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                                                                   EXHIBIT 4.1                                                                                                                                              EXECUTION COPY                 SUBORDINATED NOTE PURCHASE AGREEMENT         This SUBORDINATED  NOTE  PURCHASE  AGREEMENT         (this  “Agreement”)  is  dated as of August 27, 2020, and is made by and among Citizens Community Bancorp, Inc., a  Maryland corporation (“Company”), and the several purchasers of the Subordinated Notes named  on Schedule I hereto (each a “Purchaser” and collectively, the “Purchasers”).                                    RECITALS         WHEREAS, Company has requested that the Purchasers purchase from Company up to     $15  million  in  aggregate principal  amount  of  Subordinated  Notes  (as  defined  herein),  which  aggregate amount is intended to qualify as Tier 2 Capital (as defined herein).         WHEREAS,   Company  has  engaged  Janney  Montgomery  Scott  LLC  as  its  exclusive  placement agent (the “Placement Agent”) for the offering of the Subordinated Notes.         WHEREAS, each of the Purchasers is an “accredited investor” as such term is defined in  by Rule 501 of Regulation D (“Regulation D”) promulgated under the Securities Act of 1933, as  amended (the “Securities Act”).         WHEREAS, the offer and sale of the Subordinated Notes by Company is being made in  reliance upon the exemptions from registration available under Section 4(a)(2) of the Securities  Act and Rule 506(b) of Regulation D promulgated thereunder.         WHEREAS, each Purchaser is willing to purchase from Company a Subordinated Note in  the principal amount set forth in Schedule I (the “Subordinated Note Amount”) in accordance with  the terms, subject to the conditions and in reliance on, the recitals, representations, warranties,  covenants and agreements set forth herein and in the Subordinated Notes.         NOW,  THEREFORE,     in  consideration  of  the  mutual  covenants,  conditions  and  agreements herein contained and other good and valuable consideration, the receipt of which is  hereby acknowledged, the parties hereto hereby agree as follows:                                   AGREEMENT   1.    DEFINITIONS.         1.1   Defined Terms.  The following capitalized terms used in this Agreement and in  the Subordinated Notes have the meanings defined or referenced below.  Certain other capitalized  terms used only in specific sections of this Agreement may be defined in such sections.         “Affiliate(s)”  means,  with  respect  to  any  Person,  such  Person’s  immediate  family  members, partners, members or parent and subsidiary corporations, and any other Person directly  or  indirectly  controlling,  controlled  by,  or  under  common  control  with  said  Person  and  their  respective Affiliates.         “Agreement” has the meaning set forth in the preamble hereto.                                                                                                                                    

 

         “Bank” means Citizens Community Federal National Association, a federally chartered  national bank and a wholly owned subsidiary of the Company          “Business Day” means any day other than a Saturday, Sunday or any other day on which  banking institutions in the State of Wisconsin are permitted or required by any applicable law or  executive order to close.         “Closing” has the meaning set forth in Section 2.4.         “Closing Date” means August 27, 2020.         “Company”  has  the  meaning  set  forth  in  the  preamble  hereto  and  shall  include  any  successors to Company by merger or otherwise.         “Company’s Liabilities” means Company’s obligations under the Transaction Documents.         “Company’s Reports” means (a) audited financial statements of the Company included in  the SEC Reports for the year ended December 31, 2019, the transition period ended December 31,  2018, and the year ended September 30, 2018; (b) unaudited financial statements of the Company  included in the SEC Reports for the period ended June 30, 2020 and March 31, 2020; and (c) the  Company’s reports for the period ended June 30, 2020 and the year ended December 31, 2019 as  filed with the FRB as required by regulations of the FRB.          “Disbursement” has the meaning set forth in Section 3.1.         “Equity Interest” means any and all shares, interests, participations or other equivalents  (however designated) of capital stock of a corporation, any and all equivalent ownership interests  in a Person which is not a corporation, and any and all warrants, options or other rights to purchase  any of the foregoing.         “Event of Default” has the meaning set forth in the Subordinated Notes.         “Exchange Act” means the Securities Exchange Act of 1934, as amended.         “FDIC” means the Federal Deposit Insurance Corporation.         “FRB” means the Board of Governors of the Federal Reserve Board.         “GAAP” means generally accepted accounting principles in effect from time to time in the  United States of America.         “Governmental Agency(ies)” means, individually or collectively, any federal, state, county  or local governmental department, commission, board, regulatory authority or agency (including,  without limitation, each applicable Regulatory Agency) with jurisdiction over Company or any of  its Subsidiaries.                                                 2                                                    

 

         “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 the Hazardous Materials Laws and/or other applicable environmental laws, ordinances or  regulations.         “Hazardous Materials Laws” mean any laws, regulations, permits, licenses or requirements  pertaining to the protection, preservation, conservation or regulation of the environment which  relates to real property, including:  the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.;  the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource  Conservation  and  Recovery  Act  of  1976,  as  amended,  42  U.S.C.  Section  6901  et  seq.;  the  Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended  (including the Superfund Amendments and Reauthorization Act of 1986), 42 U.S.C. Section 9601  et  seq.;  the  Toxic  Substances  Control  Act,  as  amended,  15  U.S.C.  Section  2601  et  seq.;  the  Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651, the Emergency Planning  and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety  and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act,  42 U.S.C. Section 300f et seq.; and all comparable state and local laws and regulations.         “Holder” has the meaning set forth in the Subordinated Notes.         “Indebtedness” means and includes:  (i) all items arising from the borrowing of money that,  according to GAAP as in effect from time to time, would be included in determining total liabilities  as  shown  on  the  consolidated  balance  sheet  of  Company  and  its  Subsidiaries;  and  (ii)  all  obligations secured by any lien in property owned by Company or any Subsidiary whether or not  such  obligations  shall  have  been  assumed; provided, however,  Indebtedness  shall  not  include  deposits or other borrowings created, incurred or maintained in the ordinary course of the business  of the Company or Bank (including, without limitation, federal funds purchased, advances from  any  Federal  Home  Loan  Bank,  secured  deposits  of  municipalities,  letters  of  credit  issued  by  Company or Bank and repurchase arrangements) and consistent with customary  banking practices  and applicable laws and regulations.          “Leases” means all leases, licenses or other documents providing for the use or occupancy  of  any  portion  of  any  Property,  including  all  amendments,  extensions,  renewals,  supplements,  modifications,  sublets  and  assignments  thereof  and  all  separate  letters  or  separate  agreements  relating thereto.          “Material Adverse Effect” means, with respect to any Person, any change or effect that (i)  is or would be reasonably likely to be material and adverse to the financial condition, results of  operations or business of such Person, or (ii) would materially impair the ability of such Person to  perform its respective obligations under any of the Transaction Documents, or otherwise materially                                          3                                                    

 

   impede  the  consummation  of  the  transactions  contemplated  hereby; provided, however,  that  “Material Adverse Effect” shall not be deemed to include the impact of (1) changes in banking  and  similar  laws,  rules  or  regulations  of  general  applicability  or  interpretations  thereof  by  Governmental Agencies, (2) changes in GAAP or regulatory accounting requirements applicable  to financial institutions and their holding companies generally, (3) changes after the date of this  Agreement in general economic or capital market conditions affecting financial institutions or their  market prices generally and not specifically related to Company, Bank or Purchasers, (4) any acts  of  God,  natural  disasters,  terrorism,  armed  hostilities,  sabotage,  war,  epidemic,  pandemic  or  disease outbreak (including the COVID-19 virus) or any escalation or worsening of any of the  foregoing that do not disproportionately affect the operations or business of the Company or Bank  in comparison to other banking institutions with similar operations, (5) direct effects of compliance  with this Agreement on the operating performance of Company or Purchasers, including expenses  incurred by Company, Bank  or Purchasers in consummating the transactions contemplated by this  Agreement, and (6) the effects of any action or omission taken by Company or the Bank with the  prior  written  consent  of  Purchasers,  and  vice  versa,  or  as  otherwise  contemplated  by  this  Agreement and the Subordinated Notes.         “Maturity Date” means September 1, 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.         “Purchaser” or “Purchasers” has the meaning set forth in the preamble hereto.         “Regulation D” has the meaning set forth in the Recitals.         “Regulatory Agency” means any federal or state agency charged with the supervision or  regulation of depository institutions or holding companies of depository institutions, or engaged  in  the  insurance  of  depository  institution  deposits,  or  any  court,  administrative  agency  or  commission or other authority, body or agency having supervisory or regulatory authority with  respect to Company, Bank or any of their Subsidiaries.         “Secondary Market Transaction” has the meaning set forth in Section 5.5.         “Securities Act” has the meaning set forth in the Recitals.         “SEC” means the Securities and Exchange Commission.         “SEC Reports” has the meaning set forth in Section 4.9.                                                   4                                                    

 

         “Subordinated  Note”  means  the  Subordinated  Note  (or  collectively,  the  “Subordinated  Notes”) in the form attached as Exhibit A hereto, as amended, restated, supplemented or modified  from time to time, and each Subordinated Note delivered in substitution or exchange for such  Subordinated Note.         “Subordinated Note Amount” has the meaning set forth in the Recitals.         “Subsidiary”  means  with  respect  to  any  Person,  any  corporation  or  entity  in  which  a  majority of the outstanding Equity Interest is directly or indirectly owned by such Person.         “Tier 2 Capital” has the meaning given to the term “Tier 2 capital” in 12 C.F.R. Part 217,  as  amended,  modified  and  supplemented  and  in  effect  from  time  to  time  or  any  replacement  thereof.           “Transaction Documents” has the meaning set forth in Section 3.2.1.         1.2   Interpretations.   The  foregoing  definitions  are  equally  applicable  to  both  the  singular and plural forms of the terms defined.  The words “hereof”, “herein” and “hereunder” and  words of like import when used in this Agreement shall refer to this Agreement as a whole and not  to any particular provision of this Agreement.  The word “including” when used in this Agreement  without the phrase “without limitation,” shall mean “including, without limitation.” All references  to time of day herein are references to Eastern Time unless otherwise specifically provided.  All  references to the Agreement and Subordinated Notes shall be deemed to be to such documents as  amended, modified or restated from time to time.  With respect to any reference in this Agreement  to any defined term, (i) if such defined term refers to a Person, then it shall also mean all heirs,  legal representatives and permitted successors and assigns of such Person, and (ii) if such defined  term refers to a document, instrument or agreement, then it shall also include any amendment,  replacement, extension or other modification thereof.          1.3   Exhibits Incorporated.  All Exhibits attached are hereby incorporated into this  Agreement.   2.    SUBORDINATED DEBT.         2.1   General Matters.               2.1.1  Certain Terms.  Subject to the terms and conditions herein contained,  Company proposes to issue and sell to the Purchasers, severally and not jointly, Subordinated  Notes in an aggregate principal amount equal to the aggregate of the Subordinated Note Amounts.   Purchasers, severally and not jointly, each agree to purchase the Subordinated Notes  from the  Company on the Closing Date in accordance with the terms of, and subject to the conditions and  provisions  set  forth  in, this  Agreement  and  the  Subordinated  Notes.   The  Subordinated  Note  Amounts shall be disbursed in accordance with Section 3.1.  The Subordinated Notes shall bear  interest 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                                        5                                                    

 

   of (i) acceleration by Purchasers in accordance with the terms of the Subordinated Notes and this  Agreement or (ii) Company’s delivery of a notice of redemption or repayment in accordance with  the terms of the Subordinated Notes.               2.1.2  Subordination.   The  Subordinated  Notes  shall  be  subordinated  in  accordance with the subordination provisions set forth therein.         2.2   Maturity  Date.   On  the  Maturity  Date,  all  sums  due  and  owing  under  this  Agreement and the Subordinated Notes shall be repaid in full.  Company acknowledges and agrees  that Purchasers have not made any commitments, either express or implied, to extend the terms of  the  Subordinated  Notes  past  their  Maturity  Date,  and  shall  not  extend  such  terms  beyond  the  Maturity Date unless Company and Purchasers hereafter specifically otherwise agree in writing.         2.3   Unsecured  Obligations;  No  Sinking  Fund.   The  obligations  of  Company  to  Purchasers  under  the  Subordinated  Notes  shall  be  unsecured.  The  Subordinated  Notes  are  not  entitled to the benefit of any sinking fund.         2.4   The Closing.  The closing of the sale and purchase of the Subordinated Notes (the  “Closing”) shall occur at the offices of Company at 10:00 a.m. (local time) on the Closing Date,  or remotely via the electronic or other exchange of documents and signature pages, or at such other  place or time or on such other date as the parties hereto may agree.         2.5   Payments.  Company agrees that matters concerning payments and application of  payments shall be as set forth in this Agreement and in the Subordinated Notes.         2.6   No Right of Offset.  Each Purchaser hereby expressly waives any right of offset it  may have against Company or any of its Subsidiaries.         2.7   Use  of  Proceeds.   Company  shall  use  the  net  proceeds  from  the  sale  of  Subordinated Notes for general corporate purposes.   3.    DISBURSEMENT.         3.1   Disbursement.  On the Closing Date, assuming all of the terms and conditions set  forth in Section 3.2 have been satisfied by Company and Company has executed and delivered to  each of the Purchasers this Agreement and such Purchaser’s the Subordinated Notes and any other  related documents in form and substance reasonably satisfactory to Purchasers, each Purchaser  shall  disburse  the  Subordinated  Note  Amount  set  forth  next  to  its  name  in Schedule  I in  immediately available funds to Company in exchange for a Subordinated Note with a principal  amount  equal  to  such  Subordinated  Note  Amount  (the  “Disbursement”).   The  Company  will  deliver to the respective Purchaser one or more certificates representing the Subordinated Notes in  definitive form (or provide evidence of the same with the original to be delivered by the Company  by overnight delivery on the next calendar day in accordance with the delivery instructions of  Purchaser), registered in such names and denominations as such Purchasers may request.                                         6                                                    

 

         3.2   Conditions Precedent to Disbursement.  In conjunction with and as additional  (but independent) supporting evidence for certain of the covenants, representations and warranties  made  by  Company  herein,  prior  to  and  as  a  condition  of  each  Purchaser’s  obligation  to  consummate the purchase of the Subordinated Note and to effect the Disbursement, Company shall  deliver or cause to be delivered to Purchasers each of the following (or Purchaser shall waive, in  writing, such delivery, which written waiver shall be binding only on the Purchaser granting such  waiver):               3.2.1  Transaction Documents.   This  Agreement  and  such  Purchaser’s   Subordinated  Note  (collectively,  the  “Transaction  Documents”),  each  duly  authorized  and  executed by Company.               3.2.2  Authority Documents.                      3.2.2.1 A  copy,  certified  by  the  Secretary  or  Assistant  Secretary  of  Company, of the Articles of Incorporation of Company;                      3.2.2.2 A certificate of existence of Company issued by the Secretary of  State of Maryland and a certificate of corporate existence of the Bank issued by the Office of the  Comptroller of the Currency;                       3.2.2.3 A copy, certified by the Secretary or Assistant Secretary, of the  Bylaws of Company;                      3.2.2.4 A  copy,  certified  by  the  Secretary  or  Assistant  Secretary  of  Company, of the resolutions of the board of directors of Company authorizing the issuance of the  Subordinated Notes and the execution, delivery and performance of the Transaction Documents;  and                      3.2.2.5 An  incumbency  certificate  of  the  Secretary  or  Assistant  Secretary of Company certifying the names of the officer or officers of Company authorized to  sign the Transaction Documents and the other documents provided for in this Agreement.               3.2.3  Other Requirements.  Such other additional information regarding the  Company, the Bank and any other Subsidiary of Company and their respective assets, liabilities  (including  any  liabilities  arising  from,  or  relating  to,  legal  proceedings)  and  contracts  as  a  Purchaser may reasonably require.               3.2.4  Officer’s Certificate.  A certificate signed on behalf of Company by a  senior executive officer certifying that the representations and warranties of Company set forth in  this Agreement are true and correct in all respects on and as of the date of this Agreement and on  and as of the Closing Date as though made on and as of the Closing Date, except where the failure  to be true and correct (without regard to any materiality or Material Adverse Effect qualifications  contained  therein),  individually  or  in  the  aggregate,  would  not  be  reasonably  likely  to  have  a  Material Adverse Effect (and except that (i) representations and warranties made as of a specified  date shall only be required to be true and correct as of such date and (ii) the representations and                                        7                                                    

 

   warranties of Company set forth in Sections 4.2.1 and 4.2.3 of this Agreement shall be true and  correct in all respects).               3.2.5   Opinion  of  Counsel.   Purchasers  and  Placement  Agent  shall  have  received  the  opinion  of Taft  Stettinius  &  Hollister  LLP,   counsel  for  the  Company,  dated  the  Closing Date, substantially in the form annexed hereto as Exhibit B.                             3.2.6   Aggregate  Investments.   Prior  to,  or  contemporaneously  with  the  Closing, each Purchaser shall have actually subscribed for the Subordinated Note Amount set forth  on such Purchaser’s signature page.                            3.2.7  Other  Documents.   Such  other  certificates,  affidavits,  schedules,  resolutions, notes and/or other documents which are provided for hereunder or as a Purchaser may  reasonably request.               3.2.8  Conditions  to  the  Company’s  Obligations.   With  respect  to  a  given  Purchaser, the obligation of the Company to consummate the sale of the Subordinated Notes and  to effect the Closing is subject to delivery by or at the direction of such Purchaser to the Company  of this Agreement, duly authorized and executed by such Purchaser.   4.    REPRESENTATIONS AND WARRANTIES OF COMPANY.          Company hereby represents and warrants to each Purchaser as follows:         4.1   Organization and Authority.               4.1.1  Organization Matters of Company and Its Subsidiaries.                      4.1.1.1  Company is  a duly  organized  corporation, is  validly  existing  and in good standing under the laws of the Maryland 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.   Company  is  duly  qualified  as  a  foreign corporation to transact business and is in good standing in each other jurisdiction in which  such qualification is required, whether by reason of the ownership or leasing of property or the  conduct of business, except where the failure so to qualify or to be in good standing would not  reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect.   Schedule  4.1.1.1 lists  each  state  where  the  Company  is  engaged  in  business  as  a  foreign  corporation.  Company is duly registered as a bank holding company under the Bank Holding  Company Act of 1956, as amended.                      4.1.1.2 Bank is validly existing as a federally chartered national bank  and  has  all  requisite  corporate  power  and  authority  to  conduct  its  business  and  activities  as  presently conducted and to own its properties.  Bank is duly qualified as a foreign corporation to  transact business and is in good standing in each other jurisdiction in which such qualification is  required, whether by reason of the ownership or leasing of property or the conduct of business,  except where the failure so to qualify or to be in good standing would not reasonably be expected                                        8                                                    

 

   to result in a Material Adverse Effect.  Schedule 4.1.1.2 lists each state where the Bank is engaged  in business as a foreign corporation.  The deposit accounts of Bank are insured by the FDIC up to  applicable  limits.   Neither  Company nor  Bank  has  received  any  notice  or  other  information  indicating that Bank is not an “insured depository institution” as defined in 12 U.S.C. Section  1813, nor has any event occurred which could reasonably be expected to adversely affect the status  of Bank as an FDIC-insured institution.                      4.1.1.3 Schedule  4.1.1.3 lists  the  Subsidiaries  of  the  Company  other  than the Bank.                      4.1.1.4 All of the issued and outstanding shares of capital stock or other  equity interests in Bank have been duly authorized and validly issued, are fully paid and non- assessable and are owned by Company directly free and clear of any security interest, mortgage,  pledge, lien, encumbrance or claim except as set forth in Section 4.4.5; none of the outstanding  shares  of  capital  stock  of,  or  other  equity  interests  in,  Bank  were  issued  in  violation  of  the  preemptive or similar rights of any security holder of Bank or any other entity.               4.1.2  Capital Stock and Related Matters.  The Articles of Incorporation of  Company authorizes Company to issue 30,000,000 shares of common stock, $0.01 par value and  1,000,000 shares of preferred stock, $0.01 par value.  As of the date of this Agreement, there are  11,150,695 shares of the Company’s common stock issued and outstanding and no shares of the  Company’s  preferred  stock  issued  and  outstanding.   All  of  the  outstanding  capital  stock  of  Company has been duly authorized and validly issued and is fully paid and non-assessable.  Except  as set forth on Schedule 4.1.2, there are, as of the date hereof, no outstanding options, rights,  warrants or other agreements or instruments obligating Company to issue, deliver or sell, or cause  to be issued, delivered or sold, additional shares of the capital stock of Company or obligating  Company to grant, extend or enter into any such agreement or commitment to any Person except  pursuant to Company’s equity incentive plans duly adopted by Company’s Board of Directors.          4.2   No Impediment to Transactions.               4.2.1  Transaction is Legal and Authorized.  The issuance of the Subordinated  Notes, the borrowing of the aggregate of the Subordinated Note Amounts, the execution of the  Transaction Documents and compliance by Company with all of the provisions of the Transaction  Documents are within the corporate and other powers of Company.                 4.2.2  Agreement.   The  Agreement  has  been  duly  authorized,  executed  and  delivered by the Company, and, assuming due authorization, execution and delivery by the other  parties  thereto,  constitutes  the  legal,  valid  and  binding  obligations  of  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 Company and when executed by the Company and issued, delivered to and paid for by the  Purchasers  in  accordance  with  the  terms  of  the  Agreement,  will have  been  duly executed,                                        9                                                    

 

   authenticated,  issued  and  delivered,  and  will  constitute  legal,  valid  and binding  obligations  of  Company  enforceable  in  accordance  with  their  terms,  except  as  enforcement  thereof  may  be  limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or  affecting creditors’ rights generally or by general equitable principles.               4.2.4  No Defaults or Restrictions.  Neither the execution and delivery of the  Transaction Documents nor compliance with their respective terms and conditions will (whether  with or without the giving of notice or lapse of time or both) (i) violate, conflict with or result in a  breach of, or constitute a default under:  (1) the Articles of Incorporation or Bylaws of Company;  (2) any of the terms, obligations, covenants, conditions or provisions of any corporate restriction  or  of  any  contract,  agreement,  indenture,  mortgage,  deed  of  trust,  pledge,  bank  loan  or  credit  agreement, or any other agreement or instrument to which Company or Bank, as applicable, is now  a party or by which it or any of its properties may be bound or affected; (3) any judgment, order,  writ, injunction, decree or demand of any court, arbitrator, grand jury, or Governmental Agency  applicable to Company or Bank; or (4) any statute, rule or regulation applicable to Company,  except, in the case of item (2), (3) or (4) for such violations and conflicts that would not reasonably  be expected to have, singularly or in the aggregate, a Material Adverse Effect on Company and  the Bank  taken  as  a  whole,  or  (ii)  result  in  the  creation  or  imposition  of  any  lien,  charge  or  encumbrance of any nature whatsoever upon any property or asset of Company. Neither Company  nor  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  Company  or  Bank,  as  applicable, is a party or by which Company or Bank, as applicable, or any of its properties may be  bound or affected, except, in each case, only such defaults that would not reasonably be expected  to have, singularly or in the aggregate, a Material Adverse Effect on Company.               4.2.5  Governmental  Consent.   No  governmental  orders,  permissions,  consents, approvals or authorizations are required to be obtained by Company that have not been  obtained, and no registrations or declarations are required to be filed by Company that have not  been  filed  in  connection  with,  or,  in  contemplation  of,  the  execution  and  delivery  of,  and  performance under, the Transaction Documents, except for applicable requirements, if any, of the  Securities Act, the Exchange Act, or state securities laws or “blue sky” laws of the various states  and any applicable federal or state banking laws and regulations.         4.3   Possession of Licenses and Permits. Each of Company and 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,  singularly or in the aggregate, have a Material Adverse Effect on Company or such applicable  Subsidiary;  Company  and  each  Subsidiary  of  Company  is  in  compliance  with  the  terms  and  conditions of all such Governmental Licenses, except where the failure so to comply would not,  individually or in the aggregate, have a Material Adverse Effect on Company or such applicable  Subsidiary of Company; all of the Governmental Licenses are valid and in full force and effect,  except where the invalidity of such Governmental Licenses or the failure of such Governmental                                        10                                                    

 

   Licenses to be in full force and effect would not have a Material Adverse Effect on Company or  such applicable Subsidiary of Company; and neither Company nor any Subsidiary of Company  has  received  any  notice  of  proceedings  relating  to  the  revocation  or  modification  of  any  such  Governmental Licenses.         4.4   Financial Condition.               4.4.1  Financial  Statements.   The  financial  statements  of  the  Company  included in Company’s Reports (including the related notes, where applicable), which have been  provided to Purchasers (i) have been prepared from, and are in accordance with, the books and  records of the Company and the Bank; (ii) fairly present in all material respects the results of  operations, changes in stockholders’ equity and financial position of 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, banking requirements and rules and regulations of the SEC,  as  applicable,  with  respect  thereto;  and  (iv)  have  been  prepared  in accordance  with  GAAP  consistently  applied during the periods involved, except,  in  each case, (w) as  required by any  regulatory accounting practices; (x) as indicated in such statements or in the notes thereto; (y) for  any  statement  therein  or  omission  therefrom  that  was  corrected,  amended  or  supplemented  or  otherwise disclosed or updated in a subsequent Company Report, and (z) to the extent that any  unaudited interim financial statements do not contain the footnotes required by GAAP, and were  or are subject to normal and recurring year-end adjustments, which were not or are not expected  to  be  material  in  amount,  either  individually  or  in  the  aggregate.  The  books  and  records  of  Company and the Bank have been, and are being, maintained in all material respects in accordance  with GAAP and any other applicable legal and accounting requirements.  Neither Company nor  Bank has any material liability of any nature whatsoever (whether absolute, accrued, contingent  or otherwise and whether due or to become due), except for those liabilities that are reflected or  reserved  against  on  the  consolidated  balance  sheet  of  the  Company  contained  in  Company’s  Reports for the Company’s most recently completed quarterly, semi-annual 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.                4.4.2    Controls. The  records,  systems,  controls,  data  and  information  of  Company and the Bank are recorded, stored, maintained and operated under means (including any  electronic, mechanical or photographic process, whether computerized or not) that are under the  exclusive ownership and direct control of it or its accountants including all means of access thereto  and  therefrom,  except  for  any  non-exclusive  ownership  and  non-direct  control  that  would  not  reasonably be expected to have a Material Adverse Effect on the system of internal accounting  controls described in the following sentence.  Company, on a consolidated basis, has devised and  maintained a system of internal accounting controls sufficient to provide reasonable assurances (i)  that the assets of Company and the Bank are properly recorded and (ii) regarding the reliability of  financial reporting and the preparation of financial statements for external purposes in accordance  with GAAP.                                         11                                                    

 

               4.4.3  Absence of Default.  Since the end of the Company’s fiscal year ended  December 31, 2019, no event has occurred which either of itself or with the lapse of time or the  giving of notice or both, would give any creditor of Company the right to accelerate the maturity  of any material Indebtedness of 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 could reasonably be expected to result in a Material Adverse  Effect on Company.               4.4.4  Solvency.  After giving effect to the consummation of the transactions  contemplated  by  this  Agreement,  Company  has  capital  sufficient  to  carry  on  its  business  and  transactions and is solvent and able to pay its debts as they mature.  No transfer of property is  being  made  and  no  Indebtedness  is  being  incurred  in  connection  with  the  transactions  contemplated by this Agreement with the intent to hinder, delay or defraud either present or future  creditors of Company or any Subsidiary of Company.               4.4.5  Ownership of Property.  Company and each of its Subsidiaries has good  and marketable title as to all real property owned by it and good title to all assets and properties  owned by Company and such Subsidiary in the conduct of its businesses, whether such assets and  properties are real or personal, tangible or intangible, including assets and property reflected in the  most recent balance sheet contained in Company’s Reports or acquired subsequent thereto (except  to  the  extent  that  such  assets  and  properties  have  been  disposed  of  in  the  ordinary  course  of  business,  since the date  of such balance sheet),  subject  to  no encumbrances,  liens,  mortgages,  security interests or pledges, except (i) those items which secure liabilities for public or statutory  obligations or any discount with, borrowing from or other obligations to the Federal Home Loan  Bank, inter-bank credit facilities, reverse repurchase agreements or any transaction by Bank acting  in  a  fiduciary  capacity,  (ii)  statutory  liens  for  amounts  not  yet  delinquent  or  which  are  being  contested in good faith, (iii) a lien in favor of Chippewa Valley Bank with respect to all of the  shares of stock issued by the Bank and held by the Company, and (iv) 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 Company or any of its Subsidiaries.   Company and each of its Subsidiaries, as lessee, has the right under valid and existing Leases of  real and personal properties that are material to Company or such Subsidiary, as applicable, in the  conduct of its business to occupy or use all such properties as are presently occupied and used by  it.  Such existing Leases and commitments to lease constitute or will constitute operating leases  for both tax and financial accounting purposes except as otherwise disclosed in the Company’s  Reports and the lease expense and minimum rental commitments with respect to such Leases and  lease commitments are as disclosed in all material respects in Company’s Reports.               4.4.6  No  Material  Adverse  Change.   Since  the  date  of  the  latest  financial  statements included within the Company’s Reports, there has been no development or event which  has had or could reasonably be expected to have a Material Adverse Effect on Company or Bank.                                          12                                                    

 

         4.5   Legal Matters.               4.5.1  Compliance with Law.  Company and Bank (i) has complied with and  (ii) to the Company’s knowledge is not under investigation with respect to, and have not been  threatened to  be  charged with  or given  any notice of  any material  violation of any  applicable  statutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any  instrumentality  or  agency  thereof,  having  jurisdiction  over  the  conduct  of  its  business  or  the  ownership  of  its  properties,  except  where  any  such  failure  to  comply  or  violation  would  not  reasonably be expected to have a Material Adverse Effect on Company or any of its Subsidiaries.   Each of the Company and Bank is, and at all times prior to the date hereof has been, in compliance  with (x) all applicable 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 their respective customers, consumers and employees, concerning data  protection and the privacy and security of personal data and the nonpublic personal information of  their respective customers, consumers and employees, except in each case where the failure to so  comply would not reasonably be expected to result, individually or in the aggregate, in a Material  Adverse Effect.  At no time during the two years prior to the date hereof has Company or Bank  received any written notice asserting any of the foregoing.               4.5.2  Sarbanes-Oxley;  Internal  Control  Over  Financial  Reporting;  Disclosure  Controls.   The  Company  is  in  compliance  in  all  material  respects  with  all  of  the  provisions  of  the  Sarbanes-Oxley  Act  of  2002  that  are  applicable  to  it  and  with  all  laws  administered  by  and  regulations  of  any  Governmental  Agency  applicable  to  it,  the  failure  to  comply with which would have a Material Adverse Effect.  Except as set forth in the SEC Reports,  (i) the Company maintains internal control over financial reporting (as such term is defined in  Rule 13a-15(f) under the Exchange Act) designed to provide reasonable assurance regarding the  reliability of financial reporting and the preparation of financial statements for external purposes  in accordance with GAAP and such internal control over financial reporting is effective; and (ii)  the Company maintains disclosure controls and procedures (as such term is defined in Rule 13a- 15(e) and 15d-15(e) under the Exchange Act), and such disclosure controls and procedures were  evaluated by management of the Company and were determined to be effective as of December  31,  2019,  and  since  the  date  of  such  evaluation,  there  has  been  no  significant  changes  in  the  disclosure controls and procedures that are reasonably likely to materially adversely affect such  disclosure controls and procedures.  None of Company, Company’s Subsidiaries nor any of their  officers or directors is now operating under any restrictions, agreements, memoranda, commitment  letter, supervisory letter or similar regulatory correspondence, or other commitments (other than  restrictions of general application) imposed by any Governmental Agency, nor are, to Company’s  knowledge, (a) any such restrictions threatened, (b) any agreements,  supervisory letters or similar  regulatory correspondence, or other commitments being sought by any Governmental Agency, or  (c) any legal or regulatory violations previously identified by, or penalties or other remedial action  previously imposed by, any Governmental Agency unresolved.                                                   13                                                    

 

               4.5.3  Pending Litigation.  There are no actions, suits, proceedings or written  agreements  pending,  or,  to  Company’s  knowledge,  threatened  or  proposed,  against  Company,  Bank or any of its Subsidiaries at law or in equity or before or by any federal, state, municipal, or  other governmental department, commission, board, or other administrative agency, domestic or  foreign, that, either separately or in the aggregate, would reasonably be expected to have a Material  Adverse  Effect  on  Company  or  any  of  its  Subsidiaries  taken  as  a  whole  or  affect  issuance  or  payment of the Subordinated Notes; and neither Company and any of its Subsidiaries is a party to  or named as subject to the provisions of any order, writ, injunction, or decree of, or any written  agreement  with,  any  court,  commission,  board  or  agency,  domestic  or  foreign,  that  either  separately or in the aggregate, will have a Material Adverse Effect on Company and any of its  Subsidiaries taken as a whole.               4.5.4  Environmental.  No Property is or, to the Company’s knowledge, has  been a site for the use, generation, manufacture, storage, treatment, release, threatened release,  discharge, disposal,  transportation  or  presence  of  any  Hazardous  Materials  and  neither  the  Company nor any of its Subsidiaries has engaged in such activities, and there are no claims or  actions pending or, to the Company’s knowledge, threatened against the Company or any of its  Subsidiaries  by  any  Governmental  Agency  or  by  any  other  Person  relating  to  any  Hazardous  Materials or pursuant to any Hazardous Materials Law..                 4.5.5  Brokerage  Commissions.   Other  than  with  respect  to  the  Placement  Agent,  neither  Company  nor  any  Affiliate  of  Company  is  obligated  to  pay  any  brokerage  commission or finder’s fee to any Person in connection with the transactions contemplated by this  Agreement.               4.5.6  Investment  Company  Act.   Neither  Company  nor  Bank  is  an  “investment  company”  or  a  company  “controlled”  by  an  “investment  company,”  within  the  meaning of the Investment Company Act of 1940, as amended.         4.6   No Misstatement.  No information, exhibit, report, schedule or document, when  viewed  together  as  a  whole,  furnished  by  Company  to Purchasers  in  connection  with  the  negotiation,  execution  or  performance  of  this  Agreement  contains  any  untrue  statement  of  a  material fact, or omits to state a material fact necessary to make the statements contained therein  not misleading in light of the circumstances when made or furnished to Purchasers and as of the  Closing Date.         4.7   Tax Matters.  Each of Company and Bank has (i) filed all material foreign, U.S.  federal, state and local tax returns, information returns and similar reports that are required to be  filed, and all such tax returns are true, correct and complete in all material respects, and (ii) paid  all material taxes required to be paid by it and any other material assessment, fine or penalty levied  against it other than taxes (x) currently payable without penalty or interest, or (y) being contested  in good faith by appropriate proceedings.                                                  14                                                    

 

         4.8   Exempt Offering of Securities.  Neither Company nor any Person acting on its  behalf has taken any action which would subject the offering, issuance or sale of the Subordinated  Notes to the registration requirements of the Securities Act.  Neither the Company nor any Person  acting on its  behalf has  engaged or  will engage  in  any form  of general  solicitation or general  advertising  (within  the  meaning  of  Regulation  D)  in  connection  with  any  offer  or  sale  of  the  Subordinated  Notes  pursuant  to  the  transactions  contemplated  by  the  Transaction  Documents.   Assuming the accuracy of Purchasers’ representations and warranties set forth in this Agreement,  no registration under the Securities Act is required for the offer and sale of the Subordinated Notes  by the Company to Purchasers.  No “bad actor” disqualifying event described in Rule 506(d)(1)(i)- (viii) of the Securities Act (a “Disqualification Event”) is applicable to the Company or, to the  Company’s  knowledge,  any  Person  described  in  Rule  506(d)(1)  (each,  a  “Company  Covered  Person”).   To  the  Company’s  knowledge,  no  Company  Covered  Person  is  subject  to  a  Disqualification Event.  The Company has complied, to the extent applicable, with its disclosure  obligations under Rule 506(e).         4.9   SEC  Reports;  Disclosure  Materials.   The  Company  has  filed  all  reports,  schedules, forms, statements and other documents required to be filed by it under the Exchange  Act,  including  pursuant  to  Section  13(a)  or  15(d)  thereof,  for  the  twenty-four  (24)  months  preceding the date hereof (the foregoing materials, including the exhibits thereto and documents  incorporated by reference therein, being collectively referred to herein as the “SEC Reports” and  together with this Agreement (including the Exhibits and Schedules hereto), on a timely basis or  has received a valid extension of such time of filing and has filed any such SEC Reports prior to  the expiration of any such extension.  As of their respective filing dates, the SEC Reports complied  in all material respects with the requirements of the Securities Act and the Exchange Act and the  rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports,  when filed, contained any untrue statement of a material fact or omitted to state a material fact  required to be stated therein or necessary in order to make the statements therein, in light of the  circumstances under which they were made, not misleading.       5  GENERAL COVENANTS, CONDITIONS AND AGREEMENTS.          Company hereby further covenants and agrees with each Purchaser as follows:         5.1   Reserved.           5.2   Affiliate Transactions.  Company shall not itself, nor shall it cause, permit or allow  any Subsidiary to enter into any material transaction, including, the purchase, sale or exchange of  property or the rendering of any service, with any Affiliate of Company except in the ordinary  course of business and pursuant to the reasonable requirements of Company’s or such Affiliate’s  business and upon terms consistent with applicable laws and regulations and no less favorable to  Company or such Affiliate than would be obtained in a comparable arm’s length transaction with  a Person not an Affiliate.                                          15                                                    

 

         5.3   Compliance with Laws.               5.3.1 Generally.  Company shall comply and cause each of its Subsidiaries to  comply  in  all  material  respects  with  all  applicable  statutes,  rules,  regulations,  orders  and  restrictions in respect of the conduct of its business and the ownership of its properties, except, in  each  case,  where  such  noncompliance  would  not  reasonably  be  expected  to  have  a  Material  Adverse Effect on Company.               5.3.2 Regulated Activities.  Company shall not itself, nor shall it cause, permit  or allow Bank to (i) engage in any business or activity not permitted by all applicable laws and  regulations, except where such business or activity would not reasonably be expected to have a  Material Adverse Effect on Company or Bank  or (ii) make any loan or advance secured by the  capital  stock  of  another  bank  or  depository  institution,  or  acquire  the  capital  stock,  assets  or  obligations of or any interest in another bank or depository institution, in each case other than in  accordance with applicable laws and regulations and safe and sound banking practices.               5.3.3 Taxes.  Company shall and shall cause Bank and any other Subsidiary to  promptly pay and discharge all taxes, assessments and other governmental charges imposed upon  Company, Bank or any other Subsidiary or upon the income, profits, or property of Company or  any Subsidiary and all claims for labor, material or supplies which, if unpaid, might by law become  a lien or charge upon the property of Company or Bank.  Notwithstanding the foregoing, none of  Company or Bank or any other Subsidiary shall be required to pay any such tax, assessment, charge  or claim, so long as the validity thereof shall be contested in good faith by appropriate proceedings,  and appropriate reserves therefor shall be maintained on the books of Company and Bank.               5.3.4 Corporate Existence.  Company shall do or cause to be done all things  reasonably necessary to maintain, preserve and renew its corporate existence and that of Bank and  their respective rights and franchises, and comply in all material respects with all related laws  applicable to Company and Bank.               5.3.5 Dividends, Payments, and Guarantees During Event of Default.  During  the continuance of an Event of Default and except as required by any federal or state Governmental  Agency, Company agrees not to (a) declare or pay any dividends on, or redeem, purchase, acquire  or make a liquidation payment with respect to, any of its capital stock; (b) make any payment of  principal of, or interest or premium, if any, on, or repay, repurchase or redeem any of Company’s  Indebtedness that ranks equal with or junior to the Subordinated Notes; or (c) make any payments  under any guarantee that ranks equal with or junior to the Subordinated Notes, other than (i) any  dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase  shares of, any class of Company’s common stock; (ii) any declaration of a non-cash dividend in  connection with the implementation of a shareholders’ rights plan, or the issuance of stock under  any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto;  (iii) as a result of a reclassification of Company’s capital stock or the exchange or conversion of  one class or series of Company’s capital stock for another class or series of Company’s capital  stock; (iv) the purchase of fractional interests in shares of Company’s capital stock pursuant to the  conversion  or  exchange  provisions  of  such  capital  stock  or  the  security  being  converted  or                                         16                                                    

 

   exchanged; or (v) purchases of any class of Company’s common stock related to the issuance of  common stock or rights under any benefit plans for Company’s directors, officers or employees or  any of Company’s dividend reinvestment plans.               5.3.6 Tier 2 Capital.  If all or any portion of the Subordinated Notes ceases to  qualify as  Tier 2 Capital,  other than due to  the limitation imposed on the capital  treatment  of  subordinated  debt  during  the  five  (5)  years  immediately  preceding  the  Maturity  Date  of  the  Subordinated  Notes,  Company  will  immediately  notify  the  Holders  thereof,  and  thereafter  Company and the Holders will work together in good faith to execute and deliver all agreements  as reasonably necessary in order to restructure the applicable portions of the obligations evidenced  by  the  Subordinated  Notes  to  qualify  as  Tier  2  Capital,  if  requested  by  Company;  provided,  however, that nothing contained in this Agreement shall limit the Company’s right to redeem the  Subordinated Notes upon the occurrence of a Tier 2 Capital Event as described in the Subordinated  Notes.           5.4   Absence of Control.  It is the intent of the parties to this Agreement that in no event  shall Purchasers, by reason of any of the Transaction Documents, be deemed to control, directly  or indirectly, Company, and Purchasers shall not exercise, or be deemed to exercise, directly or  indirectly, a controlling influence over the management or policies of Company.         5.5   Secondary Market Transactions.  Each Holder shall have the right at any time  and from time to time to securitize its Subordinated Notes or any portion thereof in a single asset  securitization or a pooled loan securitization of rated single or multi-class securities secured by or  evidencing ownership interests in the Subordinated Notes (each such securitization is referred to  herein as a “Secondary Market Transaction”).  In connection with any such Secondary Market  Transaction, the Company shall, at the Company’s expense, reasonably cooperate in good faith  with Holders and otherwise reasonably assist Holders in satisfying the market standards to which  Holders  customarily  adhere  or  which  may  be  reasonably  required  in  the  marketplace  or  by  applicable rating agencies in connection with any such Secondary Market Transactions, but in no  event shall the Company be required to incur more than $10,000 (without reimbursement) in costs  or  expenses  in  connection  therewith.   Subject  to  any  written  confidentiality  obligation,  all  information regarding the Company may be furnished, without liability except in the case of gross  negligence or willful misconduct, to any Holder and to any Person reasonably deemed necessary  by Holder in connection with such Secondary Market Transaction.  Purchaser shall cause any  Person  to  whom  Purchaser  wishes  to  deliver  confidential  Company  information  related  to  the  Secondary Market Transaction to execute and deliver to Company a non-disclosure agreement  reasonably acceptable to the Company unless such Person is a party to a commercially reasonable  non-disclosure agreement to which Company is a third party beneficiary. All documents, financial  statements,  appraisals  and  other  data  relevant  to  Company  or  the  Subordinated  Notes  may  be  retained by any such Person, subject to the terms of any applicable confidentiality agreements.                  5.6   Information Available to Facilitate Resales.                                           17                                                    

 

               5.6.1 Current  Public Information.  With  a  view  to  making  available  to  Purchaser or Holder the benefits of certain SEC rules and regulations permitting the sale of the  Subordinated Notes without registration as soon as allowed, the Company shall, at all times from  the date of this Agreement through the date that the restrictive legend is removed, make and keep  available adequate current public information with respect to the Company, as those terms are  understood and defined in Rule 144(c) or any similar or analogous rules promulgated under the  Securities Act, and, upon written request by Purchaser or Holder, Company shall provide a written  statement that Company has complied with such requirements.               5.6.2 144A Information.  While any Subordinated Note meets the definition of  “restricted securities” within the meaning of the Securities Act, the Company will make available,  upon request by Purchaser or Holder, to any seller of such Subordinated Note the information  specified  in  Rule  144A(d)(4)  under  the  Securities  Act,  unless  the  Company  is  then  subject  to  Section 13 or 15(d) of the Exchange Act.         5.7   CUSIP Number.  Prior to the Closing Date, the Company shall cause (i) a CUSIP  number 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 and (ii) the Subordinated Notes to be quoted on Bloomberg.   6.    REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASERS.      Each Purchaser hereby represents and warrants to Company, and covenants with Company,  severally and not jointly, as follows:         6.1   Legal Power and Authority.  It has all necessary power and authority to execute,  deliver  and  perform  its  obligations  under  this  Agreement  and  to  consummate  the  transactions  contemplated hereby.  It is an entity duly organized, validly existing and in good standing under  the laws its jurisdiction of organization.         6.2   Authorization and Execution.  The execution, delivery and performance of this  Agreement has been duly authorized by all necessary action on the part of such Purchaser, and this  Agreement, assuming due authorization, execution and delivery by the 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) its organizational documents, (ii) any agreement to which it is  party,  (iii)  any  law  applicable  to  it  or  (iv)  any  order,  writ,  judgment,  injunction,  decree,  determination or award binding upon or affecting it.                                         18                                                    

 

         6.4   Purchase  for  Investment.   It  is  purchasing  the  Subordinated  Note  for  its  own  account and not with a view to distribution and with no present intention of reselling, distributing  or otherwise disposing of the same.  It has no present or contemplated agreement, undertaking,  arrangement, obligation, Indebtedness or commitment providing for, or which is likely to compel,  a disposition of the Subordinated Notes in any manner.         6.5   Accredited Investor.  It is and will be on the Closing Date an  “accredited investor”  as such term is defined in Rule 501(a) of Regulation D.         6.6   Financial and Business Sophistication.  It has such knowledge and experience in  financial and business matters that it is capable of evaluating the merits and risks of the prospective  investment in the Subordinated Notes.  It has relied solely upon its own knowledge of, and/or the  advice of its own legal, financial or other advisors with regard to, the legal, financial, tax and other  considerations involved in deciding to invest in the Subordinated Notes.         6.7   Ability to Bear Economic Risk of Investment.  It recognizes that an investment  in the Subordinated Notes involves substantial risk.  It has the ability to bear the economic risk of  the  prospective  investment  in  the  Subordinated  Notes,  including  the  ability  to  hold  the  Subordinated Notes indefinitely, and further including the ability to bear a complete loss of all of  its investment in Company.         6.8   Information.  It acknowledges that:  (i) it is not being provided with the disclosures  that would be required if the offer and sale of the Subordinated Notes were registered under the  Securities  Act,  nor  is  it  being  provided  with  any  offering  circular  or  prospectus  prepared  in  connection  with  the  offer  and  sale  of  the  Subordinated  Notes;  (ii)  it  has  conducted  its  own  examination of Company and the terms of the Subordinated Notes to the extent it deems necessary  to make its decision to invest in the Subordinated Notes; and (iii) it has availed itself of publicly  available financial and other information concerning Company to the extent it deems necessary to  make its decision to purchase the Subordinated Notes.  It has reviewed the information set forth in  the SEC Reports and the Company’s Reports and the exhibits and schedules hereto.          6.9   Access  to  Information.   It  acknowledges  that  it  and  its  advisors  have  been  furnished with all materials relating to the business, finances and operations of Company that have  been requested of it or its advisors and have been given the opportunity to ask questions of, and to  receive answers from, persons acting on behalf of Company concerning terms and conditions of  the  transactions  contemplated  by  this  Agreement  in  order  to  make  an  informed  and  voluntary  decision to enter into this Agreement.          6.10  Investment Decision.  It has made its own investment decision based upon its own  judgment, due diligence and advice from such advisors as it has deemed necessary and not upon  any view expressed by any other Person or entity, including the Placement Agent.  Neither such  inquiries  nor  any  other  due  diligence  investigations  conducted  by  it  or  its  advisors  or  representatives, if any, shall modify, amend or affect its right to rely on Company’s representations  and  warranties  contained  herein.   It  is  not  relying  upon,  and  has  not  relied  upon,  any  advice,  statement, representation or warranty made by any Person by or on behalf of Company, including                                         19                                                    

 

   the  Placement  Agent,  except  for  the  express  statements,  representations  and  warranties  of  Company made or contained in this Agreement.  Furthermore, it acknowledges that nothing in this  Agreement or any other materials presented by or on behalf of Company to it in connection with  the purchase of the Subordinated Notes constitutes legal, tax or investment advice.         6.11  Private Placement; No Registration; Restricted Legends.  It understands and  acknowledges that the Subordinated Notes are being sold by Company without registration under  the Securities Act in reliance on the exemption from federal and state registration set forth in,  respectively, Rule 506(b) of Regulation D promulgated under Section 4(a)(2) of the Securities Act  and Section 18 of the Securities Act, or any state securities laws, and accordingly, may be resold,  pledged or otherwise transferred only if exemptions from the Securities Act and applicable state  securities laws are available to it.  It is not subscribing for the Subordinated Notes as a result of or  subsequent  to  any  advertisement,  article,  notice  or  other  communication  published  in  any  newspaper, magazine or similar media or broadcast over television or radio, or presented at any  seminar or meeting.  It further acknowledges and agrees that all certificates or other instruments  representing  the  Subordinated  Notes  will  bear  the  restrictive  legend  set  forth  in  the  form  of  Subordinated Note.  It further acknowledges its primary responsibilities under the Securities Act  and, accordingly, will not sell or otherwise transfer the Subordinated Notes or any interest therein  without  complying  with  the  requirements  of  the  Securities  Act  and  the  rules  and  regulations  promulgated thereunder and the requirements set forth in this Agreement.          6.12  Placement Agent.  Purchaser will purchase the Subordinated Note directly from  Company and not from the Placement Agent and understands that neither the Placement Agent nor  any other broker or dealer has any obligation to make a market in the Subordinated Notes.         6.13  Tier 2 Capital.  If all or any portion of the Subordinated Notes ceases to qualify as  Tier 2 Capital, other than due to the limitation imposed on the capital treatment of subordinated  debt during the five (5) years immediately preceding the Maturity Date of the Subordinated Notes,  Company will promptly notify the Purchasers, and thereafter Company and the Purchasers will  work together in good faith to execute and deliver all agreements as reasonably necessary in order  to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to  qualify as Tier 2 Capital, if requested by Company; provided, however, that nothing contained in  this  Agreement  shall  limit  the  Company’s  right  to  redeem the  Subordinated  Notes  upon  the  occurrence of a  Tier 2 Capital Event as described in the Subordinated Notes.         6.14  Accuracy of Representations.  It understands that Company will rely upon the  truth  and  accuracy  of  the  foregoing  representations,  acknowledgements and  agreements  in  connection with the transactions contemplated by this Agreement, and agrees that if any of the  representations or acknowledgements made by it are no longer accurate as of the Closing Date, or  if any of the agreements made by it are breached on or prior to the Closing Date, it shall promptly  notify the Company.                                                   20                                                    

 

         6.15  Representations and Warranties Generally.  The representations and warranties  of Purchaser set forth in this Agreement are true and correct as of the date hereof and will be true  and correct as of the Closing Date and as otherwise specifically provided herein.  Any certificate  signed by a duly authorized representative of Purchaser and delivered to the Company or to counsel  for Company shall be deemed to be a representation and warranty by Purchaser to Company as to  the matters set forth therein.     7  TERMINATION.           7.1   Termination.  This Agreement may be terminated, with respect to any Purchaser,  prior to the Closing:               7.1.1 By mutual written agreement of the Company and such Purchaser; or               7.1.2 By the Company or such Purchaser, upon written notice to the other parties,  in  the  event  that  the  Closing  does  not  occur  within  five  (5)  business  days  of  the  date  of  this  Agreement; provided, that the right to terminate this Agreement pursuant to this Section 7.1.2 shall  not be available to any party whose failure to fulfill any obligation under this Agreement shall  have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to  such date.         7.2   Effect  of  Termination.  In  the event  of  any  termination  of  this  Agreement  as  provided in Section 7.1, this Agreement (other than Section 8, which shall remain in full force and  effect) shall forthwith become wholly void and of no further force and effect.     8  MISCELLANEOUS.         8.1   Prohibition  on  Assignment  by  Company.   Except  as  described  in Section  4  (Merger and Sale of Assets) of the Subordinated Notes,  Company may not  assign, transfer or  delegate any of its rights or obligations under this Agreement or the Subordinated Notes without  the prior written consent all of the Noteholders (as defined in the Subordinated Note).  In addition,  in accordance with the terms of the Subordinated Notes, any transfer of such Subordinated Notes  by the Noteholders must be made in accordance with the Assignment Form attached thereto and  the requirements and restrictions thereof.         8.2   Time of the Essence.  Time is of the essence for this Agreement.         8.3   Waiver  or  Amendment.   Except  as  may  apply  to  any  particular  waiving  or  consenting Noteholder, no waiver or amendment of any term, provision, condition, covenant or  agreement herein or in the Subordinated Notes shall be effective except with the consent of the  holders of not less than more than fifty percent (50%) in aggregate principal amount (excluding  any Subordinated Notes held by Company or any of its Affiliates) of the Subordinated Notes at  the time outstanding; provided, however, that without the consent of each holder of an affected  Subordinated Note, no such amendment or waiver may:  (i) reduce the principal amount of the  Subordinated  Note;  (ii)  reduce  the  rate  of  or  change  the  time  for  payment  of  interest  on  any  Subordinated Note; (iii) extend the maturity of any Subordinated Note, (iv) change the currency                                        21                                                    

 

   in  which payment of the obligations  of Company under this  Agreement  and the Subordinated  Notes are to be made; or (v) lower the percentage of aggregate principal amount of outstanding  Subordinated Notes required to approve any amendment of this Agreement or the Subordinated  Notes,  (vi) make any changes  to Section 4 (Merger and Sale of Assets), Section 5 (Events  of  Default; Acceleration; Compliance Certificate); Section 6 (Affirmative Covenants of the Issuer);  Section  7  (Negative  Covenants  of  the  Issuer);  or  Section  8  (Failure  to  Make  Payment)  of  the  Subordinated Notes that adversely affects the rights of any holder of a Subordinated Note; or (vii)  disproportionately  affect  any  of  the  holders  of  the  then  outstanding  Subordinated  Notes.   Notwithstanding  the  foregoing,  Company  may  amend  or  supplement  the  Subordinated  Notes  without the consent of the holders of the Subordinated Notes to cure any ambiguity, defect or  inconsistency or to provide for uncertificated Subordinated Notes in addition to or in place of  certificated Subordinated Notes, or to make any change that does not adversely affect the rights of  any holder of any of the Subordinated Notes.  No failure to exercise or delay in exercising, by a  Purchaser or any holder of the Subordinated Notes, of any right, power or privilege hereunder shall  operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege  preclude any other or further exercise thereof, or the exercise of any other right or remedy provided  by law.  The rights and remedies provided in this Agreement are cumulative and not exclusive of  any right or remedy provided by law or equity.  No notice or demand on Company in any case  shall,  in  itself,  entitle  Company  to  any  other  or  further  notice  or  demand  in  similar  or  other  circumstances or constitute a waiver of the rights of Purchasers to any other or further action in  any circumstances without notice or demand.  No consent or waiver, expressed or implied, by  Purchasers  to  or  of  any  breach  or  default  by  Company  in  the  performance  of  its  obligations  hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or  default in the performance of the same or any other obligations of Company hereunder.  Failure  on the part of Purchasers to complain of any acts or failure to act or to declare an Event of Default,  irrespective of how long such failure continues, shall not constitute a waiver by Purchasers of their  rights hereunder or impair any rights, powers or remedies on account of any breach or default by  Company.         8.4   Severability.  Any provision of this Agreement which is unenforceable or invalid  or  contrary  to  law,  or  the  inclusion  of  which  would  adversely  affect  the  validity,  legality  or  enforcement of this Agreement, shall be of no effect and, in such case, all the remaining terms and  provisions of this Agreement shall subsist and be fully effective according to the tenor of this  Agreement  the  same  as  though  any  such  invalid  portion  had  never  been  included  herein.   Notwithstanding any of the foregoing to the contrary, if any provisions of this Agreement or the  application thereof are held invalid or unenforceable only as to particular persons or situations, the  remainder of this Agreement, and the application of such provision to persons or situations other  than those to which it shall have been held invalid or unenforceable, shall not be affected thereby,  but shall continue valid and enforceable to the fullest extent permitted by law.         8.5   Notices.  Any notice which any party hereto may be required or may desire to give  hereunder shall be deemed to have been given if in writing and if delivered personally, or if mailed,  postage  prepaid,  by  United  States  registered  or  certified  mail,  return  receipt  requested,  or  if  delivered by a responsible overnight commercial courier promising next Business Day delivery,  addressed:                                        22                                                    

 

         if to Company:                   Jim Broucek                                         Citizens Community Bancorp, Inc.                                         2174 EastRidge Center                                         Eau Claire, WI 54701                                         Telephone: (715) 839-4662                                         Email: jbroucek@ccf.us                                                 with a copy to:                  Joseph Kinning                                         Taft Stettinius & Hollister LLP                                         2200 IDS Center                                         80 South 8th Street                                         Minneapolis, MN 55402                                         Attention: Joseph T. Kinning                                         Telephone:  (612) 977-8533                                         Email: jkinning@taftlaw.com                                                                                          if to Purchasers:                To the addresses indicated on Schedule I.    or to such other address or addresses as the party to be given notice may have furnished in writing  to the party seeking or desiring to give notice, as a place for the giving of notice; provided that no  change in address shall be effective until five (5) Business Days after being given to the other party  in the manner provided for above.  Any notice given in accordance with the foregoing shall be  deemed given when delivered personally or, if mailed, three (3) Business Days after it shall have  been deposited in the United States mails as aforesaid or, if sent by overnight courier, the Business  Day following  the date  of delivery to  such courier (provided next  Business  Day delivery was  requested).         8.6   Successors and Assigns.  This Agreement shall inure to the benefit of the parties  and  their  respective  heirs,  legal  representatives,  successors  and  assigns;  except  that,  unless  a  Purchaser consents in writing, no assignment made by Company in violation of this Agreement  shall  be  effective  or  confer  any  rights  on  any  purported  assignee  of  Company.   The  term  “successors  and  assigns”  will  not  include  a  purchaser  of  any  of  the  Subordinated  Notes  from  merely because of such purchase.         8.7   No  Joint  Venture.   Nothing  contained  herein  or  in any  document  executed  pursuant hereto and no action or inaction whatsoever on the part of a Purchaser, shall be deemed  to make a Purchaser a partner or joint venturer with Company.         8.8   Documentation.   All  documents  and  other  matters  required  by  any  of  the  provisions of this Agreement to be submitted or furnished to a Purchaser shall be in form and  substance satisfactory to such Purchaser.         8.9   Entire Agreement.  This Agreement and the Subordinated Notes along with the  Exhibits  thereto  constitute  the  entire agreement  between  the  parties  hereto  with  respect  to  the                                        23                                                    

 

   subject  matter  hereof  and  may  not  be  modified  or  amended  in  any  manner  other  than  by  supplemental written agreement executed by the parties hereto.  No party, in entering into this  Agreement, has relied upon any representation, warranty, covenant, condition or other term that is  not set forth in this Agreement or in the Subordinated Notes.         8.10  Choice of Law.  This Agreement shall be governed by and construed in accordance  with the laws of the State of New York without giving effect to its laws or principles of conflict of  laws.  Nothing herein shall be deemed to limit any rights, powers or privileges which a Purchaser  may have pursuant to any law of the United States of America or any rule, regulation or order of  any  department  or  agency  thereof  and  nothing  herein  shall  be  deemed  to  make  unlawful  any  transaction or conduct by a Purchaser which is lawful pursuant to, or which is permitted by, any  of the foregoing.         8.11  No  Third  Party  Beneficiary.   This  Agreement is  made  for  the  sole  benefit  of  Company and the Purchasers, and no other person shall be deemed to have any privity of contract  hereunder nor any right to rely hereon to any extent or for any purpose whatsoever, nor shall any  other  person  have  any  right  of action  of  any  kind  hereon  or  be  deemed  to  be  a  third  party  beneficiary hereunder, except that Placement Agent has the right to rely on the representations and  warranties of Company set forth in Section 4 of this Agreement.         8.12  Legal Tender of United States.  All payments hereunder shall be made in coin or  currency which at the time of payment is legal tender in the United States of America for public  and private debts.         8.13  Captions; Counterparts.  Captions contained in this Agreement in no way define,  limit or extend the scope or intent of their respective provisions.  This Agreement may be executed  in any number of counterparts and by different parties hereto in separate counterparts, each of  which when so executed and delivered shall be deemed to be an original and all of which taken  together  shall  constitute  but  one  and  the  same  instrument.   In  the  event  that  any  signature  is  delivered  by  facsimile  transmission,  or  by  e-mail  delivery  of  a  “.pdf”  format  data  file,  such  signature shall create a valid and binding obligation of the party executing (or on whose behalf  such signature is executed) with the same force and effect as if such facsimile signature page were  an original thereof.         8.14  Knowledge;  Discretion.   All  references  herein  to  Purchaser’s  or  Company’s  knowledge shall be deemed to mean the knowledge of such party based on the actual knowledge  of such party’s Chief Executive Officer and Chief Financial Officer or such other persons holding  equivalent offices.  Unless specified to the contrary herein, all references herein to an exercise of  discretion  or  judgment  by  a  Purchaser,  to  the  making  of  a  determination  or  designation  by  a  Purchaser, to the application of a Purchaser’s discretion or opinion, to the granting or withholding  of  a  Purchaser’s  consent  or  approval,  to  the  consideration  of  whether  a  matter  or  thing  is  satisfactory  or  acceptable  to  a  Purchaser,  or  otherwise  involving  the  decision  making  of  a  Purchaser,  shall  be  deemed  to  mean  that  such  Purchaser  shall  decide  using  the  reasonable  discretion or judgment of a prudent lender.                                         24                                                    

 

         8.15  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  COMPANY  OR  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 (iii) THIS  WAIVER  SHALL  BE  EFFECTIVE  AS  TO  EACH  OF  SUCH  TRANSACTION  DOCUMENTS  AS  IF  FULLY INCORPORATED THEREIN.         8.16  Expenses.  Except as otherwise provided in this Agreement, each of the parties will  bear and pay all other costs and expenses incurred by it or on its behalf in connection with the  transactions contemplated pursuant to this Agreement.          8.17  Survival.  Each of the representations and warranties set forth in this Agreement  shall survive the consummation of the transactions contemplated hereby for a period of one year  after the date hereof.  Except as otherwise provided herein, all covenants and agreements contained  herein shall survive until, by their respective terms, they are no longer operative.                                 [Signature Pages Follow]                                          25                                                    

 

         IN  WITNESS  WHEREOF,  Company  has  caused  this  Subordinated  Note  Purchase  Agreement to be executed by its duly authorized representative as of the date first above written.                                                                          CITIZENS COMMUNITY BANCORP, INC.                                                                                                            By:                                                                                 Stephen M. Bianchi                                          President and Chief Executive Officer                                                                  [Company Signature Page to Subordinated Note Purchase Agreement]                                                 12788366v1   

 

         IN WITNESS WHEREOF, the Purchaser has caused this Subordinated Note Purchase  Agreement to be executed by its duly authorized representative as of the date first above written.                                                                             PURCHASER:                                                                                                       By:                                                                                                     Its:      ______________________________ex42

                                                                   EXHIBIT 4.2                         FORM OF SUBORDINATED NOTE         6.00% Fixed to Floating Rate Subordinated Note due September 1, 2030    THIS OBLIGATION  (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.  THE   INDEBTEDNESS     EVIDENCED     BY    THIS   SUBORDINATED      NOTE    IS  SUBORDINATED  AND  JUNIOR  IN  RIGHT  OF  PAYMENT  TO  THE  CLAIMS  OF  CREDITORS (OTHER THAN CREDITORS OF EXISTING OR FUTURE SUBORDINATED  DEBT)  OF  CITIZENS  COMMUNITY  BANCORP,  INC.  (THE  “ISSUER”),  INCLUDING  OBLIGATIONS OF THE ISSUER TO ITS GENERAL AND SECURED CREDITORS AND IS  UNSECURED.  IT IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION OF CREDIT  BY THE ISSUER OR ANY OF ITS SUBSIDIARIES.  IN THE EVENT OF LIQUIDATION  ALL  CREDITORS  OF  THE  ISSUER  (OTHER  THAN  CREDITORS  OF  EXISTING  AND  FUTURE  SUBORDINATED  INDEBTEDNESS  OF  THE  ISSUER)  SHALL  BE  ENTITLED  TO  BE  PAID  IN  FULL  WITH  SUCH  INTEREST  AS  MAY  BE  PROVIDED  BY  LAW  BEFORE  ANY  PAYMENT  SHALL  BE  MADE  ON  ACCOUNT  OF  PRINCIPAL  OF  OR  INTEREST  ON  THIS  SUBORDINATED  NOTE.   AFTER  PAYMENT  IN  FULL  OF  ALL  SUMS OWING TO SUCH CREDITORS, THE HOLDER OF THIS SUBORDINATED NOTE  AND  THE  HOLDERS  OF  OTHER  OBLIGATIONS  RANKING  PARI  PASSU  WITH  THIS  SUBORDINATED NOTE SHALL BE ENTITLED TO BE PAID  FROM  THE REMAINING  ASSETS  OF  THE  ISSUER  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 ON ACCOUNT OF ANY SHARES OF CAPITAL STOCK  OF THE ISSUER.   THIS SUBORDINATED NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY  IN MINIMUM DENOMINATIONS OF $100,000 AND MULTIPLES OF $10,000 IN EXCESS  THEREOF.   ANY  ATTEMPTED  TRANSFER  OF  THIS  SUBORDINATED  NOTE  IN  A  DENOMINATION OF LESS THAN $100,000 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  MAY  BE  SOLD  ONLY  IN  COMPLIANCE  WITH  APPLICABLE  FEDERAL  AND  STATE  SECURITIES  LAWS.   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.   NEITHER  THIS  SUBORDINATED NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE  REOFFERED,  SOLD,  ASSIGNED,  TRANSFERRED,  PLEDGED,  ENCUMBERED  OR  OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS                                                                                        12788394v1   

 

                                                                                 SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION  REQUIREMENTS OF THE SECURITIES ACT.     IN  CONNECTION  WITH  ANY  TRANSFER,  THE  HOLDER  OF  THIS  SUBORDINATED  NOTE  WILL  DELIVER  TO  THE  ISSUER  SUCH  CERTIFICATES  AND  OTHER  INFORMATION,  INCLUDING  WITHOUT  LIMITATION,  AN  OPINION  OF  COUNSEL,  CERTIFICATION  AND/OR  OTHER  INFORMATION  SATISFACTORY  TO  THE  ISSUER,  AS  MAY  BE  REASONABLY  REQUIRED  BY  THE  ISSUER  TO  CONFIRM  THAT  THE  TRANSFER      COMPLIES       WITH     THE      FOREGOING       RESTRICTIONS.                                               

 

                                                                                 Date:  [●], 2020                                      Principal                                                           Amount:     $[●],000,000                                                                      Cert. No. [●]                                         CUSIP:  [●]                        CITIZENS COMMUNITY BANCORP, INC.        6.00% Fixed-to-Floating Rate Subordinated Note due September 1, 2030         1.    Subordinated  Notes.  This  Subordinated  Note  is  one  of  an  issue  of  notes  of  CITIZENS COMMUNITY BANCORP, INC., a Maryland corporation (the “Issuer”), designated  as  the  “6.00%  Fixed-to-Floating  Rate  Subordinated  Notes  due  September  1, 2030”  (the  “Subordinated Notes”) issued pursuant to that Subordinated Note Purchase Agreement dated as  of the date upon which this Subordinated Note was originally issued (the “Issue Date”) between  the Issuer and the several purchasers of the Subordinated Notes identified in the signature pages  thereto (the “Purchase Agreement”).         2.    Payment.  The Issuer, for value received, promises to pay to [●], or its registered  assigns, the principal sum of [●] Dollars (U.S.) ($[●],000,000), plus accrued but unpaid interest  on September 1, 2030 (the “Maturity Date”) and to pay interest thereon (i) from and including  the  original  issue  date  of  the  Subordinated  Notes  to  but  excluding  September 1,  2025  or  the  earlier redemption date contemplated by Section 9 (Redemption) of this Subordinated Note (the  “Fixed Rate Period”), at the rate of 6.00% per annum, computed on the basis of a 360-day year  consisting  of  twelve  30-day  months  and  payable  semi-annually  in  arrears  on  March  1  and  September  1  of  each  year  (each  payment  date,  a  “Fixed  Interest  Payment  Date”),  beginning  March  1,  2021,  and  (ii)  from  and  including  September  1,  2025  to  but  excluding  the  Maturity  Date or earlier redemption date contemplated by Section 9 (Redemption) of this Subordinated  Note (the “Floating Rate Period”), at the rate per annum, reset quarterly, equal to the Floating  Interest  Rate  (as  defined  below)  determined  on  the  Floating  Interest  Determination  Date  (as  defined below) of the applicable interest period plus 591 basis points, computed on the basis of a  360-day  year  and  the  actual  number  of  days  elapsed  and  payable  quarterly  in  arrears  (each  quarterly period a “Floating Interest Period”) on March 1, June 1, September 1 and December 1  of each year (each payment date, a “Floating Interest Payment Date”). Dollar amounts resulting  from this calculation shall be rounded to the nearest cent, with one-half cent being rounded up.   The term “Floating Interest Determination Date” means the date upon which the Floating Interest  Rate  is  determined  by  the  Calculation  Agent  pursuant  to  the  Three-Month  Term  SOFR  Conventions.                 (a)   An “Interest Payment Date” is either a Fixed Interest Payment Date or a  Floating Interest Payment Date, as applicable.                (b)   The “Floating Interest Rate” means:                     (i)   initially Three-Month Term SOFR (as defined below).                     (ii)  Notwithstanding the foregoing clause (i) of this Section 2(b):                                         1   

 

                                                                                                         (1)   If  the  Calculation  Agent,  determines  prior  to  the  relevant  Floating  Interest  Determination  Date  that  a  Benchmark  Transition  Event  and  its  related  Benchmark Replacement Date (each of such terms as defined below) have occurred with respect  to Three-Month Term SOFR, then the Issuer shall promptly provide notice of such determination  to the Noteholders and Section 2(c) (Effect of Benchmark Transition Event) will thereafter apply  to  all  determinations,  calculations  and  quotations  made  or  obtained  for  the  purposes  of  calculating  the  Floating  Interest  Rate  payable  on  the  Subordinated  Notes  during  a  relevant  Floating Interest Period.                            (2)   However,  if  the  Calculation  Agent,  determines  that  a  Benchmark Transition Event and its related Benchmark Replacement Date have occurred with  respect to  Three-Month  Term SOFR, but for  any reason the Benchmark Replacement  has  not  been  determined  as  of  the  relevant  Floating  Interest  Determination  Date,  the  Floating  Interest  Rate for the applicable Floating Interest Period will be equal to the Floating Interest Rate on the  last  Floating  Interest  Determination  Date  for  the  Subordinated  Notes,  as  determined  by  the  Calculation Agent (as defined below).                     (iii) If  the  then-current  Benchmark  is  Three-Month  Term  SOFR  and  any of the foregoing provisions concerning the calculation of the interest rate and the payment of  interest  during  the  Floating  Rate  Period  are  inconsistent  with  any  of  the  Three-Month  Term  SOFR Conventions (as defined below) determined by the Issuer, then the relevant Three-Month  Term SOFR Conventions will apply.               (c)   Effect of Benchmark Transition Event.                     (i)   If the Calculation Agent  determines  that a Benchmark Transition  Event and its related Benchmark Replacement Date have occurred prior to the Reference Time  (as defined below) in respect of any determination of the Benchmark (as defined below) on any  date,  the  Benchmark  Replacement  will  replace  the  then-current  Benchmark  for  all  purposes  relating to the Subordinated Notes during the relevant Floating Interest Period in respect of such  determination on such date and all determinations on all subsequent dates.                     (ii)  In  connection  with  the  implementation  of  a  Benchmark  Replacement,  the  Issuer  will  have  the  right  to  make  Benchmark  Replacement  Conforming  Changes from time to time, and such changes shall become effective without consent from the  relevant Noteholders (as defined below) or any other party.                     (iii) Any determination, decision or election that may be made by the  Issuer  or  by  the  Calculation  Agent  pursuant  to  the  benchmark  transition  provisions  set  forth  herein,  including  any  determination  with  respect  to  a  tenor,  rate  or  adjustment  or  of  the  occurrence  or  non-occurrence  of  an  event,  circumstance  or  date,  and  any  decision  to  take  or  refrain from taking any action or any selection:                           (1)   will be conclusive and binding absent manifest error;                           (2)   if  made  by  the  Issuer,  will  be  made  in  the  Issuer’s  sole  discretion;                                          2   

 

                                                                                                         (3)   if  made  by  the  Calculation  Agent,  will  be  made  after  consultation with the Issuer, and the Calculation Agent will not make any such determination,  decision or election to which the Issuer reasonably objects; and                           (4)   notwithstanding  anything  to  the  contrary  in  this  Subordinated Note or the Purchase Agreement, shall become effective without consent from the  relevant Noteholders (as defined below) or any other party.                     (iv)  For  the  avoidance  of  doubt,  after  a  Benchmark  Transition  Event  and  its  related  Benchmark  Replacement  Date  have  occurred,  interest  payable  on  this  Subordinated Note for the Floating Rate Period will be an annual rate equal to the sum of the  applicable Benchmark Replacement and the spread specified on the face hereof.                     (v)   As used in this Subordinated Note:                           (1)   “Benchmark”  means,  initially,  Three-Month  Term  SOFR;  provided  that  if  a  Benchmark  Transition  Event  and  its  related  Benchmark  Replacement  Date  have  occurred  with  respect to  Three-Month  Term  SOFR  or  the  then-current  Benchmark,  then  “Benchmark” means the applicable Benchmark Replacement.                           (2)   “Benchmark  Replacement”  means  the  Interpolated  Benchmark  with  respect  to  the  then-current  Benchmark;  provided  that  if  (a)  the  Calculation  Agent cannot determine the Interpolated Benchmark as of the Benchmark Replacement Date or  (b) the then-current Benchmark is Three-Month Term SOFR and a Benchmark Transition Event  and its related Benchmark Replacement Date have occurred with respect to Three-Month Term  SOFR  (in  which  event  no  Interpolated  Benchmark  with  respect  to  Three-Month  Term  SOFR  shall be determined), then “Benchmark Replacement” means the first alternative set forth in the  order below that can be determined by the  Calculation Agent, as of the Benchmark Replacement  Date:                                 a.    The  sum  of  (i)  Compounded  SOFR  and  (ii)  the  Benchmark Replacement Adjustment;                                 b.    the sum of: (i) the alternate rate of interest that has  been selected or recommended by the Relevant Governmental Body as the replacement for the  then-current  Benchmark  for  the  applicable  Corresponding  Tenor  and  (ii) the  Benchmark  Replacement Adjustment;                                 c.    the sum of: (i) the ISDA Fallback Rate and (ii) the  Benchmark Replacement Adjustment;                                 d.    the sum of: (i) the alternate rate of interest that has  been selected by the Issuer as the replacement for the then-current Benchmark for the applicable  Corresponding  Tenor  giving  due  consideration  to  any  industry-accepted  rate  of  interest  as  a  replacement for the then-current Benchmark for U.S. dollar denominated floating rate notes at  such time and (ii) the Benchmark Replacement Adjustment.                                          3   

 

                                                                                                         (3)   “Benchmark  Replacement  Adjustment”  means  the  first  alternative set forth in the order below that can be determined by the Calculation Agent, as of the  Benchmark Replacement Date:                                 a.    the spread adjustment, or method for calculating or  determining such spread adjustment, (which may be a positive or negative value or zero) that has  been  selected  or  recommended  by  the  Relevant  Governmental  Body  for  the  applicable  Unadjusted Benchmark Replacement;                                 b.    if  the  applicable  Unadjusted  Benchmark  Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment;                                 c.    the spread adjustment (which may be a positive or  negative  value  or  zero)  that  has  been  selected  by  the  Issuer  giving  due  consideration  to  any  industry-accepted  spread  adjustment,  or  method  for  calculating  or  determining  such  spread  adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted  Benchmark Replacement for U.S. dollar denominated floating rate notes at such time.                           (4)   “Benchmark  Replacement  Conforming  Changes”  means,  with  respect  to  any  Benchmark  Replacement,  any  technical,  administrative  or  operational  changes (including changes to the definition of “Floating Interest Period,” timing and frequency  of  determining  rates  with  respect  to  each  Floating  Interest  Period  and  making  payments  of  interest, rounding of amounts or tenors and other administrative matters) that the Issuer decides  may  be  appropriate  to  reflect  the adoption  of  such  Benchmark  Replacement  in  a  manner  substantially  consistent  with  market  practice  (or,  if  the  Issuer  decides  that  adoption  of  any  portion of such market practice is not administratively feasible or if the Issuer determines that no  market practice for use of the Benchmark Replacement exists, in such other manner as the Issuer  determines is reasonably necessary).                           (5)   “Benchmark  Replacement  Date”  means  the  earliest  to  occur of the following events with respect to the then-current Benchmark:                                 a.    in  the  case  of  clause  (a)  of  the  definition  of  “Benchmark Transition Event,” the relevant Reference Time in respect of any determination;                                 b.    in  the case of clause (b) or (c) of the definition of  “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of  information  referenced  therein  and  (ii) the  date  on  which  the  administrator  of  the  Benchmark  permanently or indefinitely ceases to provide the Benchmark; or                                 c.    in  the  case  of clause  (d) of  the  definition  of  “Benchmark Transition Event,” the date of such public statement or publication of information  referenced therein.         For the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date  occurs on the same day as, but earlier than, the Reference Time in respect of any determination,  the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time  for purposes of such determination.                                        4   

 

                                                                                                         (6)   “Benchmark  Transition  Event”  means  the  occurrence  of  one or more of the following events with respect to the then-current Benchmark:                                 a.    if  the  Benchmark  is  Three-Month  Term  SOFR,  (i)  the Relevant Governmental Body has not selected or recommended a forward-looking term rate  for a tenor of three months based on SOFR, (ii) the development of a forward-looking term rate  for  a  tenor  of  three  months  based  on  SOFR  that  has  been  recommended  or  selected  by  the  Relevant  Governmental  Body  is  not  complete  or  (iii)  the  Issuer  determines  that  the  use  of  a  forward-looking rate for a tenor of three months based on SOFR is not administratively feasible;                                 b.    a public statement or publication of information by  or  on  behalf  of  the  administrator  of  the  Benchmark  announcing  that  such  administrator  has  ceased or will cease to provide the Benchmark, permanently or indefinitely, provided that, at the  time of such statement or publication, there is no successor administrator that will continue to  provide the Benchmark;                                 c.    a public statement or publication of information by  the  regulatory  supervisor  for  the  administrator  of  the  Benchmark,  the  central  bank  for  the  currency of the Benchmark, an insolvency official with jurisdiction over the administrator for the  Benchmark, a resolution authority with jurisdiction over the administrator for the Benchmark or  a court or an entity with similar insolvency or resolution authority over the administrator for the  Benchmark,  which  states  that  the  administrator of  the  Benchmark  has  ceased  or  will  cease  to  provide the Benchmark permanently or indefinitely, provided that, at the time of such statement  or publication, there is no successor administrator that will continue to provide the Benchmark;  or                                 d.    a public statement or publication of information by  the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark  is no longer representative.                           (7)   “Calculation  Agent”  means  such  bank  or  other  entity  (which may be the Issuer or an affiliate of the Issuer) as may be appointed by the Issuer to act as  Calculation Agent for the Subordinated Notes during the Floating Rate Period.                           (8)   “Compounded  SOFR”  means  the  compounded  average  of  SOFRs for the applicable Corresponding Tenor, with the rate, or methodology for this rate, and  conventions for this rate being established by the Issuer or its designee in accordance with:                                 a.    the  rate,  or  methodology for  this  rate,  and  conventions  for  this  rate  selected  or  recommended  by  the  Relevant  Governmental  Body  for  determining compounded SOFR; provided that:                                 b.    if, and to the extent that, the Issuer or its designee  determines that Compounded SOFR cannot be determined in accordance with clause (a) above,  then the rate, or methodology for this rate, and conventions for this rate that have been selected  by the Issuer or its designee giving due consideration to any industry-accepted market practice  for U.S. dollar denominated floating rate notes at such time.                                         5   

 

                                                                                 For the avoidance of doubt, the calculation of Compounded SOFR will exclude the Benchmark  Replacement Adjustment.                           (9)   “Corresponding  Tenor”  with  respect  to  a  Benchmark  Replacement  means  a  tenor  (including overnight)  having  approximately  the  same  length  (disregarding Business Day adjustment) as the applicable tenor for the then-current Benchmark.                           (10)  “FRBNY” means the Federal Reserve Bank of New York.                           (11)  “FRBNY’s Website” means the website of the FRBNY at  http://www.newyorkfed.org, or any successor source.                           (12)  “Interpolated  Benchmark”  with  respect  to  the  Benchmark  means  the  rate  determined  for  the  Corresponding  Tenor  by  interpolating  on  a  linear  basis  between: (1) the Benchmark for the longest period (for which the Benchmark is available) that is  shorter than the Corresponding Tenor and (2) the Benchmark for the shortest period (for which  the Benchmark is available) that is longer than the Corresponding Tenor.                           (13)  “ISDA”  means  the  International  Swaps  and  Derivatives  Association, Inc. or any successor thereto.                           (14)  “ISDA  Definitions”  means  the  2006  ISDA  Definitions  published by the ISDA or any successor thereto, as amended or supplemented from time to time,  or any successor definitional booklet for interest rate derivatives published from time to time.                           (15)  “ISDA Fallback Adjustment” means the spread adjustment  (which may be a positive or negative value or zero) that would apply for derivatives transactions  referencing  the  ISDA Definitions  to  be determined upon the occurrence  of an index cessation  event with respect to the Benchmark for the applicable tenor.                           (16)  “ISDA Fallback Rate” means the rate that would apply for  derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of  an  index  cessation  date with  respect  to  the  Benchmark  for  the  applicable  tenor  excluding  the  applicable ISDA Fallback Adjustment.                           (17)  “Reference  Time”  with  respect  to  any  determination  of  a  Benchmark means (1) if the Benchmark is Three-Month Term SOFR, the time determined by the  Calculation Agent after giving effect to the Three-Month Term SOFR Conventions, and (2) if the  Benchmark is not Three-Month Term SOFR, the time determined by the Calculation Agent after  giving effect to the Benchmark Replacement Conforming Changes.                           (18)  “Relevant  Governmental  Body”  means  the  Board  of  Governors  of  the  Federal  Reserve  System  (the  “Federal  Reserve”)  and/or  the  FRBNY,  or  a  committee  officially  endorsed  or  convened  by  the  Federal  Reserve  and/or  the  FRBNY  or  any  successor thereto.                                          6   

 

                                                                                                         (19)  “SOFR”  means  the  daily  Secured  Overnight  Financing  Rate  provided  by  the  FRBNY,  as  the  administrator  of  the  benchmark  (or  a  successor  administrator), on the FRBNY’s Website.                           (20)  “Term SOFR” means the forward-looking term rate for the  Corresponding Tenor based on SOFR that has been selected or recommended by the Relevant  Governmental Body.                           (21)  “Term SOFR Administrator” means  any entity  designated  by  the  Relevant  Governmental  Body  as  the  administrator  of  Term  SOFR  (or  a  successor  administrator).                           (22)  “Three-Month Term SOFR” means the rate for Term SOFR  for a tenor of three months that is published by the Term SOFR Administrator at the Reference  Time for any Floating Interest Period, as determined by the Calculation Agent after giving effect  to  the  Three-Month  Term  SOFR  Conventions;  provided,  however,  that  if  Three-Month  Term  SOFR determined as provided above would be less than zero percent (0.00%), than Three-Month  Term SOFR shall be deemed to be zero percent (0.00%).                           (23)  “Three-Month  Term  SOFR  Conventions”  means  any  determination, decision or election with respect  to any technical, administrative or operational  matter (including with respect to the manner and timing of the publication of Three-Month Term  SOFR,  or  changes  to  the  definition  of  “Floating  Interest  Period”,  timing  and  frequency  of  determining Three-Month Term SOFR with respect to each Floating Interest Period and making  payments of interest, rounding of amounts or tenors, and other administrative matters) that the  Issuer  decides  may  be  appropriate  to  reflect  the  use  of  Three-Month  Term  SOFR as  the  Benchmark in a manner substantially consistent with market practice (or, if the Issuer decides  that  adoption  of  any  portion  of  such  market  practice  is  not  administratively  feasible  or  if  the  Issuer determines that no market practice for the use of Three-Month Term SOFR exists, in such  other manner as the Issuer determines is reasonably necessary).                           (24)  “Unadjusted  Benchmark  Replacement”  means  the  Benchmark Replacement excluding the Benchmark Replacement Adjustment.               (d)   In the event that any Fixed Interest Payment Date during the Fixed Rate  Period falls on a day that is not a Business Day (as defined below), the interest payment due on  that date shall be postponed to the next day that is a Business Day and no additional interest shall  accrue  as  a  result  of  that postponement.  In  the  event  that  any  Floating  Interest  Payment  Date  during the Floating Rate Period falls on a day that is not a Business Day (as defined below), the  interest payment due on that date shall be postponed to the next day that is a Business Day and  interest  shall  accrue  to  but  excluding  the  date  interest  is  paid.  However,  if  the  postponement  would cause the day to fall in the next calendar month during the Floating Interest Period, the  Floating Interest Payment Date shall instead be brought forward to the immediately preceding  Business Day. The term “Business Day” means any day other than a Saturday or Sunday or any  other day on which banking institutions in the State of New York are generally authorized or  required by law or executive order to be closed.                                         7   

 

                                                                                       3.    Subordination.   The  indebtedness  of  the  Issuer  evidenced  by  the  Subordinated  Notes, 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  Issuer,  whether  now  outstanding  or  subsequently  created,  assumed  or  incurred  (collectively,  “Senior Indebtedness”), which shall consist of principal of (and premium, if any) and interest, if  any,  on:  (a)  all  indebtedness  of  the  Issuer  for  money  borrowed,  whether  or  not  evidenced  by  bonds,  debentures,  securities,  notes  or  other  written  instruments,  and  all  obligations  to  the  Issuer’s general and secured creditors; (b) any deferred obligations of the Issuer for the payment  of the purchase price of property or assets acquired (other than such obligations to trade creditors  related  to  property  or  assets  acquired  in  the  ordinary  course  of  business);  (c)  all  obligations,  contingent or otherwise, of the Issuer in respect of any letters of credit, bankers’ acceptances,  security purchase facilities and similar credit transactions; (d) any capital lease obligations of the  Issuer; (e) all obligations of the Issuer in respect of interest rate swap, cap or other agreements,  interest  rate  future or  option  contracts,  currency  swap  agreements,  currency  future  or  option  contracts,  commodity  contracts  and  other  similar  arrangements;  (f)  all  obligations  of  the  type  referred  to  in  clauses  (a)  through  (e)  of  other  persons  for  the  payment  of  which  the  Issuer  is  responsible  or  liable  as  obligor,  guarantor  or  otherwise;  and  (g)  all  obligations  of  the  types  referred to in clauses (a) through (f) of other persons secured by a lien on any property or asset of  the  Issuer; except “Senior  Indebtedness”  does  not  include  (i)  the  Subordinated  Notes,  (ii)  any  obligation that by its terms expressly is junior to, or ranks equally in right of payment with, the  Subordinated Notes, or (iii) any indebtedness between the Issuer and any of its subsidiaries or  Affiliates.  This Subordinated Note is not secured by any assets of the Issuer.  “Affiliate” means,  with  respect  to  any  Person,  such  Person’s  immediate  family  members,  partners,  members  or  parent  and  subsidiary  corporations,  and  any  other  Person  directly  or  indirectly  controlling,  controlled  by,  or  under  common  control  with  said  Person  and  their  respective  Affiliates.   “Person” means an individual, a corporation (whether or not for profit), a partnership, a limited  liability  company,  a  joint  venture,  an  association,  a  trust,  an  unincorporated  organization,  a  government or any department or agency thereof (including a governmental agency) or any other  entity or organization.         In  the  event  of  any  bankruptcy,  insolvency,  dissolution,  assignment  for  the  benefit  of  creditors  or  any  liquidation  or  winding  up  of  or  relating  to  the  Issuer,  whether  voluntary  or  involuntary,  holders  of  Senior  Indebtedness  shall  be  entitled  to  be  paid  in  full  before  any  payment  shall  be  made  on  account  of  the  principal  of  or  interest  on  the  Subordinated Notes,  including this 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, together with the holders of any obligations of the Issuer  ranking on a parity with the Subordinated Notes, shall be entitled to be paid from the remaining  assets  of  the  Issuer  the  unpaid  principal  thereof,  and  the  unpaid  interest  thereon  before  any  payment  or  other  distribution,  whether  in  cash,  property  or  otherwise,  shall  be  made  (i)  with  respect  to  any  obligation  that  by  its  terms  expressly  is  junior  to,  or  ranks  equally  in  right  of  payment with,  the Subordinated Notes,  or  any indebtedness  between the  Issuer and any of its  subsidiaries or Affiliates or (ii) on account of any capital stock.         If there shall have occurred and be continuing (a) a default in any payment with respect to  any Senior Indebtedness or (b) an event of default with respect to any Senior Indebtedness as a  result of which the maturity thereof is accelerated, unless and until such payment default or event                                         8   

 

                                                                                 of default shall have been cured or waived or shall have ceased to exist, no payments shall be  made by the  Issuer with  respect  to  the Subordinated Notes.  The provisions  of this  paragraph  shall not apply to any payment with respect to which the immediately preceding paragraph of  this Section 3 would be applicable.         Nothing  herein  shall act to  prohibit, limit  or impede the  Issuer from  issuing  additional  debt of the Issuer having the same rank as the Subordinated Notes or which may be junior or  senior in rank to the Subordinated Notes.         4.    Merger and Sale of Assets.  The Issuer shall not merge into another entity, effect a  Change in Bank Control, or convey, transfer or lease substantially all of  its properties and assets  to any person, unless:         (a)   the continuing entity into which the Issuer is merged or the person which acquires  by  conveyance  or  transfer  or  which  leases  substantially  all  of  the  properties  and  assets  of  the  Issuer shall be a corporation, association or other legal entity organized and existing under the  laws of the United States of America, any State thereof or the District of Columbia and expressly  assumes the due and punctual payment of the principal of and any premium and interest on the  Subordinated  Notes  according  to  their  terms,  and  the  due  and  punctual  performance  of  all  covenants and conditions hereof on the part of the Issuer to be performed or observed; and         (b)   immediately  after  giving  effect  to  such transaction,  no  Event  of  Default  (as  defined  below),  and  no  event  which,  after  notice  or  lapse  of  time  or  both,  would  become  an  Event of Default, shall have happened and be continuing.         “Change in Bank Control” means the sale, transfer, lease or conveyance by the Issuer, or  an issuance of stock by the Bank, in either case resulting in ownership by the Issuer of less than  80% of the Bank.         5.    Events  of  Default;  Acceleration;  Compliance  Certificate.  Notwithstanding  any  cure periods provided for below, the Issuer shall promptly notify Holder in writing when Issuer  becomes aware of the happening of any event described below. Regardless of whether Issuer has  provided  the  forgoing  notice,  each  of  the  following  events  shall  constitute  an   “Event  of  Default”:         (a)   the issuer fails to pay any principal or installment of interest on this Subordinated  Note when due (or, in the case of interest, within fifteen days of its due date);         (b)   the  Issuer  materially  fails  to  keep  or  perform  any  of  its  material  agreements,  undertakings,  obligations,  covenants  or  conditions  under  the  Purchase  Agreement  or  this  Subordinated  Note  (other  than  as  provided  for  under  paragraph  (a)  above)  and  such  failure  continues for a period of thirty (30) days after the Issuer has received written notice thereof from  the Holder;          (c)   any certification made to the Holder pursuant to the Purchase Agreement by the  Issuer  or  otherwise  made  in  writing  to  Holder  in  connection  with  or  as  contemplated  by  the  Purchase Agreement or this Subordinated Note by the Issuer shall be materially incorrect or false  as of the delivery date of such certification, or any representation to Holder by the Issuer as to                                        9   

 

                                                                                 the  financial  condition  or  credit  standing  of  the  Issuer  is  or  proves  to  be  materially  false  or  misleading;          (d)   the entry of a decree or order for relief in respect of the Issuer by a court having  jurisdiction  in  the  premises  in  an  involuntary  case  or  proceeding  under  any  applicable  bankruptcy, insolvency, or reorganization law, now or hereafter in effect of the United States or  any political subdivision thereof, and such decree or order will have continued unstayed and in  effect for a period of 60 consecutive days; or         (e)   the Issuer (i) becomes insolvent or is unable to pay its debts as they mature, (ii)  makes an assignment for the benefit of creditors, (iii) admits in writing its inability to pay its  debts as they mature, or (iv) ceases to be a bank holding company or financial holding company  under the Bank Holding Company Act of 1956, as amended;          (f)   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; and         (g)   the  liquidation  of  the  Issuer  (for  avoidance  of  doubt,  “liquidation”  does  not  include  any  merger,  consolidation,  sale  of  equity  or  assets  or  reorganization  (exclusive  of  a  reorganization in bankruptcy) of the Issuer or any of its subsidiaries).         Unless  the  principal  of  this  Subordinated  Note  already  shall  have  become  due  and  payable, if an Event of Default set forth in subsection (d), (e) or (f) above shall have occurred  and be continuing, the Holder of this Subordinated Note, by notice in writing to the Issuer, may  declare the principal amount of this Subordinated Note to be due and payable immediately and,  upon  any  such  declaration  the  same  shall  become  and  shall  be  immediately  due  and  payable.   EXCEPT  AS  DESCRIBED  IN  THE  PRECEDING  SENTENCE,  THERE  IS  NO  RIGHT  OF  ACCELERATION IN THE CASE OF A DEFAULT IN THE PAYMENT OF THE PRINCIPAL  OF,  PREMIUM,  IF  ANY,  OR  INTEREST  ON  THIS  SUBORDINATED  NOTE  OR  IN  THE  PERFORMANCE OF ANY OTHER OBLIGATION OF THE ISSUER HEREUNDER.           The  Issuer  waives  demand,  presentment  for  payment,  notice  of  nonpayment,  notice  of  protest,  and  all  other  notices.  The  Issuer,  within  45  calendar  days  after  the  receipt  of  written  notice  from  any  Holder  of  the  occurrence  of  an  Event  of  Default  with  respect  to  this  Subordinated Note, shall mail to all Holders, at their addresses shown on the Security Register  (as defined in Section 12 below), such written notice of Event of Default, unless such Event of  Default  shall  have  been  cured  or  waived  before  the  giving  of  such  notice  as  certified  by  the  Issuer in writing.         6.    Affirmative Covenants of the Issuer.         (a)   Notice of Certain Events.  The Issuer shall provide written notice to the Holder of  the occurrence of any of the following events within thirty calendar days of  the Issuer becoming  aware of the occurrence of such event:                                           10   

 

                                                                                             (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 either the Issuer or Citizens Community  Federal National Association (the “Bank”) is less than ten percent (10.0%), eight percent (8.0%),  six and one half percent (6.5%) or five percent (5.0%), respectively, as of the end of any calendar  quarter;                (ii)  The  Issuer,  the  Bank  or  any  officer  of  the  Issuer or  the  Bank,  becomes  subject to any formal, written regulatory enforcement action;                (iii) The ratio of (A) non-accrual loans and any other loans that are ninety (90)  days or more past due plus other real estate owned (excluding any such loans that are guaranteed  or covered by any governmental agency or government-sponsored entity) to (B) total assets of  the Issuer becomes greater than four percent (4.0%), as of the end of any calendar quarter;               (iv)  The appointment, resignation, removal or termination of the chief  executive officer, president, chief operating officer, chief financial officer, chief credit officer,  chief lending officer or any director of the Issuer;               (v)   There  is  a  change  in  ownership  of  25%  or  more  of  the  outstanding  securities of the Issuer entitled to vote for the election of directors; or               (vi)  The Issuer undertakes the issuance of any additional Indebtedness.           (b)   Compliance with  Laws.  The  Issuer and each Subsidiary shall comply with the  requirements of all laws, regulations, orders and decrees applicable to it or its properties, except  for such noncompliance that would not reasonably be expected to result in a material  adverse  effect (i) in the condition (financial or otherwise), or in the earnings of the Issuer, whether or not  arising  in  the  ordinary  course  of business,  or  (ii)  on  the  ability  of  the  Issuer  to  perform  its  obligations under this Subordinated Note.         (c)   Taxes and Assessments.  The Issuer shall punctually pay and discharge all taxes,  assessments, and other governmental charges or levies imposed upon it or upon its income or  upon  any  of  its  properties;  provided,  that  no  such  taxes,  assessments  or  other  governmental  charges need be paid if they are being contested in good faith by the Issuer.         (d)   Financial Statements; Access to Records.                 (i)   Not later than forty-five (45) days following the end of each fiscal quarter,  the Issuer shall provide the Holder with  copies of the Issuer’s  unaudited consolidated balance  sheet and statement of income (loss) for and as of the end of such immediately preceding fiscal  quarter, provided that the Issuer shall not be obligated to provide Holder copies of the Issuer’s  financial statements  that are included in  a Quarterly Report on Form 10-Q that the  Issuer has  publicly  filed  with  the  U.S.  Securities  and  Exchange  Commission.  Such  financial  statements  shall be prepared in accordance with GAAP applied on a consistent basis throughout the period  involved.                 (ii)  Not later than ninety (90) days from the end of each fiscal year, the Issuer  shall provide the Holder with copies of the Issuer’s audited financial statements consisting of the                                         11   

 

                                                                                 consolidated  balance  sheet  of  the  Issuer  as  of  date  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, provided that the Issuer shall not be obligated to provide Holder copies of  the Issuer’s audited financial statements that are included in  an Annual  Report on Form 10-K  that  the  Issuer  has  publicly  filed  with  the  U.S.  Securities  and  Exchange  Commission.  Such  financial statements shall be prepared in accordance with GAAP applied on a consistent basis  throughout the period involved.           7.    Negative Covenants of the Issuer.         (a)   Limitation  on  Dividends.   The  Issuer  shall  not  declare  or  pay  any  dividend  or  make any distribution on capital stock or other equity securities of any kind of the Issuer if the  Issuer is not “well capitalized” for regulatory purposes immediately prior to the declaration of  such dividend or distribution, except for (i) dividends or distributions in shares of, or options,  warrants or rights to subscribe for or purchase shares of, any class of the Issuer’s common stock;  (ii) the declaration and payment of a dividend of rights to subscribe or purchase shares of the  Issuer’s  stock  in  connection  with  the  implementation  of  a  shareholders’  rights  plan,  or  the  issuance of stock under any such plan in the future, or the redemption or repurchase of any such  rights  pursuant  thereto;  or  (iii)  dividends  payable  in  shares  of  the  Issuer’s  stock  or  rights  to  purchase such shares as a result of a reclassification of the Issuer’s capital stock or the exchange  or conversion of one class or series of the Issuer’s capital stock for another class or series of the  Issuer’s capital stock.         8.    Failure  to  Make  Payment.   In  the  event  of  failure  by  the  Issuer  to  make  any  required payment of principal or interest on this Subordinated Note (and, in the case of payment  of interest, such failure to pay shall have continued for 15 calendar days), the Issuer will, upon  demand of the Holder, pay to the Holder 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 Issuer fails to pay such amount upon such demand,  the Holder may, among other things, institute a judicial proceeding for the collection of the sums  so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce  the same  against the  Issuer and collect  the amounts  adjudged or decreed to  be payable in  the  manner provided by law out of the property of the Issuer.         Upon the occurrence of a failure by the Issuer to make any required payment of principal  or interest on the Subordinated Note, or an Event of Default until such Event of Default is cured  by the Issuer, the Issuer shall not (a) declare or pay any dividends or distributions on, or redeem,  purchase,  acquire,  or  make  a  liquidation  payment  with  respect  to,  any  of  the  Issuer’s  capital  stock, (b) make any payment of principal or interest or premium, if any, on or repay, repurchase  or redeem  any debt  securities of the  Issuer that rank equal  with  or junior to  the Subordinated  Notes,  or  (c)  make  any  payments  under  any  guarantee  that  ranks  equal  with  or  junior  to  the  Subordinated Notes, other than to the extent not prohibited under Section 5.3.5 of the Purchase  Agreement (as amended from time to time). The limitations imposed by the provisions of this  Section 8 shall apply whether or not the Holder has notified the Issuer of an Event of Default.                                          12   

 

                                                                                       9.    Redemption.           (a)   Redemption  Prior  to  Fifth  Anniversary.   Subject  to Section  9(c) hereof,  this  Subordinated Note shall not be redeemable by the Issuer prior to the fifth anniversary of the date  upon which this Subordinated Note was originally issued to Holder (the “Issue Date”), except  that  in  the  event  (i) this  Subordinated  Note  no  longer  qualifies  as  Tier 2  Capital  (as  defined  below) as a result of a Tier 2 Capital Event,  (ii) of a Tax Event (as defined below) or (iii) the  Issuer receives an opinion of counsel to Issuer that there is a material risk that the Issuer is or,  within 120 days after the receipt of such opinion will be, required to register as an investment  company pursuant to the Investment Company Act of 1940, as amended, the Issuer may redeem  this Subordinated Note in whole at any time at an amount equal to 100% of the principal amount  outstanding plus accrued but unpaid interest and any late fee, if applicable, to but excluding the  redemption  date.  “Tier  2  Capital  Event”  means  the  receipt  by  the  Issuer  of  an  opinion  of  independent bank regulatory counsel that, as a result of (1) any amendment to, or change in, the  laws, rules or regulations of the United States (including, for the avoidance of doubt, any agency  or  instrumentality  of  the  United  States,  including  the  Federal  Reserve  and  other  federal  bank  regulatory  agencies)  or  any  political  subdivision  of  or  in  the  United  States  that  is  enacted  or  becomes  effective  after  the  issue  date  of  this Subordinated  Note,  (2)  any  proposed  change  in  those laws, rules or regulations that is announced or becomes effective after the issue date of this  Subordinated  Note,  or  (3)  any  official  administrative  decision  or  judicial  decision  or  administrative action or other official pronouncement interpreting or applying those laws, rules,  regulations, policies or guidelines with respect thereto that is announced after the issue date of  this Subordinated Note, there exists a material risk that the Issuer will not be entitled to treat the  Subordinated Notes then outstanding as Tier 2 capital (or its equivalent) for purposes of capital  adequacy guidelines of the Federal Reserve Board, as then in effect and applicable to the Issuer  (“Tier 2 Capital”), for so long as any Subordinated Notes are outstanding.  “Tax Event” means  the receipt by the Issuer of an opinion of counsel to the Issuer that as a result of any amendment  to, or change (including any final and adopted (or enacted) prospective change) in, the laws (or  any regulations thereunder) of the United States or any political subdivision or taxing authority  thereof or therein, or as a result of any official administrative pronouncement or judicial decision  interpreting or applying such laws or regulations, there exists a material risk that interest payable  by  the  Issuer  on  the  Subordinated  Notes  is  not,  or  within  120  days  after  the  receipt  of  such  opinion will not be, deductible by the Issuer, in whole or in part, for United States federal income  tax purposes.         (b)   Redemption on or after Fifth Anniversary.  On or after the fifth anniversary of the  Issue Date, subject to Section 9(c) hereof, Subordinated Note shall be redeemable by the Issuer,  in whole at any time, or in part from time to time, at a redemption price equal to 100% of the  outstanding  principal  amount  to  be  redeemed,  plus  accrued  but  unpaid  interest  thereon  to  but  excluding the redemption date.         (c)   Any  redemption  or  prepayment of  this  Subordinated  Note  shall  be  subject  to  receipt of prior written approval of the FRB (or any successor Federal bank regulatory agency  having  supervisory  authority  over  the  Issuer)  and  any  and  all  other  required  federal  and  state  regulatory approvals.  In the case of any redemption or prepayment of this Subordinated Note,  the Issuer will give the Holder notice not less than 30 nor more than 60 calendar days prior to the  redemption or prepayment date as to the aggregate principal amount to be redeemed or prepaid.                                         13   

 

                                                                                       (d)   Subject to any required federal and state regulatory approvals and the provisions  of this Subordinated Note, the Issuer shall have the right to purchase any of the Subordinated  Notes at any time in the open market, private transactions or otherwise.  If the Issuer purchases  any  Subordinated  Notes,  it  may,  in  its  discretion,  hold,  resell  or  cancel  any  of  the  purchased  Subordinated Notes.         10.   Payment  Procedures.   Payment  of  the  principal  and  interest  payable  on  the  Maturity Date will be made by check, or by wire transfer in immediately available funds to a  bank account in the United States designated by the registered Holder of this Subordinated Note  if such Holder shall have previously provided wire instructions to the Issuer, upon presentation  and surrender of this Subordinated Note at the Payment Office (as defined in Section 15 below)  or at such other place or places as the Issuer shall designate by notice to the registered Holders as  the Payment Office, provided that this Subordinated Note is presented to the Issuer in time for  the  Issuer  to  make  such  payments  in  such  funds  in  accordance  with  its  normal  procedures.   Payments of interest (other than interest payable on the Maturity Date) shall be made by wire  transfer  in  immediately  available  funds  or  check  mailed  to  the  registered  Holder,  as  such  person’s  address  appears  on  the  Security  Register.   Interest  payable  on  any  Interest  Payment  Date shall be payable to the Holder in whose name this Subordinated Note is registered at the  close of business on May 15, August 15, November 15, or February 15, as the case may be  (whether or not a Business Day), next preceding such Interest Payment Date (such date being  referred  to  herein  as  the  “Regular  Record  Date”)  for  such  Interest  Payment  Date,  except  that  interest not paid on the Interest Payment Date, if any, will be paid to the Holder in whose name  this Subordinated Note is registered at the close of business on a special record date fixed by the  Issuer (a “Special Record Date”), notice of which shall be given to the Holder not less than ten  (10) calendar days prior to such Special Record Date.  (The Regular Record Date and Special  Record Date are referred to herein collectively as the “Record Dates”).  To the extent permitted  by applicable law, interest shall accrue, at the rate at which interest accrues on the principal of  this  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 costs and  expenses of the Holder hereunder; then against interest due hereunder; and then against principal  due hereunder.  Holder acknowledges and agrees that the payment of all or any portion of the  outstanding  principal  amount  of  this  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  Holder receives payments in excess of its pro rata share of the Issuer’s payments to the holders  of all of the Subordinated Notes, then Holder shall hold in trust all such excess payments for the  benefit of the holders of the other Subordinated Notes and shall pay such amounts held in trust to  such other holders upon demand by such holders.         11.   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.         12.   Registration of Transfer, Security Register.  Except as otherwise provided herein,  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  in  person,  or  by  his  attorney  duly  authorized  in  writing,  at  the  Payment  Office.   The  Issuer shall maintain a register providing for the registration of the Subordinated Notes and any                                         14   

 

                                                                                 exchange or transfer thereof (the “Security Register”).  Upon surrender or presentation of this  Subordinated Note for exchange or registration of transfer, the Issuer shall execute and deliver in  exchange  therefor  a  Subordinated  Note  or  Subordinated  Notes  of  like  aggregate  principal  amount, each in a minimum denomination of $100,000 or any amount in excess thereof which is  an integral multiple of $10,000 (and, in the absence of an opinion of counsel satisfactory to the  Issuer to the contrary, bearing the restrictive legend(s) set forth hereinabove) and that is or are  registered in such name or names requested by the Holder.  Any Note presented or surrendered  for registration of transfer or for exchange shall be duly endorsed and accompanied by a written  instrument of transfer in such form as is attached hereto and incorporated herein, duly executed  by the Holder or its attorney duly authorized in writing, with such tax identification number or  other  information  for  each  person  in  whose  name  a  Subordinated  Note  is  to  be  issued,  and  accompanied  by  evidence  of  compliance  with  any  restrictive  legend(s)  appearing  on  such  Subordinated Note or Subordinated Notes as the Issuer may reasonably request to comply with  applicable law.  No exchange or registration of transfer of this Subordinated Note shall be made  on or after the fifteenth day immediately preceding the Maturity Date.           13.   Charges and Transfer Taxes.  No service charge (other than any cost of delivery)  shall be imposed for any exchange or registration of transfer of this Subordinated Note, but the  Issuer  may  require  the  payment  of  a  sum  sufficient  to  cover  any  stamp  or  other  tax  or  governmental  fee  or  charge  that  may  be  imposed  in  connection  therewith  (or  presentation  of  evidence that such tax, charge or fee has been paid).         14.   Ownership.  Prior to due presentment of this Subordinated Note for registration of  transfer, the Issuer may treat the Holder 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 be overdue, and the Issuer shall not be affected by any notice to  the contrary.         15.   Notices.  All notices to the Issuer under this Subordinated Note shall be in writing  and addressed to the Issuer at its address forth in Section 8.5 of the Purchase Agreement, or to  such other address as the Issuer may notify to the Holder (the “Payment Office”), and delivered  in accordance with, and effective as provided in, Section 8.5 of the Purchase Agreement.  All  notices to the Holders shall be in writing and sent by first-class mail to each Holder at his or its  address as set forth in the Security Register.         16.   Denominations.   The  Subordinated  Notes  are  issuable  only  as  fully  registered  Notes without interest coupons in minimum denominations of $100,000 or any amount in excess  thereof which is an integral multiple of $10,000.         17.   Absolute  and  Unconditional  Obligation  of  the  Issuer.   No  provisions  of  this  Subordinated  Note  shall  alter  or  impair  the  obligation  of  the  Issuer,  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.         18.   Waiver  and  Consent.   Any  consent  or  waiver  given  by  the  Holder  of  this  Subordinated Note shall be conclusive and binding upon such Holder and upon all future Holders                                         15   

 

                                                                                 of this Subordinated Note and of any Note issued upon the registration of transfer hereof or in  exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made  upon this Subordinated Note.  This Subordinated Note may be also amended or waived pursuant  to, and in accordance with, the provisions of Section 8.3 of the Purchase Agreement.  If all or  any portion of the Subordinated Notes ceases to be deemed to be Tier 2 Capital, other than due to  the  limitation  imposed  on  the  capital  treatment  of  subordinated  debt  during  the  five  (5)  years  immediately preceding the Maturity Date of the Subordinated Notes, the Issuer will immediately  notify the Holder, and thereafter the Issuer and the Holder will work together in good faith to  execute and deliver all agreements as reasonably necessary in order to restructure the applicable  portions of the obligations evidenced by this Subordinated Note to qualify as Tier 2 Capital, if  requested by the issuer.          (a)   No delay or omission of the Holder to exercise any right or remedy accruing upon  any Event of Default shall impair such right or remedy or constitute a waiver of any such Event  of Default or an acquiescence therein.         (b)   Any insured depository institution which shall be a Holder of this Subordinated  Note or which otherwise shall have any beneficial ownership interest in this Subordinated Note  shall, by its acceptance of such Note (or beneficial interest therein), be deemed to have waived  any right of offset with respect to the indebtedness evidenced thereby.         19.   Further  Issues.   The  Issuer  may,  without  the  consent  of  the  holders  of  the  Subordinated Notes, create and issue additional notes having the same terms and conditions of  the Subordinated Notes (except for the Issue Date and issue price) so that such further notes shall  be consolidated and form a single series with the Subordinated Notes.           20.   Governing Law; Interpretation.  This Subordinated Note shall be governed by and  construed  in  accordance  with  applicable  federal  law  and  the  laws  of  the  State  of  New  York,  without regard to conflict of laws principles of said state.  This Subordinated Note is intended to  meet  the  criteria  for  qualification  of  the  outstanding  principal  as  Tier 2  capital  under  the  regulatory guidelines of the FRB, and the terms hereof shall be interpreted in a manner to satisfy  such intent.         21.   Priority.   The  Subordinated  Notes  rank pari  passu among  themselves  and pari  passu,  in  the  event  of  any  insolvency  proceeding,  dissolution,  assignment  for  the  benefit  of  creditors,  reorganization,  restructuring  of  debt,  marshaling  of  assets  and  liabilities  or  similar  proceeding  or  any  liquidation  or  winding  up  of  the  Issuer,  with  all  other  present  or  future  unsecured subordinated debt obligations of the Issuer, except any unsecured subordinated debt  that,  pursuant  to  its  express  terms,  is  senior  or  subordinate  in  right  of  payment  to  the  Subordinated Notes.          22.   Status  as  Collateral.   The obligation  evidenced  by  this  Subordinated  Note  is  ineligible as collateral for a loan by the Issuer or any subsidiary of the Issuer.         23.   Defined Terms. Any capitalized term used herein and not otherwise defined shall  have the meaning ascribed to it in the Purchase Agreement.                                         16   

 

                                                                                       24.   Successors and Assigns.  This Subordinated Note shall be binding upon the Issuer  and inure to the benefit of the Holder and its respective successors and permitted assigns.  The  Holder  may  assign  all,  or  any  part  of,  or  any  interest  in,  the Holder’s  rights  and  benefits  hereunder  at  any  time  without  notice  to  or  consent  of  the  Issuer.   To  the  extent  of  any  such  assignment, such assignee shall have the same rights and benefits against the Issuer.  The Issuer  shall not assign this Subordinated Note or its obligations hereunder except as provided in Section  4 hereto or with the prior written consent of the Holder.                                                                         [Signature Page Follows]                                          17   

 

                                                                                             IN WITNESS WHEREOF, the undersigned has caused this Subordinated Note to be duly   executed and attested and its corporate seal to be hereunto affixed.                                                                          CITIZENS COMMUNITY BANCORP, INC.                                                                                                            By:                                                                                 Stephen M. Bianchi                                          President and Chief Executive Officer                                               ATTEST:                                                                                                                                                 Name:                                Title:

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