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TARP Capital Purchase Program 

(Non-Public QFIs, excluding S Corps and Mutual Organizations) 

Preferred Securities 

Summary of Preferred Terms

 

Issuer: Qualifying Financial Institution (“QFI”) means any (i) top-tier Bank 

Holding Company (“BHC”), or top-tier Savings and Loan Holding 

Company (“SLHC”) that engages solely or predominately in activities 

permissible for financial holding companies under relevant law, that in 

either case is not publicly traded1

, (ii) U.S. bank or U.S. savings 

association organized in a stock form that are neither publicly traded nor 

controlled by a BHC or SLHC, or (iii) U.S. bank or U.S. savings 

association that is not publicly traded and is controlled by a SLHC that is 

not publicly traded and does not engage solely or predominately in 

activities that are permitted for financial holding companies under relevant 

law, other than S Corporations and Mutual Depository Institutions. The 

term QFI shall not mean any institution that is controlled by a foreign 

bank or company. For purposes of this program, “U.S. bank”, “U.S. 

savings association”, “BHC” and “SLHC” means a bank, savings 

association, BHC or SLHC organized 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 United States 

Department of the Treasury will determine the eligibility and 

allocation for QFIs after consultation with the appropriate Federal 

banking agency. 

 “S Corporation” means any U.S. bank, U.S. savings association, BHC or 

SLHC organized as a corporation that has made a valid election to be 

taxed under Subchapter S of the U.S. Internal Revenue Code. 

 “Mutual Depository Institution” means any U.S. bank, U.S. savings 

association, BHC or SLHC organized in a mutual form. 

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

 

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 For the purposes of this term sheet “publicly traded” means a company (1) whose securities are traded on a 

national securities exchange and (2) required to file, under the federal securities laws, periodic reports such as the 

annual (Form 10-K) and quarterly (Form 10-Q) reports with either the Securities and Exchange Commission or its 

primary federal bank regulator. A company may be required to do so by virtue of having securities registered under 

Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which applies to all 

companies that are traded on an exchange or that have $10 million in assets and 500 shareholders of record or 

Section 15(d) of the Exchange Act which requires companies that have filed a registration statement under the 

Securities Act of 1933, as amended, and have 300 or more securityholders of record of the registered class to file 

reports required under Section 13 of the Exchange Act, e.g., periodic reports. 
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Size: QFIs may sell preferred to the UST subject to the limits and terms 

described below. 

 Each QFI may issue an amount of Preferred 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: Preferred, liquidation preference $1,000 per share. (Depending upon the 

QFI’s available authorized preferred shares, the UST may agree to 

purchase Preferred with a higher liquidation preference per share, in which 

case the UST may require the QFI to appoint a depositary to hold the 

Preferred and issue depositary receipts.) 

Ranking: Senior to common stock and pari passu with existing preferred shares 

other than preferred shares which by their terms rank junior to any existing 

preferred shares. 

Regulatory 

Capital 

Status: Tier 1. 

Term: Perpetual life. 

Dividend: The Preferred will pay cumulative dividends at a rate of 5% per annum 

until the fifth anniversary of the date of this investment and thereafter at a 

rate of 9% per annum. For Preferred issued by banks which are not 

subsidiaries of holding companies, the Preferred will pay non-cumulative 

dividends at a rate of 5% per annum until the fifth anniversary of the date 

of this investment and thereafter at a rate of 9% per annum. Dividends 

will be payable quarterly in arrears on February 15, May 15, August 15 

and November 15 of each year. 

Redemption: Preferred may not be redeemed for a period of three years from the date of 

this investment, except with the proceeds from a Qualified Equity 

Offering (as defined below), which results in aggregate gross proceeds to 

the QFI of not less than 25% of the issue price of the Preferred. After the 

third anniversary of the date of this investment, the Preferred may be 

redeemed, in whole or in part, at any time and from time to time, at the 

option of the QFI. All redemptions of the Preferred shall be at 100% of its 

issue price, plus (i) in the case of cumulative Preferred, any accrued and 

unpaid dividends and (ii) in the case of non-cumulative Preferred, accrued 

and unpaid dividends for the then current dividend period (regardless of 

whether any dividends are actually declared for such dividend period). All 

redemptions shall be subject to the approval of the QFI’s primary federal 

bank regulator. 

 “Qualified Equity Offering” shall mean the sale by the QFI after the date 

of this investment of Tier 1 qualifying perpetual preferred stock or 

common stock for cash (other than any sales made pursuant to agreements 
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or arrangements entered into, or pursuant to financing plans which were 

publicly announced, on or prior to November 17, 2008). 

Restrictions 

on Dividends: Subject to certain exceptions, for as long as any Preferred is outstanding, 

no dividends may be declared or paid on junior preferred shares, preferred 

shares ranking pari passu with the Preferred, or common shares (other than 

in the case of pari passu preferred shares, dividends on a pro rata basis 

with the Preferred), nor may the QFI repurchase or redeem any junior 

preferred shares, preferred shares ranking pari passu with the Preferred or 

common shares, unless (i) in the case of cumulative Preferred all accrued 

and unpaid dividends for all past dividend periods on the Preferred are 

fully paid or (ii) in the case of non-cumulative Preferred the full dividend 

for the latest completed dividend period has been declared and paid in full. 

Common dividends: The UST’s consent shall be required for any increase in common 

dividends per share 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 increase in aggregate common 

dividends per share greater than 3% per annum; provided that no increase 

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

common shares, any stock split or similar transaction. The restrictions in 

this paragraph no longer apply if the Preferred and Warrant Preferred are 

redeemed in whole or the UST has transferred all of the Preferred and 

Warrant Preferred to third parties. 

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

securities or trust preferred securities (other than (i) repurchases of the 

Preferred and (ii) repurchases of junior preferred shares or common shares 

in connection with any benefit plan in the ordinary course of business 

consistent with past practice) until the tenth anniversary of the date of this 

investment unless prior to such tenth anniversary the Preferred and the 

Warrant Preferred are redeemed in whole or the UST has transferred all of 

the Preferred and the Warrant Preferred to third parties. In addition, there 

shall be no share repurchases of junior preferred shares, preferred shares 

ranking pari passu with the Preferred, or common shares 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 common dividends or repurchasing 

any equity securities or trust preferred securities until all equity securities 

held by the UST are redeemed in whole or the UST has transferred all of 

such equity securities to third parties.
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Voting rights: The Preferred shall be non-voting, other than class voting rights on (i) any 

authorization or issuance of shares ranking senior to the Preferred, (ii) any 

amendment to the rights of Preferred, or (iii) any merger, exchange or 

similar transaction which would adversely affect the rights of the 

Preferred. 

 

 If dividends on the Preferred are not paid in full for six dividend periods, 

whether or not consecutive, the Preferred will have the right to elect 2 

directors. The right to elect directors will end when full dividends have 

been paid for (i) all prior dividend periods in the case of cumulative 

Preferred or (ii) four consecutive dividend periods in the case of noncumulative Preferred.

 

Transferability: The Preferred 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 among the QFI and its stockholders at the time of the 

Preferred investment or thereafter; provided that the UST and its 

transferees shall not effect any transfer of the Preferred 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 Preferred 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 

Preferred. Subject to the above, the QFI shall take all steps as may be 

reasonably requested to facilitate the transfer of the Preferred. 

Executive 

Compensation: As a condition to the closing of this investment, the QFI and its senior 

executive officers covered by the EESA shall modify or terminate all 

benefit plans, arrangements and agreements (including golden parachute 

agreements) to the extent necessary to be in compliance with, and 

following the closing and for so long as UST holds any equity or debt 

securities of the QFI, the QFI shall agree to be bound by, the executive 

compensation and corporate governance requirements of Section 111 of 

the EESA and any guidance or regulations issued by the Secretary of the 

Treasury on or prior to the date of this investment to carry out the 

provisions of such subsection. As an additional condition to closing, the 

QFI and its senior executive officers covered by the EESA shall grant to 

the UST a waiver releasing the UST from any claims that the QFI and 

such senior executive officers may otherwise have as a result of the 

issuance of any regulations which modify the terms of benefits plans, 

arrangements and agreements to eliminate any provisions that would not 

be in compliance with the executive compensation and corporate 

governance requirements of Section 111 of the EESA and any guidance or 

regulations issued by the Secretary of the Treasury on or prior to the date 

of this investment to carry out the provisions of such subsection. 
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Related Party 

Transactions: For as long as the UST holds any equity securities of the QFI, the QFI and 

its subsidiaries will not enter into transactions with related persons (within 

the meaning of Item 404 under the SEC’s Regulation S-K) unless (i) such 

transactions are on terms no less favorable to the QFI and its subsidiaries 

than could be obtained from an unaffiliated third party, and (ii) have been 

approved by the audit committee or comparable body of independent 

directors of the QFI. 
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Summary of Warrant Terms

Warrant: The UST will receive warrants to purchase, upon net settlement, a number 

of net shares of preferred stock of the QFI (the “Warrant Preferred”) 

having an aggregate liquidation preference equal to 5% of the Preferred 

amount on the date of investment. The initial exercise price for the 

warrants shall be $0.01 per share or such greater amount as the charter 

may require as the par value per share of Warrant Preferred. The UST 

intends to immediately exercise the warrants. 

Term: 10 years 

Exercisability: Immediately exercisable, in whole or in part. 

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

voting rights and other terms as the Preferred, except that (1) the Warrant 

Preferred will pay dividends at a rate of 9% per annum and (2) the 

Warrant Preferred may not be redeemed until all the Preferred has 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 among the QFI and its stockholders at the time of this 

investment or thereafter; provided that the UST shall not effect any 

transfer of the warrants or underlying Warrant Preferred 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 

Preferred 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 Preferred 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 Preferred.