Form of 4.50% Fixed to Floating Rate Subordinated Note Due May 28, 2031 (included as Exhibit A to the Form of Subordinated Note Purchase Agreement 4.50% Fixed to Floating Rate Subordinated Note Due May 28, 2031 as Exhibit 10.1 hereto)
FORM OF SUBORDINATED NOTE
HV BANCORP, INC.
4.50% FIXED-TO-FLOATING RATE SUBORDINATED NOTE
DUE MAY 28, 2031
THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE “FDIC”) OR ANY OTHER GOVERNMENT AGENCY OR FUND.
THIS OBLIGATION IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT TO THE OBLIGATIONS OF HV BANCORP, INC. ("COMPANY") TO ITS GENERAL AND SECURED CREDITORS AND IS UNSECURED. IT IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION OF CREDIT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES (“SUBSIDIARIES”).
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS NOTE IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS OF A SUBORDINATED NOTE PURCHASE AGREEMENT, DATED AS OF MAY 28, 2021, BETWEEN COMPANY AND THE NOTEHOLDER REFERRED TO THEREIN (THE “AGREEMENT”), A COPY OF WHICH IS ON FILE WITH THE COMPANY. THE NOTE REPRESENTED BY THIS INSTRUMENT MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE AGREEMENT. ANY SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH THE AGREEMENT WILL BE VOID.
THIS NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN THE SINGLE DENOMINATION OF $10,000,000.00. ANY ATTEMPTED TRANSFER OF THIS NOTE IN A DENOMINATION OF LESS THAN $10,000,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF THIS NOTE FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PAYMENTS ON THIS NOTE, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS NOTE.
CERTAIN ERISA CONSIDERATIONS:
THE HOLDER OF THIS NOTE, OR ANY INTEREST HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY WITHIN THE MEANING OF THE REGULATIONS OF 29 C.F.R. SECTION 2510.3-101 AS MODIFIED BY SECTION 3(42) OF ERISA, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS NOTE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS NOTE, OR ANY INTEREST HEREIN, ARE NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE AND HOLDING. ANY PURCHASER OR HOLDER OF THIS NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE I OF ERISA OR SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE “PLAN ASSETS” OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE OR HOLDING WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH FULL EXEMPTIVE RELIEF IS NOT AVAILABLE UNDER APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
ANY FIDUCIARY OF ANY PLAN WHO IS CONSIDERING THE ACQUISITION OF THE SUBORDINATED NOTE SHOULD CONSULT WITH THEIR LEGAL COUNSEL PRIOR TO ACQUIRING SUCH SUBORDINATED NOTE.
THIS SUBORDINATED NOTE IS NOT A DEPOSIT AND IT IS NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY OR FUND.
$10,000,000May 28, 2021
HV BANCORP, INC.
4.50% FIXED-TO-FLOATING RATE SUBORDINATED NOTE DUE MAY 28, 2031
1. Subordinated Notes. This Subordinated Note is one of a duly authorized issue of unsecured, subordinated notes of HV Bancorp, Inc., a Pennsylvania corporation (the "Company"), designated as the "4.50% Fixed to Floating Rate Note Due May 28, 2031” (the "Subordinated Note") issued pursuant to that Subordinated Note Purchase Agreement, dated as of the Issue Date (as defined herein), between the Company and Fulton Bank, N.A. initially limited in the aggregate principal amount of $10,000,000.00, but subject to being increased as provided in Sections 17 and 21 below. The "Issue Date" of the Subordinated Note is May 28, 2021.
2. Payment. The Company, for value received, promises to pay to Fulton Bank, N.A. or its registered assigns, the principal sum of Ten Million Dollars ($10,000,000.00), plus accrued but unpaid interest on May 28, 2031 ("Maturity Date") and to pay interest thereon (i) from and including the Issue Date of the Subordinated Note to but excluding May 28, 2026 or the earlier redemption date contemplated by Section 7 of this Subordinated Note, at the rate of 4.50% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months and payable semiannually in arrears on June 30 and December 31 of each year (each, a "Fixed Interest Payment Date"), beginning June 30, 2021 and (ii) from and including May 28, 2026, to but excluding the Maturity Date or the earlier redemption date contemplated by Section 7 of this Subordinated Note, at the rate per annum (rounded to two decimal places when expressed as a percentage), reset quarterly, equal to the sum of (A) a base rate equal to the then current 90-Day Average SOFR, determined on the Interest Determination Date (as defined below) of the applicable interest period and (B) 325 basis points, computed on the basis of a 360-day year and the actual number of days elapsed and payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year (each, a "Floating Interest Payment Date").
(a) An "Interest Payment Date" is either a Fixed Interest Payment Date or a Floating Interest Payment Date, as applicable.
(b) "90-Day Average SOFR" means the most recent 90-Day Average Secured Overnight Financing Rate for U.S. dollar denominated loans and derivatives as published by the Federal Reserve Bank of New York at the Federal Reserve Bank of New York's Website (as
defined below) after 3:00 pm Eastern Time on the publication date most recently prior to the first day of the applicable floating rate interest period (the "Interest Determination Date").
(i)If the Company (or the calculation agent, if one has been appointed by the Company) reasonably determines in good faith on the relevant Interest Determination Date that the 90-Day Average SOFR has been discontinued or is no longer being published by the Federal Reserve Bank of New York, then the Company (or the calculation agent, if one has been appointed by the Company) will either (i) use a substitute or successor base rate that it has determined, in its sole, reasonable discretion, is most comparable to the 90-Day Average SOFR or (ii) use the 90-Day Average SOFR as published by an industry standard source. Notwithstanding the foregoing, if the Company (or the calculation agent, if one has been appointed by the Company) reasonably determines in good faith that there is an industry-accepted substitute or successor base rate, then the Company (or the calculation agent, if one has been appointed by the Company) shall use such substitute or successor base rate (such rate, the "Alternative Rate");
(ii)If the Company (or the calculation agent, if one has been appointed by the Company) has determined to utilize a substitute or successor base rate in accordance with the foregoing, the Company (or the calculation agent, if one has been appointed by the Company) in its sole, reasonable discretion may determine what business day convention to use, the definition of business day, the Interest Determination Date to be used and any other relevant methodology for calculating such substitute or successor base rate, including any adjustment factor needed to make such substitute or successor base rate comparable to the 90-Day Average SOFR base rate, in a manner that is consistent with industry-accepted practices for such substitute or successor base rate;
(iii)The Company (or the calculation agent, if one has been appointed by the Company) shall provide the Noteholder (as defined herein) with notice of its determination of an Alternative Rate promptly after such determination. Notwithstanding anything herein to the contrary, if the Company has appointed a calculation agent for the Subordinated Note, absent manifest error, the calculation agent's determination of the Alternative Rate shall be binding and conclusive on the Noteholder and the Company. If the Company has determined the Alternative Rate, and if, within five (5) Business Days (as defined herein) after providing such notice, the Company is notified in writing by the Noteholder that such Noteholder reasonably believes that the determination of such Alternative Rate is not consistent with this Section 2, then the Company shall appoint a calculation agent for the Subordinated Note who shall determine the Alternative Rate and the calculation agent's determination of the Alternative Rate shall be binding and conclusive on the Noteholder and the Company;
(iv)Notwithstanding the foregoing, in the event that the 90-Day Average SOFR or Alternative Rate, as determined in accordance with this Section 2, is less than zero, the 90-Day Average SOFR or Alternative Rate for such interest period shall be deemed to be zero;
(vi)"Federal Reserve Bank of New York's Website" means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.
(c) The Company shall have the right, but not the obligation, except as expressly provided above, to appoint, in its sole discretion, from time to time, an independent calculation agent for the Subordinated Note. The independent calculation agent shall be a member firm of the Financial Industry Regulatory Authority, Inc. or a successor self-regulatory organization or a bank (as defined in parts (A) through (C) of Section 3(a)(6) of the Securities Exchange Act of 1934, as amended), in each case having total equity capital of not less than $50 million and authorized by law to perform all the duties provided for it by this Section 2. If the Company appoints a calculation agent, the Company shall promptly provide notice to the Noteholder of such appointment.
Any payment of principal of or interest on this Subordinated Note that would otherwise become due and payable on a day which is not a Business Day shall become due and payable on the next succeeding Business Day, with the same force and effect as if made on the date for payment of such principal or interest, and no interest will accrue in respect of such payment for the period after such day. The term "Business Day" means any day that is not a Saturday or Sunday and that is not a day on which banks in the Commonwealth of Pennsylvania are generally authorized or required by law or executive order to be closed.
3. Subordination. The indebtedness of Company evidenced by the Subordinated Note, including the principal and interest on this Note, shall be subordinate and junior in right of payment to the prior payment in full of all existing claims of creditors, whether now outstanding or subsequently created, assumed or incurred (collectively, “Senior Indebtedness”), which shall consist of principal of (and premium, if any) and interest, if any, on: (a) all indebtedness of the Company for borrowed money, whether or not evidenced by bonds, debentures, securities, notes or other written instruments; (b) any deferred obligations of the Company for the payment of the purchase price of property, goods, materials, assets or services purchased or acquired by the Company and accrued liabilities arising in the ordinary course of business; (c) all obligations, contingent or otherwise, of the Company in respect of any letters of credit, bankers’ acceptances, security purchase facilities and similar credit transactions; (d) any capital lease obligations of the Company; (e) 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 contacts, commodity contracts and other similar arrangements; (f) any obligation of the Company to its depositors or general creditors, as defined for purposes of the capital adequacy regulations of the Board of Governors of the Federal Reserve System applicable to Company, as the same may be amended or modified from time to time (the “Capital Adequacy Regulations”); (g) all obligations of the type referred
to in clauses (a) through (f) of other persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; and (h) all obligations of the types referred to in clauses (a) through (g) of other persons secured by a lien on any property or asset of the Company; except “Senior Indebtedness” does not include (i) the Subordinated Note, (ii) any obligation that, by its terms, is on parity with the Subordinated Note, (iii) any indebtedness between the Company and any of its Subsidiaries or Affiliates or (iv) the Junior Subordinated Indebtedness (as defined below). This Subordinated Note is not secured by any assets of the Company or any other Person (as such term is defined in the Purchase Agreement) or Affiliate of such Person.
In the event of any insolvency, dissolution, assignment for the benefit of creditors, reorganization, restructuring of debt, marshaling of assets and liabilities or similar proceedings or any liquidation or winding up of or relating to the Company, whether voluntary or involuntary, holders of Senior Indebtedness shall be entitled to be paid in full before any payment shall be made on account of the principal of or interest on the Subordinated Note. In the event of any such proceeding, liquidation or winding up after payment in full of all sums owing with respect to the Senior Indebtedness, the registered holder of the Subordinated Note from time to time (collectively, the “Noteholder”), together with the holders of any obligations of 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 thereof and the unpaid interest thereon before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock or any present or future obligations of the Company ranking junior to the Subordinated Notes (collectively, “Junior Subordinated Indebtedness”), which includes any obligation that, by its terms, is subordinated to the Subordinated Note.
If there shall have occurred and be continuing (a) a default, beyond any applicable grace period, in any payment with respect to any Senior Indebtedness or (b) an event of default, beyond any applicable grace period, 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 payment of principal or interest shall be made by the Company with respect to this Subordinated Note. The Company shall provide prompt written notice to the Noteholder upon the occurrence of events described in clauses (a) and (b) of the proceeding sentence. The provisions of this paragraph shall not apply to any payment with respect to which the immediately preceding paragraph of this Section 3 would be applicable.
Nothing herein shall act to prohibit, limit or impede the Company from issuing additional debt of the Company having the same rank as the Subordinated Note or which may be junior or senior in rank to the Subordinated Note. The Noteholder, by its acceptance hereof, agrees to and shall be bound by the provisions of this Section 3. The 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 Note, 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.
4. Merger and Sale of Assets. The Company shall not consolidate or merge into another entity or convey, transfer or lease its properties and assets substantially as an entirety to any person, unless:
(a) the continuing entity which results from such consolidation or merger, if not the Company, or the person which acquires by conveyance or transfer or which leases the properties and assets of the Company substantially as an entirety 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 Note according to its terms, and the due and punctual performance of all covenants and conditions hereof on the part of the Company to be performed or observed; provided, however, that no further express assumption is needed by any successor by merger to the Company to the extent such legal successor assumes the Company’s obligations hereunder by operation of law; and
(b) immediately after giving effect to such transaction, no Event of Default (as defined below), and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing.
For purposes of the foregoing, any sale, assignment, transfer, lease, or other conveyance of all or any of the properties and assets of one or more Subsidiaries that, if such properties and assets were directly owned by the Company, would constitute all or substantially all of the Company’s properties and assets, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.
5. Events of Default; Acceleration. If any of the following events shall occur and be continuing (each an “Event of Default”):
(a) The Company or any major subsidiary depository institution (as defined for purposes of the Capital Adequacy Regulations, a “Major Subsidiary Depository Institution”) of the Company shall commence a voluntary case under any applicable bankruptcy, insolvency, liquidation, reorganization or other similar law now or hereafter in effect, or the Company shall consent to the appointment of a receiver, liquidator, trustee or other similar official in any liquidation, insolvency or similar proceeding with respect to the Company or all or substantially all of its property, or shall make an assignment for the benefit of creditors; or
(b) A court or other governmental agency or body having jurisdiction shall enter a decree or order for the appointment of a receiver, liquidator, trustee or other similar official in any liquidation, insolvency or similar proceeding with respect to the Company or a Major Subsidiary Depository Institution of the Company or all or substantially all of the property of the Company or a Major Subsidiary Depository Institution of the Company, or for the winding up of the affairs or business of the Company or a Major Subsidiary Depository Institution, and such decree or order shall have remained in force for sixty (60) calendar days; or
(c) The Company is notified that it is considered an institution in “troubled condition” within the meaning of 12 U.S.C. Section 1831i and the regulations promulgated thereunder; or
(d) The Company (i) becomes insolvent or is unable to pay its debts as they mature, or (ii) admits in writing its inability to pay its debts as they mature; or
(e) The Company materially breaches any of the representations, warranties or covenants made by it in the Agreement; or
(f) The Company fails to make any required payment of principal or interest hereunder when due and payable (and, in the case of payment of interest, such failure to pay shall have continued for thirty (30) calendar days);
then, in the case of an Event of Default described in the foregoing clauses (a) or (b), unless the principal of this Subordinated Note already shall have become due and payable, the Noteholder, by notice in writing to the Company, may declare the principal amount of this Subordinated Note to be due and payable immediately and, upon any such declaration, the same shall become and shall be immediately due and payable. The Company waives demand, presentment for payment, notice of nonpayment, notice of protest, and all other notices.
Notwithstanding the foregoing, because the Subordinated Note is required to qualify for treatment 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 Noteholder may not accelerate the Stated Maturity of the Subordinated Note and make the principal of, and any accrued and unpaid interest on, the Subordinated Note, immediately due and payable.
6. Failure to Make Payment. In the event of the occurrence of an Event of Default described in Section 5(f), the Company, upon demand of the Noteholder, will pay to the Noteholder the whole amount then due and payable on this Subordinated Note for principal and interest (without acceleration), with interest on the overdue principal and interest at the rate borne by this Subordinated Note, to the extent permitted by applicable law. If the Company fails to pay such amount upon such demand, the Noteholder may, among other things, institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the property of the Company.
Upon the occurrence of a failure by the Company to make any required payment of principal or interest on this Subordinated Note or an Event of Default, until such failure or Event of Default is cured by the Company or waived by the Noteholder in accordance with Section 16 hereof, the Company shall not (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock, (b) make any payment of principal or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank equal with or junior to the Subordinated Note, or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Note, 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 noncash dividend in connection with the implementation of a stockholders’ 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 and stock purchase plans (including, without limitation, any repurchases or acquisitions in connection with the forfeiture of any stock award, cashless or net exercise of any option, or acceptance of common stock in lieu of an award recipient’s tax obligations under any equity award).
7. Redemption; Prepayment; Capital Treatment Event Redemption. The Subordinated Note is not subject to redemption at the option of the Noteholder. The Company, however, in its discretion, may redeem or prepay the Subordinated Note, in whole or in part, without premium or penalty, at any time on or after May 28, 2026, and prior to the Maturity Date on any Interest Payment Date at a price of 100% of the principal amount of this Subordinated Note to be redeemed or prepaid on such date, plus interest accrued and unpaid to but excluding the date of redemption or prepayment. If less than the entire amount of the Subordinated Note is to be redeemed or prepaid, the notice of redemption or prepayment shall state the portion of the principal amount to be redeemed or prepaid and shall state that on and after the date fixed for redemption or prepayment, upon surrender of such Subordinated Note, a new Subordinated Note, having the same terms and conditions of the Subordinated Note, in principal amount equal to the unpaid portion thereof will be issued.
In addition, if all or any portion of the Subordinated Note ceases to be deemed to be Tier 2 Capital, including due to a change in applicable capital regulations (a “Capital Treatment Event”), the Company shall promptly notify the Noteholder thereof, and thereafter, the Company and the Noteholder shall work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure, as agreed to by the Company and the Noteholder, the applicable portions of the obligations evidenced by the Subordinated Note to qualify as Tier 2 Capital; provided, however, that nothing contained in this section shall limit the Company’s right to redeem the Subordinated Note upon the occurrence of a Capital Treatment Event. In the event of a Capital Treatment Event, Company shall have the right to redeem, on any Interest Payment Date, all or such portion of the Subordinated Note at a price of 100% of the principal amount of the Subordinated Note to be redeemed, plus accrued but unpaid interest to but excluding the date of redemption.
Furthermore, the Company shall have the right, at any time, to redeem the Subordinated Note at a price of 100% of the principal amount of the Subordinated Note to be redeemed, plus accrued but unpaid interest to but excluding the date of redemption upon the occurrence of a Tax Event or an Investment Company Event. A “Tax Event” means the receipt by the Company of an opinion of counsel to the Company that as a result of any amendment to, or change (including any final and adopted (or enacted) prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, there exists a material risk that interest payable by the Company on the Subordinated Note is not, or within one hundred twenty (120) days after the receipt of such opinion, will not be deductible by the Company, in whole or in part, for United
States federal income tax purposes. An “Investment Company Event” means the receipt by the Company of an opinion of counsel to the Company to the effect that there is a material risk that the Company is or, within one hundred twenty (120) days after the receipt of such opinion, will be required to register as an investment company pursuant to the Investment Company Act of 1940, as amended.
In the case of any redemption or prepayment of this Subordinated Note, in whole or in part, without premium or penalty, the Company will give the holder of the Subordinated Note to be redeemed or prepaid notice not less than thirty (30) nor more than forty-five (45) calendar days prior to the redemption or prepayment date as to the aggregate principal amount to be redeemed or prepaid. Any such redemption or prepayment shall be subject to the prior approval of the Board of Governors of the Federal Reserve System (or its designee) or any successor agency to the extent such approval shall then be required by law, regulation or policy.
8. Repayment; Payment Procedures. The Company shall repay the aggregate principal amount of the Subordinated Note, plus all accrued but unpaid interest thereon to but excluding the Maturity Date, in full on the Maturity Date. Payment of the principal and interest payable on the Maturity Date will be made by check, or by wire transfer in immediately available funds to a bank account in the United States designated by the registered Noteholder of this Subordinated Note 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 in Section 13 below) or at such other place or places as the Company shall designate by notice to the registered Noteholder as the Payment Office, provided that this Subordinated Note is presented to the Company in time for the Company to make such payments in such funds in accordance with its normal procedures. Payments of interest (other than interest payable on the Maturity Date) shall be made by wire transfer in immediately available funds (if such Noteholder shall have previously provided wire transfer instructions to the Company) or check mailed to the registered Noteholder as such person’s address appears on the Security Register (as defined below). Interest payable on any Interest Payment Date shall be payable to the Noteholder in whose name this Subordinated Note is registered at the close of business on the fifteenth (15th) calendar day prior to the applicable Interest Payment Date. 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 to accrued interest and then the balance, if any, to principal. Protest, notice of protest, presentment and surrender of this Subordinated Note are hereby waived by the Company.
9. Form of Payment. Payments of principal and interest on this Subordinated Note shall be made in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.
10. Registration of Transfer; Security Register. Except as otherwise provided herein, this Subordinated Note is transferable only in whole and not in part, and may be exchanged for a like aggregate principal amount of Subordinated Note of the same denomination, by the Noteholder in person, or by its attorney duly authorized in writing, at the Payment Office (as defined in Section 13 below). The Company shall maintain a register providing for the registration of the Subordinated Note and any exchange or transfer thereof (the “Security Register”). Upon
surrender or presentation of this Subordinated Note for exchange or registration of transfer, the Company shall execute and deliver in exchange therefor a Subordinated Note in substantially the form hereof of like aggregate principal amount in the same denomination (and, in the absence of an opinion of counsel satisfactory to Company to the contrary, bearing the restrictive legend(s) set forth hereinabove) and that is or are registered in such name 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 his attorney duly authorized in writing, with such tax identification number or other information for each person in whose name a Subordinated Note is to be issued, and accompanied by evidence of compliance with any restrictive legend(s) appearing on such Subordinated Note as the Company may reasonably request to comply with applicable law. No exchange or registration of transfer of this Subordinated Note shall be made during the period on or after the fifteenth (15th) day immediately preceding the Maturity Date. This Subordinated Note is subject to the restrictions on transfer contained in the Agreement, a copy of which is on file with the Company.
11. Charges and Transfer Taxes. No service charge (other than any cost of delivery) shall be imposed for any exchange or registration of transfer of this Subordinated Note, but the Company may require the payment of a sum sufficient to cover any stamp or other tax or governmental fee or charge that may be imposed in connection therewith (or presentation of evidence that such tax, charge or fee has been paid).
12. Ownership. Prior to due presentment of this Subordinated Note for registration of transfer, 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.
13. Notices. All notices to the Company under this Subordinated Note shall be in writing and addressed to the Company at 2005 South Easton Road, Suite 304, Doylestown, PA 18901, Attention: Chief Financial Officer, or to such other address as the Company may notify to the Noteholder (the “Payment Office”). All notices to the Noteholder shall be in writing and sent by first-class mail or recognized commercial overnight courier to the Noteholder at the address as set forth in the Security Register.
14. Denominations. The Subordinated Note is issued only in fully registered form without interest coupons in a single denomination of $10,000,000.00.
15. Absolute and Unconditional Obligation of the Company. No provisions of this Subordinated Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal and interest on this Subordinated Note at the times, places and rate, and in the coin or currency, herein prescribed.
16. Waiver and Consent.
(a)Any consent or waiver given by the Noteholder of this Subordinated Note shall be conclusive and binding upon such Noteholder and upon any future Noteholder of this Subordinated Note and of any Subordinated Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Subordinated Note. No delay or omission of the holder of this Subordinated Note to exercise any right or remedy accruing upon any Event of Default shall impair such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. The Noteholder, by its acceptance of such Subordinated Note (or beneficial interest therein), shall be deemed to have waived any right of offset against the Company with respect to the indebtedness evidenced thereby.
(b) No waiver or amendment of any term, provision, condition, covenant or agreement in the Subordinated Note shall be effective except with the consent of the holder of the Subordinated Note. No failure to exercise or delay in exercising, by any Noteholder of the Subordinated Note, of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right or remedy provided at law or in equity. The rights and remedies provided in this Subordinated Note are cumulative and not exclusive of any right or remedy provided at law or in equity. No notice or demand on the Company in any case shall, in itself, entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Noteholder to any other or further action in any circumstances without notice or demand. No consent or waiver, express or implied, by the Noteholder 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 Noteholder 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 Noteholder of its rights hereunder or impair any rights, powers or remedies on account of any breach or default by the Company.
17. Further Issues. The Company may create and issue additional notes having the same terms and conditions of the Subordinated Note (except for the issue date, interest rate, issue price, and maturity date) so that such further notes shall be consolidated and form a single series with the Subordinated Note. Any such issuance will either be registered or issued pursuant to an exemption from registration under the Securities Act.
18. No Sinking Fund; Trust Indenture or Credit Rating; Convertibility. This Subordinated Note is not entitled to the benefit of any sinking fund. This Subordinated Note is not being issued pursuant to, or is the subject of, any trust indenture. This Subordinated Note is not subject to any rating by a nationally recognized statistical rating organization. This Subordinated Note is not convertible into or exchangeable for any of the equity securities, other securities or assets of the Company or any Subsidiary of the Company. This Subordinated Note will not be assigned a CUSIP or ISIN identifier.
19. 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.
20. Governing Law; Interpretation. This Subordinated Note shall be governed by and construed in accordance with applicable federal law of the United States of America and the laws of the Commonwealth of Pennsylvania, without regard to conflict of laws principles of such state that would result in the application of the laws of another jurisdiction. This Subordinated Note is intended to meet the criteria for qualification of the outstanding principal as Tier 2 Capital under the Capital Adequacy Regulations, and the terms hereof shall be interpreted in a manner to satisfy such intent, subject to the limitation imposed on the capital treatment of subordinated debt during the five (5) years immediately preceding the Maturity Date of the Subordinated Note.
21. Priority. The Subordinated Note ranks pari passu in the event of any insolvency proceeding, dissolution, assignment for the benefit of creditors, reorganization, restructuring of debt, marshaling of assets and liabilities or similar proceeding or any liquidation or winding up of the Company, with all other present or future unsecured subordinated debt obligations of the Company, except any unsecured subordinated debt that may be expressly stated to be senior to or subordinate to the Subordinated Note.
22. Successors and Assigns. This Subordinated Note shall be binding upon the Company and its successors and permitted assigns and shall inure to the benefit of the Noteholder and its respective successors and permitted assigns. The Noteholder only may assign all its interest in, the Noteholder’s rights and benefits hereunder only to the extent and in the manner permitted in Agreement. 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 such Agreement as it would have had if it were the Noteholder hereunder.
23. Purchase and Resale. Subject to any required federal and state regulatory approvals and the provisions of this Subordinated Note, the Company shall have the right to repurchase the Subordinated Note at any time in the open market, private transactions or otherwise. If the Company repurchases the Subordinated Note, it may, in its discretion, hold, resell or cancel any of the repurchased Subordinated Note, with the understanding that Subordinated Note held by the Company will not qualify as Tier 2 Capital.
24. Submission to Jurisdiction. The Noteholder hereby irrevocably submits to the exclusive jurisdiction of the Court of Common Pleas of Bucks County, Pennsylvania and the U.S. District Court for the Eastern District of Pennsylvania over any action or proceeding arising out of or relating to this Subordinated Note and the transactions related thereto, regardless of whether a claim sounds in contract, tort, or otherwise and regardless of whether a claim is at law or in equity, and the Noteholder hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such state or federal court. The Noteholder, on behalf of itself and its successors and assigns, hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any action or proceeding in any such court as well as any right it may now or hereafter have to remove such action or proceeding, once commenced, to another court on the grounds of Forum Non Conveniens or otherwise. The Noteholder agrees that
a final, non-appealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed and attested.
HV BANCORP, INC.
Name: Janice Garner Name: Joseph C. O’Neill, Jr.
Corporate SecretaryTitle: Executive Vice President/Treasurer
and Chief Financial Officer
To assign this 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)
(Insert assignee’s social security or tax I.D. No.)
and irrevocably appoint ___________ agent to transfer this Subordinated Note on the books of Company. The agent may substitute another to act for him.
Date:__________________Your Signature: ______________________
Signature Guarantee: ______________________________________________________
(Signature must be guaranteed)
Sign exactly as your name appears on the other side of this Subordinated Note.
The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The undersigned hereby certifies that it □ is / □ is not an Affiliate of Company and that, to its knowledge, the proposed transferee □ is / □ is not an Affiliate of Company.
In connection with any transfer or exchange of the Subordinated Note evidenced by this certificate occurring prior to the date that is one year after the later of the date of original issuance of such Subordinated Note and the last date, if any, on which such Subordinated Note was owned by Company or any Affiliate of Company, the undersigned confirms that such Subordinated Note is being:
CHECK ONE BOX BELOW:
□ acquired for the undersigned’s own account, without transfer; or
□transferred to Company; or
□ transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”); or
□ transferred pursuant to an effective registration statement under the Securities Act; or
□ transferred pursuant to and in compliance with Regulation S under the Securities Act; or
□ transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3), (7) or (9) under the Securities Act) or an “accredited investor” (as defined in Rule 501(a)(4) under the Securities Act), that has furnished a signed letter containing certain representations and agreements; or
□ transferred pursuant to another available exemption from the registration requirements of the Securities Act.
Unless one of the boxes is checked, Company will refuse to register this Subordinated Note in the name of any person other than the registered Noteholder thereof; provided, however, that if box (5), (6) or (7) is checked, 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 Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act such as the exemption provided by Rule 144 under the Securities Act.
(Signature must be guaranteed) Signature
The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Rule 17Ad-15 under the Exchange Act.
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 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.
Form of Legal Opinion
1. Each of the Company and the Bank (i) has been incorporated and is validly existing under the laws of its state of incorporation, (ii) has all requisite power and authority to carry on its business and to own, lease and operate its properties and assets as described in the Company’s Reports and (iii) is duly qualified or licensed to do business and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of such businesses or the ownership or leasing of such properties requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, reasonably would be expected to have a Material Adverse Effect as such term is defined in the Subordinated Note Purchase Agreement.
2. The Company is a registered bank holding company under the Bank Holding Company Act of 1956, as amended. The Bank is duly formed as a stock savings bank under Pennsylvania law.
3. The Company has all necessary power and authority to execute, deliver and perform its obligations under the Subordinated Note Purchase Agreement and Subordinated Note to which it is a party.
4. The Subordinated Note Purchase Agreement and the Subordinated Note have been duly and validly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery by the Noteholder, each will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by (i) bankruptcy, receivership, insolvency, reorganization, moratorium, fraudulent transfer, or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) rules of law governing specific performance, injunctive relief, or other equitable principles or by other general equitable principles (regardless of whether enforceability is considered in a proceeding at law or in equity).
5. Assuming the accuracy of the representations and warranties of the Purchaser set forth in the Subordinated Note Purchase Agreement and the issuance of the Subordinated Note in accordance with the terms and conditions of the Subordinated Note Purchase Agreement and the Subordinated Note, the Subordinated Note to be issued and sold by the Company to the Noteholder pursuant to the Subordinated Note Purchase Agreement will be issued in a transaction exempt from the registration requirements of the Securities Act.