Exhibit 10.1


 


SUBORDINATED NOTE PURCHASE AGREEMENT


 


4.375% FIXED TO FLOATING RATE NOTE DUE
DECEMBER 31, 2030


 


This SUBORDINATED NOTE
PURCHASE AGREEMENT (this “Agreement”) is dated as of December 10, 2020 and is made by and among
First Keystone Corporation, a Pennsylvania corporation (“the Company”), and the several purchasers of
the Subordinated Notes 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 Twenty-Five Million Dollars ($25,000,000) in aggregate
principal amount of Subordinated Notes (as defined herein), which aggregate amount is intended to meet the qualifications for inclusion
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
either an accredited investor under Rule 501(a)(1)-(3) or (7) of SEC Regulation D or a qualified institutional buyer
as such term is defined in SEC Rule 144A(a) as such rules have been promulgated under the Securities Act of 1933,
as amended (the “Securities Act”);


 


WHEREAS, the
offer and sale of the Subordinated Notes by the Company is being made in reliance upon Rule 506(b) of Regulation D; and


 


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


 


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


 


AGREEMENT


 


		1.	DEFINITIONS.



 


1.1            Defined
Terms. The following capitalized terms used in this Agreement have the meanings defined
or referenced below. Certain other capitalized terms used in this Agreement may be defined elsewhere in this Agreement.


 


“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.


 


“the Bank”
means First Keystone Community Bank, a Pennsylvania-chartered commercial bank.


 


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


 


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


 


“Closing Date” means December 10, 2020.


 


“Common Shares” means the Company’s
common stock, par value $2.00 per share.


 


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


 


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


 


“the Company’s
Reports” means (i) the audited consolidated financial statements of the Company for the year ended December 31,
2019; (ii) the unaudited financial statements of the Company and the Bank, as applicable, as of and for the quarters ended
March 31, June 30 and September 30, 2020 (iii) the Company’s Parent Only Financial Statements for Small
Holding Companies (FR Y-9SP) as of and for the twelve month period ended December 31, 2019 filed with the FRB, and (iv) the
Bank’s consolidated reports of condition and income filed (or call report) with the FDIC as of and for the period ended September 30,
2020.


 


“Control”
(including the terms “controlling,” “controlled by,” and “under common control with”) means
the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.


 


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


 


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


 


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


 


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


 


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


 


“FDIC” means the Federal Deposit Insurance Corporation.


 


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


 






    2


     


    

 


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


 


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


 


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


 


“Hazardous
Materials” means flammable explosives, asbestos, urea formaldehyde insulation, polychlorinated biphenyls, radioactive
materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances
which are “hazardous substances,” “hazardous wastes,” “hazardous materials” or “toxic
substances” under Environmental Laws.


 


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


 


“Indebtedness”
means and includes: (i) all items arising from the borrowing of money that, according to GAAP, would be included in determining
total liabilities as shown on the consolidated balance sheet of the Company or any Subsidiary of the Company; and (ii) all
obligations secured by any lien on property owned by the Company or any Subsidiary whether or not such obligations shall have been
assumed by the Company or any Subsidiary; 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.


 


“Noteholder” has
same meaning as set forth in the Form of Subordinated Note attached as Exhibit A hereto and incorporated by reference
herein.


 






    3


     


    

 


“Material Adverse Effect”
means any change or effect that (i) is or would be reasonably expected to be material and adverse to the financial condition,
results of operations, business or assets of the Company and/or the Bank taken as a whole, or (ii) would materially impair
the ability of the Company and/or the Bank to perform their respective obligations under any of the Transaction Documents, or otherwise
materially impede the consummation of the transactions contemplated hereby or thereby; provided, however, that “Material
Adverse Effect” shall not be deemed to include the impact of (1) orders issued, or changes in banking and similar laws,
rules or regulations of general applicability or interpretations thereof taken, by Governmental Agencies, (2) changes
in GAAP or regulatory accounting requirements applicable to financial institutions and their holding companies generally, (3) changes
after the date of this Agreement in the general economic, employment or capital market conditions in the United States, including,
but not limited to, interest rates, economic or capital market conditions affecting insured depository institutions and their respective
holding companies or the market prices for their issued and outstanding securities generally, (4) direct effects of compliance
with this Agreement on the operating performance of the Company, the Bank, or the Purchasers, including expenses incurred by the
Company, the Bank, or the Purchasers in consummating the transactions contemplated by this Agreement, (5) the effects of any
action or omission taken by the Company or the Bank with the prior written consent of the Purchasers, and vice versa, or as otherwise
contemplated by this Agreement or the Subordinated Notes, (6) any act of God, terrorism, war (whether or not declared), armed
conflict, civil unrest, natural disaster or any national or international calamity affecting the United States, (7) the effects
of any declaration of a state of civil emergency by the government of the United States or of any state of the United States or
political subdivision thereof, and (7) the effects of any epidemic, pandemic, or disease outbreak, or continuation or extension
of an epidemic, pandemic, or disease outbreak, affecting the United States, including without limitation, all measures taken to
protect the health, safety and welfare of the general population of the United States or of any state of the United States or political
subdivision thereof.


 


“Maturity Date” means December 31,
2030.


 


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


 


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


 


“Property”
means any real property owned, leased, or otherwise used by the Company or any Affiliate or Subsidiary of the Company. For avoidance
of doubt, Property includes, without limitation, property repossessed or foreclosed in connection with lending activities of the
Bank.


 


“Purchaser”
or “Purchasers” has the meaning set forth in the preamble hereto. “Regulation D”
means Regulation D promulgated under the Securities Act.


 


“Regulatory
Agencies” 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 or the Bank.


 


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


 






    4


     


    

 


“SEC Filings” have the meaning
set forth in Section 6.8.


 


“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. 217, Part 12 C.F.R. Part 225, and 12 C.F.R.
Part 250, as amended, modified and supplemented and in effect from time to time or any replacement thereof.


 


“Transaction Documents”
has the meaning set forth in Section 3.1.


 


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


 


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


 


		2.	SUBORDINATED DEBT.



 


2.1            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 amount equal to the aggregate of the Subordinated
Note Amounts. Purchasers, severally and not jointly, each agree to purchase the Subordinated Notes from the Company on the Closing
Date in accordance with the terms of, and subject to the conditions and provisions set forth in, this Agreement and the Subordinated
Notes. The Subordinated Note Amounts shall be disbursed in accordance with Section 3.1. The Subordinated Notes shall
bear interest per annum as set forth in the Subordinated Notes. The unpaid principal balance of the Subordinated Notes plus all
accrued but unpaid interest thereon shall be due and payable on the Maturity Date, or such earlier date on which such amount shall
become due and payable on account of (i) acceleration by Purchasers in accordance with the terms of the Subordinated Notes
and this Agreement or (ii) the Company’s delivery of a notice of redemption or repayment in accordance with the terms
of the Subordinated Notes.


 






    5


     


    

 


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, the Company shall pay in full all sums due and owing under
this Agreement and the Subordinated Notes. 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 and this Agreement shall be unsecured.


 


2.5            The
Closing. The execution and delivery of the Transaction Documents (the “Closing”)
shall occur at the offices of the Company at 10:00 a.m. (Eastern 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 and the Purchasers agree 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 the Bank.


 


2.8            Use
of Proceeds. The Company shall use the net proceeds from the sale of Subordinated
Notes for general corporate purposes, including, without limitation, to fund future growth and for investment in, or capital contributions
to, the Bank.


 


2.9            No
Trust Indenture. The Subordinated Notes will not be issued pursuant to, or be the
subject of, a trust indenture.


 


2.10            No
Credit Rating. The Subordinated Notes will not be rated by a nationally recognized
statistical rating organization.


 


		3.	DISBURSEMENT.



 


3.1            Disbursement.
On the Closing Date, assuming all of the terms and conditions set forth in Section 3.2 have been satisfied by the Company
or waived by the applicable Purchaser and the Company has executed and delivered to each of the Purchasers this Agreement and such
Purchaser’s Subordinated Note and any other related documents in form and substance reasonably satisfactory to the Purchasers
and the Company (collectively the “Transaction Documents”), each Purchaser shall disburse their respective
Subordinated Note Amount, which is set forth on such Purchaser’s signature page, in immediately available funds to the Company
in exchange for a Subordinated Note with a principal amount equal to such Subordinated Note Amount (the “Disbursement”).
The Company will deliver to the respective Purchaser one or more Subordinated Notes in definitive form (or provide evidence of
the same with the original to be delivered by the Company by overnight delivery on the next Business Day in accordance with the
delivery instructions of the Purchaser), registered in such names and denominations as such Purchasers may request.


 






    6


     


    

 


		3.2	Conditions Precedent to Disbursement.



 


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


 


3.2.1.1            Transaction
Documents. The Transaction Documents, each duly authorized and executed by the Company.


 


		3.2.1.2	Authority Documents.



 


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



 


		(b)	A certificate of good standing of the Company issued by the Secretary of the Commonwealth of the
Commonwealth of Pennsylvania;



 


		(c)	A certificate of existence of the Bank issued by the Department of Banking and Securities of the
Commonwealth of Pennsylvania;



 


		(d)	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;



 


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



 


		(f)	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;



 


		(g)	The opinion of Bybel Rutledge LLP, 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; and



 


		(h)	A confirmation of registered status of the Company issued by the Federal Reserve Bank of Philadelphia.



 






    7


     


    

 


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


 


3.2.1.4            Aggregate
Investments. Each Purchaser shall have actually subscribed for the Subordinated Note
Amount set forth on such Purchaser’s signature page.


 


3.2.1.5            Representations
and Warranties. The representations and warranties made by the Company in Section 4
hereof shall have been true and correct as of the date of this Agreement, and shall be true and correct on the Closing Date, except
where the aggregate failure of such representations and warranties to be so true and correct does not have a Material Adverse Effect
on the Company (and except that representations and warranties made as of a specified date need only be true and correct as of
such date).


 


3.2.1.6            Covenants.
All covenants and agreements contained in this Agreement to be performed by the Company on or prior to the Closing Date shall have
been performed or complied with in all material respects.


 


3.2.2            Conditions
to the Company’s Obligation. The obligation of the Company to consummate the
Closing with respect to a given Purchaser is subject to the satisfaction or written waiver by the Company of the following conditions
at or prior to the Closing:


 


3.2.2.1            Since
the date of this Agreement, there shall not have been any action taken, or any law, rule or regulation enacted, entered, enforced
or deemed applicable to the Company or the Bank or the transactions contemplated by this Agreement by any Governmental Agency which
imposes any restriction or condition that the Company determines, in its reasonable good faith judgment, is materially and unreasonably
burdensome on the Company’s business or would materially reduce the economic benefits of the transactions contemplated by
this Agreement to the Company to such a degree that the Company would not have entered into this Agreement had such condition or
restriction been known to it on the date hereof.


 


3.2.2.2            With
respect to that Purchaser, such Purchaser shall have delivered to the Company a duly authorized and executed signature page to
this Agreement.


 


3.2.2.3            The
representations and warranties made by that Purchaser in Section 6 hereof shall have been true and correct as of the
date of this Agreement, and shall be true and correct on the Closing Date, except where the failure to be so true and correct (without
regard to any materiality qualifications contained therein) would not materially adversely affect the ability of the Purchaser
to perform Purchaser’s obligations hereunder (and except that representations and warranties made as of a specified date
need only be so true and correct as of such date).


 


3.2.2.4            All
covenants and agreements contained in this Agreement to be performed by that Purchaser on or prior to the Closing Date shall have
been performed or complied with in all material respects.


 






    8


     


    

 


		4.	REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company hereby represents and warrants
to each Purchaser as follows:



 


		4.1	Organization and Authority.



 


		4.1.1	Organization Matters of the Company and Its Subsidiaries.



 


4.1.1.1            The
Company is a bank holding company registered with the FRB under the Bank Holding the Company Act of 1956, as amended. The Company
is a corporation validly existing under the laws of the Commonwealth of Pennsylvania 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, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect.


 


4.1.1.2            The
Bank is the only Subsidiary of the Company. The Bank is a state chartered commercial bank under the laws of the Commonwealth of
Pennsylvania, and has the 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, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. All
of the issued and outstanding Equity Interests in the Bank have been duly authorized and validly issued, are fully paid and non-assessable
and are owned by the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim. None of the
Equity Interests in the Bank were issued in violation of the preemptive or similar rights of any security holder of the Bank or
any other Person.


 


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


 


4.1.2            Capital
Shares and Related Matters. The articles of incorporation of the Company authorize
the Company to issue 20,000,000 Common Shares. As of November 13, 2020, there were 5,865,907 of Common Shares issued and outstanding.
All of the outstanding shares of the Company have been duly authorized and validly issued and are fully paid and non-assessable.
Except as described in, or permitted by, Section 5.3.5(c)(i)-(v), there are, as of the date hereof, no outstanding options,
rights, warrants or other agreements or instruments obligating the Company to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of the Company or obligating the Company to grant, extend or enter into any such agreement or commitment
to any Person.


 


		4.2	No Impediment to Transactions.



 


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


 






    9


     


    

 


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


 


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


 


4.2.4            Exemption
from Registration. Neither the Company, nor the Bank, nor to the Company’s knowledge,
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) of
Regulation D (a “Disqualification Event”) is applicable to the Company or, to the Company’s knowledge,
any director or executive offer of the Company or other officer of the Company participating in the offer and sale of the Subordinated
Notes except a Disqualification Event described in Rule 506(d)(2) or (3) (each, a “the 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) with
respect to any Company Covered Person. Based upon a written representation by the Placement Agent, to the Company’s knowledge,
the Placement Agent, any general partner or managing member of the Placement Agent, director or executive officer of the Placement
Agent or officer of the Placement Agent participating in the offer or sale of the Subordinated Notes are not subject to a Disqualification
Event or a Disqualification Event that requires disclosure under Rule 506(e).


 


4.2.5            No
Defaults or Restrictions. Neither the execution and delivery of the Transaction Documents
nor compliance with their respective terms and conditions will (whether with or without the giving of notice or lapse of time or
both) (i) violate, conflict with or result in a breach of, or constitute a default under: (1) the articles of incorporation
or bylaws of the Company; (2) any of the terms, obligations, covenants, conditions or provisions of any corporate restriction
or of any material contract, agreement, indenture, mortgage, deed of trust, pledge, loan or credit agreement, or any other agreement
or instrument to which the Company or the Bank, as applicable, is now a party or by which it or any of its properties may be bound
or affected; (3) any judgment, order, writ, injunction, decree or demand of any court, arbitrator, grand jury, or Governmental
Agency; or (4) any statute, rule or regulation applicable to the Company, or (ii) result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any property or asset of 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 a Material Adverse Effect. The Bank is not a party to, or
otherwise subject to, any legal restriction or any agreement (other than customary limitations imposed by corporate law statutes,
banking law statutes, rules and policies, or other regulatory statutes) restricting the ability the Bank to pay dividends
out of profits or make any other distributions to the Company.


 






    10


     


    

 


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


 


4.3            Possession
of Licenses and Permits. Each of the Company and the Bank possess such permits, licenses,
approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate
Governmental Agencies necessary to conduct the business now operated by it except where the failure to possess such Governmental
Licenses would not have a Material Adverse Effect on the Company or the Bank; each of the Company and the Bank is in compliance
with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not have a Material
Adverse Effect on the Company or the Bank; 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 the Bank; and neither the Company nor the Bank has received any notice of
proceedings relating to the revocation, suspension or modification of any such Governmental Licenses.


 


		4.4	Financial Condition.



 


4.4.1            Company
Financial Statements. The financial statements of the Company 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; (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, as indicated in such statements or in the notes thereto. 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 (or notes
thereto) 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.


 






    11


     


    

 


4.4.2            Absence
of Default. Since the date of the latest audited consolidated financial statements
of the Company, no event has occurred which either of itself or with the lapse of time or the giving of notice or both, would give
any creditor of the Company the right to accelerate the maturity of any material Indebtedness of the Company. The Company is not
in default under any other Lease, agreement or instrument, or any law, rule, regulation, order, writ, injunction, decree, determination
or award, non-compliance with which reasonably would be expected to result in a Material Adverse Effect on the Company.


 


4.4.3            Solvency.
After giving effect to the consummation of the transactions contemplated by this Agreement, the Company has capital sufficient
to carry on its business and 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 the Bank.


 


4.4.4            Ownership
or Use of Property. Each of the Company and the Bank have 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 the Bank 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 which secure liabilities
for public deposits or statutory obligations or any discount with, borrowing from or other obligations to the Federal Home Loan
Bank or FRB, 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 due or delinquent or which are being contested in good faith and (iii) such
as do not, individually or in the aggregate, materially affect the value of such property and do not materially interfere with
the use made and proposed to be made of such property by the Company or the Bank. The Company and the Bank, as lessee, has the
right under valid and existing Leases of real and personal properties that are material to the Company or the Bank, as applicable,
in the conduct of its business to occupy or use all such properties as presently occupied and used by it.


 


4.5            No
Material Adverse Change. Since December 31, 2019, there has been no development
or event that has had or would reasonably be expected to have a Material Adverse Effect. No changes in the Chief Executive Officer
or Chief Financial Officer of the Company or the Bank are currently contemplated.


 


		4.6	Legal Matters.



 


4.6.1            Compliance
with Law. Each of the Company and the Bank (i) has complied in all material respects
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 written 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. Each of the Company and the Bank is in compliance in all material respects
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. At no time during the two years prior to the date hereof has the Company or the Bank received any written
notice asserting any material violations of any of the foregoing, except for any violations that (A) have been resolved, (B) in
the reasonable judgment of the Company are in the process of being resolved, or (C) have not had, and are not reasonably expected
to have, a Material Adverse Effect.


 






    12


     


    

 


4.6.2            Regulatory
Enforcement Actions. Each of the Company and the Bank is in compliance in all material
respects with all laws administered by and regulations of any Governmental Agency applicable to it or to them. None of the Company,
the Bank, nor any of their respective officers or directors is now operating under any restrictions, agreements, memoranda, commitment
letter, supervisory letter or similar regulatory correspondence, or other commitments (other than restrictions of general application)
imposed by any Governmental Agency, nor are, to the Company’s knowledge, (a) any such restrictions threatened, or (b) any
agreements, memoranda or commitments being sought by any Governmental Agency.


 


4.6.3            Pending
Litigation. There are no actions, suits, proceedings or written agreements pending,
or, to the Company’s knowledge, threatened or proposed, against the Company or the Bank 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 would reasonably be expected to have a Material Adverse Effect on the Company or the Bank or affect issuance or
payment of the Subordinated Notes; and neither the Company nor the Bank 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 will have a Material Adverse Effect on the Company or the Bank.


 


4.6.4            Environmental.
To the knowledge of the Company, all Property is in material compliance with Environmental Laws, and neither the Company nor the
Bank has engaged in the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, or
transportation of any Hazardous Materials on any Property except in material compliance with Environmental Laws. There are no claims
or actions pending or, to the Company’s knowledge, threatened against the Company or the Bank by any Governmental Agency
or by any other Person relating to any Hazardous Materials or pursuant to any Environmental Law.


 


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


 


4.6.6            Investment
the Company Act. Neither the Company nor the Bank comes within the definition of an
 “investment company” under Section 3(a) of the Investment Company Act of 1940, as amended (the “1940
Act”) or is controlled, as that term is defined in Section 2(a)(9) of the 1940 Act, by an investment company.


 


		4.7	Intentionally blank.



 


4.8            Internal
Accounting Controls. Each of the Company and the Bank has established and maintains
a system of internal control over financial reporting that pertains to the maintenance of records that accurately and fairly reflect,
in all material respects, the transactions and dispositions of the Company’s and the Bank’s assets, provides reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and
that the Company’s and the Bank’s receipts and expenditures are being made in accordance with policies and procedures
of the Company and the Bank, as the case may be, and provides reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of assets of the Company and the Bank that could have a Material Adverse Effect on
the Company’s Reports.


 






    13


     


    

 


4.9            Tax
Matters. Each of the Company and the Bank have (a) filed all material foreign,
U.S. federal, state and local tax returns, information returns and similar reports that they are required to file with governmental
tax agencies, and all such tax returns have been filed timely and are true, correct and complete in all material respects, and
(b) paid all material taxes required to be paid by them and any other material tax assessment, fine or penalty levied against
them other than taxes (x) currently payable without penalty or interest, or (y) being contested in good faith by appropriate
proceedings, or (z) are not yet due.


 


		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 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. This Section 5.2
shall not apply to transactions to which the Bank is a party.


 


		5.3	Compliance with Laws.



 


5.3.1            Generally.
The Company shall comply and cause the Bank and each of its other Subsidiaries to comply in all material respects with all applicable
statutes, rules, regulations, orders and restrictions in respect of the conduct of its business and the ownership, leasing, or
use of its Properties (including without limitation, all Environmental Laws), except, in each case, where such noncompliance would
not reasonably be expected to have a Material Adverse Effect on the Company.


 


5.3.2            Regulated
Activities. The Company shall not itself, nor shall it cause, permit or allow the
Bank or any other of its Subsidiaries to (i) engage in any business or activity not permitted by all applicable laws and regulations
or, (ii) make any loan or advance secured by the capital stock or shares of another bank or depository institution, or acquire
the capital stock or shares, assets or obligations of or any Equity Interest in another bank or depository institution, in each
case other than in accordance with applicable laws and regulations and safe and sound banking practices.


 






    14


     


    

 


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


 


5.3.4            Corporate
Existence. the Company shall do or cause to be done all things reasonably necessary
to maintain, preserve and renew its corporate existence and that of the Bank and the other Subsidiaries and its and their rights,
licenses and franchises, and comply in all material respects with all related laws applicable to the Company, the Bank or the other
Subsidiaries; provided, however, that the Company will not be required to preserve the existence (corporate or other) of any of
its Subsidiaries or any such right, license or franchise of the Company or any of its Subsidiaries if the Board of Directors of
the Company determines that the preservation thereof is no longer desirable in the conduct of the business of the Company and its
Subsidiaries taken as a whole and that the loss thereof will not cause a Material Adverse Effect.


 


5.3.5            Dividends,
Payments, and Guarantees During Event of Default. Upon the occurrence of a failure
by the Company to make any required payment of principal or interest on the Subordinated Notes or of an Event of Default (as defined
under the Subordinated Notes), until such failure or Event of Default is cured or waived by the Noteholders, the Company shall
not, except as required by any federal or state Governmental Agency, (a) declare or pay any dividends or distributions on,
or redeem, purchase, acquire or make a liquidation payment with respect to, any of its shares; (b) make any payment of principal
of, or interest or premium, if any, on, or repay, repurchase or redeem any of the Company’s Indebtedness that ranks equal
with or junior to the Subordinated Notes; or (c) make any payments under any guarantee that ranks equal with or junior to
the Subordinated Notes, other than (i) any dividends or distributions in shares of, or options, warrants or rights to subscribe
for or purchase shares of, any class of the Company’s shares; (ii) any declaration of a non-cash dividend in connection
with the implementation of a shareholders’ rights plan, or the issuance of shares under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto; (iii) as a result of a reclassification of the Company’s
shares or the exchange or conversion of one class or series of the Company’s shares for another class or series of the Company’s
shares; (iv) the purchase of fractional interests in the Company shares pursuant to the conversion or exchange provisions
of such shares or the security being converted or exchanged; or (v) purchases of any class of the Company shares related to
the issuance of Common Shares or rights under any benefit plans for the Company’s directors, officers or employees or any
of the Company’s dividend reinvestment plans (including, without limitation, any repurchases or acquisitions in connection
with the forfeiture of any stock award, cashless or net exercise of any option, or acceptance of Common Shares in lieu of an award
recipient’s tax obligations under any equity award).


 






    15


     


    

 



 


5.3.6       Tier
2 Capital. If all or any portion of the Subordinated Notes ceases to qualify for
inclusion as Tier 2 Capital, other than due to the limitation imposed on the capital treatment of subordinated debt during the
five (5) years immediately preceding the Maturity Date of the Subordinated Notes, the Company will immediately notify the
Noteholder (as defined in the Subordinated Note), and thereafter if so requested by the Company, 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 defined in the Subordinated Notes). At any time and from time to time, if the
capital adequacy requirements and guidelines of the FRB otherwise applicable to bank holding companies are not applicable to the
Company by reason of the “Small Bank Holding the Company and Savings and Loan Holding the Company Policy Statement”
of the FRB, codified as Appendix C to 12 CFR Part 225, as amended from time to time, (the “SBHC Policy Statement”),
then the provisions of this Agreement that refer to capital adequacy or related concepts shall be applied, solely for purposes
of this Agreement, as if the SBHC Policy Statement did not exempt the Company from them.


 


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 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”).


 


5.6          Intentionally
Blank.


 


5.7          Bloomberg.
The Company agrees to request that the Placement Agent deliver a term sheet containing the material terms of the Subordinated Notes
to Bloomberg.


 


5.8          CUSIP
Numbers. Prior to the Closing Date, the Company shall cause CUSIP numbers to be obtained
for the Subordinated Notes and printed on the Subordinated Notes pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures.


 


		6.	REPRESENTATIONS, WARRANTIES AND COVENANTS OF 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. The Purchaser has all necessary power and authority to execute,
deliver and perform the Purchaser’s obligations under this Agreement and to consummate the transactions contemplated hereby.
The Purchaser is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization
or incorporation.


 






    16


     


    

 


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


 


6.3          No
Conflicts. Neither the execution, delivery or performance of the Transaction Documents
nor the consummation of any of the transactions contemplated thereby will conflict with, violate, constitute a breach of or a default
(whether with or without the giving of notice or lapse of time or both) under (i) the Purchaser’s organizational documents,
(ii) any agreement to which the Purchaser or its Affiliate is party, (iii) any law applicable to the Purchaser or (iv) any
order, writ, judgment, injunction, decree, determination or award binding upon or affecting the Purchaser.


 


6.4          Purchase
for Investment. The Purchaser is purchasing the Subordinated Note for Purchaser’s
own account and not with a view to distribution and with no present intention of reselling, distributing or otherwise disposing
of the same. The Purchaser 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          Status
as an Accredited Investor or Qualified Institutional Buyer. The Purchaser is, and
will be on the Closing Date, either an “accredited investor” under Rule 501(a)(1)-(3) or (7) of SEC
Regulation D or a qualified institutional buyer as such term is defined in SEC Rule 144A(a) as such rules have been
promulgated under the Securities Act.


 


6.6          Financial
and Business Sophistication. The Purchaser has such knowledge and experience in financial
and business matters that the Purchaser is capable of evaluating the merits and risks of the Purchaser’s prospective investment
in the Subordinated Notes. Purchaser has relied solely upon the Purchaser’s own knowledge of, and/or the advice of the Purchaser’s
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. The Purchaser recognizes that an investment in
the Subordinated Notes involves substantial risk. The Purchaser has the ability to bear the economic risk of Purchaser’s
prospective investment in the Subordinated Notes, including the ability to hold the Subordinated Notes indefinitely and the ability
to bear a complete loss of all of the principal amount of the Subordinated Note and any accrued but unpaid interest thereon purchased
under this Agreement.


 






    17


     


    

 


6.8          Information.
The Purchaser acknowledges that: (i) the Purchaser 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 the Purchaser being provided with any
offering circular, private placement memorandum or prospectus prepared in connection with the offer and sale of the Subordinated
Notes; (ii) Purchaser has conducted the Purchaser’s own examination of the Company and the terms of the Subordinated
Notes to the extent the Purchaser deems necessary to make a decision to invest in the Subordinated Notes; and (iii) the Purchaser
has availed itself of publicly available financial and other information concerning the Company to the extent the Purchaser deems
necessary to make a decision to purchase the Subordinated Notes including, without limitation, information, including risk factors,
financial data and management’s discussion and analysis of the Company’s results of operations, as respectively set
forth in the Company’s Annual Report on SEC Form 10-K for the year ending December 31, 2019 and the Company’s
Quarterly Reports on SEC Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30,
2020 as filed with the SEC as well as current reports made by the Company on SEC Form 8-K and filed with the SEC, all of
which are deemed incorporated by reference into this Agreement and which are available at www.sec.gov (collectively, the
“SEC Filings”). The Purchaser has reviewed the information set forth in the Company’s Reports
and the exhibits and schedules hereto provided by the Company in connection with the offer and sale of the Subordinated Notes
and contained in the electronic data room established by the Placement Agent and the SEC Filings.


 


6.9          Access
to Information. The Purchaser acknowledges that the Purchaser and its advisors have
been furnished with all materials relating to the business, finances and operations of the Company that have been reasonably requested
by the Purchaser and 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 the Company and the 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. The Purchaser has made its own investment decision based upon the Purchaser’s
own judgment, due diligence, and advice from such advisors as the Purchaser has deemed necessary and not upon any view expressed
by any other Person, 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. The Purchaser 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, the Purchaser
acknowledges that (i) the Placement Agent has not performed any due diligence review on behalf of the Purchaser or otherwise
acted on behalf of or for the benefit of the Purchaser and (ii) nothing in this Agreement or any other materials presented
by or on behalf of the Company to the Purchaser in connection with the purchase of the Subordinated Notes constitutes legal, tax,
accounting or investment advice.


 


6.11        Private
Placement; No Registration; Restricted Legends. The Purchaser 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 registration set forth in Rule 506(b) of Regulation D under Section 4(a)(2) of the Securities
Act, preemption of state securities registration requirements under Section 18 of the Securities Act, and exemptions from
registration under state securities laws. The Purchaser 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. The Purchaser represents that it has not been solicited with
respect to investment in the Subordinated Notes except in the jurisdiction of its address appearing on Purchaser’s signature
page to this Agreement. The Purchaser further acknowledges and agrees that all instruments representing the Subordinated Notes
will bear the restrictive legend set forth in the form of Subordinated Note. The Purchaser further acknowledges its primary responsibilities
under the Securities Act and, accordingly, will not sell, pledge or otherwise transfer the Subordinated Note or any portion thereof
or interest therein within six (6) months of the date of this Agreement unless exemptions from the Securities Act and applicable
state securities laws are available to the Purchaser or the Subordinated Notes are registered under the Securities Act.


 






    18


     


    

 


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


 


		7.	MISCELLANEOUS.



 


7.1          Prohibition
on Assignment by the Company. Except as described in Section 8(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 the Noteholders. In addition, in accordance
with the terms of the Subordinated Notes, any transfer of such Subordinated Notes by the Noteholders 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 with respect to this Agreement.



 






    19


     


    

 


7.3          Waiver
or Amendment. No waiver or amendment of any term, provision, condition, covenant or
agreement herein or in the Subordinated Notes shall be effective except with the consent of the holders of more than fifty percent
(50%) in aggregate principal amount (excluding any Subordinated Notes held by the Company or any of its Affiliates) of the Subordinated
Notes at the time outstanding; provided, however, that without the consent of each holder of an affected Subordinated
Note, no such amendment or waiver may: (i) reduce the principal amount of the Subordinated Note; (ii) reduce the rate
of or change the time for payment of interest on any Subordinated Note; (iii) extend the maturity of any Subordinated Note;
(iv) change the currency in which payment of the obligations of the Company under this Agreement and the Subordinated Notes
are to be made; (v) lower the percentage of aggregate principal amount of outstanding Subordinated Notes required to approve
any amendment of this Agreement or the Subordinated Notes; (vi) make any changes to Section 4(c) (Partial
Redemption), Section 5 (Events of Default; Acceleration), Section 6 (Failure to Make Payments), Section 7
(Affirmative Covenants of the Company), Section 8 (Negative Covenants of the Company), or Section 15 (Waiver
and Consent) of the Subordinated Notes that adversely affects the rights of any holder of a Subordinated Note; (vii) make
any changes to Section 7.3 (Waiver or Amendment) of this Agreement that adversely affects the rights of any consenting
holder of a Subordinated Note; (viii) disproportionately affect the rights of any of the holders of the then outstanding Subordinated
Notes; or (ix) modify the terms of subordination of the affected Subordinated Note in a manner adverse to the holder. 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, to ensure that the proceeds from the sale of the Subordinated Notes continues
to qualify as Tier 2 Capital to the Company, 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 the 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 at law or in equity. No notice or demand
on the Company in any case shall, in and of 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, express 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 which is unenforceable or invalid or contrary to law, or the inclusion of which would adversely
affect the validity, legality or enforcement of this Agreement, shall be of no effect and, in such case, all the remaining terms
and provisions of this Agreement shall subsist and be fully effective according to the tenor of this Agreement the same as though
any such invalid portion had never been included herein. Notwithstanding any of the foregoing to the contrary, if any provisions
of this Agreement or the application thereof are held invalid or unenforceable only as to particular Persons or situations, the
remainder of this Agreement, and the application of such provision to Persons or situations other than those to which it shall
have been held invalid or unenforceable, shall not be affected thereby, but shall continue valid and enforceable to the fullest
extent permitted by law.


 


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


 


	 if to the Company:	First Keystone Corporation
	 	P.O. Box 289
	 	111 West Front Street
	 	Berwick, PA 18603
	 	Attention: Chief Financial Officer




 






    20


     


    

 


	 with a copy to:	Bybel Rutledge LLP
	 	1017 Mumma Road
	 	Suite 302
	 	Lemoyne, PA 17043
	 	Attention: Nicholas Bybel, Jr.
	 	 
	 if to Purchasers:	To the address indicated on such Purchaser’s signature page.




 


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


 


7.7          No
Joint Venture or Fiduciary Relationship. Nothing contained herein or in any document
executed pursuant hereto and no action or inaction whatsoever on the part of the Purchaser, shall be deemed to make the Purchaser
a partner or joint venturer with the Company nor give rise to a fiduciary relationship between the Company and any Purchaser.


 


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


 


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


 


7.10        Choice
of Law; Consent to Jurisdiction and Venue. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania without giving effect to its laws or principles of conflict
of laws. Nothing herein shall be deemed to limit any rights, powers or privileges which the 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 the Purchaser which is lawful pursuant to, or which is permitted by, any
of the foregoing. Each Purchaser hereby irrevocably submits to the exclusive jurisdiction of the Court of Common Pleas of Columbia
County, Pennsylvania and the U.S. District Court for the Middle District of Pennsylvania over any action or proceeding arising
out of or relating to this Agreement and each other Transaction Document and the transactions related thereto, regardless of whether
a claim sounds in contract, tort, or otherwise and regardless of whether a claim is at law or in equity, and each Purchaser hereby
irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such state or federal
court. Each Purchaser on behalf of itself and its successors and assigns, hereby irrevocably waives, to the fullest extent
permitted by law, any objection it may now or hereafter have to the laying of venue in any action or proceeding in any such court
as well as any right it may now or hereafter have to remove such action or proceeding, once commenced, to another court on the
grounds of Forum Non Conveniens or otherwise. Each Purchaser agrees that a final, non- appealable judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided
by law.


 






    21


     


    

 


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


 


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


 


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


 






    22


     


    

 


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]


 






    23


     


    

 


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


 


	 	COMPANY:
	 	 
	 	FIRST KEYSTONE CORPORATION
	 	 
	 	By:	                                    
	 	Diane C.A. Rosler, Chief Financial Officer




 


[the Company Signature Page to Subordinated
Note Purchase Agreement]


 






    


     


    

 


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


 


	 	PURCHASER:
	 	 
	 	[INSERT PURCHASER’S NAME]
	 	 
	 	 
	 	By:	                  
	 	 	Name: [●]
	 	 	Title: [●]
	 	 
	 	Address of Purchaser:
	 	 
	 	 
	 	 
	 	 
	 	Principal Amount of Purchased Subordinated
	 	Note: $[●]




 


[Purchaser Signature Page to Subordinated
Note Purchase Agreement]


 






    


     


    

 


EXHIBIT A


 


FORM OF SUBORDINATED NOTE


 






    A-1


     


    

 


SUBORDINATED NOTE


 


FIRST KEYSTONE CORPORATION


 


4.375% FIXED TO FLOATING RATE NOTE DUE
DECEMBER 10, 2030


 


The indebtedness evidenced by this Subordinated
Note is subordinated and junior in right of payment to all Senior Indebtedness (as defined in Section 3 of this Subordinated
Note) of First Keystone Corporation, a Pennsylvania corporation (the “the Company”), including obligations
of the Company to its general and secured creditors, and its unsecured creditors. It is ineligible as collateral for any extension
of credit by the Company or any of its Subsidiaries. In the event of liquidation, all holders of any Senior Indebtedness of the
Company shall be entitled to be paid in full with such interest as may be provided by law before any payment shall be made on account
of principal of, or interest on, this Subordinated Note. After payment in full of all sums owing to such holders of Senior Indebtedness,
the holder of this Subordinated Note, together with the holders of any obligations of the Company ranking on a parity with this
Subordinated Note, shall be entitled to be paid from the remaining assets of the Company the unpaid principal amount of this Subordinated
Note plus accrued and unpaid interest thereon before any payment or other distribution, whether in cash, property or otherwise,
shall be made (i) with respect to any obligation that by its terms expressly is junior in the right of payment to this Subordinated
Note, (ii) any indebtedness between the Company and any of its Subsidiaries or Affiliates, or (iii) on account of any
shares of the Company.


 


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


 


This Subordinated Note will be issued
and may be transferred only in minimum denominations of $1,000 and multiples of $1,000 in excess thereof. Any attempted transfer
of this Subordinated Note in a denomination of less than $1,000 shall be deemed to be void and of no legal effect whatsoever. Any
such purported transferee shall be deemed not to be the holder of this Subordinated Note for any purpose, including, but not limited
to, the receipt of payments on this Subordinated Note, and such purported transferee shall be deemed to have no interest whatsoever
in this Subordinated Note.


 


This Subordinated Note has not been
registered under the Securities Act of 1933, as amended (the “Securities Act”), or any applicable state
securities laws or any other applicable securities laws. The purchaser of this Subordinated Note agrees not to sell, pledge,
hypothecate or transfer the Subordinated Note nor any portion, interest or participation thereof or therein for six (6) months
from the date of this Subordinated Note unless such transaction is exempt from registration under the Securities Act or the Subordinated
Notes are registered under the Securities Act.


 






    A-2


     


    

 


CERTAIN ERISA CONSIDERATIONS:


 


The holder of this Subordinated Note,
or any interest herein, by its acceptance hereof or thereof agrees, represents and warrants that it is not an employee benefit
plan, individual retirement account or other plan or arrangement subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”), or Section 4975 of the Internal Revenue Code of 1986, as amended
(the “Code”) (each a “Plan”), or an entity whose underlying assets include
 “Plan Assets” by reason of any plan’s investment in the entity, and no Person investing “Plan
Assets” of any plan may acquire or hold this Subordinated Note or any interest herein, unless such purchaser or holder
is eligible for the exemptive relief available under U.S. Department of Labor prohibited transaction class exemption 96-23, 95-60,
91-38, 90-1 or 84-14 or another applicable exemption or its purchase and holding of this Subordinated Note, or any interest herein,
are not prohibited by Section 406 of ERISA or Section 4975 of the Code with respect to such purchase and holding. Any
purchaser or holder of this Subordinated Note or any interest herein will be deemed to have represented by its purchase and holding
thereof that either: (i) it is not an employee benefit plan or other plan to which Title I of ERISA or Section 4975 of
the Code is applicable, a trustee or other Person acting on behalf of any such employee benefit plan or plans, or any other Person
or entity using the “Plan Assets” of any such employee benefit plan or plans to finance such purchase or (ii) such
purchase or holding will not result in a prohibited transaction under section 406 of ERISA or Section 4975 of the Code for
which full exemptive relief is not available under applicable statutory or administrative exemption.


 


Any fiduciary of any plan who is considering
the acquisition of this Subordinated Note or any interest herein should consult with his or her legal counsel prior to acquiring
this Subordinated Note or any interest herein.


 






    A-3


     


    

 


No. 2030-[●]1


 


	 	CUSIP (Accredited Investors):
	 	CUSIP (QIBs):




 


FIRST KEYSTONE CORPORATION


 


4.375% FIXED TO FLOATING RATE NOTE DUE
DECEMBER 31, 2030


 


1.             Subordinated
Notes. This Subordinated Note is one of an issue of notes of First Keystone Corporation, a Pennsylvania corporation ( the
 “Company”), designated as the “4.375% Fixed to Floating Rate Notes due December 31, 2030”
(the “Subordinated Notes”) issued pursuant to that Subordinated Note Purchase Agreement, dated as of
the Original Issue Date (as defined herein), between the Company and the several purchasers of the Subordinated Notes identified
on the signature pages thereto (the “Purchase Agreement”). The “Original Issue Date”
of the Subordinated Notes is December 10, 2020.


 


2.
             Payment. The
Company, for value received, promises to pay to ______________________________________________, or its registered assigns, the principal sum of [●] Dollars
(U.S.) ($[●]), plus accrued but unpaid interest on December 31, 2030 (“Stated Maturity”)
and to pay interest thereon (i) from and including the Issue Date of the Subordinated Notes to but excluding
December 31, 2025 or the earlier redemption date contemplated by Section 4 of this Subordinated Note, at the
rate of 4.375% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months and payable semiannually
in arrears on June 30 and December 31 of each year (each, a “Fixed Interest Payment
Date”), beginning June 30, 2021 and (ii) from and including December 31, 2025, to but excluding
the Stated Maturity or the earlier redemption date contemplated by Section 4 of this Subordinated Note, at the
rate per annum (rounded to two decimal places when expressed as a percentage), reset quarterly, equal to the sum of
(A) a base rate equal to the then current 90-Day Average SOFR, determined on the Interest Determination Date (as defined
below) of the applicable interest period and (B) 411 basis points, computed on the basis of a 360-day year and the
actual number of days elapsed and payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year (each, a “Floating Interest Payment Date”).


 


(a)            An
 “Interest Payment Date” is either a Fixed Interest Payment Date or a Floating Interest Payment Date,
as applicable.


 


(b)           “90-Day
Average SOFR” means the most recent 90-Day Average Secured Overnight Financing Rate for U.S. dollar denominated loans
and derivatives as published by the Federal Reserve Bank of New York at the Federal Reserve Bank of New York’s Website (as
defined below) after 3:00 p.m. Eastern Time on the publication date most recently prior to the first day of the applicable
floating rate interest period (the “Interest Determination Date”).


 





 






1 the Company
to insert note numbers.


 






    A-4


     


    

 


(i)            If
the Company (or the calculation agent, if one has been appointed by the Company) reasonably determines in good faith on the relevant
Interest Determination Date that the 90-Day Average SOFR has been discontinued or is no longer being published by the Federal Reserve
Bank of New York, then the Company (or the calculation agent, if one has been appointed by the Company) will use a substitute or
successor base rate that it has determined in its sole reasonable discretion is most comparable to 90-Day Average SOFR or if the
90-Day Average SOFR is no longer being published by the Federal Reserve Bank of New York will use 90-Day Average SOFR as published
by an industry standard source, provided that if the Company (or the calculation agent, if one has been appointed by the
Company) reasonably determines in good faith that there is an industry-accepted substitute or successor base rate, then the Company
(or the calculation agent, if one has been appointed by the Company) shall use such substitute or successor base rate (such rate,
the “Alternative Rate”);


 


(ii)           If
the Company (or the calculation agent, if one has been appointed by the Company) has determined to utilize a substitute or successor
base rate in accordance with the foregoing, the Company (or the calculation agent, if one has been appointed by the Company) in
its sole reasonable discretion may determine what business day convention to use, the definition of business day, the Interest
Determination Date to be used and any other relevant methodology for calculating such substitute or successor base rate, including
any adjustment factor needed to make such substitute or successor base rate comparable to the 90-Day Average SOFR base rate, in
a manner that is consistent with industry-accepted practices for such substitute or successor base rate; and


 


(iii)          The
Company (or the calculation agent, if one has been appointed by the Company) shall provide each Noteholder (as defined herein)
with notice of its determination of an Alternative Rate promptly after such determination. Notwithstanding anything herein to the
contrary, if the Company has appointed a calculation agent for the Subordinated Notes, absent manifest error, the calculation agent’s
determination of the Alternative Rate shall be binding and conclusive on the Noteholders and the Company. If the Company has determined
the Alternative Rate, and if, within five (5) Business Days (as defined herein) after providing such notice, the Company is
notified in writing by the Noteholders of at least a majority in principal amount of the outstanding Subordinated Notes that such
Noteholders reasonably believe that the determination of such Alternative Rate is not consistent with this Section 2,
then the Company shall appoint a calculation agent for the Subordinated Notes who shall determine the Alternative Rate and the
calculation agent’s determination of the Alternative Rate shall be binding and conclusive on the Noteholders and the Company.


 


(iv)          Notwithstanding
the foregoing, in the event that 90-Day Average SOFR or Alternative Rate as determined in accordance with this Section 2
is less than zero, the 90-Day Average SOFR or Alternative Rate for such interest period shall be deemed to be zero.


 


(v)           By
issuing this Subordinated Note, the Company agrees, and the holder of this Subordinated Note, by its acceptance of this Subordinated
Note, acknowledges that the use of 90-Day Average SOFR is subject to Terms of Use thereof and of related data as such Terms of
Use may be adopted and modified by the Federal Reserve Bank of New York and posted at the Federal Reserve Bank of New York’s
Website from time to time.


 






    A-5


     


    

 


(vi)          “Federal
Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org,
or any successor source.


 


(c)           The
Company shall have the right, but not the obligation, except as expressly provided above, to appoint, in its sole discretion, from
time to time, an independent calculation agent for the Subordinated Notes. The independent calculation agent shall be a member
firm of the Financial Industry Regulatory Authority, Inc. or a successor self-regulatory organization or a bank (as defined
in parts (A) through (C) of Section 3(a)(6) of the Securities Exchange Act of 1934, as amended), in each case
having total equity capital of not less than $50 million and authorized by law to perform all the duties provided for it by this
Section 2. If the Company appoints a calculation agent, the Company shall promptly provide notice to the Noteholders
of such appointment.


 


Any payment of principal of or interest
on this Subordinated 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 will 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 Pennsylvania
are generally authorized or required by law or executive order to be closed.


 


		3.	Subordination.



 


(a)           The
indebtedness of the Company evidenced by this Subordinated Note, including the principal and interest on this Subordinated Note,
shall be subordinate and junior in right of payment to the prior payment in full of all existing claims of creditors of the Company,
whether now outstanding or subsequently created, assumed, guaranteed or incurred (collectively, “Senior Indebtedness”),
which shall consist of principal of (and premium, if any) and interest, if any, on: (i) all indebtedness and obligations of,
or guaranteed or assumed by, the Company for money borrowed, whether or not evidenced by bonds, debentures, securities, notes or
other similar instruments, and including, but not limited to, all obligations to the Company’s general and secured creditors
for money borrowed; (ii) any deferred obligations of the Company for the payment of the purchase price of property or assets
acquired other than in the ordinary course of business; (iii) all obligations, contingent or otherwise, of the Company in
respect of any letters of credit, bankers’ acceptances, security purchase facilities and similar direct credit substitutes;
(iv) any capital lease obligations of the Company; (v) all obligations of the Company in respect of interest rate swap,
cap or other agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts,
commodity contracts and other similar arrangements or derivative products; (vi) any obligation of the Company to its general
creditors, as defined or interpreted by the Federal Reserve (as defined herein) for purposes of the capital adequacy regulations
of the Federal Reserve applicable to the Company, as the same may be amended or modified from time to time; (vii) all obligations
that are similar to those in clauses (i) through (vi) of other Persons (as defined herein) for the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise arising from an off-balance sheet guarantee; (viii) all
obligations of the types referred to in clauses (i) through (vii) of other Persons secured by a lien on any property
or asset of the Company; and (ix) in the case of (i) through (viii) above, all amendments, renewals, extensions,
modifications and refundings of such indebtedness and obligations; except “Senior Indebtedness”
does not include (A) the Subordinated Notes, (B) any obligation that by its terms expressly
is junior to, or ranks equally in right of payment with, the Subordinated Notes, or (C) any indebtedness between the Company
and any of its Subsidiaries or Affiliates. This Subordinated Note is not secured by any assets of the Company or any other Person.
The term “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. The term “Person” as used in
this Subordinated Note 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 Government Agency as such term is defined in the Purchase Agreement) or any other entity or organization. The term “control”
(including the terms “controlling,” “controlled by,” and “under common control with”) means
the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise. The term “Subsidiary”, or in the
plural “Subsidiaries”, means with respect to any Person, any corporation or entity in which a majority
of the outstanding Equity Interest (as such term is defined in the Purchase Agreement) is directly or indirectly owned by such
Person.


 






    A-6


     


    

 


(b)           In
the event of any liquidation of the Company, holders of Senior Indebtedness of the Company shall be entitled to be paid in
full with such interest as may be provided by law before any payment shall be made on account of principal of or interest on
this Subordinated Note. Additionally, in the event of any insolvency, dissolution, assignment for the benefit of creditors or
any liquidation or winding up of or relating to the Company, whether voluntary or involuntary, holders of Senior Indebtedness
shall be entitled to be paid in full before any payment shall be made on account of the principal of or interest on the
Subordinated Notes, including this Subordinated Note. In the event of any such proceeding, after payment in full of all sums
owing with respect to the Senior Indebtedness, the registered holders of the Subordinated Notes from time to time (each a
 “Noteholder” and, collectively, the “Noteholders”), together with the
holders of any obligations of the Company ranking on a parity with the Subordinated Notes, shall be entitled to be paid from
the remaining assets of the Company the unpaid principal thereof, and the unpaid interest thereon before any payment or other
distribution, whether in cash, property or otherwise, shall be made (i) with respect to any obligation that by its terms
expressly is junior in right of payment to the Subordinated Notes, (ii) any indebtedness between the Company and any of its
Subsidiaries or Affiliates or (iii) on account of any shares of the Company.


 


(c)           If
there shall have occurred and be continuing (i) a default in any payment with respect to any Senior Indebtedness or (ii) an
event of default with respect to any Senior Indebtedness as a result of which the maturity thereof is accelerated, unless and until
such payment default or event of default shall have been cured or waived or shall have ceased to exist, Section 17
hereof notwithstanding, no payments shall be made by the Company with respect to the Subordinated Notes. The provisions of this
subsection shall not apply to any payment with respect to which Section 3(b) hereof would be applicable.


 


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


 






    A-7


     


    

 


		4.	Redemption.



 


(a)           Redemption
Prior to Fifth Anniversary. This Subordinated Note shall not be redeemable by the Company in whole or in part prior to the
fifth anniversary of the Original Issue Date, except in the event of a: (i) Tier 2 Capital Event (as defined below); (ii) Tax
Event (as defined below); or (iii) Investment Company Event (as defined below). Upon the occurrence of a Tier 2 Capital Event,
a Tax Event or an Investment Company Event, subject to Section 4(f) below, the Company may redeem this Subordinated
Note in whole or in part at any time, upon giving not less than ten (10) calendar days’ notice to the Noteholders, at
an amount equal to 100% of the outstanding principal amount being redeemed plus accrued but unpaid interest, to but excluding the
redemption date. “Tier 2 Capital Event” means the receipt by the Company of an opinion of counsel to
the Company to the effect that there is, or within one hundred twenty (120) days after the receipt of such opinion there will be,
a material risk that this Subordinated Note does not qualify as “Tier 2” Capital (as defined by the Board of Governors
of the Federal Reserve System (the “Federal Reserve”)) (or its then equivalent) as a result of a change
in interpretation or application of law or regulation by any judicial, legislative or Regulatory Agency (as such term is defined
in the Purchase Agreement) that becomes effective after the Original Issue Date. “Tax Event” means the
receipt by the Company of an opinion of counsel to the Company that as a result of any amendment to, or change (including any final
and adopted (or enacted) prospective change) in, the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, there exists a material risk that interest payable by the Company on the Subordinated
Notes is not, or within one hundred twenty (120) days after the receipt of such opinion will not be, deductible by the Company,
in whole or in part, for United States federal income tax purposes. “Investment Company Event” means
the receipt by the Company of an opinion of counsel to the Company to the effect that there is a material risk that the Company
is or, within one hundred twenty (120) days after the receipt of such opinion will be, required to register as an investment company
pursuant to the Investment Company Act of 1940, as amended.


 


(b)           Redemption
on or after Fifth Anniversary. On or after the fifth anniversary of the Original Issue Date, subject to Section 4(f) below,
this Subordinated Note shall be redeemable at the option of and by the Company, in whole or in part at any time and from time to
time upon any Interest Payment Date, at an amount equal to 100% of the outstanding principal amount being redeemed plus accrued
but unpaid interest, to but excluding the redemption date, but in all cases in a principal amount with integral multiples of $1,000.
In addition, subject to Section 4(f) below, the Company may redeem all or a portion of the Subordinated Notes,
at any time upon the occurrence of a Tier 2 Capital Event, Tax Event or an Investment Company Event. In the case of any redemption
of this Subordinated Note pursuant to this paragraph, the Company will give the Noteholders notice of such redemption, which notice
shall indicate the aggregate principal amount of Subordinated Notes to be redeemed, not less than (i) in the cases described
in the immediately preceding sentence, ten (10) calendar days, and (ii) in all other cases, no less than thirty (30)
but no more than sixty (60) calendar days, prior to the redemption date.


 


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


 






    A-8


     


    

 


(d)           No
Redemption at Option of Noteholder. This Subordinated Note is not subject to redemption at the option of the Noteholders.


 


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


 


(f)            Regulatory
Approvals. Any such redemption shall be subject to receipt of any and all required federal and state regulatory approvals,
including, but not limited to, any required consent of the Federal Reserve.


 


(g)           Purchase
and Resale of the Subordinated Notes. Subject to any required federal and state regulatory approvals and the provisions of
this Subordinated Note, the Company shall have the right to purchase any of the Subordinated Notes at any time in the open market,
private transactions or otherwise. If the Company purchases any Subordinated Notes, it may, in its discretion, hold, resell or
cancel any of the purchased Subordinated Notes, with the understanding that Subordinated Notes held by the Company will not qualify
as Tier 2 Capital.


 


5.             Events
of Default; Acceleration. Each of the following events shall constitute an “Event of Default”:


 


(a)           the
entry of a decree or order for relief in respect of the Company by a court having jurisdiction in the premises in an involuntary
case or proceeding under any applicable bankruptcy, insolvency, or reorganization law, now or hereafter in effect of the United
States or any political subdivision thereof, and such decree or order will have continued unstayed and in effect for a period of
sixty (60) consecutive calendar days or a banking regulator shall have placed the Bank (as such term is defined in the Purchaser
Agreement) into receivership;


 


(b)           the
commencement by the Company of a voluntary case under any applicable bankruptcy, insolvency or reorganization law, now or hereafter
in effect of the United States or any political subdivision thereof, or the consent by the Company to the entry of a decree or
order for relief in an involuntary case or proceeding under any such law;


 


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


 






    A-9


     


    

 


(d)           the
failure of the Company to pay any installment of interest on any of the Subordinated Notes as and when the same will become
due and payable, and the continuation of such failure for a period of fifteen (15) calendar days;


 


(e)            the
failure of the Company to pay all or any part of the principal of any of the Subordinated Notes as and when the same will become
due and payable;


 


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


 


(g)           the
failure of the Company to perform any other covenant or agreement on the part of the Company contained in this Subordinated Note,
and the continuation of such failure for a period of thirty (30) calendar days after the date on which notice specifying such failure,
stating that such notice is a “Notice of Default” hereunder and demanding that the Company remedy the same, will have
been given, in the manner set forth in Section 19, to the Company by the holders of not less than fifteen percent (15.0%)
in principal amount of the then outstanding Subordinated Notes; or


 


(h)           the
default by the Company under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company having
an aggregate principal amount outstanding of at least $5,000,000, whether such indebtedness now exists or is created or incurred
in the future, which default (i) constitutes a failure to pay any portion of the principal of such indebtedness when due and
payable after the expiration of any applicable grace period or (ii) results in such indebtedness becoming due or being declared
due and payable prior to the date on which it otherwise would have become due and payable without, in the case of clause (i), such
indebtedness having been discharged or, in the case of clause (ii), without such indebtedness having been discharged or such acceleration
having been rescinded or annulled.


 


If an Event of Default
described in Section 5(a), Section 5(b) or Section 5(f) occurs, then the principal
amount of all of the outstanding Subordinated Notes, and accrued and unpaid interest, if any, on all outstanding Subordinated Notes
will become and be immediately due and payable without any declaration or other act on the part of any Noteholder, and the Company
waives demand, presentment for payment, notice of nonpayment, notice of protest, and all other notices. Notwithstanding any other
provision in this Section 5, because the Company will treat the Subordinated Notes as Tier 2 Capital, upon the occurrence
of an Event of Default other than an Event of Default described in Section 5(a), Section 5(b) or Section 5(f),
no Noteholder may accelerate the Stated Maturity of the Subordinated Notes and make the principal of, and any accrued and unpaid
interest on, the Subordinated Notes, immediately due and payable. The Company, within thirty (30) calendar days after the receipt
of written notice from any Noteholder of the occurrence of an Event of Default with respect to this Subordinated Note, shall mail
to all Noteholders, at their addresses shown on the Security Register (as defined in Section 13 below), such written
notice of Event of Default, unless such Event of Default shall have been cured or waived before the giving of such notice as certified
by the Company in writing.


 






    A-10


     


    

 


6.             Failure
to Make Payments. In the event of an Event of Default under Section 5(d) or Section 5(e) above,
the Company will, upon demand of the Noteholder, pay to the Noteholder the amount then due and payable on this Subordinated
Note for principal and interest (without acceleration of the Subordinated Note in any manner), with interest on the overdue
principal and interest at the rate borne by this Subordinated Note, to the extent permitted by applicable law. If the Company
fails to pay such amount upon such demand, the Noteholder 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 Company and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the
property of the Company.


 


Upon the
occurrence of a failure by the Company to make any required payment of principal or interest on this Subordinated Note or an
Event of Default, until such failure or Event of Default is cured by the Company or waived by the Noteholders in accordance
with Section 15 hereof, the Company shall not, except as required by any federal or state governmental agency:
(a) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with
respect to, any of the Company’s shares; (b) make any payment of principal of, or interest or premium, if any, on,
or repay, repurchase or redeem any indebtedness of the Company that ranks equal with or junior to the Subordinated Notes; or
(c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Notes, other than
(i) any dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of,
any class of the Company’s shares; (ii) any declaration of a non-cash dividend in connection with the
implementation of a shareholders’ rights plan, or the issuance of shares under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto; (iii) as a result of a reclassification of the Company’s
shares or the exchange or conversion of one class or series of the Company’s shares for another class or series of the
Company’s shares; (iv) the purchase of fractional interests in the Company’s shares pursuant to the
conversion or exchange provisions of such shares or the security being converted or exchanged; or (v) purchases of any
class of the Company’s shares related to the issuance of Common Shares or rights under any benefit plans for the
Company’s directors, officers or employees or any of the Company’s dividend reinvestment plans (including,
without limitation, any repurchases or acquisitions in connection with the forfeiture of any stock award, cashless or net
exercise of any option, or acceptance of Common Shares in lieu of an award recipient’s tax obligations under any equity
award).


 


		7.	Affirmative Covenants of the Company.



 


(a)           Notice
of Certain Events. To the extent permitted by applicable statute, rule or regulation, the Company shall provide written
notice to the Noteholder of the occurrence of any of the following events as soon as practicable, but in no event later than fifteen
(15) Business Days following the Company becoming aware of the occurrence of such event:


 


(i)           The
total risk-based capital ratio, Tier 1 risk-based capital ratio, common equity Tier 1 risk-based capital ratio or leverage ratio
of the Company (but only to the extent the Company is required to measure and report such ratios on a consolidated basis under
applicable law) or any of the Company’s banking Subsidiaries becomes less than ten percent (10.0%), eight percent (8.0%),
six and one-half percent (6.50%) or five percent (5.0%), respectively;


 


(ii)          The
Company, or the Chief Executive Officer or Chief Financial Officer of the Company, becomes subject to any formal, written regulatory
enforcement action (as defined by the applicable regulatory authority); or


 






    A-11


     


    

 


(iii)         There
is a change in ownership of greater than twenty-five percent (25%) of the outstanding securities of the Company entitled to vote
for the election of directors.


 


(b)           Payment
of Principal and Interest. The Company covenants and agrees for the benefit of the Noteholder that it will duly and punctually
pay the principal of, and interest on, this Subordinated Note in accordance with the terms hereof.


 


(c)           Maintenance
of Office. The Company will maintain an office or agency in the borough of Berwick, PA where Subordinated Notes may be surrendered
for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Subordinated
Notes may be served; provided, however, the Company may, from time to time, designate one or more other offices or agencies where
the Subordinated Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations.
The Company will give prompt written notice to the Noteholders of any such designation or rescission and of any change in the location
of any such other office or agency.


 


(d)           Corporate
Existence. The Company will do or cause to be done all things necessary to preserve and keep in full force and effect: (i) the
corporate existence of the Company; (ii) the existence (corporate or other) of each Subsidiary of the Company; and (iii) the
rights (charter and statutory), licenses and franchises of the Company and each of its Subsidiaries; provided, however,
that the Company will not be required to preserve the existence (corporate or other) of any of its Subsidiaries or any such right,
license or franchise of the Company or any of its Subsidiaries if the Board of Directors of the Company determines that the preservation
thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole and that the
loss thereof will not be disadvantageous in any material respect to the Noteholders.


 


(e)           Maintenance
of Properties. The Company will, and will cause each Subsidiary to, cause all its properties used or useful in the conduct
of its business to be maintained and kept in good condition, repair and working order, ordinary wear and tear excepted, and supplied
with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that nothing in this Section will prevent the Company
or any Subsidiary from discontinuing the operation and maintenance of any of their respective properties if such discontinuance
is, in the judgment of the Board of Directors of the Company, desirable in the conduct of the business of the Company and its Subsidiaries
taken as a whole.


 


(f)           Waiver
of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth
in Section 7(c), Section 7(d) or Section 7(e) above with respect to this Subordinated
Note if before the time for such compliance the Noteholders of at least a majority in principal amount of the outstanding Subordinated
Notes, by act of such Noteholders, either will waive such compliance in such instance or generally will have waived compliance
with such term, provision or condition, but no such waiver will extend to or affect such term, provision or condition except to
the extent so expressly waived, and, until such waiver will become effective, the obligations of the Company in respect of any
such term, provision or condition will remain in full force and effect.


 






    A-12


     


    

 



 


(g)            Company
Statement as to Compliance. The Company will deliver to the Noteholders, within one hundred twenty (120) calendar days after
the end of each fiscal year, an Officer’s Certificate covering the preceding calendar year, stating whether or not, to the
knowledge of the executive officer of the Company executing such certificate, the Company is in default in the performance and
observance of any of the terms, provisions and conditions of this Subordinated Note (without regard to notice requirements or periods
of grace) and if the Company is in default, specifying all such defaults and the nature and status thereof of which he or she may
have knowledge.


 


(h)            Tier
2 Capital. If all or any portion of the Subordinated Notes ceases to be deemed to be “Tier 2” Capital (as defined
by the Federal Reserve (or its then equivalent)), other than due to the limitation imposed on the capital treatment of subordinated
debt during the five years immediately preceding the Stated Maturity of the Subordinated Notes, the Company will immediately notify
the Noteholders and thereafter, if the Company so requests, the Company and the Noteholders will work together in good faith to
execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced
by the Subordinated Notes to qualify as Tier 2 Capital; provided, however, that nothing contained in this Section 7(h) shall
limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event pursuant to Section 4(a) or
Section 4(b).


 


(i)            Compliance
with Laws. The Company shall comply with the requirements of all laws, regulations, orders and decrees applicable to it or
its properties, except for such noncompliance that would not reasonably be expected to result in a Material Adverse Effect (as
such term is defined in a Purchase Agreement) on the Company and its Subsidiaries taken as a whole.


 


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


 


		(k)	Financial Statements; Access to Records.



 


(i)            Not
later than forty-five (45) days following the end of each six month period for which the Company has not submitted a Consolidated
Financial Statements for Holding Companies Reporting Form FR Y-9SP to the Federal Reserve, upon request, the Company shall
provide the Noteholder with a copy of the Company’s unaudited consolidated balance sheet and statement of income (loss) for
and as of the end of such immediately preceding fiscal quarter, prepared in accordance with past practice. Quarterly financial
statements, if required herein, shall be unaudited and need not comply with GAAP.


 


(ii)           Not
later than one hundred twenty (120) days from the end of each fiscal year (or, if the Company’s auditors have not yet then
issued the auditor’s report, promptly following the auditor’s issuance of such report), upon request, the Company
shall provide the Noteholder with copies of the Company’s audited financial statements consisting of the consolidated balance
sheet of the Company as of the fiscal year end and the related statements of income (loss) and retained earnings, stockholders’
equity and cash flows for the fiscal year then ended. Such financial statements shall be prepared in accordance with GAAP applied
on a consistent basis throughout the period involved.


 






    A-13


     


    

 


(iii)            In
addition to the foregoing Sections 7(k)(i) and (ii), the Company shall, upon a Noteholder’s reasonable request,
furnish such Noteholder with such financial, business and legal information of the Company and the Bank as may be reasonably necessary
to allow the Noteholder to confirm compliance by the Company with this Subordinated Note; provided, however, in no event
shall the Company or the Bank be obligated hereunder to furnish or share (A) confidential bank supervisory communications,
customer financial records or other “exempt records” as defined by 12 C.F.R. Part 309, reports of examination,
or any other confidential, supervisory information, (B) any information that could cause the Company or the Bank to waive
attorney/client privilege, or (C) any information the disclosure of which would be prohibited by applicable law, rule, or
regulation. Prior to any additional disclosure under this Section 7(k)(iii), the Company may require Noteholder to
enter into a customary non-disclosure agreement.


 


8.              Negative
Covenants of the Company. So long as this Subordinated Note is issued and outstanding:


 


(a)            Limitation
on Dividends. The Company shall not declare or pay any dividend or make any distribution on shares or other equity securities
of any kind of the Company if the Company is not “well capitalized” for all regulatory purposes immediately prior to
the declaration, and after giving effect to the payment, of such dividend or distribution, except for dividends payable solely
in Common Shares (as such term is defined in the Purchase Agreement) of the Company.


 


(b)            Merger
or Sale of Assets. The Company shall not merge into another entity or convey, transfer or lease substantially all of its properties
and assets to any Person, unless:


 


(i)            the
continuing entity into which the Company is merged or the Person which acquires by conveyance or transfer or which leases substantially
all of the properties and assets of the Company shall be a corporation, association or other legal entity organized and existing
under the laws of the United States of America, any State thereof or the District of Columbia and expressly assumes the due and
punctual payment of the principal of and any premium and interest on the Subordinated Notes according to their terms, and the due
and punctual performance of all covenants and conditions hereof on the part of the Company to be performed or observed; provided,
however, that no further express assumption is needed by any successor by merger to the Company to the extent such legal successor
assumes the Company’s obligations hereunder by operation of law; and


 


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


 


(c)            Continuance
of Business. Other than in connection with a transaction which complies with Section 8(b), the Company shall not
take any action, omit to take any action or enter into any other transaction that would have the effect of: (i) the Company
ceasing to be a bank holding company under the Bank Holding Company Act of 1956, as amended (provided, however, for the
avoidance of doubt, nothing herein is intended to prohibit the Company from electing to be a financial holding company or, following
such an election, exiting financial holding company status), (ii) the liquidation or dissolution of the Company or the Bank,
(iii) the Bank ceasing to be an “insured depository institution” under Section 3(c)(2) of the Federal
Deposit Insurance Act, as amended, or (iv) the Company owning less than one hundred percent (100%) of the outstanding shares
of the Bank.


 






    A-14


     


    

 


(d)            No
Restrictions on Distributions from the Bank. The Company will not permit the Bank to enter into any agreement (other than an
agreement mandated by a Regulatory Agency) which restricts the ability of the Bank to declare and pay any dividend or to make any
other distribution on its shares or to make advances to the Parent.


 


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


 


10.            Charges
and Transfer Taxes. No service charge will be made for any registration of transfer or exchange of this Subordinated Note,
or any redemption or repayment of this Subordinated Note, or any conversion or exchange of this Subordinated Note for other types
of securities or property, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental
charges that may be imposed in connection with the transfer or exchange of this Subordinated Note from the Noteholder requesting
such transfer or exchange.


 


11.            Payment
Procedures. Payment of the principal and interest payable on the Stated Maturity will be made by check, or by wire or
Automated Clearing House (ACH) transfer in immediately available funds to a bank account in the United States designated by
the Noteholder of this Subordinated Note if such Noteholder shall have previously provided wire or ACH instructions to the
Company, upon presentation and surrender of this Subordinated Note at the Payment Office (as defined in Section 19
below) or at such other place or places as the Company shall designate by notice to the Noteholders as the Payment Office,
provided that this Subordinated Note is presented to the Company in time for the Company to make such payments in such funds
in accordance with its normal procedures. Payments of interest (other than interest payable on the Stated Maturity) shall be
made by wire or ACH transfer in immediately available funds or check mailed to the registered Noteholder of this Subordinated
Note, as such Person’s address appears on the Security Register (as defined in Section 13 below). Interest
payable on any Interest Payment Date shall be payable to the Noteholder in whose name this Subordinated Note is registered at
the close of business on the fifteenth (15th) calendar day prior to the applicable Interest Payment Date, without regard to
whether such date is a Business Day (such date being referred to herein as the “Regular Record
Date”), except that interest not paid on the Interest Payment Date, if any, will be paid to the Noteholder in
whose name this Subordinated Note is registered at the close of business on a special record date fixed by the Company (a
 “Special Record Date”), notice of which shall be given to the Noteholder of this Subordinated Note
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 Subordinated Note, on any amount
of principal or interest on this Subordinated Note not paid when due. All payments on this Subordinated Note shall be applied
first against interest due hereunder; and then against principal due hereunder. The Noteholder of this Subordinated Note
acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Subordinated Note
and all interest hereon shall be pari passu in right of payment and in all other respects to the other Subordinated
Notes. In the event that the Noteholder of this Subordinated Note receives payments in excess of the Noteholder’s pro
rata share of the Company’s payments to the Noteholders of all of the Subordinated Notes, then the Noteholder of this
Subordinated Note shall hold in trust all such excess payments for the benefit of the Noteholders of the other Subordinated
Notes and shall pay such amounts held in trust to such other Noteholders upon demand by such Noteholders.


 






    A-15


     


    

 


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


 


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


 


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


 






    A-16


     


    

 


15.            Waiver
and Consent.


 


(a)            Any
consent or waiver given by the Noteholder of this Subordinated Note shall be conclusive and binding upon such Noteholder and
upon all future Noteholders of this Subordinated Note and of any Subordinated Note issued upon the registration of transfer
hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this
Subordinated Note. No delay or omission of the holder of this Subordinated Note to exercise any right or remedy accruing upon
any Event of Default shall impair such right or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Any insured depository institution that shall be a holder of this Subordinated Note or that otherwise shall have any
beneficial ownership interest in this Subordinated Note shall, by its acceptance of such Subordinated Note (or beneficial
interest therein), be deemed to have waived any right of offset with respect to the indebtedness evidenced
thereby.


 


(ix)            No
waiver or amendment of any term, provision, condition, covenant or agreement in the Subordinated Notes shall be effective except
with the consent of the holders of more than fifty percent (50%) in aggregate principal amount (excluding any Subordinated Notes
held by the Company or any of its Affiliates) of the Subordinated Notes at the time outstanding; provided, however,
that without the consent of each Noteholder of an affected Subordinated Note, no such amendment or waiver may: (i) reduce
the principal amount of any Subordinated Note; (ii) reduce the rate of or change the time for payment of interest on any Subordinated
Note; (iii) extend the maturity of any Subordinated Note; (iv) change the currency in which payment of the obligations
of the Company under the Subordinated Notes are to be made; (v) lower the percentage of aggregate principal amount of outstanding
Subordinated Notes required to approve any amendment of the Subordinated Notes; (vi) make any changes to Section 4(c) (Partial
Redemption), Section 5 (Events of Default; Acceleration), Section 6 (Failure to Make Payments), Section 7
(Affirmative Covenants of the Company), Section 8 (Negative Covenants of the Company), or Section 15 (Waiver
and Consent) of the Subordinated Notes that adversely affects the rights of any Noteholder; (vii) disproportionately affect
the rights of any of the Noteholders of the then outstanding Subordinated Notes; (viii) permit the Company to declare or pay
any cash dividends while an Event of Default is continuing or; modify the terms of subordination of the affected Subordinated Note
in a manner adverse to the holder. Notwithstanding the foregoing, the Company may amend or supplement the Subordinated Notes without
the consent of the Noteholders 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 Noteholder of any of the Subordinated Notes. No failure to exercise or delay in exercising, by any Noteholder
of the Subordinated Notes, of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other
right or remedy provided at law or in equity. The rights and remedies provided in this Subordinated Note are cumulative and not
exclusive of any right or remedy provided at law or in 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 Noteholders to any other or further action in any circumstances without notice or demand. No consent or waiver, express or implied,
by Noteholders to or of any breach or default by the Company in the performance of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the performance of the same or any other obligations
of the Company hereunder. Failure on the part of the Noteholders to complain of any acts or failure to act or to declare an Event
of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Noteholders of their rights hereunder
or impair any rights, powers or remedies on account of any breach or default by the Company.


 


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


 






    A-17


     


    

 


17.            No
Sinking Fund, Trust Indenture or Credit Rating; Convertibility. This Subordinated Note is not entitled to the benefit of any
sinking fund. This Subordinated Note is not being issued pursuant to, or is the subject of, any trust indenture. This Subordinate
Note is not subject to any rating by a nationally recognized statistical rating organization. This Subordinated Note is not convertible
into or exchangeable for any of the equity securities, other securities or assets of the Company or any Subsidiary.


 


18.            No
Recourse Against Others. No recourse under or upon any obligation, covenant or agreement contained in this Subordinated Note,
or for any claim based thereon or otherwise in respect thereof, will be had against any past, present or future shareholder, employee,
agent, officer, or director, as such, of the Company or of any predecessor or successor, either directly or through the Company
or any predecessor or successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment
or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance
of this Subordinated Note by the holder of this Subordinated Note and as part of the consideration for the issuance of this Subordinated
Note.


 


19.            Notices.
All notices to the Company under this Subordinated Note shall be in writing and addressed to the Company at First Keystone Corporation,
P.O. Box 289, 111 W. Front Street, Berwick, PA 18603, Attention: Chief Financial Officer, or to such other address as the
Company may notify to the Noteholder (the “Payment Office”). All notices to the Noteholders shall be
in writing and sent by first-class mail to each Noteholder at such Noteholder’s address as set forth in the Security Register.
Any notice mailed as provided in this section shall be conclusively presumed to have been duly given, whether or not the Noteholder
receives such notice; provided, further, that failure of the Company to give such notice by mail, or any defect in such
notice or in the mailing thereof, to any Noteholder shall not affect the validity of the proceedings for any redemption under Section 4
or any matter required to be presented to the Noteholders for approval.


 


20.            Successors
and Assigns. This Subordinated Note shall be binding upon the Company and inure to the benefit of the Noteholder and its respective
successors and permitted assigns. Subject to the terms and conditions of this Subordinated Note and compliance with applicable
securities laws and regulations, the Noteholder may assign all, or any part of, or any interest in, the Noteholder’s rights
and benefits hereunder.


 


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


 






    A-18


     


    

 


22.            Governing
Law; Interpretation. This Subordinated Note will be deemed to be a contract made under the laws of the Commonwealth
of Pennsylvania and will be governed by, and construed in accordance with, the laws of the Commonwealth of Pennsylvania without
regard to conflict of law principles thereof. This Subordinated Note is intended to meet the criteria for qualification of the
outstanding principal as Tier 2 Capital under the regulatory rules and guidelines of the Federal Reserve, and the terms hereof
shall be interpreted in a manner to satisfy such intent, subject 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. At any time and from time
to time, if the capital adequacy requirements and guidelines of the Federal Reserve otherwise applicable to bank holding companies
are not applicable to the Company by reason of the “Small Bank Holding the Company and Savings and Loan Holding Company Policy
Statement” of the Federal Reserve, codified as Appendix C to 12 CFR Part 225, as amended from time to time, (the “SBHC
Policy Statement”), then the provisions of this Subordinated Note that refer to capital adequacy or related concepts
shall be applied, solely for purposes of this Subordinated Note as if the SBHC Policy Statement did not apply to the Company.


 


23.            Submission
to Jurisdiction. Each Noteholder hereby irrevocably submits to the exclusive jurisdiction of the Court of Common Pleas of
Columbia County, Pennsylvania and the U.S. District Court for the Middle District of Pennsylvania over any action or proceeding
arising out of or relating to this Subordinated Note and the transactions related thereto, regardless of whether a claim sounds
in contract, tort, or otherwise and regardless of whether a claim is at law or in equity, and each Noteholder hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and determined in such state or federal court. Each
Noteholder on behalf of itself and its successors and assigns, hereby irrevocably waives, to the fullest extent permitted by law,
any objection it may now or hereafter have to the laying of venue in any action or proceeding in any such court as well as any
right it may now or hereafter have to remove such action or proceeding, once commenced, to another court on the grounds of Forum
Non Conveniens or otherwise. Each Noteholder agrees that a final, non-appealable judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.


 


[Signature Page Follows]


 






    A-19


     


    

 


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


 





	 	FIRST KEYSTONE CORPORATION
	 	 
	 	By:	
	 	 	         Diane C.A. Rosler, Chief Financial Officer



 





	ATTEST:	 
	 	 
	Name:	 	 
	Title:	 	 



 


[Signature Page to Subordinated
Note]


 






    


     


    

 


ASSIGNMENT FORM


 


[Capitalized terms used herein but not defined
have the meanings assigned in the Subordinated Note]


 


To assign this Subordinated Note of First Keystone Corporation
(the “the Company”), fill in the form below: (I) or (we) assign and transfer this Subordinated Note to:


 





 






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


 





 






(Insert assignee’s social security
or tax I.D. Number


 


and irrevocably appoint____________________ as agent to transfer
this Subordinated Note on the books of the Company. The agent may substitute another to act for him.


 





	Date:		Your signature:	 
	 	(Sign exactly as your name appears on the face of
this Subordinated Note)



 





	 	FOR EXECUTION BY AN ENTITY:
	 	 
	 	Entity name:________________________
	 	 
	 	By:_______________________________
	 	Name:_____________________________
	 	Title:____________________________
	 	 
	 	Tax Identification No. or SSN#:____________________________



 


Signature
Guarantee: _________________________________________________________________________________________________________


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


 


The undersigned certifies
that he/she/it [is / is not] (circle one) an Affiliate of the Company and that, to such Person’s knowledge,
the proposed transferee [is / is not] (circle one) an Affiliate of the Company.


 


In connection with any
transfer or exchange of this Subordinated Note occurring prior to the date that is one year after the later of the date of original
issuance of this Subordinated Note and the last date, if any, on which this Subordinated Note was owned by the Company or any Affiliate
of the Company, the undersigned confirms that this Subordinated Note is being:


 






    


     


    

 


CHECK ONE BOX BELOW:


 


		 ̈	(1)	acquired
                                         for the undersigned’s own account, without transfer;



 


		 ̈	(2)	transferred
                                         to the Company,



 


		 ̈	(3)	transferred
                                         in accordance and in compliance with Rule 144A under the Securities Act of 1933,
                                         as amended (the “Securities Act”);



 


		 ̈	(4)	transferred
                                         under an effective registration statement under the Securities Act;



 


		 ̈	(5)	transferred
                                         in accordance with and in compliance with Section 4(a)(7) of the Securities
                                         Act.



 


		 ̈	(6)	transferred
                                         to an institutional “accredited investor” (as defined in Rule 501(a)(l)(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 in accordance with another available exemption from the registration requirements of
the Securities Act.



 


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


 





	 	Your signature:	 
	 	 	(Sign exactly as your name appears on the face of this Subordinated Note)



 





	 	FOR EXECUTION BY AN ENTITY:
	 	 
	 	Entity name:_____________________________
	 	 
	 	By:_____________________________
	 	Name:_____________________________
	 	Title:_____________________________
	 	 
	 	Tax Identification No. or SSN#:_________________________________



 





Signature
Guarantee: _________________________________________________________________________________________________________


(Signatures must be guaranteed by an eligible
guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature
guarantee medallion program), pursuant to Exchange Act Rule 17Ad-l5).


 






    


     


    

 


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


 


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


 





	Date:	Signature:	 



 





	 	Print name:
	 	___________________________
	 	FOR EXECUTION BY AN ENTITY:
	 	 
	 	Entity name:_____________________________________
	 	 
	 	By:____________________________________________
	 	Name:__________________________________________
	 	Title:___________________________________________
	 	 
	 	Tax Identification No. or SSN#:_______________________



 






    


     


    

 


EXHIBIT B


 


FORM OF OPINION OF COUNSEL


 


1.            Each
of the Company and the Bank (i) has been incorporated and is validly existing under the laws of its state of incorporation,
(ii) has all requisite power and authority to carry on its business and to own, lease and operate its properties and assets
as described in the Company’s Reports and (iii) is duly qualified or licensed to do business and is in good standing
as a foreign corporation authorized to do business in each jurisdiction in which the nature of such businesses or the ownership
or leasing of such properties requires such qualification, except where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect.


 


2.            The
Company is a registered bank holding company under the Bank Holding Company Act of 1956, as amended. The Bank is duly formed as
a commercial bank under Pennsylvania law.


 


3.            The
Company has all necessary power and authority to execute, deliver and perform its obligations under the Transaction Documents to
which it is a party and to consummate the transactions contemplated by the Transaction Documents.


 


4.            The
Agreement has been duly and validly authorized, executed and delivered by the Company. The Agreement constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent conveyance, fraudulent
transfer or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles
of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may
be brought.


 


5.            The
Subordinated Notes have been duly and validly authorized by the Company and when issued and delivered to and paid for by Purchasers
in accordance with the terms of this Agreement, will have been duly executed, issued and delivered and will constitute legal, valid
and binding obligations of the Company, and enforceable against the Company in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent conveyance, fraudulent
transfer or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles
of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may
be brought.


 


6.            Assuming
the accuracy of the representations and warranties of each of Purchasers set forth in the Agreement, the Subordinated Notes to
be issued and sold by the Company to Purchasers pursuant to the Agreement will be issued in a transaction exempt from the registration
requirements of the Securities Act.