On December 23, 2008, the Treasury “upgraded” the Securities Purchase Agreement for publicly traded companies under the TARP Capital program.  The Securities Purchase Agreement on the Treasury’s website is now identified as version 12 rather than version 11 in the footer of the document.

The Treasury added Sections 4.11 (Bank and Thrift Holding Company Status) and 4.12 (Predominantly Financial) to the Securities Purchase Agreement for publicly traded companies.  The private company documents already contained these provisions, so the modifications merely conform the terms for private and public participants.  The new provisions add two  ongoing obligations for TARP Capital recipients: (a) retaining bank holding company or savings and loan holding company status while the Treasury owns any investments; and (b) remaining predominantly engaged in financial activities.  For traditional community banks, we do not foresee any issues in complying with the provisions of 4.11 and 4.12.

The new provisions are as follows:

4.11 Bank and Thrift Holding Company Status. If the Company is a Bank Holding Company or a Savings and Loan Holding Company on the Signing Date, then the Company shall maintain its status as a Bank Holding Company or Savings and Loan Holding Company, as the case may be, for as long as the Investor owns any Purchased Securities or Warrant Shares. The Company shall redeem all Purchased Securities and Warrant Shares held by the Investor prior to terminating its status as a Bank Holding Company or Savings and Loan Holding Company, as applicable. “Bank Holding Company” means a company registered as such with the Board of Governors of the Federal Reserve System (the “Federal Reserve“) pursuant to 12 U.S.C. §1842 and the regulations of the Federal Reserve promulgated thereunder. “Savings and Loan Holding Company” means a company registered as such with the Office of Thrift Supervision pursuant to 12 U.S.C. §1467(a) and the regulations of the Office of Thrift Supervision promulgated thereunder.

4.12 Predominantly Financial. For as long as the Investor owns any Purchased Securities or Warrant Shares, the Company, to the extent it is not itself an insured depository institution, agrees to remain predominantly engaged in financial activities. A company is predominantly engaged in financial activities if the annual gross revenues derived by the company and all subsidiaries of the company (excluding revenues derived from subsidiary depository institutions), on a consolidated basis, from engaging in activities that are financial in nature or are incidental to a financial activity under subsection (k) of Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)) represent at least 85 percent of the consolidated annual gross revenues of the company.