Document:

EX-10.1

  Exhibit 10.1

  Certain information (indicated by [***]) has been omitted from this exhibit because it is both (i) not material and (ii) is of the type that the registrant treats as private or confidential.

  SUBORDINATED NOTE PURCHASE AGREEMENT

  This SUBORDINATED NOTE PURCHASE AGREEMENT (this “Agreement”) is dated as of March 4, 2022, and is made by and between Guaranty Bancshares, Inc., a Texas corporation (the “Company”), and the purchaser of the Subordinated Note (as defined herein) identified on the signature page hereto (the “Purchaser” and together with any other purchasers of the Subordinated Notes hereunder, the “Purchasers”).

  RECITALS

  WHEREAS, the Company has requested that the Purchasers purchase from the Company up to $35,000,000 in aggregate principal amount of Subordinated Notes, which aggregate amount is intended to qualify as Tier 2 Capital (as defined herein);

  WHEREAS, the Company has engaged Keefe, Bruyette & Woods, Inc. as its exclusive placement agent (“Placement Agent”) for the offering of the Subordinated Notes;

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

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

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

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

   

  

   

  AGREEMENT

  1.DEFINITIONS.

  1.1Defined Terms.  The following capitalized terms used in this Agreement and in the Subordinated Note 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 Guaranty Bank and Trust, N.A., a national banking association and wholly-owned Subsidiary of the Company.

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

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

  “Charter” means the Amended and Restated Certificate of Formation of the Company, as amended and as in effect on the Closing Date. 

  “Closing” has the meaning set forth in Section 2.2.

  “Closing Date” means March 4, 2022.

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

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

  “Company’s Reports” means (i) the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 12, 2021, including the audited financial statements of the Company contained therein; (ii) the Company’s Quarterly Reports on Form 10-Q for the quarter ended March 31, 2021, as filed with the SEC on May 7, 2021, the quarter ended June 30, 2021, as filed with the SEC on August 6, 2021, the quarter ended September 30, 2021, as filed with the SEC on November 5, 2021, including the unaudited financial statements of the Company contained therein; (iii) the Company’s Current Reports on Form 8-K, as filed with the SEC on January 5, 2021, January 21, 2021, March 12, 2021, April 2, 2021, April 7, 2021, May 20, 2021, June 17, 2021, July 8, 2021, July 19, 2021, September 7, 2021, September 10, 2021, September 16, 2021, October 1, 2021, October 18, 2021, December 16, 2021, January 4, 2022, January 18, 2022; (iv) the Company’s Definitive Proxy Statement, as filed with the SEC on April 

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  5, 2021, (v) the Company’s and Bank’s public reports for the year ended December 31, 2021; as filed with the FRB and FDIC as required by regulations of the FRB and FDIC, respectively.

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

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

  “Equity Interest” means any and all shares, interests, participations or other equivalents (however designated) of capital stock 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 Note.

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

  “FDIC” means the Federal Deposit Insurance Corporation.

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

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

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

  “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 

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  Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and all comparable state and local laws, laws of other jurisdictions or orders and regulations.

  “Indebtedness” means:  (i) all obligations in respect of indebtedness for borrowed money that, according to GAAP as in effect from time to time, would be included in determining total liabilities as shown on the consolidated balance sheet of the Company; and (ii) all obligations for indebtedness of the type referred to in the preceding clause (i) of persons other than the Company or any of its Subsidiaries, secured by any lien on  property owned by the Company or any Subsidiary whether or not such obligations shall have been assumed (it being understood that the amount of such obligations described in clause (ii), for the purposes of this definition, shall be the lesser of the aggregate principal amount of such obligations and the fair market value (as determined by the Company in good faith) of the property of the Company or any Subsidiary securing such obligations); provided, however, Indebtedness shall not include deposits or other indebtedness created, incurred or maintained in the ordinary course of the Company’s or the Bank’s business (including, without limitation, federal funds purchased, advances from any Federal Home Loan Bank, secured deposits of municipalities, letters of credit issued by the Company or the Bank or any other Subsidiary, repurchase arrangements and derivatives transactions 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 any change or effect that (i) is or would be material and adverse to the financial condition, results of operations or business of the Company and its Subsidiaries, taken as a whole, or (ii) would materially impair the ability of the Company to perform its respective obligations under any of the Transaction Documents; provided, however, that “Material Adverse Effect” shall not be deemed to include the impact of (1) changes after the date of this Agreement in banking and similar laws, rules or regulations of general applicability or interpretations thereof by Governmental Agencies, (2) changes after the date of this Agreement in GAAP or regulatory accounting requirements applicable to financial institutions in the United States 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 the Company or the Bank (4) direct effects of compliance with this Agreement on the operating performance of the Company or the Bank including expenses incurred by the Company, the Bank or such Purchaser in consummating the transactions contemplated by this Agreement, and (5) the effects of any action or omission taken by the Company with the prior written consent of such Purchaser, and vice versa, or as otherwise contemplated by this Agreement and the Subordinated Note, (6) the effects of any declaration of a state of emergency by the government of the United States or any State of the United States; and (7) the effects of any epidemic, pandemic or disease outbreak, or continuation or extension of any epidemic, pandemic or disease outbreak, affecting the United States, except, in the case of the 

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  foregoing clauses (1), (2), (3), (6) or (7), to the extent that the Company is disproportionately adversely affected thereby relative to other financial institutions with similar operations. 

  “Maturity Date” means April 1, 2032.

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

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

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

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

  “QIB” means a “qualified institutional buyer” as defined in Rule 144A under the Securities Act.

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

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

  “SEC” means the U.S. Securities and Exchange Commission.

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

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

  “Subordinated Note” means the Subordinated Note 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, subdivision 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 other Person in which a majority of the outstanding voting shares of Equity Interest entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees or equivalent Person or body thereof, 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.

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  “Transaction Documents” means this Agreement and the Subordinated Note.

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

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

  2.SUBORDINATED DEBT.

  2.1Certain Terms.  Subject to the terms and conditions herein contained, the Company proposes to issue and sell to the Purchasers, severally and not jointly, Subordinated Notes in an aggregate principal amount equal to the aggregate of the Subordinated Note Amounts.  The Purchasers, severally and not jointly, agree to purchase the Subordinated Notes from the Company in an amount equal to such Purchaser’s Subordinated Note Amount from the Company on the Closing Date in accordance with the terms of, and subject to the conditions set forth in, this Agreement and the Subordinated Notes.  The Subordinated Note Amounts shall be disbursed in accordance with Section 3.1.  

  2.2The Closing.  The execution and delivery of the Transaction Documents and the closing of the sale and purchase of the Subordinated Notes (the “Closing”) shall occur remotely via electronic or other exchange of documents and signature pages, at 10:00 a.m. (local time) on the Closing Date, or at such other place or time or on such other date as the parties hereto may agree.  

  2.3No Right of Offset.  The Purchaser hereby expressly waives any right of offset it may have against the Company or any of its Subsidiaries.

  2.4Use of Proceeds.  The Company shall use the net proceeds from the sale of the Subordinated Notes for general corporate purposes, which may include, without limitation, the repayment of certain outstanding indebtedness and repurchases of Company common stock; provided; however, that no part of the proceeds from the sale of the Subordinated  Note  will  be  used  by  the  Company  or  any  of  its Subsidiaries  or  Affiliates,  directly  or indirectly, to pay Stifel, Nicolaus & Company, Incorporated or any affiliate of Stifel, Nicolaus & Company, Incorporated, including the Placement Agent.

  3.DISBURSEMENT.

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  3.1Disbursement.  On the Closing Date, assuming all of the conditions set forth in Section 3.2 have been satisfied by the Company or waived by the Purchaser, the Purchaser shall disburse to the Company in immediately available funds the Subordinated Note Amount set forth on the Purchaser’s respective signature page to this Agreement in exchange for a Subordinated Note with a principal amount equal to such Subordinated Note Amount.

  3.2Conditions Precedent to Disbursement.  

  3.2.1Conditions to the Purchasers’ Obligation. The obligation of each Purchaser to consummate the purchase of the Subordinated Notes to be purchased by such Purchaser at Closing and to effect the Disbursement is subject to delivery by or at the direction of the Company to such Purchaser (or, with respect to the opinion of counsel, the Placement Agent), on or prior to the Closing Date, of  each of the following (unless such Purchaser shall have waived such satisfaction or delivery):

  3.2.1.1Transaction Documents.  This Agreement and the Purchaser’s Subordinated Note has been duly authorized and executed by the Company.

  3.2.1.2Authority Documents.

  (a)A copy, certified by the Secretary or Assistant Secretary of the Company, of the Charter of the Company;

  (b)A certificate of existence of the Company issued by the Secretary of State of the State of Texas;

  (c)A copy, certified by the Secretary or Assistant Secretary of the Company, of the Bylaws of the Company;

  (d)A copy, certified by the Secretary or Assistant Secretary of the Company, of the resolutions of the Board of Directors of the Company, or any duly authorized committee thereof, authorizing the execution, delivery and performance of the Transaction Documents;

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

  (f)The opinions of Fenimore Kay Harrison, LLP, counsel to the Company, dated as of the Closing Date, substantially in the form set forth at Exhibit B attached hereto addressed to the Purchasers and the Placement Agent.

  3.2.2Conditions to the Company’s Obligation.

  3.2.2.1With 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, on or prior to the Closing Date, of each of the following (unless the Company shall have waived such satisfaction or delivery):

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  (a)The delivery to the Company of this Agreement duly authorized and executed by such Purchaser; and

  (b)The disbursement to the Company in immediately available funds the Subordinated Note Amount set forth on each Purchaser’s respective signature page to this Agreement.

   

  4.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

  The Company hereby represents and warrants to each Purchaser, as of the date hereof, as follows:

  4.1Organization and Authority.

  4.1.1Organization Matters of the Company and Its Subsidiaries.

  4.1.1.1The Company is a duly organized corporation, is validly existing and in good standing under the laws of the State of Texas and has all requisite corporate power and authority to conduct its business and activities as presently conducted, to own its properties, and to perform its obligations under the Transaction Documents.  The Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not reasonably be expected to result in a Material Adverse Effect.  The Company is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended.

  4.1.1.2The entities listed on Schedule A attached hereto are the only direct or indirect Subsidiaries of the Company as of the date hereof.  Each Subsidiary of the Company (other than the Bank) either has been duly organized and is validly existing as a corporation or limited liability company, or, in the case of the Bank, has been duly chartered and is validly existing as a national banking association, in each case in good standing under the laws of the jurisdiction of its incorporation, has the corporate or similar power and authority to own, lease and operate its properties and to conduct its business and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not reasonably be expected to result in a Material Adverse Effect. Except where indicated on Schedule A, all of the issued and outstanding shares of capital stock or other equity interests in each Subsidiary of the Company have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company, directly or through Subsidiaries of the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim.  None of the outstanding shares of capital stock of, or other Equity Interests in, any Subsidiary of the Company were issued in violation of the preemptive or similar rights of any security holder of such Subsidiary of the Company or any other entity.

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

  4.1.2Capital Stock and Related Matters.  The Charter of the Company authorizes the Company to issue 50,000,000 shares of common stock with a par value of $1.00 per share, and 15,000,000 shares of preferred stock, $5.00 par value per share.  As of February 28, 2022, there were 12,117,517 shares of the Company’s common stock issued and outstanding, and no shares of the Company’s preferred stock issued and outstanding. All of the outstanding capital stock of the Company has been duly authorized and validly issued and is fully paid and non-assessable. Except pursuant to the Company’s equity incentive plans duly adopted by the Company’s Board of Directors, there are, as of the date hereof, no outstanding options, rights, warrants or other agreements or instruments obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of the capital stock of the Company or obligating the Company to grant, extend or enter into any such agreement or commitment to any Person other than the Company. 

  4.2No Impediment to Transactions.

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

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

  4.2.3Subordinated Notes.  The Subordinated Notes issued on the Closing Date has been duly authorized by the Company and when duly executed by the Company and issued by the Company and delivered to and paid for by the Purchasers in accordance with the terms of this Agreement, will have been duly executed, issued and delivered, and will constitute legal, valid and binding obligations of the Company and enforceable against the Company 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. 

  4.2.4Exemption from Registration.  Neither the Company, nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Subordinated Note.  Assuming the accuracy of the representations and warranties of the Purchasers set forth in this Agreement, the Subordinated Note will be issued in a 

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  transaction exempt from the registration requirements of the Securities Act.  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) of Regulation D (each, a “Company Covered Person”).  The Company has exercised reasonable care to determine whether any Company Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e) of Regulation D. 

  4.2.5No Defaults or Restrictions.  Neither the execution and delivery of the Transaction Documents by the Company nor the compliance by the Company 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 Charter or Bylaws of the Company; (2) any of the terms, obligations, covenants, conditions or provisions of any corporate restriction or of any material contract, agreement, indenture, mortgage, deed of trust, pledge, bank loan or credit agreement, or any other agreement or instrument to which the Company or Bank, as applicable, is now a party or by which it or any of its properties may be bound or affected; (3) any judgment, order, writ, injunction, decree or demand of any court, arbitrator, grand jury, or Governmental Agency applicable to the Company or the Bank; or (4) any statute, rule or regulation applicable to the Company, except, in the case of items (2), (3) or (4), for such violations and conflicts, breaches and defaults that would not, singularly or in the aggregate, reasonably be expected to result in a Material Adverse Effect on the Company and its Subsidiaries taken as a whole, or (ii) result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any property or asset of the Company.  Neither the Company nor the Bank is in default in the performance, observance or fulfillment of any of the terms, obligations, covenants, conditions or provisions contained in any indenture or other agreement creating, evidencing or securing Indebtedness of any kind or pursuant to which any such Indebtedness is issued, or any other agreement or instrument to which the Company or the Bank, as applicable, is a party or by which the Company or the Bank, as applicable, or any of its properties may be bound or affected, except, in each case, for defaults that would not, singularly or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

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

  4.3Possession of Licenses and Permits.  The Company and each of its Subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Agencies necessary to conduct the business now operated by them except where the failure to possess such Governmental Licenses would not, singularly or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company or such applicable Subsidiary. The Company and each Subsidiary of the Company is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure to so comply would not, individually or in the aggregate, reasonably be 

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  expected to have a Material Adverse Effect on the Company or such applicable Subsidiary of the Company. All of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not reasonably be expected to have a Material Adverse Effect on the Company or such applicable Subsidiary of the Company. Neither the Company nor any Subsidiary of the Company has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses.

  4.4Financial Condition.

  4.4.1Company Financial Statements.  The financial statements of the Company included in the Company’s Reports (including the related notes, where applicable), which have been provided to the Purchaser (i) have been prepared from, and are in accordance with, the books and records of the Company; (ii) fairly present in all material respects the results of operations, cash flows, changes in stockholders’ equity and financial position of the Company and its consolidated Subsidiaries, for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to recurring year-end audit adjustments normal in nature and amount), as applicable; (iii) complied as to form, as of their respective dates of filing in all material respects with applicable accounting and banking requirements as applicable, with respect thereto; and (iv) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto.  The books and records of the Company have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements. The Company does not have any material liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due), except for those liabilities that are reflected or reserved against on the consolidated balance sheet of the Company contained in the Company’s Reports for the Company’s most recently completed quarterly or annual fiscal period, as applicable, and for liabilities incurred in the ordinary course of business consistent with past practice or in connection with this Agreement and the transactions contemplated hereby.

  4.4.2Absence of Default.  Since the end of the Company’s last fiscal year, for which audited financial statements have been included in the Company’s Reports, no event has occurred which either of itself or with the lapse of time or the giving of notice or both, would give any creditor of the Company the right to accelerate the maturity of any material Indebtedness of the Company.  The Company is not in default under any Lease, agreement or instrument, or any law, rule, regulation, order, writ, injunction, decree, determination or award, except for such defaults that would not reasonably be expected to result, singularly or in the aggregate, in a Material Adverse Effect on the Company.

  4.4.3Solvency.  After giving effect to the consummation of the transactions contemplated by this Agreement, the Company has capital sufficient to carry on its business and transactions and is solvent and able to pay its debts as they mature.  No transfer of property is being made and no Indebtedness is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud either present or future creditors of the Company or any Subsidiary of the Company.

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  4.4.4Ownership of Property.  The Company and each of its Subsidiaries has good and marketable title as to all real property owned by it and good title to all assets and properties owned by the Company and such Subsidiary in the conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the most recent balance sheet contained in the Company’s Reports or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such balance sheet), subject to no encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure liabilities for public or statutory deposits, obligations or any discount with, borrowing from or other obligations to the Federal Home Loan Bank, the FRB, inter-bank credit facilities, reverse repurchase agreements or any transaction by the Bank acting in a fiduciary capacity, (ii) statutory liens for amounts not yet due or delinquent or which are being contested in good faith and (iii) such as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect.  The Company and each of its Subsidiaries, as lessee, has the right under valid and existing Leases of real and personal properties that are material to the Company or such Subsidiary, as applicable, in the conduct of its business to occupy or use all such properties as presently occupied and used by it.  

  4.5No Material Adverse Change.  Since the end of the Company’s last fiscal year, for which audited financial statements have been included in the Company’s Reports, there has been no development or event that has had or would reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect.

  4.6Legal Matters.

  4.6.1Compliance with Law.  The Company and each of its Subsidiaries (i) has complied with and (ii) to the Company’s knowledge, is not under investigation with respect to, and, to the Company’s knowledge, has not been threatened to be charged with or given any notice of any material violation of, any applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any instrumentality or agency thereof, having jurisdiction over the conduct of its business or the ownership of its properties, except where any such failure to comply or violation would not reasonably be expected to result, singularly or in the aggregate, in a Material Adverse Effect.  The Company and each of its Subsidiaries is in compliance with, and at all times prior to the date hereof has been in compliance with, (x) all statutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any Governmental Agency, applicable to it, and (y) its own privacy policies and written commitments to customers, consumers and employees, concerning data protection, the privacy and security of personal data, and the nonpublic personal information of its customers, consumers and employees, in each case except where any such failure to comply would not 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 the Company or any of its Subsidiaries received any written notice asserting any violations of any of the foregoing.

  4.6.2Regulatory Enforcement Actions.  The Company, the Bank and its other Subsidiaries are in compliance in all material respects with all laws administered by and regulations of any Governmental Agency applicable to it or to them, except where the failure to comply would not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect.  None of the Company, the Bank, the Company’s or the Bank’s Subsidiaries nor any of their officers or 

  12

  

   

  directors is now operating under any restrictions, agreements, memoranda, commitment letter, supervisory letter or similar regulatory correspondence, or other commitments (other than restrictions of general application) imposed by any Governmental Agency, nor are, to the Company’s knowledge (a) any such restrictions threatened, (b) any agreements, memoranda or commitments being sought by any Governmental Agency, or (c) any material legal or regulatory violations previously identified by, or material penalties or other remedial action previously imposed by, any Governmental Agency remaining unresolved.

  4.6.3Pending Litigation.  There are no actions, suits, proceedings or written agreements pending, or, to the Company’s knowledge, threatened or proposed, against the Company or any of its Subsidiaries at law or in equity before or by any Governmental Agency, that would reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect on the Company and any of its Subsidiaries, taken as a whole, or materially and adversely affect the issuance or payment of the Subordinated Notes.  Neither the Company nor any of its Subsidiaries is a party to or named as subject to the provisions of any order, writ, injunction, or decree of, or any written agreement with, any court, commission, board or agency, domestic or foreign, that would reasonably be expected to result, singularly or in the aggregate, in a Material Adverse Effect.

  4.6.4Environmental.  Except as would not reasonably be expected to result, singularly or in the aggregate, in a Material Adverse Effect, no Property is or, to the Company’s knowledge, has been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any Hazardous Materials and neither the Company nor any of its Subsidiaries has engaged in such activities. There are no claims or actions pending or, to the Company’s knowledge, threatened against the Company or any of its Subsidiaries by any Governmental Agency or by any other Person relating to any Hazardous Materials or pursuant to any Hazardous Materials Law, except for such claims or actions that would not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect.

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

  4.6.6Investment Company Act.  Neither the Company nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

  4.7No Misstatement.  None of the representations or warranties made in the Transaction Documents or in any certificate delivered to the Purchaser by the Company prior to the Closing Date required pursuant to the terms of or in connection with 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 in which they were made.

  4.8Internal Accounting Controls.  The Company and the Bank have established and maintain a system of internal control over financial reporting that pertains to the maintenance of records that accurately and fairly reflect the transactions and dispositions of the Company’s assets (on a consolidated basis), provides reasonable assurance that transactions are recorded as necessary 

  13

  

   

  to permit preparation of financial statements in accordance with GAAP, and that the Company’s and the Bank’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and Board of Directors, and provides reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the Company on a consolidated basis that could reasonably be expected to have a Material Adverse Effect.  Such internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with GAAP. Since the conclusion of the Company’s last completed fiscal year, there has not been and there currently is not (i) any significant deficiency or material weakness in the design or operation of its internal control over financial reporting which is reasonably likely to adversely affect its ability to record, process, summarize and report financial information, or (ii) any fraud, whether or not material, that involves management or other employees who have a role in the Company’s or the Bank’s internal control over financial reporting.  The Company (A) has implemented and maintains disclosure controls and procedures reasonably designed and maintained to ensure that material information relating to the Company is made known to the Chief Executive Officer and the Chief Financial Officer of the Company by others within the Company and (B) has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s outside auditors and the audit committee of the Company’s Board of Directors any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s internal controls over financial reporting.  Such disclosure controls and procedures are effective for the purposes for which they were established.

  4.9Tax Matters.  The Company, the Bank and each other Subsidiary of the Company have (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.

  4.10Representations and Warranties Generally.  The representations and warranties of the Company set forth in this Agreement that do not contain a “Material Adverse Effect” qualification or other express materiality or similar qualification are true and correct in all material respects (i) as of the Closing Date and (ii) as otherwise specifically provided herein. The representations and warranties of the Company set forth in this Agreement that contain a “Material Adverse Effect” qualification or any other express materiality or similar qualification are true and correct (a) as of the Closing Date and (b) as otherwise specifically provided herein.  

  5.GENERAL COVENANTS, CONDITIONS AND AGREEMENTS.

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

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

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

  5.3Compliance with Laws.

  5.3.1Generally.  The Company shall comply and cause the Bank and each of its other Subsidiaries to comply in all material respects with all applicable statutes, rules, regulations, orders and restrictions in respect of the conduct of its business and the ownership of its properties, except, in each case, where such noncompliance would not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect.

  5.3.2Regulated Activities.  The Company shall not itself, nor shall it cause, permit or allow the Bank or any other of its Subsidiaries to (i) engage in any business or activity not permitted by all applicable laws and regulations, except where such business or activity would not reasonably be expected to have a Material Adverse Effect 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.

  5.3.3Taxes.  The Company shall and shall cause the Bank and any other of its Subsidiaries to timely pay and discharge all taxes, assessments and other governmental charges imposed upon the Company, the Bank or any of its Subsidiaries or upon the income, profits, or property of the Company or any of its Subsidiaries and all claims for labor, material or supplies which, if unpaid, might by law become a lien or charge upon the property of the Company, the Bank or any other of its Subsidiaries.  Notwithstanding the foregoing, none of the Company, the Bank or any other of its Subsidiaries shall be required to pay any such tax, assessment, charge or claim, so long as the validity thereof shall be contested in good faith by appropriate proceedings, and appropriate reserves therefor shall be maintained on the books of the Company, the Bank or any of its Subsidiary, as the case may be.

  5.3.4Corporate Existence.  The Company shall do or cause to be done all things reasonably necessary to maintain, preserve and renew its corporate existence and that of the Bank and the other Subsidiaries and its and their rights and franchises, and comply in all material respects with all related laws applicable to the Company, the Bank or the other Subsidiaries; provided, however, that the Company may consummate a merger in which (a) the Company is the surviving entity or (b) if the Company is not the surviving entity, the surviving entity assumes, by operation of law or otherwise, all of the obligations of the Company under the Subordinated Notes.

  5.3.5Tier 2 Capital.  If all or any portion of the Subordinated Notes ceases to be eligible, or there is a material risk that all or any portion of the Subordinated Notes will cease to be 

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  eligible 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, the Company will immediately notify the Noteholders (as defined in the Subordinated Notes), and thereafter, if requested by the Company, the Company and the Noteholders will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to be eligible to qualify as Tier 2 Capital; provided, however, that nothing contained in this Agreement shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event as described in the Subordinated Notes.

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

  6.REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.

  The Purchaser hereby represents and warrants to the Company, and covenants with the Company as follows:

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

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

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

  6.4Purchase for Investment.  The Purchaser 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.  The Purchaser has no present or contemplated agreement, undertaking, arrangement, obligation, Indebtedness or commitment providing for, or which is likely to compel, a disposition of the Subordinated Note in any manner.

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

  6.6Financial and Business Sophistication.  The Purchaser 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.  The Purchaser has relied solely upon its own knowledge of, and/or the advice of its own legal, financial, tax or other advisors with regard to, the legal, financial, tax and other considerations involved in deciding to invest in the Subordinated Notes.

  6.7Ability to Bear Economic Risk of Investment.  The Purchaser recognizes that an investment in the Subordinated Notes is a speculative investment that involves substantial risk, including risks related to the Company’s business, operating results, financial condition and cash flows, which risks it has carefully considered in connection with making an investment in the Subordinated Notes.  It has the ability to bear the economic risk of the prospective investment in the Subordinated Notes, including the ability to hold the Subordinated Notes indefinitely, and further including the ability to bear a complete loss of all of its investment in the Company. 

  6.8Information.  The Purchaser acknowledges that  (i) it is not being provided with the disclosures that would be required if the offer and sale of the Subordinated Notes was registered under the Securities Act, nor is it being provided with any offering circular, private placement memorandum or prospectus prepared in connection with the offer and sale of the Subordinated Notes; (ii) it has conducted its own examination of the Company and the terms of the Subordinated Notes to the extent it deems necessary to make its decision to invest in the Subordinated Notes; (iii) it has availed itself of publicly available financial and other information concerning the Company to the extent it deems necessary to make its decision to purchase the Subordinated Notes (including meeting with representatives of the Company); and (iv) it has not received nor relied on any form of general solicitation or general advertising (within the meaning of Regulation D) from the Company in connection with the offer and sale of the Subordinated Notes.  It has reviewed the information set forth in the Company’s Reports, including the risk factors set forth therein, the exhibits hereto in connection with the transactions contemplated by this Agreement. 

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

  6.10Investment Decision.  The Purchaser 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, including the Company of the Placement Agent.  Neither such inquiries nor any other due diligence investigations conducted by the Purchaser or its advisors or representatives, if any, shall modify, amend or affect its right to rely on the Company’s representations and warranties contained herein.  The Purchaser is not relying 

  17

  

   

  upon, and has not relied upon, any advice, statement, representation or warranty made by any Person by or on behalf of the Company, including, without limitation, the Placement Agent, except for the express statements, representations and warranties of the Company made or contained in this Agreement.  Furthermore, the Purchaser acknowledges that (i) the Placement Agent has not performed any due diligence review on behalf of it and (ii) nothing in this Agreement or any other materials presented by or on behalf of the Company to it in connection with the purchase of the Subordinated Note constitutes legal, tax or investment advice.

  6.11Private Placement; No Registration; Restricted Legends.  The Purchaser understands and acknowledges that the Subordinated Note is “restricted securities” under the Securities Act and is being sold by the Company without registration under the Securities Act in reliance on the exemption from federal and state registration set forth in, respectively, Rule 506(b) of Regulation D promulgated under Section 4(a)(2) of the Securities Act and Section 18 of the Securities Act, or any applicable state securities laws, and accordingly, may be resold, pledged or otherwise transferred only in compliance with the registration requirements of federal and state securities laws or if exemptions from the Securities Act and applicable state securities laws are available to it.  Further, while any Subordinated Note remain in the restricted holding period pursuant to Rule 144 under the Securities Act, the Purchaser understands and acknowledges that any resale of such Subordinated Note will be limited to a QIB under Rule 144A under the Securities Act. The Purchaser is not subscribing for the Subordinated Note as a result of or subsequent to any general solicitation or general advertising, in each case within the meaning of Rule 502(c) of Regulation D, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or presented at any seminar or meeting. The Purchaser has not been solicited with respect to investment in the Subordinated Note except in the jurisdiction of its address appearing on the Purchaser’s signature page to this Agreement. The Purchaser further acknowledges and agrees that all certificates or other instruments representing the Subordinated Note will bear the restrictive legend set forth in the form of Subordinated Note.  The Purchaser further acknowledges its primary responsibilities under the Securities Act and, accordingly, will not sell or otherwise transfer the Subordinated Note 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. Neither the Placement Agent nor the Company have or has made or are or is making any representation, warranty or covenant, express or implied, as to the availability of any exemption from registration under the Securities Act or any applicable state securities laws for the resale, pledge or other transfer of the Subordinated Note, or that the Subordinated Note purchased by the Purchaser will ever be able to be lawfully resold, pledged or otherwise transferred. 

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

  6.13Not Debt of the Bank; Not Savings Accounts, Etc.  The Purchasers acknowledge that the Company is a bank holding company and the Company’s rights and the rights of the Company’s creditors, including, the Noteholders (as defined in the Subordinated Note), to participate in the assets of any Subsidiary during its liquidation or reorganization are structurally subordinate to the prior claims of the Subsidiary’s creditors. The Purchasers acknowledge and 

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  agree that the Subordinated Notes are not a savings account or deposit of the Bank and is not insured or guaranteed by the FDIC or any Governmental Agency, and that no Governmental Agency has passed upon or will pass upon the offer or sale of the Subordinated Notes or has made or will make any finding or determination as to the fairness of this investment.

  6.14Accuracy of Representations.  The Purchaser understands that the Placement Agent and the Company are relying and 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 the Purchaser are no longer accurate as of the Closing Date, or if any of the agreements made by it are breached on or prior to the Closing Date, it shall promptly notify the Placement Agent and the Company.

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

  7.MISCELLANEOUS.

  7.1Prohibition on Assignment by the Company.  Except as described in Section 8(b) (Merger or Sale of Assets) of the Subordinated Notes, the Company may not assign, transfer or delegate any of its rights or obligations under this Agreement or the Subordinated Notes without the prior written consent of all the Noteholders (as defined in the Subordinated Note).  

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

  7.3Waiver or Amendment.  No waiver or amendment of any term, provision, condition, covenant or agreement herein shall be effective unless in writing and signed by the parties hereto. Failure on the part of the Purchasers to complain of any acts or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Purchasers of its rights hereunder or impair any rights, powers or remedies on account of any breach or default by the Company.

  7.4Severability.  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.

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  7.5Notices.  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, or if by email with confirmation of transmission, addressed:

  		
	if to the Company:
	Guaranty Bancshares, Inc.
16475 Dallas Parkway, Suite 600
Addison, Texas 75001
Attention: Clifton A. Payne 
(214) 710-2300
 

	with a copy to:
	Fenimore Kay Harrison LLP
812 San Antonio St., Suite 600
Austin, Texas  78701
Attention: Kevin Strachan
(770) 282-5117
 

	if to the Purchaser:
	To the address indicated on the Purchaser’s signature page to this Agreement.

   

  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).

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

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

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

  7.9Public Announcement.  The Company and the Purchaser agree that no public release, statement, announcement, or other disclosure detailing the purchase of the Subordinated Note pursuant to this Agreement that refers to the other party or parties by name shall be issued by any party without the prior written consent of the other party so named (which consent shall not be unreasonably withheld, conditioned or delayed), except as otherwise required by law or the applicable rules or regulations of any securities exchange or securities market, in which case the Company shall use commercially reasonable efforts, to the extent permitted by applicable law, to allow the Purchaser reasonable time to comment on such release or announcement in advance of such issuance.

  7.10Entire Agreement.  The Transaction Documents, along with any exhibits hereto and thereto, constitute the entire agreement between the parties hereto with respect to the subject matter hereof and may not be modified or amended in any manner other than by supplemental written agreement executed by the parties hereto.  No party, in entering into this Agreement, has relied upon any representation, warranty, covenant, condition or other term that is not set forth in the Transaction Documents.

  7.11Choice 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 (other than Section 5-1401 of the New York General Obligations Law).  Nothing herein shall be deemed to limit any rights, powers or privileges which the Purchaser may have pursuant to any law of the United States of America or any rule, regulation or order of any department or agency thereof and nothing herein shall be deemed to make unlawful any transaction or conduct by the Purchaser which is lawful pursuant to, or which is permitted by, any of the foregoing.

  7.12No Third Party Beneficiary.  This Agreement is made for the sole benefit of the Company and the Purchasers, and no other Person shall be deemed to have any privity of contract hereunder nor any right to rely hereon to any extent or for any purpose whatsoever, nor shall any other Person have any right of action of any kind hereon or be deemed to be a third party beneficiary hereunder; provided, that the Placement Agent may rely on the representations and warranties contained herein to the same extent as if it were a party to this Agreement.

  7.13Legal Tender of United States.  All payments hereunder shall be made in coin or currency which at the time of payment is legal tender in the United States of America for public and private debts.

  7.14Captions; 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 

  21

  

   

  such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof. Any use by a party of an electronic signature must be in accordance with the federal Electronic Signature In Global and National Commerce Act.

  7.15Knowledge; Discretion.  All references herein to the Purchaser’s or the Company’s knowledge shall be deemed to mean the knowledge of such party based on the actual knowledge of such party’s Chief Executive Officer and Chief Financial Officer or such other persons holding equivalent offices.  Unless specified to the contrary herein, all references herein to an exercise of discretion or judgment by the Purchaser, to the making of a determination or designation by the Purchaser, to the application of the Purchaser’s discretion or opinion, to the granting or withholding of the Purchaser’s consent or approval, to the consideration of whether a matter or thing is satisfactory or acceptable to the Purchaser, or otherwise involving the decision making of the Purchaser, shall be deemed to mean that the Purchaser shall decide using the reasonable discretion or judgment of a prudent lender.

  7.16Waiver of Right to Jury Trial.  TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OF THE COMPANY OR THE PURCHASER.  THE PARTIES HERETO 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 HERETO 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 HERETO AND THEIR COUNSEL AND IS A MATERIAL INDUCEMENT FOR ENTRY INTO THIS AGREEMENT AND (III) THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH TRANSACTION DOCUMENTS AS IF FULLY INCORPORATED THEREIN.

  7.17Expenses.  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; provided that at the Closing the Company shall bear, and upon request by the Purchaser, reimburse the Purchaser for all reasonable out-of-pocket fees and expenses of attorneys incurred by the Purchaser in connection with the negotiation and preparation of this Agreement and undertaking of the transactions contemplated pursuant to this Agreement for a flat fee of $5,000.00. 

  7.18Survival.  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]

   

   

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

  		
	 
	COMPANY:
GUARANTY BANCSHARES, INC.
 
 
By: _____________________________________		 
Name: Tyson T. Abston
  Title: Chairman and Chief Executive Officer 

	 
	  

   

   

  [Company Signature Page to Subordinated Note Purchase Agreement]

  

   

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

  		
	 
	  

	 
	PURCHASER: 
[***]
By: _______________________________
Name:
  Title:
Address of Purchaser:
 
[***]
Principal Amount of Purchased Subordinated Note: 
  

   

   

   

  

   

  EXHIBIT A

  FORM OF SUBORDINATED NOTE

  GUARANTY BANCSHARES, INC. 

  3.625% FIXED-TO-FLOATING RATE Subordinated Note due APRIL 1, 2032

  THE INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS (AS DEFINED IN SECTION 3 (SUBORDINATION) OF THIS SUBORDINATED NOTE) OF GUARANTY BANCSHARES, INC. (THE “COMPANY”), INCLUDING OBLIGATIONS OF THE COMPANY TO ITS GENERAL CREDITORS AND SECURED CREDITORS, AND IS UNSECURED.  IT IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION OF CREDIT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES. IN THE EVENT OF LIQUIDATION ALL HOLDERS OF SENIOR INDEBTEDNESS OF THE COMPANY SHALL BE ENTITLED TO BE PAID IN FULL WITH SUCH INTEREST AS MAY BE PROVIDED BY LAW BEFORE ANY PAYMENT SHALL BE MADE ON ACCOUNT OF PRINCIPAL OF OR INTEREST ON THIS SUBORDINATED NOTE. AFTER PAYMENT IN FULL OF ALL SUMS OWING TO SUCH HOLDERS OF SENIOR INDEBTEDNESS, THE HOLDER OF THIS SUBORDINATED NOTE, TOGETHER WITH THE HOLDERS OF ANY OBLIGATIONS OF THE COMPANY RANKING ON A PARITY WITH THE SUBORDINATED NOTE, SHALL BE ENTITLED TO BE PAID FROM THE REMAINING ASSETS OF THE COMPANY THE UNPAID PRINCIPAL AMOUNT OF THIS SUBORDINATED NOTE PLUS ACCRUED AND UNPAID INTEREST THEREON BEFORE ANY PAYMENT OR OTHER DISTRIBUTION, WHETHER IN CASH, PROPERTY OR OTHERWISE, SHALL BE MADE (i) with respect to any obligation that by its terms expressly is junior in the right of payment to the Subordinated Notes or (ii) on account OF ANY SHARES OF CAPITAL STOCK OF THE COMPANY.

  ANY PURCHASER OF THIS SUBORDINATED NOTE IS HEREBY NOTIFIED THAT THE SELLER IS RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) PROVIDED BY RULE 144A THEREUNDER (“RULE 144A”) OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THIS SUBORDINATED NOTE HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SUBORDINATED NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) (A) TO A PERSON WHO IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (B) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (D) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (II) TO THE COMPANY, OR (III) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT 

  A-1

    

   

   

  

   

  HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SUBORDINATED NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN CLAUSE (A) ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144A FOR RESALE OF THE SUBORDINATED NOTE EVIDENCED HEREBY.

  THE INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS NOT A DEPOSIT AND IS NOT INSURED BY ANY FEDERAL AGENCY OR INSTRUMENTALITY, INCLUDING, WITHOUT LIMITATION, THE FEDERAL DEPOSIT INSURANCE CORPORATION. 

  THIS SUBORDINATED NOTE WILL BE ISSUED ONLY IN MINIMUM DENOMINATIONS OF $250,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF, ANY ATTEMPTED TRANSFER OF THIS SUBORDINATED NOTE IN A DENOMINATION OF LESS THAN $1,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER 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, 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 SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. 

   

  CERTAIN ERISA CONSIDERATIONS:

  1.THE HOLDER OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR  A GOVERNMENTAL PLAN AS DEFINED IN SECTION 3(32) OF ERISA, A NON-U.S. PLAN OR A CHURCH PLAN AS DEFINED IN SECTION 3(33) OF ERISA NOT SUBJECT TO THE REQUIREMENTS OF ERISA OR SECTION 4975 OF THE CODE BUT MAY BE SUBJECT TO OTHER SIMILAR LEGAL RESTRICTIONS (“SIMILAR LAWS”) (EACH A PLAN”) OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE 

  A-2

    

   

   

  

   

  RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, ARE NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR SIMILAR LAWS. ANY PURCHASER OR HOLDER OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER: (I) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE I OF ERISA OR SECTION 4975 OF THE CODE IS APPLICABLE, A GOVERNMENTAL PLAN AS DEFINED IN SECTION 3(32) OF ERISA, A NON-U.S. PLAN OR A CHURCH PLAN AS DEFINED IN SECTION 3(33) OF ERISA  NOT SUBJECT TO THE REQUIREMENTS OF ERISA OR SECTION 4975 OF THE CODE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR OTHER PLAN, OR ANY OTHER PERSON OR ENTITY USING THE “PLAN ASSETS” OF ANY SUCH PLAN OR OTHER PLAN TO FINANCE SUCH PURCHASE OR (II) SUCH PURCHASE OR HOLDING WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR A VIOLATION OF SIMILAR LAWS.

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

  A-3

    

   

   

  

   

  No. [●]

   

  GUARANTY BANCSHARES, INC. 

  3.625% FIXED-TO-FLOATING RATE Subordinated NoteS due APRIL 1, 2032

  Subordinated Notes.  This Subordinated Note is one of a series of notes of Guaranty Bancshares, Inc., a Texas corporation (the “Company”) designated as the “3.625% Fixed-to-Floating Rate Subordinated Notes due April 1, 2032” (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”) by and between the Company and each of the purchasers of the Subordinated Notes identified in the signature page thereto (the “Purchase Agreement”).

  Payment.  The Company, for value received, promises to pay to [●], or its registered assigns, the principal sum of Thirty-Five Million Dollars (U.S.) ($35,000,000) plus accrued but unpaid interest on April 1, 2032 (the “Maturity Date”) and to pay interest thereon (i) from and including the Issue Date to but excluding April 1, 2027 or the earlier redemption date contemplated by Section 4 (Redemption) of this Subordinated Note, (the “Fixed Rate Period”), at the rate of 3.625% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months and payable semi-annually  in arrears on April 1 and October 1 of each year (each payment date, a “Fixed Interest Payment Date”), beginning on October 1, 2022, and (ii) from and including April 1, 2027 to but excluding the Maturity Date or the earlier redemption date contemplated by Section 4 (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 192 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 January 1, April 1, July 1, and October 1 of each year, beginning on July 1, 2027.  The term “Floating Interest Determination Date” means the date upon which the Floating Interest Rate is determined by the Calculation Agent (as defined herein) pursuant to the Three-Month Term SOFR Conventions (as defined herein).  Any payment of principal of or interest on this Subordinated Note that would otherwise become due and payable on a day which is not a Business Day shall become due and payable on the next succeeding Business Day, with the same force and effect as if made on the date for payment of such principal or interest, and no interest will accrue in respect of such payment for the period after such day; provided, that in the event that any scheduled Floating Interest Payment Date falls on a day that is not a Business Day and the next succeeding Business Day falls in the next succeeding calendar month, such Floating Interest Payment Date will be accelerated to the immediately preceding Business Day, and, in each such case, the amounts payable on such Business Day will include interest accrued to, but excluding, such Business Day.  Dollar amounts resulting from interest calculations will be rounded to the nearest cent, with one half cent being rounded upward. Notwithstanding anything to the contrary provided in this Subordinated Note or the Purchase Agreement, (i) in the event the Three-Month Term SOFR (as defined herein) is less than zero, the Three-Month Term SOFR shall be deemed to be zero, and (ii) if a Benchmark Transition Event (as defined herein) and its related Benchmark Replacement Date (as defined herein) have occurred and the Benchmark Replacement (as defined herein) is less than zero, then the Benchmark Replacement shall be deemed to be zero.

  A-4

    

   

   

  

   

  The Company shall take such actions as are necessary to ensure that from the commencement of the Floating Rate Period for so long as any of the Subordinated Notes remain outstanding there will at all times be a Calculation Agent appointed to calculate Three-Month Term SOFR in respect of each Floating Rate Period. The calculation of Three-Month Term SOFR for each applicable Floating Rate Period by the Calculation Agent will (in the absence of manifest error) be final and binding. The Calculation Agent’s determination of any interest rate and its calculation of interest payments for any period will be maintained on file at the Calculation Agent’s principal offices, and will be made available to any Noteholder (as defined herein) upon request. The Calculation Agent may be removed by the Company at any time. If the Calculation Agent is unable or unwilling to act as Calculation Agent or is removed by the Company, the Company will promptly appoint a replacement Calculation Agent. The Calculation Agent may not resign its duties without a successor having been duly appointed; provided, that if a successor Calculation Agent has not been appointed by the Company and such successor accepted such position within thirty (30) calendar days after the giving of notice of resignation by the Calculation Agent, then the resigning Calculation Agent may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Calculation Agent with respect to such series. For the avoidance of doubt, if at any time there is no Calculation Agent appointed by the Company, then the Company shall be the Calculation Agent. 

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

  A “Floating Interest Period” means:

  the period from, and including, each Floating Interest Payment Date to, but excluding, the next succeeding Floating Interest Payment Date, except for the initial Floating Interest Period, which will be the period from, and including, July 1, 2027 to, but excluding, the next succeeding Floating Interest Payment Date.

  The “Floating Interest Rate” means: 

  initially Three-Month Term SOFR (as defined below).

  Notwithstanding the foregoing clause (i) of this Section 2(d):

  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 Company shall promptly provide notice of such determination to the Noteholders and Section 2(e) (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.

  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 

  A-5

    

   

   

  

   

  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). 

  Effect of Benchmark Transition Event.  

  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.

  In connection with the implementation of a Benchmark Replacement, the Calculation Agent 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.

  The Calculation Agent is expressly authorized to make certain determinations, decisions and elections under the Subordinated Notes, including with respect to the use of Three-Month Term SOFR as the Benchmark under this Section 2(e).  Any determination, decision or election that may be made by the Calculation Agent under the terms of the Subordinated Note, 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:

  will be conclusive and binding absent manifest error;

  if made by the Company as the Calculation Agent, will be made in the Company’s sole discretion; 

  if made by the Calculation Agent other than the Company, will be made after consultation with the Company, and the Calculation Agent will not make any such determination, decision or election to which the Company reasonably objects; and

  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.

  If the Calculation Agent fails to make any determination, decision or election that it is required to make under the terms of the Subordinated Notes, then the Company will make such determination, decision or election on the same basis as described above.

  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.

  A-6

    

   

   

  

   

  If the then-current Benchmark is Three-Month Term SOFR, the Calculation Agent will have the right to establish the Three-Month Term SOFR Conventions, and if 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 determined by the Calculation Agent, then the relevant Three-Month Term SOFR Conventions will apply.

  As used in this Subordinated Note:

  “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. 

  “Benchmark” means, initially, Three-Month Term SOFR; provided that if the Calculation Agent determines on or prior to the Reference Time that 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.

  “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:

  the sum of (i) Compounded SOFR and (ii) the Benchmark Replacement Adjustment;

  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;

  the sum of: (i) the ISDA Fallback Rate and (ii) the Benchmark Replacement Adjustment;

  the sum of: (i) the alternate rate of interest that has been selected by the Calculation Agent 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.

  “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-7

    

   

   

  

   

  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;

  if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment; or

  the spread adjustment (which may be a positive or negative value or zero) that has been selected by the Calculation Agent 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.

  “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 Calculation Agent decides may be appropriate to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with market practice (or, if the Calculation Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Calculation Agent determines that no market practice for use of the Benchmark Replacement exists, in such other manner as the Calculation Agent determines is reasonably necessary).

  “Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:

  in the case of clause (a) of the definition of “Benchmark Transition Event,” the relevant Reference Time in respect of any determination; or 

  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

  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, for purposes of the definitions of Benchmark Replacement Date and Benchmark Transition Event, references to the Benchmark also include any reference rate underlying the Benchmark (for example, if the Benchmark becomes Compounded SOFR, references to the Benchmark would include SOFR).

  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 

  A-8

    

   

   

  

   

  Replacement Date will be deemed to have occurred prior to the Reference Time for purposes of such determination.

  “Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:

  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 Company determines that use of a forward-looking rate for a tenor of three months based on SOFR is not administratively feasible;

  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;

  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

  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.

   “Business Day” means any day that is not a Saturday or Sunday and that is not a day on which banks in the State of Texas are generally authorized or required by law or executive order to be closed.  

  “Calculation Agent” means the agent (which may be the Company or an Affiliate of the Company) appointed by the Company, in its sole discretion, to act as Calculation Agent for the Subordinated Notes prior to the commencement of the Floating Interest Period to act in accordance with Section 2 (Payment).

  “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 Calculation Agent in accordance with:

  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:

  A-9

    

   

   

  

   

  if, and to the extent that, the Calculation Agent 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 Calculation Agent giving due consideration to any industry-accepted market practice for U.S. dollar denominated floating rate notes at such time.

  For the avoidance of doubt, the calculation of Compounded SOFR will exclude the Benchmark Replacement Adjustment (if applicable) and the spread specified on the face hereof.

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

  “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.  

  “FRBNY” means the Federal Reserve Bank of New York.

  “FRBNY’s Website” means the website of the FRBNY at http://www.newyorkfed.org, or any successor source.

  “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.

  “ISDA” means the International Swaps and Derivatives Association, Inc. or any successor thereto.

  “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.

  “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.

  “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.

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  “Noteholders” means the registered holders of the Subordinated Notes from time to time (and each, a “Noteholder”).

  “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 (as such term is defined in the Purchase Agreement)) or any other entity or organization.

  “Reference Time” with respect to any determination of the Benchmark means (a) 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 (b) 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.

  “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.

  “SOFR” means the daily secured overnight financing rate published by the FRBNY, as the administrator of the benchmark, (or a successor administrator) on the FRBNY’s Website (or such successor’s website).

  “Subsidiary” means with respect to any Person, any other Person in which a majority of the outstanding voting shares of Equity Interest (as such term is defined in the Purchase Agreement) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees or equivalent Person or body thereof, is directly or indirectly owned by such Person.

  “Term SOFR” means the forward-looking term rate for the applicable Corresponding Tenor based on SOFR that has been selected or recommended by the Relevant Governmental Body.

  “Term SOFR Administrator” means any entity designated by the Relevant Governmental Body as the administrator of Term SOFR (or a successor administrator).

  “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. All percentages used in or resulting from any calculation of Three-Month Term SOFR shall be rounded, if necessary, to the nearest one-hundred-thousandth of a percentage point, with 0.000005% rounded up to 0.00001%.

  “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 

  A-11

    

   

   

  

   

  other administrative matters) that the Calculation Agent 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 Calculation Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Calculation Agent determines that no market practice for the use of Three-Month Term SOFR exists, in such other manner as the Calculation Agent determines is reasonably necessary).

  “Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.

  Subordination.  

  The indebtedness of the Company evidenced by this Subordinated Note, including the principal and interest on this Subordinated Note, shall be subordinate and junior in right of payment to the prior payment in full of all existing claims of creditors of the Company whether now outstanding or subsequently created, assumed, guaranteed or incurred (collectively, “Senior Indebtedness”), which shall consist of principal of (and premium, if any) and interest, if any, on: (i) all obligations for borrowed money; (ii) all obligations evidenced by bonds, debentures, securities, notes or other similar instruments; (iii) any deferred obligations of the Company for the payment of the purchase price of property or assets acquired other than in the ordinary course of business; (iv) all obligations, contingent or otherwise, of the Company in respect of any letters of credit, bankers’ acceptances, security purchase facilities and similar direct credit substitutes; (v) any capital lease obligations of the Company; (vi) all obligations of the Company in respect of interest rate swap, cap or other agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity contracts and other similar arrangements or derivative products; (vii) any obligation of the Company to its general creditors, as defined for purposes of the capital adequacy regulations of the Federal Reserve applicable to the Company, as the same may be amended or modified from time to time; (viii) all obligations that are similar to those in clauses (i) through (vi) of other persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise arising from an off-balance sheet guarantee; (ix) all obligations of the types referred to in clauses (i) through (vii) of other persons secured by a lien on any property or asset of the Company, and (x) in the case of (i) through (ix) above, all amendments, renewals, extensions, modifications and refundings of such indebtedness and obligations; except “Senior Indebtedness” does not include (A) the Subordinated Notes, (B) any obligation that by its terms expressly is junior to, or ranks equally in right of payment with, the Subordinated Notes, (C) the existing junior subordinated debentures of the Company (underlying the outstanding trust preferred securities) (the “TruPs”) as of the date of the issuance of this Subordinated Note to which this Subordinated Note shall be senior, or (D) any indebtedness to a Subsidiary of the Company. This Subordinated Note is not secured by any assets of the Company or any Subsidiary or Affiliate of the Company.  

  In the event of any liquidation of the Company, holders of Senior Indebtedness of the Company shall be entitled to be paid in full with such interest as may be provided by law before any payment shall be made on account of principal of or interest on this Subordinated Note.  Additionally, in the event of any insolvency, dissolution, assignment for the benefit of creditors or any liquidation or winding up of or relating to the Company, whether voluntary or involuntary, holders of Senior Indebtedness shall be entitled to be paid in full before any payment shall be made on account of the 

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  principal of or interest on the Subordinated Notes, including this Subordinate Note.  In the event of any such proceeding, after payment in full of all sums owing with respect to the Senior Indebtedness, the Noteholders, together with the holders of any obligations of the Company ranking on a parity with the Subordinated Notes, shall be entitled to be paid from the remaining assets of the Company the unpaid principal thereof, and the unpaid interest thereon before any payment or other distribution, whether in cash, property or otherwise, shall be made (i) with respect to any obligation that by its terms expressly is junior to in the right of payment to the Subordinated Notes or (ii) on account of any capital stock.

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

  Nothing herein shall act to prohibit, limit or impede the Company from issuing additional debt of the Company having the same rank as the Subordinated Notes or which may be junior or senior in rank to the Subordinated Notes.  Each Noteholder, by its acceptance hereof, agrees to and shall be bound by the provisions of this Section 3.  Each Noteholder, by its acceptance hereof, further acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration for each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of the Subordinated Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness, and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold or in continuing to hold such Senior Indebtedness.

  Redemption. 

  Redemption Prior to Fifth Anniversary.  This Subordinated Note shall not be redeemable by the Company in whole or in part prior to the fifth anniversary of the Issue Date, except in the event of: (i) a Tier 2 Capital Event (as defined herein); (ii) a Tax Event (as defined herein); or (iii) an Investment Company Event (as defined herein).  Upon the occurrence of a Tier 2 Capital Event, a Tax Event or an Investment Company Event, the Company may redeem this Subordinated Note, subject to Section 4(f) (Regulatory Approvals) hereof, in whole, but not in part, at any time, upon giving not less than ten (10) calendar days’ notice to the Noteholders at an amount equal to 100% of the outstanding principal amount being redeemed plus accrued and unpaid interest, to but excluding the redemption date.  “Tier 2 Capital Event” means the receipt by the Company of an opinion of counsel to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any rules, guidelines or policies of an applicable regulatory authority for the Company or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of original issuance of the Subordinated Notes, the Subordinated Notes do not constitute, or within 90 days of the date of such opinion will not constitute, Tier 2 capital (or its equivalent if the Company were subject to such capital requirement) for purposes of capital adequacy guidelines of the Federal Reserve (or any successor 

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  regulatory authority with jurisdiction over bank holding companies), as then in effect and applicable to the Company that would preclude the Subordinated Notes from being included as Tier 2 capital.  “Tax Event” means the receipt by the Company of an opinion of counsel to the effect that, as a result of (a) an amendment to, or change (including any announced prospective change) in, the laws or any regulations of the United States or any political subdivision or taxing authority, or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which change or amendment becomes effective or which pronouncement or decision is announced on or after the date of the issuance of the Notes, there is more than an insubstantial risk that the interest payable on the Subordinate Note is not, or within 120 calendar days after the receipt of such opinion will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes. “Investment Company Event” means the receipt by the Company of an opinion of independent counsel to the Company to the effect that there exist a material risk that the Company is or, within one hundred twenty (120) calendar 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. 

  Redemption on or after Fifth Anniversary.  On or after the fifth anniversary of the Issue Date, subject to the provisions of Section 4(f) (Regulatory Approvals) hereof, this Subordinated Note shall be redeemable at the option of and by the Company, in whole or in part at any time and from time to time upon any Interest Payment Date, at an amount equal to 100% of the outstanding principal amount being redeemed plus accrued but unpaid interest, to but excluding the redemption date, but in all cases in a principal amount with integral multiples of $1,000.  In addition, on or after the fifth anniversary of the Issue Date, subject to Section 4(f) (Regulatory Approvals), the Company may redeem all or a portion of the Subordinated Notes, at any time upon the occurrence of a Tier 2 Capital Event, Tax Event or an Investment Company Event. 

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

  No Redemption at Option of Noteholder. This Subordinated Note is not subject to redemption at the option of any Noteholder. 

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

  Regulatory Approvals. Any such redemption shall be subject to receipt of any and all required federal and state regulatory approvals or non-objections, as applicable, including, but not limited to, the consent of the Federal Reserve to the extent then required by applicable law.  In the case of any 

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  redemption of this Subordinated Note pursuant to paragraphs (b) or (c) of this Section 4, the Company will give the Noteholder notice of redemption, which notice shall indicate the aggregate principal amount of Subordinated Notes to be redeemed, not less than thirty (30) nor more than forty-five (45) calendar days prior to the proposed redemption date.

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

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

  the entry of a decree or order for relief in respect of the Company by a court having jurisdiction in the premises in an involuntary case or proceeding under any applicable bankruptcy, insolvency, or reorganization law, now or hereafter in effect of the United States or any political subdivision thereof, and such decree or order will have continued unstayed and in effect for a period of ninety (90) consecutive calendar days;

  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;

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

  the failure of the Company to pay any installment of interest on any of the Subordinated Notes as and when the same will become due and payable, and the continuation of such failure for a period of thirty (30) calendar days;

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

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

  the failure of the Company to perform any other covenant or agreement on the part of the Company contained in the Subordinated Notes, and the continuation of such failure for a period of thirty (30) calendar days after the date on which notice specifying such failure, stating that such notice is a “Notice of Default” hereunder and demanding that the Company remedy the same, will have been given, in the manner set forth in Section 21 (Notices), to the Company by a Noteholder; and

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

   Unless the principal amount of this Subordinated Note already shall have become due and payable, if an Event of Default set forth in Section 5(a) or Section 5(b) shall have occurred and be continuing, Noteholders holding not less than twenty percent (20%) in aggregate principal amount of the Subordinated Notes at the time outstanding, by notice in writing to the Company, may declare the principal amount of all outstanding Subordinated Notes to be due and payable immediately and, upon any such declaration, the same shall become and shall be immediately due and payable. The Company waives demand, presentment for payment, notice of nonpayment, notice of protest, and all other notices.  Notwithstanding the foregoing, because the Company will treat the Subordinated Notes as Tier 2 Capital, upon the occurrence of an Event of Default other than an Event of Default described in Section 5(a) or Section 5(b), the Noteholders may not accelerate the Maturity Date of the Subordinated Notes and make the principal of, and any accrued and unpaid interest on, the Subordinated Notes, immediately due and payable.  The Company, within thirty (30) calendar days after the receipt of written notice from any Noteholder of the occurrence of an Event of Default with respect to this Subordinated Note, shall mail to all Noteholders, at their addresses shown on the Security Register (as defined in Section 13 (Registration of Transfer, Security Register) below), such written notice of Event of Default, unless such Event of Default shall have been cured or waived before the giving of such notice as certified by the Company in writing to the Noteholder or Noteholders who provided written notice of such Event of Default.

  Failure to Make Payments.  In the event of any failure by the Company 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 thirty (30) calendar days), the Company will, upon demand of the Noteholders, pay to the Noteholders 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 per annum borne by the Subordinated Note, to the extent permitted by applicable law.  If the Company fails to pay such amount upon such demand, the Noteholders may, among other things, institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the property of the Company.

  Upon the occurrence of a failure by the Company to make any required payment of principal or interest on this Subordinated Note, or an Event of Default until such Event of Default is cured by the Company, or waived by the Noteholders in accordance with Section 16 (Waiver and Consent) hereof, except as may be required by any federal or state bank regulatory agency, the Company shall not: (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment 

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  with respect to, any of the Company’s capital stock; (b) make any payment of principal or interest or premium, if any, on or repay, repurchase or redeem any indebtedness of the Company that ranks equal with or junior to the Subordinated Notes; or (c) make any payments under any guarantee of indebtedness, which guarantee ranks equal with or junior to the Subordinated Notes, other than (i) any dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, any class of the Company’s 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 the Company’s capital stock or the exchange or conversion of one class or series of the Company’s capital stock for another class or series of the Company’s capital stock; (iv) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; or (v) purchases of any class of the Company’s common stock related to the issuance of common stock or rights under any benefit plans for the Company’s directors, officers or employees or any of the Company’s dividend reinvestment plans (the foregoing clauses (i) through (v) are collectively referred to as the “Permitted Dividends”). 

  Affirmative Covenants of the Company. 

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

  The total risk-based capital ratio, Tier 1 risk-based capital ratio, common equity Tier 1 risk-based capital ratio or leverage ratio of the Company (but only to the extent the Company is required to measure and report such ratios on a consolidated basis under applicable law) or any of the Company’s banking Subsidiaries becomes less than eight percent (8.0%), six percent (6.0%), four and one-half percent (4.5%) or four percent (4.0%), respectively, as of the end of any fiscal quarter;

  The Company, or any of the Company’s subsidiaries, or any officer of the Company (in such capacity), becomes subject to any formal, written regulatory enforcement action (as defined by the applicable state or federal bank regulatory authority);

  The ratio of non-performing assets to total assets of Guaranty Bank and Trust (the “Bank”), as calculated by the Company in the ordinary course of business and consistent with past practices, becomes greater than four percent (4.0%);

  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 Company or a Bank; or

  There is a change in ownership of 25.0% or more of the outstanding securities of the Company, entitled to vote for the election of directors; provided, however, that the Company shall not be required to comply with this Section 7(a) if at any time when the Company is subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 

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

  Maintenance of Office. The Company will maintain an office or agency in the State of  Texas, unless the Company has provided due notice to the Noteholders of such change in office or agency location, where the Subordinated Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Subordinated Note may be served.  The Company may also from time to time designate one or more other offices or agencies where the Subordinated Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in Texas, unless the Company has provided due notice to the Noteholders of such change in office or agency location.  The Company will give prompt written notice to the Noteholders of any such designation or rescission and of any change in the location of any such other office or agency.

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

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

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

  Tier 2 Capital.  Whether or not the Company is subject to consolidated capital requirements under applicable regulations of the Federal Reserve, if all or any portion of the Subordinated Notes 

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  ceases to be eligible, or there is a material risk that the Subordinated Note will cease to be eligible, 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, the Company will promptly notify the Noteholder and thereafter, subject to the Company’s right to redeem the Subordinated Notes under such circumstances pursuant to the terms of the Subordinated Notes, if requested by the Company, the Company and the Noteholder 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 be eligible to qualify as Tier 2 Capital; provided, however, that nothing contained in this Section 7(g) shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event pursuant to Section 4(a) (Redemption Prior to Fifth Anniversary) or Section 4(b) (Redemption on or after Fifth Anniversary).

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

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

  Financial Statements; Access to Records.

  Not later than forty-five (45) calendar days following the end of each fiscal quarter for which the Company has neither filed a quarterly report on form 10-Q under Section 13 or Section 15(d) of the Exchange Act, nor submitted a Consolidated Financial Statements for Holding Companies Reporting Form FR Y-9C to the Federal Reserve, upon request, the Company shall provide the Noteholders with a copy of the Company’s unaudited parent company only balance sheet and statement of income (loss) for and as of the end of such immediately preceding fiscal quarter, prepared in accordance with past practice. Quarterly financial statements, if required herein, shall be unaudited and need not comply with GAAP. 

  Not later than ninety (90) calendar days from the end of each fiscal year, upon request the Company shall provide the Noteholder with copies of the Company’s audited financial statements consisting of the consolidated balance sheet of the Company as of the fiscal year end and the related statements of income (loss) and retained earnings, stockholders’ equity and cash flows for the fiscal year then ended.  Such financial statements shall be prepared in accordance with GAAP applied on a consistent basis throughout the period involved.

  Negative Covenants of the Company.

  Limitation on Dividends.  The Company shall not declare or pay any dividend or make any distribution on capital stock or other equity securities of any kind of the Company if the Company is 

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  not “well capitalized” for regulatory purposes immediately prior to the declaration of such dividend or distribution, except for Permitted Dividends.

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

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

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

  Change in Bank Control.  The Company shall not effect a Change in Bank Control.  “Change in Bank Control” means the sale, transfer, lease or conveyance by the Company, or an issuance of stock by the Bank, in either case resulting in ownership by the Company of securities that provides it with less than 80% of the Bank’s outstanding voting equity securities, calculated on the basis of voting power.

  Affiliate Indebtedness.  The Company shall not incur any indebtedness to any of its Subsidiaries or Affiliates unless such indebtedness shall be subordinated in right of payment to the Company’s obligations with respect to this Note.

  “indebtedness” means (i) all obligations for borrowed money; (ii) all obligations evidenced by bonds, debentures, securities, notes or other similar instruments; (iii) any deferred obligations for the payment of the purchase price of property or assets acquired other than in the ordinary course of business; (iv) all obligations, contingent or otherwise, in respect of any letters of credit, bankers’ acceptances, security purchase facilities and similar direct credit substitutes; (v) any capital lease obligations; and (vi) all obligations in respect of interest rate swap, cap or other agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity contracts and other similar arrangements or derivative products.

  Denominations.  The Subordinated Notes are issuable only in registered form without interest coupons in minimum denominations of $250,000 and integral multiples of $1,000 in excess thereof. 

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

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  Payment Procedures.  

  Payments of the principal and interest payable on the Maturity Date will be made by (i) check mailed to the registered Noteholder, as such person’s address appears on the Security Register (as defined herein), or (ii) wire transfer or Automated Clearing House (ACH) transfer in immediately available funds to a bank account in the United States designated by the Noteholder if such Noteholder shall have previously provided wire instructions to the Company, upon presentation and surrender of this Subordinated Note at the Payment Office (as defined herein) or at such other place or places as the Company shall designate by notice to the Noteholders as the Payment Office.  Payments of interest (other than interest payable on the Maturity Date) shall be made by (x) check mailed to the registered Noteholder, as such person’s address appears on the Security Register (as defined herein) or (y) wire transfer or ACH transfer in immediately available funds to an account at an institution in the United States designated by such Noteholder if the Noteholder shall have previously provided wire instructions to the Company.  

  Interest payable on any Interest Payment Date shall be payable to the Noteholder in whose name this Subordinated Note is registered at the close of business on the fifteenth (15th) calendar day prior to the applicable Interest Payment Date, without regard to whether such date is a Business Day, except that interest not paid on the Interest Payment Date, if any, will be paid to the Noteholder in whose name this Subordinated Note is registered at the close of business on a special record date fixed by the Company (a “Special Record Date”), notice of which shall be given to the Noteholder not less than ten (10) calendar days prior to such Special Record Date.  

  To the extent permitted by applicable law, interest shall accrue, at the rate at which interest accrues on the principal of this Subordinated Note, on any amount of principal or interest on this Subordinated Note not paid when due.  All payments on this Subordinated Note shall be applied first against interest due hereunder; and then against principal due hereunder.  The Noteholder acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Subordinated Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Subordinated Notes. In the event that the Noteholder receives payments in excess of its pro rata share of the Company’s payments to the Noteholders of all of the Subordinated Notes, then the Noteholder 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 Noteholders upon demand by such Noteholders. 

  Form of Payment.  Payments of principal of 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.

  Registration of Transfer, Security Register.  Except as otherwise provided herein, or in the Purchase Agreement, and subject to limitations set forth under applicable state and federal securities laws, this Subordinated Note is transferable in whole or in part, and may be exchanged for a like aggregate principal amount of Subordinated Notes of other authorized denominations, by the Noteholder in person, or by its attorney duly authorized in writing, at the Payment Office.  The Company or, if applicable, the Company’s registrar and transfer agent (the “Registrar”), shall maintain a register providing for the registration of the Subordinated Notes and any exchange or transfer thereof 

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  (the “Security Register”).  Upon surrender or presentation of the Subordinated Note for exchange or registration of transfer, the Company, or the Registrar, as the case may be, shall execute and deliver in exchange therefor a Subordinated Note or Subordinated Notes of like aggregate principal amount, each in a minimum denomination of $250,000 or any amount in excess thereof which is an integral multiple of $1,000 (and, in the absence of an opinion of counsel satisfactory to the Company to the contrary, bearing the restrictive legend(s) set forth hereinabove) and that is or are registered in such name or names requested by the Noteholder.  Any Subordinated Note presented or surrendered for registration of transfer or for exchange shall be duly endorsed and accompanied by a written instrument of transfer in such form as is attached hereto and incorporated herein, duly executed by the Noteholder 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 Company may reasonably request to comply with applicable law.  No exchange or registration of transfer of this Subordinated Note shall be made on or after (i) the fifteenth (15th) calendar day immediately preceding the Maturity Date or (ii) the due delivery of notice of redemption. 

  Priority.  The Subordinated Notes ranks pari passu among themselves and, 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 Company with all other present or future unsecured subordinated debt obligations of the Company, except any unsecured subordinated debt that, pursuant to its express terms, is senior or subordinate in right of payment to the Subordinated Notes (including all Senior Indebtedness).  

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

  Waiver and Consent.

  Any consent or waiver given by the Noteholders or otherwise in accordance with the terms hereof shall be conclusive and binding upon such Noteholder and upon all subsequent holders of this Subordinated Note and of any Subordinated Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Subordinated Note.  No delay or omission of the Noteholder 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.  Any insured depository institution which shall be a Noteholder or which otherwise shall have any beneficial ownership interest in this Subordinated Note shall, by its acceptance of this Subordinated Note (or beneficial interest therein), be deemed to have waived any right of offset with respect to the repayment of the indebtedness evidenced thereby.

  No waiver or amendment of any term, provision, condition, covenant or agreement in the Subordinated Notes shall be effective except with the consent of the Noteholders holding more than fifty percent (50%) in aggregate principal amount (excluding any Subordinated Notes held by the Company or any of its Affiliates) of the Subordinated Notes at the time outstanding; provided, however, 

  A-22

    

   

   

  

   

  that without the consent of each Noteholder of an affected Subordinated Note, no such amendment or waiver may:  (i) reduce the principal amount of such Subordinated Note; (ii) reduce the rate of or change the time for payment of interest on such Subordinated Note; (iii) extend the maturity of such Subordinated Note; (iv) change the currency in which payment of the obligations of the Company under the Subordinated Notes are to be made; (v) lower the percentage of aggregate principal amount of outstanding Subordinated Notes required to approve any amendments of the Subordinated Notes; (vi) make any changes to Section 5 (Events of Default; Acceleration); Section 6 (Failure to Make Payments); Section 7 (Affirmative Covenants of the Company); Section 8 (Negative Covenants of the Company) or Section 16 (Waiver and Consent) of the Subordinated Notes that adversely affects the rights of any Noteholder; or (vii) disproportionately affect any of the Noteholders of the then outstanding Subordinated Notes. Notwithstanding the foregoing, the Company may amend or supplement the Subordinated Notes without the consent of the Noteholder to cure any ambiguity, defect or inconsistency or to provide for uncertificated Subordinated Note in addition to or in place of certificated Subordinated Note, or to make any change that does not adversely affect the rights of any Noteholder of any of the Subordinated Notes. No failure to exercise or delay in exercising, by any Noteholder of the Subordinated Notes, of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right or remedy provided by law, except as restricted hereby.  The rights and remedies provided in this Subordinated Note are cumulative and not exclusive of any right or remedy provided by law or equity.  No notice or demand on the Company in any case shall, in itself, entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Noteholders to any other or further action in any circumstances without notice or demand.  No consent or waiver, expressed or implied, by the Noteholders to or of any breach or default by the Company in the performance of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance of the same or any other obligations of the Company hereunder.  Failure on the part of the Noteholders to complain of any acts or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Noteholders of their rights hereunder or impair any rights, powers or remedies on account of any breach or default by the Company.

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

  Successors and Assigns.  This Subordinated Note shall be binding upon the Company and inure to the benefit of the Noteholder and its respective successors and permitted assigns.  The Noteholder may, subject to the terms set forth in the restrictive legend(s) set forth hereinabove, assign all, or any part of, or any interest in, the Noteholder’s rights and benefits hereunder, upon execution of the Assignment Form attached hereto.  To the extent of any such assignment, such assignee shall have the same rights and benefits against the Company and shall agree to be bound by and to comply with the terms and conditions of the Purchase Agreement as it would have had if it were the Noteholder hereunder.

  A-23

    

   

   

  

   

  No Sinking Fund; Convertibility.  This Subordinated Note is not entitled to the benefit of any sinking fund.  The Subordinated Note is not convertible into or exchangeable for any of the equity securities, other securities or assets of the Company or any of its Subsidiaries.

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

  Notices.  All notices to the Company under this Subordinated Note shall be in writing and addressed to the Company at: Guaranty Bancshares, Inc., 16475 Dallas Parkway, Suite 600, Addison, Texas 75001, Attention: Clifton A. Payne (with a copy to: Fenimore Kay Harrison LLP, 812 San Antonio St., Suite 600, Austin, Texas 78701, Attention: Kevin Strachan) or to such other address as the Company may provide to the Noteholders (the “Payment Office”).  All notices to the Noteholders 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. 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).

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

  Governing Law; Interpretation.  THIS SUBORDINATED NOTE WILL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).  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 FEDERAL RESERVE, AND THE TERMS HEREOF SHALL BE INTERPRETED IN A MANNER TO SATISFY SUCH INTENT.

   

  A-24

    

   

   

  

   

   

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

  				
	 
	GUARANTY BANCSHARES, INC. 
 

	 
	 
	 
	 

	 
	 
 
By:
	 

	 
	 
	Name:
	 Tyson T. Abston

	 
	 
	Title: 
	Chairman and Chief Executive Officer 

   

  		
	ATTEST:
	 
 

	 
	 

	 
	 

	Name: 
	 

	Title:  
	 

   

   

  A-25

    

   

   

  

   

  ASSIGNMENT FORM

  To assign the Subordinated Note, fill in the form below: (I) or (we) assign and transfer this Subordinated Note to:

  _____________________________________________________________________________

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

   

  _____________________________________________________________________________

  (Print or type assignee’s social security or tax identification number)

   

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

   

  Date: ___________________                 Your signature: _____________________   

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

   

  Tax identification no: _____________________                                

   

  Signature guarantee: ____________________________________________________________

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

   

  The undersigned certifies that it [is / is not] an Affiliate of the Company and that, to its knowledge, the proposed transferee [is / is not] an Affiliate of the Company.

   

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

  4.CHECK ONE BOX BELOW:

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

  	(2)  transferred to the Company;

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

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

  	(5)  transferred in accordance with and in compliance with Regulation S under the Securities Act;

  A-26

    

   

   

  

   

  	(6)  transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act);

  	(7)  transferred to an “accredited investor” (as defined in Rule 501(a)(4) under the Securities Act), not referred to in item (6) that has been provided with the information designated under Section 4(d) of the Securities Act of 1933; or

  	(8)  transferred in accordance with another available exemption from the registration requirements of the Securities Act.

  5.Unless one of the boxes is checked, the Company will refuse to register this Subordinated Note in the name of any Person other than the registered holder thereof; provided, however, that if box (5), (6), (7) or (8) is checked, the Company may require, prior to registering any such transfer of this Subordinated Note, in its sole discretion, such legal opinions, certifications and other information as the Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act such as the exemption provided by Rule 144 under such Act.

  Assignee’s signature: _____________________	

   

  Signature guarantee: ___________________________________________________________	

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

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

   

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

   

  Date: _________________________		Assignee’s Signature: _______________________

   

  A-27

    

   

   

  

   

  EXHIBIT B

  OPINION OF COUNSEL

  1.The Company is validly existing as a corporation and is in good standing under the laws of the State of Texas.  The Bank is validly existing as a national banking association under the laws of the United States of America.

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

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

  4.The Company has the corporate power and authority under the laws of the State of Texas to execute and deliver, and to perform its obligations under, the Transaction Documents.

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

  6.The execution and delivery by the Company of, and the performance by the Company of its obligations under, the Transaction Documents do not (i) to our knowledge, violate any applicable provisions of the Texas Business Organizations Code, (ii) to our knowledge, violate any court order or judgment of any agency or court of the State of Texas having jurisdiction over the Company and known to us or (iii) contravene the Certificate of Formation or Bylaws of the Company, each as currently in effect.

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

  8.Assuming (i) the accuracy of the representations and warranties of the Company set forth in Section 4 of the Agreement, (ii) the due performance by the Company and the Purchaser of the covenants and agreements set forth in the Agreement, and (iii) the accuracy of the representations and warranties of the Purchaser set forth in Article 6 of the Agreement, the offer and sale of the Subordinated Note by the Company, in the manner contemplated by the 

  B-1

   

   

  

   

  Agreement, do not require registration under the Securities Act of 1933, as amended, but we express no opinion as to any subsequent resale or other transfer of the Subordinated Note. 

   

   

  B-2Exhibit 4.1

 

 

DUKE ENERGY CAROLINAS, LLC

 

TO

 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

Trustee

 

ONE-HUNDRED AND SIXTH SUPPLEMENTAL INDENTURE

 

Dated as of March 4,
2022

 

 

 

CREATING TWO SERIES OF FIRST AND REFUNDING

MORTGAGE BONDS

 

$500,000,000 FIRST AND REFUNDING MORTGAGE BONDS,
2.85% SERIES DUE 2032

$650,000,000
FIRST AND REFUNDING MORTGAGE BONDS, 3.55% SERIES DUE 2052

  

 

 

SUPPLEMENTAL TO

FIRST AND REFUNDING MORTGAGE

DATED AS OF December 1, 1927

  

  

Drawn By and Return To:

Hunton Andrews Kurth LLP

200 Park Avenue

New York, New York 10166

Attention: Brendan P. Harney

 

    

     

    

  

SUPPLEMENTAL INDENTURE, bearing
date as of the 4th day of March, 2022, made and entered into by and between Duke Energy Carolinas, LLC, a limited liability company duly
organized and existing under the laws of the State of North Carolina, hereinafter called the “Company”, party of the first
part, and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.), a national banking
association, having a corporate trust office at 4655 Salisbury Road, Suite 300, Jacksonville, Florida 32256, hereinafter called the
 “Trustee”, as Trustee, party of the second part. The Trustee is the successor to JPMorgan Chase Bank, N.A. (formerly known
as The Chase Manhattan Bank, formerly known as Chemical Bank (successor to Morgan Guaranty Trust Company of New York)), as Trustee.

 

WHEREAS the Company’s
predecessor is Duke Energy Corporation (formerly known as Duke Power Company), a corporation organized under the laws of the State of
North Carolina, which converted its form of organization on April 3, 2006 from a North Carolina corporation to a North Carolina limited
liability company named “Duke Power Company LLC,” which changed its name to Duke Energy Carolinas, LLC on October 1,
2006; and

 

WHEREAS Duke Power Company,
a New Jersey corporation, hereinafter called the “New Jersey Company”, duly executed and delivered its First and Refunding
Mortgage, dated as of December 1, 1927, to Guaranty Trust Company of New York, as Trustee, to secure its First and Refunding Mortgage
Gold Bonds, to be issued from time to time in series as provided in said Mortgage, and has from time to time duly executed and delivered
supplemental indentures, including supplemental indentures dated as of September 1, 1947 and February 1, 1949, to Guaranty Trust
Company of New York (the corporate name of which has been changed to Morgan Guaranty Trust Company of New York), as Trustee, and a supplemental
indenture dated as of February 1, 1960 to Morgan Guaranty Trust Company of New York, as Trustee, supplementing and modifying said
Mortgage (said Mortgage, as so supplemented and modified by the supplemental indentures dated as of September 1, 1947, February 1,
1949 and February 1, 1960, being hereinafter referred to as the “original indenture”); and

 

    1

     

    

 

WHEREAS bonds of a series
known as the “First and Refunding Mortgage Bonds, 2.65% Series Due 1977” (herein called “bonds of the 2.65% Series”),
bonds of a series known as the “First and Refunding Mortgage Bonds, 2 7/8% Series Due 1979” (herein called “bonds
of the 1979 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 6 3/8% Series Due 1998”
(herein called “bonds of the 1998 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, Pollution
Control Facilities Revenue Refunding Series Due 2014” (herein called “bonds of the 1990 Pollution Control Series”),
bonds of a series known as the “First and Refunding Mortgage Bonds, City of Greensboro Series Due 2027” (herein called
 “bonds of the 2027 City of Greensboro Series”), bonds of a series known as the “First and Refunding Mortgage Bonds,
Medium-Term Notes Series” (herein called “bonds of the Medium-Term Notes Series”), bonds of a series known as the “First
and Refunding Mortgage Bonds, 6 5/8% Series B Due 2003” (herein called “bonds of the 2003 Series B”), bonds
of a series known as the “First and Refunding Mortgage Bonds, 6 3/8% Series Due 2008” (herein called “bonds of
the 2008 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 5 7/8% Series C Due 2003”
(herein called “bonds of the 2003 Series C”), bonds of a series known as the “First and Refunding Mortgage Bonds,
Pollution Control Facilities Revenue Refunding Series Due 2014” (herein called “bonds of the 1993 Pollution Control Series”),
bonds of a series known as the “First and Refunding Mortgage Bonds, 6 1/4% Series B 2004” (herein called “bonds
of the 2004 Series B”), bonds of a series known as the “First and Refunding Mortgage Bonds, 7% Series Due 2033”
(herein called “bonds of the 2033 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 6 7/8%
Series B Due 2023” (herein called “bonds of the 2023 Series B”), bonds of a series known as the “First
and Refunding Mortgage Bonds, 6 3/4% Series Due 2025” (herein called “bonds of the 2025 Series”), bonds of a series
known as the “First and Refunding Mortgage Bonds, 7 7/8% Series Due 2024” (herein called “bonds of the 2024 Series”),
bonds of a series known as the “First and Refunding Mortgage Bonds, 7 1/2% Series B Due 2025” (herein called “bonds
of the 2025 Series B”), bonds of a series known as the “First and Refunding Mortgage Bonds, 7 1/2% Series Due 1999”
(herein called “bonds of the 1999 Series”), bonds of a series known as the “First and Refunding Mortgage Bonds, 7% Series Due
2000” (herein called “bonds of the 2000 Series”), bonds of a series known as the “First and Refunding Mortgage
Bonds, 7% Series B Due 2000” (herein called “bonds of the 2000 Series B”), bonds of a series known as the
 “First and Refunding Mortgage Bonds, 6.625% Series Due 2003” (herein called “bonds of the 2003 Series”),
bonds of a series known as the “First and Refunding Mortgage Bonds, 9 5/8% Series Due 2020” (herein called “bonds
of the 9 5/8% Series due 2020”), bonds of a series known as the “First and Refunding Mortgage Bonds, 8 3/4% Series Due
2021” (herein called “bonds of the 2021 Series”), bonds of a series known as “First and Refunding Mortgage Bonds,
7% Series Due 2005” (herein called “bonds of the 2005 Series”), bonds of a series known as “First and Refunding
Mortgage Bonds, 3.75% Series A Due 2008” (herein called “bonds of the 3.75% Series A”), bonds of series known
as “First and Refunding Mortgage Bonds, 3.75% Series B Due 2008” (herein called “bonds of the 3.75% Series B,”
and together with the bonds of the 3.75% Series A, the “bonds of the 3.75% Series”), bonds of a series known as “First
and Refunding Mortgage Bonds, 7 3/8% Series Due 2023” (herein called “bonds of the 7 3/8% Series”), bonds of a
series known as “First and Refunding Mortgage Bonds, 4 1/2% Series Due 2010” (herein called “bonds of the 4 1/2%
Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 5.30% Series Due 2015” (herein called
 “bonds of the 5.30% Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 5.25% Series Due
2018” (herein called “bonds of the 5.25% Series”), bonds of a series known as “First and Refunding Mortgage Bonds,
6.00% Series Due 2038” (herein called “bonds of the 6.00% Series”), bonds of a series known as “First and
Refunding Mortgage Bonds, 2007A Pledge Series Due 2040” (herein called “bonds of the 2007A Pledge Series”), bonds
of a series known as “First and Refunding Mortgage Bonds, 2007B Pledge Series Due 2040” (herein called “bonds of
the 2007B Pledge Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 5.10% Series B Due 2018”
(herein called “bonds of the 5.10% Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 6.05% Series B
Due 2038” (herein called “bonds of the 6.05% Series”), bonds of a series known as “First and Refunding Mortgage
Bonds, 7.00% Series C Due 2018 (herein called “bonds of the 2018 Series C”), bonds of a series known as “First
and Refunding Mortgage Bonds, 5.30% Series Due 2040” (herein called “bonds of the 2040 Series”), bonds of a series
known as “First and Refunding Mortgage Bonds, 4.30% Series due 2020”(herein called “bonds of the 2020 Series”),
bonds of a series known as “First and Refunding Mortgage Bonds, Solid Waste Disposal Revenue Bonds Series 2010A Due 2031”
(herein called “bonds of the 2010A Solid Waste Disposal Series”), bonds of a series known as “First and Refunding Mortgage
Bonds, Solid Waste Disposal Revenue Bonds Series 2010B Due 2031” (herein called “bonds of the 2010B Solid Waste Disposal
Series”), bonds of a series known as “First and Refunding Mortgage Bonds, Solid Waste Disposal Revenue Bonds Series 2010C
Due 2040” (herein called “bonds of the 2010C Solid Waste Disposal Series”), bonds of a series known as “First
and Refunding Mortgage Bonds, Solid Waste Disposal Revenue Bonds Series 2010D Due 2040 (herein called “bonds of the 2010D Solid
Waste Disposal Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 3.90% Series due 2021”
(herein called “bonds of the 3.90% Series”), bonds of a series known as “First and Refunding Mortgage Bonds, 1.75% Series due
2016” (herein called “bonds of the 1.75% Series”), bonds of a series known as “First and Refunding Mortgage Bonds,
4.25% Series due 2041” (herein called “bonds of the 4.25% Series”), bonds of a series known as “First and
Refunding Mortgage Bonds, 4.00% Series due 2042” (herein called “bonds of the 4.00% Series”), bonds of a series
known as “First and Refunding Mortgage Bonds, 3.75% Series due 2045” (herein called “bonds of the 3.75% Series due
2045”), bonds of a series known as “First and Refunding Mortgage Bonds, 2.500% Series due 2023” (herein called
 “bonds of the 2.500% Series due 2023”), bonds of a series known as “First and Refunding Mortgage Bonds, 3.875%
Series due 2046” (herein called “bonds of the 3.875% Series due 2046”), bonds of a series known as “First
and Refunding Mortgage Bonds, 2.95% Series due 2026” (herein called “bonds of the 2.95% Series due 2026”),
bonds of a series known as “First and Refunding Mortgage Bonds, 3.70% Series due 2047” (herein called “bonds of
the 3.70% Series due 2047”), bonds of a series known as “First and Refunding Mortgage Bonds, 3.05% Series due 2023”
(herein called “bonds of the 3.05% Series due 2023”), bonds of a series known as “First and Refunding Mortgage
Bonds, 3.95% Series due 2048 (herein called “bonds of the 3.95% Series due 2048”), bonds of a series known as “First
and Refunding Mortgage Bonds, 3.35% Series due 2022” (herein called “bonds of the 3.35% Series due 2022”),
bonds of a series known as “First and Refunding Mortgage Bonds, 3.95% Series due 2028” (herein called “bonds of
the 3.95% Series due 2028”), bonds of a series known as “First and Refunding Mortgage Bonds, 2.45% Series due 2029”
(herein called “bonds of the 2.45% Series due 2029”), bonds of a series known as “First and Refunding Mortgage
Bonds, 3.20% Series due 2049” (herein called “bonds of the 3.20% Series due 2049”), bonds of a series known
as “First and Refunding Mortgage Bonds, 2.45% Series due 2030” (herein called “bonds of the 2.45% Series due
2030”), bonds of a series known as “First and Refunding Mortgage Bonds, 2.55% Series due 2031” (herein called “bonds
of the 2.55% Series due 2031”), bonds of a series known as “First and Refunding Mortgage Bonds, 3.45% Series due
2051” (herein called “bonds of the 3.45% Series due 2051”) and such other bonds that have heretofore been issued
and (except for bonds of the 2.65% Series, bonds of the 1979 Series, bonds of the 1998 Series, bonds of the 1990 Pollution Control Series,
bonds of the Medium Term Notes Series, bonds of the 2003 Series B, bonds of the 2008 Series, bonds of the 2003 Series C, bonds
of the 1993 Pollution Control Series, bonds of the 2004 Series B, bonds of the 2033 Series, bonds of the 2023 Series B, bonds
of the 2025 Series, bonds of the 2024 Series, bonds of the 2025 Series B, bonds of the 1999 Series, bonds of the 2000 Series, bonds
of the 2000 Series B, bonds of the 2003 Series, bonds of the 9 5/8% Series due 2020, bonds of the 2021 Series, bonds of the
2005 Series, bonds of the 3.75% Series, bonds of the 7 3/8% Series, bonds of the 2007A Pledge Series, bonds of the 2007B Pledge Series,
bonds of the 4 1/2% Series, bonds of the 5.30% Series, bonds of a series known as “First and Refunding Mortgage Bonds, Pollution
Control Facilities Revenue Refunding Series Due 2017,” bonds of the 1.75% Series, bonds of the 5.25% Series, bonds of the 5.10%
Series, bonds of the 2018 Series C, bonds of the 2020 Series, bonds of the 2007A Pledge Series, bonds of the 2007B Pledge Series,
bonds of the 2010A Solid Waste Disposal Series, bonds of the 2010B Solid Waste Disposal Series, bonds of the 3.90% Series, and other such
bonds which have been redeemed or retired in their entirety) are the only bonds now outstanding under the original indenture as heretofore
supplemented; and

 

    2

     

    

  

WHEREAS the Company has duly
executed and delivered a supplemental indenture, dated as of June 15, 1964, to Morgan Guaranty Trust Company of New York, as Trustee,
for the purpose of evidencing the succession by merger of the Company to the New Jersey Company and the assumption by the Company of the
covenants and conditions of the New Jersey Company in the original indenture and to enable the Company to have and exercise the powers
and rights of the New Jersey Company under the original indenture in accordance with the terms thereof and whereby the Company assumed
and agreed to pay duly and punctually the principal of and interest on the bonds issued under the original indenture in accordance with
the provisions of said bonds and the coupons thereto appertaining and the original indenture, and agreed to perform and fulfill all the
terms, covenants and conditions of the original indenture binding upon the New Jersey Company, and

 

WHEREAS Morgan Guaranty Trust
Company of New York resigned as Trustee under the original indenture as heretofore supplemented and Chemical Bank was appointed successor
Trustee, said resignation and appointment having taken effect on August 30, 1994 pursuant to an Instrument of Resignation, Appointment
and Acceptance dated as of August 30, 1994 among the Company, Morgan Guaranty Trust Company of New York, as Trustee, and Chemical
Bank (now known as JPMorgan Chase Bank, N.A.), as successor Trustee; and

 

WHEREAS JPMorgan Chase Bank,
N.A. resigned as Trustee and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.)
was appointed successor Trustee, said resignation and appointment having taken effect on September 24, 2007 pursuant to an Instrument
of Resignation, Appointment and Acceptance dated as of September 24, 2007 among the Company, JPMorgan Chase Bank, N.A., as Trustee,
and The Bank of New York Mellon Trust Company, N.A., as successor Trustee; and

 

    3

     

    

 

WHEREAS the Company desires
to create under the original indenture, as heretofore supplemented and as to be supplemented by this supplemental indenture, two new series
of bonds, to be known as its “First and Refunding Mortgage Bonds, 2.85% Series due 2032,” and its “First and Refunding
Mortgage Bonds, 3.55% Series due 2052,” and to determine the terms and provisions and the form of the bonds of each such series;
and

  

WHEREAS for the purposes hereinabove
recited, and pursuant to due limited liability company action, the Company has duly determined to execute and deliver to the Trustee a
supplemental indenture in the form hereof supplementing the original indenture (the original indenture, as previously supplemented by
supplemental indentures and as hereby supplemented, being sometimes hereinafter referred to as the “Indenture”); and

 

WHEREAS all conditions and
requirements necessary to make this supplemental indenture a valid, legal and binding instrument in accordance with its terms have been
done and performed, and the execution and delivery hereof have been in all respects duly authorized:

 

NOW, THEREFORE, THIS INDENTURE
WITNESSETH:

 

That in consideration of the
premises and of the sum of one dollar duly paid by the Company to the Trustee at or before the execution and delivery of these presents,
the receipt whereof is hereby acknowledged, the Company hereby covenants and agrees with the Trustee and its successors in the trust under
the Indenture as follows:

 

PART One.

 

SECTION 1.         Bonds
of the 2.85% Series

 

Section 1.1.           The
Company hereby creates a new series of bonds to be issued under and secured by the Indenture and known as its First and Refunding Mortgage
Bonds, 2.85% Series due 2032 (herein called “bonds of the 2.85% Series”) and the Company hereby establishes, determines
and fixes the terms and provisions of the bonds of the 2.85% Series as hereinafter in this Section 1 set forth.

 

Each bond of the 2.85% Series shall
be dated the date of its authentication (except that if any such bond shall be authenticated on any interest payment date, it shall be
dated the following day) and interest shall be payable on the principal represented thereby commencing September 15, 2022, from March 15
or September 15, as the case may be, next preceding the date thereof to which interest has been paid, unless such date of authentication
is prior to September 15, 2022, in which case interest shall be payable from March 4, 2022; provided, however,
that interest shall be payable on each bond of the 2.85% Series authenticated after the record date (as defined in the next succeeding
paragraph of this Section 1.1) with respect to any interest payment date and prior to such interest payment date, only from such
interest payment date.

 

Interest on any bond of the
2.85% Series shall be paid to the person who, according to the bond register of the Company, is the registered holder of such bond
of the 2.85% Series at the close of business on the applicable record date, and such interest payments shall be made by check mailed
to such registered holder at his last address shown on such bond register or, at the option of the Company, by wire transfer at such place
and to such account at a banking institution in the United States as may be designated in writing to the Trustee at least sixteen (16)
days prior to the date of payment by the Person entitled thereto (provided, that if the bonds of the 2.85% Series are represented
by Global Securities held by the Depositary, payment may be made pursuant to the procedures of the Depositary); provided, however,
that, if the Company shall default in the payment of the interest due on any interest payment date on any bond of the 2.85% Series, such
defaulted interest shall be paid to the registered holder of such bond (or any bond or bonds of the 2.85% Series issued upon transfer,
exchange or substitution thereof) on the date of subsequent payment of such defaulted interest or, at the election of the Company, to
the person in whose name such bond (or any bond or bonds of the 2.85% Series issued upon transfer, exchange or substitution thereof)
is registered on a subsequent record date established by notice given by mail by or on behalf of the Company to the holders of all bonds
of the 2.85% Series not less than ten (10) days preceding such subsequent record date. The term “record date” as
used in this Section 1.1 shall mean, with respect to any semi-annual interest payment date, the close of business on (i) the
business day immediately preceding such interest payment date so long as the bonds of the 2.85% Series remain in book-entry only
form or (ii) the fifteenth calendar day immediately preceding such interest payment date if any of the bonds of the 2.85% Series do
not remain in book-entry only form, in each case, whether or not a business day, or, in the case of a payment of defaulted interest, the
close of business on any subsequent record date established as provided above.

 

    4

     

    

  

Section 1.2.           All
bonds of the 2.85% Series shall mature as to principal on March 15, 2032 and shall bear interest at a rate of 2.85% per annum,
payable semi-annually on the 15th day of March and September in each year, commencing on the 15th day
of September, 2022. Interest on the bonds of the 2.85% Series will be computed on the basis of a 360-day year consisting of twelve
30-day months.

 

Section 1.3.           The
bonds of the 2.85% Series shall be fully registered bonds, without coupons, in denominations of two thousand dollars ($2,000) and
integral multiples of one thousand dollars ($1,000) in excess thereof, all such bonds to be numbered, and shall be transferable and exchangeable
as provided in the form of bond set forth as Exhibit A to this supplemental indenture. The provisions of §1.19 and any other
provision in the Indenture in respect of coupon bonds or reservation of coupon bond numbers shall be inapplicable to the bonds of the
2.85% Series.

 

Section 1.4.           Prior
to December 15, 2031 (the “2032 Par Call Date”), the Company may redeem at its option the bonds of the 2.85% Series,
in whole or in part, at any time and from time to time, at a redemption price (expressed as a percentage of principal amount and rounded
to three decimal places) equal to the greater of: (a) the sum of the present values of the remaining scheduled payments of principal
and interest thereon discounted to the redemption date (assuming the bonds of the 2.85% Series matured on the 2032 Par Call Date)
on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate applicable to the bonds of the
2.85% Series plus 20 basis points less (b) interest accrued to the redemption date; and 100% of the principal amount of the
bonds of the 2.85% Series to be redeemed, plus, in either case, accrued and unpaid interest thereon to, but excluding, the redemption
date. The Company shall notify the Trustee of the redemption price with respect to any redemption pursuant to this paragraph promptly
after the calculation thereof. The Trustee shall not be responsible for calculating said redemption price.

 

On
or after the 2032 Par Call Date, the Company may redeem at its option the bonds of the 2.85% Series, in whole or in part, at any
time and from time to time, at a redemption price equal to 100% of the principal amount of the bonds of the 2.85% Series to be redeemed
plus accrued and unpaid interest thereon to, but excluding, the redemption date.

 

The bonds of the 2.85% Series are
also subject to redemption through the operation of the Replacement Fund provided in Part Two of this supplemental indenture or through
the application of moneys paid to the Trustee pursuant to the provisions of §5.05 of the Indenture, at any time or from time to time
prior to maturity, upon prior notice as hereinafter provided, at the redemption prices specified in the fifth paragraph of the reverse
side of the form of bond set forth as Exhibit A to this supplemental indenture, together with interest accrued thereon to the date
fixed for redemption thereof.

 

    5

     

    

 

In the event that any redemption
date is not a business day, the Company shall pay the redemption price on the next business day without any interest or other payment
due to the delay.

  

All
such redemptions of bonds of the 2.85% Series shall be effected as provided in Article 3 of the Indenture except that, in case
a part only of the bonds of the 2.85% Series is to be paid and redeemed, the particular bonds or part thereof shall be selected by
the Trustee in such manner as the Trustee in its uncontrolled discretion shall determine to be fair and in any case where several bonds
are registered in the same name, the Trustee may treat the aggregate principal amount so registered as if it were represented by one bond
and except that when bonds are redeemed in part only the notice given to any particular holder need state only the principal amount
of the bonds of that holder which is to be redeemed and except that notice to the holders of bonds to be redeemed shall be given by mailing
to such holders a notice of such redemption, first class mail postage prepaid, not later than the tenth day, and not earlier than the
sixtieth day, before the date fixed for redemption, at their last addresses as they shall appear upon the bond register of the Company.
Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder
receives such notice; and failure duly to give such notice by mail, or any defect in such notice, to the holder of any bond designated
for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other bond. No publication
of notice of such redemption shall be required.

 

Section 1.5.           The
limit upon the aggregate principal amount of the bonds of the 2.85% Series which may be authenticated and delivered pursuant to this
supplemental indenture shall initially be $500,000,000. Notwithstanding the foregoing, the Company may, without the consent of the holders
of the bonds of the 2.85% Series, reopen the bonds of the 2.85% Series and issue an unlimited amount of additional bonds having the
same ranking, interest rate, maturity and other terms (except for the price to the public, the issue date, and, if applicable, the initial
interest accrual date and the first interest payment date) as the bonds of the 2.85% Series authenticated and delivered pursuant
to this supplemental indenture; provided, that, the Company may reopen the bonds of the 2.85% Series only if the additional bonds
issued will be fungible for United States federal income tax purposes with the bonds of the 2.85% Series authenticated and delivered
pursuant to this supplemental indenture. Any such additional bonds will be consolidated with and form a single series of bonds under the
Indenture with the bonds of the 2.85% Series authenticated and delivered pursuant to this supplemental indenture.

 

Section 1.6.           The
place or places of payment (as to principal and premium, if any, and interest), redemption, transfer, exchange and registration of the
bonds of the 2.85% Series shall be the office or offices or the agency or agencies of the Company in the Borough of Manhattan, The
City of New York, designated from time to time by the Board of Directors of the Company (provided, that if the bonds of the 2.85% Series are
represented by Global Securities held by or on behalf of the Depositary, the procedures of the Depositary may be followed for any action
under this Section 1.6).

 

Section 1.7.
           The form of the bonds of the 2.85% Series and the certificate of the Trustee to be endorsed on such bonds,
respectively, shall be in substantially the form set forth in Exhibit A hereto.

 

SECTION 2.          Bonds
of the 3.55% Series

 

Section 2.1.           The
Company hereby creates a new series of bonds to be issued under and secured by the Indenture and known as its First and Refunding Mortgage
Bonds, 3.55% Series due 2052 (herein called “bonds of the 3.55% Series”) and the Company hereby establishes, determines
and fixes the terms and provisions of the bonds of the 3.55% Series as hereinafter in this Section 2 set forth.

 

Each bond of the 3.55% Series shall
be dated the date of its authentication (except that if any such bond shall be authenticated on any interest payment date, it shall be
dated the following day) and interest shall be payable on the principal represented thereby commencing September 15, 2022, from March 15
or September 15, as the case may be, next preceding the date thereof to which interest has been paid, unless such date of authentication
is prior to September 15, 2022, in which case interest shall be payable from March 4, 2022; provided, however,
that interest shall be payable on each bond of the 3.55% Series authenticated after the record date (as defined in the next succeeding
paragraph of this Section 2.1) with respect to any interest payment date and prior to such interest payment date, only from such
interest payment date.

 

    6

     

    

  

Interest on any bond of the
3.55% Series shall be paid to the person who, according to the bond register of the Company, is the registered holder of such bond
of the 3.55% Series at the close of business on the applicable record date, and such interest payments shall be made by check mailed
to such registered holder at his last address shown on such bond register or, at the option of the Company, by wire transfer at such place
and to such account at a banking institution in the United States as may be designated in writing to the Trustee at least sixteen (16)
days prior to the date of payment by the Person entitled thereto (provided, that if the bonds of the 3.55% Series are represented
by Global Securities held by the Depositary, payment may be made pursuant to the procedures of the Depositary); provided, however,
that, if the Company shall default in the payment of the interest due on any interest payment date on any bond of the 3.55% Series, such
defaulted interest shall be paid to the registered holder of such bond (or any bond or bonds of the 3.55% Series issued upon transfer,
exchange or substitution thereof) on the date of subsequent payment of such defaulted interest or, at the election of the Company, to
the person in whose name such bond (or any bond or bonds of the 3.55% Series issued upon transfer, exchange or substitution thereof)
is registered on a subsequent record date established by notice given by mail by or on behalf of the Company to the holders of all bonds
of the 3.55% Series not less than ten (10) days preceding such subsequent record date. The term “record date” as
used in this Section 2.1 shall mean, with respect to any semi-annual interest payment date, the close of business on (i) the
business day immediately preceding such interest payment date so long as the bonds of the 3.55% Series remain in book-entry only
form or (ii) the fifteenth calendar day immediately preceding such interest payment date if any of the bonds of the 3.55% Series do
not remain in book-entry only form, in each case, whether or not a business day, or, in the case of a payment of defaulted interest, the
close of business on any subsequent record date established as provided above.

 

Section 2.2.           All
bonds of the 3.55% Series shall mature as to principal on March 15, 2052 and shall bear interest at a rate of 3.55% per annum,
payable semi-annually on the 15th day of March and September in each year, commencing on the 15th day
of September, 2022. Interest on the bonds of the 3.55% Series will be computed on the basis of a 360-day year consisting of twelve
30-day months.

 

Section 2.3.           The
bonds of the 3.55% Series shall be fully registered bonds, without coupons, in denominations of two thousand dollars ($2,000) and
integral multiples of one thousand dollars ($1,000) in excess thereof, all such bonds to be numbered, and shall be transferable and exchangeable
as provided in the form of bond set forth as Exhibit B to this supplemental indenture. The provisions of §1.19 and any other
provision in the Indenture in respect of coupon bonds or reservation of coupon bond numbers shall be inapplicable to the bonds of the
3.55% Series.

 

Section 2.4.           Prior
to September 15, 2051 (the “2052 Par Call Date”), the Company may redeem at its option the bonds of the 3.55% Series,
in whole or in part, at any time and from time to time, at a redemption price (expressed as a percentage of principal amount and rounded
to three decimal places) equal to the greater of: (a) the sum of the present values of the remaining scheduled payments of principal
and interest thereon discounted to the redemption date (assuming the bonds of the 3.55% Series matured on the 2052 Par Call Date)
on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate applicable to the bonds of the
3.55% Series plus 25 basis points less (b) interest accrued to the redemption date; and 100% of the principal amount of the
bonds of the 3.55% Series to be redeemed, plus, in either case, accrued and unpaid interest thereon to, but excluding, the redemption
date. The Company shall notify the Trustee of the redemption price with respect to any redemption pursuant to this paragraph promptly
after the calculation thereof. The Trustee shall not be responsible for calculating said redemption price.

 

    7

     

    

  

On or after the 2052 Par Call
Date, the Company may redeem at its option the bonds of the 3.55% Series, in whole or in part, at any time and from time to time, at a
redemption price equal to 100% of the principal amount of the bonds of the 3.55% Series to be redeemed plus accrued and unpaid interest
thereon to, but excluding, the redemption date.

 

The bonds of the 3.55% Series are
also subject to redemption through the operation of the Replacement Fund provided in Part Two of this supplemental indenture or through
the application of moneys paid to the Trustee pursuant to the provisions of §5.05 of the Indenture, at any time or from time to time
prior to maturity, upon prior notice as hereinafter provided, at the redemption prices specified in the fifth paragraph of the reverse
side of the form of bond set forth as Exhibit B to this supplemental indenture, together with interest accrued thereon to the date
fixed for redemption thereof.

 

In the event that any redemption
date is not a business day, the Company shall pay the redemption price on the next business day without any interest or other payment
due to the delay.

 

All
such redemptions of bonds of the 3.55% Series shall be effected as provided in Article 3 of the Indenture except that, in case
a part only of the bonds of the 3.55% Series is to be paid and redeemed, the particular bonds or part thereof shall be selected by
the Trustee in such manner as the Trustee in its uncontrolled discretion shall determine to be fair and in any case where several bonds
are registered in the same name, the Trustee may treat the aggregate principal amount so registered as if it were represented by one bond
and except that when bonds are redeemed in part only the notice given to any particular holder need state only the principal amount
of the bonds of that holder which is to be redeemed and except that notice to the holders of bonds to be redeemed shall be given by mailing
to such holders a notice of such redemption, first class mail postage prepaid, not later than the tenth day, and not earlier than the
sixtieth day, before the date fixed for redemption, at their last addresses as they shall appear upon the bond register of the Company.
Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder
receives such notice; and failure duly to give such notice by mail, or any defect in such notice, to the holder of any bond designated
for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other bond. No publication
of notice of such redemption shall be required.

 

Section 2.5.          The
limit upon the aggregate principal amount of the bonds of the 3.55% Series which may be authenticated and delivered pursuant to this
supplemental indenture shall initially be $650,000,000. Notwithstanding the foregoing, the Company may, without the consent of the holders
of the bonds of the 3.55% Series, reopen the bonds of the 3.55% Series and issue an unlimited amount of additional bonds having the
same ranking, interest rate, maturity and other terms (except for the price to the public, the issue date, and, if applicable, the initial
interest accrual date and the first interest payment date) as the bonds of the 3.55% Series authenticated and delivered pursuant
to this supplemental indenture; provided, that, the Company may reopen the bonds of the 3.55% Series only if the additional bonds
issued will be fungible for United States federal income tax purposes with the bonds of the 3.55% Series authenticated and delivered
pursuant to this supplemental indenture. Any such additional bonds will be consolidated with and form a single series of bonds under the
Indenture with the bonds of the 3.55% Series authenticated and delivered pursuant to this supplemental indenture.

 

Section 2.6.           The
place or places of payment (as to principal and premium, if any, and interest), redemption, transfer, exchange and registration of the
bonds of the 3.55% Series shall be the office or offices or the agency or agencies of the Company in the Borough of Manhattan, The
City of New York, designated from time to time by the Board of Directors of the Company (provided, that if the bonds of the 3.55% Series are
represented by Global Securities held by or on behalf of the Depositary, the procedures of the Depositary may be followed for any action
under this Section 2.6).

 

    8

     

    

  

Section 2.7.          The
form of the bonds of the 3.55% Series and the certificate of the Trustee to be endorsed on such bonds, respectively, shall be in
substantially the form set forth in Exhibit B hereto.

 

PART Two.

 

REPLACEMENT FUND.

 

SECTION 1.      So long as any of the bonds of the 2.85% Series or the 3.55% Series are outstanding, the Company will
continue to maintain the Replacement Fund set forth in, and in accordance with the applicable terms and conditions now contained in,
Part Two of the supplemental indenture dated as of February 1, 1949, and the covenants on the part of the Company
contained in such Part Two shall continue and remain in full force and effect, whether or not bonds of the 1979 Series are
outstanding and to the same extent as though the words “or any bonds of the 2.85% Series or the 3.55% Series” were
inserted after the word “Series” appearing in the second line of Section 1 and the second line of Section 4 of
said Part Two of said supplemental indenture dated as of February 1, 1949.

 

SECTION 2.      If
at any time (a) any of the bonds of the 2.85% Series or the 3.55% Series  are outstanding and (b) no Outstanding Mortgage
Bonds (as defined in Section 1 of Part Three of this supplemental indenture) entitled to the benefit of the Replacement Fund
are outstanding and (c) cash which shall have been deposited with the Trustee pursuant to such Replacement Fund shall not within
five years from the date of deposit thereof have been paid out, or used or set aside by the Trustee for the payment, purchase or redemption
of bonds, pursuant to such Replacement Fund, such cash shall, if in excess of fifty thousand dollars ($50,000), be applied to the redemption
of bonds of the 2.85% Series and the 3.55% Series on a pro rata basis as between such series in an aggregate principal amount
sufficient to exhaust as nearly as possible the full amount of such cash. Anything in Section 5 of Part Two of the aforesaid
supplemental indenture dated as of February 1, 1949, in Section 3 of Part Two of the supplemental indentures dated as of
May 1, 1993, July 1, 1993, August 1, 1993, August 20, 1993, May 1, 1994, February 25, 2003, March 21,
2003 and September 23, 2003, in Section 3 of Part Three of the supplemental indenture dated as of March 1, 1990 and
in Section 5 of Part Four of the supplemental indenture dated as of March 1, 1993 to the contrary notwithstanding, no cash
shall be paid over to the Company thereunder if at the time any bonds of the 2.85% Series or the 3.55% Series are then outstanding,
and such cash shall in such event be applied as in this Part Two set forth.

 

SECTION 3.      Whenever
all of the bonds of the 2.85% Series or the 3.55% Series and all of the Outstanding Mortgage Bonds entitled to the benefit of
the Replacement Fund shall have been paid, purchased or redeemed, the Trustee shall, upon application of the Company, pay to or upon the
order of the Company all cash theretofore deposited with the Trustee pursuant to the provisions of the Replacement Fund and not previously
disposed of pursuant to the provisions of the Replacement Fund, and shall deliver to the Company any bonds which shall theretofore have
been deposited with the Trustee pursuant to the provisions of the Replacement Fund or paid, purchased or redeemed pursuant to the provisions
of the Replacement Fund.

 

    9

     

    

 

PART Three.

 

ADDITIONAL COVENANTS OF THE COMPANY

 

SECTION 1.      Whether
or not the covenants on the part of the Company contained in Part Three of the supplemental indenture dated as of February 1,
1949 are modified with the consent of the holders of bonds of the 2027 City of Greensboro Series, the 6.00% Series, the 6.05% Series,
the 2040 Series, the 2020 Series, the 2010C Solid Waste Disposal Series, the 2010D Solid Waste Disposal Series, the 3.90% Series, the
4.25% Series or the 4.00% Series (collectively, the “Outstanding Mortgage Bonds”), such covenants on the part of
the Company contained in said Part Three shall continue and remain in full force and effect so long as any of the bonds of the 2.85%
Series or the 3.55% Series are outstanding and to the same extent as though the words “or so long as any bonds of the
2.85% Series or the 3.55% Series are outstanding” were inserted after the words “so long as any of the bonds of
the 1979 Series or any bonds of the 2.65% Series are outstanding” wherever such words appear in said Part Three of
the supplemental indenture dated as of February 1, 1949.

  

SECTION 2.      Whether
or not the second sentence of paragraph (a) of §2.08 of the original indenture (making certain provisions for the definition
of the term “net amount” applicable while bonds of the 2.65% Series were outstanding and which was originally set forth
in Section 4 of Article One of the supplemental indenture dated as of September 1, 1947 and which is corrected and clarified
by Section 2 of Part Four of the supplemental indenture dated as of February 1, 1968) is modified with the consent of the
holders of any of the Outstanding Mortgage Bonds, said sentence shall continue and remain in full force and effect so long as any bonds
of the 2.85% Series or the 3.55% Series are outstanding, and with the same force and effect as though said sentence had stated
that such provisions were to be applicable so long as any of the bonds of the 2.85% Series or the 3.55% Series are outstanding.

 

PART Four.

 

GLOBAL SECURITIES; TRANSFER AND EXCHANGE

 

SECTION 1.      The
bonds of the 2.85% Series shall initially be issued in the form of one or more Global Securities registered in the name of the Depositary
(which initially shall be The Depository Trust Company) or its nominee. Except under the limited circumstances described below, bonds
of the 2.85% Series represented by such Global Security or Global Securities shall not be exchangeable for, and shall not otherwise
be issuable as, bonds of the 2.85% Series in definitive form. The Global Securities described in this Part Four may not be transferred
except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or to a successor Depositary or its nominee.

 

None of the Company, the Trustee
nor any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments
made on account of beneficial ownership interests of a Global Security or maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.

 

A Global Security shall be
exchangeable for bonds of the 2.85% Series registered in the names of persons other than the Depositary or its nominee only if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as a Depositary for such Global Security and no successor Depositary
shall have been appointed by the Company within 90 days of receipt by the Company of such notification, or if at any time the Depositary
ceases to be a clearing agency registered under the Exchange Act at a time when the Depositary is required to be so registered to act
as such Depositary and no successor Depositary shall have been appointed by the Company within 90 days after it becomes aware of such
cessation, (ii) an Event of Default has occurred and is continuing with respect to the bonds of the 2.85% Series or (iii) the
Company in its sole discretion, and subject to the procedures of the Depositary, determines that such Global Security shall be so exchangeable.
Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for bonds of the 2.85% Series registered
in such names as the Depositary shall direct.

 

    10

     

    

 

SECTION 2.      The
bonds of the 3.55% Series shall initially be issued in the form of one or more Global Securities registered in the name of the Depositary
(which initially shall be The Depository Trust Company) or its nominee. Except under the limited circumstances described below, bonds
of the 3.55% Series represented by such Global Security or Global Securities shall not be exchangeable for, and shall not otherwise
be issuable as, bonds of the 3.55% Series in definitive form. The Global Securities described in this Part Four may not be transferred
except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or to a successor Depositary or its nominee.

  

None of the Company, the Trustee
nor any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments
made on account of beneficial ownership interests of a Global Security or maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.

 

A Global Security shall be
exchangeable for bonds of the 3.55% Series registered in the names of persons other than the Depositary or its nominee only if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as a Depositary for such Global Security and no successor Depositary
shall have been appointed by the Company within 90 days of receipt by the Company of such notification, or if at any time the Depositary
ceases to be a clearing agency registered under the Exchange Act at a time when the Depositary is required to be so registered to act
as such Depositary and no successor Depositary shall have been appointed by the Company within 90 days after it becomes aware of such
cessation, (ii) an Event of Default has occurred and is continuing with respect to the bonds of the 3.55% Series or (iii) the
Company in its sole discretion, and subject to the procedures of the Depositary, determines that such Global Security shall be so exchangeable.
Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for bonds of the 3.55% Series registered
in such names as the Depositary shall direct.

 

SECTION 3.      Depository
Legend. Each of the Global Securities shall bear the following legend (the “Depository Legend”) on the face thereof:

 

“UNLESS THIS CERTIFICATE IS PRESENTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.”

 

SECTION 4.      Transfer
and Exchange.

 

(a)        Every
bond of the 2.85% Series or the 3.55% Series presented or surrendered for registration of transfer or for exchange shall (if
so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory
to the Company and the Trustee duly executed, by the Holder thereof or his attorney duly authorized in writing.

 

    11

     

    

 

(b)       No
service charge shall be made for any registration of transfer or exchange of bonds of the 2.85% Series or the 3.55% Series, but the
Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any
registration or transfer or exchange of bonds of the 2.85% Series or the 3.55% Series.

 

SECTION 5.      Definitions.
The following defined terms used herein shall, unless the context otherwise requires, have the meanings specified below. Capitalized terms
used herein for which no definition is provided herein shall have the meanings set forth in the Indenture.

 

“Business day”
means any day other than a day on which banks in New York City are required or authorized to be closed.

 

“Depositary” means
a clearing agency registered under the Exchange Act that is designated to act as Depositary for the bonds of the 2.85% Series or
the 3.55% Series, which Depositary shall initially be The Depository Trust Company.

 

“Depository Legend”
means a legend set forth in Section 2 of this Part Four.

 

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

 

“Global Security”
means a bond of the 2.85% Series or the 3.55% Series in global form.

 

“Holder” means
a Person in whose name a bond of the 2.85% Series or the 3.55% Series is registered in the registration books maintained by
the Trustee.

 

“Person”
means any individual, corporation, partnership, limited liability company or corporation, joint venture, trust, unincorporated organization
or government or any agency or political subdivision thereof.

 

“Treasury
Rate” means, with respect to any redemption date, the yield determined by the Company in accordance with the following two
paragraphs.

 

The Treasury Rate shall be determined by the Company
after 4:15 p.m., New York City time (or after such time as yields on U.S. government securities are posted daily by the Board of Governors
of the Federal Reserve System), on the third business day preceding the redemption date based upon the yield or yields for the most recent
day that appear after such time on such day in the most recent statistical release published by the Board of Governors of the Federal
Reserve System designated as “Selected Interest Rates (Daily)—H.15” (or any successor designation or publication) (“H.15”)
under the caption “U.S. government securities—Treasury constant maturities — Nominal” (or any successor
caption or heading). In determining the Treasury Rate, the Company shall select, as applicable:

 

		•	the yield for the Treasury constant maturity on H.15 exactly equal to the period from the redemption date to the 2032 Par Call Date
or the 2052 Par Call Date, as applicable (the “Remaining Life”); or

 

		•	if there is no such Treasury constant maturity on H.15 exactly equal to the applicable Remaining Life, the two yields—one yield
corresponding to the Treasury constant maturity on H.15 immediately shorter than and one yield corresponding to the Treasury constant
maturity on H.15 immediately longer than such Remaining Life—and shall interpolate to the 2032 Par Call Date or the 2052 Par Call
Date, as applicable, on a straight-line basis (using the actual number of days) using such yields and rounding the result to three decimal
places; or

 

    12

     

    

 

		•	if there is no such Treasury constant maturity on H.15 shorter than or longer than the applicable Remaining Life, the yield for the
single Treasury constant maturity on H.15 closest to such Remaining Life. For purposes of this clause, the applicable Treasury constant
maturity or maturities on H.15 shall be deemed to have a maturity date equal to the relevant number of months or years, as applicable,
of such Treasury constant maturity from the redemption date.

  

If on the third business day preceding the redemption
date H.15 or any successor designation or publication is no longer published, the Company shall calculate the Treasury Rate based on the
rate per annum equal to the semi-annual equivalent yield to maturity at 11:00 a.m., New York City time, on the second business day preceding
such redemption date of the United States Treasury security maturing on, or with a maturity that is closest to, the 2032 Par Call Date
or the 2052 Par Call Date, as applicable. If there is no United States Treasury security maturing on the 2032 Par Call Date or the 2052
Par Call Date, as applicable, but there are two or more United States Treasury securities with a maturity date equally distant from such
Par Call Date, one with a maturity date preceding such Par Call Date and one with a maturity date following such Par Call Date, the Company
shall select the United States Treasury security with a maturity date preceding such Par Call Date. If there are two or more United States
Treasury securities maturing on the 2032 Par Call Date or the 2052 Par Call Date, as applicable, or two or more United States Treasury
securities meeting the criteria of the preceding sentence, the Company shall select from among these two or more United States Treasury
securities the United States Treasury security that is trading closest to par based upon the average of the bid and asked prices for such
United States Treasury securities at 11:00 a.m., New York City time. In determining the Treasury Rate in accordance with the terms of
this paragraph, the semi-annual yield to maturity of the applicable United States Treasury security shall be based upon the average of
the bid and asked prices (expressed as a percentage of principal amount) at 11:00 a.m., New York City time, of such United States Treasury
security, and rounded to three decimal places.

 

The Company’s actions and determinations
in determining the redemption price shall be conclusive and binding for all purposes, absent manifest error.

 

The Trustee shall have no obligation or duty whatsoever
to determine, or to verify the Company’s calculations of, the redemption price.

 

PART Five.

 

MISCELLANEOUS.

 

SECTION 1.

 

(a)        For
the purposes of §2.10 of the Indenture and for the purposes of any modification of the provisions of the Replacement Fund referred
to in Part Two of this supplemental indenture, the covenants and provisions on the part of the Company which are set forth or incorporated
in Part Two of this supplemental indenture shall be for the benefit only of the holders of the bonds of the 2.85% Series and
the 3.55% Series. Such covenants and provisions shall remain in force and be applicable only so long as any bonds of the 2.85% Series or
the 3.55% Series shall be outstanding, and, subject to the provisions of paragraph (2) of subdivision (c) of §10.01
of the Indenture, any such covenants and provisions may be modified with respect to the bonds of the 2.85% Series or the 3.55% Series with
the consent, in writing or by vote at a bondholders’ meeting of the holders of sixty-six and two-thirds per cent (66 2/3%) of the
principal amount of the bonds of the 2.85% Series or the 3.55% Series, as the case may be, at the time outstanding and without the
consent of the holders of any other bonds then outstanding under the Indenture; provided that no such consent shall be effective
to waive any past default under such covenants and provisions, and its consequences, unless the consent of the holders of at least a majority
in principal amount of all bonds then outstanding under the Indenture is obtained. Such covenants shall be deemed to be additional covenants
and none of them shall affect or derogate from, or relieve the Company from, its obligation to comply with any of the other covenants,
conditions, requirements or provisions of the Indenture or any other supplemental indenture.

 

    13

     

    

 

(b)        For
the purposes of §2.10 of the Indenture and for the purposes of any modification of the provisions of Part Three of this supplemental
indenture, the covenants and provisions on the part of the Company which are set forth or incorporated in said Part Three shall be
for the benefit only of the holders of the bonds of the 2.85% Series and the 3.55% Series. Such covenants and provisions shall remain
in force and be applicable only so long as any bonds of the 2.85% Series or the 3.55% Series shall be outstanding, and, subject
to the provisions of paragraph (2) of subdivision (c) of §10.01 of the Indenture, any such covenants and provisions may
be modified with respect to the bonds of the 2.85% Series or the 3.55% Series with the consent, in writing or by vote at a bondholders’
meeting of the holders of sixty-six and two-thirds per cent (66 2/3 %) of the principal amount of the bonds of the 2.85% Series or
the 3.55% Series, as the case may be, at the time outstanding and without the consent of the holders of any other bonds then outstanding
under the Indenture; provided that no such consent shall be effective to waive any past default under such covenants and provisions,
and its consequences, unless the consent of the holders of at least a majority in principal amount of all bonds then outstanding under
the Indenture is obtained. Such covenants shall be deemed to be additional covenants and none of them shall affect or derogate from, or
relieve the Company from, its obligation to comply with any of the other covenants, conditions, requirements or provisions of the Indenture
or any other supplemental indenture.

 

SECTION 2.      All
terms contained in this supplemental indenture shall, except as specifically provided herein or except as the context may otherwise require,
have the meanings given to such terms in the Indenture.

 

SECTION 3.      In
case any one or more of the provisions contained in this supplemental indenture should be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other provision contained in this supplemental indenture, and, to
the extent, but only to the extent, that such provision is invalid, illegal or unenforceable, this supplemental indenture shall be construed
as if such provision had never been contained herein.

 

SECTION 4.      The
Trustee hereby accepts the trusts herein declared and provided upon the terms and conditions in the Indenture set forth.

 

    14

     

    

 

SECTION 5.      This
supplemental indenture may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument.
The words “execution,” signed,” signature,” and words of like import in the Indenture shall include images of
manually executed signatures transmitted by facsimile, email or other electronic format (including, without limitation, “pdf,”
 “tif” or “jpg”) and other electronic signatures (including without limitation, DocuSign and AdobeSign). The use
of electronic signatures and electronic records (including, without limitation, any contract or other record created, generated, sent,
communicated, received, or stored by electronic means) shall be of the same legal effect, validity and enforceability as a manually executed
signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the Federal Electronic
Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act and any other applicable law,
including, without limitation, any state law based on the Uniform Electronic Transactions Act or the Uniform Commercial Code. Without
limitation to the foregoing, and anything in the Indenture to the contrary notwithstanding, (a) any officers’ certificate,
Opinion of Counsel, Trustee’s Certificate, Engineer’s Certificate, Net Earnings Certificate, bond, certificate of authentication
appearing on or attached to any bond, or other certificate, opinion of counsel, instrument, agreement or other document delivered pursuant
to the Indenture may be executed, attested and transmitted by any of the foregoing electronic means and formats, (b) all references
in Article Two or elsewhere in the Indenture to the execution, attestation or authentication of any bond or any certificate of authentication
appearing on or attached to any bond by means of a manual or facsimile signature shall be deemed to include signatures that are made or
transmitted by any of the foregoing electronic means or formats, and (c) any requirement in Article Two or elsewhere in the
Indenture that any signature be made under a corporate seal (or facsimile thereof) shall not be applicable to the bonds of the 2.85% Series and
the bonds of the 3.55% Series.

   

SECTION 6.      In
addition to the amendment provisions of the Indenture, the terms and conditions of this supplemental indenture and the bonds of the 2.85%
Series or the 3.55% Series may be modified, amended or supplemented by the Company and the Trustee, without the consent of the
holders of the bonds of the 2.85% Series or the 3.55% Series, and if not inconsistent with the Indenture, to cure ambiguities in
this supplemental indenture or the bonds of the 2.85% Series or the 3.55% Series, or correct defects or inconsistencies in the provisions
of this supplemental indenture or the bonds of the 2.85% Series or the 3.55% Series or to provide for such appropriate additional
provisions in this supplemental indenture or the bonds of the 2.85% Series or the 3.55% Series as are necessary for certificated
bonds to be issued in lieu of Global Securities or to reflect additional provisions related to the issuance of Global Securities (including
changes in the procedures of the Depositary).

 

    15

     

    

 

IN WITNESS WHEREOF, Duke Energy
Carolinas, LLC, the party of the first part hereto, has caused this supplemental indenture to be signed in its name by one of its Senior
Vice Presidents and its company seal to be hereunto affixed, and the same to be attested by one of its Assistant Secretaries, and The
Bank of New York Mellon Trust Company, N.A., the party of the second part hereto, in token of its acceptance of the trust hereby created,
has caused this supplemental indenture to be signed in its name by one of its Vice Presidents and its company seal to be hereunto affixed,
and the same to be attested by one of its Vice Presidents, all as of the day and year first above written.

 

	 	DUKE ENERGY CAROLINAS, LLC
	 	 
	 	By:	/s/
    Karl W. Newlin
	 	 	Name: 	Karl W. Newlin
	 	 	Title:	 Senior Vice President, Corporate Development and Treasurer

 

 

	ATTEST:	 	 
	 	 	 
	/s/ Robert T. Lucas III	 	 
	Name:	Robert T. Lucas III	 	 
	Title:	Assistant Secretary	 	 
	 	 	 
	 	 	 
	Signed, sealed, executed, acknowledged	 	 
	and delivered by Duke Energy	 	 
	Carolinas, LLC, in the presence of:	 	 
	 	 	 
	 	 	 
	/s/ Deana Walker	 	 
	Deana Walker	 	 
	 	 	 
	 	 	 
	/s/ Jenny Pattana	 	 
	Jenny Pattana	 	 

 

[COMPANY’S SIGNATURE PAGE]

 

[ONE-HUNDRED AND SIXTH SUPPLEMENTAL INDENTURE

TO THE DUKE ENERGY CAROLINAS, LLC FIRST AND REFUNDING MORTGAGE

DATED AS OF DECEMBER 1, 1927]

 

     

     

    

 

	 	The Bank of New York Mellon Trust Company, N.A.,

                    as Trustee

	 	 	 
	 	By:	/s/ Ann Dolezal
	 	 	Name: Ann Dolezal
	 	 	Title:   Vice President

 

 

	ATTEST:	 	 
	 	 	 
	 	 	 
	/s/ D.G. Donovan	 	 
	Name: D. G. Donovan	 	 
	Title: Vice President	 	 
	 	 	 
	Signed, sealed, executed,

acknowledged and delivered by The Bank of New York	 	 
	Mellon Trust Company, N.A.,	 	 
	in the presence of:	 	 
	 	 	 
	 	 	 
	/s/ Robert W. Hardy	 	 
	Name: Robert W. Hardy	 	 
	 	 	 
	 	 	 
	/s/ Keith Bear	 	 
	Name: Keith Bear	 	 

 

[TRUSTEE’S SIGNATURE PAGE]

 

[ONE-HUNDRED AND SIXTH SUPPLEMENTAL INDENTURE

TO THE DUKE ENERGY CAROLINAS, LLC FIRST AND REFUNDING MORTGAGE

DATED AS OF DECEMBER 1, 1927]

 

     

     

    

 

State of Illinois       )

  ) ss.:

County of Cook      )

 

Personally appeared before me, Robert W. Hardy,
and made oath that he is not a party to or beneficiary of the transaction and that he saw Ann Dolezal, a Vice President and D.G. Donovan,
a Vice President, respectively, of The Bank of New York Mellon Trust Company, N.A., sign, attest and affix hereto the corporate seal of
said The Bank of New York Mellon Trust Company, N.A., and, as the act and deed of said corporation, deliver the within written and foregoing
deed, and that he, with Keith Bear, witnessed the execution thereof.

 

	 	Sworn and subscribed before me
	 	this 23rd day of February, 2022.
	 	 
	 	 
	 	/s/ Lawrence M. Kusch
	 	Lawrence M. Kusch
	 	Notary Public – State of Illinois
	 	Commission Expires 10/24/22

 

State of Illinois         )

    ) ss.:

County of Cook        )

 

I,
 Lawrence M. Kusch, a Notary Public in and for the State aforesaid, certify that D.G. Donovan personally came before me this day
and acknowledged that she is a Vice President of The Bank of New York Mellon Trust Company, N.A., a national banking association, and
that, by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by one of its Vice Presidents,
sealed with its corporate seal, and attested by himself as one of its Vice Presidents.

 

Witness may hand and official seal, this 23rd
day of February, 2022.

 

	 	/s/ Lawrence M. Kusch
	 	Name: Lawrence M. Kusch
	 	Notary Public – State of Illinois
	 	Commission Expires 10/24/22

 

     

     

    

 

State of North Carolina       )

) ss.:

County of Mecklenburg     )

 

I, Jenny Pattana, a Notary Public in and for the
State and County aforesaid, certify that Sheila Lemoine personally appeared before me this day, and being duly sworn, stated that she
is not a party to or beneficiary of the transaction and that in her presence Karl W. Newlin, Senior Vice President, Corporate Development
and Treasurer of Duke Energy Carolinas, LLC, executed the foregoing instrument, and that she, with Nancy M. Wright, witnessed the
execution thereof.

 

Witness my hand and official seal, this 3rd
day of March, 2022.

 

	 	/s/ Nancy M. Wright
	 	Nancy M. Wright
	 	 
	 	 
	 	/s/ Jenny Pattana
	 	Name:  Jenny Pattana
	 	Notary Public, State of North Carolina
	 	Mecklenburg County
	 	My Commission Expires:

 

State of North Carolina         )

  ) ss.:

County of Mecklenburg       )

 

I, Jenny Pattana, a Notary Public in and for the
State and County aforesaid, certify that Robert T. Lucas III personally came before me this day and acknowledged that he is an Assistant
Secretary of Duke Energy Carolinas, LLC, a North Carolina limited liability company, and that, by authority duly given and as the act
of the company, the foregoing instrument was signed in its name by one of its Senior Vice Presidents, sealed with its seal, and attested
by himself as one of its Assistant Secretaries.

 

Witness my hand and official seal, this 3rd
day of March, 2022.

 

	 	/s/ Jenny Pattana
	 	Name:  Jenny Pattana
	 	Notary Public, State of North Carolina
	 	Mecklenburg County
	 	My Commission Expires:

 

     

     

    

 

EXHIBIT A

 

FORM OF
DUKE ENERGY CAROLINAS, LLC

FIRST AND REFUNDING MORTGAGE BOND, 2.85% SERIES DUE 2032

 

[FACE SIDE
OF BOND]

 

[DEPOSITORY
LEGEND, IF APPLICABLE]

DUKE ENERGY CAROLINAS, LLC

 

FIRST
AND REFUNDING MORTGAGE BOND,

2.85% SERIES DUE 2032

 

	No.	$

 

CUSIP
No.    26442C BG8

ISIN               US26442CBG87

 

Duke
Energy Carolinas, LLC, a North Carolina limited liability company (hereinafter called the “Company”), for value received,
hereby promises to pay to                                   
or registered assigns, the principal sum of                      Dollars on March 15, 2032 in any coin or currency of the United States of America which
at the time of payment shall be legal tender for the payment of public and private debts, at the office or agency of the Company in the
Borough of Manhattan, The City of New York, and to pay interest thereon at said office or agency from the interest payment date next preceding
the date hereof to which interest on outstanding bonds of this series has been paid (unless the date hereof is prior to September 15,
2022, in which case from March 4, 2022, and unless the date hereof is subsequent to a record date (as defined below) and prior to
the next succeeding March 15 or September 15, in which case from the next succeeding March 15 or September 15 as the
case may be), at the rate of 2.85% per annum, in like coin or currency, semi-annually on March 15 and September 15, in each
year, commencing September 15, 2022, until the principal hereof shall become due and payable. Such interest payments shall be made
to the person in whose name this bond is registered at the close of business on the record date (as defined below) for such interest payment
date, which will be the close of business on (i) the business day immediately preceding such interest payment date so long as the
bonds of the 2.85% Series remain in book-entry only form or (ii) the fifteenth calendar day, whether or not a business day,
immediately preceding such interest payment date if any of the bonds of the 2.85% Series do not remain in book-entry only form (each
of (i) or (ii), a “record date”) (subject to certain exceptions provided in the Indenture hereinafter mentioned), at
his last address as it shall appear upon the bond register of the Company.

 

The provisions of this bond
are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth
in this place.

 

This
bond shall not become or be valid or obligatory for any purpose until the Trustee shall have signed the form of certificate endorsed hereon.

 

    	 	A-1	 

     

    

 

IN WITNESS WHEREOF, the Company
has caused this instrument to be signed in its name by its President or one of its Vice Presidents, manually or by facsimile signature,
and its company seal to be hereto affixed, or a facsimile thereof to be hereon engraved, lithographed or printed, and to be attested by
the manual or facsimile signature of its Secretary or one of its Assistant Secretaries.

 

Dated:

 

	 	DUKE ENERGY CAROLINAS, LLC
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

	ATTEST:	 	 
	 	 	 
	 	 	 
	Name:	 	 
	Title:	 	 

 

    	 	A-2	 

     

    

 

CERTIFICATE
OF AUTHENTICATION

 

This bond is one of the bonds,
of the series designated therein, described in the within-mentioned Indenture.

 

	 	The Bank of New York Mellon Trust Company, N.A.,

                           as Trustee

	 	 
	 	 
	 	By:	 
	 	 	Authorized Signatory

 

    	 	A-3	 

     

    

 

[REVERSE
SIDE OF BOND]

 

This
bond is one of the bonds of a series, designated specially as First and Refunding Mortgage Bonds, 2.85% Series due 2032, of
an authorized issue of bonds of the Company, without limit as to aggregate principal amount, designated generally as First and Refunding
Mortgage Bonds, all issued and to be issued under and equally and ratably secured by a First and Refunding Mortgage dated as of December 1,
1927, duly executed by Duke Power Company, a New Jersey corporation (hereinafter called the “New Jersey Company”), to Guaranty
Trust Company of New York, as Trustee (The Bank of New York Mellon Trust Company, N.A., as successor trustee), as supplemented and modified
by indentures supplemental thereto, including a supplemental indenture dated as of March 4, 2022 providing for said series (said
First and Refunding Mortgage as so supplemented and modified being hereinafter referred to as the “Indenture”), to which Indenture
reference is made for a description of the property mortgaged, the nature and extent of the security, the rights of the holders of the
bonds in respect thereof, the terms and conditions upon which the bonds are secured and the restrictions subject to which additional bonds
secured thereby may be issued. To the extent permitted by, and as provided in, the Indenture, modifications or alterations of the Indenture,
or of any indenture supplemental thereto, and of the rights and obligations of the Company and of the holders of the bonds, may be made
with the consent of the Company by the affirmative vote, or with the written consent, of the holders of not less than 66 2/3% in principal
amount of the bonds then outstanding, and by the affirmative vote, or with the written consent, of the holders of not less than 66 2/3%
in principal amount of the bonds of any series then outstanding and affected by such modification or alteration, in case one or more but
less than all of the series of bonds then outstanding under the Indenture are so affected, evidenced, in each case, as provided in the
Indenture; provided that any supplemental indenture may be modified in accordance with the provisions contained therein for its
modification; and provided, further, that no such modification or alteration shall be made which will affect the terms of payment of the
principal of, or interest or premium on, this bond, or the right of any bondholder to institute suit for the enforcement of any such payment
on or after the respective due dates expressed in this bond, or reduce the percentage required for the taking of any such action. Any
such affirmative vote of, or written consent given by, any holder of this bond is binding upon all subsequent holders hereof as provided
in the Indenture.

 

In case an event of default
as defined in the Indenture shall occur, the principal of all the bonds outstanding thereunder may become or be declared due and payable
at the time, in the manner and with the effect provided in the Indenture.

 

Prior
to December 15, 2031 (the “Par Call Date”), the Company may redeem at its option the bonds of the 2.85% Series,
in whole or in part, at any time and from time to time, at a redemption price (expressed as a percentage of principal amount and rounded
to three decimal places) equal to the greater of: (a) the sum of the present values of the remaining scheduled payments of principal
and interest thereon discounted to the redemption date (assuming the bonds of the 2.85% Series matured on the Par Call Date) on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate applicable to the bonds of the 2.85%
Series plus 20 basis points less (b) interest accrued to the redemption date; and 100% of the principal amount of the bonds
of the 2.85% Series to be redeemed, plus, in either case, accrued and unpaid interest thereon to, but excluding, the redemption date.
The Company shall notify the Trustee of the redemption price with respect to any redemption pursuant to this paragraph promptly after
the calculation thereof. The Trustee shall not be responsible for calculating said redemption price.

 

On
or after the Par Call Date, the Company may redeem at its option the bonds of the 2.85% Series, in whole or in part, at any time
and from time to time, at a redemption price equal to 100% of the principal amount of the bonds of the 2.85% Series to be redeemed
plus accrued and unpaid interest thereon to, but excluding, the redemption date.

 

    	 	A-4	 

     

    

 

“Business day”
means any day other than a day on which banks in New York City are required or authorized to be closed.

 

“Treasury
Rate” means, with respect to any redemption date, the yield determined by the Company in accordance with the following two
paragraphs.

 

The Treasury Rate shall be determined by the Company
after 4:15 p.m., New York City time (or after such time as yields on U.S. government securities are posted daily by the Board of Governors
of the Federal Reserve System), on the third business day preceding the redemption date based upon the yield or yields for the most recent
day that appear after such time on such day in the most recent statistical release published by the Board of Governors of the Federal
Reserve System designated as “Selected Interest Rates (Daily)—H.15” (or any successor designation or publication) (“H.15”)
under the caption “U.S. government securities—Treasury constant maturities — Nominal” (or any successor
caption or heading). In determining the Treasury Rate, the Company shall select, as applicable:

 

		•	the yield for the Treasury constant maturity on H.15 exactly equal to the period from the redemption date to the Par Call Date (the
 “Remaining Life”); or

 

		•	if there is no such Treasury constant maturity on H.15 exactly equal to the Remaining Life, the two yields—one yield corresponding
to the Treasury constant maturity on H.15 immediately shorter than and one yield corresponding to the Treasury constant maturity on H.15
immediately longer than such Remaining Life—and shall interpolate to the Par Call Date on a straight-line basis (using the actual
number of days) using such yields and rounding the result to three decimal places; or

 

		•	if there is no such Treasury constant maturity on H.15 shorter than or longer than the Remaining Life, the yield for the single Treasury
constant maturity on H.15 closest to such Remaining Life. For purposes of this clause, the applicable Treasury constant maturity or maturities
on H.15 shall be deemed to have a maturity date equal to the relevant number of months or years, as applicable, of such Treasury constant
maturity from the redemption date.

 

If on the third business day preceding the redemption
date H.15 or any successor designation or publication is no longer published, the Company shall calculate the Treasury Rate based on the
rate per annum equal to the semi-annual equivalent yield to maturity at 11:00 a.m., New York City time, on the second business day preceding
such redemption date of the United States Treasury security maturing on, or with a maturity that is closest to, the Par Call Date. If
there is no United States Treasury security maturing on the Par Call Date but there are two or more United States Treasury securities
with a maturity date equally distant from the Par Call Date, one with a maturity date preceding the Par Call Date and one with a maturity
date following the Par Call Date, the Company shall select the United States Treasury security with a maturity date preceding the Par
Call Date. If there are two or more United States Treasury securities maturing on the Par Call Date or two or more United States Treasury
securities meeting the criteria of the preceding sentence, the Company shall select from among these two or more United States Treasury
securities the United States Treasury security that is trading closest to par based upon the average of the bid and asked prices for such
United States Treasury securities at 11:00 a.m., New York City time. In determining the Treasury Rate in accordance with the terms of
this paragraph, the semi-annual yield to maturity of the applicable United States Treasury security shall be based upon the average of
the bid and asked prices (expressed as a percentage of principal amount) at 11:00 a.m., New York City time, of such United States Treasury
security, and rounded to three decimal places.

 

The Company’s actions and determinations
in determining the redemption price shall be conclusive and binding for all purposes, absent manifest error.

 

    	 	A-5	 

     

    

 

The Trustee shall have no obligation or duty whatsoever
to determine, or to verify the Company’s calculations of, the redemption price.

 

The
bonds of this series are also subject to redemption for the Replacement Fund for bonds of this series provided for in the supplemental
indenture dated as of March 4, 2022, providing for this series, or upon application of moneys arising from a taking of any of the
mortgaged property by eminent domain or similar action, at any time or from time to time prior to maturity, at 100% of their principal
amount, in each case together with accrued and unpaid interest to, but excluding, the date fixed for redemption.

 

Redemption is in every case
to be effected at the office or agency of the Company in the Borough of Manhattan, The City of New York, upon at least ten, but not more
than sixty, days’ prior notice, given by mail as more fully provided in the Indenture.

 

If this bond or any portion
hereof ($2,000 and integral multiples of $1,000 in excess thereof) is called for redemption and payment is duly provided, this bond or
such portion thereof shall cease to bear interest from and after the date fixed for such redemption.

 

This bond is transferable,
as provided in the Indenture, by the registered owner hereof in person or by duly authorized attorney, at the office or agency of the
Company in the Borough of Manhattan, The City of New York, upon surrender and cancellation of this bond, and thereupon a new bond of the
same series and of like aggregate principal amount will be issued to the transferee in exchange herefor as provided in the Indenture;
or the registered owner of this bond, at his option, may surrender the same for cancellation at said office or agency of the Company and
receive in exchange herefor the same aggregate principal amount of bonds of the same series of authorized denominations; all subject to
the terms of the Indenture but without payment of any charges other than a sum sufficient to reimburse the Company for any stamp taxes
or other governmental charges incident thereto.

 

This bond is a company obligation
only and no recourse whatsoever, either directly or through the Company or any trustee, receiver, assignee or any other person, shall
be had for the payment of the principal of or premium, if any, or interest on this bond, or for the enforcement of any claim based hereon,
or otherwise in respect hereof or of the Indenture, against any promoter, subscriber to the capital stock, incorporator, or any past,
present or future stockholder, member, officer or director of the Company as such, or of any successor or predecessor corporation or entity,
whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment, penalty, subscription
or otherwise, any and all such liability of promoters, subscribers, incorporators, stockholders, members, officers and directors being
waived and released by each successive holder hereof by the acceptance of this bond, and as a part of the consideration for the issue
hereof, and being likewise waived and released by the terms of the Indenture.

 

[END OF
BOND FORM]

 

    	 	A-6	 

     

    

 

ABBREVIATIONS

 

The following abbreviations, when used in the
inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or
regulations:

 

	TEN COM — as tenants in common	 	
    UNIF GIFT MIN ACT - ______Custodian ______

         (Cust)                    
    (Minor)

	TEN ENT — as tenants by the entireties	 	 
	 	 	 
	JT TEN — as joint tenants with rights of survivorship and not as tenants in common	 	 	
          under Uniform Gifts to

           Minors Act

    ____________________

	 	 	 	            (State)

 

Additional abbreviations may also be used though
not on the above list.

 

FOR VALUE RECEIVED, the undersigned hereby sell(s) and
transfer(s) unto (please insert Social Security or other identifying number of assignee)

 

PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING
POSTAL ZIP CODE OF ASSIGNEE

 

the within bond and all rights thereunder, hereby
irrevocably constituting and appointing agent to transfer said bond on the books of the Company, with full power of substitution in the
premises.

 

	Dated:	 	 	 

	 	NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular without alteration or enlargement, or any change whatever.
	 	 
	 	Signature Guarantee:	 

 

    	 	A-7	 

     

    

 

SIGNATURE
GUARANTEE

 

Signatures must be guaranteed
by an “eligible guarantor institution” meeting the requirements of the Trustee, which requirements include membership or participation
in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may
be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934,
as amended.

 

    	 	A-8	 

     

    

 

EXHIBIT B

 

FORM OF
DUKE ENERGY CAROLINAS, LLC

FIRST AND REFUNDING MORTGAGE BOND, 3.55% SERIES DUE 2052

 

[FACE SIDE
OF BOND]

 

[DEPOSITORY
LEGEND, IF APPLICABLE]

DUKE ENERGY CAROLINAS, LLC

 

FIRST
AND REFUNDING MORTGAGE BOND,

3.55% SERIES DUE 2052

 

	No.	$

 

CUSIP
No.      26442C BH6

ISIN                 US26442CBH60

 

Duke
Energy Carolinas, LLC, a North Carolina limited liability company (hereinafter called the “Company”), for value received,
hereby promises to pay to                                   
or registered assigns, the principal sum of                Dollars on March 15, 2052 in any coin or currency of the United States of America which
at the time of payment shall be legal tender for the payment of public and private debts, at the office or agency of the Company in the
Borough of Manhattan, The City of New York, and to pay interest thereon at said office or agency from the interest payment date next preceding
the date hereof to which interest on outstanding bonds of this series has been paid (unless the date hereof is prior to September 15,
2022, in which case from March 4, 2022, and unless the date hereof is subsequent to a record date (as defined below) and prior to
the next succeeding March 15 or September 15, in which case from the next succeeding March 15 or September 15 as the
case may be), at the rate of 3.55% per annum, in like coin or currency, semi-annually on March 15 and September 15, in each
year, commencing September 15, 2022, until the principal hereof shall become due and payable. Such interest payments shall be made
to the person in whose name this bond is registered at the close of business on the record date (as defined below) for such interest payment
date, which will be the close of business on (i) the business day immediately preceding such interest payment date so long as the
bonds of the 3.55% Series remain in book-entry only form or (ii) the fifteenth calendar day, whether or not a business day,
immediately preceding such interest payment date if any of the bonds of the 3.55% Series do not remain in book-entry only form (each
of (i) or (ii), a “record date”) (subject to certain exceptions provided in the Indenture hereinafter mentioned), at
his last address as it shall appear upon the bond register of the Company.

 

The provisions of this bond
are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth
in this place.

 

This
bond shall not become or be valid or obligatory for any purpose until the Trustee shall have signed the form of certificate endorsed hereon.

 

    	 	B-1	 

     

    

 

IN WITNESS WHEREOF, the Company
has caused this instrument to be signed in its name by its President or one of its Vice Presidents, manually or by facsimile signature,
and its company seal to be hereto affixed, or a facsimile thereof to be hereon engraved, lithographed or printed, and to be attested by
the manual or facsimile signature of its Secretary or one of its Assistant Secretaries.

 

Dated:

 

	 	DUKE ENERGY CAROLINAS, LLC
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

	ATTEST:	 	 
	 	 	 
	 	 	 
	Name:	 	 
	Title:	 	 

 

    	 	B-2	 

     

    

 

CERTIFICATE
OF AUTHENTICATION

 

This bond is one of the bonds,
of the series designated therein, described in the within-mentioned Indenture.

 

	 	The Bank of New York Mellon Trust Company, N.A.,

as Trustee
	 	 
	 	By:	 
	 	 	Authorized Signatory

 

    	 	B-3	 

     

    

 

[REVERSE
SIDE OF BOND]

 

This
bond is one of the bonds of a series, designated specially as First and Refunding Mortgage Bonds, 3.55% Series due 2052, of
an authorized issue of bonds of the Company, without limit as to aggregate principal amount, designated generally as First and Refunding
Mortgage Bonds, all issued and to be issued under and equally and ratably secured by a First and Refunding Mortgage dated as of December 1,
1927, duly executed by Duke Power Company, a New Jersey corporation (hereinafter called the “New Jersey Company”), to Guaranty
Trust Company of New York, as Trustee (The Bank of New York Mellon Trust Company, N.A., as successor trustee), as supplemented and modified
by indentures supplemental thereto, including a supplemental indenture dated as of March 4, 2022 providing for said series (said
First and Refunding Mortgage as so supplemented and modified being hereinafter referred to as the “Indenture”), to which Indenture
reference is made for a description of the property mortgaged, the nature and extent of the security, the rights of the holders of the
bonds in respect thereof, the terms and conditions upon which the bonds are secured and the restrictions subject to which additional bonds
secured thereby may be issued. To the extent permitted by, and as provided in, the Indenture, modifications or alterations of the Indenture,
or of any indenture supplemental thereto, and of the rights and obligations of the Company and of the holders of the bonds, may be made
with the consent of the Company by the affirmative vote, or with the written consent, of the holders of not less than 66 2/3% in principal
amount of the bonds then outstanding, and by the affirmative vote, or with the written consent, of the holders of not less than 66 2/3%
in principal amount of the bonds of any series then outstanding and affected by such modification or alteration, in case one or more but
less than all of the series of bonds then outstanding under the Indenture are so affected, evidenced, in each case, as provided in the
Indenture; provided that any supplemental indenture may be modified in accordance with the provisions contained therein for its
modification; and provided, further, that no such modification or alteration shall be made which will affect the terms of payment of the
principal of, or interest or premium on, this bond, or the right of any bondholder to institute suit for the enforcement of any such payment
on or after the respective due dates expressed in this bond, or reduce the percentage required for the taking of any such action. Any
such affirmative vote of, or written consent given by, any holder of this bond is binding upon all subsequent holders hereof as provided
in the Indenture.

 

In case an event of default
as defined in the Indenture shall occur, the principal of all the bonds outstanding thereunder may become or be declared due and payable
at the time, in the manner and with the effect provided in the Indenture.

 

Prior to September 15,
2051 (the “Par Call Date”), the Company may redeem at its option the bonds of the 3.55% Series, in whole or in part, at any
time and from time to time, at a redemption price (expressed as a percentage of principal amount and rounded to three decimal places)
equal to the greater of: (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon
discounted to the redemption date (assuming the bonds of the 3.55% Series matured on the Par Call Date) on a semi-annual basis (assuming
a 360-day year consisting of twelve 30-day months) at the Treasury Rate applicable to the bonds of the 3.55% Series plus 25 basis
points less (b) interest accrued to the redemption date; and 100% of the principal amount of the bonds of the 3.55% Series to
be redeemed, plus, in either case, accrued and unpaid interest thereon to, but excluding, the redemption date. The Company shall notify
the Trustee of the redemption price with respect to any redemption pursuant to this paragraph promptly after the calculation thereof.
The Trustee shall not be responsible for calculating said redemption price.

 

On
or after the Par Call Date, the Company nay redeem at its option the bonds of the 3.55% Series, in whole or in part, at any time
and from time to time, at a redemption price equal to 100% of the principal amount of the bonds of the 3.55% Series to be redeemed
plus accrued and unpaid interest thereon to, but excluding, the redemption date.

 

    	 	B-4	 

     

    

 

“Business day”
means any day other than a day on which banks in New York City are required or authorized to be closed.

 

“Treasury
Rate” means, with respect to any redemption date, the yield determined by the Company in accordance with the following two
paragraphs.

 

The Treasury Rate shall be determined by the Company
after 4:15 p.m., New York City time (or after such time as yields on U.S. government securities are posted daily by the Board of Governors
of the Federal Reserve System), on the third business day preceding the redemption date based upon the yield or yields for the most recent
day that appear after such time on such day in the most recent statistical release published by the Board of Governors of the Federal
Reserve System designated as “Selected Interest Rates (Daily)—H.15” (or any successor designation or publication) (“H.15”)
under the caption “U.S. government securities—Treasury constant maturities — Nominal” (or any successor
caption or heading). In determining the Treasury Rate, the Company shall select, as applicable:

 

		•	the yield for the Treasury constant maturity on H.15 exactly equal to the period from the redemption date to the Par Call Date (the
 “Remaining Life”); or

 

		•	if there is no such Treasury constant maturity on H.15 exactly equal to the Remaining Life, the two yields—one yield corresponding
to the Treasury constant maturity on H.15 immediately shorter than and one yield corresponding to the Treasury constant maturity on H.15
immediately longer than such Remaining Life—and shall interpolate to the Par Call Date on a straight-line basis (using the actual
number of days) using such yields and rounding the result to three decimal places; or

 

		•	if there is no such Treasury constant maturity on H.15 shorter than or longer than the Remaining Life, the yield for the single Treasury
constant maturity on H.15 closest to such Remaining Life. For purposes of this clause, the applicable Treasury constant maturity or maturities
on H.15 shall be deemed to have a maturity date equal to the relevant number of months or years, as applicable, of such Treasury constant
maturity from the redemption date.

 

If on the third business day preceding the redemption
date H.15 or any successor designation or publication is no longer published, the Company shall calculate the Treasury Rate based on the
rate per annum equal to the semi-annual equivalent yield to maturity at 11:00 a.m., New York City time, on the second business day preceding
such redemption date of the United States Treasury security maturing on, or with a maturity that is closest to, the Par Call Date. If
there is no United States Treasury security maturing on the Par Call Date but there are two or more United States Treasury securities
with a maturity date equally distant from the Par Call Date, one with a maturity date preceding the Par Call Date and one with a maturity
date following the Par Call Date, the Company shall select the United States Treasury security with a maturity date preceding the Par
Call Date. If there are two or more United States Treasury securities maturing on the Par Call Date or two or more United States Treasury
securities meeting the criteria of the preceding sentence, the Company shall select from among these two or more United States Treasury
securities the United States Treasury security that is trading closest to par based upon the average of the bid and asked prices for such
United States Treasury securities at 11:00 a.m., New York City time. In determining the Treasury Rate in accordance with the terms of
this paragraph, the semi-annual yield to maturity of the applicable United States Treasury security shall be based upon the average of
the bid and asked prices (expressed as a percentage of principal amount) at 11:00 a.m., New York City time, of such United States Treasury
security, and rounded to three decimal places.

 

The Company’s actions and determinations
in determining the redemption price shall be conclusive and binding for all purposes, absent manifest error.

 

    	 	B-5	 

     

    

 

The Trustee shall have no obligation or duty whatsoever
to determine, or to verify the Company’s calculations of, the redemption price.

 

The
bonds of this series are also subject to redemption for the Replacement Fund for bonds of this series provided for in the supplemental
indenture dated as of March 4, 2022, providing for this series, or upon application of moneys arising from a taking of any of the
mortgaged property by eminent domain or similar action, at any time or from time to time prior to maturity, at 100% of their principal
amount, in each case together with accrued and unpaid interest to, but excluding, the date fixed for redemption.

 

Redemption is in every case
to be effected at the office or agency of the Company in the Borough of Manhattan, The City of New York, upon at least ten, but not more
than sixty, days’ prior notice, given by mail as more fully provided in the Indenture.

 

If this bond or any portion
hereof ($2,000 and integral multiples of $1,000 in excess thereof) is called for redemption and payment is duly provided, this bond or
such portion thereof shall cease to bear interest from and after the date fixed for such redemption.

 

This bond is transferable,
as provided in the Indenture, by the registered owner hereof in person or by duly authorized attorney, at the office or agency of the
Company in the Borough of Manhattan, The City of New York, upon surrender and cancellation of this bond, and thereupon a new bond of the
same series and of like aggregate principal amount will be issued to the transferee in exchange herefor as provided in the Indenture;
or the registered owner of this bond, at his option, may surrender the same for cancellation at said office or agency of the Company and
receive in exchange herefor the same aggregate principal amount of bonds of the same series of authorized denominations; all subject to
the terms of the Indenture but without payment of any charges other than a sum sufficient to reimburse the Company for any stamp taxes
or other governmental charges incident thereto.

 

This bond is a company obligation
only and no recourse whatsoever, either directly or through the Company or any trustee, receiver, assignee or any other person, shall
be had for the payment of the principal of or premium, if any, or interest on this bond, or for the enforcement of any claim based hereon,
or otherwise in respect hereof or of the Indenture, against any promoter, subscriber to the capital stock, incorporator, or any past,
present or future stockholder, member, officer or director of the Company as such, or of any successor or predecessor corporation or entity,
whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment, penalty, subscription
or otherwise, any and all such liability of promoters, subscribers, incorporators, stockholders, members, officers and directors being
waived and released by each successive holder hereof by the acceptance of this bond, and as a part of the consideration for the issue
hereof, and being likewise waived and released by the terms of the Indenture.

 

[END OF
BOND FORM]

 

    	 	B-6	 

     

    

 

ABBREVIATIONS

 

The following abbreviations, when used in the
inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or
regulations:

 

	TEN COM — as tenants in common	 	
    UNIF GIFT MIN ACT - ______Custodian ______

         (Cust)                   
    (Minor)

	TEN ENT — as tenants by the entireties	 	 
	 	 	 
	JT TEN — as joint tenants with rights of survivorship and not as tenants in common	 	 	
          under Uniform Gifts to

           Minors Act

    ____________________

	 	 	 	            (State)

 

Additional abbreviations may also be used though
not on the above list.

 

FOR VALUE RECEIVED, the undersigned hereby sell(s) and
transfer(s) unto (please insert Social Security or other identifying number of assignee)

 

PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING
POSTAL ZIP CODE OF ASSIGNEE

 

the within bond and all rights thereunder, hereby
irrevocably constituting and appointing agent to transfer said bond on the books of the Company, with full power of substitution in the
premises.

 

	Dated:	 	 	 

	 	NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular
without alteration or enlargement, or any change whatever.
	 	 
	 	Signature Guarantee:	 

 

    	 	B-7	 

     

    

 

SIGNATURE
GUARANTEE

 

Signatures must be guaranteed
by an “eligible guarantor institution” meeting the requirements of the Trustee, which requirements include membership or participation
in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may
be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934,
as amended.

 

    	 	B-8

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