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(CDFI Credit Unions
Senior Securities)
ANNEX A
FORM OF SENIOR SUBORDINATED SECURITIES
(FORM OF FACE OF SECURITY)
“THIS SENIOR SUBORDINATED SECURITY WILL BE ISSUED AND MAY BE
TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $1,000 AND
MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER
OF SUCH SECURITIES IN A DENOMINATION OF LESS THAN $1,000 AND
MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID
AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED
TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH
SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE
RECEIPT OF PAYMENTS ON SUCH SECURITIES, AND SUCH PURPORTED
TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN
SUCH SECURITIES.
THIS SECURITY IS SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN
THE LETTER AGREEMENT BY AND BETWEEN THE CREDIT UNION AND THE
UNITED STATES DEPARTMENT OF THE TREASURY AND SECURITIES
PURCHASE AGREEMENT – STANDARD TERMS (THE “AGREEMENT”), EACH
OF WHICH ARE INCORPORATED INTO THIS SENIOR SUBORDINATED
SECURITY.
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT
INSURED BY THE UNITED STATES, ANY AGENCY OR FUND OF THE
UNITED STATES OR THE NATIONAL CREDIT UNION SHARE INSURANCE
FUND.
THIS OBLIGATION IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT,
AS TO PRINCIPAL, INTEREST AND PREMIUM, TO ALL CLAIMS AGAINST THE
CREDIT UNION HAVING THE SAME PRIORITY AS SAVINGS ACCOUNT
HOLDERS, SHAREHOLDERS OR OTHER DEPOSITORS, THE NATIONAL
CREDIT UNION SHARE INSURANCE FUND OR ANY HIGHER PRIORITY,
INCLUDING GENERAL AND SECURED CREDITORS OF THE CREDIT UNION.
THIS OBLIGATION IS NOT SECURED BY THE CREDIT UNION’S ASSETS OR
THE ASSETS OF ANY OF ITS AFFILIATES. THIS OBLIGATION IS NOT
ELIGIBLE AS COLLATERAL FOR ANY LOAN BY THE CREDIT UNION.
THE TERMS UNDER WHICH THE CREDIT UNION MAY PREPAY THIS SENIOR
SUBORDINATED SECURITY ARE SET FORTH IN THE AGREEMENT.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING
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(CDFI Credit Unions
Senior Securities)
THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT OR SUCH LAWS. EACH PURCHASER OF THIS SECURITY
IS NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. ANY TRANSFEREE OF THIS SECURITY BY ITS ACCEPTANCE
HEREOF (1) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER”
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT
IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THE SECURITIES
REPRESENTED BY THIS INSTRUMENT EXCEPT (A) PURSUANT TO A
REGISTRATION STATEMENT WHICH IS THEN EFFECTIVE UNDER THE
SECURITIES ACT, (B) FOR SO LONG AS THE SECURITIES REPRESENTED BY
THIS INSTRUMENT ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A,
TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL
BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO THE CREDIT
UNION OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
THIS INSTRUMENT IS ISSUED SUBJECT TO THE RESTRICTIONS ON
TRANSFER AND OTHER PROVISIONS OF THE AGREEMENT BETWEEN THE
CREDIT UNION AND THE INVESTOR REFERRED TO THEREIN, A COPY OF
WHICH IS ON FILE WITH THE CREDIT UNION. THIS SECURITY MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH SAID
AGREEMENT. ANY SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH
SAID
AGREEMENT
WILL
BE
VOID.”
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(CDFI Credit Unions
Senior Securities)
[NAME OF CREDIT UNION]
[Federal/State] Credit Union Charter No. ____________
$_______________
2% SENIOR SUBORDINATED SECURITY DUE [Insert for securities with 8 year maturity:
2018] [Insert for securities with 13 year maturity: 2023]
[Credit Union], a credit union organized under the laws of [___________] (the “Credit
Union,” which term includes any permitted successor thereto), for value received, hereby
promises to pay to the order of the United States Department of the Treasury or registered
assigns, by wire transfer, the principal sum of $_______________________
(_________________Dollars) on ________________________, [Insert for securities with 8
year maturity: 2018] [Insert for securities with 13 year maturity: 2023] (the “Maturity Date”)
(or any earlier redemption date or date of acceleration of the Maturity Date) and to pay interest
on the outstanding principal amount of this Senior Subordinated Security Due [Insert for
securities with 8 year maturity: 2018] [Insert for securities with 13 year maturity: 2023] (this
“Senior Subordinated Security”) (i) from ____________, or from the most recent interest
payment date to which interest has been paid or duly provided for, quarterly in arrears on
February 15, May 15, August 15 and November 15 of each year (each such date, an “Interest
Payment Date”), commencing on _____________ ________, at the rate of 2% per annum, until
the eighth anniversary of the date hereof, provided, however, that [(A)] if a CDFI Event shall
have occurred and it or any other CDFI Event is continuing at all times, from and after the 180th
day after the date on which the first CDFI Event occurred until the date on which no CDFI
Events are continuing, the Interest Rate shall be 5% per annum, [To be inserted if Issuer was not
a CDFI on February 3, 2010: and (B) if a CDFI Event shall have occurred and it or any other
CDFI Event is continuing, at all times, from and after the 270th day after the date on which the
first CDFI Event occurred until the date on which no CDFI Events are continuing, 9% per
annum] and (ii) from and after the eighth anniversary of the date hereof, at a rate of 9% per
annum (each such interest rate, the applicable “Interest Rate”) until the principal hereof shall
have been paid or duly provided for, compounded quarterly, and on any overdue principal and on
any overdue installment of interest (without duplication and to the extent that payment of such
interest is enforceable under applicable law) at the same rate per annum. The amount of interest
payable hereon shall be computed on the basis of a 360 day year comprised of twelve 30-day
months.
This Senior Subordinated Security is one of the Senior Subordinated Securities referred
to in the Letter Agreement and Securities Purchase Agreement – Standard Terms, dated as of
___________________ (as amended, modified or restated from time to time, the “Agreement”),
by and among the Credit Union and the United States Department of the Treasury, as the initial
Investor (the “Investor”). Capitalized terms used in this Senior Subordinated Security are
defined in the Agreement, unless otherwise expressly stated herein. The Senior Subordinated
Security is entitled to the benefits of the Agreement and is subject to all of the agreements, terms
and conditions contained therein, all of which are incorporated herein by this reference. This
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(CDFI Credit Unions
Senior Securities)
Senior Subordinated Security may be redeemed, in whole or in part, in accordance with the terms
and conditions set forth in the Agreement.
Interest
The interest installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will be paid to the person in whose name this Senior Subordinated
Security is registered at the close of business on the regular record date for such installment of
interest, which date shall be at the close of business on the 1st calendar day (whether or not a
business day) of the month in which each Interest Payment Date occurs (each such date, the
“Regular Record Date”). Any such installment of interest not punctually paid or duly provided
for shall forthwith cease to be payable to the Holders on such Regular Record Date and shall be
paid to the person in whose name this Senior Subordinated Security is registered at the close of
business on the date preceding the next Interest Payment Date, on the next Interest Payment
Date, along with all other amounts then due and payable. In no event, however, shall interest
exceed the maximum rate permitted by applicable law.
If an Interest Payment Date or the Maturity Date falls on a day that is not a “business
day” (as defined in the Agreement), the related payment of principal or interest will be paid on
the next business day, with the same force and effect as if made on such date, and no interest on
such payments will accrue from and after such Interest Payment Date or Maturity Date, as the
case may be. Interest payable on the Maturity Date of the Senior Subordinated Securities will be
paid to the registered Holder to whom the principal is payable upon presentation and surrender
for cancellation.
Method of Payment
The principal of this Senior Subordinated Security shall be payable upon surrender hereof
and interest on this Senior Subordinated Security shall be payable at the office or agency of the
Credit Union or an agent appointed for that purpose in any coin or currency of the United States
of America that at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest shall be made by the Credit Union to the Holders of
this Senior Subordinated Security entitled thereto as shown on the Senior Subordinated
Securities Register by wire transfer of immediately available funds to any account with a
banking institution located in the United States designated by such Holder no later than the
related Regular Record Date.
Subordination
The indebtedness evidenced by this Senior Subordinated Security is, to the extent
provided in the Agreement, subordinate and junior in right of payment to all deposit liabilities of
the Credit Union and to the Credit Union’s debt obligations to its general and secured creditors,
unless such debt obligations are explicitly made pari passu or subordinated to the Senior
Subordinated Securities, in accordance with regulations of the Appropriate Supervisory
Authority, if applicable. Each Holder of this Senior Subordinated Security, by accepting the
same agrees to and shall be bound by such provisions of the Agreement. Each Holder hereof, by
his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination
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(CDFI Credit Unions
Senior Securities)
provisions contained herein and in the Agreement by each holder of Senior Indebtedness,
whether now outstanding or hereafter incurred, and waives reliance by each such holder upon
said provisions.
The provisions of this Senior Subordinated Security are continued on the reverse side
hereof and such provisions shall for all purposes have the same effect as though fully set forth at
this place.
IN WITNESS WHEREOF, the Credit Union has caused this instrument to be duly
executed this
_______________ day of ________________, __________.
[NAME OF CREDIT UNION]
By: ____________________________________
Name:
Title:
Attest:
By: ____________________________________
Name:
Title:
A-5
(CDFI Credit Unions
Senior Securities)
(FORM OF REVERSE OF SECURITY)
This Senior Subordinated Security is one of the Senior Subordinated Securities of the
Credit Union (herein sometimes referred to as the “Senior Subordinated Securities”), issued or to
be issued under and pursuant to a Letter Agreement and Securities Purchase Agreement –
Standard Terms, dated as of ____________, 2010 (as amended, modified or restated from time
to time, the “Agreement”), by and between the Credit Union and the United States Department
of the Treasury, as the initial Investor (the “Investor”), to which Agreement reference is hereby
made for a description of the rights, limitations of rights, obligations, duties and immunities
thereunder of Credit Union and the Holders of the Senior Subordinated Securities. This Senior
Subordinated Security is a single series note with a face value in aggregate principal amount as
set forth on the front of this Senior Subordinated Security.
Defaults and Remedies
If an Event of Default as provided for under Section 5.1 of the Agreement occurs, then
the principal of, interest accrued on, and other obligations payable under this Senior
Subordinated Security and the Transaction Documents, will immediately become due and
payable. Notwithstanding anything to the contrary herein or in the Agreement, other than
Section 5.2 of the Agreement, there is no right of acceleration for any default, including a default
in the payment of principal or interest or the performance of any other covenant or obligation by
the Credit Union under this Senior Subordinated Security or the Agreement.
Amendment and Waiver
No amendment, modification, termination or waiver of any provision of the Agreement,
the Senior Subordinated Securities or any of the other Transaction Documents, or consent to any
departure by the Credit Union therefrom, shall be effective unless made in writing and signed by
an officer or a duly authorized representative of the Credit Union, and in the case of the Senior
Subordinated Securities, the Majority Holders; provided that for so long as the Senior
Subordinated Securities are outstanding, the Investor may at any time and from time to time
unilaterally amend Section 4.1(d) of the Agreement to the extent the Investor deems necessary,
in its sole discretion, to comply with, or conform to, any changes after the Signing Date in any
federal statutes, any rules and regulations promulgated thereunder and any other publications or
interpretative releases of the Fund governing CDFIs, including, without limitation, any changes
in the criteria for certification as a CDFI by the Fund; provided further that no amendment,
modification, termination or waiver with respect to the Senior Subordinated Securities shall,
unless in writing and signed by all Holders, do any of the following: (A) change the principal of
or the rate of interest on any Senior Subordinated Security; (B) extend any date fixed for any
payment of principal or interest; (C) change the definition of the terms “Holders” or “Majority
Holders” or the percentage of Holders which shall be required for Holders to take any action
hereunder; or (D) consent to the assignment, delegation or other transfer by the Credit Union of
any of its rights and obligations under any Transaction Documents.
Any such consent or waiver by the Holder of this Senior Subordinated Security shall be
conclusive and binding upon such Holder and upon all future Holders of this Senior
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(CDFI Credit Unions
Senior Securities)
Subordinated Security and of any Senior Subordinated Security issued in exchange herefor or in
place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Senior Subordinated Security.
No reference herein to the Agreement and no provision of this Senior Subordinated
Security or of the Agreement shall alter or impair the obligation of the Credit Union, which is
absolute and unconditional, to pay the principal of and interest on this Senior Subordinated
Security at the time and place and at the rate and in the money herein prescribed.
Limitation on Dividends and Repurchases of Equity Securities
The Credit Union’s ability to declare and pay dividends and purchase or acquire Capital
Interests or other equity securities of any kind of any Credit Union Subsidiary or any Senior
Subordinated Security is limited by the terms of the Agreement. The Credit Union’s ability to
redeem this Senior Subordinated Security is limited by the terms of the Agreement.
Denominations; Transfer; Exchange
The Senior Subordinated Securities are issuable only in registered form without coupons
in minimum denominations of $1,000.00 and integral multiples of $1,000.00 in excess thereof.
As provided in the Agreement, this Senior Subordinated Security is transferable by the Holder
hereof on the Senior Subordinated Securities Register maintained by the Credit Union or its
agent, upon surrender of this Senior Subordinated Security for registration of transfer at the
office or agency of the Credit Union or its agent, accompanied by a written instrument or
instruments of transfer in form satisfactory to the Credit Union duly executed by the Holder
hereof or his or her attorney duly authorized in writing, and thereupon one or more new Senior
Subordinated Securities of authorized denominations and for the same aggregate principal
amount will be issued to the designated transferee or transferees. No service charge will be
made for any such registration of transfer, but the Credit Union may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Senior Subordinated Security,
the Credit Union and any agent thereof may deem and treat the Holder hereof as the absolute
owner hereof (whether or not this Senior Subordinated Security shall be overdue and
notwithstanding any notice of ownership or writing hereon made) for the purpose of receiving
payment of or on account of the principal hereof and (subject to the Agreement) interest due
hereon and for all other purposes, and none of the Credit Union or any agent thereof shall be
affected by any notice to the contrary.
No Recourse Against Others
No recourse shall be had for the payment of the principal of or interest on this Senior
Subordinated Security, or for any claim based hereon, or otherwise in respect hereof, or based on
or in respect of the Agreement or any other Transaction Document, against any incorporator,
Mutual Interest Holder, employee, officer or director, as such, past, present or future, as such, of
the Credit Union or of any successor thereto, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being,
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(CDFI Credit Unions
Senior Securities)
by the acceptance hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
Governing Law
THE AGREEMENT AND THIS SENIOR SUBORDINATED SECURITY SHALL
EACH BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
FEDERAL LAW OF THE UNITED STATES, IF AND TO THE EXTENT SUCH LAW IS
APPLICABLE AND OTHERWISE IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
Abbreviations
The following abbreviations, when used in the inscription on the face of this Senior
Subordinated Security, shall be construed as though they were written out in full according to
applicable laws or regulations:
TEN CON – as tenants in common TEN ENT – as tenants in the entireties
JT TEN – as joint tenants with right of survival
UNIF GIFT MIN ACT – under Uniform Gift to Minors Act and not as tenants
Additional abbreviations may also be used though not in the above list.
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(CDFI Credit Unions
Senior Securities)
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby assigns and transfers this Senior
Subordinated Security to:
________________________________________________
(Assignee’s social security or tax identification number)
________________________________________________
(Address and zip code of assignee)
and irrevocably appoints __________________________ agent to transfer this Senior
Subordinated Security on the books of the Credit Union. The agent may substitute another to act
for him or her.
Date: ________________
Signature: _______________________________________
(Sign exactly as your name appears on the other side of this Senior Subordinated Security)
Signature Guarantee:_______________________________
[Signature must be guaranteed by an “eligible guarantor
institution” that is a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the
Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion
Program (“STAMP”) or such other “signature guarantee
program” as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as
amended.]
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ANNEX E
FORM OF DISCLOSURE AND ACKNOWLEDGMENT
[Name of Credit Union] and the United States Department of the Treasury hereby acknowledge
and agree that the United States Department of the Treasury has committed [amount of funds] to
a secondary capital account with [name of Credit Union] under the following terms and
conditions:
1. Term. The funds committed to the secondary capital account are committed for a period of
[8][13] years.
2. Redemption prior to maturity. Subject to the conditions set forth in 12 CFR 701.34, the funds
committed to the secondary capital account are redeemable prior to maturity only at the option of
the [name of Credit Union] and only with the prior approval of the Appropriate Supervisory
Authority (as defined in that certain Letter Agreement, dated as of the date hereof, between
[name of Credit Union] and the United States Department of the Treasury).
3. Uninsured, non-share account. The secondary capital account is not a share account and the
funds committed to the secondary capital account are not insured by the National Credit Union
Share Insurance Fund or any other governmental or private entity.
4. Prepayment risk. Redemption of secondary capital prior to the account’s original maturity date
may expose the account investor to the risk of being unable to reinvest the repaid funds at the
same rate of interest for the balance of the period remaining until the original maturity date. The
investor acknowledges that it understands and assumes responsibility for prepayment risk
associated with the [name of Credit Union]’s redemption of the investor’s secondary capital
account prior to the original maturity date.
5. Availability to cover losses. The funds committed to the secondary capital account and any
interest paid into the account may be used by [name of Credit Union] to cover any and all
operating losses that exceed the Credit Union’s net worth exclusive of allowance accounts for
loan losses, and in the event the funds are so used, [name of Credit Union] will under no
circumstances restore or replenish those funds to the United States Department of the Treasury.
Dividends are not considered operating losses and are not eligible to be paid out of secondary
capital.
6. Accrued interest. By initialing below, [name of Credit Union] and United States Department
of Treasury agree that accrued interest will be:
___ Paid into and become part of the secondary capital account;
_X_ Paid directly to the United States Department of the Treasury;
UST Sequence No. [___]
@FedFRASER