As filed with the Securities and Exchange Commission on November 20, 2013
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Broadway Financial Corporation
(Exact name of registrant as specified in its charter)
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Delaware |
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6035 |
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95-4547287 |
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(State or other jurisdiction of |
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(Primary Standard Industrial |
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(I.R.S. Employer |
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incorporation or organization) |
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Classification Code Number) |
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Identification No.) |
5055 Wilshire Boulevard
Suite 500
Los Angeles, California 90036
(323) 634-1700
(Address, including zip code, and telephone number, including area code,
of registrant’s principal executive offices)
Brenda J. Battey
Chief Financial Officer
Broadway Financial Corporation
5055 Wilshire Boulevard, Suite 500
Los Angeles, California 90036
(323) 634-1700
BBattey@broadwayfederalbank.com
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
James R. Walther, Esq.
Arnold & Porter LLP
777 South Figueroa Street, Suite 4400
Los Angeles, California 90017
Ph: (213) 243-4297
Fax: (213) 243-4199
James.Walther@aporter.com
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effectiveness of this Registration Statement.
If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Non-accelerated filer |
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Smaller reporting company x |
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF
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AMOUNT TO BE
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PROPOSED
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PROPOSED
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AMOUNT OF
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Common stock, $.01 par value |
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17,956,700 |
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1.21 |
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21,727,607 |
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2,798.52 |
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(1) Pursuant to Rule 416 under the Securities Act of 1933, as amended, this registration statement also registers a currently indeterminate number of additional shares of our common stock that may be issued to prevent dilution as a result of stock splits, stock dividends and similar events that result in stockholders, including the selling stockholders, holding additional shares of common stock or having the right to receive additional shares of common stock.
(2) Estimated solely for purposes of computing the registration fee in accordance with Rule 457(c) of the Securities Act of 1933, as amended, based on the average of the high and low sale prices for our common stock as reported by the NASDAQ Capital Market on November 18, 2013.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
EXPLANATORY STATEMENT
The securities covered by this registration statement include shares of the Company’s Common Stock that are expected to be issued upon mandatory conversion of the Common Stock Equivalents and Series G Non-Voting Common Stock referred to herein. Such conversion will occur automatically if stockholder approval is obtained for certain proposals that will be presented at the Company’s annual meeting of stockholders that has been called for November 27, 2013. The follow prospectus assumes that, and may only be used or relied upon if, such stockholder approvals have been received.
SUBJECT TO COMPLETION, DATED NOVEMBER 20, 2013
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission relating to these securities is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any state or jurisdiction where the offer or sale of these securities is not permitted.
PRELIMINARY PROSPECTUS
BROADWAY FINANCIAL CORPORATION
17,956,700 Shares of Common Stock
This prospectus relates solely to the resale or other disposition by the selling stockholders named in this prospectus of up to 17,956,700 shares of common stock.
The selling stockholders may sell, transfer or otherwise dispose of any or all of their shares of common stock from time to time on any stock exchange, market or trading facility on which the shares are traded or in private transactions. Such sales, transfers or other dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to prevailing market prices, at varying prices determined at the time of sale or at negotiated prices. See “Plan of Distribution” for additional information.
We are not offering any shares of common stock for sale pursuant to this prospectus and we will not receive any of the proceeds from sales of the shares covered hereby.
Our common stock is currently traded on the NASDAQ Capital Market under the symbol “BYFC.” As of November 18, 2013, the closing sale price for our common stock as reported by the NASDAQ Capital Market was $1.19 per share.
Investing in our common stock involves substantial risks. You should carefully read the section entitled “Risk Factors” commencing on page 8 of this prospectus before investing in our common stock.
The shares of common stock offered hereby are not savings accounts, deposits or any other debt obligations of any savings and loan association or bank, and are not insured by the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission nor any state securities commission, the Board of Governors of the Federal Reserve System or any other regulatory authority has approved or disapproved these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This prospectus is dated , 2013
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You should rely only on the information contained or incorporated by reference in this prospectus. Neither we nor the selling stockholders have authorized anyone to provide you with different information. This prospectus is not an offer to sell these securities, and neither we nor any selling stockholder is soliciting offers to buy these securities, in any state or other jurisdiction in which the offer or sale of these securities is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the date of delivery of this prospectus or of any sale of these securities. You should not assume that the information contained in this prospectus is accurate as of any date other than the date stated herein for such information or, if no date is stated for such information herein, then the date on the front cover of this prospectus, or that the information contained in any document incorporated by reference is accurate as of any date other than the date of such document, regardless of the date of delivery of this prospectus or any sale of these securities.
As used in this prospectus, unless the context requires otherwise, references to “the Company,” “we,” “us,” or “our” refer to Broadway Financial Corporation and its subsidiaries, and references to our “common stock” refer to the class of common stock of the Company, par value $0.01 per share, having full voting rights, and do not include our separate authorized class of stock referred to as “non-voting common stock.”
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference in this prospectus contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These forward-looking statements involve risks, uncertainties and assumptions as described in registration statements, annual reports and other periodic reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”). Such statements may relate to our strategy, future operations, future financial position, future revenue, projected costs, or plans and objectives of the board of directors and management. All statements contained herein or incorporated by reference in this prospectus that are not clearly historical in nature are forward-looking. Words such as “anticipate,” “believe,” “continues,” “expect,” “estimates,” “intend,” “project” and similar expressions, as well as statements in the future tense, identify forward-looking statements.
We caution readers that forward-looking statements are not a guarantee of future performance or conditions. Actual results could differ materially from any expectation, estimate or projection conveyed by these statements and there can be no assurance that any such expectation, estimate or projection will be met. Numerous important factors, risks and uncertainties affect our operating results and could cause actual results to differ from the results implied by these or any other forward-looking statements. These potential factors, risks and uncertainties include, among other things, such factors as:
· the level of demand for mortgage loans, which is affected by such external factors as general economic conditions, market interest rate levels, tax laws, and the demographics of our lending markets;
· the direction and magnitude of changes in interest rates and the relationship between market interest rates and the yield on our interest earning assets and the cost of our interest-bearing liabilities;
· the rate and amount of loan losses incurred and projected to be incurred by us, increases in the amounts of our nonperforming assets, the level of our loss reserves and management’s judgments regarding the collectability of loans;
· changes in the regulation of lending and deposit operations or other regulatory actions, whether industry wide or focused on our operations, including increases in capital requirements or directives to increase loan loss allowances or make other changes in our business operations;
· actions undertaken by both current and potential new competitors;
· the possibility of continuing adverse trends in property values or economic trends in the residential and commercial real estate markets in which we compete;
· the effect of changes in economic conditions;
· difficulties in successfully completing our pending efforts to obtain and retain sufficient operating cash at our holding company level or to raise additional capital to maintain compliance with increases in regulatory capital requirements; and
· other risks and uncertainties detailed in our most recent Annual Report on Form 10-K, including those described in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations “ thereof, and in the other reports and documents that we file with the SEC that are incorporated herein by reference.
You should carefully consider such risks, uncertainties and other information, disclosures and discussions which contain cautionary statements identifying important factors that could cause actual results to differ materially from those provided in the forward-looking statements.
We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.
This summary highlights important information about our business and about the common stock described herein. This summary does not contain all of the information that you may consider to be important to your decision whether to purchase any common stock offered hereby. You should carefully read this prospectus, including the reports and other documents incorporated by reference herein, in its entirety before making an investment decision. In particular, you should read the section of this prospectus entitled “Risk Factors,” and the financial statements and related notes, and other information, included in our Annual Report on Form 10-K for the year ended December 31, 2012, which is incorporated by reference in this prospectus.
BROADWAY FINANCIAL CORPORATION
Our Business
Broadway Financial Corporation was incorporated under Delaware law in 1995 for the purpose of acquiring and holding all of the outstanding capital stock of Broadway Federal Savings and Loan Association (“Broadway Federal” or the “Bank”) as part of the Bank’s conversion from a federally chartered mutual savings association to a federally chartered stock savings bank. In connection with the conversion, the Bank’s name was changed to Broadway Federal Bank, f.s.b. The conversion was completed, and the Bank became a wholly owned subsidiary of the Company, in January 1996.
The Company is regulated as a savings and loan holding company by the Board of Governors of the Federal Reserve System. The Bank is regulated by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. The Bank’s deposits are insured up to applicable limits by the FDIC. The Bank is also a member of the Federal Home Loan Bank of San Francisco.
We are headquartered in Los Angeles, California and our principal business is the operation of the Bank as our wholly-owned subsidiary. The Bank’s principal business consists of attracting retail deposits from the general public in the areas surrounding our branch offices and investing those deposits, together with funds generated from operations and borrowings, primarily in multi-family mortgage loans, commercial real estate loans and one-to-four family mortgage loans. In addition, we invest in securities issued by the federal government and federal agencies, residential mortgage-backed securities and other investments. The Company has discontinued its former program of mortgage lending to churches, but such loans, which resulted in substantial losses in recent years, remain a significant portion of our portfolio.
Our revenue is derived primarily from interest income on loans and investments. Our principal costs are interest expenses we incur on deposits and borrowings, together with general and administrative expenses. Our earnings are significantly affected by general policies and actions of regulatory authorities, as well as changes in the real estate markets we serve and changes in the general economy.
Recent Developments
Holding Company Liquidity
The Company has limited liquidity to pay its separate company operating expenses over an extended period of time and will need to raise additional capital within the next 12 to 18 months to continue paying such expenses, including allocations of shared expenses from the Bank, on a timely basis. The Company stopped paying interest expense on its $6.0 million aggregate principal amount of Floating Rate Junior Subordinated Debentures, which we refer to herein as the Debentures or the subordinated debentures, in September 2010 and does not have sufficient liquidity to repay the Debentures when they mature on March 17, 2014. The Company restructured its $5.0 million borrowing under a line of credit payable to another financial institution, as part of the Company’s recapitalization completed on August 22, 2013. Pursuant to that restructuring the Company exchanged $2.6 million of Common Stock Equivalents for $2.6 million principal amount of the line of credit borrowing and the lender forgave all of the $1.8 million of accrued interest on the entire amount of the borrowing as of the closing of the recapitalization. The Company must obtain approval from the Federal Reserve Bank of San Francisco (the “FRB”) before making payments on the $2.4 million remaining principal amount of the modified loan. Under the terms of the loan modification, however, failure of the Company to obtain approval for any such payment despite the exercise of diligent efforts to obtain such approval will not constitute a new default on the loan that would terminate any of the benefits to the Company of the loan modification. The Company received approval from the FRB to make the first payment of interest only due in November 2013.
The Company’s principal sources of funds have historically been dividends from the Bank and, to a lesser extent, additional capital from investors. The Bank has not paid dividends to the Company since June, 2010 because of the Bank’s recent operating losses and because of limitations in a Consent Order the Bank entered into with the Office of the Comptroller of the Current (“OCC”) on October 30, 2013, and a previous Order to Cease and Desist entered into with the OCC’s predecessor regulatory agency in September 2010. Management does not anticipate that the Bank will receive approval to pay dividends for at least the next several quarters. Accordingly, the Company will not be able to meet its payment obligations on its debt noted above within the foreseeable future unless the Company is able to obtain new capital.
Regulatory Cease and Desist Orders
Beginning in 2009, the Bank has experienced elevated levels of loan delinquencies and non-performing assets, which have resulted in substantial operating losses. As a result of these factors and significant deficiencies in the Company’s and the Bank’s operations noted in a regulatory examination in early 2010, the Company and the Bank were declared to be in “troubled condition” and entered into cease and desist orders (the “Orders”) issued by the OCCs regulatory predecessor effective September 9, 2010, requiring, among other things, that the Company and the Bank take remedial actions to improve the Bank’s loan underwriting and internal asset review procedures, to reduce the amount of its non-performing assets and to improve other aspects of the Bank’s business, as well as the Company’s management of its business and the oversight of the Company’s business by the board of directors. Effective October 30, 2013, the Order for the Bank was superseded by a Consent Order entered into by the Bank and the OCC. The Consent Order requires the Bank to maintain a Tier 1 (Core) Capital to Adjusted Total Assets ratio of at least 9% and a Total Risk-Based Capital to Risk-Weighted Assets ratio of at least 13%, both of which ratios are greater than the respective 4% and 8% levels for such ratios that are generally required under OCC regulations. The Bank’s capital exceeded both of these higher capital ratio requirements at the end of each quarter during 2013.
The Consent Order imposes additional requirements on the Bank, including the following among others:
· The Bank must create a Compliance Committee consisting of at least three independent directors to monitor compliance with the Consent Order.
· The Board of the Bank must prepare and submit a Strategic Plan and a Capital Plan for approval by the OCC that is consistent with the Strategic Plan. The Capital Plan requirement includes requirements regarding targeted capital ratios and prior approval requirements for the payment of dividends, both as mentioned above.
· The Bank must implement an enhanced set of lending, other business and corporate governance procedures, and must develop and adhere to a written commercial real estate loan concentration risk management program and a written program to reduce the level of assets considered doubtful, substandard or special mention. This latter program requirement includes requirements to monitor the levels of such assets on an on-going basis and to prepare and implement corrective actions as deemed necessary.
· The Bank must also implement an independent on-going loan review system and adopt new policies with respect to maintaining an adequate allowance for loan and lease losses.
The Consent Order does not include certain explicit restrictions on the Bank that had been imposed by the prior OTS Order issued to the Bank, such as the specific limitation on the Bank’s ability to increase its assets during any quarter or certain limitations on employment agreements and compensation arrangements. The Strategic Plan required by the Consent Order, however, must include the Bank’s plans regarding growth. The Bank will not be permitted to commence any new business strategies, or any variation from the Strategic Plan, prior to receiving an OCC statement of no supervisory objection thereto.
The Order issued to the Company, which has been administered by the FRB since July 2012, remains in effect. This Order imposes the following restriction, among other limitations and requirements:
· The Company may not declare or pay any dividends or make any other capital distributions without the prior written approval of the FRB.
· The Company may not make any changes in its directors or senior executive officers without prior notice to and receipt of notice of non-objection from the FRB.
· The Company is subject to limitations on severance and indemnification payments and on entering into or amending employment agreements and compensation arrangements, and on the payment of bonuses to directors and officers.
· The Company may not incur, issue, renew, repurchase, make payments on or increase any debt or redeem any capital stock without prior notice to and receipt of written notice of non-objection from the FRB.
Recapitalization Transactions
Our plans to address the conditions described above include raising additional equity capital for the Company and negotiating an extension of the maturity of our outstanding Debentures, together with taking steps to improve our business and reduce our level of nonperforming assets. These steps are planned to complement the improvements in the Company’s liquidity and capital structure, and enhancement of the Bank’s capital ratios, that we accomplished with the completion of a series of recapitalization transactions, which we refer to herein as the Recapitalization, in late August 2013. The Company’s ability to continue as a going concern is dependent on the timely implementation and success of our plans to raise more capital and extend the maturity of the Debentures. There can be no assurance that our plans will be achieved.
The Recapitalization simplified the Company’s capital structure through completion of the following transactions:
· The issuance of 8,776 shares of Series F Common Stock Equivalent (the “Common Stock Equivalents”) in exchange for the five series of the Company’s formerly outstanding preferred stock that had an aggregate liquidation value or preference of $17.6 million, including two series of preferred stock, which we refer to as the TARP preferred stock, that the Company issued to the Treasury Department pursuant to the Capital Purchase Program component of the Treasury Department’s Troubled Asset Relief Program. The parties agreed to value Common Stock Equivalents issued for this purpose at $8.8 million based on the price at which shares of our common stock were sold in the Subscription Offering referred to below.
· The issuance of 2,646 shares of Common Stock Equivalents in exchange for all of the accumulated dividends on the TARP preferred stock, totaling $2.6 million as of the date of the exchange;
· The issuance of 2,575 shares of Common Stock Equivalents in exchange for $2.6 million principal amount of the Company’s $5 million principal amount of borrowings under its bank line of credit;
· The forgiveness of the $1.8 million of accrued interest on the entire $5 million principal amount of the Company’s bank debt as of the date of the bank debt exchange;
· The modification of the terms of the remaining $2.4 million principal amount of the Company’s line of credit borrowings to, among other matters, extend the maturity and terminate application of the default interest rate;
· The exchange of 698 shares of Common Stock Equivalents issued in the bank debt exchange for 6,982 shares of Series G Non-Voting Preferred Stock; and
· The issuance of 4,235,500 shares of common stock in private sales (the “Subscription Offering”) at a price of $1.00 per share, yielding $4.2 million in gross proceeds. A portion of the proceeds of the Subscription Offering were used to invest additional capital in the Bank and to repay all of the inter-company payables owed to the Bank from the Company.
The Common Stock Equivalents were a series of preferred stock of the Company, the terms of which provided that they would automatically convert into shares of the Company’s common stock, at the rate of 1,000 shares of common stock for each of the shares of Common Stock Equivalents, upon stockholder approval of an amendment to the Company’s certificate of incorporation increasing the number of shares of common stock the Company is authorized to issue so as to permit such conversion. The terms of the Series G Non-Voting Preferred Stock provided that it would automatically convert into shares of non-voting common stock of the Company upon approval by the stockholders of an amendment of the Company’s certificate of incorporation authorizing the Company to issue non-voting common stock. The amendments required to effect such conversions were approved at the Company’s annual meeting of stockholders held on November 27, 2013 and the conversions of the Common Stock Equivalents and the Series G Non-Voting Preferred Stock became effective December , 2013. Management believes that these conversions will improve the Company’s ability to raise additional capital.
Additional Information
For a complete description of our business, legal proceedings, financial condition, results of operations and other important information, we refer you to our filings with the SEC that are incorporated by reference in this prospectus, including our Annual Report on Form 10-K, as amended, for the year ended December 31, 2012. For information on how to find copies of these documents, please see the section of this prospectus entitled “Where You Can Find Additional Information.”
Corporate Information
We are a corporation organized under the laws of the State of Delaware. Our principal executive offices are located at 5055 Wilshire Boulevard, Suite 500, Los Angeles, California 90036, our telephone number is (323) 634-1700 and our website is located at www.broadwayfederalbank.com. The contents of our website are not part of this prospectus.
THE OFFERING
The following is a brief summary of the offering to which the prospectus relates. You should read the entire prospectus carefully, including “Risk Factors” and the information relating to us, including our consolidated financial statements, contained in our filings with the SEC and incorporated by reference into this prospectus.
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Issuer |
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Broadway Financial Corporation |
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Shares of common stock offered by the selling stockholders |
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17,956,700 shares of common stock(1) |
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Shares of common stock outstanding, including the shares offered hereby |
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20,142,651(1) |
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Use of Proceeds |
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We will not receive any of the proceeds from sales of the common stock offered hereby, all of which are being offered by selling stockholders. |
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Risk Factors |
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An investment in our common stock involves substantial risks that should be carefully considered by prospective investors before investing in our common stock. See “Risk Factors” in this prospectus |
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Trading Symbol |
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Our common stock is traded on the NASDAQ Capital Market under the symbol “BYFC.” |
(1) Includes 698,200 outstanding shares of non-voting common stock, which shares may only be sold in certain circumstances and must be exchanged for common stock having full voting rights in connection with such permitted sales. See “Description of Our Securities” for descriptions of our common stock and non-voting common stock.
Investing in our common stock involves substantial risks including, without limitation, those set forth below. In addition to the risks summarized herein or in documents incorporated herein by reference, we may be subject to other risks from time to time that are not currently known to us or that we do not currently consider to be material, but which may have material adverse effects on our future results of operations and financial condition, and on the market price of our common stock. You should carefully consider all of the information set forth in this prospectus and the documents we have filed with the SEC, which are incorporated by reference in this prospectus prior to purchasing our common stock.
Risks Related to Our Business
The Company and the Bank are subject to regulatory orders issued with their consent by their principal federal regulators.
The Company and the Bank are subject to separate regulatory orders administered by the Federal Reserve Bank of San Francisco and the OCC, respectively. These orders, which are described in this prospectus under the caption “Prospectus Summary—Recent Developments—Regulatory Cease and Desist Orders,” require that the Company and the Bank make certain changes in their business and management processes, including improvements to the Bank’s lending and loan review processes, not pay any dividends or make any other capital distributions without prior approval from the relevant regulator, and certain other requirements. The Bank is required under the Consent Order to which it is currently subject to prepare a strategic plan and a capital plan for its business and submit those plans to the OCC for approval. The Bank is not permitted to commence any new business strategies described in such plans before it has received a written statement of no supervisory objection from the OCC, or to deviate from a plan that has received such non-objection statement without having obtained a new statement of supervisory non-objection.
We are a holding company and depend on dividends from our subsidiary for operating funds. We have not received such dividends since 2010 and are facing a resulting shortage of operating funds to pay our separate company obligations that has raised substantial doubt about our ability to continue as a going concern.
Substantially all of our activities are conducted through the Bank and the principal source of funds with which we service our debt and pay our parent company operating expenses and dividends to our stockholders has historically been dividends from the Bank. Under the Consent Order from the OCC and the prior cease and desist order issued to the Bank by the Office of Thrift Supervision, the Bank may not pay a dividend or make a capital distribution to the Company without the prior written consent of the OCC. Due, among other factors, to the operating losses that the Bank has experienced in recent years, the Bank has not received regulatory approval for the payment of any such dividends since mid-2010 and the Company has accordingly been faced with a severe shortage of liquidity to pay its separate company obligations. This shortage raised substantial doubt about our ability to continue as a going concern. While the completion of the Recapitalization transactions described herein in late August of this year improved the Company’s liquidity to a certain degree and substantially reduced its debt service obligations, the Company continues to have limited liquidity and management believes that the Company will need to raise additional capital over the next 12 to 18 months. We anticipate that the OCC will consider the extent to which we have satisfied all of the requirements of the Consent Order and whether it believes we have achieved sustainable profitable operations in determining whether to approve dividend requests from the Bank. We further anticipate that the OCC will not approve dividend requests from the Bank for at least the next several quarters.
A downturn in the real estate market could seriously impair our loan portfolio and operating results.
Most of our loan portfolio consists of loans secured by various types of real estate located in Southern California. Real estate values in the region declined substantially in the recent economic downturn and the Bank experienced significant increases in loan delinquencies and defaults, which resulted in increases in the amounts of nonperforming assets. These assets include loans on which the borrowers are not making required payments, loans that we have restructured to permit the borrower to make smaller payments, and real estate that we have acquired through foreclosure. This has necessitated increasing our loss allowances, which has significantly reduced our income and resulted in substantial net operating losses since 2009. Real estate values have begun to improve and we have been successful in reducing our ratios of non-performing assets to total assets, although they remain high in comparison to historical standards. If real estate values in the Southern California markets that we serve decline, or higher vacancies occur and other factors deteriorate, then the financial condition of our borrowers could be harmed, and the collateral for our loans will provide less security, both of which would likely cause the Bank to suffer additional losses.
Our allowance for loan losses may not be adequate to cover actual loan losses.
We try to limit the risk that borrowers will fail to repay loans by carefully underwriting the loans that we make. Losses nevertheless occur. We establish allowances for estimated loan losses in our accounting records through loss provisions which are recorded as reductions of our income. We base our decisions on the amount of these loss provisions and allowances that are prudent from time to time on our estimates of the following factors, among others:
· historical experience with our loans;
· evaluation of current economic conditions;
· reviews of the quality, mix and size of the overall loan portfolio;
· reviews of loan delinquencies, including trends in such delinquencies; and
· the quality of the collateral underlying our loans, based in part on independent appraisals by third parties.
If our actual loan losses exceed the amount that we have allocated for estimated probable losses, our net income and our financial condition could be materially and adversely affected. Evaluation of many of the factors that are relevant to the determination of the appropriate levels of loss provisions and allowances is an inherently subjective process, and our conclusions are subject to review by our regulators in the course of regular periodic and special examinations of the Bank. The regulatory examiners may make different judgments on such matters based on the information available to them at the time of their examination and may require that we increase the amounts of our loss provisions and allowances.
Changes in interest rates affect our profitability.
Changes in prevailing interest rates may hurt our business. We derive our income mainly from the difference or “spread” between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. In general, the wider the spread, the more we earn. When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. In addition, the timing and rate of change in the interest that we earn on our assets do not necessarily match the timing and rate of change in the interest that we must pay on our deposits, even though most of our loans have variable interest rates. This can cause increases or decreases in our spread and can greatly affect our income. In addition, interest rate fluctuations can affect how much money we may be able to lend and our ability to attract and retain customer deposits, which are an important source of funds for making and holding loans.
Changes in governmental regulation may impair our operations or restrict our growth.
We are subject to substantial governmental supervision and regulation, which are intended primarily for the protection of depositors. Statutes and regulations affecting our business may be changed at any time, and the interpretation of existing statutes and regulations by examining authorities may also change. Within the last several years Congress and the federal bank regulatory authorities have made significant changes to these statutes and regulations. There can be no assurance that such changes to the statutes and regulations or in their interpretation will not adversely affect our business. We are also subject to changes in other federal and state laws, including changes in tax laws, which could materially affect the banking industry. If we fail to comply with federal bank regulations, the regulators may limit our activities or growth, assess civil money penalties against us or place the Bank into conservatorship or receivership. Bank regulations can hinder our ability to compete with financial services companies that are not regulated or are less regulated.
Risks Related to Ownership of Our Common Stock
The United States Treasury Department is our controlling stockholder and may make decisions with respect to fundamental corporate transactions that may be different from the interests of other stockholders.
The Treasury Department owns approximately 52% of our outstanding common stock. The Treasury Department has agreed generally to vote its shares of our common stock in the same proportions (for, against or abstain) as our other common stockholders do in the aggregate, but has excepted voting on certain important matters from its proportional voting agreement. These include: election and removal of directors; approval of business combinations, including sales of all or substantially all of our assets or property; approval of dissolution of the Company; approval of any issuance of securities of the Company on which our common stockholders are entitled to vote; and amendments to our certificate of incorporation or bylaws on which our common stockholders are entitled to vote. Accordingly, the Treasury Department has the ability to exercise a controlling influence over these important matters. In pursuing its economic interests, the Treasury Department may make decisions with respect to fundamental corporate transactions that may be different from the interests of other stockholders.
The price of our common stock is volatile and you may not be able to resell shares of our common stock owned by you at times or at prices you find attractive.
The trading price of our common stock may fluctuate significantly as a result of a number of factors, including the following:
· actual or anticipated changes in our operating results and financial condition;
· changes in financial estimates or publication of research reports and recommendations by financial analysts with respect to our common stock or those of other financial institutions;
· failure to meet stockholder or market expectations regarding loan and deposit volume, revenue, asset quality or earnings;
· speculation in the press or the investment community relating to us or the financial services industry generally;
· actions by our current stockholders, including sales of common stock by the Treasury Department or by other substantial stockholders and/or directors and executive officers;
· the limited number of our shares that are held by the general public, commonly called the “public float,” and our small market capitalization;
· fluctuations in the stock price and operating results of our competitors;
· proposed or adopted regulatory changes or developments;
· investigations, proceedings, or litigation that involve or affect us;
· the performance of the national and California economy and the real estate markets in California;
· general market conditions and, in particular, developments related to market conditions for the financial services industry;
· additions or departures of key personnel; and
· actions taken by bank regulatory authorities, including required additions to our loan loss reserves or the issuance of revised or additional cease and desist orders, based on adverse evaluations of our loans and other assets, our operating results, our management practices and procedures or other aspects of our business.
We have suspended payment of cash dividends on our common stock and may not pay any cash dividends on our common stock for the foreseeable future.
We have not declared or paid cash dividends on our common stock since June , 2010 due to the operating losses we have experienced, and the Order issued to us with our consent by the Office of Thrift Supervision, which requires, among other limitations and requirements on our business operations, that we obtain the written non-objection of the Office of Thrift Supervision before we declare or pay any dividends. The Order, now administered by the Federal Reserve Board acting through the Federal Reserve Bank of San Francisco, remains in effect.
There may be future sales or other dilution of our equity that may adversely affect the market price of our common stock.
We are seeking to sell additional shares of our common stock in one or more transactions with investors to improve our holding company liquidity and strengthen our capital position and that of the Bank. The issuance of additional shares of common stock, or securities that are convertible into our common stock, could be substantially dilutive to existing holders of our common stock. The market value of our common stock could also decline as a result of sales by us of a large number of shares of common stock or any future class or series of stock or the perception that such sales could occur.
Resales of our common stock in the public market by current investors may cause the market price of our common stock to fall.
In connection with the Recapitalization described herein, we provided the investors, including the Treasury Department, with customary registration rights with respect to the shares of our stock issued to them. In addition, certain of such investors may be able to resell their shares in the public market without necessity of such registration rights based on the size of their holdings of shares of our common stock and the period of time they have held such shares. The market value of our common stock could decline as a result of sales by the investors of a substantial amount of the common stock held by each of them, or the perception that they may initiate such sales.
Anti-takeover provisions of our articles of incorporation and bylaws and federal and state law may limit the ability of another party to acquire us, which could cause our stock price to decline.
Various provisions of our articles of incorporation and bylaws and certain other actions that we have taken could delay or prevent a third-party from acquiring control of us even if doing so might be beneficial to our stockholders. These include, among others, our classified board of directors, the fact that directors may only be removed for cause, advance notice requirements for stockholder nominations of director candidates or presenting proposals at annual stockholder meetings, super-majority stockholder voting requirements for amendments to our certificate of incorporation and bylaws, and for certain business combination transactions, and the authorization to issue “blank check” preferred stock by action of our board of directors acting alone, without obtaining stockholder approval. See “Description of Our Securities - Certain Anti-Takeover Effects.” These provisions could be used by our board of directors to prevent a merger or acquisition that would be attractive to stockholders and could limit the price investors would be willing to pay in the future for our common stock.
Our common stock is not insured and you could lose the value of your entire investment.
An investment in shares of our common stock is not a deposit and is not insured against loss or guaranteed by the Federal Deposit Insurance Corporation or any other government agency or authority.
We will not receive any of the proceeds from the sale of the shares of our common stock offered by the selling stockholders.
SELLING STOCKHOLDER INFORMATION
This prospectus covers the resale from time to time of 17,956,700 shares of common stock that may be sold from time to time by the selling stockholders identified herein.
The shares offered hereby were issued to the selling stockholders in the Recapitalization described herein, either directly as common stock or upon conversion in accordance with the terms of the Common Stock Equivalents and Series G Non-Voting Preferred Stock that were issued in exchange for the Company’s then outstanding preferred stock or for a portion of the principal amount of a bank loan to the Company. See “Prospectus Summary—Recent Developments—Recapitalization Transactions” for further information regarding the transactions comprising the Recapitalization.
The table below has been prepared based upon the information furnished to us by the selling stockholders. We do not know whether, when or in what amounts the selling stockholders may sell or otherwise dispose of the shares of common stock covered hereby. As a result, we cannot estimate the number of the shares that will be held by the selling stockholders after completion of the offering. For purposes of this table, we have assumed that all of the shares of common stock covered by this prospectus will be sold by the selling stockholders.
No selling stockholder has had any position, office or other material relationship with us or any of our predecessors or affiliates within the past three years. We are filing the registration statement on Form S-1, of which this prospectus is a part, to fulfill contractual obligations to the respective selling stockholders to do so pursuant to agreements entered into by the Company with them in connection with the Recapitalization transactions.
|
Name of Selling
|
|
Shares
|
|
Percent of
|
|
Number of
|
|
Number of Shares
|
|
Percent of Class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BBCN Bancorp, Inc. |
|
500,000 |
|
2.48 |
|
500,000 |
|
— |
|
— |
|
|
BBCN Bank |
|
1,425,000 |
|
7.07 |
|
1,425,000 |
|
— |
|
— |
|
|
Butterfield Trust (Bermuda) Limited as Trustee of the Alicia De Brosses Trust F/B/O Descendants of O.R. Grace #6664 |
|
200,000 |
|
* |
|
200,000 |
|
— |
|
— |
|
|
Butterfield Trust (Bermuda) Limited as Trustee of The Lorraine L. Grace Millennium Trust |
|
200,000 |
|
* |
|
200,000 |
|
— |
|
— |
|
|
Butterfield Trust (Bermuda) Limited as Trustee of The Anne Grace Kelly Millennium Trust |
|
200,000 |
|
* |
|
200,000 |
|
— |
|
— |
|
|
Butterfield Trust (Bermuda) Limited as Trustee of The Helen Grace Spencer Millennium Trust — Alice’s Sub-Fund |
|
50,000 |
|
* |
|
50,000 |
|
— |
|
— |
|
|
Butterfield Trust (Bermuda) Limited as Trustee of The Helen Grace Spencer Millennium Trust — Helen’s Sub-Fund |
|
50,000 |
|
* |
|
50,000 |
|
— |
|
— |
|
|
Butterfield Trust (Bermuda) Limited as Trustee of The Helen Grace Spencer Millennium Trust — Mark’s Sub-Fund |
|
50,000 |
|
* |
|
50,000 |
|
— |
|
— |
|
|
Butterfield Trust (Bermuda) Limited as Trustee of the Helen Grace Spencer Millennium Trust — Ralph’s Sub-Fund |
|
50,000 |
|
* |
|
50,000 |
|
— |
|
— |
|
|
California Community Foundation |
|
250,000 |
|
1.24 |
|
250,000 |
|
— |
|
— |
|
|
Cathay General Bancorp, Inc. |
|
500,000 |
|
2.48 |
|
500,000 |
|
— |
|
— |
|
|
CJA Private Equity Financial Restructuring Master Fund I L.P. |
|
1,935,500 |
|
9.61 |
|
1,935,500 |
|
— |
|
— |
|
|
Economic Resources Corporation |
|
250,000 |
|
1.24 |
|
250,000 |
|
— |
|
— |
|
|
National Community Investment Fund (4) |
|
1,650,200 |
|
8.19 |
|
1,650,200 |
|
— |
|
— |
|
|
United States Department of the Treasury |
|
10,146,000 |
|
50.37 |
|
10,146,000 |
|
— |
|
— |
|
|
Valley Economic Development Center, Inc. |
|
500,000 |
|
2.48 |
|
500,000 |
|
— |
|
— |
|
(1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Based upon representations of the selling stockholders, we believe that the selling stockholders possess sole voting and investment power over all shares of common stock shown as beneficially owned by the selling stockholders.
(2) Based on the 19,444,451 shares of common stock outstanding as of December , 2013 plus 698,200 outstanding shares of Non-Voting Common Sock beneficially owned by National Community Investment Fund.
(3) Assumes that all securities offered hereby are sold.
(4) Includes the 698,200 outstanding shares of non-voting common stock beneficially owned by National Community Investment Fund, which shares may only be sold in certain circumstances and must be exchanged for common stock having full voting rights in connection with such permitted sales. See “Description of Our Securities” for descriptions of our common stock and non-voting common stock.
* Less than 1%.
The selling stockholders, which term includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, may sell or otherwise dispose of from time to time any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are then traded or in private transactions. These sales or dispositions may be at fixed prices, at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at varying prices determined at the time of sale, or at negotiated prices.
The selling stockholders may use any one or more of the following methods when selling or otherwise disposing of shares of common stock or interests therein:
· ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
· block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
· purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
· an exchange distribution in accordance with the rules of the applicable exchange;
· privately negotiated transactions;
· short sales effected after the date the registration statement of which this prospectus forms a part is declared effective by the SEC;
· through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
· agreements with broker-dealers to sell a specified number of such shares at a stipulated price per share;
· a combination of any such methods of sale; and
· any other method permitted by applicable law.
The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if a selling stockholder defaults in the performance of its secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, using this prospectus, or an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sales of the common stock or interests therein, selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of the common stock short and deliver shares of the common stock covered hereby to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell shares of the common stock covered hereby. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction to the extent required by law).
The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any. Each of the selling stockholders, together with their duly authorized agents from time to time, reserves the right to accept and to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents.
The selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling stockholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.
To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, and any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.
The anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of the common stock offered hereby in the market and to the activities of the selling stockholders and their affiliates. We will make copies of this prospectus, as it may be supplemented or amended from time to time, available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act.
We have agreed to indemnify the selling stockholders against certain liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus. The selling stockholders may indemnify broker-dealers that participate in transactions involving the sale of the common stock offered hereby against certain liabilities, including liabilities arising under the Securities Act.
We have agreed with the selling stockholders to keep the registration statement, of which this prospectus constitutes a part, effective until the earlier of (1) [the date that is 12 months after the effective date of the registration statement of which this prospectus forms a part or (2) the date on which all of the shares held by a selling stockholder may be sold without restriction pursuant to Rule 144 of the Securities Act.
We have the authority to issue an aggregate of 50,000,000 shares of common stock, par value $0.01 per share, 5,000,000 shares of non-voting common stock, par value $0.01 per share and 1,000,000 shares of preferred stock, par value $0.01 per share. As of December , 2013, we had outstanding 19,444,451 shares of common stock, 698,200 shares of non-voting common stock and no shares of preferred stock. The rights, preferences and privileges of holders of our common stock and our non-voting common stock, are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock which we may designate and issue in the future.
The following is a summary of the material terms of our common stock and our non-voting common stock, which are the only classes of capital stock that we currently have outstanding. This description does not purport to be complete and is qualified in its entirety by reference to our certificate of incorporation and amended and restated bylaws, which are filed as exhibits to the registration statement of which this prospectus forms a part.
Common Stock
Dividend Rights. Subject to the rights of holders of preferred stock of any series that may be issued and outstanding from time to time, holders of our common stock are entitled to receive such dividends and other distributions in cash as may be declared by our board of directors from time to time out of our funds or assets that are legally available for dividends and other distributions, and are entitled to share equally on a per share basis in all such dividends and other distributions.
Voting Rights. E ach outstanding share of our common stock is entitled to one vote on all matters submitted to a vote of stockholders generally. In the event we issue one or more series of preferred or other securities in the future such preferred stock or other securities may be given rights to vote, either together with the common stock or as a separate class on one or more types of matters.
Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Company, the holders of our common stock will be entitled, subject to the prior rights of any outstanding series of our preferred stock, to share in our net assets, if any, that are available after the payment of all of our debts and other liabilities.
Preemptive Rights. The holders of our common stock have no preemptive rights in their capacities as such holders. Certain investors who acquired an aggregate of 5,510,700 shares of common stock in the Recapitalization were granted rights, subject to certain limitations, to purchase shares of common stock that we may offer in the future to the extent necessary to maintain their respective ownership percentages of our outstanding common stock.
Board of Directors. Holders of common stock do not have cumulative voting rights with respect to the election of directors. At any meeting to elect directors by holders of our common stock, the presence, in person or by proxy, of the holders of a majority of the voting power of shares of our capital stock then outstanding will constitute a quorum for such election. Directors may be elected by a plurality of the votes of the shares present and entitled to vote on the election of directors, except for directors whom the holders of any then outstanding preferred stock have the right to elect, if any.
Certain Anti-Takeover Effects
Provisions of Delaware Law. We are a Delaware corporation and Section 203 of the Delaware General Corporate Law (“DGCL”) applies to us. It is an anti-takeover statute that is designed to protect stockholders against coercive, unfair or inadequate tender offers and other abusive tactics and to encourage any person contemplating a business combination with us to negotiate with our board of directors for the fair and equitable treatment of all stockholders.
Under Section 203 of the DGCL, a Delaware corporation is not permitted to engage in a “business combination” with an “interested stockholder” for a period of three years following the date that the stockholder became an interested stockholder. As defined for this purpose, the term “business combination” includes a merger, consolidation, asset sale or other transaction resulting in a financial benefit to the interested stockholder. The term “interested stockholder” is defined to mean a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the corporation’s outstanding voting stock. This prohibition does not apply if:
· prior to the time that the stockholder became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction resulting in the stockholder’s becoming an interested stockholder;
· upon completion of the transaction resulting in the stockholder’s becoming an interested stockholder, the stockholder owns at least 85% of the outstanding voting stock of the corporation, excluding voting stock owned by directors who are also officers and by certain employee stock plans; or
· at or subsequent to the time that the stockholder became an interested stockholder, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that the interested stockholder does not own.
A Delaware corporation may elect not to be governed by these restrictions. We have not opted out of Section 203.
Classified Board of Directors; Removal of Directors for Cause. Our certificate of incorporation and bylaws provide for our board of directors to be divided into three classes, as nearly equal in number as possible, serving staggered terms. Approximately one-third of our board will be elected each year. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire will be elected for a three-year term of office. All directors elected to our classified board of directors will serve until the election and qualification of their respective successors or their earlier resignation or removal. The board of directors is authorized to create new directorships and to fill such positions so created and is permitted to specify the class to which any such new position is assigned. The person filling such position would serve for the term applicable to that class. The board of directors (or its remaining members, even if less than a quorum) is also empowered to fill vacancies on the board of directors occurring for any reason for the remainder of the term of the class of directors in which the vacancy occurred. Members of the board of directors may only be removed for cause by the affirmative vote, taken at a stockholders meeting, of a majority of our outstanding voting stock. Cause is defined for this purpose to mean conviction of a felony, or gross negligence or misconduct in the performance of a director’s duty to the Company as determined by a court of competent jurisdiction, which adjudication is no longer subject to direct appeal. These provisions are likely to increase the time required for stockholders to change the composition of the board of directors. For example, in general, at least two annual meetings will be necessary for stockholders to effect a change in a majority of the members of the board of directors. The provision for a classified board could prevent a party who acquires control of a majority of our outstanding common stock from obtaining control of our board of directors until our second annual stockholders meeting following the date the acquirer obtains the controlling stock interest. The classified board provision could have the effect of discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us and could increase the likelihood that incumbent directors will retain their positions.
Advance Notice Procedures. Our bylaws establish an advance notice procedure for stockholder nominations of persons for election to our board of directors and for any proposals to be presented by stockholders at an annual meeting. Stockholders at an annual meeting will only be able to consider nominations and other proposals specified in the notice of meeting or brought before the meeting by or at the direction of our board of directors or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given our corporate secretary timely written notice, in proper form, of the stockholder’s intention to nominate a person for election as a director or to bring a proposal for action at the meeting.
Unanimity Required For Stockholder Action Without Meeting
Our certificate of incorporation provides that stockholder actions may be taken without a meeting only by written consent signed by all stockholders.
Super-Majority Stockholder Vote Required for Certain Actions. The Delaware General Corporation Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation or bylaws, unless the corporation’s certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our certificate of incorporation requires the affirmative vote of the holders of at least 66-2/3% of our outstanding voting stock to amend or repeal certain provisions of the certificate of incorporation. This “super-majority” stockholder vote would be in addition to any separate class vote that might be required pursuant to the terms of any preferred stock that might then be outstanding. In addition, our amended and restated bylaws may only be amended by the directors then in office.
The affirmative vote of the holders of two-thirds of our outstanding voting stock is also required by our certificate of incorporation, in addition to any other approval that may be required by law, for approval of a business combination with or upon a proposal by an interested stockholder, unless the business combination (1) has been approved by a majority of disinterested directors, or (2) will occur at least three years after the proposing stockholder became an interested stockholder and certain criteria relating to the price to be paid in the business combination are satisfied, or (3) is solely with one of our subsidiaries and certain criteria are satisfied. For purposes of the foregoing provisions, the term “interested stockholder” is defined as a direct or indirect beneficial owner of more than 10% of our outstanding voting stock.
Effects of Authorized but Unissued Shares. We have shares of common stock and “blank check” preferred stock available for future issuance and our Board may establish the terms of separate series of such preferred stock, without stockholder approval, subject to the limitations imposed by the listing standards of the NASDAQ Capital Market or any securities market or exchange on which our securities may be listed or traded. These additional shares may be utilized for a variety of corporate purposes, including future private sales or public offerings to raise additional capital, acquisitions of other companies and grants of stock options or other stock-based compensation awards pursuant to employee incentive compensation plans. The existence of authorized but unissued shares of common stock and “blank check” preferred stock could render more difficult or discourage an attempt to obtain control of a majority of our common stock by means of a proxy contest, tender offer, merger, or otherwise.
California and Federal Banking Law . Federal law prohibits a person or group of persons “acting in concert” from acquiring “control” of a bank holding company unless the Federal Reserve Board has been given 60 days prior written notice of such proposed acquisition and within that time period the Federal Reserve Board has not issued a notice disapproving the proposed acquisition or extending for up to another 30 days the period during which such a disapproval may be issued. An acquisition may be made prior to the expiration of the disapproval period if the Federal Reserve Board issues written notice of its intent not to disapprove the action. Under a rebuttable presumption established by the Federal Reserve Board, the acquisition of 10% or more of a class of voting stock of a bank or bank holding company with a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, would, under the circumstances set forth in the presumption, constitute the acquisition of control. In addition, any “company” would be required to obtain the approval of the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended, before acquiring 25% (5% in the case of an acquiror that is, or is deemed to be, a bank holding company) or more of any class of voting stock, or such lesser number of shares as may constitute control.
Under the California Financial Code, no person shall, directly or indirectly, acquire control of a California state bank or its holding company unless the Commissioner has approved such acquisition of control. A person would be deemed to have acquired control of us if such person, directly or indirectly, has the power (i) to vote 25% or more of our voting power or (ii) to direct or cause the direction of the management and policies of us. For purposes of this law, a person who directly or indirectly owns or controls 10% or more of our common stock would be presumed to control us.
Non-Voting Common Stock
The non-voting common stock has all of the attributes and rights of our common stock, other than as described below with respect to voting rights and provisions regarding conversion to common stock. Holders of the non-voting common stock would be entitled to share ratably with the holders of the common stock, based on the numbers of shares held by each, in any dividends declared on the common stock by the Company’s board of directors and in distributions of any net liquidation proceeds upon dissolution and liquidation of the Company, after payment or provisions for payment of creditors’ claims and distribution of net liquidation proceeds to the extent legally required on any then outstanding shares of preferred stock.
The holders of the non-voting common stock do not have any voting rights, except as required by the DGCL. Under the DGCL, the holders of stock that by its terms is stated not to have voting rights nonetheless have the right to vote as a separate class on proposed amendments to the issuing corporation’s certificate of incorporation that would change the authorized number of shares of such class, change their par value or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely.
The non-voting common stock is transferable, subject to certain limitations, and is convertible into common stock in connection with transfers that are made to new holders of the non-voting common stock that are not affiliated with the holder to whom it was initially issued and which conform to the criteria specified in clauses (iii) , (iv) or (v) listed below. These criteria are intended to comply with bank regulatory requirements used to determine whether the holders of the non-voting common stock may be found or presumed to have control (as defined in applicable regulations) of a savings and loan holding company or bank holding company. The shares of non-voting common stock are only be transferrable by the initial holder thereof or an affiliate of the initial holder (i) to an affiliate of the initial holder, (ii) to the Company, (iii) in a widespread public distribution, (iv) in a transfer in which no transferee (or group of associated transferees) would receive 2% or more of any class of voting securities of the Company, or (v) to a transferee that would control more than 50% of the voting securities of the Company without any transfer from the initial holder or any affiliate of the initial holder. The terms of the non-voting common stock further provide that, notwithstanding the foregoing, the Company may restrict such conversion to the extent it would be inconsistent with, or in violation of, the requirements of any bank regulator (as defined in the Company’s certificate of incorporation) with respect to the restrictions on the transfer of the non-voting common stock that are required in order to preserve the “non-voting” classification of the non-voting common stock for bank regulatory purposes. Any such restriction would be imposed and deemed effective immediately upon the transmittal by the Company of written notice to such holder specifying in reasonable detail the reason for such restriction. In the event such notice is transmitted after the event giving rise to such automatic conversion, the restriction would be deemed to have been imposed and effective retroactively to the time of such event, and such conversion would be deemed not to have occurred, so long as such notice is transmitted within 180 days after the event giving rise to such conversion.
Transfer Agent and Registrar
Computershare Investor Services is the transfer agent and registrar for our common stock. The transfer agent and registrar’s address is 250 Royall Street, Canton, MA 02021.
Listing of Our Common Stock
Our common stock is listed on the NASDAQ Capital Market under the symbol “BYFC.”
The validity of the issuance of the shares of common stock offered hereby will be passed upon for us by Arnold & Porter LLP, Los Angeles, California.
The consolidated financial statements of Broadway Financial Corporation incorporated into this prospectus by reference to Broadway Financial Corporation’s Annual Report on Form 10-K for the year ended December 31, 2012 have been so incorporated in reliance on the report of Crowe Horwath LLP, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement with the SEC on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus does not contain all of the information about us and the common stock that is included in the registration statement and the exhibits and schedules thereto. We are subject to the informational requirements of the Exchange Act, and, in accordance therewith, we file reports and other information with the SEC. You may read and copy the registration statement and the exhibits and schedules thereto, as well as the other information that we file with the SEC, at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at l-800-SEC-0330. The SEC also maintains a website (http://www.sec.gov) that contains information that we and other registrants file electronically with the SEC. Statements made in this prospectus about legal documents may not necessarily be complete and you should read the documents, which are filed as exhibits to the registration statement or otherwise filed with the SEC, for a complete statement of their terms or other content. Our website address is www.broadwayfederalbank.com. The contents of our website are not incorporated by reference into this prospectus.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” the information that we have filed with it, meaning we can disclose important information to you by referring you to those documents already on file with the SEC. The information incorporated by reference is considered to be part of this prospectus except for any information that is superseded by other information that is included in this prospectus.
This filing incorporates by reference the following documents, which we have previously filed with the SEC:
· Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on April 1, 2013, as amended and restated by Form 10-K/A filed on May 9, 2013;
· Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 2013 filed with the SEC on May 15, 2013, August 13, 2013, and November 14, 2013, respectively;
· Current Reports on Form 8-K filed with the SEC on April 19, May 8, July 8, August 23, August 28, and September 16, 2013 and November 6, 2013; and
· Definitive Proxy Statement on Schedule 14A filed with the SEC on October 31, 2013 under the Exchange Act.
We will provide, without charge, to each person, including any beneficial owner, to whom this prospectus is delivered, on the written or oral request of such person, a copy of any or all of the reports or documents incorporated by reference in this prospectus but not delivered with this prospectus. Any request may be made by writing or calling us at the following address or telephone number:
Broadway Financial Corporation
5055 Wilshire Boulevard
Suite 500
Los Angeles, California 90036
Attn: Investor Relations
(323) 634-1700
DJohnson@broadwayfederalbank.com
You may also access the documents incorporated by reference into this prospectus at our website address at http://www.broadwayfederalbank.com. The other information and content contained on or linked from our website are not part of this prospectus.
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PROSPECTUS DATED , 2013
BROADWAY FINANCIAL CORPORATION
17,956,700 Shares of Common Stock
PROSPECTUS
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses incurred or expected to be incurred in connection with this registration statement and the transactions contemplated hereby, all of which are to be paid by the registrant:
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ITEM |
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AMOUNT |
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SEC registration fee |
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$ |
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Legal fees and expenses |
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20,000 |
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Accounting fees and expenses |
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* |
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Miscellaneous expenses |
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5,000 |
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$ |
* |
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* To be supplied by amendment.
Item 14. Indemnification of Directors and Officers
Section 102(b)(7) of the Delaware General Corporation Law, or DGCL, enables a Delaware corporation to provide in its certificate of incorporation for the elimination or limitation of the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. However, no such provision can eliminate or limit a director’s liability for any breach of the director’s duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for unlawful payment of dividends or unlawful stock purchase or redemption, or for any transaction from which the director derives an improper personal benefit.
Section 145 of the DGCL authorizes a corporation to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding, if the person acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. In addition, the DGCL does not permit indemnification in any threatened, pending or completed action or suit by or in the right of the corporation in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses, which such court shall deem proper. To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to above, or in defense of any claim, issue or matter, such person shall be indemnified against expenses, including attorneys’ fees, actually and reasonably incurred by such person. Indemnity is mandatory to the extent a claim, issue or matter has been successfully defended.
These provisions will not limit the liability of directors or officers under the federal securities laws of the United States.
Our certificate of incorporation provides for the indemnification of directors and officers to the fullest extent permissible under Delaware law.
Item 15. Recent Sales of Unregistered Securities
During the three years preceding the filing of this registration statement, the Registrant has not sold its securities without registration under the Securities Act of 1933, as amended, except as described below:
On August 22, 2013, the Company issued 13,997 shares of its Common Stock Equivalents and 4,235,500 shares of its common stock pursuant to the respective transactions and related agreements entered into in connection with the Recapitalization described herein. Each of the exchanges and sales of Common Stock Equivalents and common stock was conducted without registration under the Securities Act in reliance on the exemption from such registration requirement provided by Section 4(a)(2) of the Securities Act and Rule 506 thereunder. Each of the exchanging and purchasing entities is believed by the Company to be an accredited investor and none were initially contacted through any advertising or other general solicitation efforts. The shares of common stock were sold in the Subscription Offering for cash at a price of $1.00 per share. The Common Stock Equivalents were valued on an as-converted basis of $1,000 per share, reflecting the fact that they were mandatorily convertible into 1,000 shares of common stock upon receipt of the requisite stockholder vote, for purposes of determining the number of shares of Common Stock Equivalents to be issued in exchange for the shares of the respective series of the Company’s outstanding preferred stock, accrued dividends on the TARP Preferred Stock and a portion of the principal amount of the BBCN Bank loan. Additional information regarding these transactions is provided in the Current Report on Form 8-K filed by the Company with the Commission on August 28, 2013, which report is incorporated herein by reference.
The Company sold an aggregate of 115,386 shares of common stock to certain of its directors and one executive officer for an aggregate price of $150,000 on July 2, 2012. The Company sold 50,000 shares (after adjustment) of common stock to another executive officer of the Company on November 26, 2012 for an aggregate price of $50,000. These sales were made in reliance on the exemption from the registration requirement of the Securities Act provided by Section 4(a)(2) of the Securities Act and Rule 506 thereunder.
Item 16. Exhibits and Financial Statement Schedules
Reference is made to the Exhibit Index filed as part of this registration statement. All exhibits have been previously filed unless otherwise noted.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use; and
(b) The undersigned registrant hereby undertakes that insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California, on November 19, 2013.
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BROADWAY FINANCIAL CORPORATION |
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By: |
/s/ Wayne-Kent A. Bradshaw |
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Name: Wayne-Kent A. Bradshaw |
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Title: President and Chief Executive Officer |
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We, the undersigned directors and officers of Broadway Financial Corporation do hereby constitute and appoint Wayne-Kent A. Bradshaw and Brenda J. Battey, and each of them acting individually, with full and individual power of substitution, our true and lawful attorneys-in-fact and agents with full power to them, and to each of them acting individually, to do any and all acts and things in our names and on our behalf in our capacities as directors and officers and to execute any and all instruments for us in our name and in the capacities indicated below, which said attorneys and agents may deem necessary or advisable to enable said registrant to comply with the Securities Act of 1933 and the rules, regulations and requirements of the Securities and Exchange Commission, in connection with this registration statement, including specifically but without limitation, the power and authority to sign for any of us in our names and in the capacities indicated below any and all amendments, including post-effective amendments, hereof; and we do hereby ratify and confirm all that said attorneys-in-fact and agents shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
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Title |
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Date |
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/s/ Wayne-Kent A. Bradshaw |
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President and Chief Executive Officer
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Wayne-Kent A. Bradshaw |
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November 19, 2013 |
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/s/ Brenda J. Battey |
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Chief Financial Officer (Principal
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Brenda J. Battey |
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November 18, 2013 |
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/s/ Virgil Roberts |
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Director, Chairman of the Board |
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November 12, 2013 |
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Virgil Roberts |
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/s/ Kellogg Chan |
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Director |
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November 12, 2013 |
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Kellogg Chan |
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Robert C. Davidson |
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Director |
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November , 2013 |
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Robert C. Davidson |
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Paul C. Hudson |
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Director |
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November , 2013 |
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Paul C. Hudson |
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Javier León |
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Director |
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November , 2013 |
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Javier León |
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/s/ A. Odell Maddox |
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Director |
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November 12, 2013 |
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A. Odell Maddox |
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/s/ Daniel Medina |
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Director |
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November 12, 2013 |
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Daniel Medina |
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EXHIBIT INDEX
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Exhibit
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Description |
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3.1 |
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Certificate of Incorporation of Registrant, including amendments thereto (Exhibit 3.1 to Form 10-Q filed by Registrant on November 14, 2013) |
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3.2 |
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Bylaws of Registrant (Exhibit 3.2 to Form 10-Q filed by Registrant on November 14, 2013) |
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4.13 |
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Certificate of Designations of Series F Common Stock Equivalents (Exhibit 4.13 to Form 10-Q filed by Registrant on November 14, 2013) |
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4.14 |
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Certificate of Designations of Series G Non-Voting Preferred Stock (Exhibit 4.14 to Form 10-Q filed by Registrant on November 14, 2013) |
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5.1 |
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Opinion of Arnold & Porter LLP** |
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10.8 |
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Broadway Financial Corporation 2008 Long Term Incentive Plan (Exhibit A to proxy statement filed by Registrant on Schedule 14A on November 17, 2009) |
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10.14 |
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Deferred Compensation Plan |
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10.15 |
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Salary Continuation Agreement Between Broadway Federal Bank and Chief Executive Officer Paul C. Hudson |
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10.18 |
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Business Loan Agreement between Broadway Financial Corporation and Nara Bank, dated July 31, 2009 (Exhibit 10.18 to Form 10-K filed by the Registrant for the fiscal year ended December 31, 2009) |
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10.19.1 |
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Exchange Agreement by and between Broadway Financial Corporation and The United States Department of the Treasury (Exhibit 10.19 to Form 10-K filed by the Registrant on April 1, 2013) |
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10.19.2 |
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Amendment No. 1 to Exchange Agreement by and between the Registrant and The United States Department of the Treasury |
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10.20 |
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Exchange Agreement by and among Broadway Financial Corporation, the Insurance Exchange of the Automobile Club, and the Automobile Club of Southern California (Exhibit 10.20 to Form 10-K filed by the Registrant on April 1, 2013) |
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10.21.1 |
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Exchange Agreement by and between the Registrant and BBCN Bancorp, Inc. (Exhibit 10.21.1 to Form 10-Q filed by Registrant on November 14, 2013) |
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10.21.2 |
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Investor Rights Letter by and between the Registrant and BBCN Bancorp, Inc. (Exhibit 10.21.2 to Form 10-Q filed by Registrant on November 14, 2013) |
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10.22.1 |
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Exchange Agreement by and between the Registrant and National Community Investment Fund (Series C for Series F Preferred Stock) (Exhibit 10.22.1 to Form 10-Q filed by Registrant on November 14, 2013) |
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10.22.2 |
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Investor Rights Letter by and between the Registrant and National Community Investment Fund (Exhibit 10.22.2 to Form 10-Q filed by Registrant on November 14, 2013) |
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10.22.3 |
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Exchange Agreement by and between the Registrant and National Community Investment Fund (Series F for Series G Preferred Stock) (Exhibit 10.22.3 to Form 10-Q filed by Registrant on November 14, 2013) |
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10.23 |
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Registration Rights Agreement among the Registrant, CJA Private Equity Financial Restructuring Master Fund I LP, National Community Investment Fund and BBCN Bancorp, Inc. (Exhibit 10.23to Form 10-Q filed by Registrant on November 14, 2013) |
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10.24 |
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Form of Subscription Agreements entered into by the Registrant with various purchasers of the Registrant’s common stock (Exhibit 10.24 to Form 10-Q filed by Registrant on November 14, 2013) |
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10.25.1 |
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Subscription Agreement between the Registrant and CJA Private Equity Financial Restructuring Master Fund I LP (Exhibit 10.25.1 to Form 10-Q filed by Registrant on November 14, 2013) |
* Exhibits followed by a parenthetical reference are incorporated by reference herein from the document filed by the Registrant with the SEC described therein. Except as otherwise indicated, the SEC File No. for each incorporated document is 000-27464.
** To be filed by amendment.
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Exhibit
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Description |
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10.25.2 |
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Investor Rights Letter between the Registrant and CJA Private Equity Financial Restructuring Master Fund I LP (Exhibit 10.25.2 to Form 10-Q filed by Registrant on November 14, 2013) |
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10.26.1 |
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Subscription Agreement between the Registrant and Valley Economic Development Center, Inc. (Exhibit 10.26.1 to Form 10-Q filed by Registrant on November 14, 2013) |
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10.26.2 |
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Investor Rights Letter between the Registrant and Valley Economic Development Center, Inc. (Exhibit 10.26.2 to Form 10-Q filed by Registrant on November 14, 2013) |
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10.27 |
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Agreement for Partial Satisfaction of Debt Previously Contracted by and among BBCN Bank and the Registrant (Exhibit 10.27 to Form 10-Q filed by Registrant on November 14, 2013) |
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21.1 |
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List of Subsidiaries |
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23.1 |
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Consent of Crowe Horwath LLP |
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23.2 |
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Consent of Arnold & Porter LLP (to be included in Exhibit 5.1) |
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24.1 |
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Power of Attorney (included on signature page hereto) |
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99.1 |
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Order to Cease and Desist, issued by Office of Thrift Supervision to Broadway Financial Corporation, Order No.: WN 10-026, effective September 9, 2010 (Exhibit 99.1 to Form 8-K filed by the Registrant on September 16, 2010) |
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99.2 |
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Order to Cease and Desist, issued by Office of Thrift Supervision to Broadway Federal Bank, f.s.b., Order No.: WN-10-025, effective September 9, 2010 (Exhibit 99.2 to Form 8-K filed by the Registrant on September 16, 2010) |
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99.3 |
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Consent Order, issued by Comptroller of the Currency to Broadway Federal Bank, f.s.b., Order No. AA-EC-2013-XX, effective October 30, 2013 (Exhibit 99.1 to Form 8-K filed by Registrant on November 5, 2013) |
TABLE OF CONTENTS
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Page |
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SECTION 1 |
DEFINITIONS |
3 |
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SECTION 2 |
PARTICIPATION |
4 |
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SECTION 3 |
SALARY DEFERRAL ELECTIONS |
6 |
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SECTION 4 |
ACCOUNTING |
7 |
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SECTION 5 |
DISTRIBUTIONS |
7 |
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SECTION 6 |
PARTICIPANT’S INTEREST IN ACCOUNT |
9 |
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SECTION 7 |
ADMINISTRATION OF THE PLAN |
9 |
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SECTION 8 |
FUNDING |
11 |
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SECTION 9 |
MODIFICATION OR TERMINATION OF PLAN |
11 |
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SECTION 10 |
GENERAL PROVISIONS |
12 |
BROADWAY FEDERAL BANK
DEFERRED COMPENSATION PLAN
( Effective July 1, 2006)
BROADWAY FEDERAL BANK, a California corporation, hereby establishes the Broadway Federal Bank Deferred Compensation Plan, effective July 1, 2006, for the benefit of (i) a select group of management and highly compensated employees of the Company and its participating Affiliates (“Directors”) and (ii) the members of the Board of Directors of the Company and its participating affiliates, in order to provide such employees and Directors with certain deferred compensation benefits. The Plan is an unfunded deferred compensation plan that is intended to qualify for the exemptions provided in sections 201, 301, and 401 of ERISA.
SECTION 1
DEFINITIONS
The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:
1.2 “ Affiliate ” shall have the same meaning as that assigned from time to time to the identical term under the Investment Plan.
1.3 “ Beneficiary ” shall mean the person or persons entitled to receive benefits under the Plan upon the death of a Participant, as provided in Section 5.4.
1.4 “ Board ” shall mean the Board of Directors of Broadway Federal Bank, as from time to time constituted.
1.5 “ Code ” shall mean the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.
1.6 “ Committee ” shall mean the committee appointed by the Board to administer the Plan. Any member of the Committee may resign at any time by notice in writing mailed or delivered to the Secretary of the Company. The Board may remove any member of the Committee at any time and for any reason, and may fill any vacancy which exists.
1.7 “ Company ” shall mean Broadway Federal Bank, a California corporation.
1.8 “ Compensation ” shall mean the base salary and the annual salary of an Eligible Employee and all compensation earned by a Director as a Director.
1.9 “ Compensation Deferrals ” shall mean the amounts credited to Participants’ Accounts under Section 3.1.
1.10 “ Director ” shall mean a member of the Board.
1.11 “ Disability ” shall mean the mental or physical inability of an eligible employee to perform the regularly assigned duties of his or her employment, provided that such inability (a) has continued or is expected to continue for a period of at least 12 months and (b) is evidenced by the certificate of a medical examiner satisfactory to the Committee stating that such inability exists and is likely to be permanent.
1.12 “ Eligible Employee ” shall mean an employee of an Employer who has been selected for participation in the Plan by the Committee.
1.13 “ Employers ” shall mean the Company and each of its Affiliates that adopts the Plan. With respect to an individual Participant, Employer shall mean the Company or its Affiliate that has adopted the Plan and that directly employs such Participant.
1.14 “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific section of ERISA shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.
1.15 “ Normal Retirement Date ” shall mean the date on which the Participant attains age 65.
1.16 “ Participant ” shall mean Eligible Employees and Directors who (a) have become a Participant in the Plan pursuant to Section 2.1 and (b) have not ceased to be a Participant pursuant to Section 2.3.
1.17 “ Participant’s Account ” or “ Account ” means as to any Participant the separate account maintained on the books of the Employers in order to reflect his or her interest under the Plan.
1.18 “ Plan ” shall mean Broadway Federal Bank Deferred Compensation Plan, as set forth in this instrument and as heretofore and hereafter amended from time to time.
1.19 “ Plan Year ” shall mean the calendar year.
1.20 “ Supplemental Allocations ” means any amounts credited to a Participant’s Account under Section 3.2.
SECTION 2
PARTICIPATION
2.1 Participation. Each Eligible Employee’s and Director’s decision to become a Participant shall be entirely voluntary.
2.1.1 Initial Election . An Eligible Employee and a Director may elect to become a Participant in this Plan for the Plan Year beginning on July 1, 2006. An election to make Compensation Deferrals under this Section 2.1.1 shall be irrevocable as to the amounts already deferred as of the effective date of any suspension in accordance with Section 2.2.
2.1.2 Election for Subsequent Plan Years . An Eligible Employee and Director (whether or not he or she previously elected to make Compensation Deferrals) may elect to become a Participant (or to reinstate his or her active participation) in the Plan for any Plan Year, not covered by Section 2.1 by electing at least 30 days prior to the beginning of each plan year, and subject to Section 2.1.4, to make Compensation Deferrals under the Plan. An election under this Section 2.1.2 to make Compensation Deferrals shall be effective only for the Plan Year with respect to which the election is made. An election to make Compensation Deferrals under this Section 2.1.2 shall be irrevocable as to amounts deferred as
of the effective date of any suspension in accordance with Section 2.2. An Eligible Employee who is newly hired by an Employer during a Plan Year may elect to become a Participant in the Plan for that Plan Year by electing, within thirty days of the date of his or her hire, appointment or election and subject to Section 2.1.4, to make Compensation Deferrals under the Plan. An election under this Section 2.1.2 to make Compensation shall be effective only for the Plan Year with respect to which the election is made. An election to make Compensation Deferrals under this Section 2.1.2 shall be irrevocable as to amounts deferred as of the effective date of any suspension in accordance with Section 2.2.
2.1.3 No Election Changes During Plan Year . A Participant shall not be permitted to change or revoke his or her election for a Plan Year after the beginning of such Plan Year, except as provided in Section 2.2.
2.1.4 Specific Timing and Method of Election . Notwithstanding the foregoing, the Committee, in its sole discretion, shall determine the manner and deadlines for Participants to make Compensation Deferral elections. The deadlines prescribed by the Committee may be earlier than the deadlines specified in Section 2.1.1 and 2.1.2, but shall not be later than the deadlines prescribed in such Sections.
2.2 Hardship Suspension of Participation .
2.2.1 Automatic Suspension . In the event that a Participant receives a distribution from the Investment Plan on account of a financial hardship during a Plan Year for which he or she has elected to make Compensation Deferrals, the Participant’s Compensation Deferrals under this Plan shall be suspended for the same period that his or her pre-tax contributions to the Investment Plan are suspended pursuant to the provisions of the Investment Plan.
2.2.2 Permissible Suspension . In the event that a Participant incurs a “financial hardship” (as defined in this Section 2.2.2), the Committee, in its sole discretion, may suspend the Participant’s Compensation Deferrals for the remainder of the Plan Year. A “financial hardship” for purposes of the Plan shall mean a severe financial emergency which is caused by a sudden and unexpected accident, illness or other event beyond the control of the Participant which would, if no suspension of deferrals (or accelerated distribution under Section 5.5) were made, result in severe financial hardship to the Participant or a member of his or her immediate family. This standard is more difficult to satisfy than the standard for financial hardship withdrawals under the Investment Plan. For example, a Participant’s desire to send his or her child to college or to purchase a home would not constitute a financial hardship. Also, a financial hardship does not exist to the extent that the hardship may be relieved by (a) reimbursement or compensation by insurance, or (b) by liquidation of the Participant’s other assets (to the extent such liquidation would not itself cause severe financial hardship).
2.3 Termination of Participation . An Eligible Employee or Director who has become a Participant shall remain a Participant until his or her entire vested Account balance is distributed. However, an Eligible Employee or Director who has become a Participant may or may not be an active Participant making Compensation Deferrals for a particular Plan Year, depending upon whether he or she has elected to make Compensation Deferrals for such Plan Year.
SECTION 3
COMPENSATION DEFERRALS AND SUPPLEMENTAL ALLOCATIONS
3.1 Compensation Deferrals . At the times and in the manner prescribed in Section 2.1, each Eligible Employee and Director may elect to defer portions of his or her Compensation and to have the amounts of such deferrals credited on the books of the Employer to his or her Account under the Plan. For each Plan Year, an Eligible Employee may elect to defer an amount equal to a percentage of the Participant’s Compensation for the Plan Year. The percentage elected by a Participant shall be a multiple of 5%. An eligible employee shall not elect to defer more than 50% of his or her base salary. An Eligible Employee may elect to defer up to 100% of his or her annual bonus and a Director may elect to defer up to 100% of his or her Compensation earned as a Director.
3.2 Crediting of Compensation Deferrals . The amounts deferred pursuant to Section 3.1 shall reduce the Participant’s Compensation during the Plan Year and shall be credited to the Participant’s Account as of the last day of the months in which the deferral occurs.
3.4 Interest . As of the close of each Plan Year, interest shall be credited to the Account of each Participant. The interest shall be based on the average balance in each Account during the Plan Year. The interest shall become a part of the Account and shall be paid at the time or times as the balance of the Account. The prime rate of interest, or similar standards, selected by the Committee in its discretion, applicable from time to time plus one hundred basis points.
3.5 Form of Payment . Each Participant shall indicate on his or her deferral election made pursuant to Section 3.1 the form of payment for his or her Account. A Participant may elect either (a) a lump sum payment, or (b) substantially equal annual installments payments not exceeding 10 in number. A Participant’s election as to the form of payment shall be irrevocable.
3.6 Time for Payment . Each Participant shall indicate on his or her first deferral election made pursuant to Section 3.1 the time for payment for his or her Account. A Participant may elect either:
(a) The Participant’s termination of employment with all Employers and Affiliates; or
(b) The later (i) the Participant’s termination of employment with all Employers and Affiliates, or (ii) the Participant’s Normal Retirement Date.
A Participant’s election as to the time for payment shall be irrevocable and shall apply to all amounts credited to the Participant’s Account, without regard to the Plan Year in which such amounts are credited.
SECTION 4
ACCOUNTING
4.1 Participant’s Accounts . At the direction of the Committee, an Agreement shall be established and maintained on the books of the Employer for each Participant to which there shall be credited all Compensation Deferrals under Section 3.1.
4.2 Accounting Methods . The accounting methods or formulae to be used under the Plan for the purpose of maintaining the Participants’ Accounts, including but not limited to the crediting intent under Section 3.3, shall be determined by the Committee. The accounting methods or formulas may be revised from time to time.
4.3 Reports . Each Participant shall be furnished with periodic statements of his or her Account, reflecting the status of his or her interest in the Plan, at least annually.
SECTION 5
DISTRIBUTIONS
5.1 Normal Time of Distribution. Subject to Section 5.2 and 5.3, distribution of the vested balance credited to a Participant’s Account shall be commence as soon as administratively practicable after the date elected by the Participant pursuant to Section 3.5. If pursuant to Section 3.4, the Participant elected to receive a lump sum payment, his or her lump sum shall be paid to him or her as soon as administratively practicable after the date specified in the first sentence of this Section 5.1. If pursuant to Section 3.4, the Participant elected to receive annual installment payments, his or her first installment shall be equal to 1/10 th of the balance then credited to his or her Account divided by the number of annual installment to be paid. The first installment shall be paid to him or her as soon as administratively practicable after the date specified in the first sentence of this Section 5.1. Each subsequent annual installment shall be paid to the Participant as near as administratively practicable to each anniversary of the first installment payment. The amount of each subsequent installment shall be equal to the balance then credited to the Participant’s Account, divided by the number of installments remaining to be made.
5.2 Death Distribution . If a Participant dies before his or her entire Account has been distributed (whether or not the Participant had previously terminated employment), the vested balance credited to his or her Account shall be distributed to his or her Beneficiary (or Beneficiaries) in a lump sum as soon as administratively practicable after the date of death.
5.3 Effect of Disability . If the active employment of a Participant ceases at any time on account of his or her Disability, the vested balance credited to his or her Account shall be distributed to him or her in a lump sum as soon as administratively practicable after the date of Disability.
5.4 Beneficiary Designations . Each Participant may, pursuant to such procedures as the Committee may specify, designate one or more Beneficiaries.
5.4.1 Spousal Consent . If a Participant designates a person other than or in addition to his or her spouse as a primary Beneficiary, the designation shall be ineffective unless the Participant’s spouse consents to the designation. Any spousal consent required under this Section 5.4 shall be ineffective unless it (a) is set forth in writing, (b) acknowledges the effect of the Participant’s designation of another person as his or her Beneficiary under the Plan, and (c) is signed by the spouse and witnessed by and authorized agent of the Committee or a notary public. Notwithstanding this consent requirement, if the Participant establishes to the satisfaction of the Committee that spousal consent may be obtained, his or her designation shall be effective without a spousal consent. Any spousal consent required under this Section 5.4 shall be valid only with respect to the spouse who signs the consent. A Participant may revoke his or her Beneficiary designation in writing at any time, regardless of his or her spouse’s previous consent to the Beneficiary designation being revoked, and any such revoked designation shall be ineffective.
5.4.2 Changes and Failed Designations . A Participant may designate different Beneficiaries (or may revoke a prior Beneficiary designation) at any time by delivering a new designation (or revocation of a prior designation) in like manner. Any designation shall become effective only upon its receipt by the Committee and when so received, whether the Participant is living or not, shall be operative as of the date the notice is executed, but without prejudice to the Committee on account of any payment made before the change is recorded. Any designation shall cease to be effective when a revocation of that designation by the Participant is received by the Committee. The last effective designation received by the Committee shall supersede all prior designations. If a Participant dies without having effectively designated a Beneficiary, or if no Beneficiary survives his or her surviving spouse, or, if the Participant is not survived by his or her spouse, the vested Account shall be paid to his or her estate.
5.5 Financial Hardship . In the event that a Participant incurs a “financial hardship” (as defined in Section 2.2.2), the Committee, in its sole discretion and notwithstanding any contrary provision of the Plan, may determine that all or part of the Participant’s vested Account shall be paid to him or her immediately; provided, however, that the amount paid to the Participant pursuant to this Section 5.5 shall be limited to the amount reasonably necessary to alleviate the Participant’s hardship. Also, payment under this Section 5.5 may not be made to the extent that the hardship may be relieved by suspension of the Participant’s Compensation Salary Deferrals in accordance with Section 2.2.2.
5.6 Payment to Incompetents . If any individual to whom a benefit is payable under the Plan is a minor or legally incompetent, the Committee shall determine whether payment shall be made directly to the individual, any person acting as his or her custodian under the California Uniform Transfers to Minors Act, his or her legal representative or a near relative, or directly for his or her support, maintenance or education.
5.7 Undistributable Account . Each Participant and (in the event of death) his or her Beneficiary shall keep the Committee advised of his or her current address. If the Committee is unable to locate a Participant or Beneficiary to whom the vested portion of a Participant Account is payable under this Section 5, the Participant’s Account shall continue to be credited with interest under Section 3.3. Accounts that have been undistributable for a period of thirty-five months shall be forfeited as of the end of the thirty-fifth month. If a Participant whose Account was forfeited under this Section 5.7 (or his or her beneficiary) files a claim for distribution of the Account after the date that it was forfeited, and if the Committee determines that such claim is valid, then the vested forfeited balance shall be paid to the Employer in a lump sum cash payment as soon as practicable thereafter.
5.8 Committee Discretion . Within the specific time periods described in this Section 5, the Committee shall have sole discretion to determine the specific timing of the payment of any Account balance under the Plan.
SECTION 6
PARTICIPANT’S INTEREST IN ACCOUNT
6.1 Salary Deferral Contributions . Subject to Section 8.1 (relating to creditor status) and 9.2 (relating to amendment and/or termination of the Plan), a Participant’s vested interest in the balance credited to his or her Account (as adjusted by deemed earnings, gains, and losses) at all times shall be 100% owned by him or her; provided, however, that if the Participant’s employment is terminated on account of “cause” (as defined in this Section 6.1), the portion of the Participant’s Account attributable to interest credited to the Account under Section 3.3 shall be permanently forfeited. For purposes of this Section 6.1, “cause” means conviction of a felony or any other crime that involves fraud, embezzlement, dishonestly or moral turpitude.
SECTION 7
ADMINISTRATION OF THE PLAN
7.1 Plan Administrator . The Committee is hereby designated as the administrator of the Plan (within the meaning of section 3(16) (A) of ERISA).
7.2 Committee . The Plan shall be administered by the Committee. The Committee shall have the authority to control and manage the operation and administration of the Plan.
7.3 Actions by Committee . Each decision of a majority of the members of the Committee then in office shall constitute the final and binding act of the Committee. The Committee may act with or without a meeting being called or held and shall keep minutes of all meetings held and a record of all actions taken by written consent.
7.4 Powers of Committee . The Committee shall have all powers necessary to supervise the administration of the Plan and to control its operation in accordance with its terms, including but not limited to, the following powers:
(a) To interpret and determine the meaning and validity of the provisions of the Plan and to determine any question arising under, or in connection with, the administration, operation or validity of the Plan or any amendment thereto;
(b) To select the Eligible Employees who shall be eligible for the Plan, and to determine any and all other considerations affecting the eligibility of any employee to become a Participant or remain a Participant in the Plan;
(c) To cause one or more separate Accounts to be maintained for each Participant;
(d) To cause Compensation Deferrals and intent under Section 3.4 to be credited to Participants’ Account;
(e) To establish and revise an accounting method or formula for the Plan, as provided in Section 4.2;
(f) To determine the manner and form in which any distribution is to be made under the Plan;
(g) To determine the status and rights of Participants and their spouses, beneficiaries or estates;
(h) To employ such counsel, agents and advisers, and to obtain such legal, clerical and other services, as it may deem necessary or appropriate in carrying out the provisions of the Plan;
(i) To establish, from time to time, rules for the performance of its powers and duties and for the administration of the Plan;
(j) To arrange for annual distribution to each Participant of a statement of benefits accrued under the Plan;
(k) To publish a claims and appeal procedure satisfying the minimum standards of section 503 of ERISA pursuant to which individuals or estates may claim Plan benefits and appeal denials of such claims;
(l) To delegate to any one or more of its members or to any other person, severally or jointly, the authority to perform for and on behalf of the Committee one or more of the functions of the Committee under the Plan; and
(m) To decide all issues regarding Account balances, and time, form, manner, and amount of distributions to Participants.
7.5 Decisions of Committee . All actions, interpretations, and decisions of the Committee shall be conclusive and binding on all persons, and shall be given the maximum possible deference allowed by law.
7.6 Administrative Expenses . All expenses incurred in the administration of the Plan by the Committee, or otherwise, including but not limited to legal fees and expenses, shall be paid and borne by the Employers.
7.7 Eligibility to Participate . No member of the Committee who is also an employee shall be excluded from participating in the Plan if otherwise eligible, but he or she shall not be entitled, as a member of the Committee, to act or pass upon any matters pertaining specifically to his or her own Account under the Plan.
7.8 Indemnification . Each of the Employers shall, and hereby does, indemnify and hold harmless the members of the Committee, from and against any and all losses, claims, damages or liabilities (including attorneys’ fees and amounts paid, with the approval of the Board of Directors, in settlement of any claim) arising out of or resulting from the implementation of a duty, act or decision with respect to the Plan, so long as such duty, act or decision does not involve gross negligence or willful misconduct on the part of any such individual.
SECTION 8
FUNDING
8.1 Unfunded Plan . All amounts credited to a Participant’s Account under the Plan shall continue for all purposes to be a part of the general assets of the Employer. The interest of the Participant in his or her Account, including his or her right to distribution thereof, shall be an unsecured claim against the general assets of the Employer.
SECTION 9
MODIFICATION OR TERMINATION OF PLAN
9.1 Employers’ Obligations Limited . The Plan is voluntary on the part of the Employers, and the Employers do not guarantee to continue the Plan. The Company at any time may, by amendment of the Plan, suspend Compensation Deferrals or may discontinue Compensation Deferrals, with or without cause. Complete discontinuance of all Compensation Deferrals shall be deemed a termination of the Plan.
9.2 Plan Termination Generally . The Bank may unilaterally terminate this Agreement at any time. The termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 4 or Article 5.
9.3 Plan Terminations Under Section 409A. Notwithstanding anything to the contrary, if the Bank terminates this Agreement in the following circumstances:
(a) Within thirty (30) days before, or twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following such termination of the Agreement and further provided that all the Bank’s arrangements which are substantially similar to the Agreement are terminated so the Director and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the termination of the arrangements;
(b) Upon the Bank’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under the Agreement are included in the Director’s gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or
(c) Upon the Bank’s termination of this and all other account balance plans (as referenced in Section 409A of the Code or the regulations thereunder), provided that all distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and the Bank does not adopt any new non-account balance plans for a minimum of five (5) years following the date of such termination; the Bank may distribute the Deferral Account balance, determined as of the date of the termination of the Agreement to the Director, in a lump sum subject to the above terms.
9.4 Effect of Termination . If the Plan is terminated, the vested balances credited to the Accounts of the affected Participants shall be distributed to them at the time and in the manner set forth in Section 5; provided, however, that the Committee, in its sole discretion may authorize accelerated distribution of Participant’s Accounts as of any earlier date.
9.5 Termination by Change in Control . In the event of a change in control of the Company, the Plan shall terminate and all balances credited to the Accounts of Participants shall vest and shall be distributed to the Participants as soon as practical. For this purpose, a change in control means any of the following transactions, or series of such transactions that are related, wherein the stockholders of the Company immediately before such transaction or transactions do not retain immediately after such transaction or transactions direct or indirect beneficial ownership of more than 51% of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which assets of the Company were transferred: (i) the direct or indirect sale or exchange by stockholders of the Company of the voting stock of the Company, (ii) a merger or consolidation in which the Company is a party, (iii) the sale, exchange or transfer or all or substantially all of the assets of the Company, or (iv) a liquidation or dissolution of the Company.
SECTION 10
GENERAL PROVISIONS
10.1 Participation by Affiliates . One or more Affiliates of the Company may become participating Employers by adopting the Plan and obtaining approval for such adoption from the Board. By adopting the Plan, an Affiliate is deemed to agree to all of its terms, including, (but not limited to) the provisions granting exclusive authority to the Board to amend the Plan and to the Committee to administer and interpret the Plan. Any Affiliate may terminate its participation in the Plan at any time. The liabilities incurred under the Plan to the Participants employed by each Employer shall be solely the liabilities of that Employer, and no other Employer shall be liable for benefits accrued by Participant during any period when he or she was not employed by such Employer. A list of participating Employers, and the effective dates of their participation, is attached hereto as Exhibit A.
10.2 Inalienability . In no event may either a Participant, a former Participant or his or her Beneficiary, spouse or estate sell, transfer, anticipate, assign, hypothecate or otherwise dispose of any right or interest under the Plan; and such rights and interests shall not at any time be subject to the claims of creditors nor be liable to attachment, execution or other legal process. Accordingly, for example, a Participant’s interest in the Plan is not transferable pursuant to a domestic relations order.
10.3 Rights and Duties . Neither the Employers nor the Committee shall be subject to any liability or duty under the Plan except as expressly provided in the Plan, or for any action taken, omitted or suffered in good faith.
10.4 No Enlargement of Employment Rights . Neither the establishment or maintenance of the Plan, the making of any Compensation Deferrals nor any action of any Employer or Committee, shall be held or construed to confer upon any individual any right to continued employment by any Employer, nor any right or interest in any specific assets of the Employers other than as provided in the Plan. Each Employer expressly reserves the right to discharge any Eligible Employee at any time.
10.5 Apportionment of Costs and Duties . All acts required of the Employers under the Plan may be performed by the Company for itself and its Affiliates, and the costs of the Plan may be equitably apportioned by the Committee among the Company and the other Employers. Whenever an Employer is permitted or required under the terms of the Plan to do or perform any act, matter or thing, it shall be done and performed by any officer or employee of the Employer who is thereunto duly authorized by the board of directors of the Employer.
10.6 Compensation Deferrals Not Counted Under Other Employee Benefit Plans . Salary Deferrals under the Plan will not be considered for purposes of contributions or benefits under any other employee benefit plan sponsored by the Employers, except as expressly provided otherwise in any such other employee benefit plan.
10.7 Applicable Law . The provisions of the Plan shall be constructed, administered and enforced in accordance with ERISA, and to the extent not preempted by ERISA, with the laws of the State of California.
10.8 Severability . If any provision of the Plan is held invalid or unenforceability, its invalidity or unenforceability shall not affect any other provisions of the Plan, and in lieu of each provision which is held invalid or unenforceable, there shall be added as part of this Plan a provision that shall be as similar in terms to such invalid or unenforceable provision as may be possible and be valid, legal and enforceable.
10.9 Captions . The captions contained in and the table of contents prefixed to the Plan are inserted only as a matter of convenience and of reference and in no way define, limit, enlarge or describe the scope or intent of the Plan nor in any way shall affect the construction of any provision of the Plan.
EXECUTION
IN WITNESS WHEREOF, Broadway Federal Bank, by its duly authorized officer, has executed this Plan on the date indicated below.
BROADWAY FEDERAL BANK
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Dated |
By: /s/ Robert C. Davidson |
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Title:
Chairman of the Compensation
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Exhibit 10.15
BROADWAY FEDERAL BANK, F.S.B.
SALARY CONTINUATION AGREEMENT
THIS SALARY CONTINUATION AGREEMENT (the “Agreement”) is adopted this 6th day of October, 2006, by and between BROADWAY FEDERAL BANK, F.S.B., a California corporation located in Los Angeles, California (the “Bank”) and PAUL HUDSON (the “Executive”).
The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development, and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended from time to time.
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall have the meanings specified:
1.1 “ Account Value ” means the amount shown on Schedule A under the heading Account Value. The parties expressly acknowledge that the Account Value may be different than the liability that should be accrued by the Bank, under Generally Accepted Accounting Principles (“GAAP”), for the Bank’s obligation to the Executive under this Agreement. The Account Value on any date other than the end of a Plan Year shall be determined by adding the prorated increase attributable for the current Plan Year to the Account Value for the previous Plan Year.
1.2 “ Beneficiary ” means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive determined pursuant to Article 4.
1.3 “ Beneficiary Designation Form ” means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.
1.4 “ Board ” means the Board of Directors of the Bank as from time to time constituted.
1.5 “ Change in Control ” means a change in the ownership or effective control of the Bank, or in the ownership of a substantial portion of the assets of the Bank, as such change is defined in Section 409A of the Code and regulations thereunder.
1.6 “ Code ” means the Internal Revenue Code of 1986, as amended.
1.7 “ Disability ” means Executive: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank. Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering employees of the Bank. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of the Social Security Administration’s or the provider’s determination.
1.8 “ Early Involuntary Termination ” means the Executive has been notified in writing by the Bank of a Separation from Service before Normal Retirement Age except when such Separation from Service occurs due to death, Disability, Early Voluntary Termination or Termination for Cause.
1.9 “ Early Voluntary Termination ” means Separation from Service before Normal Retirement Age except when such Separation from Service occurs: (i) within twelve (12) months following a Change in Control; or (ii) due to death, Disability, Early Involuntary Termination, or Termination for Cause.
1.10 “ Early Voluntary Termination With Good Reason ” means Separation from Service before Normal Retirement Age when such Separation from Service occurs within twelve (12) months following a Change in Control and where such Separation from Service results from any of the following:
(a) Failure to provide Executive a substantially equivalent or better position, without regard to the new title given to Executive by any successor, with the Bank and/or a Subsidiary (or any successor thereto by operation of law of or otherwise), which the Executive held immediately prior to a Change in Control, or the removal of the Executive as a Director of the Bank and/or a Subsidiary (or any successor thereto) if the Executive shall have been a Director of the Bank and/or a Subsidiary immediately prior to the Change in Control;
(b) Failure of the Bank to remedy any of the following within 10 calendar days after receipt by the Bank of written notice thereof from the Executive: (A) a significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position with the Bank and any Subsidiary which the Executive held immediately prior to the Change in Control, (B) a 20% reduction in the Executive’s Base Pay received from the Bank or any Subsidiary, or (D) the termination or denial of the Executive’s rights to Employee Benefits or a reduction in the scope or value thereof;
(c) The liquidation, dissolution, merger, consolidation or reorganization of the Bank or the transfer of all or substantially all of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization, transfer or otherwise) to which all or substantially all of its business and/or assets have been transferred (by operation of law or otherwise) assumed all duties and obligations of the Bank under this Agreement;
(d) The Bank requires the Executive to have his principal location of work changed to any location that is in excess of 50 miles from the location thereof immediately prior to the Change in Control, or requires the Executive to travel away from his office in the course of discharging his responsibilities or duties hereunder at least 20% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of Executive in any of the three full years immediately prior to the Change in Control without, in either case, his prior written consent; or
(e) Without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Bank or any successor thereto which is not remedied by the Bank within 10 calendar days after receipt by the Bank of written notice from the Executive of such breach.
1.11 “ Effective Date ” means March 1, 2006.
1.12 “ Normal Retirement Age ” means the Executive attaining age sixty-five (65).
1.13 “ Normal Retirement Date ” means the later of Normal Retirement Age or Separation from Service.
1.14 “ Plan Administrator ” means the plan administrator described in Article 6.
1.15 “ Plan Year ” means each twelve-month period commencing on March 1 st and ending on the last day of February of each year.
1.16 “ Schedule A ” means the schedule attached to this Agreement and made a part hereof. Schedule A shall be updated upon a change in any of the benefits under Articles 2 or 3.
1.17 “ Separation from Service ” means the termination of the Executive’s employment with the Bank for reasons other than death or Disability. Whether a Separation from Service takes place is determined based on the facts and circumstances surrounding the termination of the Executive’s employment and whether the Bank and the Executive intended for the Executive to provide significant services for the Bank following such termination. A termination of employment will not be considered a Separation from Service if:
(a) the Executive continues to provide services as an employee of the Bank at an annual rate that is twenty percent (20%) or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or, if employed less than three years, such lesser period) and the annual remuneration for such services is twenty percent (20%) or more of the average annual remuneration earned during the final three full calendar years of employment (or, if less, such lesser period), or
(b) the Executive continues to provide services to the Bank in a capacity other than as an employee of the Bank at an annual rate that is fifty percent (50%) or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or if employed less than three years, such lesser period) and the annual remuneration for such services is fifty percent (50%) or more of the average annual remuneration earned during the final three full calendar years of employment (or if less, such lesser period).
1.18 “ Specified Employee ” means a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Bank if any stock of the Bank is publicly traded on an established securities market or otherwise.
1.19 “ Termination for Cause ” means Separation from Service for:
(a) Gross negligence or gross neglect of duties to the Bank; or
(b) Conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Bank; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy committed in connection with the Executive’s employment and resulting in a material adverse effect on the Bank.
1.20 “ Years of Participation ” means the consecutive 12-month period beginning on the Effective Date of this Agreement and any 12-month anniversary thereof, during the entirety of which time the Executive is a participant in the Agreement.
Article 2
Distributions During Lifetime
2.1 Normal Retirement Benefit . Upon the Normal Retirement Date, the Bank shall distribute to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Article.
2.1.1 Amount of Benefit . The annual benefit under this Section 2.1 is One Hundred Thousand Dollars ($100,000).
2.1.2 Distribution of Benefit . The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service. The annual benefit shall be distributed to the Executive for fifteen (15) years.
2.2 Early Involuntary Termination Benefit . Upon Early Involuntary Termination, the Bank shall distribute to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Article.
2.2.1 Amount of Benefit . The benefit under this Section 2.2 is one hundred percent (100%) of the Account Value determined as of the end of the Plan Year preceding Separation from Service.
2.2.2 Distribution of Benefit . The Bank shall distribute the benefit to the Executive in one hundred eighty (180) consecutive equal monthly installments commencing on the first day of the month following Separation from Service.
2.3 Early Voluntary Termination Benefit . In the case of Early Voluntary Termination, the Executive shall not be entitled to any benefit hereunder.
2.4 Disability Benefit . If the Executive experiences a Disability prior to Normal Retirement Age the Bank shall distribute to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Article.
2.4.1 Amount of Benefit . The benefit under this Section 2.4 is one hundred percent (100%) of the Account Value determined as of the end of the Plan Year preceding such Disability.
2.4.2 Distribution of Benefit . The Bank shall distribute the benefit to the Executive in one hundred eighty (180) consecutive equal monthly installments commencing on the first day of the month following Separation from Service.
2.5 Change in Control Benefit . Upon a Change in Control, followed within twelve (12) months by a Early Involuntary Termination or Early Voluntary Termination with Good Reason, the Bank shall distribute to the Executive the benefit described in this Section 2.5 in lieu of any other benefit under this Article.
2.5.1 Amount of Benefit . The benefit under this Section 2.5 is one hundred percent (100%) of the Account Value determined as of the end of the Plan Year preceding Separation from Service.
2.5.2 Distribution of Benefit . The Bank shall distribute the benefit to the Executive in a lump sum within ninety (90) days following Separation from Service.
2.6 Restriction on Timing of Distribution . Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at Separation from Service under such procedures as established by the Bank in accordance with Section 409A of the Code, benefit distributions that are made upon Separation from Service may not commence earlier than six (6) months after the date of such Separation from Service. Therefore, in the event this Section 2.6 is applicable to the Executive, any distribution which would otherwise be paid to the Executive within the first six months following the Separation from Service shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following the Separation from Service. All subsequent distributions shall be paid in the manner specified.
2.7 Distributions Upon Income Inclusion Under Section 409A of the Code . Upon the inclusion of any portion of the Account Value into the Executive’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Code, to the extent such tax liability can be covered by the Executive’s vested Account Value, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.
2.8 Change in Form or Timing of Distributions . For distribution of benefits under this Article 2, the Executive and the Bank may, subject to the terms of Section 8.1, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:
(a) may not accelerate the time or schedule of any distribution, except as provided in Section 409A of the Code and the regulations thereunder;
(b) must, for benefits distributable under Sections 2.1, 2.2, 2.3 and 2.5, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and
(c) must take effect not less than twelve (12) months after the amendment is made.
Article 3
Distribution at Death
3.1 Death During Active Service . If the Executive dies while in the active service of the Bank, the Bank shall distribute to the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed in lieu of the benefits under Article 2.
3.1.1 Amount of Benefit . The benefit under this Section 3.1 is the Normal Retirement Benefit amount described in Section 2.1.1.
3.1.2 Distribution of Benefit . The Bank shall distribute the annual benefit to the Beneficiary in twelve (12) equal monthly installments for fifteen (15) years commencing the first day of the month following receipt by the Bank of the Executive’s death certificate.
3.2 Death During Distribution of a Benefit . If the Executive dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Bank shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts that would have been distributed to the Executive had the Executive survived.
3.3 Death After Separation from Service But Before Benefit Distributions Commence . If the Executive is entitled to benefit distributions under this Agreement, but dies prior to the commencement of said benefit distributions, the Bank shall distribute to the Beneficiary the same benefits that the Executive was entitled to prior to death except that the benefit distributions shall commence within thirty (30) days following receipt by the Bank of the Executive’s death certificate.
Article 4
Beneficiaries
4.1 Beneficiary . The Executive shall have the right, at any time, to designate a Beneficiary to receive any benefit distributions under this Agreement upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other plan of the Bank in which the Executive participates.
4.2 Beneficiary Designation: Change; Spousal Consent . The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. If the Executive names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Plan Administrator, must be signed by the Executive’s spouse and returned to the Plan Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator prior to the Executive’s death.
4.3 Acknowledgment . No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.
4.4 No Beneficiary Designation . If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be made to the personal representative of the Executive’s estate.
4.5 Facility of Distribution . If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Executive’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.
Article 5
General Limitations
5.1 Termination for Cause . Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive’s employment with the Bank is terminated due to a Termination for Cause.
5.2 Suicide or Misstatement . No benefits shall be distributed if the Executive commits suicide within two years after the Effective Date of this Agreement, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Bank denies coverage (i) for material misstatements of fact made by the Executive on an application for such life insurance, or (ii) for any other reason.
5.3 Removal . Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.
Article 6
Administration of Agreement
6.1 Plan Administrator Duties . This Agreement shall be administered by a Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall appoint. The Plan Administrator shall administer this Agreement according to its express terms and shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement to the extent the exercise of such discretion and authority does not conflict with Section 409A of the Code and regulations thereunder.
6.2 Agents . In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.
6.3 Binding Effect of Decisions . The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.
6.4 Indemnity of Plan Administrator . The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.
6.5 Bank Information . To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Separation from Service of the Executive, and such other pertinent information as the Plan Administrator may reasonably require.
6.6 Annual Statement . The Plan Administrator shall provide to the Executive, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement.
Article 7
Claims And Review Procedures
7.1 Claims Procedure . An Executive or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be distributed shall make a claim for such benefits as follows:
7.1.1 Initiation – Written Claim . The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the claimant, the claim must be made within sixty (60) days after such notice was received by the claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the claimant.
7.1.2 Timing of Plan Administrator Response . The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.
7.1.3 Notice of Decision . If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of the Agreement on which the denial is based;
(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;
(d) An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and
(e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.
7.2 Review Procedure . If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:
7.2.1 Initiation – Written Request . To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.
7.2.2 Additional Submissions – Information Access . The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.
7.2.3 Considerations on Review . In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
7.2.4 Timing of Plan Administrator Response . The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.
7.2.5 Notice of Decision . The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of the Agreement on which the denial is based;
(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and
(d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).
Article 8
Amendments and Termination
8.1 Amendments . This Agreement may be amended only by a written agreement signed by the Bank and the Executive. However, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.
8.2 Plan Termination Generally . The Bank may unilaterally terminate this Agreement at any time. The benefit shall be the Account Value as of the date the Agreement is terminated. Except as provided in Section 8.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.
8.3 Plan Terminations Under Section 409A . Notwithstanding anything to the contrary in Section 8.2, if the Bank terminates this Agreement in the following circumstances:
(a) Within thirty (30) days before, or twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following such termination of the Agreement and further provided that all the Bank’s arrangements which are substantially similar to the Agreement are terminated so the Executive and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the termination of the arrangements;
(b) Upon the Bank’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under the Agreement are included in the Executive’s gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or
(c) Upon the Bank’s termination of this and all other non-account balance plans (as referenced in Section 409A of the Code or the regulations thereunder), provided that all distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and the Bank does not adopt any new non-account balance plans for a minimum of five (5) years following the date of such termination;
the Bank may distribute the Account Value, determined as of the date of the termination of the Agreement, to the Executive in a lump sum subject to the above terms.
Article 9
Miscellaneous
9.1 Binding Effect . This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, administrators and transferees.
9.2 No Guarantee of Employment . This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Bank, nor does it interfere with the Bank’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.
9.3 Non-Transferability . Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
9.4 Tax Withholding and Reporting . The Bank shall withhold any taxes that are required to be withheld, including but not limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further, the Bank shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.
9.5 Applicable Law . The Agreement and all rights hereunder shall be governed by the laws of the State of California, except to the extent preempted by the laws of the United States of America.
9.6 Unfunded Arrangement . The Executive and the Beneficiary are general unsecured creditors of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life or other informal funding asset is a general asset of the Bank to which the Executive and Beneficiary have no preferred or secured claim.
9.7 Reorganization . The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor bank.
9.8 Entire Agreement . This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.
9.9 Interpretation . Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.
9.10 Alternative Action . In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank, provided that such alternative acts do not violate Section 409A of the Code.
9.11 Headings . Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.
9.12 Validity . In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.
9.13 Notice . Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:
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Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.
9.14 Compliance with Section 409A . This Agreement shall at all times be administered and the provisions of this Agreement shall be interpreted consistent with the requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the Effective Date of this Agreement.
IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement.
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EXECUTIVE: |
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BANK: |
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BROADWAY FEDERAL BANK, F.S.B. |
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/s/ Paul Hudson |
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By /s/_Robert C. Davidson_Jr. |
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Paul Hudson |
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Title
Chairman – Compensation Committee
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Exhibit 10.19.2
EXECUTION VERSION
AMENDMENT NO. 1 TO EXCHANGE AGREEMENT
THIS AMENDMENT NO. 1 TO EXCHANGE AGREEMENT , dated as of August 8, 2013 (this “ Amendment ”), is by and between Broadway Financial Corporation, a corporation organized under the laws of the State of Delaware (the “ Company ”), and the United States Department of the Treasury (“ Treasury ”).All capitalized terms used and not otherwise defined herein have the meanings ascribed to them in the Exchange Agreement (as defined below).
WHEREAS, the Company and Treasury are party to that certain Exchange Agreement, dated as of February 10, 2012 (the “ Exchange Agreement ”); and
WHEREAS, pursuant to the terms of the Exchange Agreement and in accordance with Section 6.3 thereof, the parties wish to amend the Exchange Agreement in the manner set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Amendment, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereby agree as follows:
1. Amendment to WHEREAS Clause . The fourth WHEREAS clause of the Exchange Agreement is hereby amended by deleting such clause in its entirety and replacing it with the following:
“WHEREAS, the Company intends to (i) exchange all shares of the Other Series of Preferred Stock (as defined below) for (x) if the Shareholder Proposals (as defined below) have been approved by the Requisite Shareholder Votes (as defined below) and the Charter Amendment (as defined below) has been filed (together, the “ Conversion Requirements ”), shares of the Company’s common stock, par value $0.01 per share (the “ Common Stock ”) in such amounts as set forth on Annex A attached hereto, or (y) if the Conversion Requirements have not been completed, shares of the Company’s Preferred Stock designated as Series F Common Stock Equivalents (the “ Common Stock Equivalents ”) in such amounts as set forth on Annex A attached hereto, which Common Stock Equivalents will convert to shares of Common Stock upon completion of the Conversion Requirements (such exchange as described in clauses (x) or (y), as applicable, the “ Other Preferred Exchange ”), and (ii) issue shares of Common Stock (or Common Stock Equivalents) (x) for aggregate gross proceeds to the Company of not less than $4,415,000 (including shares of Common Stock sold to directors and officers of the Company for cash after February 10, 2012) and (y) in full satisfaction of at least $2,300,000 of senior indebtedness of the Company owed to BBCN Bank ((x) and (y), collectively, the “ Equity Offering ,” and together with the Other Preferred Exchange and the Exchange (as defined below), the “ Recapitalization ”);”
2. Amendment to Section 1.1 . Section 1.1(a) of the Exchange Agreement is hereby amended by deleting the first sentence thereof in its entirety and replacing it with the following:
“The closing of the Exchange (the “ Closing ”) will take place at the offices of Cadwalader, Wickersham & Taft LLP, One World Financial Center, New York, New York 10281, or remotely via the electronic or other exchange of documents and signature pages, as the parties may agree.”
3. Insertion of Section 3.9 . The Exchange Agreement is hereby amended by inserting the following Section 3.9 immediately after Section 3.8 of the Exchange Agreement:
“ Section 3.9 Shareholder Proposals .
Each of the purchasers in the Equity Offering has agreed in such purchaser’s subscription agreement with the Company to vote to approve the Shareholder Proposals and, assuming the Investor votes to approve the Shareholder Proposals, the votes of such purchasers are sufficient to secure the Requisite Shareholder Vote.”
4. Amendment to Section 4.3(b) . The first sentence of Section 4.3(b) of the Exchange Agreement is hereby amended by deleting such sentence in its entirety and replacing it with the following:
“Promptly, and in no event later than 20 days following the clearance of the Proxy Statement by the SEC, the Company shall call and hold a meeting of its shareholders to (i) approve the Charter Amendment and (ii) to the extent required by applicable law or stock exchange rule or regulation, approve the issuance of, as applicable, (x) the Underlying Common Shares and the Other Conversion Shares or (y) the Exchange Common Stock and the Common Stock to be delivered in the Other Preferred Exchange ((i) and (ii) together, the “ Shareholder Proposals ”).
5. Amendment to Section 6.6 . Section 6.6 of the Exchange Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
“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 hereunder shall be delivered as set forth below or pursuant to such other instructions as may be designated in writing by the party to receive such notice.
If to the Company:
Broadway Financial Corporation
5055 Wilshire Boulevard, Suite 500
Los Angeles, CA 90036
Attention: Wayne-Kent A. Bradshaw
President & Chief Operating Officer
Telephone: (323) 556-3248
Facsimile: (323) 634-1717
With a copy to:
Arnold & Porter LLP
777 South Figueroa Street, 44th Floor
Los Angeles, California 90017
Attention: James R. Walther, Esq.
Telephone: (213) 243-4297
Facsimile: (213) 243-4199
If to the Investor:
United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220
Attention: Chief Counsel Office of Financial Stability
Facsimile: (202) 927-9225
Email: OFSChiefCounselNotices@do.treas.go
With a copy to:
Cadwalader, Wickersham & Taft LLP
One World Financial Center
New York, New York 10281
Attention: William P. Mills
Telephone: (212) 504-6436
Facsimile: (212) 504-6666”
6. Amendment to Annex B . Annex B of the Exchange Agreement is hereby amended by deleting such Annex in its entirety and replacing it with Annex A to this Amendment.
7. No Amendment, Modification or Waiver . This Amendment shall not constitute an amendment, modification or waiver of any provision of the Exchange Agreement, except as expressly set forth herein. In the event of any conflict or inconsistency between the terms of the Exchange Agreement and the terms hereof, the terms of the Exchange Agreement shall govern.
8. Counterparts and Facsimile . For the convenience of the parties hereto, this Amendment may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. Executed signature pages to this Amendment may be delivered by facsimile and such facsimiles will be deemed as sufficient as if actual signature pages had been delivered.
9. Governing Law . This Amendment and any claim, controversy or dispute arising under or related to this Amendment, 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.
10. Interpretation . 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 Amendment as a whole and not to any particular section or provision, unless the context requires otherwise. The headings contained in this Amendment are for reference purposes only and are not part of this Amendment. Whenever the words “include,” “includes” or “including” are used in this Amendment, 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 Amendment, as this Amendment is the product of negotiation between sophisticated parties advised by counsel. All references to “$” or “dollars” mean the lawful currency of the United States of America.
[ Signature Pages to Follow ]
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first herein written above.
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BROADWAY FINANCIAL CORPORATION |
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By: |
/s/ Wayne-Kent A. Bradshaw |
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Name: Wayne-Kent A. Bradshaw |
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Title: President / CEO |
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UNITED STATES DEPARTMENT OF THE TREASURY |
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By: |
/s/ Charmian Uy |
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Name: Charmian Uy |
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Title: Chief Investment Officer |
[Signature Page to Amendment No. 1 to Exchange Agreement]
ANNEX A
FORM OF NEW CERTIFICATE OF DESIGNATIONS
FORM OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES F COMMON STOCK EQUIVALENT
OF
BROADWAY FINANCIAL CORPORATION
Broadway Financial Corporation, a corporation organized and existing under the laws of the State of Delaware (the “ Corporation ”), in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, does hereby certify:
The board of directors of the Corporation (the “ Board of Directors ”), or a duly authorized committee of the Board of Directors, in accordance with the Charter and bylaws of the Corporation and applicable law, adopted the following resolution on [_______], 2013 creating a series of 12,000 shares of Preferred Stock of the Corporation designated as “ Series F Common Stock Equivalent ”).
RESOLVED , that pursuant to the provisions of the Charter and the bylaws of the Corporation and applicable law, a series of Preferred Stock, par value $0.01 per share, of the Corporation be and hereby is created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:
Part 1. Designation and Number of Shares; Fractional Shares .
(a) There is hereby created out of the authorized and unissued shares of Preferred Stock of the Corporation a series of Preferred Stock designated as the “Series F Common Stock Equivalent” (the “ Designated Stock ”). The authorized number of shares of Designated Stock shall be 12,000.
(b) Each Holder of a fractional interest in a share of Designated Stock shall be entitled, proportionately, to all the rights, preferences and privileges of the Designated Stock (including the conversion, dividend, voting, redemption and liquidation rights contained in this Certificate of Designations).
Part 2. Standard Provisions . The Standard Provisions contained in Annex A attached hereto are incorporated herein by reference in their entirety and shall be deemed to be a part of this “ Certificate of Designations ”) to the same extent as if such provisions had been set forth in full herein.
Part 3. Definitions. The following terms are used in this Certificate of Designations (including the Standard Provisions in Annex A hereto) as defined below:
(a) “ Common Stock ” means the common stock, par value $0.01 per share, of the Corporation, or any other shares of the capital stock of the Corporation into which such shares of common stock shall be reclassified or changed.
(b) “ Dividend Payment Date ” means February 15, May 15, August 15, and November 15 of each year.
(c) “ Junior Stock ” means the Common Stock, and any other class or series of stock of the Corporation the terms of which expressly provide that it ranks junior to Designated Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation.
(d) “ Liquidation Amount ” means $1,000 per share of Designated Stock.
(e) “ Parity Stock ” means any class or series of stock of the Corporation (other than Designated Stock) the terms of which do not expressly provide that such class or series shall rank senior or junior to Designated Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation (in each case without regard to whether dividends accrue cumulatively or non-cumulatively).
(f) “ Signing Date ” means February 10, 2012.
Part 4. Certain Voting Matters .
(a) Whether the vote or consent of the Holders of a plurality, majority or other portion of the shares of Designated Stock and any Common Stock has been cast or given on any matter on which under Sections 10(a) or 10(b) of the Standard Provisions forming part of this Certificate of Designations the Holders of shares of Designated Stock are entitled to vote shall be determined by the Corporation by reference to a number of votes per share of Designated Stock equal to the Conversion Rate (as defined in Section 2 of the Standard Provisions forming a part of this Certificate of Designations) in effect on the record date for such vote or consent, if any, or in the absence of a record date, on the date for such vote or consent.
(b) Whether the vote or consent of the Holders of a plurality, majority or other portion of the shares of Designated Stock and any Voting Parity Stock has been cast or given on any matter on which under Sections 10(c) and 10(d) of the Standard Provisions forming part of this Certificate of Designations the Holders of shares of Designated Stock are entitled to vote shall be determined by the Corporation by reference to the specified liquidation amount of the shares voted or covered by the consent as if the Corporation were liquidated on the record date for such vote or consent, if any, or, in the absence of a record date, on the date for such vote or consent.
(c) The Corporation shall aggregate any fractional interests in a share of Designated Stock with all other fractional interests having made the same voting or consent decision and shall count the number of whole votes resulting from such aggregation in accordance with the voting or consent decisions received.
[ Remainder of Page Intentionally Left Blank ]
IN WITNESS WHEREOF, Broadway Financial Corporation has caused this Certificate of Designations to be signed by [__________], its Chief Executive Officer, this [___] day of [___], 2013.
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BROADWAY FINANCIAL CORPORATION |
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By: |
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Name: |
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Title: Chief Executive Officer |
[Signature Page to Certificate of
Designations, Series F]
ANNEX A
STANDARD PROVISIONS
Section 1. General Matters. Each share of Designated Stock shall be identical in all respects to every other share of Designated Stock. The Designated Stock shall be perpetual. The Designated Stock shall rank equally with Parity Stock and senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Corporation.
Section 2. Standard Definitions. As used herein with respect to Designated Stock:
“ Affiliate ” of any specified “ Person ” means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“ Agent Members ” has the meaning set forth in Section 19(c).
“ Alternate Dividend Amount ” means an amount equal to the product of (1) the sum of (A)the Liquidation Amount plus (B) the amount of declared but unpaid dividends for any priorDividend Period from and including the Second Dividend Payment Date and (2) (u) a per annum rate of 9% from and including the Second Dividend Payment Date to but excluding [May 15, 2014]; (v) a per annum rate of 11% from and including [May 15, 2014] to but excluding [August 15, 2014]; (w) a per annum rate of 13% from and including [August 15 ,2014] to but excluding [November 15, 2014]; (x) a per annum rate of 15% from and including [November 15, 2014] to but excluding [February 15, 2015]; (y) a per annum rate of 17% from and including [February 15, 2015] to but excluding [May 15, 2015]; and a per annum rate of 19% from and including [May 15, 2015]. 1
“ As-Converted Dividend Amount ” means, with respect to any Dividend Period, the product of (i) the pro forma per share quarterly Common Stock dividend derived by (x) annualizing the last dividend declared during such Dividend Period on the Common Stock and (y) dividing such annualized dividend by four and (ii) the then-current Conversion Rate; provided that for any such Dividend Period during which no dividend has been declared on the Common Stock, the As-Converted Dividend Amount shall be deemed to be $0.00.
“ As-Converted Liquidation Amount ” has the meaning set forth in Section 4(c).
“ Board of Directors ” has the meaning set forth in the recitals to the Certificate of Designations.
1 NTD: Subject to change based on the closing date.
“ Business Day ” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close.
“ Bylaws ” means the bylaws of the Corporation, as they may be amended from time to time.
“ Certificate of Amendment ” means the amendment to the Charter of the Corporation reflecting the increase of the number of authorized shares of Common Stock to at least such number as shall be sufficient to permit the full conversion of the Designated Stock into Common Stock.
“ Certificate of Designations ” means the Certificate of Designations, of which these Standard Provisions form a part, as it may be amended from time to time.
“ Charter ” means the Corporation’s certificate or articles of incorporation, articles of association, or similar organizational document, as amended from time to time.
“ Closing Price ” of the Common Stock on any date of determination means the closing sale price or, if no closing sale price is reported, the last reported sale price of the shares of the Common Stock on the NASDAQ Stock Market on such date. If the Common Stock is not traded on the NASDAQ Stock Market on any date of determination, the Closing Price of the Common Stock on such date of determination means the closing sale price as reported in the composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock is so listed or quoted, or, if no closing sale price is reported, the last reported sale price on the principal U.S. national or regional securities exchange on which the Common Stock is so listed or quoted, or if the Common Stock is not so listed or quoted on a U.S. national or regional securities exchange, the last quoted bid price for the Common Stock in the over-the-counter market as reported by Pink Sheets LLC or similar organization, or, if that bid price is not available, the market price of the Common Stock on that date as determined by a nationally recognized investment banking firm (unaffiliated with the Corporation) retained by the Corporation for this purpose.
“ Constituent Person ” has the meaning set forth in Section 9(a).
“ Conversion Agent ” means the Transfer Agent, acting in its capacity as conversion agent for the Designated Stock, and its successors and assigns.
“ Conversion Price ” at any time means, for each share of Designated Stock, a dollar amount equal to $[1.00] 2 .
“ Conversion Rate ” means for each share of Designated Stock, 1,000 shares of Common Stock, subject to adjustment as set forth herein.
“ Corporation ” has the meaning set forth in the recitals to the Certificate of Designations.
2 To reflect the lowest price per share (or lower) paid in the Corporation’s equity offering.
“ Current Market Price ” per share of Common Stock on any day means the average of the VWAP per share of Common Stock on each of the 10 consecutive Trading Days ending on the earlier of the day in question and the day before the Ex-date or other specified date with respect to the issuance or distribution requiring such computation, appropriately adjusted to take into account the occurrence during such period of any event described in Section 8.
“ Depositary ” means The Depository Trust Company or its nominee or any successor depositary appointed by the Corporation.
“ Designated Stock ” has the meaning set forth in Part 1.
“ Dividend Period ” has the meaning set forth in Section 3(d).
“ Dividend Record Date ” has the meaning set forth in Section 3(d).
“ Dividend Threshold Amount ” has the meaning set forth in Section 8(a)(iv).
“ Ex-date ” when used with respect to any issuance or distribution, means the first date on which the shares of Common Stock or other securities trade without the right to receive an issuance or distribution.
“ Exchange Property ” has the meaning set forth in Section 9(a).
“ Expiration Date ” has the meaning set forth in Section 8(a)(v).
“ Expiration Time ” has the meaning set forth in Section 8(a)(v).
“ Global Designated Stock ” has the meaning set forth in Section 19(a).
“ Holders ” means the Persons in whose names the shares of the Designated Stock are registered, which may be treated by the Corporation, Transfer Agent, Registrar, paying agent and Conversion Agent as the absolute owners of the shares of Designated Stock for the purpose of making payment and settling the related conversions and for all other purposes.
“ Liquidation Participation Amount ” has the meaning set forth in Section 4(c).
“ Liquidation Preference ” has the meaning set forth in Section 4(a).
“ Mandatory Conversion Date ” means the later of (a) the fifth Business Day after the date on which the Shareholder Approval has been received and (b) the Original Issue Date.
“ Market Disruption Event ” means any of the following events that has occurred:
(i) any suspension of, or limitation imposed on, trading by any exchange or quotation system on which the Closing Price is determined pursuant to the definition of Closing Price (a “ Relevant Exchange ” during the one-hour period prior to the close of trading for the regular trading session on the Relevant Exchange (or for purposes of determining the VWAP per share of Common Stock any period or periods aggregating one half-hour or longer during the regular trading session on the relevant day) and whether by reason of movements in price exceeding
limits permitted by the Relevant Exchange, or otherwise relating to Common Stock or in futures or options contracts relating to the Common Stock on the Relevant Exchange;
(ii) any event (other than an event described in clause (iii) below) that disrupts or impairs (as determined by the Corporation in its reasonable discretion) the ability of market participants during the one-hour period prior to the close of trading for the regular trading session on the Relevant Exchange (or for purposes of determining the VWAP per share of Common Stock any period or periods aggregating one half-hour or longer during the regular trading session on the relevant day) in general to effect transactions in, or obtain market values for, the Common Stock on the Relevant Exchange or to effect transactions in, or obtain market values for, futures or options contracts relating to the Common Stock on the Relevant Exchange; or
(iii) the failure to open of the exchange on which futures or options contracts relating to the Common Stock, are traded or the closure of such exchange prior to its respective scheduled closing time for the regular trading session on such day (without regard to after hours or any other trading outside of the regular trading session hours) unless such earlier closing time is announced by such exchange at least one hour prior to the earlier of the actual closing time for the regular trading session on such day, and the submission deadline for orders to be entered into such exchange for execution at the actual closing time on such day.
“ Officer ” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Assistant Treasurer, the General Counsel and Corporate Secretary and any Assistant Secretary of the Corporation.
“ Officers’ Certificate ” means a certificate signed (i) by the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, or the Treasurer and (ii) by any Assistant Treasurer, the General Counsel and Corporate Secretary or any Assistant Secretary of the Corporation, and delivered to the Conversion Agent.
“ Original Issue Date ” means the date on which shares of Designated Stock are first issued.
“ Person ” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, common trust fund or trust.
“ Preferred Director ” has the meaning set forth in Section 10(c).
“ Preferred Directors ” has the meaning set forth in Section 10(c).
“ Preferred Stock ” means any and all series of preferred stock of the Corporation, including the Designated Stock.
“ Purchased Shares ” has the meaning set forth in Section 8(a)(v).
“ Record Date ” has the meaning set forth in Section 8(d).
“ Registrar ” means the Transfer Agent acting in its capacity as registrar for the Designated Stock, and its successors and assigns.
“ Relevant Exchange ” has the meaning set forth above in the definition of Market Disruption Event.
“ Reorganization Event ” has the meaning set forth in Section 9(a).
“ Second Dividend Payment Date ” has the meaning set forth in Section 3(b).
“ Series F Common Stock Equivalent ” has the meaning set forth in the recitals above.
“ Share Dilution Amount ” has the meaning set forth in Section 3(e).
“ Shareholder Approval ” means the approval by the stockholders of the Corporation of an amendment to the Charter of the Corporation to increase the number of authorized shares of Common Stock to at least such number as shall be sufficient to permit the full conversion of the Designated Stock into Common Stock.
“ Standard Provisions ” mean these Standard Provisions that form a part of the Certificate of Designations relating to the Designated Stock.
“ Trading Day ” means, for purposes of determining a VWAP or Closing Price per share of Common Stock or a Closing Price, a Business Day on which the Relevant Exchange is scheduled to be open for business and on which there has not occurred or does not exist a Market Disruption Event.
“ Transfer Agent ” means the Corporation acting as Transfer Agent, Registrar, paying agent and Conversion Agent for the Designated Stock, and its successors and assigns.
“ Voting Parity Stock ” means, with regard to any matter as to which the Holders of Designated Stock are entitled to vote as specified in Section 10(c) of these Standard Provisions that form a part of the Certificate of Designations, any and all series of Parity Stock upon which like voting rights with respect to the election of directors have been conferred and are exercisable with respect to such matter.
“ VWAP ” per share of the Common Stock on any Trading Day means the per share volume-weighted average price as displayed under the heading Bloomberg VWAP on Bloomberg page C US <equity>AQR (or its equivalent successor if such page is not available) in respect of the period from the open of trading on the relevant Trading Day until the close of trading on the relevant Trading Day (or if such volume-weighted average price is unavailable, the market price of one share of Common Stock on such Trading Days determined, using a volume-weighted average method, by a nationally recognized investment banking firm (unaffiliated with the Corporation) retained for this purpose by the Corporation).
Section 3. Dividends .
(a) Rate. Holders of Designated Stock shall be entitled to receive, on each share of Designated Stock if, as and when declared by the Board of Directors or a duly authorized committee of the Board of Directors, but only out of assets legally available therefor, dividends and any other distributions, whether payable in cash, securities or any other form of property or assets, in an amount determined as described in Sections 3(b) and 3(c) below.
(b) Subject to Section 3(a) above, from and including the Original Issue Date to but excluding [February 15, 2014] (the “ Second Dividend Payment Date ”) 3 , the Board of Directors or a duly authorized committee of the Board of Directors may not declare and pay any dividend or make any distribution (including, but not limited to, regular quarterly dividends) in respect of Common Stock, whether payable in cash, securities or any other form of property or assets, unless the Board of Directors or a duly authorized committee of the Board of Directors declares and pays to the Holders of the Designated Stock, at the same time (irrespective of whether or not such time is a Dividend Payment Date) and on the same terms as holders of Common Stock, an amount per share of Designated Stock equal to the product of (i) any per share dividend or distribution, as applicable, declared and paid or made in respect of each share of Common Stock and (ii) the then-current Conversion Rate.
Dividends payable on the Designated Stock pursuant to this Section 3(b) are non-cumulative. If the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof does not declare a dividend on the Designated Stock during the period described in this Section 3(b), that dividend shall not accrue, and the Corporation shall have no obligation to pay, and Holders shall have no right to receive, a dividend for such period, whether or not dividends on the Designated Stock or any series of Preferred Stock or common stock are declared for any subsequent Dividend Period with respect to the Designated Stock, Parity Stock, Junior Stock or any other class or series of authorized Preferred Stock of the Corporation. References herein to the “accrual” of non-cumulative dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Subject to Section 3(a) above, for each Dividend Period from and including the Second Dividend Payment Date, non-cumulative cash dividends shall be payable in an amount equal to the greater of (i) the As-Converted Dividend Amount and (ii) the Alternate Dividend Amount.
Dividends payable on the Designated Stock pursuant to this Section 3(c) are non-cumulative. If the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof does not declare a dividend on the Designated Stock during the period described in this Section 3(b), that dividend shall not accrue, and the Corporation shall have no obligation to pay, and Holders shall have no right to receive, a dividend for such period, whether or not dividends on the Designated Stock or any series of Preferred Stock or common stock are declared for any subsequent Dividend Period with respect to the Designated Stock, Parity Stock, Junior Stock or any other class or series of authorized Preferred Stock of the
3 Note to draft : To be 6 months from issuance.
Corporation. References herein to the “accrual” of non-cumulative dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
The dividends described in this Section 3(c) shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the Dividend Period ending [May 14, 2014].
(d) In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date shall be postponed to the next day that is a Business Day and no additional dividends shall accrue as a result of that postponement. The period from and including any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “ Dividend Period ” , provided that the initial Dividend Period shall be the period from and including the Second Dividend Payment Date to but excluding the next Dividend Payment Date.
Dividends that are payable pursuant to Section 3(c) on Designated Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable pursuant to Section 3(c) on Designated Stock on any date prior to the end of a Dividend Period or on any Dividend Payment Date for a Dividend Period that is shorter than a full Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month.
Dividends that are payable on Designated Stock shall be payable to Holders of record of Designated Stock as they appear on the stock register of the Corporation on the applicable record date, which (i) with respect to dividends payable pursuant to Section 3(b), shall be the same day as the record date for the payment of the corresponding dividends to the holders of shares of Common Stock and (ii) with respect to dividends payable pursuant to Section 3(c), shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “ Dividend Record Date ”. Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.
Holders of Designated Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Designated Stock as specified in this Section 3 (subject to the other provisions of the Certificate of Designations).
(e) Priority of Dividends. So long as any share of Designated Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock or in shares of the same series of the Junior Stock for which the dividend is being paid) or Parity Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly, purchased, redeemed or otherwise acquired for consideration by the Corporation or any of its subsidiaries unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period on all outstanding shares of Designated Stock have been or are contemporaneously declared and paid in full (or have been declared and a sum sufficient for the
payment thereof has been set aside for the benefit of the holders of shares of Designated Stock on the applicable record date). The foregoing limitation shall not apply to (i) redemptions, purchases or other acquisitions of shares of Common Stock or other Junior Stock in connection with the administration of any employee benefit plan in the ordinary course of business (including purchases to offset the Share Dilution Amount (as defined below) pursuant to a publicly announced repurchase plan) and consistent with past practice, provided that any purchases to offset the Share Dilution Amount shall in no event exceed the Share Dilution Amount; (ii) any dividends or distributions of rights of Junior Stock in connection with a stockholders’ rights plan or any redemption or repurchase of rights pursuant to any stockholders’ rights plan; (iii) the acquisition by the Corporation or any of its subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than the Corporation or any of its subsidiaries), including as trustees or custodians; and (iv) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case in this clause (iv), solely to the extent required pursuant to binding contractual agreements entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock. “ Share Dilution Amount ” means the increase in the number of diluted shares outstanding (determined in accordance with generally accepted accounting principles in the United States, and as measured from the date of the Corporation’s consolidated financial statements most recently filed with the Securities and Exchange Commission prior to the Original Issue Date) resulting from the grant, vesting or exercise of equity-based compensation to employees and equitably adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction.
When dividends are not paid (or declared and a sum sufficient for payment thereof set aside for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment Date) in full upon Designated Stock and any shares of Parity Stock, all dividends declared on Designated Stock and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) shall be declared pro rata so that the respective amounts of such dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per share on the shares of Designated Stock (including, if applicable as provided in Section 3(c) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) (subject to their having been declared by the Board of Directors or a duly authorized committee of the Board of Directors out of legally available funds and including, in the case of Parity Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to each other. Any remaining accrued but unpaid cumulative dividends shall continue and be cumulative thereafter, shall compound on each subsequent Dividend Payment Date and shall be payable in arrears on each Dividend Payment Date, pursuant to Section 3(c) above. If the Board of Directors or a duly authorized committee of the Board of Directors determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation shall provide written notice to the Holders of Designated Stock prior to such Dividend Payment Date.
Subject to the foregoing in this Section 3, and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and Holders of Designated Stock shall not be entitled to participate in any such dividends.
Section 4. Liquidation Rights .
(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, Holders of Designated Stock shall be entitled to receive for each share of Designated Stock, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Corporation, subject to the rights of any creditors of the Corporation, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock or any other Junior Stock or other stock of the Corporation ranking junior to Designated Stock as to such distribution, payment in full in an amount (the “ Liquidation Preference ” equal to the sum of (x) the Liquidation Amount per share and (y) the amount of any accrued and unpaid dividends declared to the date of payment.
(b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Designated Stock and the corresponding amounts payable with respect to any other stock of the Corporation ranking equally with Designated Stock as to such distribution, Holders of Designated Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled.
(c) Residual Distributions. If the Liquidation Preference has been paid in full to all Holders of Designated Stock and the corresponding amounts payable with respect to any other stock of the Corporation ranking equally with Designated Stock as to such distribution has been paid in full, the holders of other stock of the Corporation shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences; provided that if the amount of such assets or proceeds to be distributed with respect to a number of shares of Common Stock equal to the then-current Conversion Rate (the “ As-Converted Liquidation Amount ” exceeds the Liquidation Preference, Holders of Designated Stock shall be entitled to receive, for each share of Designated Stock, an additional amount (the “ Liquidation Participation Amount ” out of such assets or proceeds such that the As-Converted Liquidation Amount equals the sum of the Liquidation Preference plus the Liquidation Participation Amount, after making appropriate adjustment such that the holders of Designated Stock receive the same amount on an as-converted basis as the holders of a number of shares of Common Stock equal to the then-current Conversion Rate.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Corporation with any other corporation or other entity, including a merger or consolidation in which the Holders of Designated Stock receive cash, securities or other property for their shares, or the sale,
lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.
Section 5. Optional Redemption. The Designated Stock shall not be redeemable either at the Corporation’s option or at the option of the Holders at any time.
Section 6. Mandatory Conversion on the Mandatory Conversion Date . Effective as of the close of business on the Mandatory Conversion Date with respect to any share of Designated Stock, such share of Designated Stock shall automatically convert into shares of Common Stock at the then-current Conversion Rate.
Section 7. Conversion Procedures .
(a) Effect of Mandatory Conversion Date. Effective immediately prior to the close of business on the Mandatory Conversion Date, dividends shall no longer be declared on any such converted shares of Designated Stock and such shares of Designated Stock shall cease to be outstanding, in each case, subject to the right of Holders to receive any (i) declared but unpaid dividends or distributions (with respect to dividends or distributions described in Section 3(b) above) on such shares, (ii) declared but unpaid dividends or distributions (with respect to dividends or distributions described in Section 3(c) above) on such shares in an amount calculated as if the Mandatory Conversion Date were a Dividend Payment Date and (iii) any other payments to which they are otherwise entitled pursuant to the terms hereof.
(b) Rights Prior to Conversion. No allowance or adjustment, except pursuant to Section 8 below, shall be made in respect of dividends payable to holders of the Common Stock of record as of any date prior to the close of business on the Mandatory Conversion Date (except to the extent of the dividends described in Sections 3(b) and 3(c) above). Prior to the close of business on the Mandatory Conversion Date, shares of Common Stock issuable upon conversion of, or other securities issuable upon conversion of, any shares of Designated Stock shall not be deemed outstanding for any purpose, and Holders shall have no rights with respect to the Common Stock or other securities issuable upon conversion (including voting rights, rights to respond to tender offers for the Common Stock or other securities issuable upon conversion and rights to receive any dividends or other distributions on the Common Stock or other securities issuable upon conversion) by virtue of holding shares of Designated Stock (except to the extent of the dividends described in Sections 3(b) and 3(c) above and the voting rights described in Section 10(a) below).
(c) Record Holder as of Conversion Date. The Person or Persons entitled to receive the Common Stock and/or cash, securities or other property issuable upon conversion of Designated Stock shall be treated for all purposes as the record holder(s) of such shares of Common Stock and/or securities as of the close of business on the Mandatory Conversion Date. In the event that a Holder shall not by written notice designate the name in which shares of Common Stock and/or cash, securities or other property to be issued or paid upon conversion of shares of Designated Stock should be registered or paid or the manner in which such shares should be delivered, the Corporation shall be entitled to register and deliver such shares, and make such payment, in the name
of the Holder (as of the close of business on the Mandatory Conversion Date) and in the manner shown on the records of the Corporation or, in the case of global certificates, through book-entry transfer through the Depositary.
(d) Reacquired Shares. Shares of Designated Stock duly converted in accordance with this Certificate of Designations, or otherwise reacquired by the Corporation, will resume the status of authorized and unissued shares of Preferred Stock of the Corporation, undesignated as to series and available for future issuance; provided that any such shares of Designated Stock may be reissued only as shares of any series of Preferred Stock of the Corporation other than Designated Stock. The Corporation may from time-to-time take such appropriate action as may be necessary to reduce the authorized number of shares of Designated Stock.
Section 8. Anti-Dilution Adjustments .
(a) Adjustments. The Conversion Rate will be subject to adjustment, without duplication, under the following circumstances:
(i) the issuance of Common Stock as a dividend or distribution to all holders of Common Stock, or a subdivision or combination (including, without limitation, a reverse stock split) of Common Stock, in which event the Conversion Rate will be adjusted based on the following formula:
CR 1 = CR 0 x (OS 1 / OS 0 ) where,
CR 0 = the Conversion Rate in effect at the close of business on the Record Date
CR 1 = the Conversion Rate in effect immediately after the Record Date
OS 0 = the number of shares of Common Stock outstanding at the close of business on the Record Date prior to giving effect to such event
OS ’ = the number of shares of Common Stock that would be outstanding immediately after, and solely as a result of, such event
Notwithstanding the foregoing, with respect to any dividend or distribution subject to Section 3(b) above (but only with respect to such dividend or distribution), no adjustment will be made for the issuance of Common Stock as a dividend or distribution to all holders of Common Stock that is made in lieu of a quarterly or annual cash dividend or distribution to such holders.
(ii) the issuance to all holders of Common Stock of certain rights or warrants entitling them for a period expiring 60 days or less from the date of issuance of such rights or warrants to purchase shares of Common Stock (or securities convertible into Common Stock) at less than (or having a conversion price per share less than) the Current Market Price as of the Record Date, in which event each Conversion Rate will be adjusted based on the following formula:
CR 1 = CR 0 x (OS 0 + X) / (OS 0 + Y) where,
CR 0 = the Conversion Rate in effect at the close of business on the Record Date
CR ’ = the Conversion Rate in effect immediately after the Record Date
OS 0 = the number of shares of Common Stock outstanding at the close of business on the Record Date
X = the total number of shares of Common Stock issuable pursuant to such rights (or upon conversion of such securities)
Y = the aggregate price payable to exercise such rights (or the conversion price for such securities paid upon conversion) divided by the average of the VWAP of the Common Stock over each of the ten consecutive Trading Days prior to the Business Day immediately preceding the announcement of the issuance of such rights
However, the Conversion Rate will be readjusted to the extent that any such rights or warrants are not exercised prior to their expiration.
(iii) the dividend or other distribution to all holders of Common Stock of shares of capital stock of the Corporation (other than common stock) or evidences of its indebtedness or its assets (excluding any dividend, distribution or issuance covered by clauses (i) or (ii) above or (iv) or (v) below) in which event the Conversion Rate will be adjusted based on the following formula:
CR 1 = CR 0 x SP 0 / (SP 0 – FMV)
where,
CR 0 = the Conversion Rate in effect at the close of business on the Record Date
CR 1 = the Conversion Rate in effect immediately after the Record Date
SP 0 = the Current Market Price as of the Record Date
FMV = the fair market value (as determined in good faith by the Board of Directors or a duly authorized committee of the Board of Directors) on the Record Date of the shares of capital stock of the Corporation, evidences of indebtedness or assets so distributed, expressed as an amount per share of Common Stock
However, if the transaction that gives rise to an adjustment pursuant to this clause (iii) is one pursuant to which the payment of a dividend or other distribution on Common Stock consists of shares of capital stock of the Corporation or capital stock of, or similar equity interests in, a subsidiary or other business unit of the Corporation, (i.e., a spin-off) that are, or, when issued, will be, traded on the NASDAQ Stock Market or any other national or regional securities exchange or market, then the Conversion Rate will instead be adjusted based on the following formula:
CR 1 = CR 0 x ( FMV 0 + MP 0 ) / MP 0
where,
CR 0 = the Conversion Rate in effect at the close of business on the Record Date
CR 1 = the Conversion Rate in effect immediately after the Record Date
FMV 0 = the average of the VWAP of the capital stock of the Corporation, or the capital stock or similar equity interests in a subsidiary or other business unit of the Corporation, distributed to holders of Common Stock applicable to one share of Common Stock over each of the 10 consecutive Trading Days commencing on and including the third Trading Day after the date on which “ex-distribution trading” commences for such dividend or distribution on the NASDAQ Stock Market or such other national or regional exchange or market on which Common Stock, or the capital stock or similar equity interests in a subsidiary or other business unit of the Company, is then listed or quoted
MP 0 = the average of the VWAP of the Common Stock over each of the 10 consecutive Trading Days commencing on and including the third Trading Day after the date on which “ex-distribution trading” commences for such dividend or distribution on the NASDAQ Stock Market or such other national or regional exchange or market on which Common Stock is then listed or quoted
(iv) the Corporation makes a distribution consisting exclusively of cash to all holders of Common Stock, excluding (a) any cash dividend on Common Stock to the extent that the aggregate cash dividend per share of Common Stock does not exceed $0.01 in any fiscal quarter (the “ Dividend Threshold Amount ” (b) any cash that is distributed as part of a distribution referred to in clause (iii) above, (c) any consideration payable in connection with a tender or exchange offer made by the Corporation or any of its subsidiaries referred to in clause (v) below and (d) any cash dividend on the Common Stock to the extent a corresponding cash dividend is paid on the Designated Stock pursuant to Section 3(b) above, in which event, the Conversion Rate will be adjusted based on the following formula:
CR 1 = CR 0 x SP 0 / (SP 0 – C)
where,
CR 0 = the Conversion Rate in effect at the close of business on the Record Date
CR 1 = the Conversion Rate in effect immediately after the Record Date
SP 0 = the Current Market Price as of the Record Date
C = the amount in cash per share of Common Stock of the distribution, as determined pursuant to the following paragraph
If an adjustment is required to be made as set forth in this clause (iv) as a result of a distribution (a) that is a regularly scheduled quarterly dividend, such adjustment would be based on the amount by which such dividend exceeds the Dividend Threshold Amount or (b) that is not a regularly scheduled quarterly dividend, such adjustment would be based on the full amount of such distribution.
The Dividend Threshold Amount is subject to adjustment on an inversely proportional basis whenever the Conversion Rate is adjusted, provided that no adjustment will be made to the Dividend Threshold Amount for any adjustment made to the Conversion Rate pursuant to this clause (iv).
(v) the Corporation or one or more of its subsidiaries makes purchases of Common Stock pursuant to a tender offer or exchange offer by the Corporation or a subsidiary of the Corporation for Common Stock to the extent that the cash and value of any other consideration included in the payment per share of Common Stock validly tendered or exchanged exceeds the VWAP per share of Common Stock on the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer (the “ Expiration Date ” in which event the Conversion Rate will be adjusted based on the following formula:
CR 1 = CR 0 x [( FMV + ( SP 1 x OS 1 )] / ( SP 1 x OS 0 )
where,
CR 0 = the Conversion Rate in effect at the close of business on the Expiration Date
CR ’ = the Conversion Rate in effect immediately after the Expiration Date
FMV = the fair market value (as determined in good faith by the Board of Directors or a duly authorized committee of the Board of Directors), on the Expiration Date, of the aggregate value of all cash and any other consideration paid or payable for shares validly tendered or exchanged and not withdrawn as of the Expiration Date (the “ Purchased Shares ”)
OS ’ = the number of shares of Common Stock outstanding as of the last time tenders or exchanges may be made pursuant to such tender or exchange offer (the “ Expiration Time ”), less any Purchased Shares
OS 0 = the number of shares of Common Stock outstanding at the Expiration Time, including any Purchased Shares
SP 1 = the average of the VWAP of the Common Stock over each of the ten consecutive Trading Days commencing with the Trading Day immediately after the Expiration Date.
(b) Calculation of Adjustments. All adjustments to the Conversion Rate shall be calculated by the Corporation to the nearest 1/10,000th of one share of Common Stock (or if there is not a nearest 1/10,000th of a share, to the next lower 1/10,000th of a share). No adjustment to the Conversion Rate will be required unless such adjustment would require an increase or decrease of at least one percent; provided, however, that any such minor adjustments that are not required to be made will be carried forward and taken into account in any subsequent adjustment, and provided further that any such adjustment of less than one percent that has not been made will be made upon (x) the end of each fiscal year of the Corporation and (y) the Mandatory Conversion Date.
(c) When No Adjustment Required .
(i) Except as otherwise provided in this Section 8, the Conversion Rate will not be adjusted for the issuance of Common Stock or any securities convertible into or exchangeable for Common Stock or carrying the right to purchase any of the foregoing or for the repurchase of Common Stock.
(ii) No adjustment of the Conversion Rate need be made as a result of: (A) the issuance of the rights; (B) the distribution of separate certificates representing the rights; (C) the exercise or redemption of the rights in accordance with any rights agreement; or (D) the termination or invalidation of the rights, in each case, pursuant to the Corporation’s stockholder rights plan existing on the Signing Date, as amended, modified, or supplemented from time to time, or any newly adopted stockholder rights plans; provided, however, that to the extent that the Corporation (x) has a stockholder rights plan in effect on the Mandatory Conversion Date (including the Corporation’s rights plan, if any, existing on the Signing Date) or (y) had a stockholder rights plan take effect after the Signing Date that is no longer in effect on the Mandatory Conversion Date and the rights under such plan were exercised, the Holder shall receive, in addition to the shares of Common Stock, the rights under such rights plan, unless, prior to the Mandatory Conversion Date, the rights have separated from the Common Stock, in which case the Conversion Rate will be adjusted at the time of separation as if the Corporation made a distribution to all holders of Common Stock of shares of capital stock of the Corporation or evidences of its indebtedness or its assets as described in Section 8 (a)(iii), subject to readjustment in the event of the expiration, termination or redemption of the rights of a stockholder rights plan in effect on the Mandatory Conversion Date.
(iii) No adjustment to the Conversion Rate need be made:
(A) upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of additional optional amounts in Common Stock under any plan;
(B) upon the issuance of any shares of Common Stock or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Corporation or any of its subsidiaries; or
(C) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security outstanding as of the Signing Date.
(iv) No adjustment to the Conversion Rate need be made for a transaction referred to in Section 8 (a)(i), (ii), (iii), (iv) or (v) above if Holders may participate in the transaction that would otherwise require an adjustment on a basis and with notice that the Board of Directors or a duly authorized committee of the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction.
(v) No adjustment to the Conversion Rate need be made for a change in the par value of the Common Stock.
(vi) No adjustment to the Conversion Rate will be made to the extent that such adjustment would result in the Conversion Price being less than the par value of the Common Stock.
(d) Record Date. For purposes of this Section 8, “ Record Date ”), means, with respect to any dividend, distribution or other transaction or event in which the holders of the Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of holders of the Common Stock entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or a duly authorized committee of the Board of Directors or by statute, contract or otherwise).
(e) Successive Adjustments. After an adjustment to the Conversion Rate under this Section 8, any subsequent event requiring an adjustment under this Section 8 shall cause an adjustment to such Conversion Rate as so adjusted.
(f) Multiple Adjustments. For the avoidance of doubt, if an event occurs that would trigger an adjustment to the Conversion Rate pursuant to this Section 8 under more than one subsection hereof, such event, to the extent fully taken into account in a single adjustment, shall not result in multiple adjustments hereunder.
(g) Other Events. If any event occurs as to which the failure to make any adjustment to the Conversion Rate would adversely affect the conversion rights or conversion value represented by the Designated Stock, then the Board of Directors or a duly authorized committee of the Board of Directors, acting in good faith, shall determine the adjustment, if any, on a basis consistent with the essential intent and principles herein, necessary to preserve, without dilution, the conversion rights and conversion value represented by the Designated Stock.
(h) Notice of Adjustments. Whenever a Conversion Rate is adjusted as provided under this Section 8, the Corporation shall within 10 Business Days following the occurrence of an event that requires such adjustment (or if the Corporation is not aware of such occurrence, as soon as reasonably practicable after becoming so aware):
(i) compute the adjusted applicable Conversion Rate in accordance with this Section 8 and prepare and transmit to the Conversion Agent an Officers’ Certificate setting forth the applicable Conversion Rate, as the case may be, the method of calculation thereof in reasonable detail, and the facts requiring such adjustment and upon which such adjustment is based; and
(ii) provide a written notice to the Holders of the occurrence of such event and a statement in reasonable detail setting forth the method by which the adjustment to the applicable Conversion Rate was determined and setting forth the adjusted applicable Conversion Rate.
(i) Conversion Agent . The Conversion Agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist that may require any adjustment of the applicable Conversion Rate or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed in making the same. The Conversion Agent shall be fully authorized and
protected in relying on any Officers’ Certificate delivered pursuant to Section 8(h) above and any adjustment contained therein and the Conversion Agent shall not be deemed to have knowledge of any adjustment unless and until it has received such certificate. The Conversion Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, that may at the time be issued or delivered with respect to any Designated Stock; and the Conversion Agent makes no representation with respect thereto. The Conversion Agent shall not be responsible for any failure of the Corporation to issue, transfer or deliver any shares of Common Stock pursuant to the conversion of Designated Stock or to comply with any of the duties, responsibilities or covenants of the Corporation contained in this Section 8.
(j) Fractional Shares. No fractional shares of Common Stock will be issued to holders of the Designated Stock upon conversion. In lieu of fractional shares otherwise issuable, holders will be entitled to receive an amount in cash equal to the fraction of a share of Common Stock, calculated on an aggregate basis in respect of the shares of Designated Stock being converted, multiplied by the Closing Price of the Common Stock on the Trading Day immediately preceding the Mandatory Conversion Date.
Section 9. Adjustment for Reorganization Events .
(a) Reorganization Events . In the event of:
(i) any consolidation or merger of the Corporation with or into another Person (other than a merger or consolidation in which the Corporation is the continuing corporation and in which the shares of Common Stock outstanding immediately prior to the merger or consolidation are not exchanged for, or converted into, cash, securities, or other property of the Corporation or another corporation);
(ii) any sale, transfer, lease or conveyance to another Person of all or substantially all the property and assets of the Corporation; or
(iii) any statutory exchange of securities of the Corporation with another Person (other than in connection with a merger or acquisition), any reclassification or any binding share exchange which reclassifies or changes its outstanding Common Stock;
each of which is referred to as a “ Reorganization Event ”), each share of the Designated Stock outstanding immediately prior to such Reorganization Event will, without the consent of the holders of the Designated Stock, become convertible into the kind and amount of securities, cash and other property (the “ Exchange Property ”), receivable in such Reorganization Event (without any interest thereon, and, solely with respect to dividends or distributions described in Section 3(b) above, without any right (in connection with such Reorganization Event) to dividends or distribution thereon which have a record date that is prior to the Mandatory Conversion Date) per share of Common Stock by a holder of Common Stock that is not a Person with which the Corporation consolidated or into which the Corporation merged or which merged into the Corporation or to which such sale or transfer was made, as the case may be (any such Person, a “ Constituent Person ”), or an Affiliate of a Constituent Person to the extent such Reorganization Event provides for different treatment of Common Stock held by Affiliates of the
Corporation and non-Affiliates; provided that if the kind and amount of Exchange Property receivable upon such Reorganization Event is not the same for each share of Common Stock held immediately prior to such Reorganization Event by a Person other than a Constituent Person or an Affiliate thereof, then for the purpose of this Section 9(a), the Exchange Property receivable upon such Reorganization Event will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make an election (or of all such holders if none make an election). If the Mandatory Conversion Date follows a Reorganization Event, the Conversion Rate then in effect will be applied to the amount on the Mandatory Conversion Date of such Exchange Property received per share of Common Stock, as determined in accordance with this Section 9.
(b) Successive Reorganization Events. The above provisions of this Section 9 shall similarly apply to successive Reorganization Events and the provisions of Section 8 shall apply to any shares of capital stock of the Corporation (or any successor) received by the holders of the Common Stock in any such Reorganization Event.
(c) Reorganization Event Notice. The Corporation (or any successor) shall, within 20 days of the occurrence of any Reorganization Event, provide written notice to the Holders of such occurrence of such event and of the kind and amount of the cash, securities or other property that constitutes the Exchange Property. Failure to deliver such notice shall not affect the operation of this Section 9.
Section 10. Voting Rights .
(a) General. Each share of Designated Stock shall entitle the holder thereof to a number of votes equal to the Conversion Rate in effect on the record date for the vote or consent on all matters submitted to a vote of the stockholders of the Corporation.
(b) Single Class. Except as otherwise provided herein, in the Charter or by applicable law, the Holders of shares of Designated Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(c) Preferred Stock Directors. Whenever, at any time or times, from and including the Second Dividend Payment Date, dividends payable on the shares of Designated Stock have not been paid for an aggregate of six quarterly Dividend Periods or more, whether or not consecutive, the authorized number of directors of the Corporation shall automatically be increased by two and the holders of the Designated Stock shall have the right, with holders of shares of any one or more other classes or series of Voting Parity Stock outstanding at the time, voting together as a class (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to elect two directors (hereinafter the “ Preferred Directors ”), and each a “ Preferred Director ”), to fill such newly created directorships at the Corporation’s next annual meeting of stockholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting of stockholders until all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period, on all outstanding shares of Designated Stock have been declared and paid in full, at which time such right shall terminate with respect to the Designated Stock, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default
of the character above mentioned; provided that it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Corporation to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Corporation may then be listed or traded that listed or traded companies must have a majority of independent directors. Upon any termination of the right of the Holders of shares of Designated Stock and Voting Parity Stock as a class to vote for directors as provided above, the Preferred Directors shall cease to be qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately, and the authorized number of directors shall be reduced by the number of Preferred Directors elected pursuant hereto. Any Preferred Director may be removed at any time, without cause, and any vacancy created thereby may be filled, only by the affirmative vote of the Holders of a majority of the shares of Designated Stock at the time outstanding voting separately as a class together with the holders of shares of Voting Parity Stock (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the extent the voting rights of such holders described above are then exercisable. If the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the remaining Preferred Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(d) Class Voting Rights as to Particular Matters. So long as any shares of Designated Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter, the vote or consent of the Holders of at least 66 2/3% of the shares of Designated Stock at the time outstanding, voting as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of Designations for the Designated Stock or the Charter to authorize or create or increase the authorized amount of, or any issuance of, any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Corporation ranking senior to Designated Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up of the Corporation;
(ii) Amendment of Designated Stock. Any amendment, alteration or repeal of any provision of the Certificate of Designations for the Designated Stock or the Charter (including, unless no vote on such merger or consolidation is required by Section 10(d)(iii) below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Stock; or
(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Designated Stock, or of a merger or consolidation of the Corporation with another corporation or other entity, unless in each case (x) the shares of Designated Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S.
federal income tax purposes (or if such entity is not a corporation, the Corporation having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preference securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Designated Stock prior to such merger or consolidation), and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of Designated Stock immediately prior to such consummation, taken as a whole; provided , however , that for all purposes of this Section 10(d), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Designated Stock necessary to satisfy preemptive or similar rights granted by the Corporation to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Designated Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation shall not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Designated Stock.
(e) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the Holders of Designated Stock (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules that the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the rules of any national securities exchange or other trading facility on which Designated Stock is listed or traded at the time.
Section 11. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the Transfer Agent may deem and treat the record Holder of any share of Designated Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor such Transfer Agent shall be affected by any notice to the contrary.
Section 12. Rank. Notwithstanding anything set forth in the Charter or this Certificate of Designations to the contrary, the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, without the vote of the Holders, may authorize and issue additional shares of Junior Stock or Parity Stock.
Section 13. Listing. The Corporation hereby covenants and agrees that it will use its reasonable best efforts to list and keep listed the Designated Stock on the NASDAQ Stock
Market or another national securities exchange or automated quotation system, if permitted by the rules of such exchange or automated quotation system.
Section 14. No Preemptive Rights. No share of Designated Stock shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.
Section 15. Notice of Shareholder Approval. The Corporation shall notify the Holders of the status of the Shareholder Approval on the Business Day immediately succeeding the date on which the Shareholder Approval has been received or the date on which the Shareholder Approval has been sought but not received, as applicable. If the Shareholder Approval has been received, such notice will include (i) the Mandatory Conversion Date, (ii) the number of shares of Common Stock to be issued upon conversion of each share of Designated Stock and (iii) instructions regarding the surrender of certificates of Designated Stock for Common Stock.
Section 16. No Sinking Fund. Shares of Designated Stock are not subject to the operation of a sinking fund.
Section 17. Reservation of Common Stock.
(a) Sufficient Shares. In order to cause an effective date no later than 5 Business Days following the Shareholder Approval, the Corporation shall file the Certificate of Amendment with the Secretary of State of the State of Delaware as soon as practicable after the date of the Shareholder Approval. As soon as practicable after the effective date of the Certificate of Amendment, the Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock or shares acquired by the Corporation, solely for issuance upon the conversion of shares of Designated Stock as provided in this Certificate of Designations, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Designated Stock then outstanding at the then-current Conversion Price. For purposes of this Section 17(a), the number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding shares of Designated Stock shall be computed as if at the time of computation all such outstanding shares were held by a single Holder.
(b) Use of Acquired Shares. Notwithstanding the foregoing, the Corporation shall be entitled to deliver upon conversion of shares of Designated Stock, as herein provided, shares of Common Stock acquired by the Corporation (in lieu of the issuance of authorized and unissued shares of Common Stock), so long as any such acquired shares are free and clear of all liens, charges, security interests or encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).
(c) Free and Clear Delivery. All shares of Common Stock or other securities delivered upon conversion of the Designated Stock shall be duly authorized, validly issued, fully paid and non-assessable, free of preemptive rights and free and clear of all liens, claims, security interests and other encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).
(d) Compliance with Law. Prior to the delivery of any securities that the Corporation shall be obligated to deliver upon conversion of the Designated Stock, the Corporation shall use its reasonable best efforts to comply with all federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof by, any governmental authority.
(e) Listing. The Corporation hereby covenants and agrees that, if at any time the Common Stock shall be listed on the NASDAQ Stock Market or any other national securities exchange or automated quotation system, the Corporation will, if permitted by the rules of such exchange or automated quotation system, list and keep listed, so long as the Common Stock shall be so listed on such exchange or automated quotation system, all the Common Stock issuable upon conversion of the Designated Stock; provided, however, that if the rules of such exchange or automated quotation system require the Corporation to defer the listing of such Common Stock until the mandatory conversion of Designated Stock into Common Stock in accordance with the provisions hereof, the Corporation covenants to list such Common Stock issuable upon conversion of the Designated Stock in accordance with the requirements of such exchange or automated quotation system at such time.
Section 18. Transfer Agent, Conversion Agent, Registrar and Paying Agent .
The duly appointed Transfer Agent, Conversion Agent, Registrar and paying agent for the Designated Stock initially shall be the Corporation. The Corporation may, in its sole discretion, appoint a successor transfer agent, and may thereafter remove any such successor transfer agent and appoint a successor thereto; provided that in each case any such successor must accept such appointment prior to the effectiveness of such appointment or removal. Upon any such removal or appointment, the Corporation shall send notice thereof to the Holders.
Section 19. Form .
(a) Global Designated Stock. Designated Stock may be issued in the form of one or more permanent global shares of Designated Stock in definitive, fully registered form with a global legend in substantially the form attached hereto as Exhibit A (each, a “ Global Designated Stock ”), which is hereby incorporated in and expressly made a part of this Certificate of Designations. The Global Designated Stock may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Corporation is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Corporation). The aggregate number of shares represented by each Global Designated Stock may from time to time be increased or decreased by adjustments made on the records of the Registrar and the Depositary or its nominee as hereinafter provided. This Section 19(a) shall apply only to a Global Designated Stock deposited with or on behalf of the Depositary.
(b) Delivery to Depositary. If Global Designated Stock is issued, the Corporation shall execute and the Registrar shall, in accordance with this Section 19, countersign and deliver initially one or more Global Designated Stock that (i) shall be registered in the name of Cede & Co. or other nominee of the Depositary and (ii) shall be delivered by the Registrar to the Depositary or pursuant to instructions received from the
Depositary or held by the Registrar as custodian for the Depositary pursuant to an agreement between the Depositary and the Registrar.
(c) Agent Members. If Global Designated Stock is issued, members of, or participants in, the Depositary ( “ Agent Members ”), shall have no rights under this Certificate of Designations with respect to any Global Designated Stock held on their behalf by the Depositary or by the Registrar as the custodian of the Depositary or under such Global Designated Stock, and the Depositary may be treated by the Corporation, the Registrar and any agent of the Corporation or the Registrar as the absolute owner of such Global Designated Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Corporation, the Registrar or any agent of the Corporation or the Registrar from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of the Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Designated Stock. If Global Designated Stock is issued, the Depositary may grant proxies or otherwise authorize any Person to take any action that a Holder is entitled to take pursuant to the Designated Stock, this Certificate of Designations or the Charter.
(d) Physical Certificates. Owners of beneficial interests in any Global Designated Stock shall not be entitled to receive physical delivery of certificated shares of Designated Stock, unless (x) the Depositary has notified the Corporation that it is unwilling or unable to continue as Depositary for the Global Designated Stock and the Corporation does not appoint a qualified replacement for the Depositary within 90 days, (y) the Depositary ceases to be a “clearing agency” registered under the Securities Exchange Act of 1934, as amended, and the Corporation does not appoint a qualified replacement for the Depositary within 90 days or (z) the Corporation decides to discontinue the use of book-entry transfer through the Depositary. In any such case, the Global Designated Stock shall be exchanged in whole for definitive shares of Designated Stock in registered form, with the same terms and of an equal aggregate Liquidation Preference. Such definitive shares of Designated Stock shall be registered in the name or names of the Person or Persons specified by the Depositary in a written instrument to the Registrar.
(e) Signature. An Officer shall sign any Global Designated Stock for the Corporation, in accordance with the Corporation’s Bylaws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Global Designated Stock no longer holds that office at the time the Transfer Agent countersigned the Global Designated Stock, the Global Designated Stock shall be valid nevertheless. A Global Designated Stock shall not be valid until an authorized signatory of the Transfer Agent manually countersigns Global Designated Stock. Each Global Designated Stock shall be dated the date of its countersignature.
Section 20. Replacement Certificates. The Corporation shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Corporation. The Corporation shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Corporation of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be reasonably required by the Corporation; provided that if physical certificates are issued, the Corporation shall not be
required to issue any certificates representing the Designated Stock on or after the Mandatory Conversion Date. In place of the delivery of a replacement certificate following the Mandatory Conversion Date, the Transfer Agent, upon delivery of the evidence and indemnity described in the second sentence above, shall deliver the shares of Common Stock pursuant to the terms of the Designated Stock formerly evidenced by the certificate.
Section 21. Taxes .
(a) Transfer Taxes. The Corporation shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Designated Stock or shares of Common Stock or other securities issued on account of Designated Stock pursuant hereto or certificates representing such shares or securities. The Corporation shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Designated Stock, shares of Common Stock or other securities in a name other than that in which the shares of Designated Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Designated Stock (and on the shares of Common Stock received upon their conversion) shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 22. Notices. All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of (a) receipt thereof or (b) for notices sent within the United States, three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid or (c) for notices sent outside the United States, two Business Days after the sending thereof if sent by recognized next day courier service, addressed: (i) if to the Corporation, to its office at 5055 Wilshire Boulevard, Suite 500, Los Angeles, CA 90036(Attention: Chief Financial Officer), or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Corporation (which may include the records of the Transfer Agent) or (iii) to such other address and by such other means as the Corporation or any such Holder, as the case may be, shall have designated by notice similarly given. Notwithstanding the foregoing, if shares of Designated Stock are issued in book-entry form through The Depositary Trust Company or any similar facility, such notices may be given to the Holders of Designated Stock in any manner permitted by such facility.
Section 23. Other Rights. The shares of Designated Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional, preemptive or other
special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Charter or as provided by applicable law.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE 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. EACH PURCHASER OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. ANY TRANSFEREE OF 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 ISSUER 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.
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Certificate Number 1 |
Number of Shares of Series F Common Stock Equivalent |
BROADWAY FINANCIAL CORPORATION
Series F Common Stock Equivalent
(par value $0.01 per share)
(liquidation amount as specified below)
Broadway Financial Corporation, a Delaware corporation (the “Corporation”), hereby certifies that [ ] (the “Holder”), is the registered owner of [ ] ([ ]) fully paid and non-assessable shares of the Company’s designated Series F Common Stock Equivalent, with a par value of $0.01 per share and a liquidation amount of $1,000 per share (the “Series F Stock”). The shares of Series F Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms
and provisions of the Series F Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated [ ], 2013 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Corporation will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Corporation at its principal place of business.
Reference is hereby made to select provisions of the Series F Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this executed certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series F Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Corporation by its Chief Executive Officer and countersigned by an Assistant Secretary this [_____] day of [_______], 2013.
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BROADWAY FINANCIAL CORPORATION |
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By: |
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Name: |
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Title: Chief Executive Officer |
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By: |
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Name: |
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Title: Assistant Secretary |
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Series F Common Stock Equivalent
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series F Stock referred to in the within-mentioned Certificate of Designations.
Dated: [______], 2013
[___________________], as Registrar
By:
Name:
Title:
Series F Common Stock Equivalent
REVERSE OF CERTIFICATE
Dividends on each share of Series F Stock shall be payable at the applicable rate provided in the Certificate of Designations.
The shares of Series F Stock shall be convertible in the manner and accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series F Stock evidenced hereby to:
(Insert assignee’s social security or taxpayer identification number, if any)
(Insert address and zip code of assignee) and irrevocably appoints:
as agent to transfer the shares of Series F Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee:
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(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
Exhibit 21.1
List of Subsidiaries
1. Broadway Federal Bank, f.s.b. (a federal savings bank)
2. Broadway Service Corporation (a California corporation, a wholly owned subsidiary of Broadway Federal Bank, f.s.b.)
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement of Broadway Financial Corporation on Form S-1 of our report dated April 1, 2013 on the consolidated financial statements of Broadway Financial Corporation appearing in the 2012 Form 10-K of Broadway Financial Corporation, and to the reference to us under the heading “Experts” in the prospectus.
/s/Crowe Horwath LLP
Sacramento, California
November 20, 2013