FORM 8-K CURRENT REPORT ACNB Corporation
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Transcript of FORM 8-K CURRENT REPORT ACNB Corporation
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 30, 2021
ACNB Corporation
(Exact name of Registrant as specified in its charter)
Pennsylvania 1-35015 23-2233457 (State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
16 Lincoln Square, Gettysburg, PA 17325 (Address of principal executive offices) (Zip Code)
717.334.3161
(Registrant’s telephone number, including area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the followingprovisions (see General Instruction A.2. below): ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) orRule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨ If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Securities registered pursuant to Section 12(b) of the Act:
Title Of Each Class Trading Symbol(s) Name Of Each Exchange On Which RegisteredCommon Stock, $2.50 par value per share ACNB The NASDAQ Stock Market, LLC
CURRENT REPORT ON FORM 8-K
ITEM 1.01 Entry into a Material Definitive Agreement
On March 30, 2021, ACNB Corporation (the “Company”) entered into Subordinated Note Purchase Agreements (the “Purchase Agreements”)with certain institutional accredited investors and qualified institutional buyers (the “Purchasers”) pursuant to which the Company sold andissued $15.0 million in aggregate principal amount of its 4.00% fixed-to-floating rate subordinated notes due March 31, 2031 (the “Notes”). TheNotes were issued by the Company to the Purchasers at a price equal to 100% of their face amount. The Company intends to use the net proceedsit received from the sale of the Notes to retire outstanding debt of the Company, repurchase issued and outstanding shares of the Company,support general corporate purposes, underwrite growth opportunities, create an interest reserve for the Notes, and downstream proceeds toACNB Bank, an insured depository subsidiary of the Company (the “Bank”), to be used by the Bank to continue to meet regulatory capitalrequirements, increase the regulatory lending ability of the Bank, and support the Bank’s organic growth initiatives. The Purchase Agreementscontain certain customary representations, warranties and covenants made by the Company, on the one hand, and the Purchasers, severally andnot jointly, on the other hand.
The Notes have a stated maturity of March 31, 2031, are redeemable by the Company at its option, in whole or in part, on or after March 30,2026, and at any time upon the occurrences of certain events. Prior to March 30, 2026, the Company may redeem the Notes, in whole or in part,only under certain limited circumstances set forth in the Notes. On or after March 30, 2026, the Company may redeem the Notes, in whole or inpart, at its option, on any interest payment date. Any redemption by the Company would be at a redemption price equal to 100% of the principalamount of the Notes being redeemed, together with any accrued and unpaid interest on the Notes being redeemed to, but excluding, the date ofredemption. The Notes are not subject to redemption at the option of the holder.
The Notes will bear interest at a fixed rate of 4.00% per year, from and including March 30, 2021 to, but excluding, March 31, 2026 or earlierredemption date. From and including March 31, 2026 to, but excluding the maturity date or earlier redemption date, the interest rate will resetquarterly at a variable rate equal to the then current 90-day average Secured Overnight Financing Rate (“SOFR”) plus 329 basis points. Asprovided in the Notes, the interest rate on the Notes during the applicable floating rate period may be determined based on a rate other than the90-day average SOFR.
Principal and interest on the Notes are subject to acceleration only in limited circumstances. The Notes are unsecured, subordinated obligationsof the Company, are not obligations of, and are not guaranteed by, any subsidiary of the Company, and rank junior in right of payment to theCompany’s current and future senior indebtedness. The Notes are intended to qualify as Tier 2 capital of the Company for regulatory capitalpurposes.
The Notes were offered and sold by the Company in a private placement transaction in reliance on exemptions from the registrationrequirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act andRule 506(b) of Regulation D thereunder. The Notes are not subject to any sinking fund and are not convertible into or exchangeable for any othersecurities or assets of the Company or any of its subsidiaries.
The form of the Note and the form of the Purchase Agreement are attached as Exhibits 4.1 and 10.1, respectively, to this Current Report onForm 8-K and are incorporated herein by reference. The foregoing descriptions of the Purchase Agreements and the Notes are summaries and arequalified in their entirety by reference to the full text of such documents.
ITEM 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information set forth under Item 1.01 above is incorporated by reference into this Item 2.03. ITEM 7.01 Regulation FD Disclosure
In connection with the offering of the Notes, the Company delivered an investor presentation to potential investors on a confidential basis, acopy of which is furnished herewith as Exhibit 99.1.
The information contained in this Item 7.01 and Exhibit 99.1 shall not be deemed to be “filed” for the purposes of Section 18 of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section, nor will such information bedeemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as may be expressly set forth by specificreference in such filing.
ITEM 9.01 Financial Statements and Exhibits
(d) Exhibits. Exhibit No. Description
4.1 Form of ACNB Corporation 4.00% Fixed-to-Floating Rate Subordinated Note due March 31, 2031 (included as Exhibit A tothe Form of Subordinated Note Purchase Agreement dated March 30, 2021, filed as Exhibit 10.1 hereto).
10.1 Form of Subordinated Note Purchase Agreement dated March 30, 2021, by and among ACNB Corporation and the
Purchasers.
99.1 ACNB Corporation Subordinated Note Placement Investor Presentation dated March 23, 2021.
EXHIBIT INDEX
EXHIBIT NO.
4.1 Form of ACNB Corporation 4.00% Fixed-to-Floating Rate Subordinated Note due March 31, 2031 (included as Exhibit A to theForm of Subordinated Note Purchase Agreement dated March 30, 2021, filed as Exhibit 10.1 hereto).
10.1 Form of Subordinated Note Purchase Agreement dated March 30, 2021, by and among ACNB Corporation and the Purchasers.
99.1 ACNB Corporation Subordinated Note Placement Investor Presentation dated March 23, 2021.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf bythe undersigned, thereunto duly authorized. ACNB CORPORATION (Registrant) Dated: March 30, 2021 /s/ Lynda L. Glass Lynda L. Glass Executive Vice President/ Secretary & Chief Governance Officer
Exhibit 10.1
SUBORDINATED NOTE PURCHASE AGREEMENT
This SUBORDINATED NOTE PURCHASE AGREEMENT (this “Agreement”) is dated as of March 30, 2021, and is made by and among ACNBCorporation (“Company”), and each of the noteholders named on Schedule I hereto (each a “Noteholder” and together, the “Noteholders”). Capitalized termsthat are not otherwise defined shall have the meanings set forth in Section 1 hereof.
RECITALS:
WHEREAS, Company is a Pennsylvania corporation and the parent company of ACNB Bank (the “Bank”), a Pennsylvania chartered bank and trustcompany;
WHEREAS, Company wishes to sell unsecured subordinated notes up to $15,000,000.00 in aggregate principal amount in substantially the form attachedto this Agreement as Exhibit A (individually, a “Subordinated Note” and collectively, the “Subordinated Notes”), which aggregate amount is intended to qualifyas Tier 2 Capital;
WHEREAS, Company has engaged Boenning & Scattergood, Inc., as its exclusive placement agent ("Placement Agent") for the offering of theSubordinated Notes;
WHEREAS, each of the Purchasers is an institutional “accredited investor,” as such term is defined in Rule 501(a)(1)-(3), (7) or (9) of Regulation D(“Regulation D”) under the Securities Act of 1933, as amended (the “Securities Act”), or a “qualified institutional buyer” as such term is defined in Rule 144Aunder the Securities Act;
WHEREAS, Company and each Noteholder is executing and delivering this Agreement in reliance upon the exemption from securities registrationafforded by Section 4(a)(2) of the Securities Act, and Rule 506(b) of Regulation D as promulgated by the United States Securities and Exchange Commissionunder the Securities Act; and
WHEREAS, each Noteholder, severally and not jointly, wishes to purchase from Company a Subordinated Note in the principal amount set forth next toits name in Schedule I attached 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 sufficiency and receipt which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
AGREEMENT:
1. DEFINITIONS.
1.1. Defined Terms. The following capitalized terms generally used in this Agreement and in the Subordinated Notes have the meanings herein definedor 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, andany other Person directly or indirectly controlling, controlled by, or under common control with such Person and their respective Affiliates.
“Agreement” has the meaning set forth in the preamble hereto.
“Anti-Money Laundering Laws” has the meaning set forth in Section 4.6.7.
“Bank” has the meaning set forth in the Recitals.
“Business Day” means any day other than a Saturday, Sunday or any other day on which banking institutions in the Commonwealth of Pennsylvania arepermitted or required by any applicable law or executive order to close.
“Closing” has the meaning set forth in Section 2.4.
“Closing Date” means March 30, 2021.
“Company” has the meaning set forth in the preamble hereto and shall include any successor to Company by merger or otherwise.
“Company’s Liabilities” means Company’s obligations under this Agreement and the Subordinated Notes.
“Company’s Reports” means (i) the audited consolidated financial statements of the Company for the year ended December 31, 2020, (ii) theCompany’s Parent Only Financial Statements for Small Holding Companies (FR Y-SP) as of and for the twelve month period ended December 31, 2020 filed withthe Federal Reserve, (iii) the Bank’s consolidated reports of condition and income filed (or call report) with the FDIC as of and for the period ended December 31,2020 and (iv) such other reports, schedules, forms, statements and other documents (including exhibits and other information incorporated therein) that have beenfiled or furnished by the Company with the SEC under the Securities Act, Exchange Act or regulations thereunder as of the Closing Date.
“Condition or Release” means any presence, use, storage, transportation, discharge, disposal, or release of any Hazardous Materials.
“Disbursement” has the meaning set forth in Section 3.1.
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“Economic Sanctions” has the meaning set forth in Section 4.6.8.3.
“Equity Interest” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and
all equivalent ownership interests in a Person which is not a corporation and any and all warrants, options or other rights to purchase any of the foregoing.
“Event of Default” has the meaning set forth in the Subordinated Notes.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“FDIC” means the Federal Deposit Insurance Corporation.
“Federal Reserve” 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 with jurisdiction over Company or the Bank.
“Governmental Licenses” has the meaning set forth in Section 4.3.
“Government Lists” has the meaning set forth in Section 4.6.8.1.
“Hazardous Materials” means oil, flammable explosives, asbestos, urea formaldehyde insulation, polychlorinated biphenyls, radioactive materials,hazardous wastes, and toxic or hazardous substances, including, without limitation, any substances which are “hazardous substances,” “hazardous wastes,”“hazardous materials” or “toxic substances” under the Hazardous Materials Laws.
“Hazardous Materials Laws” mean any laws, regulations, permits or licenses pertaining to the protection, preservation, conservation or regulation of theenvironment which relates to real property, including without limitation: the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the Federal WaterPollution 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 etseq.; the Comprehensive Environment Response, Compensation and Liability Act of 1980, as amended (including the Superfund Amendments and ReauthorizationAct of 1986), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and HealthAct, as amended, 29 U.S.C. Section 651, the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safetyand 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 laws,orders and regulations.
“Indebtedness” means and includes: (i) all items arising from the borrowing of money that, according to GAAP as in effect from time to time, would beincluded in determining total liabilities as shown on the consolidated balance sheet of Company or any Subsidiary of Company; and (ii) all obligations secured byany lien on Property owned by Company whether or not such obligations shall have been assumed; provided, however, Indebtedness shall not include deposits orother indebtedness created, incurred or maintained in the ordinary course of business of Company or any Subsidiary of Company (including, without limitation,federal funds purchased, advances from any Federal Home Loan Bank, secured deposits of municipalities, letters of credit issued by Company and repurchasearrangements) and consistent with customary banking practices and applicable laws and regulations.
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“Leases” means all leases, licenses or other documents providing for the use or occupancy of any portion of any Property, including all amendments,
extensions, renewals, supplements, modifications, sublets and assignments thereof and all separate letters or separate agreements relating thereto.
“Material Adverse Effect” means, with respect to any Person, any change or effect that (i) is or would be reasonably expected to be material and adverseto the financial position, results of operations, or business of such Person, or (ii) would materially impair the ability of any Person to perform its respectiveobligations under this Agreement or the Subordinated Notes, or otherwise materially impede the consummation of the transactions contemplated hereby; provided,however, that “Material Adverse Effect” shall not be deemed to include the impact of (1) changes in banking and similar laws, rules or regulations of generalapplicability or interpretations thereof by Governmental Agencies, (2) changes in GAAP or regulatory accounting requirements applicable to financial institutionsand their holding companies generally, (3) changes after the date of this Agreement in general economic, employment or capital market conditions in the UnitedStates, including interest rates, economic or capital market conditions affecting insured depository institutions and their respective holding companies or the marketprices for their issued and outstanding securities generally and not specifically related to Company or the Noteholders, (4) changes in national or internationalpolitical or social conditions including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency orwar, or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices orupon any military installation, equipment or personnel of the United States, declarations of any national or global epidemic, pandemic or disease outbreak(including the COVID-19 virus), including all measures taken to protect the health, safety and welfare of the general population of the United States or any state orterritory of the United States or political subdivision thereof, the effects of any declaration of a state of civil emergency by the government of the United States orof any state or territory of the United States or political subdivision thereof, or the material worsening of such conditions threatened or existing as of the date of thisAgreement, (5) direct effects of compliance with this Agreement on the operating performance of Company or Noteholders, including expenses incurred byCompany or the Noteholders in consummating the transactions contemplated by this Agreement, and (6) the effects of any action or omission taken by Companywith the prior written consent of the Noteholders, and vice versa, or as otherwise contemplated by this Agreement and the Subordinated Notes.
“Maturity Date” means March 31, 2031.
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“Noteholder” or “Noteholders” has the meaning set forth in the preamble hereto.
“OFAC” has the meaning set forth in Section 4.6.8.1.
“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 Company or any Subsidiary of the Company.
“SEC” means the United States Securities and Exchange Commission.
“Securities Act” has the meaning set forth in the Recitals.
“Subordinated Note” or “Subordinated Notes” has the meaning set forth in the Recitals, as amended, restated, supplemented or modified from time totime, and each Subordinated Note delivered in substitution or exchange for such Subordinated Note.
“Subordinated Note Amount” has the meaning set forth in the Recitals.
“Subsidiary” means with respect to any Person, any corporation or entity in which a majority of the outstanding Equity Interest is directly or indirectlyowned by such Person.
“Tax” and “Taxes” mean all federal, state, local or foreign income, gross income, gains, gross receipts, sales, use, ad valorem, goods and services,capital, production, transfer, franchise, windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp,occupation, property, environmental, custom duties, unemployment or other taxes of any kind whatsoever, together with any interest, additions or penalties theretoand any interest in respect of such interest and penalties.
“Tax Returns” means any return, declaration or other report (including elections, declarations, schedules, estimates and information returns) with respectto any Taxes.
“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 fromtime to time or any replacement thereof, without giving effect to the applicability to the Company of the Small Bank Holding Company and Savings and LoanHolding Company Policy Statement, as set forth at 12 C.F.R. Part 225, Appendix C, as amended, modified and supplemented and in effect from time to time or anyreplacement thereof.
“USA PATRIOT Act” has the meaning set forth in Section 4.6.7.
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1.2. Interpretation; Construction. 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 particularprovision of this Agreement. The word “including” when used in this Agreement without the phrase “without limitation,” shall mean “including, withoutlimitation.” All references to time of day herein are references to Eastern Time unless otherwise specifically provided. All references to the Agreement andSubordinated Notes shall be deemed to be to such documents as amended, modified, supplemented or restated from time to time. With respect to any reference inthis Agreement to any defined term, (a) if such defined term refers to a Person, then it shall also mean all heirs, legal representatives and permitted successors andassigns of such Person, and (b) if such defined term refers to a document, instrument or agreement, then it shall also include any replacement, extension,supplement or other modification thereof. No rule of construction against the draftsperson of the Agreement shall be applied in connection with the interpretationand enforcement of the Agreement.
1.3. Exhibits Incorporated. All Exhibits attached are hereby incorporated into this Agreement. 2. SUBORDINATED DEBT.
2.1. General Matters.
2.1.1. Certain Terms. Subject to the terms and conditions herein contained, Company agrees to issue and sell to the Noteholders, and theNoteholders agree, severally and not jointly, to purchase from Company, a Subordinated Note in an amount equal to the Subordinated Note Amount onthe Closing Date in accordance with the terms of, and subject to the conditions and provisions set forth in, this Agreement and the Subordinated Notes.The Subordinated Note Amount shall be disbursed in accordance with Section 3.1. The Subordinated Notes shall bear interest per annum as set forth inthe Subordinated Notes. The unpaid principal balance of the Subordinated Notes plus all accrued but unpaid interest thereon shall be due and payable onthe Maturity Date, or such earlier date on which such amount shall become due and payable on account of (i) acceleration by the Noteholders inaccordance with the terms of the Subordinated Notes or (ii) Company’s delivery of a notice of redemption or repayment in accordance with the terms ofthe Subordinated Notes.
2.1.2. Subordination. The Subordinated Notes shall be subordinated in accordance with the subordination provisions set forth therein.
2.1.3. No Trust Indenture. The Subordinated Notes will not be issued pursuant to, or be the subject of, a trust indenture.
2.1.4. No Credit Rating. The Subordinated Notes will not be rated by a nationally recognized statistical rating organization.
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2.1.5. No Convertibility. The Subordinated Notes are not convertible into or exchangeable for any Equity Interests, other securities or
assets of the Company or a Company Subsidiary.
2.2. Maturity Date. On the Maturity Date, all sums due and owing under this Agreement and the Subordinated Notes shall be repaid in full. Companyacknowledges and agrees that each Noteholder has not made any commitments, either express or implied, to extend the terms of the Subordinated Notes past theirMaturity Date, and shall not extend such terms beyond the Maturity Date unless Company and the Noteholders hereafter specifically otherwise agree in writing intheir sole and absolute discretion.
2.3. Unsecured Obligations. The obligations of Company to the Noteholders under the Subordinated Notes shall be unsecured.
2.4. The Closing. The execution and delivery of this Agreement and Subordinated Notes (the “Closing”) shall occur at the offices of Company at10:00 a.m. Eastern Time on the Closing Date, or at such other place or time or on such other date as the parties hereto may agree.
2.5. Payments.
2.5.1. Company agrees that matters concerning prepayments, payments and application of payments shall be as set forth in this Agreementand in the Subordinated Notes.
2.5.2. Company, with prior written notice to the Noteholders, shall have the right to appoint a payment agent in order to make any payments
due pursuant to this Agreement and the Subordinated Notes.
2.6. Right of Offset. Noteholders hereby expressly waive any right of offset they may have against Company.
2.7. Right to Repurchase. Subject to any required federal and state regulatory approvals and the terms and conditions of the Subordinated Notes, theCompany has the right to purchase any of the issued and outstanding Subordinated Notes at any time in the open market, private transactions or otherwise and, inits discretion, may hold, resell or cancel any of the purchased Subordinated Notes, provided that such Subordinated Notes held by the Company will not qualify asTier 2 Capital. 3. DISBURSEMENT AND CONDITIONS TO COMPANY’S OBLIGATIONS.
3.1. Disbursement. On the Closing Date, assuming all of the terms and conditions set forth in Section 3.2 have been satisfied by Company or waived bythe applicable Noteholder and Company has executed and delivered or caused to be executed and delivered to each Noteholder this Agreement and a SubordinatedNote and any other related documents, certificates and opinions, each in form and substance reasonably satisfactory to the Noteholders, each Noteholder shalldisburse in immediately available funds the Subordinated Note Amount to Company in exchange for a Subordinated Note (the “Disbursement”). The Companywill deliver to the respective Noteholder one or more Subordinated Notes in definitive form (or provide evidence of the same with the original to be delivered bythe Company by overnight delivery on the next Business Day in accordance with the delivery instructions of the Noteholder), registered in such names anddenominations as such Noteholders may request.
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3.2. Conditions Precedent to Disbursement. The obligation of each Noteholder to consummate the purchase of the Subordinated Notes to be purchased
by them at Closing and to effect Disbursement is subject to the fulfillment of, or delivery by, or at the direction of the Company to such Noteholder, on or prior tothe Closing Date of each of the following (or written waiver of such delivery by such Noteholder prior to the Closing):
3.2.1. Transaction Documents. This Agreement and a Subordinated Note, each duly authorized and executed by the Company.
3.2.2. Authority Documents. The Company may meet its obligation of delivery of the following documents to the Noteholders by deliveryto the Placement Agent on behalf of the Noteholders.
(a) A copy, certified by the Secretary or Assistant Secretary of the Company, of the Articles of Incorporation of the Company and all
amendments thereto which are true, complete and correct copies of such documents as in effect as of the Closing Date;
(b) A certificate of good standing of the Company issued by the Secretary of the Commonwealth of the Commonwealth ofPennsylvania;
(c) A certificate of subsistence of the Bank issued by the Department of Banking and Securities of the Commonwealth of
Pennsylvania;
(d) A copy, certified by the Secretary or Assistant Secretary of the Company, of the Bylaws of the Company and all amendmentsthereto as in effect as of the Closing Date;
(e) A copy, certified by the Secretary or Assistant Secretary of the Company, of the resolutions of the Board of Directors of the
Company, and any committee thereof, authorizing the execution, delivery and performance of the Agreement and the SubordinatedNotes;
(f) An incumbency certificate of the Secretary or Assistant Secretary of the Company certifying the names of the officer or officers of
the Company authorized to sign this Agreement, the Subordinated Notes and the other documents provided for in this Agreement,together with a sample of the true signature of each such officer;
(g) The opinion of Bybel Rutledge LLP, special counsel to the Company, dated as of the Closing Date, substantially in the form set
forth at Exhibit B attached hereto addressed to the Noteholders and the Placement Agent; and
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(h) A confirmation of registered status of the Company issued by the Federal Reserve Bank of Philadelphia.
3.3. Other Documents. The Company shall provide such other certificates, affidavits, schedules, resolutions, opinions, notes and/or other documents as
the Noteholders may reasonably request.
3.4. Conditions to the Company’s Obligation. The obligation of the Company to consummate the Closing with respect to a given Noteholder is subjectto the satisfaction or waiver by the Company of the following conditions at or prior to Closing:
3.4.1. Since the date of this Agreement, there has not been any action taken, or any law, rule or regulation enacted, entered, enforced ordeemed applicable to the Company or the Bank or the transactions contemplated by this Agreement by an Governmental Agency which imposes anyrestriction or condition that the Company determines, in its reasonable good faith judgment, is materially and unreasonably burdensome on theCompany’s business or would materially reduce the economic benefits of the transactions contemplated by this Agreement to the Company to such adegree that the Company would not have entered into this Agreement had such condition or restriction been know to it on the date hereof.
3.4.2. With respect to the Noteholder, such Noteholder shall have delivered to the Company a duly authorized and executed signature
page to this Agreement.
3.4.3. The representations and warranties made by the Noteholders in Section 6 hereof shall have been true and correct as of the date of thisAgreement, and shall be true and correct on the Closing Date, except where the failure to be so true and correct (without regard to any materialityqualifications contained therein) would not reasonably be expected to materially adversely affect the ability of the Noteholder to perform the Noteholder’sobligations hereunder (and except that representations and warranties made as of specified date need only be so true and correct as of such date).
3.4.4. All covenants and agreements contained in this Agreement to be performed by that Noteholder on or prior to the Closing Date shall
have been performed or complied with in all material respects.
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4. REPRESENTATIONS AND WARRANTIES OF COMPANY.
Company hereby represents and warrants to the Noteholders as follows:
4.1. Organization and Authority.
4.1.1. Organization Matters.
4.1.1.1. Company is presently subsisting as a corporation in good standing under the laws of the Commonwealth ofPennsylvania and is duly registered under the Bank Holding Company Act of 1956, as amended. Company has full corporate power and authority to carryon its business as now conducted. Company is duly licensed or qualified to do business in the States of the United States and foreign jurisdictions whereits ownership or leasing of Property or the conduct of its business requires such qualification, except where the failure to so qualify would not reasonablybe expected to result in a Material Adverse Effect.
4.1.1.2 The Bank is a Pennsylvania chartered bank and trust company. The deposit accounts of the Bank are insured by the
FDIC to the fullest extent permitted by law. Neither Company nor the Bank has 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 affectthe status of the Bank as an FDIC-insured institution.
4.1.1.2 Subsidiaries. Each Subsidiary of Company is validly existing and in good standing under the laws of its jurisdiction
of organization, and each Subsidiary has all requisite power and authority, corporate or otherwise, and possesses all material licenses necessary, toconduct its business and own its properties as presently conducted.
4.1.13 Capital Stock and Related Matters. All of the outstanding capital stock of Company has been duly authorized and
validly issued and is fully paid and non-assessable. There are, as of the date hereof, no outstanding options, rights, warrants or other agreements orinstruments obligating Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of the capital stock of Company orobligating Company to grant, extend or enter into any such agreement or commitment to any Person other than Company, except pursuant to employmentarrangements, agreements or understandings, or Company’s equity incentive plans (including any dividend reinvestment and stock purchase plan) adoptedby Company’s Board of Directors.
4.2. No Impediment to Transactions.
4.2.1. Transaction is Legal and Authorized. The issuance of the Subordinated Notes, the borrowing of the Subordinated Note Amounts,
the execution of this Agreement and the Subordinated Notes, and the performance by Company of its obligations under this Agreement and theSubordinated Notes are within the corporate and other powers of Company. This Agreement and the Subordinated Notes have been duly authorized,executed and delivered, and, assuming due authorization, execution and delivery by the other parties thereto, are the legal, valid and binding obligationsof Company, enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium and othersimilar laws relating to or affecting creditors’ rights generally and subject to general principles of equity (regardless of whether enforceability isconsidered in a proceeding in law or in equity).
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4.2.2. No Defaults or Restrictions. Neither the execution and delivery of this Agreement or the Subordinated Notes nor compliance with
their terms and conditions will (a) violate, conflict with or result in a breach of, or constitute a default under: (i) the Articles of Incorporation or theBylaws of Company or any Subsidiary of Company, in each case, as amended; (ii) any of the terms, obligations, covenants, conditions or provisions ofany corporate restriction or of any contract, agreement, indenture, mortgage, deed of trust, pledge, bank loan or credit agreement, or any other agreementor instrument to which Company or any Subsidiary of Company is now a party or by which any of them or any of their properties may be bound oraffected; (iii) any judgment, order, writ, injunction, decree or demand of any court, arbitrator, grand jury, or Governmental Agency; or (iv) any statute,rule or regulation applicable to Company, except, in the case of items (ii), (iii) or (iv), for such violations and conflicts that would not reasonably beexpected to have, singularly or in the aggregate, a Material Adverse Effect on Company, or (b) result in the creation or imposition of any lien, charge orencumbrance of any nature whatsoever upon any property or asset of Company or any Subsidiary of Company. None of Company or any Subsidiary ofCompany is in default in the performance, observance or fulfillment of any of the terms, obligations, covenants, conditions or provisions contained in anyindenture or other agreement creating, evidencing or securing Indebtedness of any kind or pursuant to which any such Indebtedness is issued, or otheragreement or instrument to which Company or any Subsidiary of Company is a party or by which Company or any such Subsidiary of Company or theirrespective properties may be bound or affected, except, in each case, only such defaults that would not reasonably be expected to have, singularly or in theaggregate, a Material Adverse Effect on Company.
4.2.3. Governmental Consent. Other than those required under the securities or blue sky laws of the various states, no governmental
orders, permissions, consents, approvals or authorizations are required to be obtained by Company that have not been obtained, and no registrations ordeclarations are required to be filed by Company that have not been filed in connection with, or, contemplation of the execution and delivery of, andperformance under, this Agreement and the Subordinated Notes.
4.2.4. Exemption from Registration. Neither 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 ofthe Subordinated Notes. Assuming the accuracy of the representations and warranties of each Noteholder set forth in this Agreement, the SubordinatedNotes will be issued in a transaction exempt from the registration requirements of the Securities Act.
None of the Company, any predecessor of the Company, any of its directors, executive officers, other officers participating in the Offering, or beneficialowners (as that term is defined in Rule 13d-3 under the Exchange Act) of 20% or more of the Company’s outstanding voting equity securities, calculatedon the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity(each, a “Company Covered Person” and, together, “Company Covered Persons”) is subject to any of the “Bad Actor” disqualifications described inRule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under the Securities Act. The Company has exercised reasonable care to determine whether any Company Covered Person is subject to aDisqualification Event. The Company has complied and agrees to comply, to the extent applicable, with its disclosure obligations under Rule 506(e) ofthe Securities Act.
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4.3. Possession of Licenses and Permits. Company and each of its Subsidiaries possesses such permits, licenses, approvals, consents and other
authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Agencies necessary to conduct the business now operated by it,except where the failure to possess such Governmental Licenses would not, singularly or in the aggregate, reasonably be expected to have a Material AdverseEffect on Company; each of Company and its Subsidiaries is in compliance with the terms and conditions of all such Governmental Licenses, except where thefailure so to comply, singularly or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Company; all of the GovernmentalLicenses 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 fullforce and effect would not reasonably be expected to have a Material Adverse Effect on Company; and neither Company nor any Subsidiary of Company hasreceived any notice of proceedings relating to the revocation or modification of any such Governmental Licenses.
4.4. Financial Condition.
4.4.1. Company Financial Statements. The consolidated financial statements of Company included in Company’s Reports (includingthe related notes, where applicable) (i) have been prepared from, and are in accordance with, the books and records of Company; (ii) fairly present in allmaterial respects the consolidated results of operations, cash flows, changes in stockholders’ equity and consolidated financial position of Company, forthe respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to recurring year-end auditadjustments normal in nature and amount); (iii) complied as to form, as of their respective dates of filing in all material respects with applicableaccounting and banking requirements as applicable, with respect thereto; and (iv) have been prepared in accordance with GAAP consistently appliedduring the periods involved, except, in each case, as indicated in such statements or in the notes thereto and Regulation S-X promulgated under theSecurities Act. The books and records of Company have been, and are being, maintained in all material respects in accordance with GAAP and any otherapplicable legal and accounting requirements. 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 balancesheet of Company contained in Company’s Reports for Company’s most recently completed quarterly or annual fiscal period, as applicable, and forliabilities incurred in the ordinary course of business consistent with past practice or in connection with this Agreement and the transactions contemplatedhereby.
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4.4.2. Absence of Default. Since the date of the latest audited financial statements included in Company’s Reports, no event has
occurred that either of itself or with the lapse of time or the giving of notice or both, would give any creditor of Company the right to accelerate thematurity of any material Indebtedness of Company. Company is not in default under any other lease, agreement or instrument, or any law, rule,regulation, order, writ, injunction, decree, determination or award, non-compliance with which could reasonably be expected to result in a MaterialAdverse Effect on Company.
4.4.3. Solvency. After giving effect to the consummation of the transactions contemplated by this Agreement, Company has capital
sufficient to carry on its business and transactions and is solvent and able to pay its debts as they mature. No transfer of property is being made and noindebtedness is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud eitherpresent or future creditors of Company or any Subsidiary of Company.
4.5. No Material Adverse Change. Since the date of the latest audited financial statements included in Company’s Reports, there has been no
development or event which has had or could reasonably be expected to have a Material Adverse Effect on Company or any Subsidiary of Company.
4.6. Legal Matters.
4.6.1. Compliance with Law. Company and each of its Subsidiaries (i) have complied with and (ii) to Company’s knowledge, are notunder investigation with respect to, and have not been threatened to be charged with or given any notice of any material violation of any applicablestatutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any instrumentality or agency thereof, having jurisdictionover the conduct of their respective businesses or the ownership of their respective properties, except where any such failure to comply or violation wouldnot reasonably be expected to have a Material Adverse Effect on Company or any such Subsidiary.
4.6.2. Regulatory Enforcement Actions. None of Company, any Subsidiary of Company, or any of their respective officers or directors
is now operating under any restrictions, agreements, memoranda, or commitments (other than restrictions of general application) imposed by anyGovernmental Agency, nor are, to Company’s knowledge, (a) any such restrictions threatened or (b) any agreements, memoranda or commitments beingsought by any Governmental Agency.
4.6.3. Pending Litigation. There are no material actions, suits, proceedings or written agreements pending, or, to Company’s knowledge,
threatened or proposed, against Company or any Subsidiary of Company at law or in equity or before or by any federal, state, municipal, or othergovernmental department, commission, board, or other administrative agency, domestic or foreign, that, either separately or in the aggregate, wouldreasonably be expected to affect the issuance of, or payment on, the Subordinated Notes; and none of Company or any Subsidiary of Company is a partyto or named as subject to the provisions of any order, writ, injunction, or decree of, or any written agreement with, any court, commission, board oragency, domestic or foreign, that either separately or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Company.
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4.6.4. Environmental. Except as would not, singularly or in the aggregate, reasonably be expected to result in a Material Adverse Effect
on Company: (i) no Property is or, to Company’s knowledge, has been a site for the use, generation, manufacture, storage, treatment, release, discharge,disposal or transportation of any Hazardous Materials, and neither Company nor any Subsidiary of Company has engaged in such activities; (ii) eachProperty, and Company and each such Subsidiary, are in compliance with all Hazardous Materials Laws; and (iii) there are no claims or actions pendingor, to Company’s knowledge, threatened against Company or any Company Subsidiary or any Property by any Governmental Agency or by any otherPerson relating to any Hazardous Materials or pursuant to any Hazardous Materials Law.
4.6.5. Brokerage Commissions. Neither Company nor any Subsidiary of Company is obligated to pay any brokerage commission or
finder’s fee to any Person in connection with the transactions contemplated by this Agreement except to the Placement Agent.
4.6.6. Intentionally omitted.
4.6.7. Anti-Money Laundering. Company and its Subsidiaries are in compliance in all material respects with the applicable financialrecordkeeping and reporting requirements of the Currency and Foreign Transaction Reporting Act of 1970, as amended, including as amended by theUniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “USA PATRIOT Act”) andthe rules and regulations thereunder and any other applicable anti-money laundering statute, rule, or regulation (the “Anti-Money Laundering Laws”).Company and its Subsidiaries have established compliance programs to ensure compliance with the requirements of the Anti-Money Laundering Laws.There is no charge, investigation, action, suit or proceeding before any court, regulatory authority or governmental agency or body pending or, to the bestknowledge of Company and its Subsidiaries, threatened regarding the compliance by Company and its Subsidiaries with any applicable Anti-MoneyLaundering Laws, rule or regulation.
4.6.8. Compliance with Economic Sanctions.
4.6.8.1. Neither the Company nor any of its Subsidiaries is acting or has acted at any time, directly or indirectly, on behalf of
any persons or entities whose name appears on the Annex to the Executive Order No. 13224 (Blocking Property and Prohibiting Transactions withPersons Who Commit, Threaten to Commit, or Support Terrorism) or are included on any relevant lists maintained by the Office of Foreign AssetsControl (“OFAC”) of U.S. Department of Treasury, including the Specially Designated Nationals and Blocked Persons List, the Foreign SanctionsEvaders List, and the Sectoral Sanctions Identifications List, and any similar list maintained by the U.S. Department of State, or other U.S. governmentagencies, all as may be amended from time to time (such lists, collectively, the “Government Lists”).
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4.6.8.2. Neither the Company nor any of its Subsidiaries engages, or has engaged, in business activities or transactions with
or for the benefit of any persons or countries subject to any sanctions administered by OFAC, including any persons in Cuba, Iran, Sudan, Syria or NorthKorea, or any person on any relevant lists maintained by OFAC, the U.S. Department of State or other U.S. government agencies, including theGovernment Lists.
4.6.8.3. The operations of the Company and its Subsidiaries are not in contravention of, and since January 1, 2016 have not
violated, any applicable economic sanctions laws and any executive order or regulations issued pursuant to any such laws (collectively, “EconomicSanctions”). No proceeding before any government authority involving the Company or its Subsidiaries with respect to Economic Sanctions is pendingor, to the Company’s knowledge, is threatened, nor have there been any such proceedings within the past five years.
4.6.9. Taxes. Company and its Subsidiaries have filed all Tax Returns that they were required to file under applicable laws and
regulations, other than Tax Returns that are not yet due or for which a request for extension was filed. All such Tax Returns were correct and complete inall material respects and have been prepared in substantial compliance with all applicable laws and regulations. All Taxes due and owing by andCompany and its Subsidiaries (whether or not shown on any Tax Return) have been paid other than Taxes that have been reserved or accrued on thebalance sheet of Company and which Company is contesting in good faith.
4.6.10. Title to Property. Company and its Subsidiaries have good and sufficient title to their respective Property except for assets sold,
collected or otherwise disposed of in the ordinary course of Company’s business. All material Leases are valid and subsisting and are in full force andeffect in all material respects.
4.6.11. Use of Proceeds. At the discretion of the Board of Directors of the Company, the Company may use the proceeds from the sale of
the Subordinated Notes to retire outstanding debt of the Company, repurchase issued and outstanding shares of common stock of the Company, supportgeneral corporate purposes, underwrite growth opportunities, create an interest reserve for the Subordinated Notes and downstream proceeds to the Bankto continue to meet regulatory capital requirements, increase the regulatory lending ability of the Bank and support the Bank’s organic growth initiatives.The use of such proceeds does not and will not violate Section 7 of the Exchange Act or any regulations issued pursuant thereto.
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4.7. Company Status.
4.7.1. Investment Company Act. Company is not an “investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as amended.
4.7.2. Foreign Qualifications. Each of Company and the Subsidiaries of Company is duly qualified as a foreign corporation to transactbusiness and each is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing ofProperty or the conduct of business, except where the failure to so qualify or be in good standing would not reasonably be expected to result in anyMaterial Adverse Effect on Company and the other Subsidiaries of Company, considered as one enterprise.
4.8. Reporting Compliance. Company is subject to, and is in compliance in all material respects with, the reporting requirements of Section 13 and
Section 15(d), as applicable, of the Exchange Act. Company’s Reports at the time they were or hereafter are filed with the SEC, complied and will comply in allmaterial respects with the requirements of the Exchange Act and did not and do not include any untrue statement of a material fact or omit to state a material factnecessary in order to make the statements made, in light of the circumstances under which they were or are made, not misleading.
4.9. Internal Control Over Financial Reporting. Company and its Subsidiaries maintain systems of “internal control over financial reporting” (asdefined in Rule 13a-15(f) of the Exchange Act) that comply with the requirements of the Exchange Act and have been designed by, or under the supervision of,their respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to, a systemof accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specificauthorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability forassets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets iscompared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Since the end of Company’s most recentaudited fiscal year, (y) Company has no knowledge of (i) any material weakness in Company’s internal control over financial reporting (whether or notremediated) or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Company’s internal controlsand (z) there has been no change in Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect,Company’s internal control over financial reporting.
4.10. Disclosure Controls and Procedures. Company and its Subsidiaries maintain an effective system of disclosure controls and procedures (as definedin Rule 13a-15 and Rule 15d-15 of the Exchange Act), that (i) are designed to ensure that information required to be disclosed by Company in the reports that itfiles or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and thatmaterial information relating to Company and its Subsidiaries is made known to Company’s principal executive officer and principal financial officer by otherswithin Company and its Subsidiaries to allow timely decisions regarding disclosure, and (ii) are effective in all material respects to perform the functions for whichthey were established. As of the date hereof, Company has no knowledge that would reasonably cause it to believe that the evaluation to be conducted of theeffectiveness of Company’s disclosure controls and procedures for the most recently ended fiscal quarter period will result in a finding that such disclosure controlsand procedures are ineffective for such quarter ended. Based on the evaluation of Company’s and each Subsidiary’s disclosure controls and procedures describedabove, Company is not aware of (1) any significant deficiency in the design or operation of internal controls which could adversely affect Company’s ability torecord, process, summarize and report financial data or any material weaknesses in internal controls or (2) any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in Company’s internal controls. Since the most recent evaluation of Company’s disclosure controlsand procedures described above, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls.
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4.11. Representations and Warranties Generally. All representations, warranties, covenants and agreements made in this Agreement or in any
certificate or other document delivered to the Noteholders by or on behalf of Company pursuant to or in connection with this Agreement shall be deemed to havebeen relied upon by the Noteholders in the purchase of the Subordinated Notes. 5. GENERAL COVENANTS, CONDITIONS AND AGREEMENTS.
Company hereby further covenants and agrees with each Noteholder as follows, for as long as there remains unperformed any obligations to theNoteholders hereunder or under the Subordinated Notes:
5.1. Compliance with Transaction Documents. Company shall comply with, observe and timely perform each and every one of the covenants,agreements and obligations under this Agreement and the Subordinated Notes.
5.2. Affiliate Transactions. Company shall not itself, nor shall it cause, permit or allow any of its Subsidiaries to enter into any transaction, including, thepurchase, sale or exchange of property or the rendering of any service, with any Affiliate of Company except in the ordinary course of business and pursuant to thereasonable requirements of Company’s or such Affiliate’s business and upon terms consistent with applicable laws and regulations and reasonably found by theappropriate board(s) of directors to be fair and reasonable and no less favorable to Company or such Affiliate than would be obtained in a comparable arm’s lengthtransaction with a Person not an Affiliate. Notwithstanding the foregoing, nothing herein shall restrict the Company from providing capital or financial support orserving as a source of strength to the Bank.
5.3. Compliance with Laws.
5.3.1. Generally. Company shall comply and cause each Subsidiary of Company to comply in all material respects with all applicablestatutes, rules, regulations, orders and restrictions in respect of the conduct of their respective businesses and the ownership of their respective Properties,except, in each case, where such noncompliance would not reasonably be expected to have a Material Adverse Effect on Company or such Subsidiary.
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5.3.2. Regulated Activities. Company shall not itself, nor shall it cause, permit or allow any Subsidiary of Company to engage in any
business or activity that, to its knowledge, is not permitted by all applicable laws and regulations.
5.3.3. Taxes. Company shall, and shall cause each Subsidiary of Company to, promptly pay and discharge all taxes, assessments andother governmental charges imposed upon Company or any such Subsidiary or upon the income, profits, or property of Company or any such Subsidiaryand all claims for labor, material or supplies which, if unpaid, might by law become a lien or charge upon the Property of Company or any suchSubsidiary. Notwithstanding the foregoing, none of Company or any Subsidiary of Company shall be required to pay any such tax, assessment, charge orclaim, so long as the validity thereof shall be contested in good faith by appropriate proceedings, and appropriate reserves therefor shall be maintained onthe books of Company and such other Subsidiary.
5.3.4. Environmental Matters. Except as would not, singularly or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on Company or any Subsidiary of Company, Company shall: (i) exercise, and cause each such Subsidiary to exercise, due diligence inorder to comply in all material respects with all Hazardous Materials Laws; and (ii) promptly take any and all remedial action required of Company inconnection with any Condition or Release or threatened Condition or Release on, under or about any Property in order to comply in all material respectswith all applicable Hazardous Materials Laws; provided, however, that Company shall not be deemed to be in breach of the foregoing covenant if and tothe extent it has not taken such remedial actions due to (x) its diligent pursuit of an available statutory or administrative exemption from compliance withthe relevant Hazardous Materials Law from the appropriate Governmental Agency (and no material penalties for non-compliance with the relevantHazardous Materials Law(s) shall accrue as a result of such non-compliance, without rebate or waiver if such exemption or waiver is granted), or (y) isactively and diligently contesting in good faith any Governmental Agency’s order, determination or decree with respect to the applicability orinterpretation of any such relevant Hazardous Materials Law and/or the actions required under such laws or regulations in respect of such Condition orRelease. In the event Company or any other Subsidiary of Company undertakes any remedial action with respect to such Hazardous Material on, under orabout any Property, Company or such Subsidiary shall conduct and complete such remedial action in compliance in all material respects with allapplicable Hazardous Materials Laws and in accordance with the binding and applicable policies, orders and directives of all Governmental Agencies.
5.3.5. Corporate Existence. Company shall do or cause to be done all things reasonably necessary to maintain, preserve and renew its
corporate existence and that of all Subsidiaries of Company and its and their rights and franchises, and comply in all material respects with all relatedlaws applicable to Company or such Subsidiaries; provided, however, that Company may: (i) consummate a merger in which (y) Company is thesurviving entity; or (z) if Company is not the surviving entity, the surviving entity assumes, by operation of law or otherwise, all of the obligations ofCompany under the Subordinated Notes; or (ii) cease the operations and/or discontinue the corporate existence of a Subsidiary, other than the Bank;provided, however, that the cessation of such operations or discontinuance of such corporate existence would not reasonably be expected to be materialand adverse to the financial position, results of operations, or business of Company and its other Subsidiaries, taken as a whole.
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5.4. Dividends, Payments, and Guarantees During Event of Default. During the continuance of an Event of Default, 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 Company’s capital stock, (b) make anypayment of principal or interest or premium, if any, on or repay, repurchase or redeem any debt securities of Company that rank equal with or junior to theSubordinated Notes, or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Notes, other than (i) any dividends ordistributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, any class of Company’s common stock, (ii) any declaration of anoncash 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 redemptionor repurchase of any such rights pursuant thereto, (iii) as a result of a reclassification of Company’s capital stock or the exchange or conversion of one class orseries of Company’s capital stock for another class or series of Company’s capital stock, (iv) the purchase of fractional interests in shares of Company’s capitalstock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, or (v) purchases of any class ofCompany’s common stock related to the issuance of common stock or rights under any benefit plans for Company’s directors, officers or employees or any ofCompany’s dividend reinvestment and stock purchase plans (including, without limitation, any repurchases or acquisitions in connection with the forfeiture of anystock 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).
5.5. Tier 2 Capital. If all or any portion of the Subordinated Notes ceases to be deemed to be Tier 2 Capital under the risk-based capital rules of theFederal Reserve as in effect as of the date of this Agreement, other than due to the limitation imposed on the capital treatment of subordinated debt during the five(5) years immediately preceding the Maturity Date of the Subordinated Notes, Company will immediately notify the Noteholders, and thereafter Company and theNoteholders will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of theobligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital.
5.6. Absence of Control. It is the intent of the parties to this Agreement that in no event shall the Noteholders, by reason of any of the transactiondocuments, be deemed to control, directly or indirectly, Company or Company Subsidiary, and the Noteholders shall not exercise, or be deemed to exercise,directly or indirectly, a controlling influence over the management or policies of Company or Company Subsidiary.
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6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE NOTEHOLDERS.
Each Noteholder hereby represents and warrants to Company, severally and not jointly, as follows:
6.1. Legal Power and Authority. It has all necessary power and authority to execute, deliver and perform its obligations under this Agreement and,assuming that the representations of Company contained in this Agreement are true and correct, to consummate the transactions contemplated hereby. If it is anentity, it is an entity validly existing under the laws of its jurisdiction of organization.
6.2. The Agreement. This Agreement has been duly and validly authorized, executed and delivered by it and, assuming due authorization, execution anddelivery by the other parties thereto, is the legal, valid and binding obligation of such Noteholder, enforceable in accordance with its terms, except as may belimited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and subject to generalprinciples of equity (regardless of whether enforceability is considered in a proceeding in law or in equity).
6.3. No Conflicts. Neither the execution, delivery or performance of this Agreement nor the consummation of any of the transactions contemplatedhereby will conflict with, violate, constitute a breach of or a default (with the passage of time or otherwise) under (i) its organizational documents, (ii) the terms,obligations, covenants, conditions or provisions of any agreement to which it is party, (iii) any law applicable to it, or (iv) any order, writ, judgment, injunction,decree, determination or award binding upon or affecting it; except, in the case of items (ii), (iii) or (iv), for such violations and conflicts that would not reasonablybe expected to have, singularly or in the aggregate, a Material Adverse Effect on the Noteholder.
6.4. Institutional Accredited Investor. It is and will be on the Closing Date (i) an institutional “accredited investor” as such term is defined inRule 501(a) of Regulation D and as contemplated by subsections (1), (2), (3), (7) and (9) of Rule 501(a) of Regulation D or (ii) or a “qualified institutional buyer”as such term is defined in Rule 144A under the Securities Act.
6.5. Purchase for Own Account. It is purchasing the Subordinated Note(s) for its own account, for investment or as a loan transaction in its normalcourse of business, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or other applicablesecurities laws, or pursuant to an exemption therefrom or in a transaction not subject thereto.
6.6. Financial and Business Sophistication. It has such knowledge and experience in financial and business matters that it is capable of evaluating themerits and risks of the prospective investment in the Subordinated Notes. It has relied solely upon its own knowledge of and/or the advice of its own legal, tax,financial, investment, accounting or other advisors with regard to the legal, financial, tax and other considerations involved in deciding to invest in, or lend moneyas evidenced by, the Subordinated Notes.
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6.7. Private Placement; No Registration of Securities. It understands and acknowledges that the Subordinated Notes are being sold by Company
without registration under the Securities Act in reliance on the exemption from federal and state registration set forth in, respectively, Rule 506(b) of Regulation Dpromulgated under Section 4(a)(2) of the Securities Act and Section 18 of the Securities Act, or any state securities laws, and accordingly, may be resold, pledgedor otherwise transferred only if exemptions from the Securities Act and applicable state securities laws are available to it. It further understands and acknowledgesthat Company will not be obligated in the future to register the Subordinated Notes under the Securities Act, the Exchange Act, or under any state securities laws. Itfurther acknowledges and agrees that all certificates or other instruments representing the Subordinated Notes will bear the restrictive legend set forth in the formof Subordinated Note, which is attached as Exhibit A to this Agreement. Company has not made nor is Company making any representation, warranty orcovenant, express or implied, as to any applicable state securities laws for the resale, pledge or other transfer of the Subordinated Notes, or that the SubordinatedNote(s) purchased by the Noteholder will ever be able to be lawfully resold, pledged or otherwise transferred.
6.8. Ability to Bear Economic Risk of Investment/Loan. It recognizes that an investment in, or a loan made pursuant to the purchase of, theSubordinated Notes involves substantial risk. It has the ability to bear the economic risk of the prospective investment in, or loan made pursuant to the purchase of,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 itsinvestment or loan.
6.9. No Offering Memorandum. It acknowledges that: (i) it is not being provided with the disclosures that would be required if the offer and sale of theSubordinated Notes were registered under the Securities Act, nor is it being provided with any offering memorandum, offering circular or prospectus prepared inconnection with the offer and sale of the Subordinated Notes; (ii) it has conducted its own examination of Company, the Subsidiaries of Company and the terms ofthe Subordinated Notes to the extent it deems necessary to make its decision to purchase the Subordinated Notes; and (iii) it has availed itself of public access tofinancial and other information concerning Company and its Subsidiaries to the extent it deems necessary to make its decision to purchase the Subordinated Notes.
6.10. Information. It acknowledges that it and its advisors have been furnished with all materials relating to the business, finances and operations ofCompany and its Subsidiaries 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 Company concerning terms and conditions of the transactions contemplated by this Agreement in order to make an informed andvoluntary decision to enter into this Agreement.
6.11. Investment/Lending Decision. It has made its own investment/lending decision based upon its own judgment, due diligence and advice from suchadvisors as it has deemed necessary and not upon any view expressed by any other person or entity. Neither such inquiries nor any other due diligenceinvestigations conducted by it or its advisors or representatives, if any, shall modify, amend or affect its right to rely on Company’s representations and warrantiescontained herein. It is not relying upon, and has not relied upon, any advice, statement, representation or warranty made by any Person by or on behalf ofCompany, except for the express statements, representations and warranties of Company made or contained in this Agreement. Furthermore, it acknowledges thatnothing in this Agreement or any other materials presented by or on behalf of Company to it in connection with the purchase of the Subordinated Notes constituteslegal, tax or investment advice.
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6.12. Placement Agent. It will purchase the Subordinated Note(s) directly from Company and not from the Placement Agent and understands that neither
the Placement Agent nor any other broker or dealer has any obligation to make a market in the Subordinated Notes.
6.13. Accuracy of Representations. It understands that Company will rely upon the truth and accuracy of the foregoing representations,acknowledgements and agreements in connection with the transactions contemplated by this Agreement.
6.14. No Government Consent. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained by theNoteholder that have not been obtained, and no registrations or declarations are required to be filed by Noteholder that have not been filed in connection with, or,contemplation of the execution and delivery of, and performance under this Agreement.
6.15. Pending Litigation. There are no material actions, suits, proceedings or written agreements pending, or, to Noteholder’s knowledge, threatened orproposed, against the Noteholder at law or in equity or before or by any federal, state, municipal, or other governmental department, commission, board, or otheradministrative agency, domestic or foreign, that, either separately or in the aggregate, would reasonably be expected to prevent the Noteholder from purchasing theSubordinated Notes and making the Disbursement of the Subordinated Note Amount on the Closing Date. 7. MISCELLANEOUS.
7.1. Prohibition on Assignment. Company may not assign, transfer or delegate any of its rights under this Agreement or the Subordinated Notes withoutthe prior written consent of the Noteholders.
7.2. Waiver or Amendment. No waiver or amendment of any term, provision, condition, covenant or agreement contained in this Agreement or theSubordinated Notes shall be effective except with the consent of the holders of more than 50% in aggregate principal amount (excluding any Subordinated Notesheld by Company or any of parent corporations or subsidiaries) of the Subordinated Notes at the time outstanding; provided, however, that any amendment to thisSection 7.2 and any amendment that would decrease the rate of interest applicable to the Subordinated Notes, change the Maturity Date or the date of any interestpayment due on the Subordinated Notes, change the priority of the Subordinated Notes as to the right to payment, or change the currency in which the principal ofand interest on the Subordinated Notes is to be paid shall only be effective with the consent of the holders of all of the Subordinated Notes then outstanding. Nofailure to exercise or delay in exercising, by a Noteholder, of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single orpartial 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. Therights and remedies provided in this Agreement are cumulative and not exclusive of any right or remedy provided by law or equity. No notice or demand onCompany in any case shall, in itself, entitle Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rightsof Noteholder to any other or further action in any circumstances without notice or demand. No consent or waiver, expressed or implied, by Noteholder to or of anybreach or default by Company in the performance of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach ordefault in the performance of the same or any other obligations of Company hereunder. Failure on the part of Noteholder to complain of any acts or failure to act orto declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Noteholder of its rights hereunder or impair anyrights, powers or remedies on account of any breach or default by Company.
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7.3. Severability. Any provision of this Agreement which is unenforceable or invalid or contrary to law, or the inclusion of which would adversely affect
the validity, legality or enforcement of this Agreement, shall be of no effect and, in such case, all the remaining terms and provisions of this Agreement shallsubsist 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 toparticular persons or situations, the remainder of this Agreement, and the application of such provision to persons or situations other than those to which it shallhave been held invalid or unenforceable, shall not be affected thereby, but shall continue valid and enforceable to the fullest extent permitted by law.
7.4. Usury; Revival of Liabilities. All agreements between Company and the Noteholders (including, without limitation, this Agreement and theSubordinated Notes) are expressly limited so that in no event whatsoever shall the amount paid or agreed to be paid to the Noteholders exceed the highest lawfulrate of interest permissible under the laws of the Commonwealth of Pennsylvania. If the Noteholders shall ever receive as interest an amount which would bedeemed unlawful, such interest shall be applied to the payment of the principal of the Subordinated Note (whether or not then due and payable) and not to thepayment of interest. To the extent that the Noteholders receive any payment on account of Company’s Liabilities and any such payment(s) and/or proceeds or anypart thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, subordinated and/or required to be repaid to a trustee, receiver or anyother Person under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment(s) or proceeds received,Company’s Liabilities or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment(s) and/or proceeds had notbeen received by the Noteholders and applied on account of Company’s Liabilities; provided, however, if the Noteholders successfully contest any suchinvalidation, declaration, set aside, subordination or other order to pay any such payment and/or proceeds to any third party, the revived Company’s Liabilitiesshall be deemed satisfied.
7.5. Notices. Any notice which any party hereto may be required or may desire to give hereunder shall be deemed to have been given if in writing and ifdelivered personally, or if mailed, postage prepaid, by United States registered or certified mail, return receipt requested, or if delivered by a nationally recognizedcommercial courier (such as Federal Express), addressed:
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If to Company: ACNB Corporation
16 Lincoln SquareGettysburg, PA 17325Attention: David W. Cathell, Chief Financial Officer
With a copy to (which shall not constitutenotice):
Bybel Rutledge LLP1017 Mumma Road, Suite 302Lemoyne, PA 17043Attention: Nicholas Bybel, Jr., Esq.
If to the Noteholder: At the Noteholder’s address as set forth on Schedule I
or to such other address or addresses as the party to be given notice may have furnished in writing to the party seeking or desiring to give notice, as a place for thegiving of notice, provided that no change in address shall be effective until seven (7) Business Days after being given to the other party in the manner provided forabove. Any notice given in accordance with the foregoing shall be deemed given when delivered personally or, if mailed, five (5) Business Days after it shall havebeen 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 thatnext business day delivery was requested.
7.6. Successors and Assigns. This Agreement shall inure to the benefit of the parties and their respective successors and assigns except that, unless theNoteholder consents in writing, no assignment made by Company in violation of this Agreement shall be effective or confer any rights on any purported assigneeof Company.
7.7. No Joint Venture or Fiduciary Duty. Nothing contained herein or in any document executed pursuant hereto and no action or inaction whatsoeveron the part of the Noteholder, shall be deemed to make the Noteholder a partner or joint venturer with Company nor give rise to a fiduciary relationship betweenthe Company and any Noteholder.
7.8. Documentation. All documents and other matters required by any of the provisions of this Agreement to be submitted or furnished to the Noteholdershall be in form and substance satisfactory to the Noteholder.
7.9. Entire Agreement. This Agreement and the Subordinated Notes along with the exhibits thereto constitute the entire agreement between the partieshereto 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 theparties 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 thisAgreement or in the Subordinated Notes.
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7.10. Choice of Law. This Agreement 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 giving effect to its laws or principles of conflict of laws that would result in the application of the laws ofanother jurisdiction. Each of the parties hereto (a) consents to submit itself to the personal jurisdiction of a federal court sitting in Adams County, Pennsylvania ora state court sitting in Gettysburg, Pennsylvania, in any action or proceeding arising out of or relating to this Agreement or any of the transactions contemplated bythis Agreement, (b) agrees that all claims in respect of such action or proceeding shall be heard and determined exclusively in any such court, and (c) agrees that itwill not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court. Each of the parties hereto waives any defenseor inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any otherparty with respect thereto. To the extent permitted by applicable law, any party hereto may make service on another party by sending or delivering a copy of theprocess to the party to be served at the address and in the manner provided for the giving of notices in Section 7.5. Nothing in this Section 7.10, however, shallaffect the right of any party to serve legal process in any other manner permitted by law. Nothing herein shall be deemed to limit any rights, powers or privilegeswhich Noteholder 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 nothingherein shall be deemed to make unlawful any transaction or conduct by the Noteholder which is lawful pursuant to, or which is permitted by, any of the foregoing.
7.11. No Third Party Beneficiary. This Agreement is made for the sole benefit of Company and each Noteholder, and no other person shall be deemedto 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 ofaction of any kind hereon or be deemed to be a third party beneficiary hereunder.
7.12. Legal Tender of United States. All payments hereunder shall be made in coin or currency which at the time of payment is legal tender in theUnited States of America for public and private debts.
7.13. Captions; Counterparts. Captions contained in this Agreement in no way define, limit or extend the scope or intent of their respective provisions.This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed anddelivered 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 isdelivered 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 partyexecuting (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.
7.14. Knowledge; Discretion. All references herein to the Noteholder’s or Company’s knowledge shall be deemed to mean the knowledge of such partybased on commercially reasonable inquiry. All references herein to Company’s knowledge shall be deemed to refer to the knowledge of Company and eachSubsidiary of Company. Unless specified to the contrary herein, all references herein to an exercise of discretion or judgment by the Noteholder, to the making of adetermination or designation by the Noteholder, to the application of the Noteholder’s discretion or opinion, to the granting or withholding of the Noteholder’sconsent or approval, to the consideration of whether a matter or thing is satisfactory or acceptable to the Noteholder, or otherwise involving the decision making ofthe Noteholder, shall be deemed to mean that such the Noteholder shall decide using the reasonable discretion or judgment of a prudent lender.
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7.15. Waiver Of Right To Jury Trial. TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, COMPANY AND THE NOTEHOLDER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT EACH MAY HAVE TO A TRIAL BY JURY IN ANYLITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS AGREEMENT OR THE SUBORDINATED NOTES, OR ANY OTHERSTATEMENTS OR ACTIONS OF COMPANY OR THE NOTEHOLDER. COMPANY AND NOTEHOLDER ACKNOWLEDGE THAT EACH HAS BEENREPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSELSELECTED OF ITS OWN FREE WILL. COMPANY AND NOTEHOLDER FURTHER ACKNOWLEDGE THAT (a) EACH HAS READ ANDUNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (b) THIS WAIVER HAS BEEN REVIEWED BY COMPANY ANDNOTEHOLDER AND THEIR RESPECTIVE COUNSEL AND IS A MATERIAL INDUCEMENT FOR COMPANY AND NOTEHOLDER TO ENTER INTOTHIS AGREEMENT TO PURCHASE THE SUBORDINATED NOTES AND (c) THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCHTRANSACTION DOCUMENTS AS IF FULLY INCORPORATED THEREIN.
7.16. Expenses. Except as otherwise provided in this Agreement, each of the parties will bear and pay all other costs and expenses incurred by it or on itsbehalf in connection with the transactions contemplated pursuant to this Agreement.
7.17. Survival. Each of the representations and warranties set forth in this Agreement shall survive the consummation of the transactions contemplatedhereby for a period of one year after the date hereof. Except as otherwise provided herein, all covenants and agreements contained herein shall survive until, bytheir respective terms, they are no longer operative.
7.18. Time of the Essence. Time is of the essence with respect to this Agreement.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Subordinated Note Purchase Agreement to be executed by their duly authorized
representatives as of the date first above written.
COMPANY:
ACNB Corporation
By: Name: David W, Cathell
Title: Chief Financial Officer
[COMPANY SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]
Schedule I
Schedule of Noteholders
Name and Address Principal Amount Purchased Wire Instructions for
Interest Payments[Name] [______________] [______________] $ [_____________] [Name] [______________] [______________] $ [_____________] Total $ [________________]
EXHIBIT A
Form of Subordinated Note
FORM OF SUBORDINATED NOTE
ACNB CORPORATION
4.00% FIXED-TO-FLOATING RATE SUBORDINATED NOTEDUE MARCH 31, 2031
THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE “FDIC”) OR ANYOTHER GOVERNMENT AGENCY OR FUND. THIS OBLIGATION IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT TO THE OBLIGATIONS OF ACNB CORPORATION (“COMPANY”)TO ITS GENERAL AND SECURED CREDITORS AND IS UNSECURED. IT IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION OF CREDIT BYCOMPANY 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 STATESECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREINMAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCHREGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THESECURITIES ACT. THIS NOTE IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS OF A SUBORDINATEDNOTE PURCHASE AGREEMENT, DATED AS OF MARCH 30, 2021, BETWEEN COMPANY AND THE NOTEHOLDERS REFERRED TO THEREIN(THE “AGREEMENT”), A COPY OF WHICH IS ON FILE WITH COMPANY. THE NOTE REPRESENTED BY THIS INSTRUMENT MAY NOT BETRANSFERRED EXCEPT IN COMPLIANCE WITH THE AGREEMENT. ANY SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH THEAGREEMENT WILL BE VOID. THIS NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $500,000 AND MULTIPLES OF $10,000 INEXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS NOTE IN A DENOMINATION OF LESS THAN $500,000 SHALL BE DEEMED TO BEVOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OFTHIS NOTE FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PAYMENTS ON THIS NOTE, AND SUCH PURPORTEDTRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS NOTE.
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CERTAIN ERISA CONSIDERATIONS: THE HOLDER OF THIS NOTE, OR ANY INTEREST HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS ANDWARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENTSUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THEINTERNAL 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 ACQUIREOR HOLD THIS NOTE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEFAVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 ORANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS NOTE, OR ANY INTEREST HEREIN, ARE NOT PROHIBITEDBY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE AND HOLDING. ANY PURCHASER ORHOLDER OF THIS NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOFTHAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE I OF ERISA OR SECTION 4975 OF THE CODE ISAPPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHERPERSON 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 OFTHE 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 ANY SUBORDINATED NOTE SHOULD CONSULT WITH HIS ORHER LEGAL COUNSEL PRIOR TO ACQUIRING SUCH SUBORDINATED NOTE.
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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.
Certificate Number:$ March 30, 2021
CUSIP (Accredited Investors)
CUSIP (QIB)
ACNB CORPORATION
4.00% FIXED-TO-FLOATING RATE SUBORDINATED NOTE DUE MARCH 31, 2031
1. Subordinated Notes. This Subordinated Note is one of a duly authorized issue of unsecured, subordinated notes of ACNB Corporation, a Pennsylvaniacorporation (the “Company”), designated as the “4.00% Fixed to Floating Rate Note Due March 31, 2031” (the “Subordinated Notes”) issued pursuant to thatSubordinated Note Purchase Agreement, dated as of the Issue Date (as defined herein), between the Company and the several purchasers of the Subordinated Notesidentified on the signature pages thereto (the “Agreement”), and initially limited in the aggregate principal amount to $15,000,000.00, but subject to beingincreased as provided in Sections 17 and 21 below. The “Issue Date” of the Subordinated Notes is March 30, 2021.
2. Payment. The Company, for value received, promises to pay to _______________, or its registered assigns, the principal sum of [·] Dollars ($[·]), plusaccrued but unpaid interest on March 31, 2031 (“Maturity Date”) and to pay interest thereon (i) from and including the Issue Date of the Subordinated Notes to butexcluding March 31, 2026 or the earlier redemption date contemplated by Section 7 of this Subordinated Note, at the rate of 4.00% per annum, computed on thebasis of a 360-day year consisting of twelve 30-day months and payable semiannually in arrears on June 30 and December 30 of each year (each, a “Fixed InterestPayment Date”), beginning June 30, 2021 and (ii) from and including March 31, 2026, to but excluding the Maturity Date or the earlier redemption datecontemplated by Section 7 of this Subordinated Note, at the rate per annum (rounded to two decimal places when expressed as a percentage), reset quarterly, equalto 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 applicableinterest period and (B) 329 basis points, computed on the basis of a 360-day year and the actual number of days elapsed and payable quarterly in arrears onMarch 30, June 30, September 30 and December 30 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.
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(b) “90-Day Average SOFR” means the most recent 90-Day Average Secured Oversight 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 EasternTime 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 onthe relevant Interest Determination Date that the 90-Day Average SOFR has been discontinued or is no longer being published by the FederalReserve 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 orsuccessor 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-DayAverage SOFR as published by an industry standard source. Notwithstanding the foregoing, if the Company (or the calculation agent, if one has beenappointed by the Company) reasonably determines in good faith that there is an industry-accepted substitute or successor base rate, then theCompany (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 usedand any other relevant methodology for calculating such substitute or successor base rate, including any adjustment factor needed to make suchsubstitute or successor base rate comparable to the 90-Day Average SOFR base rate, in a manner that is consistent with industry-accepted practicesfor such substitute or successor base rate;
(iii) The Company (or the calculation agent, if one has been appointed by the Company) shall provide each Noteholder (as defined
herein) with notice of its determination of an Alternative Rate promptly after such determination. Notwithstanding anything herein to the contrary, ifthe Company has appointed a calculation agent for the Subordinated Notes, absent manifest error, the calculation agent's determination of theAlternative Rate shall be binding and conclusive on the Noteholders and the Company. If the Company has determined the Alternative Rate, and if,within five (5) Business Days (as defined herein) after providing such notice, the Company is notified in writing by the Noteholders of at least amajority in principal amount of the outstanding Subordinated Notes that such Noteholders reasonably believe that the determination of suchAlternative Rate is not consistent with this Section 2, then the Company shall appoint a calculation agent for the Subordinated Notes who shalldetermine the Alternative Rate and the calculation agent's determination of the Alternative Rate shall be binding and conclusive on the Noteholdersand the Company;
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(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;
(v) By issuing this Subordinated Note, the Company agrees, and the holder of this Subordinated Note, by its acceptance of thisSubordinated Note, acknowledges that the use of the 90-Day Average SOFR is subject to Terms of Use, as published by the Federal Reserve Bank ofNew York, and such Terms of Use may be adopted and modified by the Federal Reserve Bank of New York and posted at the Federal Reserve Bankof New York's Website from time to time; and
(vi) “Federal Reserve Bank of New York's Website” means the website of the Federal Reserve Bank of New York at
http://www.newyorkfed.org, or any successor source.
(c) The Company shall have the right, but not the obligation, except as expressly provided above, to appoint, in its sole discretion, from time to time,an independent calculation agent for the Subordinated Notes. The independent calculation agent shall be a member firm of the Financial Industry RegulatoryAuthority, 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. Ifthe Company appoints a calculation agent, the Company shall promptly provide notice to the Noteholders of such appointment.
Any payment of principal of or interest on this Subordinated Note that would otherwise become due and payable on a day which is not a BusinessDay 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 orinterest, 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 orSunday 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 Notes, including the principal and interest on this Note, shall besubordinate 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 interests, if any, on: (a) all indebtedness ofCompany for borrowed money, whether or not evidenced by bonds, debentures, securities, notes or other written instruments; (b) any deferred obligations ofCompany for the payment of the purchase price of property, goods, materials, assets or services purchased or acquired by Company and accrued liabilities arisingin the ordinary course of business; (c) all obligations, contingent or otherwise, of Company in respect of any letters of credit, bankers’ acceptances, securitypurchase facilities and similar credit transactions; (d) any capital lease obligations of Company; (e) all obligations of Company in respect of interest rate swap, capor other agreements, interest rate future or option contracts, currency swap agreements, currency future or option contacts, commodity contracts and other similararrangements; (f) any obligation of Company to its depositors or general creditors, as defined for purposes of the capital adequacy regulations of the Board ofGovernors of the Federal Reserve System applicable to Company, as the same may be amended or modified from time to time (the “Capital AdequacyRegulations”); (g) all obligations of the type referred to in clauses (a) through (f) of other persons for the payment of which Company is responsible or liable asobligor, 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 assetof Company; except “Senior Indebtedness” does not include (i) the Subordinated Notes, (ii) any obligation that, by its terms, is on parity with the SubordinatedNotes, (iii) any indebtedness between Company and any of its Subsidiaries or Affiliates or (iv) the Junior Subordinated Indebtedness (as defined below). ThisSubordinated 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 suchPerson.
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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 Company, whether voluntary or involuntary, holders of Senior Indebtedness shallbe entitled to be paid in full before any payment shall be made on account of the principal of or interest on the Subordinated Notes, including this SubordinatedNote. 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 registeredholders of the Subordinated Notes from time to time (collectively, the “Noteholders”), together with the holders of any obligations of Company ranking on a paritywith the Subordinated Notes, shall be entitled to be paid from the remaining assets of Company the unpaid principal thereof and the unpaid interest thereon beforeany 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 ofCompany ranking junior to the Subordinated Notes (collectively, “Junior Subordinated Indebtedness”), which includes any obligation that, by its terms, issubordinated to the Subordinated Notes.
If there shall have occurred and be continuing (a) a default, beyond any applicable grace period, in any payment with respect to any Senior Indebtednessor (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 bemade by Company with respect to this Subordinated Note. Company shall provide prompt written notice to the Noteholder upon the occurrence of events describedin 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 precedingparagraph of this Section 3 would be applicable.
Nothing herein shall act to prohibit, limit or impede Company from issuing additional debt of Company having the same rank as the Subordinated Notesor which may be junior or senior in rank to the Subordinated Notes.
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4. Merger and Sale of Assets. 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 Company, or the person which acquires by conveyance or transfer orwhich leases the properties and assets of Company substantially as an entirety shall be a corporation, association or other legal entity organized and existing underthe 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 andany premium and interest on the Subordinated Notes according to their terms, and the due and punctual performance of all covenants and conditions hereof on thepart of Company to be performed or observed; provided, however, that no further express assumption is needed by any successor by merger to the Company to theextent 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 orboth, 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 moreSubsidiaries that, if such properties and assets were directly owned by the Company, would constitute all or substantially all of the Company’s properties andassets, 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) Company or any major subsidiary depository institution (as defined for purposes of the Capital Adequacy Regulations, a “Major SubsidiaryDepository Institution”) of Company shall commence a voluntary case under any applicable bankruptcy, insolvency, liquidation, reorganization or other similarlaw now or hereafter in effect, or Company shall consent to the appointment of a receiver, liquidator, trustee or other similar official in any liquidation, insolvencyor similar proceeding with respect to 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 Company or a Major Subsidiary Depository Institution ofCompany or all or substantially all of the property of Company or a Major Subsidiary Depository Institution of Company, or for the winding up of the affairs orbusiness of Company or a Major Subsidiary Depository Institution, and such decree or order shall have remained in force for sixty (60) calendar days; or
(c) Company is notified that it is considered an institution in “troubled condition” within the meaning of 12 U.S.C. Section 1831i and the regulationspromulgated thereunder; or
(d) 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) Company materially breaches any of the representations, warranties or covenants made by it in the Agreement; or
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(f) 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 dueand payable, the Noteholder, by notice in writing to 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. Company waives demand, presentment for payment, notice ofnonpayment, notice of protest, and all other notices.
Company, within ninety (90) calendar days after the receipt of written notice from the Noteholder or any other holder of the Subordinated Notes of theoccurrence of an Event of Default with respect to this Subordinated Note, shall mail to all the Noteholders, at their addresses shown on the Security Register (asdefined in Section 10 below), such written notice of Event of Default, unless such Event of Default shall have been cured or waived before the giving of suchnotice, as certified by Company in writing.
6. Failure to Make Payment. In the event of the occurrence of an Event of Default described in Section 5(f), Company will, upon demand of theNoteholder, pay to the Noteholder the whole amount then due and payable on this Subordinated Note for principal and interest (without acceleration), with intereston the overdue principal and interest at the rate borne by this Subordinated Note, to the extent permitted by applicable law. If Company fails to pay such amountupon such demand, the Noteholder may, among other things, institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute suchproceeding to judgment or final decree and may enforce the same against Company and collect the amounts adjudged or decreed to be payable in the mannerprovided by law out of the property of Company.
Upon the occurrence of a failure by the Company to make any required payment of principal or interest on this Subordinated Note or an Event of Default,until such failure or Event of Default is cured by the Company or waived by the Noteholders in accordance with Section 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 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 Company that rank equal with or juniorto the Subordinated Notes, or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Notes, other than (i) any dividends ordistributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, any class of Company’s common stock, (ii) any declaration of anoncash 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 redemptionor repurchase of any such rights pursuant thereto, (iii) as a result of a reclassification of Company’s capital stock or the exchange or conversion of one class orseries of Company’s capital stock for another class or series of Company’s capital stock, (iv) the purchase of fractional interests in shares of Company’s capitalstock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, or (v) purchases of any class ofCompany’s common stock related to the issuance of common stock or rights under any benefit plans for Company’s directors, officers or employees or any ofCompany’s dividend reinvestment and stock purchase plans (including, without limitation, any repurchases or acquisitions in connection with the forfeiture of anystock award, cashless or net exercise of any option, or acceptance of Common Shares in lieu of an award recipient’s tax obligations under any equity award).
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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 any or all of the Subordinated Notes, including this Subordinated Note, in whole or in part,without premium or penalty, at any time on or after March 31, 2026, and prior to the Maturity Date, but in all cases in a principal amount with integral multiples of$10,000, 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 interestaccrued and unpaid to the date of redemption or prepayment. If less than the entire amount of the Subordinated Note is to be redeemed or prepaid, the notice ofredemption 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 orprepayment, upon surrender of such Subordinated Note, a new Subordinated Note, having the same terms and conditions of the Subordinated Note, in principalamount equal to the unpaid portion thereof will be issued.
In addition, if all or any portion of the Subordinated Notes cease to be deemed to be Tier 2 Capital, including due to a change in applicable capitalregulations (a “Capital Treatment Event”), the Company shall promptly notify the Noteholders thereof, and thereafter the Company and the Noteholders shall worktogether in good faith to execute and deliver all agreements as reasonably necessary in order to restructure, as agreed to by the Company and the Noteholders, theapplicable portions of the obligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital; provided, however, that nothing contained in this sectionshall limit the Company’s right to redeem the Subordinated Notes 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 Notes at a price of 100% of the principal amount ofthe Subordinated Notes to be redeemed, plus accrued but unpaid interest to the date of redemption.
Furthermore, the Company shall have the right, at any time, to redeem the Subordinated Notes at a price of 100% of the principal amount of theSubordinated Notes to be redeemed, plus accrued but unpaid interest to the date of redemption upon the occurrence of a Tax Event or an Investment CompanyEvent. 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 anyfinal and adopted (or enacted) prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authoritythereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, there exists amaterial risk that interest payable by the Company on the Subordinated Notes is not, or within one hundred twenty (120) days after the receipt of such opinion willnot 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 theCompany 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 thereceipt of such opinion will be, required to register as an investment company pursuant to the Investment Company Act of 1940, as amended.
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In the case of any redemption or prepayment of this Subordinated Note, Company will give the holders of the Subordinated Notes 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 amountto be redeemed or prepaid. In a case where Company is making a redemption or prepayment with respect to the Subordinated Notes in an amount less than theaggregate amount of principal of the Subordinated Notes then outstanding, Company shall effect such partial redemption on a pro rata basis; provided that in nocase shall any Subordinated Notes held by any parent company or Subsidiary of Company be deemed to be outstanding.
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) orany successor agency to the extent such approval shall then be required by law, regulation or policy.
8. Repayment; Payment Procedures. Company shall repay the aggregate principal amount of the Subordinated Notes, plus all accrued but unpaid interestthereon, 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 immediatelyavailable funds to a bank account in the United States designated by the registered Noteholder of this Subordinated Note if such Noteholder shall have previouslyprovided wire instructions to Company, upon presentation and surrender of this Subordinated Note at the Payment Office (as defined in Section 13 below) or atsuch other place or places as Company shall designate by notice to the registered Noteholders as the Payment Office, provided that this Subordinated Note ispresented to Company in time for Company to make such payments in such funds in accordance with its normal procedures. Payments of interest (other thaninterest payable on the Maturity Date) shall be made by wire transfer in immediately available funds (if such Noteholder shall have previously provided wiretransfer instructions to 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 thefifteenth (15th) calendar day prior to the applicable Interest Payment Date. To the extent permitted by applicable law, interest shall accrue, at the rate at whichinterest 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 onthis Subordinated Note shall be applied first to accrued interest and then the balance, if any, to principal. Protest, notice of protest, presentment and surrender ofthis Subordinated Note are hereby waived by 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 Americaas 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 in whole or in part, and maybe exchanged for a like aggregate principal amount of Subordinated Notes of other authorized denominations, by the Noteholder in person, or by its attorney dulyauthorized in writing, at the Payment Office (as defined in Section 13 below). Company shall maintain a register providing for the registration of the SubordinatedNotes and any exchange or transfer thereof (the “Security Register”). Upon surrender or presentation of this Subordinated Note for exchange or registration oftransfer, Company shall execute and deliver in exchange therefor a Subordinated Note or Subordinated Notes in substantially the form hereof of like aggregateprincipal amount, each in a minimum denomination of $100,000 or any amount in excess thereof which is an integral multiple of $10,000 (and, in the absence ofan 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 ornames requested by the Noteholder. Any Subordinated Note presented or surrendered for registration of transfer or for exchange shall be duly endorsed andaccompanied by a written instrument of transfer in such form as is attached hereto and incorporated herein, duly executed by the Noteholder or his attorney dulyauthorized in writing, with such tax identification number or other information for each person in whose name a Subordinated Note is to be issued, andaccompanied by evidence of compliance with any restrictive legend(s) appearing on such Subordinated Note or Subordinated Notes as Company may reasonablyrequest 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 whichis on file with Company.
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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 Company may require the payment of a sum sufficient to cover any stamp or other tax or governmental fee or charge that may be imposedin 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 thisSubordinated Note is registered in the Security Register as the absolute owner of this Subordinated Note for receiving payments of principal and interest on thisSubordinated Note and for all other purposes whatsoever, whether or not this Subordinated Note be overdue, and Company shall not be affected by any notice tothe contrary.
13. Notices. All notices to Company under this Subordinated Note shall be in writing and addressed to Company at ACNB Corporation, 16 LincolnSquare, Gettysburg, PA 17325, Attention: Chief Financial Officer, or to such other address as Company may notify to the Noteholder (the “Payment Office”). Allnotices to the Noteholders shall be in writing and sent by first-class mail or recognized commercial overnight courier to each Noteholder at the address as set forthin the Security Register.
14. Denominations. The Subordinated Notes are issuable only as fully registered Subordinated Notes without interest coupons in minimum denominationsof $500,000 or any amount in excess thereof which is an integral multiple of $10,000.
15. Absolute and Unconditional Obligation of Company. No provisions of this Subordinated Note shall alter or impair the obligation of Company, whichis 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, hereinprescribed.
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 uponall future Noteholders of this Subordinated Note and of any Subordinated Note issued upon the registration of transfer hereof or in exchange therefor or in lieuhereof, 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 toexercise 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 anacquiescence therein. Each Noteholder, by its acceptance of such Subordinated Note (or beneficial interest therein), shall be deemed to have waived any right ofoffset against the Company with respect to the indebtedness evidenced thereby.
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No waiver or amendment of any term, provision, condition, covenant or agreement in the Subordinated Notes shall be effective except with the consent of
the holders of more than fifty percent (50%) in aggregate principal amount (excluding any Subordinated Notes held by the Company or any of its Affiliates) of theSubordinated Notes at the time outstanding; provided, however, that without the consent of each Noteholder of an affected Subordinated Note, no such amendmentor waiver may: (i) reduce the principal amount of any Subordinated Note; (ii) reduce the rate of or change the time for payment of interest on any SubordinatedNote; (iii) extend the maturity of any Subordinated Note; (iv) change the currency in which payment of the obligations of the Company under the SubordinatedNotes are to be made; (v) lower the percentage of aggregate principal amount of outstanding Subordinated Notes required to approve any amendment of theSubordinated Notes; (vi) make any changes to Section 7 (Redemption), Section 5 (Events of Default; Acceleration), Section 6 (Failure to Make Payments), orSection 16 (Waiver and Consent) of the Subordinated Notes that adversely affects the rights of any Noteholder; (vii) disproportionately affect the rights of any ofthe Noteholders of the then outstanding Subordinated Notes; (viii) permit the Company to declare or pay any cash dividends while an Event of Default iscontinuing or; modify the terms of subordination of the affected Subordinated Note in a manner adverse to the holder. Notwithstanding the foregoing, theCompany may amend or supplement the Subordinated Notes without the consent of the Noteholders to cure any ambiguity, defect or inconsistency or to providefor uncertificated Subordinated Notes in addition to or in place of certificated Subordinated Notes, or to make any change that does not adversely affect the rightsof any Noteholder. No failure to exercise or delay in exercising, by any Noteholder of the Subordinated Notes, of any right, power or privilege hereunder shalloperate 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 ofany 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 orremedy 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 demandin similar or other circumstances or constitute a waiver of the rights of Noteholders to any other or further action in any circumstances without notice or demand.No consent or waiver, express or implied, by Noteholders to or of any breach or default by the Company in the performance of its obligations hereunder shall bedeemed 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 Companyhereunder. 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 failurecontinues, 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 bythe Company.
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17. Further Issues. Company may create and issue additional notes having the same terms and conditions of the Subordinated Notes (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 Notes. Any suchissuance 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. Thissubordinated 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 nationallyrecognized statistical rating organization. This Subordinated Note is not convertible into or exchangeable for any of the equity securities, other securities or assetsof the Company or any Subsidiary.
19. No Recourse Against Others. No recourse under or upon any obligation, covenant or agreement contained in this Subordinated Note, or for any claimbased 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 orof any predecessor or successor, either directly or through the Company or any predecessor or successor, under any rule of law, statute or constitutional provisionor by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by theacceptance 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 UnitedStates of America and the laws of the Commonwealth of Pennsylvania, without regard to conflict of laws principles of such state that would result in theapplication of the laws of another jurisdiction. This Subordinated Note is intended to meet the criteria for qualification of the outstanding principal as Tier 2Capital under the Capital Adequacy Regulations, and the terms hereof shall be interpreted in a manner to satisfy such intent, subject to the limitation imposed onthe capital treatment of subordinated debt during the five (5) years immediately preceding the Maturity Date of the Subordinated Notes.
21. Priority. The Subordinated Notes rank pari passu among themselves and pari passu, in the event of any insolvency proceeding, dissolution,assignment for the benefit of creditors, reorganization, restructuring of debt, marshaling of assets and liabilities or similar proceeding or any liquidation or windingup of Company, with all other present or future unsecured subordinated debt obligations of Company, except any unsecured subordinated debt that may beexpressly stated to be senior to or subordinate to the Subordinated Notes. Any Subordinated Notes held by the Company or Subsidiary Company shall not bedeemed to be outstanding.
22. Successors and Assigns. This Subordinated Note shall be binding upon the Company and its successors and permitted assigns, and shall inure to thebenefit of the Noteholder and its respective successors and permitted assigns. The Noteholder may assign all, or any part of, or any interest in, the Noteholder’srights 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 samerights 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 itwere the Noteholder hereunder.
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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 purchase any of the Subordinated Notes at any time in the open market, private transactions or otherwise. If the Company purchases anySubordinated Notes, it may, in its discretion, hold, resell or cancel any of the purchased Subordinated Notes, with the understanding that Subordinated Notes heldby the Company will not qualify as Tier 2 Capital.
24. Submission to Jurisdiction. Each Noteholder hereby irrevocably submits to the exclusive jurisdiction of the Court of Common Pleas of AdamsCounty, Pennsylvania and the U.S. District Court for the Middle District of Pennsylvania over any action or proceeding arising out of or relating to thisSubordinated Note and the transactions related thereto, regardless of whether a claim sounds in contract, tort, or otherwise and regardless of whether aclaim is at law or in equity, and each Noteholder hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard anddetermined in such state or federal court. Each Noteholder on behalf of itself and its successors and assigns, hereby irrevocably waives, to the fullest extentpermitted 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 orhereafter have to remove such action or proceeding, once commenced, to another court on the grounds of Forum Non Conveniens or otherwise. Each Noteholderagrees 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 thejudgment or in any other manner provided by law.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed and attested and its corporate seal to be hereunto affixed.
ATTEST: ACNB CORPORATION
By: Name: Name: David W. CathellTitle: Title: Chief Financial Officer
ASSIGNMENT AGREEMENT
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 inan 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 ofCompany. In connection with any transfer or exchange of any of the Subordinated Notes evidenced by this certificate occurring prior to the date that is one year after the laterof the date of original issuance of such Subordinated Notes and the last date, if any, on which such Subordinated Notes were owned by Company or any Affiliateof Company, the undersigned confirms that such Subordinated Notes are being:
CHECK ONE BOX BELOW: (1) ¨ acquired for the undersigned’s own account, without transfer; or (2) ¨ transferred to Company; or (3) ¨ transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”); or (4) ¨ transferred pursuant to an effective registration statement under the Securities Act; or (5) ¨ transferred pursuant to and in compliance with Regulation S under the Securities Act; or (6) ¨ transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3), (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
(7) ¨ 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 solediscretion, such legal opinions, certifications and other information as Company may reasonably request to confirm that such transfer is being made pursuant to anexemption from, or in a transaction not subject to, the registration requirements of the Securities Act such as the exemption provided by Rule 144 under theSecurities Act.
______________________________________________Signature
Signature Guarantee: _______ (Signature must be guaranteed) Signature The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership inan 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 soleinvestment 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 awarethat 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 hasrequested 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’sforegoing representations in order to claim the exemption from registration provided by Rule 144A. Dated:_________________
EXHIBIT B
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 qualifiedor 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 orthe 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 acommercial bank and trust company under Pennsylvania law.
3. The Company has all necessary power and authority to execute, deliver and perform its obligations under each Subordinated Note PurchaseAgreement and Subordinated Note to which it is a party.
4. The Subordinated Note Purchase Agreements and the Subordinated Notes have been duly and validly authorized, executed and delivered by theCompany and they each constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except tothe extent that enforceability may be limited by (i) bankruptcy, receivership, insolvency, reorganization, moratorium, fraudulent transfer, or other similar laws nowor hereafter in effect relating to creditors’ rights generally and (ii) rules of law governing specific performance, injunctive relief, or other equitable principles or byother 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 each Purchaser set forth in the Subordinated Note Purchase Agreement and theissuance of the Subordinated Notes in accordance with the terms and conditions of the Subordinated Note Purchase Agreement, the Subordinated Note and thePlacement Agency Agreement, the Subordinated Notes to be issued and sold by the Company to Purchasers pursuant to the Subordinated Note PurchaseAgreement will be issued in a transaction exempt from the registration requirements of the Securities Act.
Exhibit 99.1
ACNB Corporation Nasdaq Listed: “ACNB” 16 Lincoln Square, P.O. Box 3129 Gettysburg,PA 17325 717.334.3161 / 888.334.2262 www.acnb.com 3/23/2021
Confidentiality Notice This Investor Presentation (the "Presentation") is being furnished to alimited number of parties who may be interested in or have expressed an interest in investingin the subordinated notes (the "Notes") of ACNB Corporation (the "Company"). TheCompany has engaged Boenning & Scattergood, Inc. ("Boenning") as its sole placement agentfor the offering (the "Offering") of the Notes. The management of the Company, with theassistance of Boenning, has assembled this Presentation. The sole purpose of the Presentationis to assist the recipient in deciding whether to invest in the Notes. Use of this Presentation isgoverned by and subject to the terms of the Confidentiality Agreement ("CA") previouslyexecuted by the recipient, which strictly limits the use and disclosure of the informationcontained herein. This Presentation should not be copied or sent to any other person withoutthe express prior written permission of Boenning. Any person in possession of thisPresentation is bound by the terms of such executed CA. As set forth in the CA and in thisPresentation, the Presentation and the information contained herein may not be used ordisclosed without the express written consent of the Company or Boenning and for anypurpose other than the evaluation of the Company by the person to whom this Presentation hasbeen delivered. 2
Note to Recipients The Presentation has been prepared solely for general informationalpurposes by the Company and is being furnished solely for use by prospective participants inconsidering participation in the proposed Offering. No representation or warranty as to theaccuracy, completeness, or fairness of such information is being made by the Company or anyother person, and neither the Company nor any other person shall have any liability for anyinformation contained herein, or for any omissions from this Presentation or any other writtenor oral communications transmitted to the recipient by the Company or any other person in thecourse of the recipient’s evaluation of the Offering. The Notes have not been registered underthe Securities Act of 1933, as amended (the “1933 Act”) or any state securities laws, and maynot be re-offered or resold absent registration or an exemption from registration underapplicable federal and state securities laws. The Notes are not a deposit or bank account, andare not, and will not be, insured or guaranteed by the Federal Deposit Insurance Corporation(the “FDIC”) or any other federal or state government agency. Investment in the Notes has notbeen approved or disapproved by the U.S. Securities and Exchange Commission (the “SEC”),the FDIC, the Board of Governors of the Federal Reserve System, the PennsylvaniaDepartment of Banking and Securities or any other federal or state regulatory authority, norhas any authority passed upon or endorsed the merits of the Offering or the accuracy oradequacy of this Presentation. Any representation to the contrary is a criminal offense. Theinformation contained herein is intended only as an outline that has been prepared to assistinterested parties in making their own evaluations of the Company. It does not purport to beall-inclusive or to contain all of the information that a prospective participant may desire.Each recipient of the information and data contained herein should perform its ownindependent investigation and analysis of the Offering and the value of the Company. Theinformation and data contained herein are not a substitute for a recipient’s independentevaluation and analysis. 3
Note to Recipients In making an investment decision, prospective participants must rely ontheir own examination of the Company, including the merits and risks involved. Prospectiveparticipants are urged to consult with their own legal, tax, investment, regulatory andaccounting advisers with respect to the consequences of an investment in the Company. In theevent that any portion of this Presentation is inconsistent with or contrary to any of the termsof the form of subordinated note purchase agreement (the “Purchase Agreement”), thePurchase Agreement shall control. Except as otherwise indicated, this Presentation speaks asof the date hereof. The delivery of this Presentation shall not, under any circumstances, createany implication that there has been no change in the affairs of the Company after the datehereof. You will be given the opportunity to ask questions of and receive answers fromCompany representatives concerning the Company’s business and the terms and conditions ofthe Offering, and the Company may provide you with additional relevant information that youmay reasonably request to the extent the Company possesses such information or can obtain itwithout unreasonable effort or expense. Except for information provided in response to suchrequests, the Company has not authorized any other person to give you information that is notfound in this Presentation. If such unauthorized information is obtained or provided, theCompany cannot and does not assume responsibility for its accuracy, credibility, or validity.The Company is not providing you with any legal, business, investment, tax or other adviceregarding an investment in the Notes. You should consult with your own advisors as needed toassist you in making your investment decision and to advise you whether you are legallypermitted to purchase the Notes. The Company is subject to the periodic reporting andinformational requirements of the Securities Exchange Act, as amended (the “1934 Act”) andfilings made by the Company with the SEC under the 1934 Act are available under the“Company Filings” page at www.sec.gov. 4
Offering Disclaimer This Presentation has been prepared by the Company solely forinformational purposes based on information regarding our operations, as well as informationfrom public sources. This Presentation is for information purposes only and is being furnishedon a confidential basis to a limited number of persons who qualify as an “accredited” investoras defined in Rule 501(a)(1)-(3), (7) and (9) of Regulation D adopted under the SecuritiesAct of 1933, as amended (the “Act”) or a qualified institutional buyer as such term is definedin SEC Rule 144A. This Presentation does not constitute an offer to sell, or a solicitation ofan offer to buy, the Notes by any person in any jurisdiction in which it is unlawful for suchperson to make such offer or solicitation. The information in this Presentation is confidentialand may not be reproduced or redistributed, passed on or divulged, directly or indirectly, toany other person. The Company reserves the right to request the return of this Presentation atany time. Purchase of the Notes may be made only by a Purchase Agreement and theinformation contained herein will be superseded in its entirety by the Purchase Agreement.This Presentation does not contain all of the information you should consider before investingin the Notes and should not be construed as accounting, investment, legal, regulatory or taxadvice. Each potential investor should review the Purchase Agreement, make suchinvestigation as it deems necessary to arrive at an independent evaluation of an investment inthe Notes and should consult its own legal counsel and financial, accounting, regulatory andtax advisors to determine the consequences of such an investment prior to making aninvestment decision and should not rely on any information set forth in this Presentation. TheNotes will be subject to significant limitations on their liquidity. Only potential investors whocan bear the risk of an unregistered illiquid investment should consider investment in theNotes described herein. 5
Confidentiality Notice The information contained in this Presentation was prepared expresslyfor use in this Presentation and is based on certain assumptions and management's analysis ofinformation available at the time this Presentation was prepared. The information containedherein has been provided to Boenning by the Company. Nothing contained within thisPresentation is, or should be relied upon as, a promise or representation as to the futureperformance of the Company. This Presentation contains supplemental financial informationwhich has been derived by methods other than GAAP. These non-GAAP financial measuresare reconciled to the most directly comparable GAAP measure at the end of this Presentation.The Presentation may contain statistics and other data that, in some cases, has been obtainedfrom or compiled from and made available by third party providers. However, the Companycannot guarantee the accuracy of such information and has not independently verified suchinformation. The Company is not making any implied or express representation or warranty asto the accuracy or completeness of the information summarized herein or made available inconnection with any further investigation of the Company. The Company expressly disclaimsany liability which may be based on such information, errors therein or omissions therefrom.This Presentation contains certain pro forma information and such pro forma information doesnot purport to present the results that the Company will actually realize and such variationcould be material. All inquiries or requests for additional information in connection with thisPresentation should be submitted or directed to Boenning. Boenning will arrange all contactsfor appropriate due diligence by potential investors. All inquiries regarding the Offering andany requests for additional information should be directed to: Charles K. Hull ManagingDirector (O) 610-832-5310 (M) 215-327-9668 [email protected] James F. McCormickManaging Director (O) 610-832-5311 (M) 484-433-1472 [email protected] J. Haldeman Analyst (O) 610-832-5296 (M) [email protected] 6
Forward Looking Statement In addition to historical information, this Investor Presentation,and oral statements made from time to time by the Company’s representatives may containforward-looking statements. Such forward-looking statements can be identified by the use offorward-looking terminology such as “believes”, “expects”, “may”, “intends”, “will”,“should”, “anticipates”, or the negative of any of the foregoing or other variations thereon orcomparable terminology, or by discussion of strategy. Forward-looking statements are subjectto certain risks and uncertainties, such as local economic conditions, competitive factors, andregulatory limitations. Actual results may differ materially from those projected in theforward-looking statements. Such risks, uncertainties and other factors that could cause actualresults and experience to differ from those projected include, but are not limited to, thefollowing: the effects of governmental and fiscal policies, as well as legislative and regulatorychanges; the effects of new laws and regulations, specifically the impact of the AmericanRescue Plan Act of 2021, Coronavirus Response and Relief Supplemental AppropriationsAct, the Coronavirus Aid, Relief, and Economic Security Act, the Tax Cuts and Jobs Act, andthe Dodd-Frank Wall Street Reform and Consumer Protection Act; impacts of the capital andliquidity requirements of the Basel III standards; the effects of changes in accounting policiesand practices, as may be adopted by the regulatory agencies, as well as the FinancialAccounting Standards Board and other accounting standard setters; ineffectiveness of thebusiness strategy due to changes in current or future market conditions; future actions orinactions of the United States government, including the effects of short-and long-term federalbudget and tax negotiations and a failure to increase the government debt limit or a prolongedshutdown of the federal government; the effects of economic conditions particularly withregard to the negative impact of severe, wide-ranging and continuing disruptions caused bythe spread of Coronavirus Disease 2019 (COVID-19) and the responses thereto on theoperations of the Corporation and current customers, specifically the effect of the economy onloan customers’ ability to repay loans; the effects of competition, and of changes in laws andregulations on competition, including industry consolidation and development of competingfinancial products and services; the risks of changes in interest rates on the level andcomposition of deposits, loan demand, and the values of loan collateral, securities, and interestrate protection agreements, as well as interest rate risks; difficulties in acquisitions andintegrating and operating acquired business operations, including information technologydifficulties; challenges in establishing and maintaining operations in new markets; the effectsof technology changes; volatilities in the securities markets; the effect of general economicconditions and more specifically in the Corporation’s market areas; the failure of assumptionsunderlying the establishment of reserves for loan losses and estimations of values of collateraland various financial assets and liabilities; acts of war or terrorism; disruption of credit andequity markets; the ability to manage current levels of impaired assets; the loss of certain keyofficers; the ability to maintain the value and image of the Corporation’s brand and protectthe Corporation’s intellectual property rights; continued relationships with major customers;and potential impacts to the Corporation from continually evolving cybersecurity and othertechnological risks and attacks, including additional costs, reputational damage, regulatorypenalties, and financial losses. We caution readers not to place undue reliance on theseforward-looking statements. They only reflect management’s analysis as of this date. TheCorporation does not revise or update these forward-looking statements to reflect events orchanged circumstances. Please carefully review the risk factors described in other documentsthe Corporation files from time to time with the Securities and Exchange Commission,including the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.7
Private Placement Terms1 1The placement and sale of the Notes will not be registered underthe Securities Act of 1933. The Company will offer and sell the Notes only to QualifiedInstitutional Buyers and Institutional Accredited Investors. The minimum investment is $500thousand, subject to an availability to waive8
Executive Summary Executive Summary Notes Bank Established:1857Headquarters:Gettysburg, PA Market Capitalization1:$259 Million Total Assets:$2.6 BillionGross Loans:$1.6 Billion Deposits:$2.2 Billion TCE/TA:8.32% ROAA2:0.97%ROAE2:9.25% LTM Net Interest Margin:3.35% LTM Noninterest Income / OperatingRevenue21.43% Trades on the NASDAQ under the symbol “ACNB.” 16th largest bank (outof 80) in Pennsylvania by asset size. 22 Bank office locations in Southcentral Pennsylvaniaand 12 offices in Maryland Approximately $437.0 million in Wealth Management assets.Trust and Fiduciary: $277.0 million in AUM Retail Brokerage: $159.0 million in AUMRussell Insurance Group Approximately $47.9 million in gross premium volume, $6.1 millionin gross commissions 3 offices in Maryland, 1 in Pennsylvania Accolades LTM EfficiencyRatio: 59.35% Total Capital Ratio3: 15.10% CET1 Ratio3: 13.86% Tier 1 Capital Ratio3:13.86% Leverage Ratio3: 9.01% Voted #1 Bank for the ninth consecutive year in theGettysburg Times Pick of the County annual award. Voted #1 in the Hanover Evening SunReaders Choice Awards for 2020. As of March 18, 2021 9 Reflects bank-level metrics
Key Notes Market Overview Ranked #1 in Adams County market, with deposit market shareof 57.9%1. ACNB has the #1 deposit market share in 7 out of 13 defined market areas inPennsylvania.2 Market footprint covers South-Central Pennsylvania and Central Maryland.The South-Central Pennsylvania and Central Maryland markets have a diverse mix ofbusinesses and industries, with an educated workforce and household-income that is greaterthan both state and national averages3. 34 locations across Pennsylvania and Maryland 13branches located in Adams County, PA (excludes HQ Operations Center) 5 branches and 1loan production office located in York County, PA 1 branch located in Franklin County, PA 1branch located in Cumberland County, PA 1 loan production office located in LancasterCounty, PA 6 branches located in Carroll County, MD 5 branches located in FrederickCounty, MD 1 loan production office located in Baltimore County, MD Solid historicaldeposit growth 5-Year (Total) CAGR = 19.1% 5-Year (Organic) CAGR = 14.6% ➢2020(Total) = 54.8% ➢2020 (Organic) = 27.8% Market Footprint According to the June 30,2020 FDIC Deposit Market Share Report These market areas include Gettysburg, UpperAdams, Littlestown, McSherrystown, Carroll Valley, East Berlin, and Newville Based onUnited States Census Bureau data 10
ACNB Executive Management Name/TitleBanking ExperienceJoined ACNBBankExperience/DisciplinesPrior Experience James P. Helt President & CEO31 Years2008Strategy, Sales, Lending, Credit, ExecutiveFB&T, Financial Trust, CMTY, SUSQ David W.Cathell EVP/Treasurer & CFO43 Years2005Finance, Treasury, Strategy, Executive GarretNational Bank, WM Bancorp, American Trust Bank Fulton County National Bank, PA StateBank Lynda L. Glass EVP/Secretary and Chief Risk & Governance Officer 39Years1984Risk, Governance, Strategy, ExecutiveMeridian Laurie A. Laub EVP/Chief Credit& Operations Officer 21 Years2005Credit, Risk, Operations, Technology, ExecutiveWaypoint, Sovereign Tom N. Rasmussen EVP/Maryland Market President 37Years2017Strategy, Lending, Operations, Executive FCNB Bank, New Windsor State BankDouglas A. Seibel EVP/Chief Lending & Revenue Officer Years2008Lending, Sales, Credit,ExecutiveFB&T, Meridian, Allfirst, M&T, CMTY, SUSQ Thomas R. Stone EVP/ChiefCommunity Banking Officer Years2009Retail, Facilities, Marketing, Human Resources,Executive York Bank & Trust Co., Allfirst, M&T, CMTY, SUSQ
Growth Opportunities Organic StrategiesInorganic Strategies Acquisition of top tier andexperienced HR talent due to market disruption Focused on balance sheet expansion, drivenby loan growth via commercial lending Expansion into new markets Loan Production Offices(Lancaster, PA and Hunt Valley, MD) Full-Service Offices Grow Wealth Managementplatform Trust & Fiduciary Services ($277 million in AUM) Retail Brokerage Services ($159million in AUM) Russell Insurance Agency 5-Year Premium CAGR: 7.1% 5-YearCommissions CAGR: 6.2% Strategically positioned in one of the fast-growing regions alongthe East Coast, within a short drive of Baltimore, Philadelphia, and Washington, D.C. TheSouth-Central Pennsylvania and Northern Maryland markets are home to a diverse mix ofbusinesses and industries Expansion into new markets based on strong demographics and theenhancement of long-term shareholder value Growth Markets Strategic Fit Cultural FitEarnings Growth Opportunity
Investment Considerations 1Well-established South-Central Pennsylvania community bank2Experienced management team with strong operational ability Financial performancehistorically above peers Strategic plans in place to drive core earnings growth Wellpositioned for future growth in core markets Strong capital base and conservative lendingapproach
Financial Summary Overview of 2020 Results Financial Overview Historical IncomeFor theYear Ended December 31, Year-end 2020 net income was $18.4 million, or $2.13/share,reflecting a 22.5% decrease from 2019. 2020’s results include $6.0 million in one-timemerger related expenses associated with the Frederick County Bancorp, Inc. (“FCBI”)acquisition. The year’s results also included a higher provision expense of $9.1 million (vs.$0.6 million in 2019), a result of the COVID-19 pandemic as well as an unanticipated $2.0million charge-off of one loan in 1Q’20 after the death of the borrower. Excluding the one-time merger expenses, net income totaled $23.0 million, or $2.67/share. In 1Q’20, ACNBcompleted the systems conversions for FCBI. This transaction resulted in the addition of$443.4 million in assets, $329.3 in loans, and $374.1 million in deposits. Noninterest incomeof $19.9 million increased 9.7% over 2019, largely due to continued growth in the wealthmanagement business and sale of mortgages. Cash dividends paid to shareholders of $8.7million increased 25.5% over 2019. In $000s, except per share data 2016 2017 2018 20192020 Cash & Securities $223,721 $243,094 $236,076 $330,177 $752,476 Gross Loans Heldfor Investment 907,910 1,244,170 1,302,465 1,272,601 1,637,784 Loans Held for Sale 1,7701,736 408 2,406 11,034 Gross Loans 909,680 1,245,906 1,302,873 1,275,007 1,648,818Loan Loss Reserve (14,194) (13,976) (13,964) (13,835) (20,226) Intangibles 6,996 22,14923,987 24,007 49,373 Other Assets 51,729 98,259 98,752 104,897 124,921 Total Assets1,206,320 1,595,432 1,647,724 1,720,253 2,555,362 Deposits 967,621 1,298,492 1,348,0921,412,260 2,185,525 Borrowings 108,840 131,508 118,164 103,233 95,347 Other Liabilities9,798 11,466 13,331 15,244 16,518 Total Liabilities 1,086,259 1,441,466 1,479,5871,530,737 2,297,390 Total Shareholders' Equity 120,061 153,966 168,137 189,516 257,972Key Metrics Loans / Deposits 93.83 95.82 96.62 90.11 74.94 Tangible Common Equity /Tangible Assets 9.43 8.38 8.88 9.76 8.32 Common Shares Outstanding 6,064,138 7,023,6587,046,020 7,079,359 8,709,393 Average Diluted Shares 6,051,579 6,543,756 7,035,8187,061,524 8,638,654 Book Value per Share $19.80 $21.92 $23.86 $26.77 $29.62 TangibleBook Value per Share $18.64 $18.77 $20.46 $23.38 $23.95 Adjusted Net Income2 $10,869$14,498 $21,748 $23,721 $23,033 Key Metrics Earnings per Share $1.80 $1.50 $3.09 $3.36$2.13 Adjusted Earnings per Share $1.80 $2.22 $3.09 $3.36 $2.67 Return on AverageAssets3 0.93% 1.02% 1.34% 1.40% 0.97% Return on Average Equity3 9.17% 10.55%13.62% 13.33% 9.25% Net Interest Margin 3.35% 3.51% 3.81% 3.81% 3.35% Provisionexpense in 2020 was a result of the COVID-19 pandemic as well as a large unanticipatedcharge-off of one loan in 1Q’20 Adjusted net income for 2017 and 2020 reflects figures thatexclude the one-time merger related charges for the New Windsor and Frederick Countyacquisitions ROAA and ROAE reflect adjusted figures that exclude the one-time mergerrelated charges for the New Windsor and Frederick County acquisitions15
Consistent Balance Sheet Growth Total Assets ($MMs) CAGR (’16 – ’20): 17.4% 2,555.4Total Loans ($MMs) CAGR (’16 – ’20): 14.0% 1,245.91,302.91,275.0 1,648.8 1,206.31,595.41,647.71,720.3 909.7 20162017201820192020 20162017201820192020 TotalDeposits ($MMs)Tangible Common Equity ($MMs) CAGR (’16 – ’20): 19.1%1,298.51,348.11,412.3 967.6 2,185.5 CAGR (’16 – ’20): 15.3% 131.8 113.1 144.2 165.5208.6 20162017201820192020 20162017201820192020 16
Net Interest Margin (%) Performance Trends ROAE (%)1 3.35 3.51 3.813.81 3.359.1710.55 13.6213.33 9.25 20162017201820192020 20162017201820192020 EfficiencyRatio (%) EPS ($)1 67.99 62.37 59.8759.7859.35 1.80 2.22 3.093.362.6720162017201820192020 20162017201820192020 TCE / TA (%) TBVPS ($) 9.43 8.38 8.889.76 8.32 18.6418.7720.4623.3823.95 20162017201820192020 20162017201820192020 171ROAE and EPS for 2017 and 2020 are adjusted to reflects figures that exclude the one-timemerger related charges for the New Windsor and Frederick County acquisitions
Wealth Management Assets At Year-End in Thousands of Dollars 103,000110,000 132,000159,700 195,000224,000232,000257,000 277,000 20162017201820192020 TrustAUMBrokerage AUM (1) ACNB’s wealth management business derives a majority of itsrevenue from noninterest income consisting of trust, investment advisory & brokerage, andother servicing fees. Wealth Management clients are located largely within the Bank’sprimary geographic markets. Substantial revenues are generated from investment managementcontracts with clients. Under these contracts, investment advisory fees are typically based onthe market value of assets under management 1Securities and certain insurance products areoffered through Cetera Investment Services, LLC, a registered broker-dealer and FINRA 18member, and advisory services are offered through Cetera Investment Advisers, LLC. Neitherfirm is affiliated with ACNB.
Russell Insurance Group At Year-End in Thousands of Dollars 36,44038,447 41,64747,73547,943 20162017201820192020 RIG Premiums ACNB Corporation's wholly-ownedsubsidiary, Russell Insurance Group, Inc., is a full-service insurance agency that offers a broadrange of property & casualty and group life & health insurance to both commercial andindividual clients, with licenses in 44 states. Based in Westminster, Maryland, RussellInsurance Group has served the needs of its clients since its founding as an independentinsurance agency in 1978. The agency was purchased by ACNB Corporation in 2005. RIGoperates additional locations in Germantown and Jarrettsville, Maryland as well as an officein Gettysburg, Pennsylvania. Russell Insurance Group is managed separately from the bankingand related financial services that ACNB offers and is reported as a separate segment. 19
Prudent Reserving Discipline In $000s unless otherwise stated 2016 2017 2018 2019 2020Loan Loss Reserve Loan Loss Reserves—Beginning of Period 14,747 14,194 13,976 13,96413,835 Less: Charge-offs (766) (461) (1,810) (917) (2,987) Add: Recoveries 213 243 178188 238 Add: Provision Expense 0 0 1,620 600 9,140 Loan Loss Reserves—End of Period14,194 13,976 13,964 13,835 20,226 Trends in Loan Loss Reserve Loan Loss Reserve($000s)Loan Loss Reserves/Loans (%) 1.23 1.56 Loan Loss Reserve Overview ACNBactively monitors its loan portfolio and records provision expense to maintain strong assetquality. To address the impact of the COVID-19 pandemic, the 1.121.071.0914,19413,97613,96413,835 20,226 Company recorded $2.6 million and $1.6 million inprovision expense during Q2’20 and Q3’20. In addition to COVID-19 related provisions,there was also a large (unanticipated) charge-off of one loan in 1Q’20 of $2.0 million due tothe death of the borrower. Although management believes many of its borrowers are in goodstanding, the Company has cautiously increased its loan loss reserve due to the continueduncertainty 20162017201820192020 surrounding COVID-19. 21
Diversified and Growing Loan Portfolio Key Underwriting Notes ACNB Asset Qualitymeasures continue to reflect commitment to sound Loan Portfolio Composition as of12/31/2020 Other credit risk management, including conservative underwriting practices,timelycreditadministrativeprocesses,andproactivecustomer relationship management.Independent loan review performed annually with a 60% penetration rate. Fully integratedEnterprise Risk Management function. Incentive plans in place to drive and reward behaviorsthat are in alignment with corporate objectives. Consumer 0.8% Construction 3.6% HELOC6.3% Farm 5.0% 4.2% 1-4 Family 24.7% Gross Loan Growth ($MMs) CAGR (’16 – ’20):14.0% 1,245.91,302.91,275.0 1,648.8 C&I 14.9% Gross Loans $1.6B 909.7 Multifamily +CRE 40.5% 20162017201820192020 22
Focused COVID-19 Response Operations & Employees All community banking offices werelimited to drive up services for in person banking transactions, with lobby access available viaappointment in the case of critical needs for services such as safe deposit box access.Additional staff were allocated to assist customers over the telephone and to handle newcustomer enrollments in Online Banking, Mobile Banking, and Bill Pay. Operations are beingconducted in compliance with current guidelines regarding social distancing, face masks,sanitation, and personal hygiene. Staff members are working remotely when able to do so inorder to complete their primary responsibilities. Limits on Mobile Banking deposittransactions were raised temporarily so that customers can deposit checks in both higherdollar amounts and number. All ACNB Bank fees for customers using an ATM, regardless ofthe location, were waived for a period of time. Early withdrawal penalties on CDs opengreater than seven days were waived for a period of time. Customers To assist customers inmanaging deposit accounts, fees for account transfers conducted via the Customer ContactCenter were waived and there was potential fee relief for overdraft services for a period oftime. For personal loan customers experiencing financial hardship, processes were in place toassist in loan payment deferrals or other accommodations. For business loan customers,processes were in place to assist in loan payment deferrals or other accommodations. Foreligible business customers, the Bank is participating in any available government loanprograms through the Small Business Administration or otherwise, including the PaycheckProtection Program. For business customers, there was potential fee relief for the Bank’sdeposit and lending solutions, as well as potential maintenance fee waiver for Remote DepositCapture services for a period of time. Free pharmacy, vision and hearing benefits, as well asidentity theft protection, were extended to all customers with personal checking accounts untilDecember 31, 2020. 23
COVID-19 Loan Considerations COVID-19 Response Despite no significant deterioration inits loan portfolio thus far throughout the pandemic, ACNB proactively increased its provisionexpense in 2020, an acknowledgement of the uncertainty in the broader economicenvironment. Although many of the Bank’s borrowers have indicated they will be able tohandle short-term interruptions, the Bank proactively increased deferred loan payments formany of its loan clients who were adversely impacted. The Bank’s primary exposure toCOVID-19 impacted industries is its hospitality portfolio, which was $18.4 million as of12/31/2020 (1.1% of total loan portfolio). The Bank continues to actively analyze the loanportfolio and economic conditions in its markets. Paycheck Protection Program (“PPP”) Asof December 31, 2020, the Bank has supported 1,440 PPP loans for a total of $160.8 million(or 9.8% of the Bank’s total loan portfolio). These PPP loans have generated $6.1 million infee income, with $2.9 million recognized in 2020 and the remainder to be recognized eitherover the life of the loan, or until loan forgiveness occurs. Participation in 2nd round of PPP –through the end of February 2021, ACNB has funded $42.0 million (420 total) in new loans,generating additional fee income of $2.1 million. Payment Deferrals As of December 31,2020, the Bank has outstanding approvals for loan modifications and deferrals for 48 loanstotaling $36.1 million in balances, or 2.2% of the Bank’s total loan portfolio. The Bank’smanagement has also been very active in communicating with its deferred borrowers andmanagement believes that asset quality will remain strong. 24
COVID-19 Loan Modifications Commercial Loans - Exposed IndustriesNumberLoan% ofTotal% of Total In $000s unless otherwise statedof LoansBalanceLoan PortfolioCapitalHospitality718,3941.12%7.13% Commercial Real Estate77,1650.43%2.78%Other205,3510.33%2.07% Food Services34,5360.28%1.76% Residential RealEstate1180.00%0.01% Totals3835,4642.17%13.75% Loan Modifications (ExposedIndustries) Food Services 0.28% Other Notes As of December 31, 2020, the Bank’scommercial exposure to the accommodation and food service sector (NAICS 72) wasapproximately 7.7% of gross loans. Beginning in late 1Q’20 and early 2Q’20, the Bank beganreceiving requests for temporary modifications to repayment structures on certain loans. Thesemodifications are grouped into deferred 0.33% Total $35.5 Million Hospitality 1.12%payments of no more than six months, interest only, lines of credit, and other. As of December31, there were 38 commercial purpose loans that have been deferred Commercial Real Estate0.43% As of December 31, there were 10 consumer purpose loans that have been deferredManagement believes its loans to borrowers in industries impacted by COVID remain strong.25
Deposit Portfolio Healthy Deposit Portfolio Deposit Composition as of 12/31/2020 Year-end2020 deposits of $2.2 billion increased 54.8% over 2019. ACNB picked up $375 million indeposits through the Frederick County Bancorp transaction that closed in 1Q’20. ACNB greworganic deposits by approximately 27.8% in 2020, largely a factor of PPP proceeds depositedto customer accounts as well as increased balances in a broad base of accounts, a result of alack of economic activity due to COVID-19. CDs >= $250,000 4.6% CDs < $250,000 17.2%Noninterest-Bearing Demand 25.5% The Bank continues to have a strong core deposit base,with core deposits making up 95.7% of total deposits. Noninterest-bearing deposits totaled$557 million at year-end 2020 and accounted for approximately 25% of the Bank’s totaldeposit portfolio. The Bank’s top 20 deposit relationships only account for 12.1% of totaldeposits. ACNB’s cost of deposits for 2020 was 0.55%, down 7 basis points from 2019’s cost.Total Deposits $2.2B Savings 39.4% Interest Bearing Demand 13.3% 26
Time Deposit Repricing Opportunities 192,866 135,068 112,473 36,250 Notes < 3 Months3Months to 6 Months6 Months to 12 Months > 12 Months Approximately 76.4% of the Bank’sTime Deposits mature within the next 12 months The potential for repricing on these maturingdeposits may help benefit the overall cost of deposits in the low interest-rate environment Thetotal weighted average rate on Time Deposits was 1.14% as of December 31, 2020. Averagerates based on maturity date are as follows: ➢ < 3 Months: 1.70% 3 Months to 6 Months:0.84% 6 Months to 12 Months: 0.58% ➢ > 12 Months: 1.15%
Strong Liquidity Position Asset Mix ($000s)Liability Mix ($000s) Total Equity BorrowingsInterest-bearing Nonbrokered Noninterest-bearing Deposits Liquidity Summary As of year-end 2020, ACNB had approximately $400 million of cash and cash equivalents between theholding company and the Bank. The Bank’s investment portfolio of approximately $350.2million had a tax-equivalent yield of 1.80% and an average duration of 3.7 years. Equities:$2.2 million AFS Securities: $337.7 million HTM Securities: $10.3 million Most of theBank’s $342.0 fixed-income portfolio is conservatively managed, with a heavy weightingtowards investment grade securities that can be leveraged for additional liquidity. AgencySecurities: 52.8% of fixed-income AFS portfolio Residential MBS: 32.9% of portfolioMunicipal: 10.5% of portfolio Corporate: 2.6% of portfolio
Consolidated In $000s unless otherwise stated2020 Placement1 Repayment1 Pro FormaBank-Level 2020 Placement1 Repayment1 Pro Forma Consolidated Capital Ratios (%)Bank-Level Capital Ratios (%) 14.91 15.75 15.10 15.10 13.68 13.63 13.68 13.63 13.86 13.8613.86 13.86 8.32 8.29 8.90 8.87 8.49 8.49 9.01 9.01 2020Pro Forma 2020Pro Forma1Assumes: i) private placement of subordinated notes with gross proceeds of $15.0 million; ii)total placement related expenses of $325 thousand (capitalized); iii) repayment of $5 millionin 29 current outstanding debt; and no proceeds downstreamed to the Bank
Double Leverage and Interest Coverage Assumes: i) private placement of subordinated noteswith gross proceeds of $15.0 million; ii) total placement related expenses of $325 thousand(capitalized); iii) repayment of $5 million in current outstanding debt; and no proceedsdownstreamed to the Bank 30 Earnings for 2020 have been adjusted to reflect figures thatexclude the one-time merger related charges for the Frederick County acquisition
Non-GAAP Disclosure Tangible common equity and tangible book value per common shareare non-GAAP financial measures calculated using GAAP figures. Tangible common equity iscalculated by excluding the balance of goodwill and intangibles from stockholders’ equity.Tangible book value per share is calculated by dividing tangible common equity by thenumber of common shares outstanding. The Company has presented these non-GAAP financialmeasures because it believes that these measures provide useful and comparative informationto assess trends in the Company’s financial condition and results of operations. Because not allcompanies use the same calculations for tangible common equity, this presentation may not becomparable to other similarly titled measures calculated by other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures, andthe Company encourages a review of its consolidated financial statements in their entirety.Following are reconciliations of these non-GAAP financial measures to the most directlycomparable GAAP measure. For the Year Ended December 31, 31