Exhibit 4.1


 


FORM OF SUBORDINATED NOTE


 


6.50% Fixed to Floating Rate Subordinated
Note due March 31, 2028


 


 


THIS OBLIGATION (THIS “NOTE”)
IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE “FDIC”) OR ANY OTHER GOVERNMENT
AGENCY OR FUND.


 


THE INDEBTEDNESS EVIDENCED BY THIS NOTE
IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT TO THE CLAIMS OF CREDITORS (OTHER THAN CREDITORS OF EXISTING OR FUTURE SUBORDINATED
DEBT) OF VILLAGE BANK AND TRUST FINANCIAL CORP. (THE “ISSUER”), INCLUDING OBLIGATIONS OF THE ISSUER TO ITS GENERAL
AND SECURED CREDITORS AND IS UNSECURED. IT IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION OF CREDIT BY THE ISSUER OR ANY OF ITS
SUBSIDIARIES. IN THE EVENT OF LIQUIDATION ALL CREDITORS OF THE ISSUER (OTHER THAN CREDITORS OF EXISTING AND FUTURE SUBORDINATED
INDEBTEDNESS OF THE ISSUER) SHALL BE ENTITLED TO BE PAID IN FULL WITH SUCH INTEREST AS MAY BE PROVIDED BY LAW BEFORE ANY PAYMENT
SHALL BE MADE ON ACCOUNT OF PRINCIPAL OF OR INTEREST ON THIS NOTE. AFTER PAYMENT IN FULL OF ALL SUMS OWING TO SUCH CREDITORS, THE
HOLDER OF THIS NOTE AND THE HOLDERS OF OTHER OBLIGATIONS RANKING PARI PASSU WITH THIS NOTE SHALL BE ENTITLED TO BE PAID FROM THE
REMAINING ASSETS OF THE ISSUER THE UNPAID PRINCIPAL AMOUNT OF THIS NOTE PLUS ACCRUED AND UNPAID INTEREST THEREON BEFORE ANY PAYMENT
OR OTHER DISTRIBUTION, WHETHER IN CASH, PROPERTY OR OTHERWISE, SHALL BE MADE ON ACCOUNT OF ANY SHARES OF CAPITAL STOCK OF THE ISSUER.


 


THIS NOTE WILL BE ISSUED AND MAY BE TRANSFERRED
ONLY IN MINIMUM DENOMINATIONS OF $1,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS NOTE IN A DENOMINATION
OF LESS THAN $1,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED
NOT TO BE THE HOLDER OF THIS NOTE FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PAYMENTS ON THIS NOTE, AND SUCH
PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS NOTE.


 


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 APPLICABLE 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.


 




     


     


    

 


CERTAIN ERISA CONSIDERATIONS:


 


THE HOLDER OF THIS NOTE, OR ANY INTEREST
HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
(“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)
(EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S
INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS NOTE OR ANY INTEREST
HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED
TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS
NOTE, OR ANY INTEREST HEREIN, ARE NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE
AND HOLDING. ANY PURCHASER OR HOLDER OF THIS NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND
HOLDING THEREOF THAT EITHER: (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE I OF ERISA OR SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON
OR ENTITY USING THE “PLAN ASSETS” OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE OR (ii) SUCH PURCHASE
OR HOLDING WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH FULL EXEMPTIVE
RELIEF IS NOT AVAILABLE UNDER APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.


 


ANY FIDUCIARY OF ANY PLAN WHO IS CONSIDERING
THE ACQUISITION OF THIS NOTE OR ANY INTEREST HEREIN SHOULD CONSULT WITH HIS OR HER LEGAL COUNSEL PRIOR TO ACQUIRING THIS NOTE OR
ANY INTEREST HEREIN. 


 


 




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	Date:March 21, 2018	Principal	 
	 	Amount:	$[●],000,000
	 	 	 
	Cert. No. [●]	CUSIP:	[●]


 


 


VILLAGE BANK AND TRUST FINANCIAL CORP.

6.50% Fixed-to-Floating Rate Subordinated Note due March 31, 2028


 


 


 


1.       Payment.


 


(a)       Village
Bank and Trust Financial Corp., a Virginia corporation (the “Issuer”), for value received, hereby promises to
pay to the order of [●] or its registered assigns (the “Holder”) the principal sum of [●] Million
Dollars (U.S.) ($[●],000,000) plus accrued but unpaid interest on March 31, 2028 (the “Maturity Date”)
and to pay interest in arrears on such principal amount at the initial rate of 6.50% per annum (computed on the basis of a 360-day
year of twelve 30-day months) from March 21, 2018 until March 21, 2023, on February 15, May 15, August 15 and November 15 of each
year (each, a “Fixed Interest Payment Date”). Thereafter, the Issuer will pay interest in arrears on the principal
amount of this Note at a variable rate equal to three month LIBOR plus 373 basis points (computed on the basis of a 360-day year
and the actual number of days elapsed in each month) payable each February 15, May 15, August 15 and November 15 (each a “Floating
Interest Payment Date”). “Interest Payment Date” shall mean any Fixed Interest Payment Date or Floating
Interest Payment Date. The interest rate applicable to each quarterly Floating Interest Payment Date shall be the rate as determined
pursuant to the preceding sentence on each January 15, April 15, July 15 and October 15. If any payment of interest or principal
is not paid in full when the same becomes due and payable, then interest will be compounded quarterly.


 


“LIBOR” means
the 3-month USD LIBOR, which will be the offered rate for 3-month deposits in U.S. dollars, as that rate appears on the Reuters
Screen LIBOR01 Page (or any successor page thereto) as of 11:00 a.m., London time, as observed two London banking days prior to
the first day of the applicable floating rate interest period. If at any time while any Notes are outstanding LIBOR ceases to exist
or be reported on the Reuters Screen, the Issuer shall select (with notice to each Holder) an alternative rate, including any spread
adjustments thereto (the “Alternative Rate”). Issuer shall use its commercially reasonable judgment in determining
the Alternative Rate based on that rate determined by the U.K Financial Conduct Authority (the “FCA”) and generally
being used as the successor to 3-month USD LIBOR; if no such successor rate has been determined by the FCA, Issuer shall use its
commercially reasonable judgment in determining the Alternative Rate generally being used as the successor to 3-month USD LIBOR;
provided, however, that, in either case, if the Issuer is notified by holders of a majority of the Subordinated Notes within five
(5) Business Days after the receipt by all holders of notice of such Alternative Rate selection that such holders reasonably believe
that such Alternative Rate is not consistent with the successor for LIBOR, including any spread adjustments, generally used in
quarterly pay floating rate obligations, then the Alternative Rate shall be the rate selected by the holders of a majority of the
Subordinated Notes, each using their commercially reasonable judgment in identifying an alternative rate that is consistent with
the successor for LIBOR, including any spread adjustments, generally used in quarterly pay floating rate obligations. In the event
the holders of a majority of the Subordinated Notes cannot reach agreement on such Alternative Rate within fifteen (15) business
days of the Issuer’s notification of its proposed Alternative Rate under this Section, the Alternative Rate shall be the
rate identified by the holder of the largest principal amount of Notes, selected based on such holder’s commercially reasonable
judgment as to the an alternative rate that is consistent with the successor for LIBOR, including any spread adjustments, generally
used in quarterly pay floating rate obligations. All references herein to “LIBOR” will mean such Alternative Rate.


 






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(b)       Any
payment of principal of or interest on this 6.50% Fixed to Floating Rate Subordinated Note (this “Note”) that
would otherwise become due and payable on a day which is not a Business Day shall become due and payable on the next succeeding
Business Day, with the same force and effect as if made on the date for payment of such principal or interest, and no interest
shall accrue in respect of such payment for the period after such day. The term “Business Day” means any day
that is not a Saturday or Sunday and that is not a day on which banks in the Commonwealth of Virginia are generally authorized
or required by law or executive order to be closed.


 


2.       Subordinated
Notes. This Note is one of a duly authorized issue of notes of the Issuer designated as 6.50% Fixed to Floating Subordinated
Notes due March 31, 2028 (herein called the “Subordinated Notes”), limited in aggregate principal amount to
$5,700,000.


 


3.       Subordination.
The indebtedness of the Issuer evidenced by the Subordinated Notes, including the principal and interest on this Note, shall be
subordinate and junior in right of payment to the prior payment in full of all existing claims of creditors of the Issuer, whether
now outstanding or subsequently created, assumed or incurred (collectively, “Senior Indebtedness”), which shall
consist of principal of (and premium, if any) and interest, if any, on: (a) all indebtedness of the Issuer for money borrowed,
whether or not evidenced by bonds, debentures, securities, notes or other written instruments, and all obligations to the Issuer’s
general and secured creditors; (b) any deferred obligations of the Issuer for the payment of the purchase price of property or
assets acquired (other than such obligations to trade creditors related to property or assets acquired in the ordinary course of
business); (c) all obligations, contingent or otherwise, of the Issuer in respect of any letters of credit, bankers’ acceptances,
security purchase facilities and similar credit transactions; (d) any capital lease obligations of the Issuer; (e) all obligations
of the Issuer in respect of interest rate swap, cap or other agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts, commodity contracts and other similar arrangements; (f) any obligation of the
Company to its general creditors, as defined for purposes of the capital adequacy regulations of the FRB applicable to Company,
as the same may be amended or modified from time to time; (g) all obligations of the type referred to in clauses (a) through (f)
of other persons for the payment of which the Issuer is responsible or liable as obligor, guarantor or otherwise; and (h) all obligations
of the types referred to in clauses (a) through (g) of other persons secured by a lien on any property or asset of the Issuer;
except “Senior Indebtedness” does not include (i) the Subordinated Notes, (ii) any obligation that by its terms expressly
is junior to, or ranks equally in right of payment with, the Subordinated Notes, or (iii) any indebtedness between the Issuer and
any of its subsidiaries or Affiliates. This Note is not secured by any assets of the Issuer. “Affiliate” 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. “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.


 






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In the event of any
bankruptcy, insolvency, dissolution, assignment for the benefit of creditors or any liquidation or winding up of or relating to
the Issuer, whether voluntary or involuntary, holders of Senior Indebtedness shall be entitled to be paid in full before any payment
shall be made on account of the principal of or interest on the Subordinated Notes, including this Note. In the event of any such
proceeding, after payment in full of all sums owing with respect to the Senior Indebtedness, the registered holders of the Subordinated
Notes from time to time, together with the holders of any obligations of the Issuer ranking on a parity with the Subordinated Notes,
shall be entitled to be paid from the remaining assets of the Issuer the unpaid principal thereof, and the unpaid interest thereon
before any payment or other distribution, whether in cash, property or otherwise, shall be made (i) with respect to any obligation
that by its terms expressly is junior to, or ranks equally in right of payment with, the Subordinated Notes, or any indebtedness
between the Issuer and any of its subsidiaries or Affiliates or (ii) on account of any capital stock.


 


If there shall have
occurred and be continuing (a) a default in any payment with respect to any Senior Indebtedness or (b) an event of default with
respect to any Senior Indebtedness as a result of which the maturity thereof is accelerated, unless and until such payment default
or event of default shall have been cured or waived or shall have ceased to exist, no payments shall be made by the Issuer with
respect to the Subordinated Notes. The provisions of this paragraph shall not apply to any payment with respect to which the immediately
preceding paragraph of this Section 3 would be applicable.


 


Nothing herein shall
act to prohibit, limit or impede the Issuer from issuing additional debt of the Issuer having the same rank as the Subordinated
Notes or which may be junior or senior in rank to the Subordinated Notes.


 


4.       Merger
and Sale of Assets. The Issuer shall not merge into another entity or convey, transfer or lease substantially all of its properties
and assets to any person, unless:


 


(a)       the
continuing entity into which the Issuer is merged or the person which acquires by conveyance or transfer or which leases substantially
all of the properties and assets of the Issuer shall be a corporation, association or other legal entity organized and existing
under the laws of the United States of America, any State thereof or the District of Columbia and expressly assumes the due and
punctual payment of the principal of and any premium and interest on the Subordinated Notes according to their terms, and the due
and punctual performance of all covenants and conditions hereof on the part of the Issuer to be performed or observed; and


 


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


 




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5.       Events
of Default; Acceleration; Compliance Certificate. Notwithstanding any cure periods provided for below, the Issuer shall promptly
notify Holder in writing when Issuer becomes aware of the happening of any event described below. Regardless of whether Issuer
has provided the forgoing notice, each of the following events shall constitute an “Event of Default”:


 


(a)       the
issuer fails to pay any principal or installment of interest on this Note within fifteen (15) days of its due date;


 


(b)       the
Issuer materially fails to keep or perform any of its material agreements, undertakings, obligations, covenants or conditions under
the Subordinated Note Purchase Agreement (the “Purchase Agreement”) or this Subordinated Note (other than as provided
for under paragraph (a) above) and such failure continues for a period of thirty (30) days after the Issuer has received written
notice thereof from the Holder;


 


(c)       any
certification made to the Holder pursuant to the Purchase Agreement by the Issuer or otherwise made in writing to Holder in connection
with or as contemplated by the Purchase Agreement or this Subordinated Note by the Issuer shall be materially incorrect or false
as of the delivery date of such certification, or any representation to Holder by the Issuer as to the financial condition or credit
standing of the Issuer is or proves to be materially false or misleading;


 


(d)       the
entry of a decree or order for relief in respect of the Issuer by a court having jurisdiction in the premises in an involuntary
case or proceeding under any applicable bankruptcy, insolvency, or reorganization law, now or hereafter in effect of the United
States or any political subdivision thereof, and such decree or order will have continued unstayed and in effect for a period of
sixty (60) consecutive days; or


 


(e)       the
Issuer (i) becomes insolvent or is unable to pay its debts as they mature, (ii) makes an assignment for the benefit of creditors,
(iii) admits in writing its inability to pay its debts as they mature, or (iv) ceases to be a bank holding company or financial
holding company under the Bank Holding Company Act of 1956, as amended; and


 


(f)       the
liquidation of the Issuer (for avoidance of doubt, “liquidation” does not include any merger, consolidation, sale of
equity or assets or reorganization (exclusive of a reorganization in bankruptcy) of the Issuer or any of its subsidiaries).


 


Unless the principal
of this Note already shall have become due and payable, if an Event of Default set forth in subsection (d) or (f) above shall have
occurred and be continuing, the Holder of this Note, by notice in writing to the Issuer, may declare the principal amount of this
Note to be due and payable immediately and, upon any such declaration the same shall become and shall be immediately due and payable.
EXCEPT AS DESCRIBED IN THE PRECEDING SENTENCE, THERE IS NO RIGHT OF ACCELERATION IN THE CASE OF A DEFAULT IN THE PAYMENT OF THE
PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THIS NOTE OR IN THE PERFORMANCE OF ANY OTHER OBLIGATION OF THE ISSUER HEREUNDER.


 


The Issuer waives demand,
presentment for payment, notice of nonpayment, notice of protest, and all other notices. The Issuer, within forty-five (45) calendar
days after the receipt of written notice from any Holder of the occurrence of an Event of Default with respect to this Note, shall
mail to all Holders, at their addresses shown on the Security Register (as defined in Section 12 below), such written notice
of Event of Default, unless such Event of Default shall have been cured or waived before the giving of such notice as certified
by the Issuer in writing.


 






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6.       Affirmative
Covenants of the Issuer.


 


(a)       Notice
of Certain Events. The Issuer shall provide written notice to the Holder of the occurrence of any of the following events within
thirty calendar days of the Issuer becoming aware of the occurrence of such event:


 


(i)       The
total risk-based capital ratio, Tier 1 risk-based capital ratio, common equity Tier 1 risk-based capital ratio or leverage ratio
of the Issuer and the Bank is less than ten percent (10.0%), eight percent (8.0%), six and one half percent (6.5%) or five percent
(5.0%), respectively, as of the end of any calendar quarter;


 


(ii)       The
Issuer, the Bank or any officer of the Issuer or the Bank, becomes subject to any formal, written regulatory enforcement action;


 


(iii)       The
ratio of (A) non-accrual loans and any other loans that are ninety (90) days or more past due plus other real estate owned (excluding
any such loans that are guaranteed or covered by any governmental agency or government-sponsored entity) to (B) total assets of
the Issuer becomes greater than four percent (4.0%), as of the end of any calendar quarter;


 


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


 


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


 


(vi)       The
Issuer undertakes the issuance of any additional Indebtedness.


 


If the information described in this Section
6(a) is disclosed by the Issuer in filings the Issuer makes with the SEC, the Issuer will be deemed to have furnished written notice
to the Holder in compliance with the requirements of this Section 6(a). The Issuer may condition providing written notice under
this Section 6(a) on the receipt of a confidentiality agreement executed by the Holder in a form reasonably acceptable to the Issuer.


 


(b)       Compliance
with Laws. The Issuer and each Subsidiary shall comply with the requirements of all laws, regulations, orders and decrees applicable
to it or its properties, except for such noncompliance that would not reasonably be expected to result in a material adverse effect
(i) in the condition (financial or otherwise), or in the earnings of the Issuer, whether or not arising in the ordinary course
of business, or (ii) on the ability of the Issuer to perform its obligations under this Subordinated Note.


 


(c)       Taxes
and Assessments. The Issuer shall punctually pay and discharge all taxes, assessments, and other governmental charges or levies
imposed upon it or upon its income or upon any of its properties; provided, that no such taxes, assessments or other governmental
charges need be paid if they are being contested in good faith by the Issuer.


 






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(d)       Compliance
Certificate. Not later than ninety (90) days following the end of each fiscal year, the Issuer shall provide each Holder with
a certificate (the “Compliance Certificate”), executed by the principal executive officer and principal financial
officer of the Issuer in their capacities as such, stating whether (i) the Issuer has complied with all notice provisions and covenants
contained in this Note; (ii) an Event of Default has occurred; (iii) an event of default has occurred under any other indebtedness
of the Issuer; and (iv) any event or events have occurred that in the reasonable judgment of the management of the Issuer would
have a material adverse effect on the ability of the Issuer to perform its obligations under this Subordinated Note.


 


7.       Limitation
on Dividends. The Issuer shall not declare or pay any dividend or make any distribution on capital stock or other equity securities
of any kind of the Issuer if either of the Issuer or the Bank is not “well capitalized” for regulatory purposes immediately
prior to the declaration of such dividend or distribution, except for dividends payable solely in shares of common stock of the
Issuer.


 


8.       Failure
to Make Payment. In the event of failure by the Issuer to make any required payment of principal or interest on this Note (and,
in the case of payment of interest, such failure to pay shall have continued for thirty (30) calendar days), the Issuer will, upon
demand of the Holder, pay to the Holder the amount then due and payable on this Note for principal and interest (without acceleration
of the Note in any manner), with interest on the overdue principal and interest at the rate borne by this Note, to the extent permitted
by applicable law. If the Issuer fails to pay such amount upon such demand, the Holder may, among other things, institute a judicial
proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Issuer and collect the amounts adjudged or decreed to be payable in the manner provided by law out
of the property of the Issuer.


 


Upon the occurrence
of a failure by the Issuer to make any required payment of principal or interest on the Note, or an Event of Default until such
Event of Default is cured by the Issuer, the Issuer shall not (a) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the Issuer’s capital stock, (b) make any payment
of principal or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Issuer that rank equal
with or junior to the Subordinated Notes, or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated
Notes, other than (i) any dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase
shares of, any class of the Issuer’s common stock; (ii) any declaration of a dividend in connection with the implementation
of a shareholders’ rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase
of any such rights pursuant thereto; (iii) as a result of a reclassification of the Issuer’s capital stock or the exchange
or conversion of one class or series of the Issuer’s capital stock for another class or series of the Issuer’s capital
stock; (iv) the purchase of fractional interests in shares of the Issuer’s capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged; or (v) purchases of any class of the Issuer’s
common stock related to the issuance of common stock or rights under any benefit plans for the Issuer’s directors, officers
or employees or any of the Issuer’s dividend reinvestment plans. The limitations imposed by the provisions of this Section
8 shall apply whether or not the Holder has notified the Issuer of an Event of Default.


 






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9.       Redemption.


 


(a)       Redemption
Prior to Fifth Anniversary. Subject to Section 9(f) hereof, this Note shall not be redeemable by the Issuer prior to the fifth
anniversary of the date upon which this Note was originally issued to Holder (the “Issue Date”), except that
in the event (i) this Note no longer qualifies as “Tier 2” capital (as defined by the FRB) as a result of
a change in interpretation or application of law or regulation by any judicial, legislative or regulatory authority that becomes
effective after the date of issuance of this Note, (ii) of a Tax Event (as defined below) or (iii) the Issuer receives an
opinion of counsel to Issuer that there is a material risk that the Issuer is or, within one hundred twenty (120) days after the
receipt of such opinion will be, required to register as an investment company pursuant to the Investment Company Act of 1940,
as amended, the Issuer may redeem this Note in whole at any time, or in part from time to time at an amount equal to 100% of the
principal amount outstanding plus accrued but unpaid interest and any late fee, if applicable, to but excluding the redemption
date. “Tax Event” means the receipt by the Issuer of an opinion of counsel to the Issuer that as a result of
any amendment to, or change (including any final and adopted (or enacted) prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such laws or regulations, there exists a material risk
that interest payable by the Issuer on the Subordinated Notes is not, or within one hundred twenty (120) days after the receipt
of such opinion will not be, deductible by the Issuer, in whole or in part, for United States federal income tax purposes.


 


(b)       Redemption
on or after Fifth Anniversary. On or after the fifth anniversary of the Issue Date, subject to Section 9(f) hereof, this Note
shall be redeemable by the Issuer, in whole at any time, or in part from time to time, at a redemption price equal to 100% of the
outstanding principal amount to be redeemed, plus accrued but unpaid interest thereon to but excluding the redemption date.


 


(c)       Partial
Redemption. If less than the then outstanding principal amount of this Note is redeemed, (i) a new Note shall be issued representing
the unredeemed portion without charge to the Holder thereof and (ii) such redemption shall be effected on a pro rata basis as to
the holders of the Subordinated Notes. For purposes of clarity, upon a partial redemption, a like percentage of the principal amount
of every Subordinated Note held by every holder thereof shall be redeemed.


 


(d)       No
Redemption at Option of Holder. This Note is not subject to redemption at the option of the Holder of this Note.


 


(e)       Effectiveness
of Redemption. If notice of redemption has been duly given and notwithstanding that this Note has been called for redemption
but has not yet been surrendered for cancellation, on and after the date fixed for redemption, interest shall cease to accrue on
this Note, this Note shall no longer be deemed outstanding and all rights with respect to this Note shall forthwith on such date
fixed for redemption cease and terminate unless Company shall default in the payment of the redemption price, except only the right
of the Holder hereof to receive the amount payable on such redemption, without interest.


 






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(f)       Regulatory
Approvals. Any redemption or prepayment of this Note shall be subject to receipt of any and all required federal and state
regulatory approvals, including, but not limited to, the consent of the FRB (or any successor Federal bank regulatory agency having
supervisory authority over the Issuer). In the case of any redemption or prepayment of this Note, the Issuer will give the Holder
notice not less than thirty (30) nor more than forty-five (45) calendar days prior to the redemption or prepayment date as to the
aggregate principal amount to be redeemed or prepaid.


 


(g)       Purchase
and Resale of the Subordinated Notes. Subject to any required federal and state regulatory approvals and the provisions of
this Note, the Issuer shall have the right to purchase any of the Subordinated Notes at any time in the open market, private transactions
or otherwise. If the Issuer purchases any Subordinated Notes, it may, in its discretion, hold, resell or cancel any of the purchased
Subordinated Notes.


 


10.       Payment
Procedures. Payment of the principal and interest payable on the Maturity Date will be made by check, or by wire transfer in
immediately available funds to a bank account in the United States designated by the registered Holder of this Note if such Holder
shall have previously provided wire instructions to the Issuer, upon presentation and surrender of this Note at the Payment Office
(as defined in Section 15 below) or at such other place or places as the Issuer shall designate by notice to the registered
Holders as the Payment Office, provided that this Note is presented to the Issuer in time for the Issuer to make such payments
in such funds in accordance with its normal procedures. Payments of interest (other than interest payable on the Maturity Date)
shall be made by wire transfer in immediately available funds or check mailed to the registered Holder, as such person’s
address appears on the Security Register. Interest payable on any Interest Payment Date shall be payable to the Holder in whose
name this Note is registered at the close of business on January 15, April 15, July 15 or October 15, as the case may be (whether
or not a Business Day), next preceding such Interest Payment Date (such date being referred to herein as the “Regular
Record Date”) for such Interest Payment Date, except that interest not paid on the Interest Payment Date, if any, will
be paid to the Holder in whose name this Note is registered at the close of business on a special record date fixed by the Issuer
(a “Special Record Date”), notice of which shall be given to the Holder not less than ten (10) calendar days
prior to such Special Record Date (The Regular Record Date and Special Record Date are referred to herein collectively as the “Record
Dates”). To the extent permitted by applicable law, interest shall accrue, at the rate at which interest accrues on the
principal of this Note, on any amount of principal or interest on this Note not paid when due. All payments on this Note shall
be applied first against costs and expenses of the Holder hereunder; then against interest due hereunder; and then against principal
due hereunder. Holder acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this
Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Subordinated
Notes. In the event Holder receives payments in excess of its pro rata share of the Issuer’s payments to the holders of all
of the Subordinated Notes, then Holder shall hold in trust all such excess payments for the benefit of the holders of the other
Subordinated Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.


 






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11.       Form
of Payment. Payments of principal and interest on this Note shall be made in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of public and private debts.


 


12.       Registration
of Transfer, Security Register. Except as otherwise provided herein, this Note is transferable in whole or in part, and may
be exchanged for a like aggregate principal amount of Subordinated Notes of other authorized denominations, by the Holder in person,
or by his attorney duly authorized in writing, at the Payment Office. The Issuer shall maintain a register providing for the registration
of the Subordinated Notes and any exchange or transfer thereof (the “Security Register”). Upon surrender or
presentation of this Note for exchange or registration of transfer, the Issuer shall execute and deliver in exchange therefor a
Subordinated Note or Subordinated Notes of like aggregate principal amount, each in a minimum denomination of $1,000 or any amount
in excess thereof which is an integral multiple of $1,000 (and, in the absence of an opinion of counsel satisfactory to the Issuer
to the contrary, bearing the restrictive legend(s) set forth hereinabove) and that is or are registered in such name or names requested
by the Holder. Any Subordinated Note presented or surrendered for registration of transfer or for exchange shall be duly endorsed
and accompanied by a written instrument of transfer in such form as is attached hereto and incorporated herein, duly executed by
the Holder or his attorney duly authorized in writing, with such tax identification number or other information for each person
in whose name a Subordinated Note is to be issued, and accompanied by evidence of compliance with any restrictive legend(s) appearing
on such Subordinated Note or Subordinated Notes as the Issuer may reasonably request to comply with applicable law. No exchange
or registration of transfer of this Note shall be made on or after the fifteenth (15th) day immediately preceding the
Maturity Date.


 


13.       Charges
and Transfer Taxes. No service charge (other than any cost of delivery) shall be imposed for any exchange or registration of
transfer of this Note, but the Issuer may require the payment of a sum sufficient to cover any stamp or other tax or governmental
fee or charge that may be imposed in connection therewith (or presentation of evidence that such tax, charge or fee has been paid).


 


14.       Ownership.
Prior to due presentment of this Note for registration of transfer, the Issuer may treat the Holder in whose name this Note is
registered in the Security Register as the absolute owner of this Note for receiving payments of principal and interest on this
Note and for all other purposes whatsoever, whether or not this Note be overdue, and the Issuer shall not be affected by any notice
to the contrary.


 


15.       Notices.
All notices to the Issuer under this Note shall be in writing and addressed to the Issuer at Village Bank and Trust Financial Corp.,
13319 Midlothian Turnpike, Midlothian, Virginia 23113, Attention: President and Chief Executive Officer, or to such other address
as the Issuer may notify to the Holder (the “Payment Office”). All notices to the Holders shall be in writing
and sent by first-class mail to each such Holder at his or its address as set forth in the Security Register.


 


16.       Denominations.
The Subordinated Notes are issuable only as fully registered notes without interest coupons in minimum denominations of $1,000
or any amount in excess thereof which is an integral multiple of $1,000.


 






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17.       Absolute
and Unconditional Obligation of the Issuer. No provisions of this Note shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal and interest on this Note at the times, places and rate, and in the coin
or currency, herein prescribed.


 


18.       Waiver
and Consent. Any consent or waiver given by the Holder of this Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange therefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this Note. This Note may be also amended or waived pursuant
to, and in accordance with, the provisions of Section 8.3 of the Purchase Agreement. 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 Issuer will immediately notify
the Holder, and thereafter the Issuer and the Holder 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 this Note to qualify as Tier
2 Capital, if requested by the Issuer.


 


(a)       No
delay or omission of the Holder to exercise any right or remedy accruing upon any Event of Default shall impair such right or remedy
or constitute a waiver of any such Event of Default or an acquiescence therein.


 


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


 


19.       Further
Issues. The Issuer may, without the consent of the holders of the Subordinated Notes, create and issue additional notes having
the same terms and conditions of the Subordinated Notes (except for the Issue Date and issue price) so that such further notes
shall be consolidated and form a single series with the Subordinated Notes.


 


20.       Governing
Law; Interpretation. This Note shall be governed by and construed in accordance with applicable federal law and the laws of
the Commonwealth of Virginia, without regard to conflict of laws principles of said state. This Note is intended to meet the criteria
for qualification of the outstanding principal as Tier 2 capital under the regulatory guidelines of the FRB, and the terms hereof
shall be interpreted in a manner to satisfy such intent.


 


21.       Priority.
The Subordinated Notes rank pari passu among themselves and pari passu, in the event of any insolvency proceeding, dissolution,
assignment for the benefit of creditors, reorganization, restructuring of debt, marshaling of assets and liabilities or similar
proceeding or any liquidation or winding up of the Issuer, with all other present or future unsecured subordinated debt obligations
of the Issuer, except any unsecured subordinated debt that, pursuant to its express terms, is senior or subordinate in right of
payment to the Subordinated Notes.


 






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22.       Status
as Collateral. The obligation evidenced by this Note is ineligible as collateral for a loan by the Issuer or any subsidiary
of the Issuer.


 


23.       Defined
Terms. Any capitalized term used herein and not otherwise defined shall have the meaning ascribed to it in the Purchase Agreement.


 


 


 


[Signature Page Follows]


 




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IN WITNESS WHEREOF,
the undersigned has caused this Note to be duly executed and attested and its corporate seal to be hereunto affixed.


 


	 	
        [COMPANY NAME] 

        

	 	 	 	 
	 	By:	 
	 	 	Name:	[●]
	 	 	Title:	[●]


 


 


	ATTEST:	
        

	 	 
	 	 
	Name: [●]	 
	Title:   [●]	 


 


 




    
[Signature Page to Subordinated Note]


     


    

ASSIGNMENT FORM


 


To assign this Note, fill in
the form below:



I or we assign and transfer this Note to:


 


	 
	(Print or type assignee’s name, address and zip code)
	 
	 
	 
	(Insert assignee’s social security or tax I.D. No.)
	 


and irrevocably appoint _______________________________
agent to transfer this Note on the books of Village Bank and Trust Financial Corp. (the “Issuer”). The agent
may substitute another to act for him.


 


	Date:	Your Signature:	 
	
         

        Signature Guarantee:
	 
	 	 	 	 


(Signature must be guaranteed)


 


	 
	Sign exactly as your name appears on the other side of this Note.


The signature(s) should be guaranteed by
an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved
signature guarantee medallion program), pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).


 


The signatory hereto hereby certifies that
it  ̈ is /  ̈ is not an Affiliate of the Issuer and that, to its knowledge, the proposed transferee  ̈ is /  ̈
is not an Affiliate of the Issuer.


 






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In connection with any transfer or exchange
of any of the Note(s) evidenced by this certificate occurring prior to the date that is one year after the later of the date of
original issuance of such Notes and the last date, if any, on which such Notes were owned by the Issuer or any Affiliate of the
Issuer, the undersigned confirms that such Notes are being:


 


	(1)	  ̈	acquired for the undersigned’s own account, without transfer; or
	(2)	  ̈	transferred to the Issuer; or
	(3)	  ̈	
        transferred pursuant to and in compliance
        with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”); or

        

	(4)	  ̈	transferred pursuant to an effective registration statement under the Securities Act; or
	(5)	  ̈	transferred pursuant to and in compliance with Regulation S under the Securities Act; or
	(6)	  ̈	transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) or an “accredited investor” (as defined in Rule 501(a)(4) under the Securities Act), that has furnished a signed letter containing certain representations and agreements; or
	(7)	  ̈	transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended.


 


Unless one of the boxes is checked, the
Issuer will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered
holder thereof; provided, however, that if box (5), (6) or (7) is checked, the Issuer may require, prior to registering
any such transfer of the Notes, in its sole discretion, such legal opinions, certifications and other information as the Issuer
may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act of 1933, as amended, such as the exemption provided by Rule 144 under such
Act.


 


	 	 	 
	 	 	Signature
	Signature Guarantee:	 	 
	 	 	 
	 	 	 
	Signature (must be guaranteed)	 	Signature


 


The signature(s) should be guaranteed by
an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved
signature guarantee medallion program), pursuant to Exchange Act Rule 17Ad-15.


 






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TO BE COMPLETED BY PURCHASER IF BOX (1) OR (3) ABOVE IS CHECKED.


 


The undersigned represents
and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under
the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations
in order to claim the exemption from registration provided by Rule 144A.


 


	 	 
	 	Signature 
	 	Date:


 






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