Exhibit 10.1


 


SUBORDINATED NOTE PURCHASE AGREEMENT


 


This SUBORDINATED NOTE PURCHASE
AGREEMENT (this “Agreement”) is dated as of March 31, 2021, and is made by and among Salisbury Bancorp, Inc., a Connecticut
corporation (the “Company”), and the several purchasers of the Subordinated Notes (as defined herein) identified on
the signature pages hereto (each a “Purchaser” and collectively, the “Purchasers”).


 


RECITALS


 


WHEREAS, the Company has requested
that the Purchasers purchase from the Company up to $25.0 million in aggregate principal amount of Subordinated Notes, which aggregate
principal amount is intended to qualify as Tier 2 Capital (as defined herein);


 


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


 


WHEREAS,
each of the Purchasers is an institutional “accredited investor” as such term is defined in Rule 501(a)(1), (2), (3) or (7)
of Regulation D (“Regulation D”) promulgated under the Securities Act of 1933, as amended (the “Securities
Act”), or a “qualified institutional buyer”
as such term is defined in Rule 144A of Regulation D promulgated under the Securities Act (“QIB”); 


 


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


 


WHEREAS, no sale will be made
to any Purchaser that would prohibit reliance on the exemption from FINRA Rule 5123; and


 


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


 


NOW, THEREFORE, in consideration
of the mutual covenants, conditions and agreements herein contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties, intending to be legally bound, hereto hereby agree as follows:


 


AGREEMENT


 


1.       DEFINITIONS.



 


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


 


“Affiliate(s)”
means, with respect to any Person, such Person’s immediate family members, partners, members or parent and subsidiary corporations,
and any other Person directly or indirectly controlling, controlled by, or under common control with said Person and their respective
Affiliates.


 


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


 


“Bank” means
Salisbury Bank and Trust Company, a Connecticut chartered bank and wholly-owned subsidiary of the Company.


 


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


 


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


 


“Certificate of Incorporation”
means the Certificate of Incorporation of the Company as in effect on the Closing Date.


 


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


 


“Closing Date”
means March 31, 2021.


 


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


 


“Company Covered Person”
has the meaning set forth in Section 4.3(d).


 


“Company’s Reports”
means the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC, including the audited
financial statements contained therein.


 


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


 


“Disqualification Event”
has the meaning set forth in Section 4.3(d).


 


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


 


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


 


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


 


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


 


“FDIC” means
the Federal Deposit Insurance Corporation.


 


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


 


“FINRA” means
the Financial Industry Regulatory Authority.


 


“GAAP” means
generally accepted accounting principles in effect from time to time in the United States of America.


 


“Global Certificate”
has the meaning set forth in Section 3.1.


 


“Governmental Agency(ies)”
means, individually or collectively, any federal, state, county or local governmental department, commission, board, regulatory authority
or agency (including, without limitation, each applicable Regulatory Agency) with jurisdiction over the Company or a Subsidiary.


 


“Governmental Licenses”
has the meaning set forth in Section 4.4.


 


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


 


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


 


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


 


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


 


“Material Adverse Effect”
means, with respect to any Person, any change or effect that (a) is or would be reasonably likely to be material and adverse to the financial
condition, results of operations or business of such Person, or (b) would materially impair the ability of such Person to perform its
respective obligations under any of the Transaction Documents, or otherwise materially impede the consummation of the transactions contemplated
hereby; provided, however, that “Material Adverse Effect” shall not be deemed to include the impact of (i) changes
in banking and similar laws, rules or regulations of general applicability or interpretations thereof by Governmental Agencies, (ii) changes
in GAAP or regulatory accounting requirements applicable to financial institutions and their holding companies generally, (iii) changes
after the date of this Agreement in general economic or capital market conditions affecting financial institutions or their market prices
generally and not specifically related to the Company, the Bank or the Purchasers, including change in interest rates, (iv) direct effects
of compliance with this Agreement on the operating performance of the Company, the Bank or the Purchasers, including expenses incurred
by the Company, the Bank or the Purchasers in consummating the transactions contemplated by this Subordinated Note Purchase Agreement
by and between the Company and the several Purchasers, (v) natural disasters or other force majeure events or any epidemic, pandemic or
disease outbreak (including COVID-19), (vi) changes in national or international political or social conditions, including the engagement
by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or by the occurrence of
any military or terrorist attack upon or within the United States and (vii) the effects of any action or omission taken by the Company
with the prior written consent of the Purchasers, and vice versa, which in the event of (i), (iii), (v), and (vi) do not disproportionately
affect the operations or business of the Company or the Bank in comparison to other banking institutions with similar operations.


 


“Maturity Date”
means March 31, 2031.


 


“Paying Agency Agreement”
means the Paying Agency and Registrar, dated as of March 31, 2021, between the Company and UMB Bank, N.A., as paying agent and registrar,
as amended, modified or restated from time to time.


 


“Paying Agent”
means UMB Bank, N.A., as paying agent and registrar under the Paying Agency Agreement, or any successor in accordance with the applicable
provisions of the Paying Agency Agreement.


 


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


 


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


 


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


 


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


 


“QIB” has the
meaning set forth in the Recitals.


 


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


 


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


 


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


 


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


 


“Subordinated Note”
means the Subordinated Note (or collectively, the “Subordinated Notes”) in the form attached as Exhibit A hereto,
as amended, restated, supplemented or modified from time to time, and each Subordinated Note delivered in substitution or exchange for
such Subordinated Note.


 


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


 


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


 


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


 


“Tier 2 Capital Event”
has the meaning set forth in the Subordinated Notes.


 


“Transaction Documents”
has the meaning set forth in Section 3.2(a).


 


1.2.        Interpretations.
The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined. The words “hereof,”
“herein” and “hereunder” and words of like import when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement. The word “including” when used in this Agreement without the
phrase “without limitation,” shall mean “including, without limitation.” All references to time of day herein
are references to Eastern Time unless otherwise specifically provided. All references to this Agreement and Subordinated Notes or the
Paying Agency Agreement shall be deemed to be to such documents as amended, modified or restated from time to time. With respect to any
reference in this Agreement to any defined term, (i) if such defined term refers to a Person, then it shall also mean all heirs, legal
representatives and permitted successors and assigns of such Person, and (ii) if such defined term refers to a document, instrument or
agreement, then it shall also include any amendment, replacement, extension or other modification thereof.


 


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


 


2.        SUBORDINATED
DEBT. 


 


2.1.        Certain
Terms. Subject to the terms and conditions herein contained, the Company proposes to issue and sell to the Purchasers, severally
and not jointly, Subordinated Notes in an aggregate principal amount equal to the aggregate of the Subordinated Note Amounts. The Purchasers,
severally and not jointly, each agree to purchase the Subordinated Notes from the Company on the Closing Date in accordance with the terms
of, and subject to the conditions and provisions set forth in, this Agreement and the Subordinated Notes and the Paying Agency Agreement.
The Subordinated Note Amounts shall be disbursed in accordance with Section 3.1. The Subordinated Notes shall bear interest per
annum as set forth in the Subordinated Notes. The unpaid principal balance of the Subordinated Notes plus all accrued but unpaid interest
thereon shall be due and payable on the Maturity Date, or such earlier date on which such amount shall become due and payable on account
of (a) acceleration by the Purchasers in accordance with the terms of the Subordinated Notes and this Agreement or (b) the Company’s
delivery of a notice of redemption or repayment in accordance with the terms of the Subordinated Notes. Any partial redemption of the
Subordinated Notes shall be made on a pro rata pass-through distribution of principal among all of the Subordinated Notes outstanding
at the time thereof.


 


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


 


2.3.        Maturity
Date. On the Maturity Date, all sums due and owing under this Agreement and the Subordinated Notes shall be repaid in full. The
Company acknowledges and agrees that the Purchasers have not made any commitments, either express or implied, to extend the terms of the
Subordinated Notes past their Maturity Date, and shall not extend such terms beyond the Maturity Date unless the Company and the Purchasers
hereafter specifically otherwise agree in writing.


 


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


 


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


 


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


 


2.7.        Right
of Offset. Each Purchaser hereby expressly waives any right of offset it may have against the Company or any of its Subsidiaries.


 


2.8.        Use
of Proceeds. The Company shall use the net proceeds from the sale of Subordinated Notes for general corporate purposes, which
may include the redemption of existing subordinated debt.


 


 


3.        DISBURSEMENT.



 


3.1.        Disbursement.
On the Closing Date, assuming all of the terms and conditions set forth in Section 3.2 and Section 3.3 have been satisfied
by the Company and the Company has executed and delivered to each of the Purchasers a Subordinated Note Purchase Agreement and such Purchaser’s
Subordinated Note and any other related documents in form and substance reasonably satisfactory to the Purchasers, each Purchaser shall
disburse in immediately available funds the Subordinated Note Amount set forth on each Purchaser’s respective signature page hereto
to the Company in exchange for an electronic securities entitlement through the facilities of the Depository Trust Company (the “DTC”)
with a principal amount equal to such Subordinated Note Amount (the “Disbursement”). The Company will deliver to the
Paying Agent a global certificate (the “Global Certificate”) representing the Subordinated Notes registered in the
name of “Cede & Co.” as nominee for DTC.


 


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


 


(a)        Transaction
Documents. This Agreement and the Global Certificate (collectively, the “Transaction Documents”), each duly
authorized and executed by the Company.


 


(b)        Authority
Documents.


 


(i)       A
copy, certified by the Secretary or Assistant Secretary of the Company, of the Certificate of Incorporation of the Company and all amendments
thereto as in effect as of the Closing Date;


 


(ii)        A
certificate of existence of the Company issued by the Secretary of the State of the State of Connecticut;


 


(iii)        A
copy, certified by the Secretary or Assistant Secretary, of the Bylaws of the Company and all amendments thereto as in effect as of the
Closing Date;


 


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


 


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


 


(vi)        The
opinion of Cranmore, FitzGerald & Meaney, counsel to the Company, dated as of the Closing Date, substantially in the form set forth
at Exhibit B attached hereto addressed to the Purchasers and Placement Agent.


 


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


 


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


 


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


 


4.        REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. 


 


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


 


4.1.       Organization
and Authority.


 


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


 


(b)       The
Bank is the only material direct or indirect Subsidiary of the Company. The Bank has been duly chartered and is validly existing as a
Connecticut state-chartered bank, in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority
to own, lease and operate its properties and to conduct its business and is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or to be in good standing would not reasonably be expected
to result in a Material Adverse Effect. All of the issued and outstanding shares of capital stock or other Equity Interests in each Subsidiary
of the Company have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company, directly
or through Subsidiaries of the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim; none of
the outstanding shares of capital stock of, or other Equity Interests in, any Subsidiary of the Company were issued in violation of the
preemptive or similar rights of any security holder of such Subsidiary of the Company or any other entity.


 


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


 


4.2.        Capital
Stock and Related Matters. The Certificate of Incorporation of the Company authorizes the Company to issue 5,000,000 shares of
common stock, par value $0.10 per share and 25,000 shares of preferred stock, par value $0.01. As of the date of this Agreement, there
are 2,845,147 shares of the Company’s common stock issued and outstanding and no shares of the Company’s preferred stock issued
and outstanding. All of the outstanding capital stock of the Company has been duly authorized and validly issued and is fully paid and
non-assessable.


 


4.3.       No
Impediment to Transactions.


 


(a)       Transaction
is Legal and Authorized. The issuance of the Subordinated Notes, the execution of the Transaction Documents and compliance by
the Company with all of the provisions of the Transaction Documents are within the corporate and other powers of the Company.


 


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


 


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


 


(d)       Exemption
from Registration. Neither the Company, nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer
or sale of the Subordinated Notes. Assuming the accuracy of the representations and warranties of each Purchaser set forth in this Agreement,
the Subordinated Notes will be issued in a transaction exempt from the registration requirements of the Securities Act. No “bad
actor” disqualifying event described in Rule 506(d)(1)(i)-(viii) of Regulation D (a “Disqualification Event”)
is applicable to the Company or, to the Company’s knowledge, any Person described in Rule 506(d)(1) (each, a “Company Covered
Person”). The Company has exercised reasonable care to determine whether any Company Covered Person is subject to a Disqualification
Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e) of Regulation D.


 


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


 


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


 


4.4.        Possession
of Licenses and Permits. The Company and its Subsidiaries possess such permits, licenses, approvals, consents and other authorizations
(collectively, “Governmental Licenses”) issued by the appropriate Governmental Agencies necessary to conduct the business
now operated by them, except where the failure to possess such Governmental Licenses would not, singularly or in the aggregate, have a
Material Adverse Effect on the Company or such applicable Subsidiary; the Company and each Subsidiary of the Company is in compliance
with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or such applicable Subsidiary of the Company; all of the Governmental Licenses
are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect would not have a Material Adverse Effect on the Company or such applicable Subsidiary of the Company;
and neither the Company nor any Subsidiary of the Company has received any notice of proceedings relating to the revocation or modification
of any such Governmental Licenses.


 


4.5.        Financial
Condition.


 


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


 


(b)        Absence
of Default. Since December 31, 2020, no event has occurred that either of itself or with the lapse of time or the giving of notice
or both, would give any creditor of the Company the right to accelerate the maturity of any material Indebtedness of the Company. Neither
the Company nor the Bank is in default under any other Lease, agreement or instrument, or any law, rule, regulation, order, writ, injunction,
decree, determination or award, except where non-compliance could not reasonably be expected to result in a Material Adverse Effect on
the Company.


 


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


 


(d)       Ownership
of Property. The Company and each of its Subsidiaries has good and marketable title as to all real property owned by it and good
title to all assets and properties owned by the Company and such Subsidiary in the conduct of its businesses, whether such assets and
properties are real or personal, tangible or intangible, including assets and property reflected in the most recent balance sheet contained
in the Company’s Reports or acquired subsequent thereto (except to the extent that such assets and properties have been disposed
of in the ordinary course of business, since the date of such balance sheet), subject to no encumbrances, liens, mortgages, security interests
or pledges, except (i) those items that secure liabilities for public or statutory obligations or any discount with, borrowing from or
other obligations to the Federal Home Loan Bank, inter-bank credit facilities, reverse repurchase agreements or any transaction by the
Bank acting in a fiduciary capacity, (ii) statutory liens for amounts not yet delinquent or that are being contested in good faith and
(iii) such as do not, individually or in the aggregate, materially affect the value of such property and do not materially interfere with
the use made and proposed to be made of such property by the Company or any of its Subsidiaries. The Company and each of its Subsidiaries,
as lessee, has the right under valid and existing Leases of real and personal properties that are material to the Company or such Subsidiary,
as applicable, in the conduct of its business to occupy or use all such properties as presently occupied and used by it. Such existing
Leases and commitments to Lease constitute or will constitute operating Leases for both tax and financial accounting purposes except as
otherwise disclosed in the Company’s Reports and the Lease expense and minimum rental commitments with respect to such Leases and
Lease commitments are as disclosed in all material respects in the Company’s Reports.


 


4.6.        No
Material Adverse Change. Since December 31, 2020, there has been no development or event which has had or could reasonably be
expected to have a Material Adverse Effect on the Company or any of its Subsidiaries.


 


4.7.        Legal
Matters.


 


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


 


(b)       Regulatory
Enforcement Actions. The Company, the Bank and its other Subsidiaries are in compliance in all material respects with all laws
administered by and regulations of any Governmental Agency applicable to it or to them, except for those with which the failure to comply
would have a Material Adverse Effect. None of the Company, the Bank, the Company’s or the Bank’s Subsidiaries nor any of their
officers or directors is now operating under any restrictions, agreements, memoranda, commitment letter, supervisory letter or similar
regulatory correspondence, or other commitments (other than restrictions of general application) imposed by any Governmental Agency, nor
are, to the Company’s knowledge, (i) any such restrictions threatened, (ii) any agreements, memoranda or commitments being sought
by any Governmental Agency, or (iii) any legal or regulatory violations previously identified by, or penalties or other remedial action
previously imposed by, any Governmental Agency remains unresolved. Notwithstanding the foregoing, nothing in this Section 4.7(b)
or this Agreement shall require the Company or any of its Subsidiaries to provide any confidential regulatory supervisory information
of the Company as any of its Subsidiaries.


 


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


 


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


 


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


 


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


 


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


 


4.9.        Internal
Accounting Controls. The Company, the Bank and each other Subsidiary has established and maintains proper and adequate internal
accounting controls that provide reasonable assurance that (a) all material transactions are executed with the authorization of the Company’s
management, (b) all material transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP
and (c) access to the Company’s material assets is permitted only in accordance with the authorization of the Company’s management.
Such internal accounting controls are effective to provide reasonable assurance regarding the reliability of the Company’s financial
reporting and the preparation of the Company’s financial statements for external purposes in accordance with GAAP. Since the conclusion
of the Company’s last completed fiscal year, to the Company’s knowledge, there has not been and there currently is not (x)
any material deficiency in the design or operation of its internal accounting controls that is reasonably likely to have a Material Adverse
Effect on such system of internal accounting controls, or (y) any fraud that involves management or other employees who have a role in
the Company’s or the Bank’s internal accounting controls.


 


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


 


4.11       Insurance.
The Company, the Bank and each Subsidiary of the Company is insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; in the past three years, neither
the Company, the Bank nor any Subsidiary has been refused any insurance coverage sought or applied for; and the Company, the Bank and
each Subsidiary have no reason to believe that they will not be able to renew existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to continue their business at a cost that would not have a Material
Adverse Effect on the Company.


 


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


 


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


 


5.        GENERAL
COVENANTS, CONDITIONS AND AGREEMENTS. 


 


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


 


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


 


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


 


5.3.        Compliance
with Laws.


 


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


 


(b)        Regulated
Activities. The Company shall not itself, nor shall it cause, permit or allow the Bank or any other of its Subsidiaries to (i)
engage in any business or activity not permitted by all applicable laws and regulations, except where such business or activity (or the
effect thereof if such laws and regulations were enforced) would not reasonably be expected to have a Material Adverse Effect on the Company,
the Bank and/or such of its Subsidiaries or (ii) make any loan or advance secured by the capital stock of another bank or depository institution,
or acquire the capital stock, assets or obligations of or any interest in another bank or depository institution (other than the contemplated
acquisition of Delmarva Bancshares, Inc. and 1880 Bank), in each case other than in accordance with applicable laws and regulations and
safe and sound banking practices.


 


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


 


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


 


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


 


(f)        Tier
2 Capital. If all or any portion of the Subordinated Notes ceases to be deemed to be Tier 2 Capital, other than due to the limitation
imposed on the capital treatment of subordinated debt during the five (5) years immediately preceding the Maturity Date of the Subordinated
Notes, the Company will immediately notify the Noteholder (as defined in the Subordinated Note), and thereafter the Company and the Noteholder
(as defined in the Subordinated Note) will work together in good faith to execute and deliver all agreements as reasonably necessary in
order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital; provided,
however, that nothing contained in this Agreement shall limit the Company’s right to redeem the Subordinated Notes upon the
occurrence of a Tier 2 Capital Event as described in the Subordinated Notes.


 


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


 


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


 


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


 


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


 


6.        REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE PURCHASERS. 


 


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


 


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


 


6.2.        Authorization
and Execution. The execution, delivery and performance of this Agreement has been duly authorized by all necessary action on the
part of the Purchaser, and, assuming due authorization, execution and delivery by the other parties hereto, this Agreement is a legal,
valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights
generally or by general equitable principles.


 


6.3.        No
Conflicts. Neither the execution, delivery or performance of the Transaction Documents nor the consummation of any of the transactions
contemplated thereby will conflict with, violate, constitute a breach of or a default (whether with or without the giving of notice or
lapse of time or both) under (a) its organizational documents, (b) any contract, agreement or instrument to which it is party, (c) any
law, statute, rule or regulation applicable to it or (d) any order, writ, judgment, injunction, decree, determination or award binding
upon or affecting it.


 


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


 


6.5.        Institutional
Accredited Investor. It is and will be on the Closing Date (a) an institutional “accredited investor” as such term
is defined in Rule 501(a) of Regulation D and as contemplated by subsections (1), (2), (3) and (7) of Rule 501(a) of Regulation D, and
has no less than $5,000,000 in total assets, or (b) a QIB.


 


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


 


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


 


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


 


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


 


6.10.        Investment
Decision. It has made its own investment decision based upon its own judgment, due diligence and advice from such advisors as
it has deemed necessary and not upon any view expressed by any other Person or entity, including the Placement Agent. Neither such inquiries
nor any other due diligence investigations conducted by it or its advisors or representatives, if any, shall modify, amend or affect its
right to rely on the Company’s representations and warranties contained herein. It is not relying upon, and has not relied upon,
any advice, statement, representation or warranty made by any Person by or on behalf of the Company, including, without limitation, the
Placement Agent, except for the express statements, representations and warranties of the Company made or contained in this Agreement.
Furthermore, it acknowledges that (a) the Placement Agent has not performed any due diligence review on behalf of it and (b) nothing in
this Agreement or any other materials presented by or on behalf of the Company to it in connection with the purchase of the Subordinated
Notes constitutes legal, tax or investment advice.


 


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


 


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


 


6.13.       Tier
2 Capital. If the Company provides notice as contemplated in Section 7.5 of this Agreement of the occurrence of the event
contemplated in such section, thereafter the Company and the Purchasers will work together in good faith to execute and deliver all agreements
as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to qualify
as Tier 2 Capital; provided, however, that nothing contained in this Agreement shall limit the Company’s right to redeem the Subordinated
Notes upon the occurrence of a Tier 2 Capital Event as described in the Subordinated Notes.


 


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


 


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


 


7.        MISCELLANEOUS.



 


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


 


7.2.        Time
of the Essence. Time is of the essence for this Agreement.


 


7.3.        Waiver
or Amendment. Except as may apply to any particular waiving or consenting Noteholder, no waiver or amendment of any term, provision,
condition, covenant or agreement herein or in the Subordinated Notes shall be effective except with the consent of at least fifty percent
(50%) of the aggregate principal amount (excluding any Subordinated Notes held by the Company or any of its Affiliates) of the Subordinated
Notes at the time outstanding; provided, however, that without the consent of each holder of an affected Subordinated Note,
no such amendment or waiver may: (a) reduce the principal amount of the Subordinated Note; (b) reduce the rate of or change the time for
payment of interest on any Subordinated Note; (c) extend the maturity of any Subordinated Note, (d) change the currency in which payment
of the obligations of the Company under this Agreement and the Subordinated Notes are to be made; (e) lower the percentage of aggregate
principal amount of outstanding Subordinated Notes required to approve any amendment of this Agreement or the Subordinated Notes, (f)
make any changes to Section 4(c) (Partial Redemption), Section 6 (Events of Default; Acceleration), Section 7 (Failure to Make Payments),
Section 16 (Priority) or Section 18 (Waiver and Consent) of the Subordinated Notes that adversely affects the rights of any holder of
a Subordinated Note; (g) make any changes to this Section 7.3 (Waiver or Amendment) that adversely affects the rights of any holder
of a Subordinated Note; or (g) disproportionately affect the rights of any of the holders of the then outstanding Subordinated Notes.
Notwithstanding the foregoing, the Company may amend or supplement the Subordinated Notes without the consent of the holders of the Subordinated
Notes to cure any ambiguity, defect or inconsistency or to provide for uncertificated Subordinated Notes in addition to or in place of
certificated Subordinated Notes, or to make any change that does not adversely affect the rights of any holder of any of the Subordinated
Notes. No failure to exercise or delay in exercising, by a Purchaser or any holder of the Subordinated Notes, of any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof, or the exercise of any other right or remedy provided by law. The rights and remedies provided in this Agreement
are cumulative and not exclusive of any right or remedy provided by law or equity. No notice or demand on the Company in any case shall,
in itself, entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the
rights of the Purchasers to any other or further action in any circumstances without notice or demand. No consent or waiver, expressed
or implied, by the Purchasers to or of any breach or default by the Company in the performance of its obligations hereunder shall be deemed
or construed to be a consent or waiver to or of any other breach or default in the performance of the same or any other obligations of
the Company hereunder. Failure on the part of the Purchasers to complain of any acts or failure to act or to declare an Event of Default,
irrespective of how long such failure continues, shall not constitute a waiver by the Purchasers of their rights hereunder or impair any
rights, powers or remedies on account of any breach or default by the Company.


 


7.4.        Severability.
Any provision of this Agreement that is unenforceable or invalid or contrary to law, or the inclusion of which would adversely affect
the validity, legality or enforcement of this Agreement, shall be of no effect and, in such case, all the remaining terms and provisions
of this Agreement shall subsist and be fully effective according to the tenor of this Agreement the same as though any such invalid portion
had never been included herein. Notwithstanding any of the foregoing to the contrary, if any provisions of this Agreement or the application
thereof are held invalid or unenforceable only as to particular persons or situations, the remainder of this Agreement, and the application
of such provision to persons or situations other than those to which it shall have been held invalid or unenforceable, shall not be affected
thereby, but shall continue valid and enforceable to the fullest extent permitted by law.


 


7.5.        Notices.
Any notice that any party hereto may be required or may desire to give hereunder shall be deemed to have been given if in writing and
if delivered personally, or if mailed, postage prepaid, by U.S. registered or certified mail, return receipt requested, or if delivered
by a responsible overnight commercial courier promising next business day delivery, addressed:


 


 


	
    if to the Company:

     
	
    Salisbury Bancorp, Inc.

    5 Bissell Street

    P.O. Box 1868

    Lakeville, Connecticut 06039

    Attention: Richard J. Cantele, Jr.,

    President and Chief Executive Officer

    rcantele@salisburybank.com

     

	with a copy to: 	
    Cranmore, FitzGerald & Meaney

    1010 Wethersfield Avenue

    Suite 206

    Hartford, CT 06114

    Attention: J.J. Cranmore, jcranmore@cfmlawfirm.com and

    Jennifer DiBella, jdibella@cfmlawfirm.com

     

     

	if to the Purchasers: 	To the address indicated on the Purchaser’s signature page hereto. 


or to such other address or addresses as the party
to be given notice may have furnished in writing to the party seeking or desiring to give notice, as a place for the giving of notice;
provided that no change in address shall be effective until five (5) Business Days after being given to the other party in the manner
provided for above. Any notice given in accordance with the foregoing shall be deemed given when delivered personally or, if mailed, three
(3) Business Days after it shall have been deposited in the U.S. mail as aforesaid or, if sent by overnight courier, the Business Day
following the date of delivery to such courier (provided next business day delivery was requested).


 


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


 


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


 


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


 


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


 


7.10.        Choice
of Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut. Nothing herein
shall be deemed to limit any rights, powers or privileges that a Purchaser may have pursuant to any law of the United States of America
or any rule, regulation or order of any department or agency thereof and nothing herein shall be deemed to make unlawful any transaction
or conduct by a Purchaser that is lawful pursuant to, or that is permitted by, any of the foregoing.


 


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


 


7.12.        Legal
Tender of United States. All payments hereunder shall be made in coin or currency that at the time of payment is legal tender
in the United States of America for public and private debts.


 


7.13.        Captions;
Counterparts. Captions contained in this Agreement in no way define, limit or extend the scope or intent of their respective provisions.
This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.
In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with
the same force and effect as if such facsimile signature page were an original thereof.


 


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


 


7.15.        Waiver
Of Right To Jury Trial. TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS,
OR ANY OTHER STATEMENTS OR ACTIONS OF THE COMPANY OR THE PURCHASERS. THE PARTIES ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING
OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL SELECTED OF THEIR OWN FREE WILL. THE PARTIES FURTHER ACKNOWLEDGE
THAT (I) THEY HAVE READ AND UNDERSTAND THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (II) THIS WAIVER HAS BEEN REVIEWED BY THE PARTIES
AND THEIR COUNSEL AND IS A MATERIAL INDUCEMENT FOR ENTRY INTO THIS AGREEMENT AND (III) THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH
TRANSACTION DOCUMENTS AS IF FULLY INCORPORATED THEREIN.


 


7.16.        Expenses.
Except as otherwise provided in this Agreement, each of the parties will bear and pay all other costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated pursuant to this Agreement.


 


7.17.        Survival.
Each of the representations and warranties set forth in this Agreement shall survive the consummation of the transactions contemplated
hereby for a period of one year after the date hereof. Except as otherwise provided herein, all covenants and agreements contained herein
shall survive until, by their respective terms, they are no longer operative.


 


 


 


[Signature Pages Follow]




    	 



    	 



    

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


 


 


SALISBURY BANCORP, INC. 


 


 


 


By:                                                                     


Name: Richard J. Cantele, Jr.


Title: President and Chief Executive Officer


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


[Company Signature Page to Subordinated Note Purchase
Agreement]



    	 	 	 



     


    




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


 


 


PURCHASER: 


 


 


 


 


 


 


By:                                                                    


Name:


Title:       



 


 





 


Address of Purchaser for Notice:


 


 


Email:


 


Principal Amount of Purchased Subordinated Note:


 


$


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


[Purchaser Signature Page to Subordinated Note Purchase
Agreement]