payment of any principal or interest on the Term Loan, and the Borrower
shall not be required to make indemnification payments hereunder, in each case
solely to the extent any such payments would violate, or jeopardize, the
qualification of the Term Loan as Tier 2 capital in accordance with 12 C.F.R.
250.166, as supplemented by Federal Reserve Supervisory Letter SR 92 37 (October
15, 1992) and 12 C.F.R. 217.20(d) and any then-applicable capital adequacy rules
and regulations promulgated by the Federal Reserve, until such time as a payment
hereunder would not be in violation of such aforementioned rules and
regulations. Borrower will not be liable to any Borrower Indemnified Person
under this Agreement to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Borrower Indemnified Person’s
material breach of any of the representations, warranties, covenants or
agreements made by such Borrower Indemnified Person in this Agreement or
attributable to the material actions or material inactions of such Borrower
Indemnified Person.

(b) Conduct of Indemnification Proceedings for Borrower Indemnified Persons.
Promptly after receipt by any Borrower Indemnified Person of notice of any
demand, claim or circumstances which would or might give rise to a claim or the
commencement of any action, proceeding or investigation in respect of which
indemnity may be sought pursuant to Section 1.1(a), such Borrower Indemnified
Person shall promptly notify Borrower in writing and Borrower shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Borrower Indemnified Person, and shall assume the payment of all fees and
expenses; provided, however, that the failure of any Borrower Indemnified Person
to so notify Borrower shall not relieve Borrower of its obligations hereunder
except to the extent that Borrower is actually and materially and adversely
prejudiced by such failure to notify (as determined by a court of competent
jurisdiction, which determination is not subject to appeal or further review).
In any such proceeding, any Borrower Indemnified Person shall have the right to
retain its own counsel, and the fees and expenses of such counsel shall be at
the expense of Borrower; provided, that Borrower shall not be liable for the
fees and expenses of more than one separate firm of attorneys at any time for
all Borrower Indemnified Persons. Borrower shall not be liable for any
settlement of any proceeding effected without its written consent, which consent
shall not be unreasonably withheld, delayed or conditioned. Without the prior
written consent of the Borrower Indemnified Person, which shall not be
unreasonably withheld, delayed or conditioned, Borrower shall not effect any
settlement of any pending or threatened proceeding in respect of which any
Borrower Indemnified Person is or could have been a party and indemnity could
have been sought hereunder by such Borrower Indemnified Person, unless such
settlement includes an unconditional release of such Borrower Indemnified Person
from all liability arising out of such proceeding.

(c) Certain Limitations

(i) The Company will not be liable for Losses that otherwise are indemnifiable
under Section 3.9(a)(ii) with respect to any claim (or series of claims arising
from the same or similar underlying facts, events or circumstances) unless and
until the total of all Losses otherwise indemnifiable under Section 3.9(a)(ii)
(in the aggregate and at any time incurred) exceeds $50,000 (the “Deductible”),
in which event the Company shall be responsible for the total amount of such
Losses incurred in excess of the Deductible. The aggregate amount of all Losses
pursuant to Section 3.9(a)(ii) for which the Company shall be liable shall not
exceed fifty percent (50%) of the initial principal amount of the Term Loan as
of the date hereof; provided that (x) the Company has timely performed all
payment obligations and covenants under this Agreement, and (y) such Losses
pursuant to 3.9(a)(ii) are not related to any breach of any of the
representations, warranties, covenants or agreements made by Borrower under this
Agreement.

(ii) For purposes of the indemnity contained in Section 1.1(a)(i), all
qualifications and limitations set forth in the parties’ representations and
warranties as to “materiality,” “material adverse effect” and words of similar
import shall be disregarded in determining whether there shall have been any
inaccuracy in or breach of any representations and warranties in this Agreement
and the Losses arising therefrom.

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

(d) Indemnification of Servicer. The Lenders will indemnify and hold the
Servicer and its respective advisors, directors, officers, shareholders,
members, partners, employees, agents and Affiliates (and any other Persons with
a functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) (each, a “Lender Indemnified Person”)
harmless from and against any and all losses, liabilities, obligations, claims,
damages, costs and expenses actually and reasonably incurred by such Lender
Indemnified Person, including all judgments, amounts paid in settlements, court
costs and reasonable attorneys’ fees and costs of investigation (collectively,
“Losses”) that any such Lender Indemnified Person may suffer or incur as a
result of: (i) any breach of any of the representations, warranties, covenants
or agreements made by Lenders in this Agreement, or (ii) any action instituted
against a Lender Indemnified Person in any capacity, or any of them or their
respective Affiliates, by any shareholder of Lender or other third party who is
not an Affiliate of such Lender Indemnified Person, with respect to any of the
transactions contemplated by this Agreement. The Lenders will not be liable to
any Lender Indemnified Person under this Agreement to the extent, but only to
the extent that a loss, claim, damage or liability is attributable to any Lender
Indemnified Person’s material breach of any of the representations, warranties,
covenants or agreements made by such Lender Indemnified Person in this Agreement
or attributable to the material actions or material inactions of such Lender
Indemnified Person.

(e) Conduct of Indemnification Proceedings for Lender Indemnified Persons.
Promptly after receipt by any Lender Indemnified Person of notice of any demand,
claim or circumstances which would or might give rise to a claim or the
commencement of any action, proceeding or investigation in respect of which
indemnity may be sought pursuant to Section 1.1(a), such Lender Indemnified
Person shall promptly notify the applicable Lenders in writing and such Lenders
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Lender Indemnified Person, and shall assume the payment of
all fees and expenses; provided, however, that the failure of any Lender
Indemnified Person to so notify the Lenders shall not relieve any Lender of its
obligations hereunder except to the extent that such Lender is actually and
materially and adversely prejudiced by such failure to notify (as determined by
a court of competent jurisdiction, which determination is not subject to appeal
or further review). In any such proceeding, any Lender Indemnified Person shall
have the right to retain its own counsel, and the fees and expenses of such
counsel shall be at the expense of the applicable Lenders; provided, that the
Lenders shall not be liable for the fees and expenses of more than one separate
firm of attorneys at any time for all Lender Indemnified Persons. No Lender
shall be liable for any settlement of any proceeding effected without its
written consent, which consent shall not be unreasonably withheld, delayed or
conditioned. Without the prior written consent of the Lender Indemnified Person,
which shall not be unreasonably withheld, delayed or conditioned, no shall
effect any settlement of any pending or threatened proceeding in respect of
which any Lender Indemnified Person is or could have been a party and indemnity
could have been sought hereunder by such Lender Indemnified Person, unless such
settlement includes an unconditional release of such Lender Indemnified Person
from all liability arising out of such proceeding.

Section 3.10 Reasonable Best Efforts. Borrower and Initial Lender agree to use
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties to this
Agreement in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including using reasonable best efforts to
accomplish the following: (a) the taking of all reasonable acts necessary to
cause the conditions to Closing to be satisfied; (b) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Agencies and the making of all necessary registrations and filings
and the taking of all reasonable steps necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Agency; (c) the
obtaining of all necessary consents, approvals or waivers from third parties;
and (d) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement.

Section 3.11 Merger, Consolidation and Sale of Assets.

(a) Borrower shall not consolidate with or merge with any Person, or effect a
Change in Bank Ownership, unless: (i) the successor entity which results from
such consolidation or merger, if not Borrower, or the Person which acquires the
assets of Borrower or the stock of the Bank from such Change in Bank Ownership

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

(the “Surviving Entity”), (A) shall be organized and existing under the laws of
the United States or any State thereof or the District of Columbia, and
(B) shall have either (x) executed and delivered to the Lenders its assumption
of the due and punctual payment of the principal of and premium, if any, and
interest on the Term Loan, and the due and punctual performance and observation
of all of the covenants in the Term Loan, and this Agreement and shall furnish
to such Lenders an opinion of counsel to the effect that the instrument of
assumption has been duly authorized, executed and delivered and constitutes the
legal, valid and binding contract and agreement of the Surviving Entity
enforceable in accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting the enforcement of creditors’ rights generally and by general
equitable principles, or (y) exchanged the Term Loan for a subordinated term
loan of the Surviving Entity or the parent of the Surviving Entity, and such
subordinated term loan shall have the same economic terms as the Term Loan,
including but not limited to, principal amount, interest rate, maturity and any
other term that would require the consent of each Lender to amend under
Section 1.1(a) hereunder, and such other rights, preferences, privileges and
covenants that are not materially less favorable than the rights, preferences,
privileges and covenants of the Term Loan; and (ii) immediately after giving
effect to such transaction and treating any indebtedness that becomes an
obligation of Borrower as a result of such transaction as having been incurred
by Borrower at the time of such transaction, no Event of Default or potential
Event of Default would exist.

(b) “Change in Bank Ownership” means the sale, transfer, lease or conveyance by
Borrower of its assets, or an issuance of stock by the Bank, resulting in
ownership by Borrower of less than 80% of such Bank (or such Bank’s assets prior
to giving effect to such transaction).

(c) No such consolidation, merger or Change in Bank Ownership shall have the
effect of releasing Borrower or any Surviving Entity that shall theretofore have
become such in the manner prescribed in this 0 from its liability under this
Agreement and the Term Loan. Borrower agrees to provide written notice to
Lenders of its intention to consolidate with or merge with, or sell, lease or
otherwise transfer all or substantially all of its assets to, or the Bank’s
intention to issue stock to, any Person, no later than five (5) Business Days
after the earlier of: (i) Borrower’s receipt of a binding letter of intent with
respect to such transaction; or (ii) the execution of an agreement by and
between Borrower and any Person with respect to such transaction.

Section 3.12 Absence of Control It is the intent of the parties to this
Agreement that in no event, other than with respect to any bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation proceedings
under U.S. federal or state bankruptcy laws, shall Lenders, by reason of this
Agreement or the Note, be deemed to control, directly or indirectly, Borrower or
any of its Subsidiaries, and Initial Lender shall not exercise, or be deemed to
exercise, directly or indirectly, a controlling influence over the management or
policies of Borrower or any of its Subsidiaries.

Section 3.13 Additional Covenants, Representations and Warranties of the Initial
Lender The Initial Lender hereby covenants, represents and warrants to the
Borrower as of the Closing Date as follows:

(a) Legal Power and Authority. The Initial Lender has all necessary power and
authority to execute, deliver and perform its obligations under the Agreement
and to consummate the transactions hereby, and no further consent or
authorization is required in connection with the execution, delivery and
performance by it of the transactions contemplated hereby. The initial Lender is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization.

(b) The Agreement. This Agreement has been duly and validly authorized, executed
and delivered by the Initial Lender and, assuming due authorization, execution
and delivery by the Borrower, constitutes its legal, valid and binding
obligations, enforceable in accordance with the terms of this Agreement, except
as the enforceability may be limited by bankruptcy, insolvency or other similar
laws affecting creditors’ rights generally and subject to general principles of
equity.

(c) Accredited Investor. At Closing, Initial Lender will be an “accredited
investor,” as such term is defined Rule 501(a) of Regulation D (an “Accredited
Investor”), and Initial Lender will promptly notify Borrower if Initial Lender
no longer qualifies as an Accredited Investor following the Closing Date.

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

Section 4. CONDITIONS PRECEDENT TO CLOSING.

Section 4.1 Conditions Precedent to Initial Lender’s Obligations. The obligation
of Initial Lender to make the Term Loan at the Closing Date is subject to the
fulfillment, on or prior to the Closing, of each of the following conditions,
any of which may be waived by Initial Lender:

(a) Representations and Warranties. The representations and warranties of
Borrower contained herein shall be true and correct in all material respects as
of the date hereof and as of the Closing Date, except for such representations
and warranties that speak as of a specific date (which representations and
warranties are so true and correct as of such date); provided, however, that for
each of the representations and warranties in this Agreement that contains an
express materiality qualification shall have been true and accurate in all
respects as of the date of this Agreement, and shall be true and accurate in all
respects on the Closing Date (or such other date as specified) as if then made.

(b) Performance. Borrower shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by it at or prior to the
Closing.

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or Governmental Agency of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by this Agreement.

(d) Consents. Borrower shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for
consummation of the borrowing of the Term Loan, including but not limited to,
any and all approvals or indications of non-objection from the applicable
Governmental Agencies, all of which shall be and remain so long as necessary in
full force and effect.

(e) Borrower Deliverables. Borrower shall have delivered the items set forth in
(a).

(f) Due Diligence. Initial Lender shall have performed its due diligence
examination of Borrower to Initial Lender’s satisfaction. Any making of the Term
Loan at the Closing is subject to the due diligence of Initial Lender and at the
sole discretion of Initial Lender. Initial Lender may decline to make the Term
Loan for any reason or no reason.

Section 4.2 Conditions Precedent to Borrower’s Obligations. Borrower’s
obligation to borrow the Term Loan from Initial Lender at the Closing is subject
to the fulfillment, on or prior to the Closing Date of the following conditions,
any of which may be waived by the Borrower:

(a) Performance. Initial Lender shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by Initial Lender at
or prior to the Closing Date.

(b) Regulatory Approvals. The Borrower shall have received all necessary federal
and state banking regulatory approvals permitting Borrower to redeem or
repurchase the Borrower’s outstanding Fixed Rate Cumulative Perpetual Preferred
Stock, Series A and Fixed Rate Cumulative Perpetual Preferred Stock, Series B.

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or Governmental Agency of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by this Agreement.

(d) Lender Deliverables. Initial Lender shall have delivered the items set forth
in (b).

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

Section 5. BORROWER’S DEFAULTS AND LENDERS’ REMEDIES.

Section 5.1 Event of Default. Notwithstanding any cure periods described below,
Borrower shall immediately notify Lenders in writing when Borrower obtains
knowledge of the occurrence of any default specified below. Regardless of
whether Borrower has given the required notice, the occurrence of one or more of
the following will constitute an “Event of Default” under the Term Loan:

(a) Borrower or any Major Bank Subsidiary applies for, consents to or acquiesces
in the appointment of a receiver for itself, or in the absence of such
application, consent or acquiescence, a receiver is appointed for Borrower;

(b) Any proceedings are commenced by or against Borrower or any Major Bank
Subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law or statute of the federal
government or any state government, if such proceedings are instituted, Borrower
or Bank by any action or failure to act indicates its approval of, consent to or
acquiescence therein, or an order shall be entered approving the petition in
such proceedings and within ninety (90) days after the entry thereof such order
is not vacated or stayed on appeal or otherwise, or shall not otherwise have
ceased to continue in effect;

(c) Borrower or any Major Bank Subsidiary applies for, consents to or acquiesces
in the appointment of a trustee, receiver or liquidator for itself under
Chapter 7 or Chapter 11 of the United States Bankruptcy Code (the “Code
Provisions”), or in the absence of such application, consent or acquiescence, a
trustee, receiver or liquidator is appointed for Borrower under the Code
Provisions, and is not discharged within ninety (90) days, or any bankruptcy,
reorganization, debt arrangement or other proceeding or any dissolution or
liquidation proceeding is instituted by or against Borrower under the Code
Provisions, and if instituted, is consented or acquiesced in by it or remains
for ninety (90) days undismissed, or if Borrower or Bank is enjoined, restrained
or in any way prevented from conducting all or any material part of its business
under the Code Provisions.

(d) Borrower or any Major Bank Subsidiary becomes insolvent or is unable to pay
its debts as they mature; or makes an assignment for the benefit of creditors or
admits in writing its inability to pay its debts as they mature; or suspends
transaction of its usual business; or if a trustee of any substantial part of
the assets of Borrower or Bank is applied for or appointed, and if appointed,
Borrower or Bank by any action or failure to act indicates its approval of,
consent to, or acquiescence in such appointment, or within ninety (90) days
after such appointment, such appointment is not vacated or stayed on appeal or
otherwise, or shall not otherwise have ceased to continue in effect;

(e) Borrower fails to pay any principal or interest due on the Term Loan when
due;

(f) Borrower fails to pay any other fees, charges, costs or expenses under this
Agreement and in each case such failure shall continue for a period of thirty
(30) days after notice thereof is given by any Lender to Borrower; or

(g) Borrower fails to perform or observe in any material respect any agreement,
term, provision, condition, or covenant (other than any such failure that
results in an Event of Default as expressly provided in any other clause of 0)
required to be performed or observed by Borrower hereunder or other agreement
with or in favor of Lenders and in each case such failure shall continue for a
period of thirty (30) days after notice thereof is given by any Lender to
Borrower.

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

Section 5.2 Effect of Event of Default; Remedies of Lenders.

(a) Upon the occurrence of any Event of Default, and upon the vote of Majority
Lenders, any Lender shall have the right, if such Event of Default shall then be
continuing, in addition to all the remedies conferred upon Lenders by the terms
of this Agreement or the Term Loan, to do any or all of the following,
concurrently or successively, without notice to Borrower:

Solely pursuant to Sections 5.1(a), (b), (c) and (d), declare the Term Loan to
be, and it shall thereupon become, immediately due and payable, subject to
approval by applicable regulatory authorities, without presentation, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Term Loan to the contrary.

[Reserved]

Following the occurrence of any Event of Default and until such Event of Default
is cured by Borrower or waived by the holders of the Term Loan pursuant to
Section 1.1(c), Borrower shall not: (w) make any payments on any indebtedness
that ranks junior to the Term Loan; (x) declare or pay any dividends on its
equity securities; (y) redeem or otherwise acquire any of its equity securities;
or (z) make any other distributions with respect to its equity securities or set
aside any monies or properties for such purposes.

Upon the occurrence of any Event of Default, it is specifically understood and
agreed that notwithstanding the curing of any such Event of Default, Borrower
shall not be released from any of its covenants hereunder unless and until the
Term Loan is paid in full.

Nothing in this (g) is intended to restrict any Lender’s rights under the Term
Loan, other related documents, or at law or in equity, and any Lender may
exercise such rights and remedies as and when they are available.

(b) In case of any Event of Default hereunder, Borrower shall pay Lenders’
reasonable fees and expenses including attorneys’ fees and expenses, in
connection with the enforcement of this Agreement or other related documents.

(c) In each case of an Event of Default,, the Majority Lenders may elect to
waive all or an individual remedy, including but not limited to 0.

Section 5.3 Reserved.

Section 6. MISCELLANEOUS.

Section 6.1 Successors and Assigns. The provisions of this Agreement will inure
to the benefit of and be binding upon the parties and their successors and
permitted assigns. Neither this Agreement, nor any rights or obligations
hereunder, may be assigned by the Borrower without the prior written consent of
the Initial Lender, or, at any such time the Initial Lender shall hold less than
66 2/3% of the then-outstanding aggregate principal amount of the Term Loan,
without the prior written consent of the Majority Lenders. Subject to 0, this
Agreement, the Term Loan and any rights or obligations hereunder, may be
assigned by any Lender without the prior written consent of Borrower.

Section 6.2 Amendments.

(a) Subject to any necessary regulatory approval, this Agreement, the Note and
any related transaction documents may, with the consent of the Borrower and the
Majority Lenders, be amended or any provision, past default, or non-compliance
thereof waived; provided, however, that, without the consent of each Lender, no
such amendment or waiver may:

reduce the principal amount of the Term Loan;

reduce the rate of or change the time for payment of interest on the Term Loan;

extend the maturity of the Term Loan;

make any change in this 0 or in 0; 0; or 0; or

make any change in 0 that adversely affects the rights of any Lender.

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

(b) Effectiveness of Amendments. An amendment or waiver becomes effective in
accordance with its terms and thereafter binds every Lender, unless otherwise
provided by (a). After an amendment or waiver becomes effective, the Borrower
may require the Initial Lender (or any subsequent Lender) to surrender the Note,
so that an appropriate notation concerning the amendment or waiver may be placed
thereon or a new Note, reflecting the amendment or waiver, exchanged therefor.
Even if such a notation is not made or such a new Note is not issued, such
amendment or waiver and any consent given thereto by a Lender shall be binding
according to its terms on any subsequent holder of the Note.

(c) Corrective Amendments upon a Tier 2 Capital Event. In the event of a Tier 2
Capital Event, the Initial Lender, or the Majority Lenders, as the case may be,
shall have the right, at their sole discretion, within 45 days of receipt of a
written notice from Borrower of such Tier 2 Capital Event, to make such
amendments to this Agreement solely to the extent necessary such that the Term
Loan qualifies or continues to qualify as Tier 2 capital under the
then-applicable capital adequacy rules and regulations promulgated by the
Federal Reserve. The Borrower shall agree to such amendments so long as such
amendments are not reasonably expected to have a Material Adverse Effect.

Section 6.3 Time of the Essence. Time is of the essence of this Agreement.

Section 6.4 No Waiver. No waiver of any term, provision, condition, covenant or
agreement herein contained shall be effective unless set forth in writing signed
by Majority Lenders or Borrower (as the case may be), and any such waiver shall
be effective only to the extent set forth in such writing. No failure to
exercise or delay in exercising, by any party, 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
Borrower in any case shall, in itself, entitle Borrower to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of Lenders to any other or further action in any circumstances without
notice or demand. No consent or waiver, expressed or implied, by Lenders to or
of any breach or default by Borrower 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 Borrower hereunder.

Section 6.5 Notices. All notices or communications in respect to this Agreement
or the Note shall be provided in writing and will be deemed given upon the
earlier of: (a) actual receipt; and (b) five (5) Business Days after being sent
by certified or registered mail, postage prepaid, return receipt requested, in
each case as follows:

 

  if to Borrower:        First National Corporation          112 West King
Street          Strasburg, Virginia 22657          Attention:    Scott C.
Harvard             President and Chief Executive Officer         
Telephone:        (540) 465-9121          E-mail:    sharvard@fbvirginia.com

 

    with a copy to:      Williams Mullen          200 S. 10th Street         
Richmond, Virginia 23219          Attention:    Wayne A. Whitham, Jr.         
Telephone:        (804) 420-6473          E-mail:    wwhitham@williamsmullen.com

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

  if to Agent or Servicer:     Community Funding CLO, Ltd.       c/o StoneCastle
Investment Management, LLC       152 West 57th Street, 35th Floor       New
York, New York 10019       Attention:    Rachel Schatten          General
Counsel       Telephone:        (212) 354-6500       E-mail:   
rschatten@stonecastle.com

 

  with a copy to:      Cleary, Gottlieb, Steen & Hamilton, LLP        One
Liberty Plaza        New York, NY        10006        Attention:    Duane
McLaughlin        Telephone:        212-225-2106        E-mail:   
dmclaughlin@cgsh.com

Any party may change or update its notice address above by written notice to
each other party hereto, at the addresses indicated above.

Section 6.6 Survival. Subject to applicable statute of limitations, the
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the extension of the Term Loan. Such representations and
warranties shall continue in full force and effect so long as any Term Loan or
any other obligation hereunder shall remain unpaid or unsatisfied (or until
final resolution of any claim or action arising from the breach of any such
representation and warranty).

Section 6.7 Confidential Customer Information. None of Lenders, Servicer or any
Lender Advisor shall be liable for any loss, claim, damage or liability
attributable to the disclosure of Confidential Customer Information to any
Lender, Servicer or any Lender Advisor, provided that such loss, claim, damage
or liability does not arise from any prohibited use or disclosure of such
information by any Lender, Servicer or any Lender Advisor. To the extent any
Confidential Customer Information is received by any Lender, Servicer or any
Lender Advisor, it will use its reasonable best efforts to destroy or return
such information to Borrower. Notwithstanding the foregoing, the Lenders,
Servicer or any Lender Advisor may retain such received Confidential Customer
Information to comply with applicable law or regulation or professional standard
or bona fide internal compliance policy requirements.

Section 6.8 No Joint Venture. Nothing contained herein or in any document
executed pursuant hereto and no action or inaction whatsoever on the part of any
Lender, shall be deemed to make such Lender a partner or joint venturer with
Borrower.

Section 6.9 Publicity. Borrower shall not publicize this Agreement or the
issuance of the Note, without the prior written consent of Majority Lenders,
except that Borrower may make any filings required by law; provided, however,
that nothing contained herein shall be construed to prohibit Borrower from
providing information regarding this Agreement or the Contemplated Transaction
to Borrower’s employees, attorneys, accountants or other advisors in order to
evaluate the Contemplated Transaction or in the ordinary course of Borrower’s
business, or to third-parties to the extent necessary for Borrower to obtain any
consents from such third-parties to this Agreement or Contemplated Transaction.

Section 6.10 Documentation. All documents and other instruments required by any
of the provisions of this Agreement to be submitted to Initial Lender shall be
in the form and substance satisfactory to Initial Lender.

Section 6.11 Additional Assurances. Each party agrees that, at any time or from
time to time, upon the written request of the other party, it will execute all
such further documents and do all such other acts and things as the other party
may reasonably request to effectuate the Contemplated Transactions.

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

Section 6.12 Entire Agreement. This Agreement and the schedules and exhibits
hereto 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. In
entering into this Agreement neither party has relied upon any representation,
warranty, covenant, obligation or other agreement that is not set forth herein.

Section 6.13 Choice of Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York. Nothing herein shall
be deemed to limit any rights, powers or privileges which Lenders may have
pursuant to any law of the United States 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 Lenders, Servicer or Lender Advisors which is
lawful pursuant to, or which is permitted by, any of the foregoing.

Section 6.14 Forum; Venue. Borrower irrevocably agrees that all actions or
proceedings in any way, manner, or respect, arising out of or from or related to
this Agreement shall be litigated only in courts within New York, New York. The
parties hereto hereby consent and submit to the jurisdiction of any local,
state, or federal court located within said city. The parties hereto hereby
waive any right they may have to transfer or change the venue of any such
litigation brought against Borrower or any Lender.

Section 6.15 No Third Party Beneficiary. This Agreement is made for the sole
benefit of Borrower, the Lenders and Servicer 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. For the avoidance of doubt, this 0 does not affect a Person’s rights
to indemnification pursuant to 0.

Section 6.16 Construction. In this Agreement, unless otherwise stated or the
context otherwise requires, the following uses apply: (a) actions permitted
under this Agreement may be taken at any time and from time to time in the
actor’s reasonable discretion; (b) references to a statute shall refer to the
statute and any successor statute, and to all regulations promulgated under or
implementing the statute or its successor, as in effect at the relevant time;
(c) in computing periods from a specified date to a later specified date, the
words “from” and “commencing on” (and the like) mean “from and including,” and
the words “to,” “until” and “ending on” (and the like) mean “to, but excluding”;
(d) “including” means “including, but not limited to”; (e) all references to
articles, sections, paragraphs, clauses, schedules and exhibits are to articles,
sections, paragraphs, clauses, schedules and exhibits in, of or to this
Agreement unless otherwise specified; (f) all words used in this Agreement will
be construed to be of such gender or number as the circumstances and context
require; (g) the captions and headings of articles, sections, schedules and
exhibits appearing in or attached to this Agreement have been inserted solely
for convenience of reference and shall not be considered a part of this
Agreement nor shall any of them affect the meaning or interpretation of this
Agreement or any of its provisions; and (h) any reference to a document or set
of documents in this Agreement, and the rights and obligations of the parties
under any such documents, shall mean such document or documents as amended from
time to time, and any and all modifications, extensions, renewals, substitutions
or replacements thereof. Borrower and Lenders further agree that this Agreement
shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting an instrument or
causing any instrument to be drafted.

Section 6.17 Certain Accounting Terms. Any accounting terms used in this
Agreement which are not specifically defined herein shall have the meaning
customarily given to them in accordance with GAAP unless otherwise described
differently.

Section 6.18 Discretion. Unless specified to the contrary herein, all references
herein to an exercise of discretion or judgment by a party, to the making of a
determination or designation by a party, to the application of a party’s
discretion or opinion, to the granting or withholding of a party’s consent or
approval, to the consideration of whether a matter or thing is satisfactory or
acceptable to a party, or otherwise involving the decision making of a party,
shall be deemed to mean that such party shall decide unilaterally using its sole
and absolute discretion or judgment.

Section 6.19 WAIVER OF RIGHT TO JURY TRIAL. THE PARTIES HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT ANY OF THEM MAY HAVE TO A

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

TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS
AGREEMENT OR THE NOTE, OR ANY OTHER STATEMENTS OR ACTIONS OF BORROWER OR LENDER.
EACH PARTY ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED BY OR HAS HAD ACCESS TO
INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL IN THE SIGNING OF THIS
AGREEMENT AND IN THE MAKING OF THIS WAIVER BY, AND THAT IT HAS DISCUSSED THIS
WAIVER WITH, SUCH LEGAL COUNSEL. BORROWER AND LENDER EACH FURTHER ACKNOWLEDGE
THAT (a) IT HAS READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS
WAIVER AND (b) THIS WAIVER HAS BEEN REVIEWED BY THE PARTIES AND IS A MATERIAL
INDUCEMENT FOR THE PARTIES TO ENTER INTO THE AGREEMENT.

Section 6.20 Execution. This Agreement may be executed in any number of
counterparts, each of which will be an original and all, when taken together,
will be considered one and the same agreement. This Agreement will become
effective with respect to Initial Lender when the Borrower receives a
counterpart hereof executed by Initial Lender. In the event that any signature
is delivered by facsimile transmission, or by e-mail delivery of a PDF format
data file, such signature will 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 or PDF signature page were an original
thereof.

Section 7. DEFINITIONS. The following capitalized terms generally used in this
Agreement shall 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.

“Administrator” means Maples FS Limited or its successor from time to time as
administrator for the Initial Lender.

“Agent” means, initially, the Initial Lender, or in the event the Initial Lender
shall no longer hold any principal amount of the Term Loan, an agent designated
by the Majority Lenders.

“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, members,
shareholders, directors, officers, employees, agents and representatives;
provided that neither the Administrator nor any special purpose entity for which
the Administrator acts as administrator and/or share trustee shall be deemed to
be an Affiliate of the Initial Lender solely because such Person or its
Affiliate serves as administrator for the Initial Lender.

“Business Day” means a day of the week other than a Saturday, Sunday or a legal
holiday under the laws of the State of New York or any other day on which
banking institutions located in the State of New York are authorized or required
by law or other governmental action to close.

“Commission” means the United States Securities and Exchange Commission.

“Confidential Customer Information” means all non-public or confidential
information that relates to personal financial information and identities of
clients and customers, including, but not limited to names, social security
numbers, employer identification numbers, tax identification numbers or other
identifying information, which may be disclosed, directly or indirectly, whether
or not by mistake, by or from the Borrower’s controlling persons, directors,
officers, employees, Affiliates, associates, agents or advisors, to Lenders
either in writing, orally or in any other form or medium, including but not
limited to, loan tapes, deposit tapes, securities tapes, documents and records.

“Contemplated Transactions” means the transactions contemplated by this
Agreement.

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

“FDIC” means the Federal Deposit Insurance Corporation.

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

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

“GAAP” means United States generally accepted accounting principles.

“Governmental Agency(ies)” means, individually or collectively, any governmental
or regulatory authorities, agencies, arbitrators, courts, commissions or other
entities, whether federal, state, local or foreign, or applicable
self-regulatory organizations, including 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 Borrower or any of its subsidiaries, and shall include, without
limitation, (i) the Small Business Administration, (ii) the Federal Housing
Administration, (iii) the Federal Home Loan Mortgage Corporation, (iv) the
Farmers Home Administration (now known as Rural Housing and Community
Development Services), (v) the Federal National Mortgage Association, (vi) the
United States Department of Veterans’ Affairs, (vii) the Government National
Mortgage Association, (viii) the Rural Housing Service of the United States
Department of Agriculture, and (ix) the United States Department of Agriculture.

“Interest Payment Date” has the meaning set forth in the Note.

“Knowledge” means to the best knowledge of Borrower based on commercially
reasonable inquiry.

“Legal Requirement” means any federal, state, local, municipal, foreign,
international, multinational or other order, constitution, law, ordinance,
regulation, rule, policy statement, directive, statute or treaty.

“Lender” means (i) the Initial Lender, (ii) any Person to whom Initial Lender
has assigned any portion of the Term Loan pursuant to Section 3.6, and (iii) any
successors or permitted assigns of the foregoing under (i) and (ii); so long as,
in each case and at such time of determination, such party holds a portion of
the Term Loan (other than a participation interest).

“Lender Advisors” means StoneCastle Partners, LLC; StoneCastle Asset Management,
LLC; StoneCastle Advisors, LLC; StoneCastle Securities, LLC; StoneCastle Loan
Management, LLC; StoneCastle Cash Management, LLC; and StoneCastle Investment
Management, LLC.

“Major Bank Subsidiary” means any subsidiary of the Borrower that is a “major
bank subsidiary” as that term is used in SR 92-37 (FIS) promulgated by the
Division of Banking Supervision and Regulation of the Federal Reserve, and as
such term may subsequently be defined or interpreted in any rule, regulation,
written interpretation or other public issuance of the Federal Reserve.

“Majority Lenders” means Lenders holding at least 66 2/3% of the aggregate
outstanding principal amount of the Term Loan then outstanding

“Material Adverse Effect” means a material adverse effect: (a) in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of Borrower and its Subsidiaries considered as one enterprise, whether
or not arising in the ordinary course of business; or (b) on the ability of
Borrower to enter into and perform its obligations under, or consummate the
transactions contemplated in, this Agreement.

“Material Contract” means any of the following agreements of Borrower or any of
its Subsidiaries:

(a) other than with respect to Loans, any contract providing for, or reasonably
likely to result in, the receipt or expenditure of more than $75,000 on an
annual basis, including the payment or receipt of royalties or other amounts
calculated based upon revenues or income;

(b) any real property lease and any other lease with annual rental payments
aggregating $75,000 or more;

(c) any contract that by its terms limits the payment of dividends or other
distributions by Borrower or any Subsidiary; and

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

(d) any contract that would reasonably be expected to prevent, materially delay,
or materially impede Borrower’s ability to consummate the Contemplated
Transactions; and

(e) any joint venture, partnership, strategic alliance, or other similar
contract (including any franchising agreement, but in any event excluding
introducing broker agreements), and any contract relating to the acquisition or
disposition of any material business or material assets (whether by merger, sale
of stock or assets, or otherwise), which acquisition or disposition is not yet
complete or where such contract contains continuing material obligations or
contains continuing indemnity obligations of Borrower or any of the
Subsidiaries.

“Outside Date” means October 31, 2015.

“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.

“Prepayment Price” means a price equal to 100% of the principal balance of the
Term Loan as of the date of any prepayment (to the extent that Borrower is
prepaying the Term Loan in full) or to the extent that Borrower is prepaying a
portion of the principal amount outstanding, the amount of such principal
prepayment.

“Record Date” has the meaning set forth in the Note.

“Representative” means (i) the Servicer, (ii) the Lender Advisors, and (iii) any
Lender’s directors, officers, employees and professional advisors engaged to
advise such Lender with respect to this Agreement, the Note, and the
Contemplated Transactions who have a reasonable need to know information about
Borrower and who agree in writing, in form and substance satisfactory to
Borrower, not to use such information for their own benefit and to maintain the
confidentiality of the information in question except as required otherwise by
law or regulation.

“Securities Act” means the Securities Act of 1933, as amended.

“Servicer” means StoneCastle Investment Management, LLC, as the servicer of the
assets held by the Initial Lender, or any successor servicer or agent designated
by the Majority Lenders.

“Subsidiary(ies)” means individually or collectively, any “significant
subsidiary” of Borrower (as such term is defined in Rule 1-02 of Regulation S-X
of the Commission) and listed on Schedule A.

“United States” means the United States of America.

[THIS SPACE LEFT INTENTIONALLY BLANK]

[SIGNATURE PAGE FOLLOWS]

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

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.

 

BORROWER: FIRST NATIONAL CORPORATION By:  

/s/ Scott C. Harvard

  Name:   Scott C. Harvard   Title:   President and Chief Executive Officer
INITIAL LENDER: COMMUNITY FUNDING CLO, LTD. By:  

/s/ Jarladth Travers

  Name:   Jarladth Travers   Title:   Director

 

Acknowledged and Agreed: STONECASTLE INVESTMENT MANAGEMENT, LLC By:  

/s/ George Shilowitz

  Name:   George Shilowitz   Title:   Managing Director

[Signature Page to Subordinated Term Loan Agreement]

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

SCHEDULE A

SUBSIDIARIES

First National

Corporation

 

i

First Bank

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

SCHEDULE B

DISCLOSURE SCHEDULES

Section 2.2 – Existing Security Interests or Liens

None.

Section 2.5 – Regulatory Consents and Approvals

None.

Section 2.6 – Preemptive Rights

None.

Section 2.13 – Taxes Due

None.

Section 2.18 – Insurance

 

  (A) Commercial Package

 

  1. Building and Business Personal Property (Blanket)

 

  2. Business Income

 

  3. Flood Coverage

 

  4. Earthquake Coverage

 

  5. General Liability

 

  6. Employee Benefit Plan Admin. Liability

 

  (B) Mortgage Holders Errors and Omissions

 

  (C) Commercial Auto Policy

 

  1. Bank-Owned Vehicles

 

  2. Repossessed Vehicles

 

  (D) Foreclosed properties

 

  1. Commercial Property

 

  2. General Liability

 

  (E) Excess Umbrella

 

  (F) STAMP Surety Bond

 

  (G) Employee Insurance

 

  1. Health

 

  2. Dental

 

  3. Vision

 

  4. Life

 

  5. Disability

 

  (H) Workers Compensation Policy

 

  1. Bodily Injury by Accident

 

  2. Bodily Injury by Disease

Section 2.19 – Regulatory Filings

The Company filed a Current Report on Form 8-K with the Commission on
January 28, 2011, one day late to report an event that occurred on January 21,
2011.

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

Section 2.22 – Prohibition on Interest Payments

None.

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

SCHEDULE C

PRINCIPAL LOAN AMOUNT AND INTEREST RATE

 

Date:    October 30, 2015 Borrower Name:    First National Corporation Principal
Amount of the Loan:    $5,000,000 Applicable Interest Rate:    6.75% per annum

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

EXHIBIT A

FORM OF SUBORDINATED TERM NOTE

FIRST NATIONAL CORPORATION

THIS SUBORDINATED TERM NOTE (THIS “NOTE”) WILL BE ISSUED AND MAY BE TRANSFERRED
ONLY IN MINIMUM DENOMINATIONS OF $100,000 AND MULTIPLES OF $100,000 IN EXCESS
THEREOF. ANY ATTEMPTED TRANSFER OF THIS NOTE IN A DENOMINATION OF LESS THAN
$100,000 AND MULTIPLES OF $100,000 IN EXCESS THEREOF 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 SUCH NOTE FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED
TO, THE RECEIPT OF PAYMENTS ON SUCH NOTE, AND SUCH PURPORTED TRANSFEREE SHALL BE
DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH NOTE.

THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED STATES OR ANY
AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE
CORPORATION. THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND THE
CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS INELIGIBLE AS
COLLATERAL FOR A LOAN BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AND IS
UNSECURED.

THIS NOTE MAY BE SOLD ONLY IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE
SECURITIES LAWS. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS 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. THIS NOTE IS ISSUED SUBJECT TO THE
RESTRICTIONS ON TRANSFER, EXERCISE AND OTHER PROVISIONS OF A SUBORDINATED LOAN
AGREEMENT DATED OCTOBER 30, 2015 BETWEEN THE ISSUER AND THE LENDERS REFERRED TO
THEREIN (THE “LOAN AGREEMENT”), A COPY OF WHICH IS ON FILE WITH THE COMPANY. THE
NOTE REPRESENTED BY THIS INSTRUMENT MAY NOT BE TRANSFERRED OR EXERCISED EXCEPT
IN COMPLIANCE WITH THE LOAN AGREEMENT. ANY SALE OR OTHER TRANSFER NOT IN
COMPLIANCE WITH THE LOAN AGREEMENT WILL BE VOID.

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

FIRST NATIONAL CORPORATION

TERM NOTE DUE 2025

Certificate No.: 1

 

U.S. $5,000,000    Dated: October 30, 2015

FOR VALUE RECEIVED, the undersigned, First National Corporation, a Virginia
corporation (the “Company”), promises to pay to the order of StoneCastle
Financial Corp., or registered assigns (collectively, the “Lender”), the
principal amount of $5,000,000 in the lawful currency of the United States of
America, or such lesser or greater amount as shall then remain outstanding under
this Note, at the times and in the manner provided herein, but no later than
October 1, 2025, or such other date upon which this Note shall become due and
payable, whether by reason of extension, acceleration or otherwise, subject to,
and in accordance with, the terms of the Subordinated Loan Agreement, dated as
of October 30, 2015 by and between the Company as Borrower, and the Lender, as
Lender (as amended, restated, amended and restated, refinanced, extended,
supplemented and/or otherwise modified from time to time, the “Loan Agreement”).
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to such terms in the Loan Agreement.

Interest on this Note will be payable quarterly in arrears on
January 1, April 1, July 1 and October 1 of each year, commencing on the first
such date following the Closing Date, to the Lender of record on December 15,
March 15, June 15 and September 15 (each, a Record Date”) and at maturity.

Reference is hereby made to the further provisions of this Note set forth on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place.

This Note is the Note referred to in the Loan Agreement that, among other
things, contains provisions for the acceleration of the maturity hereof upon the
happening of certain events, and for optional prepayment of the principal hereof
prior to the maturity hereof, all upon the terms and conditions therein
specified.

THIS NOTE MAY NOT BE TRANSFERRED OR ASSIGNED EXCEPT IN COMPLIANCE WITH THE TERMS
OF THE LOAN AGREEMENT.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

 

FIRST NATIONAL CORPORATION By:  

/s/ Scott C. Harvard

  Name:   Scott C. Harvard   Title:   President and Chief Executive Officer

 

ATTEST:

 

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

[REVERSE SIDE OF NOTE]

FIRST NATIONAL CORPORATION

TERM NOTE DUE 2025

The Company promises to pay interest on the principal amount of this Note
(this “Note”), commencing on the Closing Date until October 1, 2025 (the
“Maturity Date”), or such earlier date as this Note is paid in full, at a fixed
rate equal to 6.75% per annum. The unpaid principal balance of this Note plus
all accrued but unpaid interest thereon shall be due and payable on the Maturity
Date, or such earlier date on which such amount shall become due and payable.
This Note is the Note referred to in that certain Subordinated Loan Agreement,
dated October 30, 2015, by and between the Company and Lender (the “Loan
Agreement”). Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Loan Agreement.

Computation and Payment of Interest. This Note will bear interest at the rate
set forth above from and including each Interest Payment Date to, but excluding,
the next succeeding Interest Payment Date (or in the case of the initial
Interest Payment Date, from the Closing Date to, but excluding, the initial
Interest Payment Date), or in the case of the final Interest Payment Date, the
Maturity Date. Interest on this Note shall be paid in arrears on each Interest
Payment Date. The initial Interest Payment Date shall be January 1, 2016.
“Interest Payment Date” shall mean January 1, April 1, July 1 and October 1 of
each year and the Maturity Date. Interest shall be computed on the basis of the
actual number of days elapsed in the period during which interest accrues and a
year of 360 days.

Non-Business Days. Whenever any payment to be made by the Company hereunder
shall be stated to be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day without change in any
computation of interest with respect to such payment (or any succeeding
payment). “Business Day” means any day other than a Saturday, Sunday or a legal
holiday under the laws of the State of New York or any other day on which
banking institutions located in the State of New York are authorized or required
by law or other governmental action to close.

Subordination. So long as any portion of the unpaid principal of this Note is
deemed by the Federal Reserve of the Company to be Tier 2 capital of the Company
in accordance with the rules and regulations of the Federal Reserve applicable
to the capital status of the subordinated debt of bank holding companies, the
rights of the Lender to the principal sum and to any accrued interest shall
remain subject and subordinate in right of payment (in accordance with 12 C.F.R.
250.166, as supplemented by Federal Reserve Supervisory Letter SR 92 37 (October
15, 1992) and 12 C.F.R. 217.20(d)) to the claims of: (a) creditors of the
Company holding senior indebtedness, which shall include, without limitation,
the following: (i) all borrowed and purchased money (except such borrowed or
purchased money that by its terms expressly ranks pari passu with, or junior to,
the Note); (ii) similar obligations arising from off-balance sheet guarantees
and direct credit substitutes; and (iii) obligations associated with derivative
products such as interest and foreign exchange rate contracts, commodity
contracts, and similar arrangements; (b) general creditors (collectively,
“Senior Claims”). For the avoidance of doubt, the rights of the Lender to the
principal sum and to any accrued interest shall remain subject and subordinate
in right of payment to all Senior Claims in the final year prior to maturity of
the Term Loan notwithstanding the exclusion of the Term Loan from Tier 2 capital
of the Company when the remaining maturity of the Term Loan is under one year.
Upon dissolution or liquidation of the Company, no payment of principal,
interest or premium (including post default interest) shall be due and payable
under the terms of this Note until all Senior Claims shall have been paid in
full. The Note ranks equally with all of the Company’s other present or future
Unsecured Subordinated Debt, except any of its Unsecured Subordinated Debt which
may be expressly stated to be subordinated to the Note. The Note ranks senior to
all current and future junior subordinated obligations or securities of the
Company. “Unsecured Subordinated Debt” means unsecured subordinated debt of the
Company whether or not such debt is intended to qualify as Tier 2 capital under
the applicable capital adequacy rules and regulations promulgated by the Federal
Reserve.

Amendments and Waivers. The Note and the terms hereunder may only be amended or
waived in accordance with the provisions of the Loan Agreement. Neither any
failure nor any delay on the part of the Lender in exercising any right, power
or privilege under this Note shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
other right, power or privilege.

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

Notices. All notices and other communications hereunder shall be in writing and,
for purposes of this Note, shall be delivered in accordance with, and effective
as provided in, the Loan Agreement.

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

EXHIBIT B

FORM OF NOTICE OF BORROWING

Community Funding CLO, Ltd.

c/o StoneCastle Investment Management, LLC

152 West 57th Street, 35th Floor

New York, New York 10019

Attention: Rachel Schatten, General Counsel

Telephone: (212) 354-6500

E-mail: rschatten@stonecastle.com

The undersigned, First National Corporation. (the “Borrower”), refers to the
Subordinated Loan Agreement dated on or about October 30, 2015 (the “Loan
Agreement”), among the Borrower and Community Funding CLO, Ltd., as Lender.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Loan Agreement.

The Borrower hereby gives notice pursuant to Section 1.9(a)(ii) that it requests
a Term Loan pursuant to the provisions of Section 1 of the Loan Agreement and in
connection herewith sets forth below the terms on which such borrowing is
requested to be made:

 

(A)    Date of Borrowing          (which is a Business Day)   

           October 30, 2015

(B)    Principal Amount of Borrowing   

           $5,000,000

(C)    Closing Fee   

           None.

(D)    Net Settlement/Funding Amount:   

           $5,000,000

   (Principal minus Closing Fee)       (E)    Account Number and Location   
Bank Name: [                    ]       Routing Number: [                    ]
      Account Name: [        ]       Account Number: [                    ]1

The undersigned hereby certifies that all of the conditions to the proposed Loan
set forth in Section 4 of the Loan Agreement have been, or will be, fulfilled on
the Date of Borrowing.

[Signature Page Immediately Follows.]

 

1 CGSH Note: Borrower to provide.

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

Very truly yours, FIRST NATIONAL CORPORATION By:  

/s/ Scott C. Harvard

Name:   Scott C. Harvard Title:   President and Chief Executive Officer

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

EXHIBIT C

FORM OF LEGAL OPINION

 

1. Borrower and the Bank are validly existing and in good standing under the
laws of their respective jurisdictions of organization.

 

2. Borrower is a registered bank holding company under the Bank Holding Company
Act of 1956, as amended.

 

3. The Bank is an “insured depository institution” under Section 3(c)(2) of the
Federal Deposit Insurance Act.

 

4. Borrower has the corporate power and authority to execute and deliver and to
perform its obligations under the Agreement, including, without limitation, to
borrow under the Term Loan pursuant to the Agreement, and the execution,
delivery and performance thereof by Borrower have been duly authorized by all
necessary corporate action on the part of Borrower.

 

5. The Agreement has been duly executed and delivered by Borrower and
constitutes the valid and binding obligation of Borrower, enforceable against
Borrower in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors
generally and to general principles of equity.

 

6. The execution and delivery by Borrower of the Agreement and the consummation
or performance of any of the Contemplated Transactions, does not and will not
require any consent, approval, license or exemption by, order or authorization
of, or filing, recording or registration by Borrower with any federal or state
governmental authority, except any such indication of non-objection, consent,
approval, license or exemption by, order or authorization of, or filing,
recording or registration by Borrower with any federal or state governmental
authority that has been obtained or made on or prior to the date hereof and
remains in full force and effect.

 

7. The execution and delivery by Borrower of the Agreement and the consummation
or performance of any of the Contemplated Transactions, does not and will not:
(a) violate any federal or state statute, rule or regulation applicable to
Borrower in transactions of the nature contemplated by the Agreement;
(b) violate any court order, judgment or decree known to such counsel;
(c) result in any violation of the Articles of Incorporation or Bylaws of
Borrower; or (d) result in a breach of, or constitute a default under, any
Material Contract.

 

8. Neither Borrower nor any of its Subsidiaries is an “investment company” as
such term is defined in the Investment Company Act of 1940, as amended.

 

* The opinion letter of Borrower’s counsel will be subject to customary
limitations and carveouts, and such counsel may rely as to matters of fact upon
such certificates of the officers of Borrower and the Bank or governmental
officials as such counsel deems appropriate.

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

EXHIBIT D

FORM OF SECRETARY’S CERTIFICATE

The undersigned hereby certifies that such person is the duly elected, qualified
and acting Secretary of First National Corporation, a Virginia corporation (the
“Borrower”), and that as such she is authorized to execute and deliver this
certificate in the name and on behalf of the Borrower and in connection with the
Subordinated Loan Agreement, dated as of October 30, 2015, by and between the
Borrower and Community Funding CLO, Ltd., a Cayman Islands exempted company
incorporated with limited liability (the “Loan Agreement”), and further
certifies in such person’s official capacity, in the name and on behalf of the
Borrower, the items set forth below. Capitalized terms used but not otherwise
defined herein shall have the meaning set forth in the Loan Agreement.

1. Attached hereto as Exhibit A is a true, correct and complete copy of the
resolutions duly adopted by the Board of Directors of the Borrower dated
[            ], 2015, which represent all of the resolutions approving the
transactions contemplated by the Loan Agreement and the borrowing of the Term
Loan. Such resolutions have not in any way been amended, modified, revoked or
rescinded, have been in full force and effect since their adoption to and
including the date hereof and are now in full force and effect.

2. Attached hereto as Exhibit B is a true, correct and complete copy of the
Articles of Incorporation of the Borrower (the “Charter”), together with any and
all amendments thereto currently in effect, and no action has been taken to
amend, modify or repeal the Charter, the same being in full force and effect in
the attached form as of the date hereof.

3. Attached hereto as Exhibit C is a true, correct and complete copy of the
Bylaws of the Borrower and any and all amendments thereto currently in effect,
and no action has been taken to amend, modify or repeal such Bylaws, the same
being in full force and effect in the attached form as of the date hereof.

4. Each person listed below has been duly elected or appointed to the
position(s) indicated opposite his or her name and is duly authorized to sign
the Agreement and related documents on behalf of the Borrower, and the signature
appearing opposite such person’s name below is such person’s genuine signature.

 

Name

  

Position

  

Signature

         

 

         

 

[Signature page follows]

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

IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of this [    ]
day of [            ], 2015.

 

 

I, [                    ], [                    ] of the Borrower, hereby
certify that [                                ] is the duly elected, qualified
and acting Secretary of the Borrower and that the signature set forth above is
her true signature.

 

 

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

EXHIBIT E

FORM OF OFFICER’S CERTIFICATE

The undersigned, in his capacity as [            ] of First National
Corporation, a Virginia corporation (the “Borrower”), pursuant to the terms of
the Subordinated Loan Agreement, dated as of October 30, 2015, by and between
the Borrower and Community Funding CLO, a Cayman Islands exempted company
incorporated with limited liability (the “Loan Agreement”), hereby represents,
warrants and certifies as follows (capitalized terms used but not otherwise
defined herein shall have the meaning set forth in the Term Loan Agreement):

1. The representations and warranties of the Borrower contained in the Term Loan
Agreement were true and correct in all material respects as of the date of the
Term Loan Agreement and as of the date hereof as if then made, except for such
representations and warranties that speak as of a specific date (which
representations and warranties were so true and correct as of such date);
provided, however, that the representations and warranties that contain an
express materiality qualification were true and correct in all respects as of
the date of the Term Loan Agreement and as of the date hereof as if then made
(or such other date as specified).

2. The Borrower has performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Agreement to be
performed, satisfied or complied with by it at or prior to the Closing.

3. The Borrower has obtained any and all consents, permits, approvals,
registrations and waivers necessary for consummation of the borrowing of the
Term Loan, including but not limited to, any and all approvals or indications of
non-objection from the applicable Governmental Agencies, all of which are in
full force and effect as of the date hereof.

IN WITNESS WHEREOF, the undersigned has executed this certificate this