USActive 18647918.10 

Community Development 

Capital Initiative 

CDFI Subchapter S Corporation 

Senior Securities 

Summary of Terms of CDCI Senior Securities 

Issuer: A qualifying financial institution (“QFI”) that has made a valid election 

to be taxed under Subchapter S of Chapter 1 of the U.S. Internal Revenue 

Code (a “S-Corp”) that is also (i) any U.S. bank or U.S. savings 

association not controlled by a Bank Holding Company (“BHC”) or 

Savings and Loan Holding Company (“SLHC”); (ii) any top-tier U.S. 

BHC that engages predominately in activities that are permitted for 

financial holding companies under relevant law, (iii) any top-tier U.S. 

SLHC which engages solely or predominately in activities that are 

permitted for financial holding companies under relevant law; or (iv) any 

U.S. bank or U.S. savings association that is a qualifying S-Corp 

subsidiary that is controlled by a BHC or SLHC that itself is a S-Corp 

and that does not engage solely or predominately in activities that are 

permitted for financial holding companies under relevant law; provided, 

that, in each case, (i) the QFI collectively with all of its affiliates satisfies 

the requirements of 12 C.F.R. 1805.200(b); (ii) the QFI or an affiliate 

thereof is a regulated community development financial institution 

(“CDFI”) currently certified by the Community Development Financial 

Institution Fund (the “Fund”) of the United States Department of the 

Treasury (“UST”) pursuant to 12 C.F.R. 1805.201(a) as having met the 

eligibility requirements of the Fund’s Community Development 

Financial Institutions Program (the QFI or, if the QFI itself is not 

currently certified by the Fund as a CDFI, any affiliate that is currently 

certified by the Fund as a CDFI, each, a “Certified Entity”); and (iii) shall 

not be any BHC, SLHC, bank or savings association controlled (within 

the meaning of 12 U.S.C. 1841(a)(2) and 12 C.F.R. 225(a)(i) in the case 

of BHCs and banks; and 12 U.S.C. 1467a (a)(2) and 12 C.F.R. 583.7 in 

the case of SLHCs and savings associations) by a foreign bank or 

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

association,” “U.S. BHC” and “U.S. 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. UST will 

determine the eligibility and allocation of funds for each QFI after 

consultation with the appropriate federal banking agency. 

Initial Holder: UST. 
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Security: Unsecured subordinated debentures (“CDCI Senior Securities”) that do 

not constitute a class of stock or represent equity ownership in the issuing 

QFI. Each debenture representing a CDCI Senior Security shall be in the 

principal amount of $1,000. 

Size of Offering: Each QFI may issue CDCI Senior Securities with an aggregate principal 

amount (the “Maximum Investment Amount”) equal to not more than 

five percent (5%) of (i), if the QFI is a Certified Entity the risk-weighted 

assets (“RWA”) of the QFI, or (ii), if the QFI is not a Certified Entity, the 

sum of the RWAs of each of the Certified Entities, in each case less the 

aggregate capital or, as the case may be, principal amount of any 

outstanding TARP assistance of the QFI. 

Any QFI that, in applying to qualify for this program, is determined by 

its primary regulators to require additional capital in order to be a 

“viable” financial institution, shall be required to receive capital (“Private 

Capital”) from one or more private, non-government investors prior to or 

concurrently with any purchase of CDCI Senior Securities by UST, such 

that the sum of the Private Capital and the amount of CDCI Senior 

Securities issued by such QFI under this program shall be sufficient to 

establish the QFI’s “viability” on a pro-forma basis. Such QFI receiving 

Private Capital shall only be eligible to issue CDCI Senior Securities in 

an aggregate amount equal to, on a dollar-for-dollar basis, the amount of 

Private Capital it received; provided that the amount of CDCI Senior 

Securities issued shall not be greater than the Maximum Investment 

Amount; provided further that any Private Capital shall be subordinate to 

the CDCI Senior Securities, on terms satisfactory to UST. 

QFIs currently participating in the UST Capital Purchase Program 

(“CPP”) that issued subordinated debentures to UST may apply to 

exchange the entirety of their existing CPP subordinated debentures for 

CDCI Senior Securities as set forth herein.1

 Additionally, such QFIs 

may, but shall not be required to, apply to issue CDCI Senior Securities 

to UST in an aggregate principal amount up to the positive difference, if 

any, between (i) (x), if the QFI is a Certified Entity, five percent (5%) of 

the RWA of the QFI or (y), if the QFI is not a Certified Entity, five 

percent (5%) of the sum of the RWAs of each of the Certified Entities 

and (ii) the aggregate of any outstanding (x) principal amount of 

subordinated debentures issued under CPP and (y) principal amount of 

CDCI Senior Securities; provided, however, with respect to either an 

exchange or new issuance, (i) the QFI has not breached any 

 

1

 Applications for exchanges of CPP subordinated debentures for CDCI Senior Securities shall be made on a 

different application form than applications for new issuances of CDCI Senior Securities. Applications solely to 

exchange CPP subordinated debentures for CDCI Senior Securities shall not be required to be reviewed by the 

primary regulators of the applying QFI. 
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representation, warranty or covenant set forth in the documents 

governing the CPP subordinated debentures or its sale to UST; and (ii) 

the QFI has paid to UST all accrued and unpaid interest then due on the 

CPP subordinated debentures. 

RWA, for purposes hereunder, shall be as of the most recent fiscal 

quarter ended. 

Ranking: Senior to the QFI’s common stock (and any other class of equity, as 

applicable if a change in corporate form, relevant law or tax election 

permits other classes of equity). CDCI Senior Securities shall be 

expressly subordinated to (i), if issued by a bank or savings association, 

claims of depositors and the QFI’s other debt obligations to its general 

and secured creditors and (ii), if issued by a BHC or SLHC, senior 

indebtedness of the QFI, in accordance with applicable BHC or SLHC 

regulations, unless, in the case of either (i) or (ii), such debt obligations 

are expressly made pari passu or subordinate to the CDCI Senior 

Securities. 

Regulatory Capital 

Status: Tier 2 for a bank or savings association and Tier 1 for BHCs. 

Maturity: The date (the “Maturity Date”) that is (i), for a bank or savings 

association, thirteen (13) years from the date of the investment or (y), for 

a BHC or SLHC, thirty (30) years from the date of investment. On the 

Maturity Date, the QFI shall repay to UST the principal amount, together 

with all accrued and unpaid interest. 

Interest Rate: CDCI Senior Securities will pay cumulative interest at a rate of three and 

one-tenth percent (3.1%) per annum until the eighth (8th) anniversary of 

the closing date of this investment and thereafter at a rate of thirteen and 

eight-tenths percent (13.8%) per annum.2

Interest shall be payable quarterly in arrears on February 15, May 15, 

August 15 and November 15 of each year. Interest on the CDCI Senior 

Securities shall be computed on the basis of a 360-day year consisting of 

twelve 30-day months. 

Interest Deferral 

For Bank Holding 

Companies and 

Savings and Loan 

Holding 

For a QFI that is a BHC or SLHC, interest on the CDCI Senior Securities 

may be deferred (the “Deferred Interest”) for one or more periods of up 

to 20 consecutive quarters each (each, an “Interest Deferral Period”); 

provided, interest shall accrue on any Deferred Interest at the interest rate 

then in effect with respect to the CDCI Senior Securities. During any 

 

2

 CDCI Senior Securities have 3.1% and 13.8% interest rates which equate to after-tax effective rates (assuming a 

35% tax rate) of 2% and 9%, respectively, the same rates applied to securities issued by other classes of institutions 

participating in the CDCI. 
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Companies: Interest Deferral Period, no dividends may be paid by the QFI on shares 

of equity, trust preferred securities or other capital instruments authorized 

under applicable law. 

Redemption: The CDCI Senior Securities shall be redeemable at 100% of the issue 

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

subject to the approval of the QFI’s primary federal bank regulator. 

Restrictions on 

Dividends and 

Redemptions: For as long as any CDCI Senior Securities are outstanding, no dividends 

may be declared or paid by the QFI on any shares of equity, trust 

preferred securities or any other capital instruments it is authorized to 

issue under applicable law, nor may the QFI repurchase or redeem any 

shares of equity, trust preferred securities or other capital instruments 

authorized under applicable law (other than repurchases of common 

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

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

unless all accrued and unpaid interest for all past interest periods on the 

CDCI Senior Securities is paid in full. 

Further 

Restrictions on 

Dividend Increases: For so long as any CDCI Senior Securities are outstanding, no increase in 

regularly paid common dividends per share shall be permitted; 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. 

Notwithstanding the foregoing, an increase in dividends shall be 

permitted where such increase is solely proportionate to the increase in 

taxable income of the QFI and such increased dividends are distributed to 

shareholders in order to fund their individual tax payments on such 

allocable taxable income (“Tax Distribution”). UST (and subsequent 

investors who purchase the CDCI Senior Securities) shall have the right 

to challenge the amount of the proposed Tax Distributions to the extent it 

believes they exceed the amount necessary for the QFI shareholders to 

pay their allocable share of income taxes. 

Additional 

Restrictions on 

Dividends and 

Repurchases: From and after the eighth (8th) anniversary of the closing date of this 

investment, the QFI shall be prohibited from paying common dividends 

or repurchasing any equity securities or trust preferred securities without 

UST’s consent, unless the CDCI Senior Securities are (x) redeemed in 

whole or (y) no longer held by UST or any of its affiliates. These 

restrictions are in addition to the restrictions on repurchases of equity set 

forth above under “Restrictions on Dividends and Repurchases.” 
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Remedies Upon 

Event of Default: Principal and accrued interest may only become immediately due and 

payable (i.e., accelerated) upon the occurrence of an Event of Default. 

Voting Rights: The CDCI Senior Securities shall be non-voting, 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 CDCI Senior Securities, (ii) any 

amendment or waiver to the rights of CDCI Senior Securities, or (iii) any 

merger, exchange or similar transaction which would adversely affect the 

rights of the CDCI Senior Securities. 

If interest on the CDCI Senior Securities is not paid in full for eight (8) 

interest periods, whether or not consecutive, the holders of the CDCI 

Senior Securities will have the right to elect two (2) directors. The right 

to elect directors will end when all accrued and unpaid interest has been 

paid in full for four (4) consecutive interest periods. 

Closing Conditions: The obligation of UST to purchase or otherwise acquire any CDCI Senior 

Securities shall be subject to the satisfaction of customary closing 

conditions, including, among other things, (i) the QFI having not 

breached any representation, warranty or covenant set forth in the 

documents governing any obligations of such QFI then outstanding under 

the Troubled Asset Relief Program (“TARP Obligations”), including any 

CPP subordinated debentures, as determined by UST; (ii) all amounts 

then due and payable under any of the QFI’s TARP Obligations have 

been paid in full; and (iii) with respect to any CDCI Senior Securities not 

acquired through the exchange of outstanding CPP subordinated 

debentures, (x) receipt of approval from the QFI’s appropriate federal 

banking agency for the issuance of the CDCI Senior Securities and (y) 

the satisfaction of any conditions for such issuance imposed by such 

appropriate federal banking agency in connection with granting such 

approval. 

Transfer of 

Proceeds to 

Certified Entities: Each QFI that is not a Certified Entity shall be required to immediately 

transfer any proceeds it receives in connection with the sale of the CDCI 

Senior Securities to its related Certified Entities as capital contributions.3

 

CDFI Covenants: Each QFI shall covenant that (i) the Fund has not withdrawn or qualified 

its certification that the Certified Entities meet the requirements of 12 

C.F.R. 1805.200(b) and 12 C.F.R. 1805.201(b)(1)-(6), (ii) it and all of its 

 

3

 QFIs shall not be required to transfer any funds to any Certified Entity in connection with an exchange 

of CPP subordinated debentures for CDCI Senior Securities. 
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affiliates collectively meet the eligibility requirements of 12 C.F.R. 1805, 

(iii) each Certified Entity’s primary mission is promoting community 

development, as may be determined by UST from time to time based on 

the criteria set forth in 12 C.F.R. 1805.201(b)(1), (iv) each Certified 

Entity’s predominant business activity is the provision, in arms-length 

transactions, of “Financial Products”, “Development Services” and/or 

other similar financing, (v) each Certified Entity serves a “Target 

Market” by serving one or more “Investment Areas” and/or “Targeted 

Populations” as may be determined by UST from time to time 

substantially in the manner set forth in 12 C.F.R. 1805.201(b)(3), (vi) 

each Certified Entity directly, through an affiliate, or through a contract 

with another provider, provides “Development Services” in conjunction 

with its “Financial Products”, (vii) each Certified Entity maintains 

accountability to residents of its “Investment Area(s)” or “Targeted 

Population(s)” through representation on its governing board or directors 

or otherwise and (viii) each Certified Entity is not an agency or 

instrumentality of the United States, or any State or political subdivision 

thereof, as described in 12 C.F.R. 1805.201(b)(6). The terms “Financial 

Products”, “Development Services”, “Target Market”, “Investment 

Areas” and “Targeted Populations” are used herein in the same manner 

as such terms are used in 12 C.F.R. 105.201(b). 

Each QFI shall also deliver to UST (x) on the date that is 180 days after 

the closing date of this investment, and (y) annually at the end of each 

fiscal year of such QFI (i) reports and other documents sufficient to 

evidence each Certified Entity’s status as a CDFI including 

documentation evidencing its ongoing compliance with the Fund’s 

requirements for CDFIs and (ii) a certification that such QFI and each 

Certified Entity remains in compliance with the foregoing covenants. 

Additionally, each QFI shall be required to notify UST immediately of 

any breach of the foregoing covenants. 

Remedies for breaches of the foregoing covenants shall be set forth in the 

definitive documentation for the CDCI Senior Securities. 

Access and 

Information: So long as UST or any of its affiliates holds CDCI Senior Securities 

having a face amount of at least ten percent (10%) of its initial 

investment, each QFI shall permit UST and its agents, consultants, 

contractors and advisors (x), acting through the QFI’s appropriate federal 

banking agency, or otherwise to the extent necessary to manage, evaluate 

or transfer UST’s investment, to examine its corporate books and make 

copies thereof and to discuss the affairs, finances and accounts of such 

QFI with the principal officers of such QFI, upon reasonable notice and 

at such reasonable times and as often as UST may reasonably request and 

(y) to review any information material to UST’s investment provided by 

such QFI to its appropriate federal banking agency. 
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At any time that any CDCI Senior Securities are outstanding, each QFI 

shall deliver to UST (i) annually at the end of each fiscal year of such 

QFI, an audited (to the extent available) consolidated balance sheet of 

such QFI as of such fiscal year, and audited consolidated statements of 

income, retained earnings and cash flows of such QFI for such year, 

prepared in accordance with GAAP and setting forth in each case in 

comparative form the figures for the previous fiscal year; and (ii) copies 

of any quarterly reports provided to other equity holders of such QFI or 

the QFI’s management. Additionally, to the extent a QFI receives an 

assessment on its internal controls from its auditors at any time during 

any period in which UST or any of its affiliates holds CDCI Senior 

Securities, a copy of such assessment shall also be delivered to UST. 

On an annual basis during any period in which UST or any of its 

affiliates holds CDCI Senior Securities, each QFI shall be required to 

complete and deliver to UST a survey, in a form specified by UST, 

describing, among other things, how it has utilized the capital it received 

in connection with the issuance of the CDCI Senior Securities and the 

effects of such capital on the operations and status of the QFI. 

Events of Default: For a QFI that is a BHC or SLHC, the bankruptcy of the QFI, the 

receivership of a major bank subsidiary of the QFI or, to the extent any 

Interest Deferral Period has occurred, the failure by the QFI to pay any 

related Deferred Interest (and any interest thereon) on or before the first 

day immediately following the last day of such Interest Deferral Period. 

For a QFI that is a bank or savings association, placement of the QFI into 

receivership or conservatorship. 

Transparency, 

Executive 

Compensation and 

Employ American 

Workers Act: Each QFI and its subsidiaries shall take all necessary action to ensure that 

it and its executive officers, respectively, are in compliance with (i) all 

UST guidelines regarding transparency, reporting and monitoring; (ii) 

Section 111 of the EESA, as implemented by the TARP Standards for 

Compensation and Corporate Governance set forth in 31 C.F.R. Part 30, 

all rules, regulations and guidance issued thereunder; (iii) the provisions 

of the Employ American Workers Act (Section 1611 of Division A, Title 

XVI of the American Recovery and Reinvestment Act of 2009), Public 

Law No. 111-5, effective as of February 17, 2009; and (iv) in the case of 

(ii) and (iii), all rules, regulations and guidance issued thereunder. 

Affiliate 

Transactions: For as long as UST or any of its affiliates holds any debt or equity 

securities (including the CDCI Senior Securities) of the QFI, the QFI and 
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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 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. 

Warrant: Subject to the requirements of Section 113(d)(3)(A) of the Emergency 

Economic Stabilization Act, QFIs participating in this program shall not 

be required to issue warrants to UST.