CDCI Credit Union Summary of Terms

Community Development
Capital Initiative
CDFI Credit Unions
Senior Securities
Summary of Terms of CDCI Senior Securities
Issuer:

A qualifying credit union (“QCU”) that (i) is chartered under the Federal
Credit Union Act or under the laws of any State, the District of Columbia
or any territory or possession of the United States; (ii) if not chartered
under the Federal Credit Union Act, has its deposits insured by the
National Credit Union Share Insurance Fund; (iii) has a low-income
designation per 12 C.F.R. 701.34; and (iv) is a regulated community
development financial institution currently certified by the Community
Development Financial Institution Fund (the “Fund”) of the United States
Department of the Treasury (“UST”) pursuant to 12 C.F.R. 1805.201(a)
as having met the eligibility requirements of the Fund’s Community
Development Financial Institutions Program (“CDFI”). UST will
determine the underwriting eligibility of each QCU and allocation of
funds for QCUs after consultation with the National Credit Union
Administration (“NCUA”) and, in the case of a state-chartered QCU,
the appropriate State Supervisory Authority (“SSA”).

Initial Holder:

UST.

Security:

Unsecured subordinated debentures (“CDCI Senior Securities”) that do
not constitute a class of stock or represent equity ownership in the issuing
QCU, but constitute secondary capital accounts of the QCU within the
meaning of 12 U.S.C. 1790d(o)(2)(B). Each debenture representing a
CDCI Senior Security shall be in the principal amount of $1,000.

Size of Offering:

Each QCU may issue CDCI Senior Securities with an aggregate principal
amount (the “Principal Amount”) equal to not more than three and a half
percent (3.5%) of its total assets and not more than fifty percent (50%) of
the capital and surplus of the QCU.
Any QCU that, in applying to qualify for this program, is determined by
its primary regulators to require additional capital in order to be a
“viable” financial institution, shall be required to receive capital (“Private
Capital”) from one or more private, non-government investors prior to or
concurrently with any purchase of CDCI Senior Securities by UST, such
that the sum of the Private Capital and the amount of CDCI Senior
Securities issued to such QCU under this program shall be sufficient to
establish the QCU’s “viability” on a pro-forma basis. Such QCU

receiving Private Capital shall only be eligible to issue CDCI Senior
Securities in an aggregate amount equal to, on a dollar-for-dollar basis,
the amount of Private Capital it received; provided that the amount of
CDCI Senior Securities issued shall not be greater than three and a half
percent (3.5%) of the QCU’s total assets and not more than fifty percent
(50%) of the capital and surplus of the QCU; provided further that any
Private Capital shall be subordinate to the CDCI Senior Securities, on
terms satisfactory to UST.
Ranking:

Regulatory Capital
Status:

Subordinate to all other claims against the QCU, including the claims of
creditors, shareholders, and the National Credit Union Share Insurance
Fund; available to cover operating losses realized by the QCU that
exceed its net available reserves (exclusive of secondary capital and
allowance accounts for loan and lease losses); and not subject to
restoration or replenishment under any circumstances.
Qualifies as “net worth” of the issuing QCU per 12 U.S.C. 1790d(o).

Maturity:

Thirteen (13) years from the date of the investment (the “Maturity
Date”). On the Maturity Date, the QCU shall repay to UST the Principal
Amount, together with all accrued and unpaid interest.

Interest Rate:

CDCI Senior Securities will pay cumulative interest at a rate of two
percent (2%) per annum until the eighth (8th) anniversary of the date of
issuance, and thereafter at a rate of nine percent (9%) per annum.
Interest shall be payable quarterly in arrears on February 15, May 15,
August 15 and November 15 of each year. Interest on the CDCI Senior
Securities shall be computed on the basis of a 360-day year consisting of
twelve 30-day months.

Redemption:

Restrictions on
Dividends and
Redemptions:

CDCI Senior Securities shall be redeemable at 100% of the issue price,
plus any accrued and unpaid interest. All redemptions shall be subject to
the approval of NCUA and, in the case of a state-chartered QCU, the
appropriate SSA.

Subject to certain exceptions, for as long as any CDCI Senior Securities
are outstanding, no special dividends may be declared or paid by the
QCU on any share accounts or any other capital instruments it is
authorized to issue under applicable law. Further, the QCU may not
repurchase or redeem any other capital instruments authorized under
applicable law (other than other maturing secondary capital accounts),
unless all accrued and unpaid interest for all past interest periods on the
CDCI Senior Securities is paid in full.

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Remedies Upon
Event of Default:

Principal and accrued interest may only become immediately due and
payable (i.e., accelerated) upon the occurrence of an Event of Default.

Voting Rights:

CDCI Senior Securities shall carry no voting or membership rights in the
QCU.

CDFI Covenants:

Each QCU shall covenant that (i) the Fund has not withdrawn or
qualified its certification that such QCU meets the requirements of 12
C.F.R. 1805.201(b)(1)-(6), (ii) its primary mission is promoting
community development, as may be determined by UST from time to
time based on the criteria set forth in 12 C.F.R. 1805.201(b)(1), (iii) its
predominant business activity is the provision, in arms-length
transactions, of “Financial Products”, “Development Services” and/or
other similar financing, (iv) it serves a “Target Market” by serving one or
more “Investment Areas” and/or “Targeted Populations” as may be
determined by UST from time to time substantially in the manner set
forth in 12 C.F.R. 1805.201(b)(3), (v) it directly, through an affiliate, or
through a contract with another provider, provides “Development
Services” in conjunction with its “Financial Products”, (vi) it maintains
accountability to residents of its “Investment Area(s)” or “Targeted
Population(s)” through representation on its governing board or directors
or otherwise and (vii) it is not an agency or instrumentality of the United
States, or any State or political subdivision thereof, as described in 12
C.F.R. 1805.201(b)(6). The terms “Financial Products”, “Development
Services”, “Target Market”, “Investment Areas” and “Targeted
Populations” are used herein in the same manner as such terms are used
in 12 C.F.R. 105.201(b).
Each QCU shall also deliver to UST (x) on the date that is 180 days after
the closing date of this investment, and (y) annually at the end of each
fiscal year of such QCU (i) reports and other documents sufficient to
evidence such QCU’s status as a CDFI including its compliance with the
Fund’s requirements for CDFIs and (ii) a certification that such QCU
remains in compliance with the foregoing covenants. Additionally, each
QCU shall be required to notify UST immediately of any breach of the
foregoing covenants.
Remedies for breaches of the foregoing covenants shall be set forth in the
definitive documentation for the CDCI Senior Securities.

Access and
Information:

So long as UST or any of its affiliates holds CDCI Senior Securities
having a face amount of at least ten percent (10%) of its initial
investment, each QCU shall permit UST to (x) examine its corporate
books and make copies thereof and to discuss the affairs, finances and

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accounts of such QCU with the principal officers of such QCU, upon
reasonable notice and at such times as UST may reasonably request and
(y) review any information material to UST’s investment provided by
such QCU to its regulators.
At any time that any CDCI Senior Securities are outstanding, each QCU
shall deliver to UST (i) annually at the end of each fiscal year of such
QCU, an audited (to the extent available) consolidated balance sheet of
such QCU as of such fiscal year, and audited consolidated statements of
income, retained earnings and cash flows of such QCU for such year,
prepared in accordance with GAAP and setting forth in each case in
comparative form the figures for the previous fiscal year; and (ii) copies
of any quarterly reports provided to other equity holders of such QCU or
the QCU’s management. Additionally, to the extent a QCU receives an
assessment on its internal controls from its auditors at any time in the
ordinary course of its business during any period in which UST or any of
its affiliates holds CDCI Senior Securities, a copy of such assessment
shall also be provided to UST.
On an annual basis during any period in which UST or any of its
affiliates holds CDCI Senior Securities, each QCU shall be required to
complete and deliver to UST a survey, in a form specified by UST,
describing, among other things, how it has utilized the capital it received
in connection with the issuance of the CDCI Senior Securities and the
effects of such capital on the operations and status of the QCU.
Events of Default:

Transparency,
Executive
Compensation and
Employ American
Workers Act:

Affiliate
Transactions:

Placement of the issuing QCU into receivership, conservatorship or
liquidation by NCUA or, in the case of a state-chartered QCU, the
appropriate SSA.

Each QCU shall take all necessary action to ensure that it and its
executive officers, respectively, are in compliance with (i) all UST
guidelines regarding transparency, reporting and monitoring; (ii) Section
111 of the EESA, as implemented by the TARP Standards for
Compensation and Corporate Governance set forth in 31 C.F.R. Part 30,
all rules, regulations and guidance issued thereunder; (iii) the provisions
of the Employ American Workers Act (Section 1611 of Division A, Title
XVI of the American Recovery and Reinvestment Act of 2009), Public
Law No. 111-5, effective as of February 17, 2009; and (iv) in the case of
(ii) and (iii), all rules, regulations and guidance issued thereunder.
For as long as UST or any of its affiliates holds any debt or equity

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securities (including the CDCI Senior Securities) of the QCU, the QCU
will not enter into a transaction with related persons (within the meaning
of Item 404 under the SEC’s Regulation S-K) unless such transaction is
(i) on terms no less favorable to the QCU and its subsidiaries than could
be obtained from an unaffiliated third party, and (ii) has been approved
by the board of directors of the QCU but only if the board of directors
maintains written documentation supporting its determination that the
transaction complies with subparagraph (i) of this paragraph.
Warrant:

Subject to the requirements of Section 113(d)(3)(A) of the Emergency
Economic Stabilization Act, QCUs participating in this program shall not
be required to issue warrants to UST.

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