WHEREAS, the United States Department of the
Treasury (the “Investor” or the “Treasury”)
may from time to time agree to purchase subordinated debentures from
Eligible Financial Institutions that elect to participate in the
Emergency Capital Investment Program (“ECIP”);
WHEREAS, an Eligible Financial Institution
electing to participate in ECIP and issue securities to the Investor
shall enter into a letter agreement (the “Letter Agreement”)
with the Investor that incorporates this Securities Purchase
Agreement – Standard Terms (the Eligible Financial Institution
identified in the Letter Agreement, the “Credit Union”);
WHEREAS, the Credit Union intends to issue in a
private placement subordinated debentures (each, a “Subordinated
Security” and together, the “Subordinated Debt”),
in an amount as set forth on Schedule A to the Letter
Agreement and the Investor intends to purchase (the “Purchase”)
from the Credit Union the Subordinated Debt;
WHEREAS, the Credit Union (i) provides, among
other things, loans, grants, and forbearance for small businesses,
minority-owned businesses, and consumers, in Target Communities; and
(ii) intends to participate in the ECIP to increase its Qualified
Lending in Target Communities that may be disproportionately impacted
by the economic effects of the COVID-19 pandemic, as set forth in the
Investment and Lending Plan submitted to Investor as part of the
Credit Union’s ECIP Application; and
WHEREAS, the Purchase will be governed by this
Securities Purchase Agreement – Standard Terms and the Letter
Agreement, including the schedules thereto (the “Schedules”),
specifying additional terms of the Purchase. This Securities Purchase
Agreement – Standard Terms (including the Annexes hereto) and
the Letter Agreement (including the Schedules thereto) are together
referred to as this “Agreement”. All references in
this Securities Purchase Agreement – Standard Terms to
“Schedules” are to the Schedules attached to this
Securities Purchase Agreement. The Disclosure Schedule (as defined
below) shall be attached to the Letter Agreement.
NOW, THEREFORE, in consideration of the
premises, and of the representations, warranties, covenants and
agreements set forth herein, the parties agree as follows:
Definitions
. Except as otherwise specified herein or as
the context may otherwise require, the following terms have the
respective meanings set forth below for all purposes of this
Agreement.
“Affiliate” means (a) with
respect to any person, any person directly or indirectly controlling,
controlled by or under common control with, such other person, and
(b) with respect to the Credit Union, a credit union service
organization, as defined under 12 C.F.R. Part 712. For purposes
of this definition, “control” (including, with
correlative meanings, the terms “controlled by”
and “under common control with”), when used with
respect to any person, means the possession, directly or indirectly,
of the power to cause the direction of management and/or policies of
such person, whether through the ownership of voting securities by
contract or otherwise.
“Appropriate Supervisory Authority”
means the National Credit Union Administration in the case of credit
unions chartered under the Federal Credit Union Act and the
appropriate State Supervisory Authority along with the National
Credit Union Administration, where applicable, in the case of
state-chartered credit unions whose share accounts are insured by the
National Credit Union Share Insurance Fund.
“Bank Holding Company” has the
meaning set forth in the definition of Eligible Financial
Institution.
“Baseline” means the “Initial
Baseline Qualified Lending” set forth on the Initial
Supplemental Report, subject to adjustment as provided in the
applicable Quarterly Supplemental Report.
“Board of Directors” has the
meaning set forth in Section 2.3(e).
“Call Report” means the NCUA’s
call report for Credit Unions on Form 5300.
“Capitalization Date” means the
most recent fiscal month-end preceding the Signing Date.
“CDFI” means a regulated
community development financial institution currently certified by
the CDFI Fund pursuant to 12 C.F.R. 1805.201(a) as having satisfied
the eligibility requirements of the Community Development Financial
Institutions Program and that satisfies the eligibility requirements
for a community development financial institution set forth in 12
C.F.R. 1805.201 (b)(1) – (6).
“CDFI Fund” means the Community
Development Financial Institution Fund of the United States
Department of the Treasury.
“Community Development Banking Act”
means the Community Development Banking and Financial Institutions
Act of 1994 (12 U.S.C. 4701 et seq.).
“Contagion Event” means the
outbreak or continued presence of contagious disease, epidemic or
pandemic (including SARS-CoV-2 or COVID-19, or any evolutions or
mutations of thereof, or any other viruses (including influenza)),
and the governmental responses thereto.
“Contagion Event Measures”
means any quarantine, “shelter in place”, “stay at
home”, workforce reduction, social distancing, shut down,
closure, sequester or other directives, guidelines or recommendations
promulgated by any Governmental Entity, including the Centers for
Disease Control and Prevention and the World Health Organization, in
each case, in connection with or in response to a Contagion Event.
“Disclosure Schedule” means the
schedule to the Letter Agreement delivered to the Investor on or
prior to the Signing Date, setting forth, among other things, items
the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a
provision hereof or as an exception to one or more representations or
warranties contained in Section 3.1.
“ECIP Application” has the
meaning set forth in the definition of Eligible Financial
Institution.
“ECIP Interim Final Rule” means
the interim final rule promulgated by the Investor setting forth
restrictions on executive compensation, share buybacks and dividends
applicable to participants in ECIP, originally codified at 31 C.F.R.
Part 35.
“ECIP Period” has the meaning
set forth in the ECIP Interim Final Rule.
“Eligible Financial Institution”
means a financial institution that is, as of the date of submitting
an application to participate in ECIP (the “ECIP
Application”), (1)(i) a CDFI or (ii) a MDI; and (2)(i)
an insured depository institution not controlled by a company
registered as a bank holding company with the Federal Reserve
pursuant to 12 U.S.C. §1842 (a “Bank Holding Company”)
or a company registered as a savings and loan holding company with
the Federal Reserve pursuant to 12 U.S.C. §1467(a) (a “Savings
and Loan Holding Company”) that is also an Eligible Financial
Institution, (ii) a Bank Holding Company; (iii) a Savings and Loan
Holding Company; or (iv) any credit union the member accounts of
which are insured by the National Credit Union Share Insurance Fund.
“Eligible Nonprofit” has the
meaning set forth in Section 6.6(f)(iv).
“Event of Default” has the
meaning set forth in Section 5.1.
“Exchange Act” means the
Securities Exchange Act of 1934 (15 U.S.C. § 78a et
seq.).
“Existing Parity Subordinated Debt”
means subordinated debt of the Credit Union outstanding on the
Signing Date that ranks equally with the Subordinated Debt and is
identified on Schedule A.
“Extraordinary Dividends” means
any extraordinary or special dividends paid on Capital Interests or
other capital instruments of any kind of the Credit Union in excess
of dividends paid at the stated market dividend rates on share
accounts and other deposit liabilities of Members and the stated
interest or dividend rates payable on any other capital instruments
of the Credit Union.
“GAAP” means generally accepted
accounting principles in the United States.
“Holder” means a holder of the
Subordinated Debt.
“Indebtedness” means, whether
or not recourse is to all or a portion of the assets of the Credit
Union and whether or not contingent, (i) the claims of the Credit
Union’s secured and general creditors; (ii) every obligation of
the Credit Union for money borrowed; (iii) every obligation of the
Credit Union evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (iv) every
reimbursement obligation of the Credit Union, contingent or
otherwise, with respect to letters of credit, bankers’
acceptances, security purchase facilities or similar facilities
issued for the account of the Credit Union; (v) every obligation of
the Credit Union issued or assumed as the deferred purchase price of
property or services; (vi) every capital lease obligation of the
Credit Union; (vii) all indebtedness of the Credit Union for claims
in respect of derivative products, including interest rate, foreign
exchange rate and commodity forward contracts, options and swaps and
similar arrangements; (viii) every obligation of the type referred to
in clauses (i) through (vii) of another person and all dividends
of another person the payment of which, in either case, the Credit
Union has guaranteed or is responsible or liable for directly or
indirectly, as obligor or otherwise; and (ix) every obligation of the
type referred to in clauses (i) through (vii) of another person
and all dividends of another person the payment of which, in either
case, is secured by a lien on any property or assets of the Credit
Union.
“Insured CDFI” means an insured
community development financial institution, as defined in 12 U.S.C.
4702(13).
“Interest Deferral Period”
means the period during which an installment of interest is deferred
in accordance with Section 6.14.
“Interest Period” means the
period from and including any Interest Payment Date to, but
excluding, the next following Interest Payment Date; provided,
however, the initial Interest Period shall be the period from
and including the Second Anniversary to the next succeeding Interest
Payment Date; provided, further, that if the Second
Anniversary is a date that is an Interest Payment Date, then the
initial Interest Period shall be the period from and including the
Second Anniversary to, but excluding the next Interest Payment Date.
Interest Payment Dates and Interest Periods will not be adjusted for
business days.
“Investment and Lending Plan”
means an investment and lending plan of the Credit Union that meets
the criteria set forth in Section 104A(d)(4) of the Community
Development Banking Act.
“knowledge of the Credit Union”
or “Credit Union’s knowledge” means the
actual knowledge after reasonable and due inquiry of the “officers”
(as defined in Rule 3b-2 under the Exchange Act) of the Credit
Union.
“Material Adverse Effect” means
a material adverse effect on (i) the business, results of operation
or financial condition of the Credit Union and its consolidated
subsidiaries taken as a whole; provided, however, that
Material Adverse Effect shall not be deemed to include the effects of
(A) changes after the date of the Letter Agreement (the “Signing
Date”) in general business, economic or market conditions
(including changes generally in prevailing interest rates, credit
availability and liquidity, currency exchange rates and price levels
or trading volumes in the United States or foreign securities or
credit markets), or any outbreak or escalation of hostilities,
declared or undeclared acts of war or terrorism, in each case
generally affecting the industries in which the Credit Union and its
subsidiaries operate (including any such changes resulting from a
Contagion Event), (B) changes or proposed changes after the Signing
Date in GAAP or RAP, or authoritative interpretations thereof, or (C)
changes or proposed changes after the Signing Date in securities,
banking and other laws of general applicability or related policies
or interpretations of Governmental Entities, including any law in
respect of Taxes, and laws newly enacted for, relating to or arising
out of efforts to implement Contagion Event Measures and address the
spread of any Contagion Event (in the case of each of these
clauses (A), (B) and (C), other than changes or occurrences to
the extent that such changes or occurrences have or would reasonably
be expected to have a materially disproportionate adverse effect on
the Credit Union and its consolidated subsidiaries taken as a whole
relative to comparable U.S. banking or financial services
organizations); or (ii) the ability of the Credit Union to consummate
the Purchase and other transactions contemplated by this Agreement
and perform its obligations hereunder or thereunder on a timely
basis.
“MDI” means a minority
depository institution, (i) as defined in section 308 of
the Financial Institutions Reform, Recovery, and Enforcement Act of
1989 (12 U.S.C. 1463 et seq.); or (ii) considered to be a
minority depository institution by the National Credit Union
Administration or the “appropriate Federal banking agency”
as defined in Section 3(q) of the Federal Deposit Insurance Act
(12 U.S.C. 1813(q)), as applicable; or (iii) as listed in the
Federal Deposit Insurance Corporation’s Minority Depository
Institutions List published for the third quarter of 2020.
“Members” means persons having
ownership rights in the Credit Union by virtue of their ownership of
a deposit at the Credit Union.
“Offer Price” has the meaning
set forth in Section 6.6(f)(ii).
“Offered Securities” has the
meaning set forth in Section 6.6(f)(ii).
“Original Issue Date” means the
date on which the Subordinated Debt is issued by the Credit Union to
the Investor.
“Previously Disclosed” means
information set forth in the Disclosure Schedule or the Disclosure
Update, as applicable; provided, however, that disclosure in
any section of such Disclosure Schedule or Disclosure Update, as
applicable, shall apply only to the indicated section of this
Agreement except to the extent that it is reasonably apparent from
the face of such disclosure that such disclosure is relevant to
another section of this Agreement; provided, further,
that the inclusion of information in a Disclosure Update shall not be
deemed to correct an existing breach or misrepresentation and,
therefore, shall not obligate the Investor to consummate the Purchase
or limit or affect any rights of or remedies available to the
Investor.
“Qualified Lending” has the
meaning set forth in the definition of Qualified Lending in the
applicable Supplemental Report.
“RAP” means regulatory
accounting practices.
“Related Party” has the meaning
set forth in Section 3.1(x).
“Response Notice” has the
meaning set forth in Section 6.6(f)(ii).
“Review Period” has the meaning
set forth in Section 6.6(f)(ii).
“ROFR Notice” has the meaning
set forth in Section 6.6(f)(ii).
“Savings and Loan Holding Company”
has the meaning set forth in the definition of Eligible Financial
Institution.
“Senior Executive Officer” has
the meaning set forth in the ECIP Interim Final Rule.
“Senior Indebtedness” means,
with respect to the Subordinated Debt, (i) all deposit
liabilities of the Credit Union, (ii) the principal of (and
premium, if any) and interest, if any (including interest accruing on
or after the appointment of a receiver or conservator relating to the
Credit Union, whether or not such claim for post appointment interest
is allowed), on all Indebtedness, whether outstanding on the date of
execution of this Agreement, or hereafter created, assumed or
incurred, and any deferrals, renewals or extensions of such
Indebtedness, (iii) any obligation to holders of Capital
Interests or shares of equity in the Credit Union (if and upon
conversion of the Credit Union to a stock-based entity) arising as a
result of their status as holders of such Capital Interests or shares
of equity and (iv) any claims of the National Credit Union Share
Insurance Fund, provided, however, that Senior
Indebtedness shall not include (A) Existing Parity Subordinated
Debt, or (B) any other subordinated debt of the Credit Union
that by its terms ranks pari passu or junior to the
Subordinated Debt issued hereunder.
“Signing Date” has the meaning
set forth in the definition of Material Adverse Effect.
“State Supervisory Authority”
means the appropriate governmental agency of the state in which the
Credit Union is chartered, which regulates state-chartered credit
unions.
“Supplemental Reports” means,
collectively, the Initial Supplemental Report and the Quarterly
Supplemental Reports.
“Target Communities” means the
categories of communities set forth under the “Categories of
Target Communities” heading in the “Rate Reduction
Incentive Guidelines” published by the Treasury.
“Tax” or “Taxes”
means any federal, state, local or foreign income, gross receipts,
property, sales, use, license, excise, franchise, employment,
payroll, withholding, alternative or add-on minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty or addition imposed by any
Governmental Entity.
“Transaction Documents” means
this Agreement, the Letter Agreement, the Subordinated Debt, and all
other instruments, documents and agreements executed by or on behalf
of the Credit Union and delivered concurrently herewith or at any
time hereafter to or for the benefit of any Holders in connection
with the transactions contemplated by this Agreement, all as amended,
supplemented or modified from time to time.
“Transfer” has the meaning set
forth in Section 6.6(f).
Interpretation
. When a reference is made in this Agreement
to “Recitals,” “Articles,” “Sections,”
or “Annexes” such reference shall be to a Recital,
Article or Section of, or Annex to, this Securities Purchase
Agreement – Standard Terms, a reference to “Schedules”
shall be to a Schedule to this Securities Purchase Agreement and a
reference to “Disclosure Schedules,” shall be to the
Disclosure Schedule to the Letter Agreement, in each case, unless
otherwise indicated. The terms defined in the singular have a
comparable meaning when used in the plural, and vice versa.
References to “herein”, “hereof”, “hereunder”
and the like refer to this Agreement as a whole and not to any
particular section or provision, unless the context requires
otherwise. The table of contents and headings contained in this
Agreement are for reference purposes only and are not part of this
Agreement. Whenever the words “include”, “includes”
or “including” are used in this Agreement, they shall be
deemed followed by the words “without limitation”. No
rule of construction against the draftsperson shall be applied in
connection with the interpretation or enforcement of this Agreement,
as this Agreement is entered into between sophisticated parties
having access to counsel. All references to “$” or
“dollars” mean the lawful currency of the United States
of America. Except as expressly stated in this Agreement, all
references to any statute, rule or regulation are to the statute,
rule or regulation as amended, modified, supplemented or replaced
from time to time (and, in the case of statutes, include any rules
and regulations promulgated under the statute and, in the case of
interim final rules, include such rules as may be finalized, revised
or succeeded by a final rule) and to any section of any statute, rule
or regulation include any successor to the section. References to a
“business day” shall mean any day except Saturday,
Sunday and any day on which banking institutions in the State of New
York or the District of Columbia generally are authorized or required
by law or other governmental actions to close.
Disclosure Restrictions
. No representation, warranty,
covenant or other agreement or provision contained in this Agreement
shall be deemed to contemplate or require the disclosure of
“confidential supervisory information” or other similar
information the disclosure of which is restricted pursuant to laws
and regulations to which the Credit Union is subject, including 12
C.F.R. Part 792 of the NCUA Regulations.
Purchase; Closing
Purchase
. On the terms and subject to the conditions
set forth in this Agreement, the Credit Union agrees to sell and the
Investor agrees to purchase, at the Closing (as hereinafter defined),
the Subordinated Debt in the form attached hereto as Annex A,
appropriately completed in conformity herewith and duly and validly
issued, authorized and executed by the Credit Union, in the aggregate
principal amount set forth on Schedule A for the purchase
price set forth on Schedule A (the “Purchase
Price”). The Subordinated Debt, including the principal and
interest, shall be unsecured and subordinate and junior in right of
payment to Senior Indebtedness and other claims in the liquidation of
the Credit Union to the extent set forth in Article VII
hereof.
Closing
.
On the terms and subject to the conditions
set forth in this Agreement, the closing of the Purchase (the
“Closing”) will take place by electronic
exchange of documents at 8:00 am, New York City time, on the date
set forth in Schedule A or as soon as practicable
thereafter, or at such other time and date as shall be agreed
between the Credit Union and the Investor. The time and date on
which the Closing occurs is referred to in this Agreement as the
“Closing Date”.
Subject to the fulfillment or waiver of
the conditions to Closing in Section 2.3,
at the Closing the Credit Union will deliver, by registered mail
or by courier or express delivery service (with confirmation of
delivery, and tracking information, where possible) to the address
provided in Schedule A, the Subordinated Debt as
evidenced by one or more debentures dated as of the Closing Date
and bearing appropriate legends as hereinafter provided for, in
exchange for payment in full of the Purchase Price by wire
transfer of immediately available United States funds to a bank
account or credit union account designated by the Credit Union on
Schedule A.
Closing Conditions
. The obligation of the Investor to
consummate the Purchase is subject to the fulfillment (or waiver by
the Investor) at or prior to the Closing of each of the following
conditions:
(i) any
approvals or authorizations of all United States and other
governmental, regulatory or judicial authorities (each, a
“Governmental Entity”, and collectively,
“Governmental Entities”) required for the
consummation of the Purchase shall have been obtained or made in
form and substance reasonably satisfactory to each party and shall
be in full force and effect and all waiting periods required by
United States and other applicable law, if any, shall have expired
and (ii) no provision of any applicable United States or other law
and no judgment, injunction, order or decree of any Governmental
Entity shall prohibit the purchase and sale of the Subordinated
Debt as contemplated by this Agreement;
(i) the representations and
warranties of the Credit Union set forth in Section 3.1
shall be true and correct in all respects as though made on and as
of the Closing Date (other than representations and warranties
that by their terms speak as of another date, which
representations and warranties shall be true and correct in all
respects as of such other date) and (ii) the Credit Union
shall have performed in all respects all obligations required to
be performed by it under this Agreement at or prior to the
Closing;
the Credit Union shall have delivered to the Investor a
certificate signed on behalf of the Credit Union by a Senior
Executive Officer, in substantially the form attached hereto as
Annex B;
if applicable,
the Credit Union shall have duly adopted and filed with the
Secretary of State of its jurisdiction of organization or other
applicable Governmental Entity, an amendment to its certificate or
articles of incorporation, articles of association, organization
certificate or similar organizational document (“Charter”)
and its bylaws as in effect on the Closing Date;
the Credit
Union shall have delivered to the Investor true, complete and
correct certified copies of the Charter and bylaws of the Credit
Union and the resolutions of the Board of Directors of the Credit
Union (the “Board of Directors”) authorizing
the execution and delivery of this Agreement and the performance
of its obligations hereunder, including the issuance of the
Subordinated Debt;
the Credit Union shall have delivered to
the Investor a good standing or equivalent certificate from the
Secretary of State of its jurisdiction of organization or other
applicable Governmental Entity, dated as of a recent date, with
respect to the existence, organization and, if applicable, good
standing of the Credit Union;
the Credit Union shall have delivered to
the Investor a certificate addressing the incumbency of each
officer of the Credit Union who signs the Letter Agreement, the
certificate referred to in Section 2.3(c)
and, if applicable, the debentures representing the Subordinated
Debt (provided that if any such officer ceases to serve in
such officer’s position following the Signing Date, then the
Credit Union shall deliver a duly updated incumbency certificate
reflecting the incumbency of the respective officers as of the
Closing);
the Credit Union shall have delivered to
the Investor a written opinion from counsel to the Credit Union
(which may be internal counsel), addressed to the Investor and
dated as of the Closing Date, in substantially the form attached
hereto as Annex C;
the Credit Union shall have delivered to
the Investor, or the designee identified in writing (which may be
via e-mail) by the Investor prior to the Closing Date, physical
debentures in proper form evidencing the Subordinated Debt to the
Investor or its designee(s) in the form attached hereto as
Annex A;
the Credit Union shall have delivered to the Investor a copy of
the Disclosure Schedule on or prior to the Signing Date and, to
the extent that any information set forth on the Disclosure
Schedule needs to be updated or supplemented to make it true,
complete and correct as of the Closing Date, (i) the Credit Union
shall have delivered to the Investor an update to the Disclosure
Schedule (the “Disclosure Update”), setting
forth any information necessary to make the Disclosure Schedule
true, correct and complete as of the Closing Date and (ii) the
Investor, in its sole discretion, shall have approved the
Disclosure Update, provided, however, that the
delivery and acceptance of the Disclosure Update shall not be
deemed to obligate the Investor to consummate the Purchase nor
limit or affect any rights of or remedies available to the
Investor;
the Credit Union shall have delivered to the Investor on or prior
to the Signing Date each of the consolidated financial statements
of the Credit Union and its consolidated subsidiaries for each of
the last three (3) completed fiscal years of the Credit Union
(which shall be audited to the extent audited financial statements
are available prior to the Signing Date) and each completed
quarterly period since the last completed fiscal year
(collectively, the “Credit Union Financial Statements”);
if the Credit Union is a low-income designated Credit Union, (i)
either (A) the Credit Union shall have received notice from the
Appropriate Supervisory Authority that a “Secondary
Capital Plan” (within the meaning of Section 701.34(b)
of the regulations promulgated by the National Credit Union
Administration (the “NCUA”) and codified in 12
C.F.R. Parts 700-797 (the “NCUA Regulations”)),
covering the Subordinated Debt has been approved (the “SCP
Notice”) or (B) 45 days shall have passed since the
Credit Union submitted such a Secondary Capital Plan to the
Appropriate Supervisory Authority and such Secondary Capital Plan
has not been approved or disapproved and (ii) the Credit Union
shall have delivered to Investor (A) a certified copy of the SCP
Notice or (B) a certification that such Secondary Capital Plan has
neither been approved nor disapproved;
if the Credit Union is a low-income
designated Credit Union, the Credit Union shall have delivered to
the Investor a copy of a “Disclosure and Acknowledgement”
(within the meaning of Section 701.34(b)(11) of the NCUA
Regulations) executed by the Credit Union and the Investor as of
the Signing Date in the form attached hereto as Annex H;
and
at least ten (10) business days prior to the Closing Date, the
Credit Union shall have delivered to the Investor (i) a report,
substantially in the form attached in Annex E, setting
forth its calculation of Qualified Lending for the annual period
ending on September 30, 2020 (the “Initial Supplemental
Report”) and (ii) a certification, substantially in the
form of Annex F, signed by the Credit Union’s
principal executive officer and principal financial officer (each
as defined in the ECIP Interim Final Rule), as well as the
directors (trustees) of the Credit Union who attest to the Credit
Union’s Call Report, certifying to the Investor that the
information provided in the Initial Supplemental Report is
accurate; and
at least ten (10) business days prior to
the Closing Date, the Credit Union shall have delivered to the
Investor and the NCUA, an Investment and Lending Plan describing
to the satisfaction of the Investor: (i) how the Credit Union’s
business strategy and operating goals will address the community
development needs in communities that may be disproportionately
impacted by the economic effects of COVID-19, which includes the
needs of small businesses, consumers, nonprofit organizations and
other projects in Target Communities; (ii) a plan to provide
community outreach and communication; and (iii) how the Credit
Union plans to expand or maintain significant lending or
investment activity in low- or moderate-income and minority
communities, especially those that may be disproportionately
impacted by COVID-19, to historically disadvantaged borrowers, and
to minorities that have significant unmet capital or financial
services needs.
Representations and Warranties
Representations and Warranties of the Credit Union
. Except as Previously Disclosed, the Credit
Union represents and warrants to the Investor that as of the Signing
Date and as of the Closing Date (or such other date specified
herein):
Organization,
Authority and Significant Subsidiaries. The Credit Union has
been duly formed and is validly existing and, if applicable, in
good standing as a credit union chartered under the laws of its
jurisdiction of organization, with the necessary power and
authority to own, operate and lease its properties and conduct its
business in all material respects as it is being currently
conducted, and except as has not, individually or in the
aggregate, had and would not reasonably be expected to have a
Material Adverse Effect, has been duly qualified as a foreign
entity for the transaction of business and, if applicable, is in
good standing under the laws of each other jurisdiction in which
it owns or leases properties or conducts any business so as to
require such qualification; each subsidiary of the Credit Union
(each, a “Credit Union Subsidiary” and,
collectively, the “Credit Union Subsidiaries”)
that would be considered a “significant subsidiary”
within the meaning of Rule 1-02(w) of Regulation S-X under
the Securities Act of 1933 (the “Securities Act”)
(each such Credit Union Subsidiary, a “Significant
Subsidiary”), has been duly formed and is validly
existing in good standing under the laws of its jurisdiction of
organization. The Charter and bylaws of the Credit Union, copies
of which have been provided to the Investor prior to the Signing
Date, are true, complete and correct copies of such documents as
in full force and effect as of the Signing Date and as of the
Closing Date.
Capitalization.
The authorized and outstanding credit union membership share
interests and accounts, regardless of form (“Member
Shares”) and capital instruments authorized by law,
including subordinated debt (“Other Capital Instruments”
and, together with the Member Shares, collectively, the “Capital
Interests”) and any authorized or outstanding
instruments convertible into, or exercisable or exchangeable for,
Capital Interests, as of the most recent fiscal month-end
preceding the Signing Date (the “Capitalization Date”)
are set forth on Schedule B. The outstanding Capital
Interests in the Credit Union have been duly authorized and are
validly issued and outstanding, fully paid and nonassessable. Each
holder of 5 percent or more of the Member Shares, and each holder
of the Other Capital Interests, and such holder’s primary
address are set forth on Schedule B. The Other Capital
Instruments are not subject to preemptive rights (and were not
issued in violation of any preemptive rights). As of the Signing
Date, the Credit Union does not have outstanding any securities or
other obligations providing the holder the right to acquire its
Other Capital Instruments that are not reserved for issuance as
specified on Schedule B, and the Credit Union has not
made any other commitment to authorize, issue or sell any Other
Capital Instruments that is not specified on Schedule B.
Since the Capitalization Date, the Credit Union has not issued any
Other Capital Instruments, except as disclosed on Schedule B.
Subordinated
Debt; Enforceability. This Agreement has been duly authorized,
executed and delivered and is, and the Subordinated Debt, when
executed and delivered, will be, the legal, valid and binding
obligations of the Credit Union, each enforceable in accordance
with its respective terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy,
receivership, conservatorship, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors’
rights generally and general equitable principles, regardless of
whether such enforceability is considered in a proceeding at law
or in equity (“Bankruptcy Exceptions”). The
aggregate principal amount of the Subordinated Debt does not
exceed the maximum specified in the Letter Agreement.
The Credit Union (A) is chartered under either (x) the Federal
Credit Union Act of June 26, 1934 (the “Federal Credit
Union Act”) or (y) the laws of any State, the District
of Columbia or any territory or possession of the United States;
(B) has its deposits insured by the National Credit Union
Share Insurance Fund, if it is not chartered under the Federal
Credit Union Act; (C) is a “natural person credit union”
as defined in 12 C.F.R. 725.2(m) and (D) is not a “corporate
credit union” as defined in 12 C.F.R. 704.2.
The Credit Union satisfies the definition
of “Eligible Financial Institution” and is in
compliance with Section 104A of the Community Development
Banking Act, and all rules and regulations issued by the Investor
thereunder, including the ECIP Interim Final Rule.
The (A) information provided by the
Credit Union in the ECIP Application is true, correct and
complete in all material respects and (B) projections included in
the Investment and Lending Plan submitted as part of the ECIP
Application were reasonable on the date the ECIP Application was
submitted to the Investor, and continue to be reasonable as of
the date hereof.
The Credit Union has not made any
material changes, nor are any material changes anticipated to be
made, to the Investment and Lending Plan the Credit Union
submitted in connection with its ECIP Application.
Neither the Credit Union nor any Credit
Union Subsidiary is a “covered entity” as defined in
Section 104A(h)(2)(ii) of the Community Development Banking Act.
The Credit Union is not ineligible to
participate in ECIP under Section 104A(i), or any other
provision, of the Community Development Banking Act.
Authorization, No Conflict.
The Credit Union has the power and authority to execute and
deliver this Agreement and to carry out its obligations hereunder
(which includes the issuance of the Subordinated Debt) and, when
issued, under the Subordinated Debt. The execution, delivery and
performance by the Credit Union of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of the Credit
Union and its Members and other non-Member holders of Capital
Interests (collectively, “Interest Holders”),
and no further approval or authorization is required on the part
of the Credit Union. The resolutions of the Board of Directors
authorizing the execution and delivery of this Agreement and the
performance of the Credit Union’s obligations hereunder,
including the issuance of the Subordinated Debt, a copy of which
have been provided to the Investor prior to the Signing Date, are
true, complete and correct copies of such documents as in full
force and effect as of the Signing Date and as of the Closing
Date.
The execution,
delivery and performance by the Credit Union of this Agreement
and the consummation of the transactions contemplated hereby and
compliance by the Credit Union with the provisions hereof, will
not (A) violate, conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration of, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or
assets of the Credit Union or any Credit Union Subsidiary under
any of the terms, conditions or provisions of (x) its
organizational documents or (y) any note, debenture, bond,
mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Credit Union or any
Credit Union Subsidiary is a party or by which it or any Credit
Union Subsidiary may be bound, or to which the Credit Union or
any Credit Union Subsidiary or any of the properties or assets of
the Credit Union or any Credit Union Subsidiary may be subject,
or (B) subject to compliance with the statutes and regulations
referred to in the next paragraph, violate any statute, rule or
regulation or any judgment, ruling, order, writ, injunction or
decree applicable to the Credit Union or any Credit Union
Subsidiary or any of their respective properties or assets
except, in the case of clauses (A)(y) and (B), for those
occurrences that, individually or in the aggregate, have not had
and would not reasonably be expected to have a Material Adverse
Effect.
Other than such filings and approvals as
are required to be made or obtained under any state “blue
sky” laws and such as have been made or obtained, no notice
to, filing with, exemption or review by, or authorization,
consent or approval of, any Governmental Entity is required to be
made or obtained by the Credit Union in connection with the
consummation by the Credit Union of the Purchase except for any
such notices, filings, exemptions, reviews, authorizations,
consents and approvals the failure of which to make or obtain
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Charter;
Bylaws; Agreements among Interest Holders; Anti-takeover
Provisionsand Rights Plan. The Board of Directors has
taken all necessary action to ensure that the transactions
contemplated by this Agreement and the consummation of the
transactions contemplated hereby (i) are not prohibited by the
Credit Union’s Charter and bylaws or other organizational
documents, or any operating agreement or agreement among the
Interest Holders of the Credit Union, and has obtained all
consents required by its Charter, bylaws or other organizational
documents or by such operating agreement or agreements among
Interest Holders of the Credit Union, or has amended the Charter
and bylaws, as is necessary, in order to consummate the
transactions contemplated by this Agreement and (ii) will be
exempt from any anti-takeover or similar provisions of the Credit
Union’s Charter and bylaws, and any other provisions of any
applicable “moratorium”, “control share”,
“fair price”, “interested stockholder” or
other anti-takeover laws and regulations of any jurisdiction.
No Material Adverse Effect. Since
the last day of the last completed fiscal period for which
financial statements are included in the Credit Union Financial
Statements, no fact, circumstance, event, change, occurrence,
condition or development has occurred that, individually or in the
aggregate, has had or would reasonably be expected to have a
Material Adverse Effect, except as disclosed on Schedule C.
Credit Union Financial Statements.
The Credit Union Financial Statements present fairly in all
material respects the consolidated financial position of the
Credit Union and its consolidated subsidiaries as of the dates
indicated therein and the consolidated results of their operations
for the periods specified therein; and except as stated therein,
such financial statements (i) were prepared in conformity with
either (x) if the Credit Union has assets greater than
$10,000,000, GAAP applied on a consistent basis (except as may be
noted therein) or (y) if the Credit Union has assets under
$10,000,000, RAP applied on a consistent basis (except as may be
noted therein) and (ii) have been prepared from, and are in
accordance with, the books and records of the Credit Union and the
Credit Union Subsidiaries.
Reports.
Since December 31, 2019, the Credit Union
and each Credit Union Subsidiary has filed all reports,
registrations, documents, filings, statements and submissions,
together with any amendments thereto, that it was required to
file with any Governmental Entity (the foregoing, collectively,
the “Credit Union Reports”) and has paid all
fees and assessments due and payable in connection therewith,
except, in each case, as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. As of their respective dates of filing, the Credit Union
Reports complied in all material respects with all statutes and
applicable rules and regulations of the applicable Governmental
Entities.
The records, systems, controls, data and
information of the Credit Union and the Credit Union Subsidiaries
are recorded, stored, maintained and operated under means
(including any electronic, mechanical or photographic process,
whether computerized or not) that are under the exclusive
ownership and direct control of the Credit Union or the Credit
Union Subsidiaries or their accountants (including all means of
access thereto and therefrom), except for any non-exclusive
ownership and non-direct control that would not reasonably be
expected to have a material adverse effect on the system of
internal accounting controls described below in this Section 3.1(e)(ii).
The Credit Union (A) has implemented and maintains adequate
disclosure controls and procedures to ensure that material
information relating to the Credit Union, including the
consolidated Credit Union Subsidiaries, is made known to the
chief executive officer and the chief financial officer of the
Credit Union by others within those entities, and (B) has
disclosed, based on its most recent evaluation prior to the
Signing Date, to the Credit Union’s outside auditors and
the audit committee of the Board of Directors of the Credit Union
(x) any significant deficiencies and material weaknesses in the
design or operation of internal controls that are reasonably
likely to adversely affect the Credit Union’s ability to
record, process, summarize and report financial information and
(y) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Credit
Union’s internal controls over financial reporting.
No Undisclosed Liabilities. Neither
the Credit Union nor any of the Credit Union Subsidiaries has any
liabilities or obligations of any nature (absolute, accrued,
contingent or otherwise) which are not properly reflected or
reserved against in the Credit Union Financial Statements to the
extent required to be so reflected or reserved against in
accordance with GAAP, except for (i) liabilities that have arisen
since the last fiscal year end in the ordinary and usual course of
business and consistent with past practice and (ii) liabilities
that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect.
Offering of
Securities. Neither the Credit Union nor any person acting on
its behalf has taken any action (including any offering of any
securities of the Credit Union under circumstances which would
require the integration of such offering with the offering of any
of the Subordinated Debt under the Securities Act, and the rules
and regulations of the Securities and Exchange Commission (the
“SEC”) promulgated thereunder), which might
subject the offering, issuance or sale of any of the Subordinated
Debt to Investor pursuant to this Agreement to the registration
requirements of the Securities Act. The offering of the
Subordinated Debt is exempt from registration under the Securities
Act pursuant to Section 3(a)(5) or 4(a)(2) of the Securities
Act, or such other exemption from registration as identified by
the Credit Union in Schedule A of the Letter Agreement.
Litigation and Other Proceedings.
Except (i) as set forth on Schedule D or (ii) as would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, there is no (A) pending or, to the
knowledge of the Credit Union, threatened, claim, action, suit,
investigation or proceeding against the Credit Union or any Credit
Union Subsidiary or to which any of their assets are subject, nor
is the Credit Union or any Credit Union Subsidiary subject to any
order, judgment or decree, or (B) unresolved violation, criticism
or exception by any Governmental Entity with respect to any report
or relating to any examinations or inspections of the Credit Union
or any Credit Union Subsidiaries. There is no claim, action,
suit, investigation or proceeding pending or, to the Credit
Union’s knowledge, threatened against any
institution-affiliated party (as defined in 12 C.F.R. § 750.1)
of the Credit Union or any Credit Union Subsidiary that, if
determined or resolved in a manner adverse to such
institution-affiliated party, could result in such
institution-affiliated party being prohibited from participation
in the conduct of the affairs of any financial institution or
holding company of any financial institution and, to the Credit
Union’s knowledge, there are no facts or circumstances that
could reasonably be expected to provide a basis for any such
claim, action, suit, investigation or proceeding.
Compliance with Laws. Except as
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, the Credit Union and
the Credit Union Subsidiaries have all permits, licenses,
franchises, authorizations, orders and approvals of, and have made
all filings, applications and registrations with, Governmental
Entities that are required in order to permit them to own or lease
their properties and assets and to carry on their business as
presently conducted and that are material to the business of the
Credit Union or such Credit Union Subsidiary. The Credit Union has
all permits, licenses, franchises, authorizations, orders and
approvals of, and has made all filings, applications and
registrations with, Governmental Entities and third parties that
are required in order to permit the Credit Union to pay interest
on the Subordinated Debt on the Interest Payment Dates set forth
in the form of Subordinated Security, except such as may be
required to be obtained or made after the Closing Date under
federal or state laws or regulations relating to capital adequacy,
including 12 C.F.R. Part 702. Except as set forth on
Schedule E, the Credit Union and the Credit Union
Subsidiaries have complied in all respects and are not in default
or violation of, and none of them is, to the knowledge of the
Credit Union, under investigation with respect to or, to the
knowledge of the Credit Union, have been threatened to be charged
with or given notice of any violation of, any applicable domestic
(federal, state or local) or foreign law, statute, ordinance,
license, rule, regulation, policy or guideline, order, demand,
writ, injunction, decree or judgment of any Governmental Entity,
other than such noncompliance, defaults or violations that would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Except for statutory or regulatory
restrictions of general application or as set forth on Schedule E,
no Governmental Entity has placed any restriction on the business
or properties of the Credit Union or any Credit Union Subsidiary
that would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Employee Benefit Matters. Except as would not reasonably be
expected to have, either individually or in the aggregate, a
Material Adverse Effect: (i) each “employee benefit plan”
(within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974 (“ERISA”))
providing benefits to any current or former employee, officer or
director of the Credit Union or any member of its “Controlled
Group” (defined as any organization which is a member of
a controlled group of corporations within the meaning of
Section 414 of the Internal Revenue Code of 1986 (the
“Code”)) that is sponsored, maintained or
contributed to by the Credit Union or any member of its Controlled
Group and for which the Credit Union or any member of its
Controlled Group would have any liability, whether actual or
contingent (each, a “Plan”) has been maintained
in compliance with its terms and with the requirements of all
applicable statutes, rules and regulations, including ERISA and
the Code; (ii) with respect to each Plan subject to Title IV
of ERISA (including, for purposes of this clause (ii), any
plan subject to Title IV of ERISA that the Credit Union or
any member of its Controlled Group previously maintained or
contributed to in the six years prior to the Signing Date), (A) no
“reportable event” (within the meaning of
Section 4043(c) of ERISA), other than a reportable event for
which the notice period referred to in Section 4043(c) of
ERISA has been waived, has occurred in the three years prior to
the Signing Date or is reasonably expected to occur, (B) no
“accumulated funding deficiency” (within the meaning
of Section 302 of ERISA or Section 412 of the Code),
whether or not waived, has occurred in the three years prior to
the Signing Date or is reasonably expected to occur, (C) the fair
market value of the assets under each Plan exceeds the present
value of all benefits accrued under such Plan (determined based on
the assumptions used to fund such Plan) and (D) neither the Credit
Union nor any member of its Controlled Group has incurred in the
six years prior to the Signing Date, or reasonably expects to
incur, any liability under Title IV of ERISA (other than
contributions to the Plan or premiums to the Pension Benefit
Guaranty Corporation in the ordinary course and without default)
with respect to a Plan (including any Plan that is a
“multiemployer plan”, within the meaning of Section
4001(c)(3) of ERISA); and (iii) each Plan that is intended to
be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service
with respect to its qualified status that has not been revoked, or
such a determination letter has been timely applied for but not
received by the Signing Date, and nothing has occurred, whether by
action or by failure to act, which could reasonably be expected to
cause the loss, revocation or denial of such qualified status or
favorable determination letter.
Taxes. Except as would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, (i) the Credit Union and the Credit Union
Subsidiaries have filed all federal, state, local and foreign
income and franchise Tax returns (together with any schedules and
attached thereto) required to be filed through the Signing Date,
subject to permitted extensions, and have paid all Taxes due
thereon, (ii) all such Tax returns (together with any schedules
and attached thereto) are true, complete and correct in all
material respects and were prepared in compliance with all
applicable laws and (iii) no Tax deficiency has been determined
adversely to the Credit Union or any of the Credit Union
Subsidiaries, nor does the Credit Union have any knowledge of any
Tax deficiencies.
Properties and Leases. Except as
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, the Credit Union and
the Credit Union Subsidiaries have good and marketable title to
all real properties and all other properties and assets owned by
them, in each case free from liens (including, without limitation,
liens for Taxes), encumbrances, claims and defects that would
affect the value thereof or interfere with the use made or to be
made thereof by them. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect, the Credit Union and the Credit Union Subsidiaries hold
all leased real or personal property under valid and enforceable
leases with no exceptions that would interfere with the use made
or to be made thereof by them.
Environmental
Liability. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect:
there is no legal, administrative, or
other proceeding, claim or action of any nature seeking to
impose, or that would reasonably be expected to result in the
imposition of, on the Credit Union or any Credit Union
Subsidiary, any liability relating to the release of hazardous
substances as defined under any local, state or federal
environmental statute, regulation or ordinance, including the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, pending or, to the Credit Union’s knowledge,
threatened against the Credit Union or any Credit Union
Subsidiary;
to the Credit Union’s knowledge,
there is no reasonable basis for any such proceeding, claim or
action; and
neither the Credit Union nor any Credit
Union Subsidiary is subject to any agreement, order, judgment or
decree by or with any court, Governmental Entity or third party
imposing any such environmental liability.
Risk Management Instruments. Except
as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, all derivative
instruments, including, swaps, caps, floors and option agreements,
whether entered into for the Credit Union’s own account, or
for the account of one or more of the Credit Union Subsidiaries or
its or their customers, were entered into (i) only in the ordinary
course of business, (ii) in accordance with prudent practices and
in all material respects with all applicable laws, rules,
regulations and regulatory policies and (iii) with counterparties
believed to be financially responsible at the time; and each of
such instruments constitutes the valid and legally binding
obligation of the Credit Union or one of the Credit Union
Subsidiaries, enforceable in accordance with its terms, except as
may be limited by the Bankruptcy Exceptions. Neither the Credit
Union nor the Credit Union Subsidiaries, nor, to the knowledge of
the Credit Union, any other party thereto, is in breach of any of
its obligations under any such agreement or arrangement other than
such breaches that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Agreements
with Regulatory Agencies. Except as set forth on Schedule F,
neither the Credit Union nor any Credit Union Subsidiary is
subject to any material cease-and-desist or other similar order or
enforcement or supervisory action issued by, or is a party to any
material written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any capital directive by,
or since December 31, 2017, has adopted any board resolutions at
the request of, any Governmental Entity that currently restricts
in any material respect the conduct of its business or that in any
material manner relates to its capital adequacy, its liquidity and
funding policies and practices, its ability to pay dividends, its
credit, risk management or compliance policies or procedures, its
internal controls, its management or its operations or business
(each item in this sentence, a “Regulatory Agreement”),
nor has the Credit Union or any Credit Union Subsidiary been
advised since December 31, 2017, by any such Governmental Entity
that it is considering issuing, initiating, ordering, or
requesting any such Regulatory Agreement. The Credit Union and
each Credit Union Subsidiary is in compliance in all material
respects with each Regulatory Agreement to which it is party or
subject, and neither the Credit Union nor any Credit Union
Subsidiary has received any notice from any Governmental Entity
indicating that either the Credit Union or any Credit Union
Subsidiary is not in compliance in all material respects with any
such Regulatory Agreement.
Insurance. The Credit Union and the
Credit Union Subsidiaries are insured with reputable insurers
against such risks and in such amounts as the management of the
Credit Union reasonably has determined to be prudent and
consistent with industry practice. The Credit Union and the Credit
Union Subsidiaries are in material compliance with their insurance
policies and are not in default under any of the material terms
thereof, each such policy is outstanding and in full force and
effect, all premiums and other payments due under any material
policy have been paid, and all claims thereunder have been filed
in due and timely fashion, except, in each case, as would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
Intellectual
Property. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect, (i) the Credit Union and each Credit Union Subsidiary owns
or otherwise has the right to use, all intellectual property
rights, including all trademarks, trade dress, trade names,
service marks, domain names, patents, inventions, trade secrets,
know-how, works of authorship and copyrights therein, that are
used in the conduct of their existing businesses and all rights
relating to the plans, design and specifications of any of its
branch facilities (“Proprietary Rights”), free
and clear of all liens and any claims of ownership by current or
former employees, contractors, designers or others and
(ii) neither the Credit Union nor any of the Credit Union
Subsidiaries is materially infringing, diluting, misappropriating
or violating, nor has the Credit Union or any of the Credit Union
Subsidiaries received any written (or, to the knowledge of the
Credit Union, oral) communications alleging that any of them has
materially infringed, diluted, misappropriated or violated, any of
the Proprietary Rights owned by any other person. Except as would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, to the Credit Union’s
knowledge, no other person is infringing, diluting,
misappropriating or violating, nor has the Credit Union or any or
the Credit Union Subsidiaries sent any written communications
since December 31, 2019, alleging that any person has infringed,
diluted, misappropriated or violated, any of the Proprietary
Rights owned by the Credit Union and the Credit Union
Subsidiaries.
Brokers and Finders. The Investor
has no liability for any amounts that any broker, finder or
investment banker is entitled to for any financial advisory,
brokerage, finder’s or other fee or commission in connection
with this Agreement or the transactions contemplated hereby based
upon arrangements made by or on behalf of the Credit Union or any
Credit Union Subsidiary.
Disclosure
Schedule. The Credit Union has delivered the Disclosure
Schedule and, if applicable, the Disclosure Update to the Investor
and the information contained in the Disclosure Schedule, as
modified by the information contained in the Disclosure Update, if
applicable, is true, complete and correct.
Related
Party Transactions. Neither the Credit Union nor
any Credit Union Subsidiary has made any commercial loan to an
ineligible borrower or undertaken any other prohibited activity
specified in 12 C.F.R. 723.7. Except as disclosed on Schedule G,
to the Credit Union’s knowledge, no director or executive
officer of the Credit Union or any Credit Union Subsidiary, holder
of 5% or more of the Credit Union’s issued and outstanding
Capital Interests, or any of their respective spouses or children
or any Affiliate of any of the foregoing (each, a “Related
Party”) has any (i) material commercial, industrial,
banking, consulting, legal, accounting, charitable or familial
relationship with any vendor or material customer of the Credit
Union or any Credit Union Subsidiary that is not on arms-length
terms, or (ii) direct or indirect ownership interest in any person
or entity with which the Credit Union or any Credit Union
Subsidiary has a material business relationship that is not on
arms-length terms (not including publicly-traded entities in which
such person owns less than two percent (2%) of the outstanding
capital stock).
Covenants
Affirmative Covenants
. The Credit Union hereby covenants and
agrees with Investor that:
Commercially Reasonable Efforts.
Subject to the terms and conditions of this Agreement, each of the
parties will use its commercially reasonable efforts in good faith
to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or desirable, or advisable
under applicable laws, so as to permit consummation of the
Purchase as promptly as practicable and otherwise to enable
consummation of the transactions contemplated hereby and shall use
commercially reasonable efforts to cooperate with the other party
to that end.
Certain
Notifications Until Closing. From the Signing Date until the
Closing, the Credit Union shall promptly notify the Investor of
(i) any fact, event or circumstance of which it is aware and which
would reasonably be expected to cause any representation or
warranty of the Credit Union contained in this Agreement to be
untrue or inaccurate in any material respect or to cause any
covenant or agreement of the Credit Union contained in this
Agreement not to be complied with or satisfied in any material
respect and (ii) except as Previously Disclosed, any fact,
circumstance, event, change, occurrence, condition or development
of which the Credit Union is aware and which, individually or in
the aggregate, has had or would reasonably be expected to have a
Material Adverse Effect; provided, however, that
delivery of any notice pursuant to this Section 4.1(b)
shall not limit or affect any rights of or remedies available to
the Investor.
Access, Information and Confidentiality.
The provisions
of this Section 4.1(c)(i)
shall apply, (x) with respect to the Investor, from the Signing
Date until the date when the Investor or one of its Affiliates no
longer owns, directly or indirectly, any Subordinated Debt and
(y) with respect to the Inspector General of the Treasury and the
Comptroller General of the United States, from and after the
Signing Date but, after the date when the Investor or one of its
Affiliates no longer owns, directly or indirectly any
Subordinated Debt, only with respect to the period in which the
Investor or one of its Affiliates directly or indirectly owned
any Subordinated Debt. Subject to the foregoing, the Credit Union
will permit, and shall cause each of the Credit Union’s
Subsidiaries to permit, the Investor, the Inspector General of
the Treasury and the Comptroller General of the United States and
their respective agents, consultants, contractors and advisors to
(x) examine any books, papers, records, Tax returns (including
all schedules and attachments thereto), data and other
information, (y) make copies thereof and (z) discuss the affairs,
finances and accounts of the Credit Union and the Credit Union
Subsidiaries with the personnel (including the principal
officers) of the Credit Union and the Credit Union’s
Subsidiaries, all upon reasonable notice, provided, that:
any examinations and discussions
pursuant to this Section 4.1(c)(i)
shall be conducted during normal business hours and in such
manner as not to interfere unreasonably with the conduct of the
business of the Credit Union;
neither the Credit Union nor any Credit
Union Subsidiary shall be required by this Section 4.1(c)(i)
to disclose any information to the extent (x) prohibited by
applicable law or regulation (including laws and regulations
relating to the use or disclosure of confidential supervisory
information), or (y) that such disclosure would reasonably
be expected to cause a violation of any agreement to which the
Credit Union or any Credit Union Subsidiary is a party or would
cause a risk of a loss of privilege to the Credit Union or any
Credit Union Subsidiary (provided that the Credit Union
shall use commercially reasonable efforts to make appropriate
substitute disclosure arrangements under circumstances where the
restrictions in this clause (B) apply);
the obligations of the Credit Union and
the Credit Union Subsidiaries to disclose information pursuant
to this Section 4.1(c)(i)
to the Inspector General of the Treasury, the Comptroller
General of the United States and their respective agents,
consultants, contractors or advisors, shall be subject to the
agreement by the Inspector General of the Treasury, the
Comptroller General of the United States, as applicable, with
respect to documents obtained under this Section 4.1(c)(i),
to follow applicable law and regulation (and the applicable
customary policies and procedures) regarding the dissemination
of confidential materials, including redacting confidential
information from the public version of its reports and
soliciting the input from the Credit Union as to information
that should be afforded confidential treatment, as appropriate;
and
for avoidance of doubt, any
investigation or discussions pursuant to this Section 4.1(c)(i)
may, at the Investor’s option, be conducted on site at any
office of the Credit Union or any Credit Union Subsidiary.
Subject to the assignment of the rights under this Section 4.1(c)(ii)
pursuant to Section 4.1(c)(iv),
from the Signing Date until the date on which all the
Subordinated Debt has been redeemed in whole, the Credit Union
will deliver, or will cause to be delivered, to the Investor:
as soon as
available after the end of each fiscal year of the Credit Union,
and in any event within 90 days thereafter, a consolidated
balance sheet of the Credit Union as of the end of such fiscal
year, and consolidated statements of income, retained earnings
and cash flows of the Credit Union for such year, in each case
prepared in accordance with GAAP or RAP, as applicable, and
setting forth in each case in comparative form the figures for
the previous fiscal year of the Credit Union and which shall be
audited to the extent audited financial statements are
available;
as soon as available after the end of
the first, second and third quarterly periods in each fiscal
year of the Credit Union, a copy of any quarterly reports
provided to Interest Holders of the Credit Union or Credit Union
management by the Credit Union;
as soon as available after the Credit
Union receives any assessment of the Credit Union’s
internal controls, a copy of such assessment (other than
assessments provided by the Appropriate Supervisory Authority
that the Credit Union is prohibited by applicable law or
regulation from disclosing to the Investor));
as soon as such items become effective,
any amendments to the Charter, bylaws or other organizational
documents of the Credit Union; and
at the same time as such items are sent
to all Members of the Credit Union, copies of any information or
documents, excluding any general solicitations or advertisements
for services and products, sent by the Credit Union to its
Members.
The Investor will use reasonable best efforts to hold, and will
use reasonable best efforts to cause its agents, consultants,
contractors and advisors and United States executive branch
officials and employees, to hold, in confidence all non-public
records, books, contracts, instruments, computer data and other
data and information (collectively, “Information”)
concerning the Credit Union furnished or made available to it by
the Credit Union or its representatives pursuant to this
Agreement (except to the extent that such information can be
shown to have been (A) previously known by such party on a
non-confidential basis, (B) in the public domain through no fault
of such party or (C) later lawfully acquired from other sources
by the party to which it was furnished (and without violation of
any other confidentiality obligation)); provided that
nothing herein shall prevent the Investor from disclosing any
Information to the extent required by applicable laws or
regulations or by any subpoena or similar legal process. The
Investor understands that the Information may contain
commercially sensitive confidential information entitled to an
exception from a Freedom of Information Act request.
The Investor’s information rights pursuant to Section 4.1(c)(ii)
and the Investor’s right to receive certifications from the
Credit Union pursuant to Section 4.1(d)(ii)
may be assigned by the Investor to a transferee or assignee of
the Subordinated Debt with a face value of no less than an amount
equal to two percent (2%) of the Purchase Price.
Nothing in this Section 4.1(c)
shall be construed to limit the authority that the Inspector
General of the Treasury, the Comptroller General of the United
States or any other applicable Governmental Entity has under law.
The Credit Union shall provide to the
Investor all such information as the Investor may request from
time to time related to the study under Section 525 of Division
N—Additional Coronavirus Response and Relief of the
Consolidated Appropriations Act, 2021 and related studies.
Certifications. Subject to the assignment of the rights
under this Section 4.1(d)pursuant to Section 4.1(c)(iv)
the Credit Union shall provide the following certifications to the
Investor:
Upon delivery of each Supplemental
Report, the Credit Union’s principal executive officer and
principal financial officer (each as defined in the ECIP Interim
Final Rule), as well as the directors (trustees) of the Credit
Union who attest to the Credit Union’s Call Report (or
those of its IDI Subsidiaries, in the case of a holding company),
will deliver a certificate in substantially the form attached
hereto as Annex D to the Investor certifying to the
Investor that the information provided on each Supplemental
Report is accurate;
Following the
Closing Date, within one hundred twenty (120) days of the end of
each fiscal year of the Credit Union during which a Supplemental
Report is submitted, the Credit Union will deliver to the
Investor (1) a certification by the Credit Union that the
processes and controls used to generate the Supplemental Reports
are satisfactory and (2) an attestation with respect to the
processes and controls used to generate the Supplemental Reports
from the Credit Union’s independent auditor if the Credit
Union is required to include an attestation as to its internal
control over financial reporting in connection with the filing of
audited financial statements with any Governmental Entity or
self-regulatory agency;
Annually on
such date as may be specified by the Investor, until the later of
(x) the Last Reset Date (as defined in the Subordinated Security)
and (y) the date when the Investor or one of its Affiliates no
longer owns, directly or indirectly, any Subordinated Debt, the
Credit Union will deliver to the Investor a certificate
substantially in the form attached hereto as Annex F
certifying that it is in compliance with the Customer
Identification Program requirements set forth in 31 C.F.R.
Section 1020.220 (or any successor provision); and
By December 31
of the calendar year in which the Closing occurs and, thereafter,
annually, for so long as required by the ECIP Interim Final Rule,
a certification substantially in the form attached hereto as
Annex G by two of the Credit Union’s Senior
Executive Officers (one of which must be the Credit Union’s
principal executive officer or principal financial officer) (each
as defined in the ECIP Interim Final Rule) that the Credit Union
is in compliance with each of the excessive compensation,
severance pay and excessive or luxury expenditures requirements
and limitations on capital distributions set forth in ECIP
Interim Final Rule, as published and in effect at the time of the
certification; provided that without the consent of the
Investor, the date of such annual certifications shall not be
later than nor more than 30 days earlier than the anniversary
date for the first annual certification following the Closing.
The Credit Union shall immediately notify the
Investor upon the occurrence of any breach of any of the covenants
set forth in this Section 4.1(d).
Compensation
Matters.
Restrictions on compensation and
severance payments. During the ECIP Period, the
Credit Union shall comply, and take all necessary action to
ensure that any Credit Union Subsidiary complies, in all respects
with the requirements set forth in the ECIP Interim Final Rule
regarding restrictions on executive compensation and severance
payments, and any material changes to the policies and procedures
related thereto.
Excessive or luxury
expenditures. Within ninety (90) days of the
Closing Date, the Board of Directors shall adopt an excessive or
luxury expenditures policy, provide such policy to the Investor
and the NCUA, and post the text of such policy on its Internet
website, if the Credit Union maintains an Internet website. The
Credit Union shall comply, and take all necessary action to
ensure that any Credit Union Subsidiary complies, in all respects
with the requirements set forth in the ECIP Interim Final Rule
regarding restrictions on excessive or luxury expenditures, and
any material changes to the excessive or luxury expenditures
policy adopted by the Board of Directors.
Capital
Distributions. During the ECIP Period, the Credit Union shall
comply with each of the restrictions on capital distributions (as
defined in 31 C.F.R. 35.21) applicable to it as set forth in the
ECIP Interim Final Rule.
Payment of Principal and Interest.
The Credit Union covenants and agrees for the benefit of the
Holders of the Subordinated Debt that it will duly and punctually
pay or cause to be paid the principal of and interest on the
Subordinated Debt at the respective times and in the manner
provided herein and in the Subordinated Debt. Payment of the
principal of and interest on the Subordinated Debt due on the
Maturity Date will be made by the Credit Union in immediately
available funds against presentation and surrender of the
Subordinated Debt. Subject to the terms of the Subordinated Debt,
each installment of interest on the Subordinated Debt due on an
Interest Payment Date other than the Maturity Date shall be paid
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.
Under certain net worth classifications of the Credit Union (see
12 C.F.R. 702.204(b)(11), 702.304(b) and 702.305(b)) the Credit
Union may be prohibited by the National Credit Union
Administration from making payments on the Subordinated Debt, in
which case unpaid interest will continue to accrue under the terms
hereof and thereof to the extent permitted by law.
Capital
Covenant. From the Signing Date until the date on which all
the Subordinated Debt has been redeemed in whole, the Credit Union
and the Credit Union Subsidiaries shall maintain such capital as
may be necessary to meet the minimum capital requirements of the
Appropriate Supervisory Authority, as in effect from time to time.
Qualified Lending Reports. Following
the Closing Date, for the period through the earlier of (x) the
date on which the Subordinated Debt is redeemed in whole and (y),
the end of the period during which the interest rate applicable to
the Subordinated Debt adjusts based on the Supplemental Reports,
the Credit Union shall submit to the Investor a report,
substantially in the form attached hereto in Annex E
(the “Quarterly Supplemental Report”), in
accordance with the submission instructions set forth in such
Quarterly Supplemental Report concurrently with the submission of
the Credit Union’s Call Report for the quarter covered by
the Quarterly Supplemental Report, setting forth an updated
calculation of (i) the amount of Qualified Lending as of the
applicable quarter end date and (ii) as applicable, the difference
between the Baseline and such updated amount of Qualified Lending;
If any Initial Supplemental Report or
Quarterly Supplemental Report is inaccurate, the Investor shall
be entitled to recover from the Credit Union, upon demand, the
amount of any difference between (x) the amount of the interest
payment(s) actually made to the Investor based on such inaccurate
report and (y) the correct amount of the interest payment(s) that
should have been made, but for such inaccuracy; provided,that to the extent such inaccuracy resulted in an overpayment
of interest, the Investor shall not have any obligation to return
to or otherwise reimburse the Credit Union for such excess
interest payment. The Credit Union shall provide the Investor
with a written description of any such inaccuracy within three
(3) business days after the Credit Union’s discovery
thereof;
If the Investor transfers the
Subordinated Debt, then any amounts payable in respect of
Subordinated Debt that have been transferred shall, if and as
directed by the Investor, be paid to the transferee of the
Subordinated Debt; and
The Investor shall have the right from
time to time to modify Annex E, by posting an amended
and restated version of Annex E on its website, to
conform Annex E to (A) reflect changes in GAAP, (B)
reflect changes in the form or content of, or definitions used
in, Call Reports or any other applicable reporting form or (C) to
make clarifications, technical corrections and/or any other
adjustments as the Investor determines to be reasonably
necessary. Notwithstanding anything herein to the contrary, upon
posting by the Investor on its website, Annex E shall
be deemed to be amended and restated as so posted, without the
need for any further act on the part of any person or entity. If
any such modification includes a change to the caption or number
of any line item of Annex E, any reference herein to
such line item shall thereafter be a reference to such
re-captioned or renumbered line item.
Nonpayment of Interest. Whenever
interest payable on the Subordinated Debt will not be paid in full
for any Interest Period (as defined in the Subordinated Debt),
including nonpayment because interest will be deferred pursuant to
the applicable provisions of this Agreement and the Subordinated
Security, then no later than three (3) business days prior to the
applicable Interest Payment Date (as defined in the Subordinated
Debt) the principal executive officer and principal financial
officer of the Credit Union shall provide written notice, in a
form reasonably satisfactory to the Investor, informing the
Investor that the Credit Union will not make the applicable
interest payment and providing the rationale of the Credit Union
for not making such interest payment.
Compliance with Federal Law. The
Credit Union shall comply with, and hereby assures that it will
comply with, all applicable federal statutes and regulations
relating to nondiscrimination including: (i) Title VI of the
Civil Rights Act of 1964 (42 U.S.C. § 2000d et seq.),
including Treasury’s implementing regulations at 31 CFR
Part 22; (ii) Section 504 of the Rehabilitation Act of
1973, as amended (29 U.S.C. § 794); and (iii) the Age
Discrimination Act of 1975, as amended (42 U.S.C. §§ 6101–6107),
including Treasury’s implementing regulations at 31 CFR
Part 23 and the general age discrimination regulations at 45
CFR Part 90.
Negative Covenants
. The Credit Union hereby covenants and
agrees with the Investor that:
Certain Transactions.
The Credit Union shall not merge or
consolidate with, or sell, transfer or lease all or substantially
all of its property or assets to, any other party unless the
successor, transferee or lessee party (or its ultimate parent
entity), as the case may be (if not the Credit Union), expressly
assumes the due and punctual performance and observance of each
and every covenant, agreement and condition of this Agreement and
the Subordinated Debt to be performed and observed by the Credit
Union, including the due and punctual payment of the principal of
and interest on the Subordinated Debt and, if applicable, the
issuance by the successor party of an instrument equivalent to
the Subordinated Debt; provided, however, that in
the event of a merger or voluntary dissolution of a low-income
designated Credit Union (other than a merger with and into
another low-income designated Credit Union), the Secondary
Capital Account shall be closed and paid out in accordance with
12 C.F.R. 701.34(b)(9) (or any successor provision); and
provided, further, that if such merger is with and
into another low-income designated Credit Union, such surviving
Credit Union will execute and deliver to Investor a Disclosure
and Acknowledgment in the form attached as Annex H
with respect to the Subordinated Debt prior to the consummation
of any such merger. Any such successor entity must also qualify
as an Eligible Financial Institution unless either prior written
approval of the Investor is obtained or the Credit Union is
subject to an emergency merger pursuant to 12 C.F.R. Part 701,
Appendix B (or any successor provision).
Until such
time as the Investor or one of its Affiliates, directly or
indirectly, ceases to own any debt or equity securities of the
Credit Union, including the Subordinated Debt, the Credit Union
and the Credit Union Subsidiaries shall not enter into
transactions with Affiliates or related persons (within the
meaning of Item 404 under the SEC’s Regulation S-K) unless
(A) such transactions are on terms no less favorable to the
Credit Union and the Credit Union Subsidiaries than could be
obtained from an unaffiliated third party, and (B) have been
approved by the audit committee of the Board of Directors or
comparable body of independent directors of the Credit Union, or
if there are no independent directors, the Board of Directors,
provided that the Board of Directors shall maintain
written documentation which supports its determination that the
transaction meets the requirements of clause (A) of this Section 4.2(a)(ii).
CDFI
Status. If the Credit Union is a CDFI as of the Signing Date,
the Credit Union shall not revoke or change its status as a CDFI
within the meaning of 12 U.S.C. § 4702 and in accordance
with 12 C.F.R. 1805.201.
Restriction on Dividends and
Repurchases. For so long as any Subordinated Debt is
outstanding, no Extraordinary Dividends may be declared or paid by
the Credit Union on any Capital Interests it is authorized to
issue under applicable law, nor may any discretionary payments be
made on any other securities or instruments that are pari passu
with or junior to the Subordinated Debt with respect to interest
payments or ranking in liquidation, unless all accrued and unpaid
interest for all past Interest Periods on the Subordinated Debt
has been paid in full, and no deferred amounts are unpaid, and (B)
the Credit Union may not repurchase or redeem any Capital
Interests, or any securities or instruments ranking pari passu
with or junior to the Subordinated Debt (other than in the case of
redemptions of membership share interests upon the voluntary or
involuntary termination of membership by the Credit Union or its
members, as applicable), unless all accrued and unpaid interest
for all past Interest Periods on the Subordinated Debt has been
paid in full, and no deferred amounts are unpaid. For the
avoidance of doubt, the foregoing contractual restrictions shall
not restrict the Credit Union from making required,
non-discretionary payments on Capital Interests it has issued,
such as payments at stated maturity in accordance with an
instrument’s terms or payments of interest that may not be
deferred, and the foregoing contractual restrictions and
clarification shall not supersede otherwise applicable limitations
or determinations with respect to distributions or payments
pursuant to the rules or regulations of any Appropriate
Supervisory Authority.
Remedies of the Holders upon Event of Default and Other
Breaches or Defaults
Event of Default
. “Event of Default”
shall mean the occurrence or existence of any one or more of the
following: (a) the placement of the Credit Union into receivership or
liquidation, (b) the consent of the Credit Union to the appointment
of a receiver, liquidating agent or other similar official (other
than a conservator) of the Credit Union for any substantial part of
its property, or (c) the appointment of a receiver, liquidating agent
or other similar official (other than a conservator) of the Credit
Union for any substantial part of its property. A default in the
payment of principal of, premium, if any, or interest on, the
Subordinated Debt or in the performance of any other obligation of
the Credit Union hereunder or under the Subordinated Debt shall not
constitute an Event of Default or result in a right of acceleration.
Acceleration and Other Remedies
. When any Event of Default has occurred and
is continuing, then principal and interest, and all fees, charges and
other obligations payable hereunder and under the Transaction
Documents, shall immediately become due and payable without
presentment, demand, protest or notice of any kind. In addition, the
Holders may exercise any and all remedies available to them under the
Transaction Documents or applicable law. For the avoidance of doubt,
in the event the Credit Union is subject to receivership or
liquidation under 12 U.S.C. 1787 and the NCUA Regulations in 12
C.F.R. Part 709 (or any successor provisions) (i) accrual
of interest on the Subordinated Debt after commencement of the
liquidation or receivership proceedings, and (ii) the payment of
principal and interest on the Subordinated Debt, will be determined
in accordance with 12 U.S.C. 1787 and the NCUA Regulations in 12
C.F.R. Part 709 (or any successor provisions).
Suits for Enforcement
. In case any one or more Events of Default
shall have occurred and be continuing, any Holder, subject to the
terms of Article VI
hereof, may proceed to protect and enforce its rights under this Article V
by suit in equity or action at law. In the event of the failure by
the Credit Union to make payment of principal of or interest on the
Subordinated Debt (and, in the case of payment of interest, such
failure to pay shall have continued for two (2) business days), the
Credit Union will, upon written demand of any Holder, pay to such
Holder the whole amount then due and payable (without acceleration)
on such Holder’s Subordinated Debt, with interest on the
overdue amount at the rate borne by the Subordinated Debt to the
extent such interest is legally enforceable. Such demand shall not
serve to accelerate the Holder’s Subordinated Debt. If the
Credit Union fails to pay such amount upon such demand, the Holder
may among other things, institute a judicial proceeding for the
collection of such amount. It is agreed that in the event of such
action, or any action between a Holder of the Subordinated Debt and
the Credit Union (including its officers and agents) in connection
with a breach or enforcement of this Agreement, the Holder of the
Subordinated Debt shall be entitled to receive all reasonable fees,
costs and expenses incurred, including without limitation such
reasonable fees and expenses of attorneys (whether or not litigation
is commenced) and reasonable fees, costs and expenses of appeals.
Holders May File Proofs of Claim
. In case there shall be pending receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other administrative or judicial proceeding relative
to the Credit Union or the property of the Credit Union, any Holder,
irrespective of whether the principal of the Subordinated Debt shall
then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether any such Holder shall have made
any demand pursuant to the provisions of this Section 5.4,
shall be entitled and empowered, by intervention in such proceedings
or otherwise, to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect of the
Subordinated Debt held by any such Holder and, in case of any
administrative or judicial proceedings, to file such proofs of claim
and other papers or documents as may be necessary or advisable in
order to have the claims of any such Holder allowed in such
administrative or judicial proceedings relative to the Credit Union,
or to the creditors or property of the Credit Union, unless
prohibited by applicable law and regulations, to vote in any election
of a trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency proceedings or person
performing similar functions in comparable proceedings, and to
collect and receive any moneys or other property payable or
deliverable to any such Holder on any such claims.
Waiver of Past Defaults
. The Holders of not less than a majority in
aggregate principal amount of the outstanding Subordinated Debt may
on behalf of the Holders of all the Subordinated Debt waive any past
default hereunder with respect such Subordinated Debt and its
consequences, except a default in the payment of principal or
interest. Upon any such waiver, such default shall cease to exist,
for every purpose of this Agreement except Section 5.6
through Section 5.8;
but no such waiver shall extend to any subsequent or other default or
impair any right consequent thereon or for any purpose to Section 5.6
through Section 5.8.
This Section 5.5
shall apply only to the rights of the Holders in their capacity as
such and, notwithstanding anything to the contrary in the preceding
sentences of this Section 5.5,
any waiver pursuant to this Section 5.5
shall not extend to the rights, remedies or consequences set forth in
Section 5.6
through Section 5.8.
Rate Reductions in the Event of Breaches and Violations
. If Treasury
determines, in its sole discretion, that the Credit Union has
breached, violated or defaulted under (i) any covenant,
agreement or obligation of the Credit Union included in this
Agreement or the Subordinated Debt or (ii) Section 104A of
the Community Development Banking Act, the ECIP Interim Final Rule or
any additional rules or regulations established in connection with
ECIP, Treasury may, in its sole discretion, determine that the Credit
Union shall not be eligible for any rate reduction with respect to
the Subordinated Debt for such period as Treasury, in its sole
discretion, shall determine. Any such determination shall cause the
applicable interest rate of the Subordinated Debt to reset as
specified in the Subordinated Security. Treasury shall provide notice
to the Credit Union of any determination with respect to the Credit
Union’s disqualification from eligibility for rate reductions
or the termination of any such disqualification; provided that any
failure by Treasury to provide notice of any such determination or
defect in such notice or the transmission thereof shall not affect or
prejudice Treasury’s rights or remedies under this Section 5.6
or the Subordinated Debt. Notwithstanding the foregoing, a default in
the payment of interest shall not be subject to this Section 5.6.
Credit Union Noncompliance
.
If Treasury determines, in its sole
discretion, an instance of noncompliance by the Credit Union or an
Affiliate of the Credit Union with (i) any term or condition of
this Agreement or the Subordinated Debt or (ii) Section 104A
of the Community Development Banking Act, the ECIP Interim Final
Rule or any additional rules or regulations established in
connection with ECIP, has occurred, Treasury may, in its sole
discretion, report such noncompliance to the CDFI Fund or other
entities within or affiliated with Treasury. The Credit Union
acknowledges and agrees that any such report of noncompliance may
result in the Credit Union becoming ineligible for awards or
programs offered by the CDFI Fund or other entities within or
affiliated with Treasury at that time or in the future.
The
restrictions on, and notice requirement with respect to, the
transferability of the Subordinated Debt set forth in Section 6.6(f)(v)
shall cease to apply if Treasury determines, in its sole
discretion, an instance of noncompliance by the Credit Union or an
Affiliate of the Credit Union has occurred with respect to (i) any
term or condition of this Agreement or the Subordinated Debt or
(ii) Section 104A of the Community Development Banking Act,
the ECIP Interim Final Rule or any additional rules or regulations
established in connection with ECIP.
Additional Remedies
.
If Treasury
determines, in its sole discretion, that an instance of
noncompliance by the Credit Union or an Affiliate of the Credit
Union with (i) the terms and conditions of this Agreement or the
Subordinated Debt or (ii) Section 104A of the Community
Development Banking Act, the ECIP Interim Final Rule or any
additional rules or regulations established in connection with
ECIP, has occurred, Treasury may notify the Credit Union in
writing of its proposed determination of noncompliance, provide an
explanation of the nature of the noncompliance, and specify a
proposed remedy. Upon receipt of such notice, the Credit Union
shall, within seven (7) days, accept Treasury’s proposed
remedy, propose an alternative remedy, or provide information and
documentation contesting Treasury’s proposed determination.
Treasury shall consider any such submission by the Credit Union
and make a final written determination, which will state
Treasury’s findings regarding noncompliance and the remedy
to be imposed.
If Treasury makes a final determination
under Section 5.8(a)
that an instance of noncompliance has occurred, Treasury may, in
its sole discretion, require additional reporting or monitoring;
initiate suspension or debarment proceedings as authorized under 2
C.F.R. Part 180; or take any such other action as Treasury,
in its sole discretion, deems appropriate.
Treasury may make a final determination
regarding noncompliance without regard to Section 5.8(a)
if Treasury determines, in its sole discretion, that such
determination is necessary to protect a material interest of the
federal government. In such event, Treasury shall notify the
Credit Union of the remedy that Treasury, in its sole discretion,
shall impose, after which the Credit Union may contest Treasury’s
final determination or propose an alternative remedy in writing to
Treasury. Following the receipt of such a submission by the Credit
Union, Treasury may, in its sole discretion, maintain or alter its
final determination.
Any final determination of noncompliance
and any final determination to take any remedial action described
herein shall not be subject to further review. To the extent
permitted by law, the Credit Union waives any right to judicial
review of any such determinations and further agrees not to assert
in any court any claim arising from or relating to any such
determination or remedial action.
Instead of, or in addition to, the
remedies listed above, Treasury may refer any noncompliance or any
allegations of fraud, waste, or abuse to the Inspector General of
the Treasury.
Additional Agreements
Purchase for Investment
. The Investor acknowledges that the
Subordinated Debt has not been registered under the Securities Act,
or under any state securities laws. The Investor acknowledges that
the Subordinated Debt is not being sold pursuant to an indenture (an
“Indenture”) qualified under the Trust Indenture
Act of 1939 (the “Indenture Act”). The Investor
(a) is acquiring the Subordinated Debt pursuant to an exemption from
registration under the Securities Act and an exemption from
qualification of an indenture under the Indenture Act, and is
acquiring the Subordinated Debt solely for investment with no present
intention to distribute the Subordinated Debt to any person in
violation of the Securities Act or any applicable U.S. state
securities laws, (b) will not sell or otherwise dispose of any of the
Subordinated Debt, except in compliance with the registration
requirements or exemption provisions of the Securities Act and any
applicable U.S. state securities laws, and (c) has such knowledge and
experience in financial and business matters and in investments of
this type that it is capable of evaluating the merits and risks of
the Purchase and of making an informed investment decision.
Form of Subordinated Security
. The Subordinated Security shall be
substantially in the form of Annex A hereto, the terms of
which are incorporated in and made a part of this Agreement. The
Subordinated Debt shall be issued, and may be transferred, only in
denominations having an aggregate principal amount of not less than
$1,000 and integral multiples of $1,000 in excess thereof. The
Subordinated Debt shall be in registered form without coupons and
shall be numbered, lettered or otherwise distinguished in such manner
or in accordance with such plans as the officers executing the same
may determine as evidenced by the execution thereof.
Execution of Subordinated Debt
. The Subordinated Debt shall be executed in
the name and on behalf of the Credit Union by the manual or facsimile
signature of its President, Chief Executive Officer, Chief Financial
Officer or one of its Executive Vice Presidents under its seal (if
legally required) which may be affixed thereto or printed, engraved
or otherwise reproduced thereon, by facsimile or otherwise, and which
need not be attested, unless otherwise required by the Credit Union’s
Charter or bylaws or applicable law. Every Subordinated Security
shall be dated the date of its issuance and delivery.
Computation of Interest
.
The amount of interest payable for any
Interest Period will be computed as provided in the Subordinated
Debt.
Each
Subordinated Security will bear interest at the Applicable
Interest Rate set forth in Section 2(a) of the face of the
Subordinated Security attached hereto as Annex A for
the Interest Period on the principal thereof, on any overdue
principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of
interest (including Defaulted Interest but excluding, for the
avoidance of doubt, any interest installment the payment of which
has been deferred pursuant to Section 6.14),
payable on each Interest Payment Date or the Maturity Date, as the
case may be. Interest on any Subordinated Security that is
payable, and is punctually paid or duly provided for by the Credit
Union, on any Interest Payment Date shall be paid to the person in
whose name such Subordinated Security is registered at the close
of business on the Regular Record Date for such interest
installment.
Any
interest on the Subordinated Security that is payable, but is not
punctually paid or duly provided for by the Credit Union, on any
Interest Payment Date (herein called “Defaulted
Interest”) shall forthwith cease to be payable to the
Holder on the relevant Regular Record Date, and such Defaulted
Interest shall be paid by the Credit Union on either the next
succeeding Interest Payment Date or another date specified by the
Credit Union to the persons in whose names such Subordinated Debt
is registered at the close of business on either (x), if such
Defaulted Interest is to be paid on the next succeeding Interest
Payment Date, the related Regular Record Date, or (y), if such
Defaulted Interest is to be paid on any other date, a special
record date for the payment of such Defaulted Interest. To the
extent any Defaulted Interest is paid by the Credit Union, the
Credit Union shall notify the Holder in writing of the amount of
Defaulted Interest proposed to be paid on each such Subordinated
Security and the date of the proposed payment.
To the extent that Defaulted Interest is
to be paid on a date other than on an Interest Payment Date, the
Board of Directors shall fix a special record date for the
payment of such Defaulted Interest, which shall not be more than
fifteen (15) nor less than ten (10) days prior to the date of the
proposed payment. The Credit Union shall cause notice of the
proposed payment of such Defaulted Interest and the special
record date therefor to be mailed, first class postage prepaid,
to each Holder of a Subordinated Security at his, her or its
address as it appears in the Subordinated Debt Register, not less
than ten (10) days prior to such special record date. Notice of
the proposed payment of such Defaulted Interest and the special
record date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the person in whose name such
Subordinated Security is registered at the close of business on
such special record date and thereafter the Credit Union shall
have no further payment obligation in respect of the Defaulted
Interest.
The Credit Union may make payment of any
Defaulted Interest on the Subordinated Debt in any other lawful
manner not inconsistent with the requirements of any securities
exchange on which such Subordinated Debt may be listed, and upon
such notice as may be required by such exchange.
Subject to the foregoing provisions of this Section 6.4,
each Subordinated Security delivered under this Agreement upon
registration of transfer of or in exchange for or in lieu of any
other Subordinated Security shall carry the rights to interest
accrued and unpaid, and to accrue, that were carried by such other
Subordinated Security.
Legends
.
The Investor agrees that all certificates or other instruments
representing the Subordinated Debt will bear a legend
substantially to the following effect:
“THIS
SUBORDINATED SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
DENOMINATIONS OF A MINIMUM 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 OR IN A DENOMINATION OTHER THAN IN A
MULTIPLE 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 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 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 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.
SOLELY
WITH RESPECT TO SECURITIES NOT ISSUED PURSUANT TO THE EXEMPTION UNDER
SECTION 3(a)(5) OF THE SECURITIES ACT: EACH PURCHASER OF THE
SECURITIES REPRESENTED BY THIS INSTRUMENT IS NOTIFIED THAT THE ISSUER
MAY BE RELYING ON THE EXEMPTION FROM SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. ANY TRANSFEREE OF THE
SECURITIES REPRESENTED BY THIS INSTRUMENT 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 THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE 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. THE SECURITY REPRESENTED BY THIS INSTRUMENT 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.”
If the Letter Agreement specifies that the
offer and sale of the Subordinated Debt is exempt from
registration pursuant to Section 4(a)(2) of the Securities
Act, in the event that any Subordinated Debt (i)(A) become
registered under the Securities Act or (B) are eligible to be
transferred without restriction in accordance with Rule 144
or another exemption from registration under the Securities Act
(other than Rule 144A), and (ii)(A) become subject to an
Indenture qualified under the Indenture Act or (B) are exempt from
qualification under the Indenture Act, the Credit Union shall
issue new certificates or other instruments representing such
Subordinated Debt, which shall not contain the applicable legends
in Section 6.5(a)
above; provided that the Investor surrenders to the Credit
Union the previously issued certificates or other instruments.
Transfer of Subordinated Debt
.
The Credit Union or its duly appointed agent shall maintain a
register (the “Subordinated Securities Register”)
for the Subordinated Debt in which it shall register the issuance
and transfer of the Subordinated Debt. All transfers of the
Subordinated Debt shall be recorded on the Subordinated Securities
Register maintained by the Credit Union or its agent, and the
Credit Union shall be entitled to regard the registered Holder of
such Subordinated Security as the actual owner of the Subordinated
Security so registered until the Credit Union or its agent is
required to record a transfer of such Subordinated Security on its
Subordinated Securities Register. The Credit Union or its agent
shall, subject to applicable securities laws, be required to
record any such transfer when it receives the Subordinated
Security to be transferred duly and properly endorsed by the
registered Holder or by its attorney duly authorized in writing.
The Credit Union shall at any time, upon written request of the
Holder of Subordinated Security and surrender of the Subordinated
Security for such purpose, at the expense of the Credit Union,
issue new Subordinated Debt in exchange therefor in such
denominations of at least $1,000, as shall be specified by the
Holder of such Subordinated Security, in an aggregate principal
amount equal to the then unpaid principal amount of the
Subordinated Debt surrendered and substantially in the form of
Annex A, with appropriate insertions and variations,
and bearing interest from the date to which interest has been paid
on the Subordinated Security surrendered. All Subordinated Debt
issued upon any registration of transfer of exchange pursuant to
this Section 6.6(b)
shall be valid obligations of the Credit Union, evidencing the
same debt, and entitled to the same benefits under this Agreement,
as the Subordinated Debt surrendered upon such registration of
transfer or exchange.
All Subordinated Debt presented for
registration of transfer or for exchange or payment shall be duly
endorsed by, or be accompanied by, a written instrument or
instruments of transfer in a form satisfactory to the Credit Union
duly executed by the Holder or such Holder’s attorney duly
authorized in writing.
No service charge shall be incurred for
any exchange or registration of transfer of Subordinated Debt, but
the Credit Union may require payment of a sum sufficient to cover
any tax, fee or other governmental charge that may be imposed in
connection therewith.
Prior to due presentment for the
registration of a transfer of any Subordinated Security, the
Credit Union and any agent of the Credit Union may deem and treat
the person in whose name such Subordinated Security is registered
as the absolute owner and Holder of such Subordinated Security for
the purpose of receiving payment of principal of and interest on
such Subordinated Security and none of the Credit Union or any
agents of the Credit Union shall be affected by notice to the
contrary.
Subject to compliance with applicable law, the Investor (and any
investment vehicles established and used by the Investor to
purchase, hold, and sell Subordinated Debt) shall be permitted to
transfer, sell, assign or otherwise dispose of (“Transfer”)
all or a portion of the Subordinated Debt at any time and from
time to time, and the Credit Union shall take all steps as may be
reasonably requested by the Investor to facilitate the sale of the
Subordinated Debt, including as set forth in Section 6.5;
provided that:
The Investor shall not sell any
Subordinated Debt if such Transfer would require the Credit Union
to be subject to the periodic reporting requirements of
Section 13 or 15(d) of the Exchange Act and the Credit Union
was not already subject to such requirements;
Prior to the sale of all or a portion of the Subordinated Debt by
the Investor to a third party, the Investor shall deliver to the
Credit Union a notice (“ROFR Notice”) setting
forth the aggregate principal amount of Subordinated Debt
proposed to be sold (the “Offered Securities”)
and the cash purchase price thereof (which shall reflect a
valuation of the Subordinated Debt by an independent third party)
(the “Offer Price”) and other terms and
conditions on which the Investor proposes to sell the Offered
Securities. Within ten (10) days from the date the Investor
delivers the ROFR Notice to the Credit Union (the “Review
Period”), the Credit Union shall deliver to the
Investor a written notice (a “Response Notice”)
stating whether it elects to purchase all the Offered Securities
and irrevocably offering to purchase such number of Offered
Securities on the terms contained in the ROFR Notice, which
purchase shall, as applicable, be conditional upon receipt of
prior approval from the Credit Union’s Appropriate
Supervisory Authority. If the Credit Union does not deliver a
Response Notice in accordance with this Section 6.6(f)
prior to the expiration of the Review Period, then the Credit
Union will be deemed to have elected not to exercise the right of
first refusal specified in the ROFR Notice and the Investor shall
be free to sell the Offered Securities to a third party on the
terms reflected in the ROFR Notice;
The Investor shall not sell more than
twenty-five percent (25%) of the outstanding Capital Interests to
a single third party without the Credit Union’s consent,
which may not be unreasonably delayed, conditioned or withheld;
With the prior consent of the Credit Union (which may not be
unreasonably delayed, conditioned or withheld), the Investor may
Transfer all or a portion of the Subordinated Debt for no
consideration or for a de minimis amount to a
mission-aligned nonprofit Affiliate of an Eligible Financial
Institution participating in the ECIP that is an Insured CDFI (an
“Eligible Nonprofit”); and
Subject to Section 5.7(b),
the Investor shall not sell the Subordinated Debt to a third
party (other than to an Eligible Nonprofit) prior to the Tenth
Anniversary (as defined in the Subordinated Security) without the
prior consent of the Credit Union (which may not be unreasonably
delayed, conditioned or withheld). In addition, subject to Section 5.7(b),
the Investor shall provide the Credit Union eighteen (18) months’
advance notice of the Investor’s intent to Transfer the
Subordinated Debt to a third party other than an Eligible
Nonprofit.
In furtherance of the foregoing, the
Credit Union shall provide reasonable cooperation to facilitate
any Transfers of the Subordinated Debt, including, as is
reasonable under the circumstances, by furnishing such information
concerning the Credit Union and its business as a proposed
transferee may reasonably request and making management of the
Credit Union reasonably available to respond to questions of a
proposed transferee in accordance with customary practice, subject
in all cases to the proposed transferee agreeing to a customary
confidentiality agreement. For the avoidance of doubt, the term
“third party” as used in this Section 6.6
shall not refer to an investment vehicle or other entity
controlled by the Investor, or to any Affiliate of the Investor.
Replacement of Subordinated Debt
. Upon receipt of evidence
reasonably satisfactory to the Credit Union of the loss, theft,
destruction or mutilation of any Subordinated Security, and, in the
case of any such loss, theft or destruction, upon delivery of a bond
of indemnity reasonably satisfactory to the Credit Union (provided
that any Holder of Subordinated Security may instead deliver to
the Credit Union an indemnity agreement in form and substance
reasonably satisfactory to the Credit Union), or, in the case of any
such mutilation, upon surrender and cancellation of the Subordinated
Security, as the case may be, the Credit Union will issue a new
Subordinated Security of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Subordinated Security.
Cancellation
. All Subordinated Debt
surrendered for the purpose of payment, exchange or registration of
transfer, shall be surrendered to the Credit Union and promptly
canceled by it, and no Subordinated Debt shall be issued in lieu
thereof except as expressly permitted by any of the provisions of
this Agreement. The Credit Union shall destroy all canceled
Subordinated Debt.
Rule 144; Rule 144A; 4(1½) Transactions
. If the Letter Agreement specifies that
the offer and sale of the Subordinated Debt is exempt from
registration pursuant to Section 4(a)(2) of the Securities Act,
the following provisions shall apply:
As may be
applicable if the Credit Union is not relying on the exemption set
forth in Section 3(a)(5) of the Securities Act for the offer
and sale of the Subordinated Debt, at all times after the Signing
Date, the Credit Union covenants that (1) it will, upon the
request of the Investor or any subsequent holders of the
Subordinated Debt (“Holders”), use its
reasonable best efforts to (x), to the extent any Holder is
relying on Rule 144 under the Securities Act to sell any of
the Subordinated Debt, make “current public information”
available, as provided in Section (c)(1) of Rule 144 (if
the Credit Union is a “Reporting Issuer” within the
meaning of Rule 144) or in Section (c)(2) of Rule 144
(if the Credit Union is a “Non-Reporting Issuer”
within the meaning of Rule 144), in either case for such time
period as necessary to permit sales pursuant to Rule 144,
(y), to the extent any Holder is relying on the so-called
“Section 4(a)(1½)” exemption to sell any
of its Subordinated Debt, prepare and provide to such Holder such
information, including the preparation of private offering
memoranda or circulars or financial information, as the Holder may
reasonably request to enable the sale of the Subordinated Debt
pursuant to such exemption, or (z) to the extent any Holder
is relying on Rule 144A under the Securities Act to sell any
of its Subordinated Debt, prepare and provide to such Holder the
information required pursuant to Rule 144A(d)(4), and (2) it
will take such further action as any Holder may reasonably request
from time to time to enable such Holder to sell Subordinated Debt
without registration under the Securities Act within the
limitations of the exemptions provided by (i) the provisions of
the Securities Act or any interpretations thereof or related
thereto by the SEC, including transactions based on the so-called
“Section 4(a)(1½)” and other similar
transactions, (ii) Rule 144 or 144A under the Securities Act,
as such Rules may be amended from time to time, or (iii) any
similar rule or regulation hereafter adopted by the SEC; provided
that the Credit Union shall not be required to take any action
described in this Section 6.9(a)
that would cause the Credit Union to become subject to the
reporting requirements of Section 13 or 15(d) of the Exchange
Act if the Credit Union was not subject to such requirements prior
to taking such action. Upon the request of any Holder, the Credit
Union will deliver to such Holder a written statement as to
whether it has complied with such requirements and, if not, the
specifics thereof.
If the Letter Agreement specifies that the offer and sale of the
Subordinated Debt are exempt from registration pursuant to
Section 3(a)(5) of the Securities Act, so long as the
Subordinated Debt is subject to the exemption provided by
Section 3(a)(5) of the Securities Act, the provisions of this
Section 6.9
shall be interpreted so as to nonetheless provide a Holder of
Subordinated Debt with the benefit of the cooperation of the
Credit Union to facilitate a sale of the Subordinated Debt,
including the preparation and provision of materials referenced in
Section 6.9(a)(1)(y).
The Credit
Union agrees to indemnify Investor, Investor’s officials,
officers, directors, employees, agents, representatives and
Affiliates, and each person, if any, that controls Investor within
the meaning of the Securities Act (each, an “Indemnitee”),
against any and all losses, claims, damages, actions, liabilities,
costs and expenses (including reasonable fees, expenses and
disbursements of attorneys and other professionals incurred in
connection with investigating, defending, settling, compromising
or paying any such losses, claims, damages, actions, liabilities,
costs and expenses), joint or several, arising out of or based
upon any untrue statement or alleged untrue statement of material
fact contained in any document or report provided by the Credit
Union pursuant to this Section 6.9
or any omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
If the indemnification provided for in Section 6.9(b)
is unavailable to an Indemnitee with respect to any losses,
claims, damages, actions, liabilities, costs or expenses referred
to therein or is insufficient to hold the Indemnitee harmless as
contemplated therein, then the Credit Union, in lieu of
indemnifying such Indemnitee, shall contribute to the amount paid
or payable by such Indemnitee as a result of such losses, claims,
damages, actions, liabilities, costs or expenses in such
proportion as is appropriate to reflect the relative fault of the
Indemnitee, on the one hand, and the Credit Union, on the other
hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, actions, liabilities,
costs or expenses as well as any other relevant equitable
considerations. The relative fault of the Credit Union, on the
one hand, and of the Indemnitee, on the other hand, shall be
determined by reference to, among other factors, whether the
untrue statement of a material fact or omission to state a
material fact relates to information supplied by the Credit Union
or by the Indemnitee and the parties’ relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission; the Credit Union and Investor
agree that it would not be just and equitable if contribution
pursuant to this Section 6.9(c)
were determined by pro rata allocation or by any other
method of allocation that does not take account of the equitable
considerations referred to in Section 6.9(b).
No Indemnitee guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from the Credit Union if the Credit Union
was not guilty of such fraudulent misrepresentation.
Redemption
.
Optional Redemption. The Credit Union may, at its option,
subject to the approval of the NCUA (if then required under the
regulations of NCUA), and in any case where the Subordinated Debt
is treated as secondary capital, subject to the requirements set
forth in 12 C.F.R. 701.34 (or any successor provision) redeem the
outstanding Subordinated Debt after the Original Issue Date, in
whole or, subject to Section 6.10(d),
in part, from time to time (any such date, a “Redemption
Date”), in each case, at a redemption price equal to the
sum of (i) 100% of the principal amount thereof being called for
redemption and (ii) any accrued and unpaid interest
(including any accrued and unpaid Deferred Interest). The
redemption price for any Subordinated Debt shall be payable on the
relevant Redemption Date to the Holder of such Subordinated Debt
against surrender thereof to the Credit Union or its agent.
Interest shall be paid at the then Applicable Interest Rate from
the date of the last Interest Payment Date up to but not including
the Redemption Date.
No Sinking Fund. The Subordinated
Debt will not be subject to any mandatory redemption, sinking fund
or other similar provisions. Holders of Subordinated Debt will
have no right to require redemption or repurchase of any of the
Subordinated Debt.
Notice of Redemption. Notice of
redemption of the Subordinated Debt shall be given by first class
mail, postage prepaid, addressed to the Holders of record of the
Subordinated Debt to be redeemed at their respective last
addresses appearing on the Subordinated Securities Register. Such
mailing shall be at least thirty (30) days and not more than sixty
(60) days before the relevant Redemption Date. Any notice mailed
as provided in this subsection shall be conclusively presumed to
have been duly given, whether or not the Holder receives such
notice, but failure duly to give such notice by mail, or any
defect in such notice or in the mailing thereof, to any Holder of
Subordinated Debt designated for redemption shall not affect the
validity of the proceedings for the redemption of any other
Subordinated Debt. Notwithstanding the foregoing, if Subordinated
Debt is issued in book-entry form through The Depository Trust
Company or any other similar facility, notice of redemption may be
given to the Holders of Subordinated Debt at such time and in any
manner permitted by such facility. Each notice of redemption given
to a Holder shall state: (1) the Redemption Date; (2) the amount
of Subordinated Debt to be redeemed by such Holder; (3) the
redemption price; and (4) the place or places where such
Subordinated Debt is to be surrendered for payment of the
redemption price.
Partial Redemption. The Credit Union may redeem less than
all of the outstanding Subordinated Debt, providedthat
the principal amount of the Subordinated Debt called for
redemption at any time is not less than 20% of the Purchase Price
(or 100% of the Subordinated Debt then outstanding if representing
an aggregate principal amount less than 20% of the Purchase
Price). Subject to the provisions hereof, the Board of Directors
or a duly authorized committee thereof shall have full power and
authority to prescribe the terms and conditions upon which
Subordinated Debt shall be redeemed from time to time. If less
than the full aggregate principal amount of any Subordinated
Security is redeemed, the Credit Union shall issue a new
Subordinated Security in the unredeemed aggregate principal amount
thereof without charge to the Holder thereof. Subordinated Debt
may be redeemed in part only on a pro rata basis and only
in minimum denominations of $1,000 and integral multiples thereof.
Effectiveness of Redemption. If
notice of redemption has been duly given and if on or before the
Redemption Date specified in the notice all funds necessary for
the redemption have been deposited by the Credit Union, in trust
for the pro rata benefit of the Holders of the Subordinated
Debt called for redemption, with a bank or trust company doing
business in the Borough of Manhattan, The City of New York, and
having a capital and surplus of at least $500 million and selected
by the Board of Directors, so as to be and continue to be
available solely therefor, then, notwithstanding that any
Subordinated Security so called for redemption has not been
surrendered for cancellation, on and after the Redemption Date
interest shall cease to accrue on the aggregate principal amount
of such Subordinated Debt so called for redemption, the aggregate
principal amount of such Subordinated Debt so called for
redemption shall no longer be deemed outstanding and shall cease
to bear interest from and after the Redemption Date. All rights
with respect to such Subordinated Debt (or the portion thereof so
called for redemption) shall forthwith on such Redemption Date
cease and terminate, except only the right of the Holders thereof
to receive the redemption price payable on such redemption from
such bank or trust company, without interest. Any funds unclaimed
at the end of three years from the Redemption Date shall, to the
extent permitted by applicable law, be released to the Credit
Union, after which time the Holders of such Subordinated Debt (or
portion thereof so called for redemption) shall look only to the
Credit Union for payment of the redemption price of such
Subordinated Debt.
Status of Redeemed Securities.
Subordinated Debt that are redeemed, repurchased or otherwise
acquired by the Credit Union shall be cancelled and shall not
thereafter be reissued by the Credit Union.
Governance Rights for Non-Payment of Interest
.
Board Observation Rights. Whenever, at any time or times,
interest on the Subordinated Debt has not been paid for an
aggregate of five (5) Interest Periods or more, whether due to
deferral pursuant to Section 6.14
or otherwise and whether or not consecutive, the Credit Union
shall invite a representative (a “Subordinated Observer”)
selected by the Holders holding more than fifty percent (50%) of
the aggregate outstanding principal amount of the Subordinated
Debt (the “Majority Holders”), voting as a
single class, to attend all meetings of the Board of Directors in
a nonvoting observer capacity and, in this respect, shall give
such Subordinated Observer copies of all notices, minutes,
consents, and other materials that it provides to its directors in
connection with such meetings (subject to disclosure limitations
under applicable law); provided, that the Holders not be
obligated to select a Subordinated Observer, nor shall such
Subordinated Observer, if selected, be obligated to attend any
meeting to which he/she is invited. The rights of the Holders set
forth in this Section 6.11(a)
shall terminate when interest payments have been timely paid in
full on the Subordinated Debt for at least four (4) consecutive
Interest Periods and when there is no unpaid Deferred Interest,
subject to revesting in the event of each and every subsequent
default of the character above mentioned. Notwithstanding the
foregoing, the Subordinated Observer shall not have any rights
granted to directors pursuant to the Federal Credit Union Act, the
NCUA Regulations or the Bylaws, and shall not participate in, or
contribute to discussions, of the Board of Directors unless called
upon by the directors of the Credit Union.
Communications to Holders
. Any Holder shall have the right, upon five
(5) business days prior written notice to the Credit Union or its
duly appointed agent to obtain a complete list of Holders. In
addition, any Holder shall have the right to request that the Credit
Union or its duly appointed agent send a notice on behalf of such
Holder to all other Holders at the addresses set forth on the
Subordinated Securities Register.
Noncompliance
. The Credit Union acknowledges and
agrees that this Agreement is entered into under Section 104A of
the Community Development Banking Act and that the ECIP Interim Final
Rule was promulgated under that Act and, accordingly, where
applicable, the enforcement of the provisions of the Agreement and
the ECIP Interim Final Rule (and any violations thereof) are subject
to 12 U.S.C. 4717. The Credit Union further acknowledges and agrees
that the Investor may inform the Appropriate Supervisory Authority of
the Credit Union’s apparent noncompliance.
Deferral of Interest
.
Payments of interest on the Subordinated Debt shall be deferred
for any Interest Period, with the result that such payment of
interest shall not be due on the originally scheduled Interest
Payment Date and shall instead be due on a subsequent Interest
Payment Date or the Maturity Date, as applicable and as determined
in accordance with this Section 6.14,
if, as of the applicable Interest Payment Date, any of the
following is true:
the Credit Union fails to be classified as “well
capitalized”, as defined in 12 C.F.R. 702.102(a)(1) of the
NCUA’s regulations (or any successor provision);
the Credit Union failed to achieve
positive net income for the most recently completed quarter prior
to the relevant Interest Payment Date; or
the Credit Union determines that the payment would be detrimental
to the financial health of the Credit Union, and the principal
executive officer and principal financial officer of the Credit
Union provide written notice, in a form reasonably satisfactory
to the Investor, of such determination and the basis thereof.
Any interest
installment that is deferred pursuant to Section 6.14(a)
(“Deferred Interest”) shall be tested against
Section 6.14(a)(i)–Section 6.14(a)(iii)
at each subsequent Interest Payment Date, and the applicable
Interest Deferral Period shall continue until none of the items in
Section 6.14(a)(i)–Section 6.14(a)(iii)
is true. Deferred Interest shall be payable on any Interest
Payment Date and shall become due at the first Interest Payment
Date as of which none of such items is true. No Interest Deferral
Period may end on a date other than an Interest Payment Date or
extend beyond the Maturity Date, as the case may be. During any
Interest Deferral Period, interest will continue to accrue on the
principal amount of the Subordinated Debt in accordance with the
terms thereof, but no additional interest will accrue on any
Deferred Interest. If an Interest Deferral Period has occurred and
is continuing on the Maturity, any accrued and unpaid deferred
interest shall be due on the Maturity Date.
The Credit
Union may, in its discretion, provide the Investor notice that it
waives the deferral provisions set forth in Section 6.14(a)
above with respect to any Interest Payment Date, and may pay
interest that would otherwise be subject to deferral.
Notwithstanding any such waiver pursuant to this Section 6.14(c),
the Credit Union’s interest payments must adhere to any
distribution or interest payment limitations set forth by the
Credit Union’s Appropriate Supervisory Authority.
Secondary Capital Account Status
.
Characterization
of Subordinated Debt. If the Credit Union is a low-income
designated Credit Union, the Investor and the Credit Union hereby
agree that the funds received by the Credit Union in connection
with the Purchase shall be deposited into an account (the
“Secondary Capital Account”) and that the
Secondary Capital Account, together with the Subordinated Debt,
shall constitute a “secondary capital account” for
purposes of the NCUA Regulations.
Characterization of Letter Agreement.
The Investor and the Credit Union hereby agree that the Letter
Agreement shall constitute a “secondary capital account
contract agreement” as contemplated by Section 701.34(b)(10)
of the NCUA Regulations.
Availability to Cover Losses. The
Investor and the Credit Union hereby agree that funds deposited in
the Secondary Capital Account shall be available to cover
operating losses realized by the Credit Union that exceed its net
available reserves (exclusive of secondary capital accounts and
allowance accounts for loan and lease losses). Such funds held in
the Secondary Capital Account shall be available to cover
operating losses only to the extent that accrued but unpaid
interest on the Subordinated Debt is unavailable to cover such
losses. To the extent funds held in the Secondary Capital Account
are used to cover losses, the Credit Union shall not restore or
replenish the Secondary Capital Account.
Security. The Investor hereby
agrees that it shall not pledge or provide the Secondary Capital
Account as security on a loan or other obligation with the Credit
Union or any other party.
Expenses and Further Assurances
.
Unless
otherwise provided in this Agreement, each of the parties hereto
will bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated under this
Agreement, including fees and expenses of its own financial or
other consultants, investment bankers, accountants and counsel.
The Credit Union shall, at the Credit
Union’s sole cost and expense, (i) furnish to the Investor
all instruments, documents and other agreements required to be
furnished by the Credit Union pursuant to the terms of this
Agreement, including any documents required to be delivered
pursuant to Section 6.9
above, or which are reasonably requested by the Investor in
connection therewith; (ii) execute and deliver to the Investor
such documents, instruments, certificates, assignments and other
writings, and do such other acts necessary or desirable, to
evidence, preserve and/or protect the Subordinated Debt purchased
by the Investor, as Investor may reasonably require; and (iii) do
and execute all and such further lawful and reasonable acts,
conveyances and assurances for the better and more effective
carrying out of the intents and purposes of this Agreement, as the
Investor shall reasonably require from time to time.
Subordination of the Subordinated Debt
Agreement to Subordinate
.
The Credit Union covenants and agrees, and
each Holder of Subordinated Debt issued hereunder likewise
covenants and agrees, that the Subordinated Debt shall be issued
subject to the provisions of this Article VII;
and each Holder of Subordinated Security, whether upon original
issue or upon transfer or assignment thereof, accepts and agrees
to be bound by such provisions.
The payment by the Credit Union of the
principal of and interest on all Subordinated Debt issued
hereunder shall, to the extent and in the manner hereinafter set
forth, be subordinated and subject in right of payment to the
prior payment in full of all amounts then due and payable in
respect of Senior Indebtedness, whether outstanding at the date of
this Agreement or thereafter incurred, and to all other claims on
the assets of the Credit Union, including claims of member
shareholders, creditors and the National Credit Union Share
Insurance Fund.
If Credit Union is not a low-income
designated Credit Union, the Holder of the Subordinated Security
agrees to be subject to the same payout priority as “secondary
capital” for purposes of the NCUA Regulations, and
specifically as set forth in 12 C.F.R. 709.5(b)(8) (or any
successor provision), as though the Subordinated Security was
secondary capital, and hereby expressly waives any right to a
higher payout priority, including the priority set forth in 12
C.F.R. 709.5(b)(5) (or any successor provision).
If Credit Union is a low-income designated
Credit Union, the Holder of the Subordinated Security agrees to be
subject to the payout priorities applicable to “secondary
capital” for purposes of the NCUA Regulations, and
specifically as set forth in 12 C.F.R. 709.5(b)(8) (or any
successor provision), and to comply with the terms set forth in
the Credit Union’s secondary capital plan pursuant, in
accordance with the requirements set forth in 12 C.F.R. 701.34(b)
(or any successor provision).
No provision of this Article VII
shall prevent the occurrence of any Event of Default (or any event
which, after notice or the lapse of time or both would become, an
Event of Default) with respect to the Subordinated Debt hereunder.
Default on Senior Indebtedness
.
In the event and during the continuation
of any default by the Credit Union in the payment of principal,
premium, interest or any other payment due on any Senior
Indebtedness, no payment shall be made by the Credit Union with
respect to the principal or interest on the Subordinated Debt or
any other amounts which may be due on the Subordinated Debt
pursuant to the terms hereof or thereof.
In the event of the acceleration of the
maturity of the Senior Indebtedness, then no payment shall be made
by the Credit Union with respect to the principal or interest on
the Subordinated Debt or any other amounts which may be due on the
Subordinated Debt pursuant to the terms hereof or thereof until
the holders of all Senior Indebtedness outstanding at the time of
such acceleration shall receive payment, in full, of all amounts
due on or in respect of such Senior Indebtedness (including any
amounts due upon acceleration).
In the event that, notwithstanding the
foregoing, any payment is received by any Holder of a Subordinated
Security, when such payment is prohibited by the preceding
paragraphs of this Section 7.2,
such payment shall be held in trust for the benefit of, and shall
be paid over or delivered by the Holder of the Subordinated
Security to the holders of Senior Indebtedness or their respective
representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been
issued, as their respective interests may appear, but only to the
extent of the amounts in respect of such Senior Indebtedness and
to the extent that the holders of the Senior Indebtedness (or
their representative or representatives or a trustee) notify the
Credit Union in writing within 90 days of such payment of the
amounts then due and owing on such Senior Indebtedness, and only
the amounts specified in such notice to the Credit Union shall be
paid to the holders of such Senior Indebtedness. The Credit Union
shall, within ten (10) business days of receipt of such notice,
provide Investor with (i) a copy of such notice delivered to the
Credit Union and (ii) a certificate signed on behalf of the Credit
Union by a Senior Executive Officer certifying that the
information set forth in such notice is true and correct and
confirming that the Holder of the Subordinated Security should pay
or deliver the amounts specified in such notice in the manner
specified therein.
Liquidation; Dissolution
.
Upon any
payment by the Credit Union or distribution of assets of the
Credit Union of any kind or character, whether in cash, property
or securities, to creditors upon any dissolution, winding-up,
liquidation or reorganization of the Credit Union, whether
voluntary or involuntary or in insolvency, receivership or other
proceedings, the holders of all Senior Indebtedness of the Credit
Union will first be entitled to receive payment in full of amounts
due on or in respect of such Senior Indebtedness, before any
payment is made by the Credit Union on account of the principal of
or interest on the Subordinated Debt or any other amounts which
may be due on the Subordinated Debt pursuant to the terms hereof
or thereof; and upon any such dissolution, winding-up, liquidation
or reorganization, any payment by the Credit Union, or
distribution of assets of the Credit Union of any kind or
character, whether in cash, property or securities, which the
Holder of the Subordinated Debt would be entitled to receive from
the Credit Union, except for the provisions of this Article VII,
shall be paid by the Credit Union or by any receiver, liquidating
trustee, agent or other person making such payment or
distribution, or by the Holder of the Subordinated Debt under this
Agreement if received by them or it, directly to the holders of
Senior Indebtedness of the Credit Union (pro rata to such
holders on the basis of the respective amounts of Senior
Indebtedness held by such holders, as calculated by the Credit
Union) or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any
instruments evidencing such Senior Indebtedness may have been
issued, as their respective interests may appear, to the extent
necessary to pay all such amounts of Senior Indebtedness in full,
in money or money’s worth, after giving effect to any
concurrent payment or distribution to or for the holders of such
Senior Indebtedness, before any payment or distribution is made to
the Holder of the Subordinated Debt.
In the event that, notwithstanding the
foregoing, any payment or distribution of assets of the Credit
Union of any kind or character prohibited by Section 7.3(a),
whether in cash, property or securities, shall be received by any
Holder of the Subordinated Debt, before the amounts of all Senior
Indebtedness is paid in full, or provision is made for such
payment in money in accordance with its terms, such payment or
distribution shall be held in trust for the benefit of and shall
be paid over or delivered by any Holder of a Subordinated
Security, to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing
such Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Credit Union, for
application to the payment of all amounts of Senior Indebtedness
remaining unpaid to the extent necessary to pay all amounts due on
or in respect of such Senior Indebtedness in full in money in
accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the benefit of the holders of
such Senior Indebtedness. In such event, the Credit Union shall
provide Investor with a certificate signed on behalf of the Credit
Union by a Senior Executive Officer confirming that the Holder of
the Subordinated Debt should pay or deliver such amounts to the
holders of such Senior Indebtedness.
For purposes of this Article VII,
the words “cash, property or securities” shall
not be deemed to include Capital Interests in the Credit Union as
reorganized or readjusted, or securities of the Credit Union or
any other entity provided for by a plan of reorganization or
readjustment, the payment of which is subordinated at least to the
extent provided in this Article VII
with respect to the Subordinated Debt to the payment of Senior
Indebtedness that may at the time be outstanding, provided that
(i) such Senior Indebtedness is assumed by the new entity, if any,
resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of such Senior Indebtedness
are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Credit
Union with, or the merger of the Credit Union into, another person
or the liquidation or dissolution of the Credit Union following
the sale, conveyance, transfer or lease of its property as an
entirety, or substantially as an entirety, to another person upon
the terms and conditions provided for in Section 4.2(a)
of this Agreement shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 7.3
if such other person shall, as a part of such consolidation,
merger, sale, conveyance, transfer or lease, comply with the
conditions stated in Section 4.2(a)
of this Agreement.
Subrogation
.
Subject to the payment in full of all of
Senior Indebtedness, the rights of the Holders of the Subordinated
Debt shall be subrogated to the rights of the holders of such
Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Credit Union, as the case may be,
applicable to such Senior Indebtedness until the principal of and
interest on the Subordinated Debt shall be paid in full; and, for
the purposes of such subrogation, no payments or distributions to
the holders of such Senior Indebtedness of any cash, property or
securities to which the Holders of the Subordinated Debt would be
entitled except for the provisions of this Article VII,
and no payment pursuant to the provisions of this Article VII
to or for the benefit of the holders of such Senior Indebtedness
by the Holders of the Subordinated Debt shall, as between the
Credit Union, its creditors other than holders of Senior
Indebtedness of the Credit Union, and the Holders of the
Subordinated Debt, be deemed to be a payment by the Credit Union
to or on account of such Senior Indebtedness. It is understood
that the provisions of this Article VII
are intended solely for the purposes of defining the relative
rights of the Holders of the Subordinated Debt, on the one hand,
and the holders of such Senior Indebtedness on the other hand.
Nothing contained in this Article VII
or elsewhere in this Agreement or in the Subordinated Debt is
intended to or shall impair, as between the Credit Union, its
creditors other than the holders of Senior Indebtedness of the
Credit Union, and the Holders of the Subordinated Debt, the
obligation of the Credit Union, which is absolute and
unconditional, to pay to the Holders of the Subordinated Debt the
principal of and interest on the Subordinated Debt as and when the
same shall become due and payable in accordance with their terms,
or is intended to or shall affect the relative rights of the
Holders of the Subordinated Debt and creditors of the Credit
Union, as the case may be, other than the holders of Senior
Indebtedness of the Credit Union, as the case may be, nor shall
anything herein or therein prevent the Holder of any Subordinated
Debt from exercising all remedies otherwise permitted by
applicable law upon default under this Agreement, subject to the
rights, if any, under this Article VII
of the holders of such Senior Indebtedness in respect of cash,
property or securities of the Credit Union, as the case may be,
received upon the exercise of any such remedy.
Notice by the Credit Union
.
The Credit Union shall give prompt written
notice to the Holders of the Subordinated Debt of any fact known
to the Credit Union that would prohibit the making of any payment
of monies in respect of the Subordinated Debt pursuant to the
provisions of this Article VII.
Upon any payment or distribution of assets
of the Credit Union referred to in this Article VII,
the Holders of the Subordinated Debt shall be entitled to
conclusively rely upon any order or decree entered by any court of
competent jurisdiction in which such insolvency, receivership,
liquidation, reorganization, dissolution, winding-up or similar
case or proceeding is pending, or a certificate of the liquidating
trustee, custodian, receiver, assignee for the benefit of
creditors, agent or other person making such payment or
distribution, delivered to the Holders of the Subordinated Debt,
for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of Senior
Indebtedness and other indebtedness of the Credit Union, the
amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to
this Article VII.
Subordination May Not Be Impaired
.
No right of any present or future holder
of any Senior Indebtedness of the Credit Union to enforce
subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of
the Credit Union, as the case may be, or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by
the Credit Union, as the case may be, with the terms, provisions
and covenants of this Agreement, regardless of any knowledge
thereof that any such holder may have or otherwise be charged
with.
Without in any way limiting the generality
of the foregoing paragraph, the holders of Senior Indebtedness of
the Credit Union may, at any time and from time to time, without
the consent of or notice to the Holders of the Subordinated Debt,
without incurring responsibility to the Holders of the
Subordinated Debt and without impairing or releasing the
subordination provided in this Article VII
or the obligations hereunder of the Holders of the Subordinated
Debt to the holders of such Senior Indebtedness, do any one or
more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any
manner such Senior Indebtedness or any instrument evidencing the
same or any agreement under which such Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing such Senior
Indebtedness; (iii) release any person liable in any manner for
the collection of such Senior Indebtedness; and (iv) exercise or
refrain from exercising any rights against the Credit Union, as
the case may be, and any other person.
Miscellaneous
Termination
. This Agreement shall terminate upon the
earliest to occur of:
termination
at any time prior to the Closing:
by either the
Investor or the Credit Union if the Closing shall not have
occurred by the thirtieth (30th) calendar day
following the Signing Date; provided, however, that
in the event the Closing has not occurred by such 30th calendar
day, the parties will consult in good faith to determine whether
to extend the term of this Agreement, it being understood that
the parties shall be required to consult only until the fifth
calendar day after such 30th calendar day and not be
under any obligation to extend the term of this Agreement
thereafter; provided, further, that the right to
terminate this Agreement under this Section 8.1(a)(i)
shall not be available to any party whose breach of any
representation or warranty or failure to perform any obligation
under this Agreement shall have caused or resulted in the failure
of the Closing to occur on or prior to such date; or
by either the Investor or the Credit
Union in the event that any Governmental Entity shall have issued
an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action
shall have become final and nonappealable; or
by the mutual written consent of the
Investor and the Credit Union; or
the date on
which all the Subordinated Debt has been redeemed in whole; or
if the Closing shall not have occurred by
June 30, 2022, on such date.
In the event of termination of this Agreement as
provided in this Section 8.1,
this Agreement shall forthwith become void and there shall be no
liability on the part of either party hereto except that nothing
herein shall relieve either party from liability for any breach of
this Agreement.
Survival
.
This Agreement and all representations,
warranties, covenants and agreements made herein shall survive the
Closing without limitation.
The rights and remedies of Treasury with
respect to the representations, warranties, covenants and
obligations of the Credit Union herein shall not be affected by
any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time by Treasury or
any of its personnel or agents with respect to the accuracy or
inaccuracy of, or compliance with, any such representation,
warranty, covenant or obligation.
Amendment
. No amendment, modification,
termination or waiver of any provision of this Agreement or the
Subordinated Debt or any of the other Transaction Documents will be
effective unless made in writing and signed by an officer or a duly
authorized representative of each party hereto, and, in the case of
any amendment, modification, termination or waiver affecting the
Subordinated Debt, the Majority Holders; provided that for so
long as the Subordinated Debt is outstanding, the Investor may at any
time and from time to time unilaterally amend this 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 Investor
governing ECIP; provided, further, that,
notwithstanding anything else in this Section 8.3,
no amendment, modification, termination or waiver with respect to the
Subordinated Debt 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 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; (d) amend or waive this Section 8.3
or the definitions of the terms used in this Section 8.3
insofar as the definitions affect the substance of this Section 8.3;
or (e) consent to the assignment, delegation or other transfer by the
Credit Union of any of its rights and obligations under any
Transaction Documents. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 8.3
shall be binding upon each Holder of the Subordinated Debt at the
time outstanding, each future Holder of the Subordinated Debt and the
Credit Union. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof
nor shall any single or partial exercise thereof preclude any other
or further exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative of any rights
or remedies provided by law.
Waiver of Conditions
. The conditions to each party’s
obligation to consummate the Purchase are for the sole benefit of
such party and may be waived by such party in whole or in part to the
extent permitted by applicable law. No waiver will be effective
unless it is in a writing signed by a duly authorized officer of the
waiving party that makes express reference to the provision or
provisions subject to such waiver.
Governing Law; Submission to Jurisdiction, etc.
This Agreement and any claim, controversy
or dispute arising under or related to this Agreement, the
relationship of the parties, and/or the interpretation and
enforcement of the rights and duties of the parties shall be
enforced, governed, and construed in all respects (whether in
contract or in tort) 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. Each
of the parties hereto agrees (a) to submit to the exclusive
jurisdiction and venue of the United States District Court for the
District of Columbia and the United States Court of Federal Claims
for any and all civil actions, suits or proceedings arising out of or
relating to this Agreement or the Purchase contemplated hereby and
(b) that notice may be served upon (i) the Credit Union at the
address and in the manner set forth for notices to the Credit Union
in Section 8.6
and (ii) the Investor at the address and in the manner set forth for
notices to the Credit Union in Section 8.6,
but otherwise in accordance with federal law. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY CIVIL LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR THE PURCHASE CONTEMPLATED HEREBY.
Notices
. Any notice, request, instruction or other
document to be given hereunder by any party to the other will be in
writing and will be deemed to have been duly given (a) on the date of
delivery if delivered personally, or by facsimile, upon confirmation
of receipt, or (b) on the second business day following the date of
dispatch if delivered by a recognized next day courier service. All
notices to the Credit Union shall be delivered as set forth in
Schedule A, or pursuant to such other instruction as may
be designated in writing by the Credit Union to the Investor. All
notices to the Holders of Subordinated Debt shall be delivered in
writing, mailed first-class postage prepaid, to each Holder of a
Subordinated Security at the address of such Holder as it appears in
the Subordinated Securities Register. All notices to the Investor
shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the Investor to the
Credit Union.
If to the Investor:
United States Department of the Treasury
1500 Pennsylvania
Avenue, NW
Washington, D.C. 20220
Attention: [to
come]
Facsimile: [to come]
E-mail: [to come]
. Neither this Agreement nor any right,
remedy, obligation nor liability arising hereunder or by reason
hereof shall be assignable by any party hereto without the prior
written consent of the other party, and any attempt to assign any
right, remedy, obligation or liability hereunder without such consent
shall be void, except (a) an assignment, in the case of a merger,
consolidation, statutory share exchange or similar transaction that
requires the approval of the Credit Union’s Interest Holders or
other equity securityholders (a “Business Combination”)
where such party is not the surviving entity, or a sale of
substantially all of its assets, to the entity which is the survivor
of such Business Combination or the purchaser in such sale, (b) an
assignment of certain rights as provided in Section 4.1(c),
or (c) an assignment by the Investor of this Agreement to an
Affiliate of the Investor; provided that, if the Investor
assigns this Agreement to an Affiliate, the Investor shall be
relieved of its obligations under this Agreement but (i) all
rights, remedies and obligations of the Investor hereunder shall
continue and be enforceable by such Affiliate, (ii) the Credit
Union’s obligations and liabilities hereunder shall continue to
be outstanding and (iii) all references to the Investor herein
shall be deemed to include such Affiliate.
Severability
. If any provision of this Agreement or the
Subordinated Debt, or the application thereof to any person or
circumstance, is determined by a court of competent jurisdiction to
be invalid, void or unenforceable, the remaining provisions hereof,
or the application of such provision to persons or circumstances
other than those as to which it has been held invalid or
unenforceable, will remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party. Upon
such determination, the parties shall negotiate in good faith in an
effort to agree upon a suitable and equitable substitute provision to
effect the original intent of the parties.
No Third-Party Beneficiaries
. Other than as expressly provided herein,
nothing contained in this Agreement, expressed or implied, is
intended to confer upon any person or entity other than the Credit
Union, the Investor, any Holder, and any Indemnitee any benefit,
right or remedies.
Specific Performance
. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms. It is
accordingly agreed that the parties shall be entitled (without the
necessity of posting a bond) to specific performance of the terms
hereof, this being in addition to any other remedies to which they
are entitled at law or equity.
* * *
ANNEX A
FORM
OF SUBORDINATED SECURITY
[ATTACHED]
ANNEX B
FORM
OF OFFICER’S CERTIFICATE
OFFICER’S
CERTIFICATE OF
[CREDIT UNION]
In connection with that certain letter agreement,
dated [],
20[ ] (the “Agreement”) by and between [CREDIT
UNION] (the “Credit Union”) and the United States
Department of the Treasury which incorporates that certain Securities
Purchase Agreement –Standard Terms referred to therein (the
“Standard Terms”), the undersigned does hereby
certify as follows:
1. I am a duly elected/appointed
[]
of the Credit Union.
2. The representations and warranties of the
Credit Union set forth in Section 3.1
of the Standard Terms are true and correct in all respects as though
as of the date hereof (other than representations and warranties that
by their terms speak as of another date, which representations and
warranties shall be true and correct in all respects as of such other
date), and the Credit Union has performed in all material respects
all obligations required to be performed by it under the Agreement.
3. The Credit Union is an Eligible Financial
Institution and, as applicable, has delivered to the Investor true,
complete and correct copies of any certifications pertinent to its
status as an Eligible Financial Institution.
4. If the Credit Union is a low-income designated
Credit Union, [attached hereto as Exhibit B is a true, complete and
correct copy of the SCP Notice][forty-five days have elapsed since
the Credit Union submitted a Secondary Capital Plan related to the
Subordinated Debt to its Appropriate Supervisory Authority and such
Secondary Capital Plan has neither been approved or disapproved].
5. No material changes have been made, or are
anticipated to be made, to the Investment and Lending Plan the Credit
Union submitted in connection with its ECIP Application.
6. The Credit Union is in compliance with the
provisions of Section 104A of the Community Development Banking
and Financial Institutions Act of 1994, and all rules and regulations
issued thereunder, including the ECIP Interim Final Rule.
The foregoing certifications are made and
delivered as of []
pursuant to Section 2.3
of the Standard Terms.
Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to them in the Standard
Terms.
IN WITNESS WHEREOF, this Officer’s Certificate has been duly
executed and delivered as of the []
day of [],
20[ ].
[CREDIT UNION]
By:
Name:
Title:
ANNEX C
FORM
OF OPINION
(a) The Credit Union has been duly formed and is
validly existing as an organization of the type described in
Schedule A. The Credit Union has all necessary power and
authority to own, operate and lease its properties and to carry on
its business as it is being conducted.
(b) The Credit Union has been duly qualified as a
foreign entity for the transaction of business and is, if applicable,
in good standing, under the laws of each jurisdiction in which it
owns or leases material properties or conducts any material business
so as to require such qualification.
(c) The Subordinated Debt has been duly and
validly authorized, and, when executed and delivered pursuant to the
Agreement, the Subordinated Debt will be the legal, valid and binding
obligations of the Credit Union, enforceable in accordance with their
terms, except as the same may be limited by applicable receivership,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally and general
equitable principles, regardless of whether such enforceability is
considered in a proceeding at law or in equity.
(d) The Credit Union has the power and authority
to execute and deliver the Agreement and to carry out its obligations
thereunder (which includes the issuance of the Subordinated Debt).
(e) The execution, delivery and performance by the
Credit Union of the Agreement and the consummation of the
transactions contemplated thereby have been duly authorized by all
necessary entity action on the part of the Credit Union and its
Interest Holders, and no further approval or authorization is
required on the part of the Credit Union.
(f) The Agreement is a legal, valid and binding
obligation of the Credit Union enforceable against the Credit Union
in accordance with its terms, except as limited by applicable
receivership, bankruptcy, insolvency, reorganization, moratorium,
conservatorship or similar laws affecting the enforcement of
creditors’ rights generally and general equitable principles,
regardless of whether such enforceability is considered in a
proceeding at law or in equity.
(g) The execution and delivery by the Credit Union
of the Agreement and the performance by the Credit Union of its
obligations thereunder (i) do not require any approval by any
Governmental Entity to be obtained on the part of the Credit Union,
except those that have been obtained, (ii) do not violate or conflict
with any provision of the Charter, (iii) do not violate, conflict
with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of, any
lien, security interest, charge or encumbrance upon any of the
properties or assets of the Credit Union or any Credit Union
Subsidiary under any of the terms, conditions or provisions of its
organizational documents or under any agreement, contract, indenture,
lease, mortgage, power of attorney, evidence of indebtedness, letter
of credit, license, instrument, obligation, purchase or sales order,
or other commitment, whether oral or written, to which it is a party
or by which it or any of its properties is bound or (iv) do not
conflict with, breach or result in a violation of, or default under
any judgment, decree or order known to us that is applicable to the
Credit Union and, pursuant to any applicable laws, is issued by any
Governmental Entity having jurisdiction over the Credit Union.
(h) Other than such filings and approvals as are
required to be made or obtained under any state “blue sky”
laws and such consents and approvals that have been made or obtained,
no notice to, filing with, exemption or review by, or authorization,
consent or approval of, any Governmental Entity is required to be
made or obtained by the Credit Union in connection with the
consummation by the Credit Union of the Purchase.
(i) The Credit Union is not nor, after giving
effect to the issuance of the Subordinated Debt pursuant to the
Agreement, would be on the date hereof an “investment company”
or an entity “controlled” by an “investment
company,” as such terms are defined in the Investment Company
Act of 1940.
(j) The Credit Union is an Eligible Financial
Institution.
ANNEX D
FORM
OF SUPPLEMENTAL REPORT CERTIFICATE
U.S. DEPARTMENT OF THE TREASURY
Emergency Capital
Investment Program
Supplemental Report
Certification
This
certification certifies the attached Supplemental Report filed by the
below-named Credit Union (the “Credit Union”) that has
received capital from the U.S. Department of the Treasury
(“Treasury”) through the Emergency Capital Investment
Program (“ECIP”). The Credit Union’s principal
executive officer and principal financial officer (each as defined in
the ECIP Interim Final Rule), as well as the directors (trustees) of
the Credit Union who attest to the Credit Union’s NCUA Call
Report must certify each Supplemental Report.
Call Report used to complete:
____________
Legal Title of Credit
Union:
City:
State:
Zip:
ECIP ID number:
RSSD:
NCUA charter number (if
applicable):
Initial Supplemental Report Certified
The
Initial Supplemental Report must be filed not later than ten
(10) business days prior to the closing date of Treasury’s
investment in the Credit Union.
Quarterly Supplemental Report Certified
Quarterly
Supplemental Reports must be filed not later than [30 calendar
days] after the end of the calendar quarter.
We, the undersigned CEO
and CFO (or equivalents) of the named Credit Union, attest that
the Supplemental Report for this report date has been prepared
in conformance with the instructions issued by Treasury and is
true and correct to the best of our knowledge and belief.
Signature of CEO (or
Equivalent)
Signature of CFO (or
Equivalent)
Name:
Date:
Name:
Date:
We, the undersigned
directors (trustees), attest to the correctness of the
Supplemental Report for this report date and declare that the
Supplemental Report has been examined by us, and to the best of
our knowledge and belief, has been prepared in conformance with
the instructions issued by Treasury and is true and correct.
Signature of Director
(Trustee)
Signature of Director
(Trustee)
Name:
Date:
Name:
Date:
Signature of Director
(Trustee)
Signature of Director
(Trustee)
Name:
Date:
Name:
Date:
ANNEX E
FORM
OF SUPPLEMENTAL REPORTS
Form
of Initial Supplemental Report
[Attached.]
Form of Quarterly Supplemental Report
[Attached.]
ANNEX F
FORM
OF ANNUAL CERTIFICATION
ANNUAL
CERTIFICATION OF
[CREDIT UNION]
In connection with that certain Securities
Purchase Agreement, dated [],
20[ ] (the “Agreement”) by and
between [CREDIT UNION] (the “Credit Union”) and
the United States Department of the Treasury (the “Investor”),
the undersigned does hereby certify as follows:
1. I am a duly elected/appointed [ ]
of the Credit Union.
2. The Credit Union is in compliance with the
requirements of Section 1020.220 of title 31, Code of Federal
Regulations.
The foregoing certifications are made and
delivered as of []
pursuant to Section 4.1(d)(iii)
of the Agreement.
Capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them in the
Agreement.
[Signature page
follows]
IN WITNESS
WHEREOF, this Certificate has been duly executed and delivered as of
the [ ] day of [ ],
20[ ].
[CREDIT UNION]
By: Name:
Title:
ANNEX G
FORM
OF ECIP INTERIM FINAL RULE CERTIFICATION
ECIP
CERTIFICATION OF
[CREDIT UNION]
In connection with that certain Letter
Agreement, dated [],
20[ ] (the “Agreement”) by and
between [CREDIT UNION] (the “Credit Union”) and
the United States Department of the Treasury (the “Investor”),
the undersigned does hereby certify on behalf of the Credit Union as
follows:
1. I am a duly elected/appointed Senior Executive
Officer of the Credit Union;
2. From the Closing Date through the date of this
certification, the Credit Union has complied with the requirements
in:
a. 31 C.F.R. 35.22(a), which addresses restrictions
on executive compensation;
b. 31 C.F.R. 35.22(b), which addresses restrictions
on severance payments;
c. 31 C.F.R. 35.22(c), which addresses restrictions
on excessive or luxury expenditures;
d. 31 C.F.R. 35.22(d), which addresses material
changes in policies or procedures maintained for purposes of
compliance with 31 C.F.R. 35.22(a)–(c);
e. 31 C.F.R. 35.23(a), which addressees
restrictions on capital distributions due to nonpayment of the
Subordinated Debt; and
f. 31 C.F.R. 35.23(b), which addresses limitations
on the amount of capital distributions; and
3. The undersigned and the Credit Union understand
that a knowing and willful false or fraudulent statement made in
connection with this certification may be punished by fine,
imprisonment, or both. (See, for example, 18 U.S.C. 1001).
The foregoing certifications are made and
delivered as of []
pursuant to Section 4.1(d)(iv)
of the Agreement.
Capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them in the
Agreement unless otherwise stated.
[Signature page
follows]
IN WITNESS
WHEREOF, this Certificate has been duly executed and delivered as of
the [ ] day of [ ],
20[ ].
FORM
OF DISCLOSURE AND ACKNOWLEDGMENT FOR LOW-INCOME DESIGNATED CREDIT
UNIONS
[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 [fifteen
(15)][thirty (30)] years.
2. Redemption prior to maturity.
Subject to the conditions set forth in 12 C.F.R. 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 National Credit Union
Administration.
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 the
Secondary Capital Account 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 the Investor agree
that accrued interest will be:
Paid into and become part of the secondary capital account;
X Paid
directly to the Investor;
Paid into a separate account from which the Investor may make
withdrawals; or
Any combination of the above provided the details are specified and
agreed to in writing.
7. Subordination of claims. In the
event of liquidation of [name of Credit Union], the
funds committed to the Secondary Capital Account will be subordinate
to all other claims on the assets of the Credit Union, including
claims of member shareholders, creditors and the National Credit
Union Share Insurance Fund.
8. Prompt Corrective Action. Under
certain net worth classifications (see 12 C.F.R.
702.204(b)(11), 702.304(b) and 702.305(b), as the case may be), the
board of directors of the NCUA may prohibit [name of Credit Union]
from paying principal, dividends or interest on its uninsured
secondary capital accounts established after [•], except that
unpaid dividends or interest will continue to accrue under the terms
of the account to the extent permitted by law.
Capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them in the
Standard Terms.
[SIGNATURE PAGE FOLLOWS]
ACKNOWLEDGED
AND AGREED TO this _______ day of _______________, 2021 by:
INVESTOR
Name:
Title:
United States Department of the Treasury
1500 Pennsylvania
Avenue, NW
Washington, D.C. 20220
Attention: [to come]