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TARP Capital Purchase Program 

(Mutual Depository Institutions) 

Senior Securities 

Summary of Senior Securities Terms

 

Issuer: Qualifying Financial Institution (“QFI”) means any FDIC-insured 

depository institution organized in mutual form (a “Mutual DI”) under the 

laws of the United States or any State of the United States, the District of 

Columbia, any territory or possession of the United States, Puerto Rico, 

Northern Mariana Islands, Guam, American Samoa, or the Virgin Islands. 

The term QFI for purposes of this Term Sheet shall not mean any 

institution that is controlled by a foreign bank or company. The United 

States Department of the Treasury will determine the eligibility and 

allocation for QFIs after consultation with the appropriate Federal banking 

agency.

Initial Holder: United States Department of the Treasury (the “UST”). 

Size: QFIs may sell Senior Securities (defined below) to the UST subject to the 

limits and terms described below. 

Each QFI may issue Senior Securities with an aggregate principal amount 

equal to not less than 1% of its risk-weighted assets and not more than the 

lesser of (i) $25 billion and (ii) 3% of its risk-weighted assets. 

Security: Subordinated Debentures (“Senior Securities”); it being understood that 

the Senior Securities do not constitute a class of stock. Each note 

representing a Senior Security shall be in the principal amount of $1,000. 

Ranking: Senior to mutual capital certificates and any other capital instruments 

authorized under state law. Senior Securities must be expressly 

subordinated to claims of depositors and to the QFI’s other debt 

obligations to its general and secured creditors, unless such debt 

obligations are explicitly made pari passu or subordinated to the Senior 

Securities. 

Regulatory 

Capital 

Status: Tier 2. 

Maturity: 30 years.

Interest Rate: The Senior Securities will pay cumulative interest at a rate of 7.7% per 

annum until the fifth anniversary of the date of this investment and 
 

 

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ate”). 

 

thereafter at a rate of 13.8% per annum.1 Interest will be payable 

quarterly in arrears on February 15, May 15, August 15 and November 15

of each year (each, an “Interest Payment D

Redemption: All redemptions of the Senior Securities shall be at 100% of the issue 

price, plus any accrued and unpaid Interest. All redemptions shall be 

subject to the approval of the QFI’s appropriate Federal banking agency. 

 

Restrictions 

on Dividends: Subject to certain exceptions, for as long as any Senior Securities are 

outstanding, no dividends may be declared or paid on any shares of equity, 

mutual capital certificates, or other capital instruments authorized under 

state law, nor may the QFI repurchase or redeem any shares of equity, 

mutual capital certificates, or other capital instruments authorized under 

state law, unless all accrued and unpaid Interest for all past interest periods 

on the Senior Securities is fully paid. 

Further Restrictions 

on Dividend 

Increases: UST’s consent shall be required for any increase in regularly paid 

dividends per share, capital certificate, or other capital instruments 

authorized under state law, until the third anniversary of the date of this 

investment. After the third anniversary and prior to the tenth anniversary, 

the UST’s consent shall be required for any extraordinary dividends on 

deposit accounts (dividends in excess of the stated rate or that are in 

excess of the amount resulting from the stated method of calculating the 

rate on such an account), or to increase aggregate dividends per share, 

capital certificate or other capital instrument authorized under state law 

where the resulting aggregate dividend per share, capital certificate, or 

other capital instruments authorized under state law is greater than 103% 

of the prior year’s dividend rate per annum; provided that no increase in 

dividends may be made as a result of any dividend paid in common shares 

capital certificates, or other capital instruments authorized under state law, 

any stock split or similar transaction. The restrictions in this paragraph no 

longer apply if the Senior Securities and Warrant Securities (as defined 

below) have been redeemed in whole or the UST has transferred all of the 

Senior Securities and Warrant Securities to unaffiliated third parties, 

which for this purpose does not include a securitization vehicle or 

investment pool in which the UST is an initial sponsor or participant so 

long as UST has an economic interest in such vehicle or pool (“Third 

Parties”). 

1 Senior Securities have 7.7% and 13.8% interest rates which equate to after-tax effective rates (assuming a 

35% tax rate) of 5% and 9%, respectively, the same rates applied to securities issued by other classes of institutions 

participating in the CPP. 
 

 

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Restriction on 

Acceleration: Principal and accrued interest may only become immediately due and 

payable (i.e., accelerate) upon the receivership of the QFI. 

Repurchases: The UST’s consent shall be required for any repurchases of equity 

securities, mutual capital certificates, or other capital instruments 

authorized under state law (other than repurchases of common shares, 

mutual capital certificates, or other capital instruments authorized under 

state law in connection with any benefit plan in the ordinary course of 

business consistent with past practice or relevant income tax laws) until 

the tenth anniversary of the date of this investment unless prior to such 

tenth anniversary the Senior Securities and Warrant Securities are 

redeemed in whole or the UST has transferred all of the Senior Securities 

and Warrant Securities to third parties. In addition, there shall be no 

repurchases of equity, capital certificates, or other capital instruments 

authorized under state law if prohibited as described above under 

“Restrictions on Dividends”. 

Other Dividend and 

Repurchase 

Restrictions: From and after the tenth anniversary of the date of this investment, the 

QFI shall be prohibited from paying dividends or repurchasing any equity 

securities, mutual capital certificates, or other capital instruments 

authorized under state law, until all Senior Securities and Warrant 

Securities are redeemed or repurchased in whole. 

Voting Rights: Senior Securities shall be nonvoting, other than class voting rights on (i) 

any authorization or issuance of any equity securities, mutual capital 

certificates, or other capital instruments authorized under state law which 

purport to rank senior to the Senior Securities, (ii) any amendment to the 

rights of Senior Securities, or (iii) any merger, exchange or similar 

transaction which would adversely affect the rights of the Senior 

Securities, subject to State Restrictions (as defined below), if any. 

 

If interest on the Senior Securities is not paid in full for six interest 

periods, whether or not consecutive, the Senior Securities holders will 

have the right to elect 2 directors to the QFI, subject to State Restrictions, 

if any. The right to elect directors to the QFI will end when full interest 

has been paid for all prior interest periods. 

 

“State Restrictions” shall mean, in the case of state-chartered QFIs, any 

state law restrictions on voting rights of holders of Senior Securities that 

cannot be modified, waived or otherwise removed by the appropriate state 

authorities. 

Transferability: Senior Securities will not be subject to any contractual restrictions on 

transfer or the restrictions of any stockholders’ agreement or similar 
 

 

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arrangement that may be in effect at the time of the Senior Security 

investment or thereafter; provided that the UST and its transferees shall 

use its commercially reasonable efforts not to effect any transfer of the 

Senior Securities which would require the QFI to become subject to the 

periodic reporting requirements of Section 13 or 15(d) of the Exchange 

Act. 

If the QFI otherwise becomes subject to such reporting requirements, the 

QFI will file a shelf registration statement covering the Senior Securities 

as promptly as practicable and, if necessary, shall take all action required 

to cause such shelf registration statement to be declared effective as soon 

as possible. In addition, the UST and its transferees shall have piggyback 

registration rights for the Senior Securities. Subject to the above, the QFI 

shall take all steps as may be reasonably requested to facilitate the transfer 

of the Senior Securities. 

Executive 

Compensation, 

Transparency, 

Accountability, 

Monitoring: The QFI and its covered officers and employees shall agree to comply 

with the rules, regulations and guidance of the UST with respect to 

executive compensation, transparency, accountability and monitoring, as 

published and in effect at the time of the investment closing. 

 

Affiliate 

Transactions: For as long as the UST holds any debt or equity securities (including the 

Senior Securities) of the QFI, the QFI and its subsidiaries will not enter 

into a transaction with related persons (within the meaning of Item 404 

under the SEC’s Regulation S-K) unless such transaction is (i) on terms no 

less favorable to the QFI and its subsidiaries than could be obtained from 

an unaffiliated third party, and (ii) has been approved by the audit 

committee or a comparable body of independent directors of the QFI, or if 

there are no “independent directors,” the board of directors of the QFI but 

only if the board of directors maintains written documentation supporting 

its determination that the transaction meets the requirements of (i) of this 

paragraph. 

Summary of Warrant Terms

Warrant: In consideration of the investment in Senior Securities and other 

consideration in connection with its investment, UST will receive warrants 

to purchase, upon net settlement, a number of additional Senior Securities 

(the “Warrant Securities”) in an amount equal to 5% of the amount of 

Senior Securities purchased on the date of investment. The UST intends 

to immediately exercise the warrants. The exercise price for the warrants 

shall be $0.01 per note representing a Warrant Security. 
 

 

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Term: 10 years (it being understood the Warrant Securities themselves will have 

a maturity of 30 years). 

Exercisability: Immediately exercisable, in whole or in part. 

Warrant Securities: The Warrant Securities shall have the same rights, preferences, privileges, 

voting rights and other terms as the Senior Securities, except that (1) the 

Warrant Securities will pay Interest at a rate of 13.8% per annum and (2) 

the Warrant Securities may not be redeemed until all the Senior Securities 

have been redeemed. 

Transferability: The warrants will not be subject to any contractual restrictions on transfer 

or the restrictions of any stockholders’ agreement or similar arrangement 

that may be in effect at the time of this investment or thereafter; provided 

that the UST shall not effect any transfer of the warrants or underlying 

Warrant Securities which would require the QFI to become subject to the 

periodic reporting requirements of Section 13 or 15(d) of the Exchange 

Act. 

 

If the QFI otherwise becomes subject to the periodic reporting 

requirements of Section 13 or 15(d) of the Exchange Act, the QFI will file 

a shelf registration statement covering the warrants and the Warrant 

Securities underlying the warrants as promptly as practicable and, if 

necessary, shall take all action required to cause such shelf registration 

statement to be declared effective as soon as possible. In addition, the 

UST and its transferees shall have piggyback registration rights for the 

warrants and the Warrant Securities underlying the warrants. Subject to 

the above, the QFI shall take all steps as may be reasonably requested to 

facilitate the transfer of the warrants or the Warrant Securities.