Exhibit 10.2.1

 

SUBSCRIPTION AGREEMENT

 

October 16, 2014

 

Broadway Financial Corporation
5055 Wilshire Boulevard, Suite 500
Los Angeles, California  90036

 

Ladies and Gentlemen:

 

The undersigned (the “Investor”) hereby confirms its agreement with you as
follows:

 

1.             This Subscription Agreement (this “Agreement”) is entered into
between Broadway Financial Corporation, a Delaware corporation (the “Company”),
and the Investor whose name appears on the signature page hereto and is made as
of the date of the Company’s acceptance hereof (the “Acceptance Date”).

 

2.             The Company is proposing to issue and sell shares of the
Company’s common stock, par value $0.01 per share (the “Common Stock”, to
certain investors in a private offering at a purchase price of U.S.$1.10 per
share (the “Per Share Purchase Price”).  The Common Stock is being offered only
to persons who are accredited investors within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act of 1933, as amended (the
“Securities Act”), and certain other persons pursuant to a private placement
exemption from the securities registration requirements of the Securities Act.

 

3.             The Company and the Investor agree that, upon the terms and
subject to the conditions set forth herein, the Investor will purchase from the
Company and the Company will issue and sell to the Investor, the number of
shares of Common Stock equal to the dollar amount subscribed as indicated on the
signature page hereto divided by the Per Share Purchase Price, pursuant to the
Terms and Conditions for the Purchase of Common Stock attached hereto as Annex A
and incorporated herein by reference as if fully set forth herein. The Common
Stock purchased by the Investor will be delivered in certificated form,
registered in the Investor’s name and address as set forth below, and will be
released by Computershare Inc., the Company’s transfer agent (the “Transfer
Agent”), to the Investor at the Closing (as defined in the Terms and Conditions
for the Purchase of Common Stock) or, if uncertificated, the Transfer Agent for
the Common Stock will register the shares of Common Stock purchased in the name
of the Investor and deliver evidence of such registration to the Investor.

 

4.             In agreeing to purchase Common Stock pursuant hereto, the
Investor is making the representations and warranties set forth in the attached
Terms and Conditions for the Purchase of Common Stock (the “Terms and
Conditions”), including representations and warranties that the Investor is an
“accredited investor” (as that term is defined by Rule 501 under the Securities
Act) and that the Investor has not taken actions regarding a coordinated
acquisition of Common Stock as set forth in Section 2.3(f) or Section 2.3(j).

 

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Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

 

 

 

Subscription amount in shares and U.S. dollars:

 

 

 

 

 

 

Dollars:

7,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares:

6,363,636

 

 

 

 

 

Name of Investor:

 

 

 

 

 

GAPSTOW FINANCIAL GROWTH CAPITAL

 

 

FUND I LP

 

 

 

 

 

By: Gapstow Financial Growth Capital GP I LLC, its General Partner

 

 

 

 

 

By:

/s/ Christopher J. Acito

 

 

Print Name: Christopher J. Acito

 

 

Title: Managing Member

 

 

 

 

 

Mailing Address:

 

 

 

 

 

Gapstow Financial Growth Capital Fund I LP

 

 

c/o Hedgserv, Ltd.

 

 

Attn: Mr. Donal Murphy

 

 

75 St Stephens Green - 2nd Floor

 

 

Dublin 2 Ireland

 

 

 

 

 

with a copy to:

 

 

 

 

 

Gapstow Financial Growth Capital Fund I LP

 

 

c/o Gapstow Capital Partners LP

 

 

Attn: Virginia Kocher

 

 

654 Madison Avenue, Suite 601

 

 

New York, NY 10065

 

 

 

 

 

Type of Entity: Limited Partnership

 

 

Jurisdiction of Organization: Delaware

 

 

Tax ID No.: 46-3992947

 

 

Contact Name: Virginia Kocher

 

 

Telephone: 646-735-3447

 

 

Email Address: virginia.kocher@gapstow.com

 

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Name under which Common Stock is to be issued (if different from above): same as
above

 

 

 

 

 

Address to which share certificates or statement of ownership are to be sent (if
different from mailing address above):

 

 

 

 

 

U.S. Bank Securities Services

 

 

1555 N. River Center Drive – Suite 302

 

 

Milwaukee, WI 53212

 

 

Attn: Dan Harding — Physical Processing Manager

 

 

Ref: Acct # Gapstow Financial Growth Capital Fund I LP

 

 

Agreed and Accepted as of the date first set forth above:

 

 

 

 

 

BROADWAY FINANCIAL CORPORATION

 

 

 

 

 

By:

/s/ Wayne-Kent A. Bradshaw

 

 

Name:

Wayne-Kent A. Bradshaw

 

 

Title:

President and Chief Executive Officer

 

 

 

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INSTRUCTION SHEET FOR INVESTOR

 

(to be read in conjunction with the entire Agreement)

 

Complete the following items in the Agreement:

 

1.             Provide the information regarding the Investor requested on the
signature page to the Agreement.  The Agreement must be executed by an
individual authorized to bind the Investor.

 

2.             If the Investor is purchasing Common Stock for more than one
investor account, it may either (i) complete a separate Agreement for each such
account, in which case a separate wire transfer (or other acceptable form of
payment) must be made by or on behalf of such account for the Common Stock it
will purchase and a separate issuance of Common Stock will be made by the
Transfer Agent to each account, or (ii) complete a single Agreement for all such
accounts, in which case only one wire transfer (or other acceptable form of
payment) need be made for the Common Stock to be purchased for all such accounts
(but all such Common Stock will be issued to a single account specified by the
Investor) and the information called for on the signature page hereof must be
completed for each account.

 

3.             Return the signed Agreement to:

 

Broadway Financial Corporation

5055 Wilshire Boulevard, Suite 500

Los Angeles, California  90036

Attn:                    Wayne-Kent A. Bradshaw, President and Chief Executive
Officer
Fax:                       (323) 634-1732

Email:            WBradshaw@broadwayfederalbank.com

 

4.             Please note that all payments must be made in U.S. dollars by
wire transfer of immediately available funds to the following account, which has
been established to hold funds received from investors, which funds shall be
released to the Company only upon the Closing of the transactions referred to
and described herein:

 

Bank
Name:                                                                                                 
Broadway Federal Bank, f.s.b.

Bank Account Name:                                                 Broadway
Federal Bank for the benefit of Broadway Financial Corporation

Bank ABA
#:                                                                                             
322070145

Bank Account
#:                                                                          
80-000931-9

 

An executed Agreement or a facsimile transmission thereof must be received by
such time on such date as you are advised.  The Company reserves all rights to
reject any subscription before it is accepted by the Company.

 

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ANNEX A

 

TERMS AND CONDITIONS FOR THE PURCHASE OF COMMON STOCK

 

5

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE 1 PURCHASE; CLOSING

1

 

 

 

1.1

Issuance, Sale and Purchase

1

 

 

 

1.2

Closing; Deliverables for the Closing; Conditions to the Closing

1

 

 

 

ARTICLE 2 REPRESENTATIONS AND WARRANTIES

4

 

 

 

2.1

Certain Terms

4

 

 

 

2.2

Representations and Warranties of the Company

5

 

 

 

2.3

Representations and Warranties of the Investor

18

 

 

 

ARTICLE 3 COVENANTS

21

 

 

 

3.1

Conduct of Business Prior to Closing

21

 

 

 

3.2

Confidentiality

22

 

 

 

3.3

Commercially Reasonable Efforts

22

 

 

 

3.4

Legend

22

 

 

 

3.5

Certain Other Transactions

23

 

 

 

3.6

Exchange Listing

24

 

 

 

3.7

Stockholders Meeting

24

 

 

 

3.8

Registration Rights

24

 

 

 

ARTICLE 4 TERMINATION

32

 

 

 

4.1

Termination

32

 

 

 

4.2

Effects of Termination

33

 

 

 

ARTICLE 5 INDEMNITY

33

 

 

 

5.1

Indemnification by the Company

33

 

 

 

5.2

Indemnification by the Investor

34

 

 

 

5.3

Notification of Claims

34

 

 

 

5.4

Indemnification Payment

36

 

 

 

5.5

Exclusive Remedies

36

 

 

 

ARTICLE 6 MISCELLANEOUS

37

 

 

 

6.1

Survival

37

 

 

 

6.2

Other Definitions

37

 

 

 

6.3

Amendment and Waivers

40

 

 

 

6.4

Counterparts and Facsimile

40

 

i

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6.5

Governing Law

40

 

 

 

6.6

Jurisdiction

40

 

 

 

6.7

WAIVER OF JURY TRIAL

41

 

 

 

6.8

Notices

41

 

 

 

6.9

Entire Agreement

41

 

 

 

6.10

Successors and Assigns

41

 

 

 

6.11

Captions

42

 

 

 

6.12

Severability

42

 

 

 

6.13

Third Party Beneficiaries

42

 

 

 

6.14

Public Announcements

42

 

 

 

6.15

Specific Performance

42

 

 

 

6.16

No Recourse

42

 

 

 

Exhibit A - Summary of Modification Terms

 

 

 

Exhibit B - Gapstow Side Letter

 

 

 

Appendix I - Selling Stockholder Questionnaire

 

 

ii

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INDEX OF DEFINED TERMS

 

Defined Term

 

Section

 

 

 

Acceptance Date

 

Subscription Agreement

Action

 

2.2(f)

Affiliate

 

6.2(a)

Agency

 

6.2(b)

Agreement

 

Subscription Agreement

Agreements

 

Recital B

Bank

 

2.2(a)

Benefit Plans

 

2.2(u)(i)

Board of Directors

 

6.2(c)

Business Day

 

6.2(d)

Capital Stock

 

6.2(e)

Capitalization Date

 

2.2(c)(ii)

Change in Control

 

6.2(f)

CJA Letter Agreement

 

2.2(iv)

Closing

 

1.2(a)

Closing Date

 

1.2(a)

Code

 

6.2(g)

Common Stock

 

Subscription Agreement

Company

 

Subscription Agreement

Company Employees

 

2.2(u)(i)

Company Financial Statements

 

2.2(g)

Company Indemnified Parties

 

5.2(a)

Company Insurance Policies

 

2.2(s)

Company Preferred Stock

 

2.2(c)(i)

Company Reports

 

2.2(h)

Company Specified Representations

 

6.2(h)

Company Stock Plans

 

2.2(c)(iii)

Company Subsidiaries

 

2.2(b)

Company Subsidiary

 

2.2(b)

Confidentiality Agreement

 

3.2

control, controlling, controlled by and under common control with

 

6.2(a)

Debentures

 

Recital C

Deductible

 

5.1(b)

Disclosure Schedule

 

6.2(i)

EESA

 

2.2(u)(iii)

Effective Date

 

3.8(j)(i)

Effectiveness Deadline

 

3.8(j)(ii)

employee benefit plan

 

2.2(u)(i)

 

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Defined Term

 

Section

 

 

 

ERISA

 

2.2(u)(i)

Exchange Act

 

2.2(h)

FDI Act

 

2.2(b)

FDIC

 

2.2(b)

Federal Reserve

 

2.2(a)

Filing Deadline

 

3.8(a)(i)

finally determined

 

5.4

GAAP

 

6.2(j)

Gapstow

 

1.2(c)(ii)(H)

Gapstow Letter Agreement

 

2.2(c)(iv)

Gapstow Side Letter

 

1.2(c)(ii)(G)

Governmental Consent

 

6.2(k)

Governmental Entity

 

6.2(l)

Holder

 

3.8(j)(iii)

Indemnified Party

 

5.3(a)

Indemnifying Party

 

5.3(a)

Indemnitee

 

3.8(g)(i)

Indenture

 

Recital C

Insider

 

2.2(bb)

Insurer

 

6.2(m)

Investment

 

Recital A

Investment Manager

 

2.3(f)

Investor

 

Subscription Agreement

Investor Indemnified Parties

 

5.1(a)

Investor Specified Representations

 

6.2(n)

Investors

 

Recital B

Knowledge

 

6.2(o)

Law

 

2.2(p)

Liens

 

2.2(d)(ii)

Loan Investor

 

6.2(p)

Losses

 

6.2(q)

Material Adverse Effect

 

2.1(a)

Material Contract

 

2.2(r)

Modification

 

Recital C

NASDAQ

 

2.2(d)(i)

NCIF Letter Agreement

 

2.2(c)(iv)

Non-Voting Common Stock

 

2.2(c)(i)

OFAC

 

2.2(m)

Other Investors

 

Recital B

Other Private Placements

 

Recital B

Per Share Purchase Price

 

Subscription Agreement

Person

 

6.2(r)

Placement Agent

 

2.2(x)

Potential Investor

 

2.3(j)

Previously Disclosed

 

2.1(b)

Purchase Price

 

1.1

 

iv

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Defined Term

 

Section

 

 

 

Register, registered and registration

 

3.8(j)(iv)

Registrable Securities

 

3.8(j)(v)

Registration Expenses

 

3.8(j)(vi)

Registration Termination Date

 

3.8(a)(i)

Regulatory Agreement

 

2.2(q)

Regulatory Order or Regulatory Orders

 

2.2(p)

Rule 158, Rule 159A, Rule 405 and Rule 415

 

3.8(j)(vii)

SDN List

 

2.2(m)

SEC

 

2.1(b)

Securities Act

 

Subscription Agreement

Selling Expenses

 

3.8(j)(viii)

Shelf Registration Statement

 

3.8(a)(ii)

Side Letters

 

2.2(c)(iv)

SLHC Act

 

2.2(a)

Subsidiary

 

6.2(s)

Suspension Period

 

3.8(d)

Tax or Taxes

 

6.2(t)

Tax Return

 

6.2(u)

Third Party Claim

 

5.3(a)

Transfer Agent

 

Subscription Agreement

Trustee

 

Recital C

Voting Debt

 

2.2(c)(iv)

Voting Securities

 

6.2(v)

 

v

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RECITALS

 

A.                                    The Investment.  The Company intends to
issue and sell to the Investor, and the Investor intends to purchase from the
Company, on the terms and conditions described herein, the number of shares of
Common Stock set forth on such Investor’s signature page hereto for the
aggregate purchase price set forth on such signature page (the “Investment”).

 

B.                                    Other Private Placements.  The Company
also intends to enter into agreements similar to this Agreement with certain
other investors (the “Other Investors”) and expects to complete sales of Common
Stock to them, with the closing of such sales to occur simultaneously with the
Closing (the “Other Private Placements”).  The Investor and the Other Investors
are hereinafter sometimes collectively referred to as the “Investors”, and this
Agreement and the subscription agreements executed by the Other Investors are
hereinafter sometimes collectively referred to as the “Agreements.”

 

C.                                    Debenture Modification.  The Company has
outstanding $6,000,000 aggregate principal amount of Floating Rate Junior
Subordinated Debentures due March 17, 2014 (the “Debentures”) that were issued
pursuant to that certain Indenture, dated as of March 17, 2004 (the
“Indenture”), entered into between the Company and U.S. Bank National
Association, a national banking association organized under the laws of the
United States of America, as debenture trustee (the “Trustee”).  Concurrently
with, and as a condition concurrent to, the sale of Common Stock by the Company
pursuant to this Agreement and each of the Other Agreements, the Company will
make certain payments of principal of and accrued interest on the Debentures and
certain fees and expenses, and will enter into a supplemental indenture with the
Trustee to extend the maturity and modify certain of the other terms of the
Debentures.  The making of such payments and entering into such supplemental
indenture are collectively referred to herein as the “Modification.”  The
principal terms of the Modification are set forth in the summary attached as
Exhibit A to this Agreement.

 

ARTICLE 1

 

PURCHASE; CLOSING

 

1.1                               Issuance, Sale and Purchase.  On the terms and
subject to the conditions set forth herein, the Company agrees to issue and sell
to the Investor, and the Investor agrees to purchase from the Company, free and
clear of any Liens, a number of shares of Common Stock equal to the dollar
amount subscribed as indicated on the signature page hereto divided by the Per
Share Purchase Price payable by the Investor to the Company.  The aggregate
purchase price payable pursuant to this Section 1.1 is referred to herein as the
“Purchase Price”.

 

1.2                               Closing; Deliverables for the Closing;
Conditions to the Closing.

 

(a)                                 Closing.  Unless this Agreement has been
terminated pursuant to Article 4, and subject to the satisfaction or, to the
extent permitted by Law and this Agreement, the written waiver of the conditions
set forth in Section 1.2(c), the closing of the transactions contemplated by
this Agreement (the “Closing”) shall take place at the offices of Arnold &
Porter LLP, located at 777 South Figueroa Street, 44th Floor, Los Angeles,
California 90017, or

 

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remotely via the electronic or other exchange of documents and signature pages,
on a date to be specified by the Company on no less than two Business Days’
notice to the Investor (which date shall be the same date as the date of closing
of the Other Private Placements and the Modification), or at such other place or
such other date as agreed to in writing by the parties hereto (the “Closing
Date”).

 

(b)                                 Closing Deliverables.  Subject to the
satisfaction or waiver on the Closing Date of the conditions to the Closing set
forth in Section 1.2(c), at the Closing the parties shall make the following
deliveries:

 

(i)                                     the Company shall deliver to the
Investor one or more certificates evidencing the Common Stock to be purchased
pursuant to Section 1.1 registered in the name of the Investor (or if the shares
of the Common Stock being purchased are to be uncertificated, the Company shall
cause the Transfer Agent to register such shares in the name of the Investor and
deliver evidence of such registration to the Investor); and

 

(ii)                                  the Investor shall deliver the Purchase
Price, by wire transfer of immediately available funds to the account set forth
in the Instruction Sheet for Investor provided with this Agreement.

 

(c)                                  Closing Conditions.

 

(i)                                     The obligations of the Investor, on the
one hand, and the Company, on the other hand, to consummate the purchase and
sale of Common Stock provided for in this Agreement are each subject to the
satisfaction or, to the extent permitted by Law and this Agreement, the written
waiver by the Company or the Investor, as applicable, of the following
conditions at the Closing:

 

(A)                               No provision of any Law and no judgment,
injunction, order or decree shall prohibit the Closing or shall prohibit or
restrict the Investor from owning or voting any Common Stock to be purchased
pursuant to this Agreement; and

 

(B)                               All Governmental Consents required to have
been obtained at or prior to the Closing Date in connection with the execution,
delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby (including the Modification) shall have been
obtained and shall be in full force and effect.

 

(C)                               The sale of Common Stock by the Company
pursuant to the Agreements shall have been approved by the stockholders of the
Company to the extent required by Section 5635(d), and any other applicable
provisions, of the Nasdaq Listing Rules.

 

(D)                               The Modification shall have been approved by
the holders of the outstanding Debentures, and by the holder or holders of the
Company’s Senior Indebtedness (as defined in the Indenture) required by

 

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the Indenture; the form of supplemental indenture to be entered into in
connection with the Modification shall have been approved by the Company and the
Trustee; and such supplemental indenture shall be executed and delivered by the
Company and the Trustee concurrently with the Closing under this Agreement.

 

(ii)                                  The obligation of the Investor to
consummate the purchase of Common Stock provided for in this Agreement is also
subject to the satisfaction or written waiver by the Investor of the following
conditions at the Closing:

 

(A)                               The representations and warranties of the
Company set forth in this Agreement shall be true and correct in all respects on
and as of the date of this Agreement and on and as of the Closing Date as though
made on and as of the Closing Date, except to the extent that the failure to be
true and correct (without regard to any materiality or Material Adverse Effect
qualifications contained therein), would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and except that
representations and warranties made as of a specified date shall be true and
correct as of such date;

 

(B)                               The Company shall have performed and complied
with, in all material respects, all agreements, covenants and conditions
required by this Agreement to be performed by it on or prior to the Closing
Date;

 

(C)                               The Investor shall have received a
certificate, dated as of the Closing Date, signed on behalf of the Company by a
senior executive officer certifying to the effect that the conditions set forth
in Section 1.2(c)(ii)(A) and Section 1.2(c)(ii)(B) have been satisfied on and as
of the Closing Date;

 

(D)                               Since the date of this Agreement, a Material
Adverse Effect shall not have occurred and no change or other event shall have
occurred that would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;

 

(E)                                The Common Stock to be purchased pursuant to
this Agreement shall have been authorized for listing on the NASDAQ Capital
Market or such other market on which the Common Stock is then listed or quoted,
subject to official notice of issuance;

 

(F)                                 The Company shall have received (or shall
receive concurrently with the Closing) gross proceeds from the Other Private
Placements in an aggregate amount, together with the Purchase Price, of not less
than $6 million;

 

(G)                               The Company and the Investor shall have
entered into the Letter Agreement, substantially in the form attached hereto as
Exhibit B (the “Gapstow Side Letter”); and

 

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(H)                              The Investment shall not have caused the
Investor, together with other funds controlled or managed by Gapstow Capital
Partners (“Gapstow”) or any other affiliate (as defined under the SLHC Act and
any implementing regulations issued thereunder) of the Investor, to hold in the
aggregate: (1) in excess of 24.95% of the total outstanding capital stock of the
Company; or (2) in excess of 24.95% of any class of voting securities (as
defined under the SLHC Act and any implementing regulations issued thereunder)
of the Company.

 

(iii)                               The obligation of the Company to consummate
the sale of Common Stock provided for in this Agreement is also subject to the
satisfaction or written waiver by the Company of the following conditions at the
Closing:

 

(A)                               The representations and warranties of the
Investor set forth in this Agreement shall be true and correct in all respects
on and as of the date of this Agreement and on and as of the Closing Date as
though made on and as of the Closing Date except where the failure to be true
and correct (without regard to any materiality qualifications contained therein)
would not materially adversely affect the ability of the Investor to perform its
obligations hereunder (and except that (1) representations and warranties made
as of a specified date shall be true and correct as of such date and (2) the
representations and warranties of the Investor set forth in Sections 2.3(d) and
2.3(h) shall be true and correct in all respects);

 

(B)                               The Investor shall have performed and complied
with, in all material respects, all agreements, covenants and conditions
required by this Agreement to be performed by it on or prior to the Closing
Date; and

 

(C)                               The Company shall have received a certificate,
dated as of the Closing Date, signed on behalf of the Investor by a duly
authorized person certifying to the effect that the conditions set forth in
Section 1.2(c)(iii)(A) and Section 1.2(c)(iii)(B) have been satisfied on and as
of the Closing Date.

 

ARTICLE 2

 

REPRESENTATIONS AND WARRANTIES

 

2.1                               Certain Terms.

 

(a)                                 As used in this Agreement, the term
“Material Adverse Effect” means any circumstance, event, change, development or
effect that, individually or in the aggregate, would reasonably be expected to
(i) result in a material adverse effect on the assets, liabilities, business,
financial condition or results of operations of the Company and the Company
Subsidiaries, taken as a whole, or (ii) materially impair or delay the ability
of the Company or any of the Company Subsidiaries to perform its or their
obligations under this Agreement to consummate the Closing or any of the
transactions contemplated hereby; provided, however, that

 

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in determining whether a Material Adverse Effect has occurred under clause (i),
there shall be excluded any circumstance, event, change, development or effect
to the extent resulting from (A) actions or omissions of the Company or any
Company Subsidiary expressly required or contemplated by the terms of this
Agreement, (B) changes after the date hereof in general economic conditions in
the United States, including financial market volatility or downturns, or in the
markets in which the Company and the Company Subsidiaries operate, (C) changes
after the date hereof affecting the banking industry generally, (D) any changes
after the date hereof in applicable Laws or accounting rules or principles,
including changes in GAAP, (E) changes in the market price or trading volume of
the Common Stock or the Company’s other outstanding securities (but not the
underlying causes of such changes) or (F) any failure by the Company or any of
the Company Subsidiaries to meet any internal projections or forecasts with
regard to the assets, liabilities, business, financial condition or results of
operations of the Company and the Company Subsidiaries, taken as a whole (but
not the underlying causes of such failure), in each case to the extent that such
circumstance, event, change, development or effect referred to in clauses (B),
(C) and (D) do not have a disproportionate effect on the Company and the Company
Subsidiaries compared to other participants in the industries or markets in
which the Company and the Company Subsidiaries operate.

 

(b)                                 As used in this Agreement, the term
“Previously Disclosed” (i) with regard to any party, means information set forth
in its Disclosure Schedule under Section references corresponding with the
provision of this Agreement to which such information relates (including, in the
case of the Company, information identified in the Company’s Disclosure Schedule
by reference to specific portions of the “virtual data room” website established
by the Company for use by the Investor in its “due diligence” examination of the
Company; provided, however, that if such information is disclosed in such a way
as to make its relevance or applicability to another provision of this Agreement
reasonably apparent on its face, such information shall be deemed to be
responsive to such other provision of this Agreement and (ii) with regard to the
Company, includes information publicly disclosed by the Company in (A) the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2013, as filed by it with the Securities and Exchange Commission (the “SEC”),
(B) the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2014, as filed by it with the SEC, (C) the Company’s definitive Proxy Statement
on Schedule 14A, as filed by it with the SEC on August 15, 2014, or (D) any
Current Report on Form 8-K filed or furnished by it with the SEC since
January 1, 2014, in each case available prior to the date of this Agreement
(excluding any risk factor disclosures contained in such documents under the
heading “Risk Factors” and any disclosure of risks included in any
“forward-looking statements” disclaimer or other statements that are similarly
non-specific and are predictive or forward-looking in nature).  Notwithstanding
anything in this Agreement to the contrary, the mere inclusion of an item in a
Disclosure Schedule shall not be deemed an admission that such item represents a
material exception or material fact, event or circumstance or that such item has
had or would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

2.2                               Representations and Warranties of the
Company.  Except as Previously Disclosed, the Company hereby represents and
warrants to the Investor, as of the date of this Agreement and as of the Closing
Date (except for the representations and warranties that are as of a specific
date, which are made as of that date) that:

 

5

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(a)                                 Organization and Authority.  Each of the
Company and the Company Subsidiaries is a corporation or other entity duly
organized and validly existing under the laws of the jurisdiction of its
incorporation or organization, is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified except where any failure
to be so qualified would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect, and has the corporate or other
organizational power and authority to own its properties and assets and to carry
on its business as it is now being conducted.  The Company has Previously
Disclosed correct and complete copies of the certificate of incorporation and
bylaws (or similar governing documents) as amended through the date of this
Agreement for the Company and Broadway Federal Bank, f.s.b. (the “Bank”).  The
Company is duly registered with the Board of Governors of the Federal Reserve
System (the “Federal Reserve”) as a savings and loan holding company under the
Savings and Loan Holding Company Act, as amended, 12 U.S.C. 1467a (the “SLHC
Act”).

 

(b)                                 Company Subsidiaries.  The Company has
Previously Disclosed a true, complete and correct list of all of its
subsidiaries as of the date of this Agreement (each, a “Company Subsidiary” and,
collectively, the “Company Subsidiaries”).  Except for the Company Subsidiaries,
the Company does not own beneficially, directly or indirectly, more than 5% of
any class of equity securities or similar interests of any corporation, business
trust, association or similar organization, and is not, directly or indirectly,
a partner in any partnership or party to any joint venture.  The Company owns,
directly or indirectly, all of its interests in each Company Subsidiary free and
clear of any and all Liens, except for the Lien of BBCN Bank on all assets of
the Company, including the stock of the Bank owned by the Company.  The deposit
accounts of the Bank are insured by the Federal Deposit Insurance Corporation
(“FDIC”) to the fullest extent permitted by the Federal Deposit Insurance Act,
as amended (the “FDI Act”), and the rules and regulations of the FDIC
thereunder, and all premiums and assessments required to be paid in connection
therewith have been paid when due (after giving effect to any applicable
extensions).  The Company beneficially owns all of the outstanding capital
securities of, and has sole control of, the Bank.

 

(c)                                  Capitalization.

 

(i)                                     As of the date hereof, the authorized
Capital Stock of the Company consists of 50,000,000 shares of Common Stock, par
value $0.01 per share, 25,000,000 shares of non-voting common stock, par value
$0.01 per share (the “Non-Voting Common Stock”), and 1,000,000 shares of
preferred stock, par value $0.01 per share (the “Company Preferred Stock”).

 

(ii)                                  As of the close of business on
September 30, 2014 (the “Capitalization Date”), the Company had outstanding:
19,548,959 shares of Common Stock, 698,200 shares of Non-Voting Common Stock and
no shares of Company Preferred Stock.

 

(iii)                               As of the close of business on the
Capitalization Date, other than in respect of awards outstanding under or
issuable pursuant to the Company’s 1996 Long-Term Incentive Plan, 1996 Stock
Option Plan and 2008 Long-Term

 

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Incentive Plan (the “Company Stock Plans”) in respect of which an aggregate of
2,000,000 shares of Common Stock have been reserved for issuance, no shares of
Common Stock or Company Preferred Stock were reserved for issuance.  Since the
Capitalization Date and through the date of this Agreement, except in connection
with this Agreement and the transactions contemplated hereby, including the
Investment and the Other Private Placements, the Company has not (A) issued or
authorized the issuance of any shares of Common Stock or Company Preferred
Stock, or any securities convertible into or exchangeable or exercisable for
shares of Common Stock or Company Preferred Stock, (B) reserved for issuance any
shares of Common Stock or Company Preferred Stock or (C) repurchased or
redeemed, or authorized the repurchase or redemption of, any shares of Common
Stock or Company Preferred Stock.

 

(iv)                              All of the issued and outstanding shares of
Common Stock and Company Preferred Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights,
exceptfor certain preemptive rights set forth in (A) those certain letter
agreements, each dated as of August 22, 2013, between the Company and,
respectively, (1) BBCN Bancorp, Inc., (2) CJA Private Equity Financial
Restructuring Master Fund I L.P. (as amended, restated or otherwise modified
from time to time, the “CJA Letter Agreement”), and (iii) National Community
Investment Fund (as amended, restated or otherwise modified from time to time,
the “NCIF Letter Agreement”), or (B) the Gapstow Side Letter or a separate side
letter between the Company and National Community Investment Fund (the “Side
Letters”).  None of the outstanding shares of Capital Stock or other securities
of the Company or any of the Company Subsidiaries was issued, sold or offered by
the Company or any Company Subsidiary in violation of the Securities Act or the
securities or blue sky laws of any state or jurisdiction.  No bonds, debentures,
notes or other indebtedness having the right to vote on any matters on which the
shareholders of the Company may vote (“Voting Debt”) are issued and outstanding.

 

(v)                                 As of the date of this Agreement, except for
the outstanding awards under the Company Stock Plans listed on Section 2.2(c) of
the Disclosure Schedule, and the Agreements, the Company does not have and is
not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of, or securities or rights convertible into or exchangeable or exercisable for,
any shares of Common Stock or Company Preferred Stock or any other equity
securities of the Company or Voting Debt or any securities representing the
right to purchase or otherwise receive any shares of Capital Stock of the
Company.

 

(d)                                 Authorization; No Conflicts; Shareholder
Approval.

 

(i)                                     The Company has the corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder.  Subject to receipt of the approval by the Company’s stockholders
required by the NASDAQ Stock Market (“NASDAQ”) pursuant to
Rule 5635(c) and(d) and any other

 

7

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applicable provisions of the Nasdaq Listing Rules to issue Common Stock in
connection with the Investment and the Other Private Placements and the approval
by the Company’s stockholders of an amendment to Article FOURTH of the Company’s
Certificate of Incorporation to increase the number of shares of Non-Voting
Common Stock the Company is authorized to issue to a number that will permit the
issuance and sale of all of such stock contemplated by the Agreements, the
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company and no further
approval or authorization is required on the part of the Company or its
shareholders.  The Board of Directors has unanimously approved the transactions
contemplated by this Agreement, including the Investment, the Other Private
Placements and the Modification.  This Agreement has been duly and validly
executed and delivered by the Company and, assuming due authorization, execution
and delivery by the Investor, is the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general applicability
relating to or affecting creditors’ rights or by general equity principles
(whether applied in equity or at law).

 

(ii)                                  Neither the execution and delivery by the
Company of this Agreement nor the consummation of the transactions contemplated
hereby, nor compliance by the Company with any of the provisions hereof, will
(A) violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or result in
the loss of any benefit or creation of any right on the part of any third party
under, or accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of any liens, charges,
adverse rights or claims, pledges, covenants, title defects, security interests
or other encumbrances of any kind (“Liens”) upon any of the properties or assets
of the Company or any Company Subsidiary, under any of the terms, conditions or
provisions of (1) the certificate of incorporation or bylaws (or similar
governing documents) of the Company and each Company Subsidiary or (2) any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company or any of the Company Subsidiaries
is a party or by which it may be bound, or to which the Company or any of the
Company Subsidiaries, or any of the properties or assets of the Company or any
of the Company Subsidiaries may be subject, or (B) violate any Law applicable to
the Company or any of the Company Subsidiaries or any of their respective
properties or assets except in the case of clauses (A)(2) and (B) for such
violations, conflicts and breaches as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

(e)                                  Governmental Consents.  Except as set forth
on Section 2.2(e) of the Disclosure Schedule, no Governmental Consents are
necessary for the execution and delivery of

 

8

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this Agreement or for the sale by the Company of Common Stock to the Investor
pursuant to this Agreement.

 

(f)                                   Litigation and Other Proceedings.  Except
as would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, there is no pending or, to the Knowledge of the
Company, threatened claim, action, suit, arbitration, complaint, charge or
investigation or proceeding (each an “Action”) against the Company or any
Company Subsidiary or any of its assets, rights or properties, nor is the
Company or any Company Subsidiary a party or named as subject to the provisions
of any order, writ, injunction, settlement, judgment or decree of any court,
arbitrator or government agency, or instrumentality.  There has not been, and to
the Knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company or any current or former director
or officer of the Company in his or her capacity as such.

 

(g)                                  Financial Statements.  The audited
consolidated balance sheets of the Company and the Company Subsidiaries and the
related consolidated statements of operations, changes in stockholders’ equity
and cash flows, together with the notes thereto, included in the Company’s
Annual Report on Form 10-K filed with the SEC for the year ended December 31,
2013 (the “Company Financial Statements”) (i) have been prepared from, and are
in accordance with, the books and records of the Company and the Company
Subsidiaries, (ii) complied, as of their respective date of such filing, in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, (iii) have been prepared
in accordance with GAAP applied on a consistent basis and (iv) present fairly in
all material respects the consolidated financial position of the Company and the
Company Subsidiaries at the dates and the consolidated results of operations,
changes in shareholders’ equity and cash flows of the Company and the Company
Subsidiaries for the periods stated therein.

 

(h)                                 Reports.  Since December 31, 2010, the
Company and each Company Subsidiary have filed all material reports,
registrations, documents, filings, statements and submissions, together with any
required amendments thereto, that they were required to file with any
Governmental Entity (the foregoing, collectively, being referred to herein as
the “Company Reports”) and have paid all material fees and assessments due and
payable in connection therewith.  As of their respective filing dates, or as
subsequently amended prior to the date hereof, the Company Reports complied in
all material respects with all statutes and applicable rules and regulations of
the applicable Governmental Entities.  As of the date of this Agreement, there
are no outstanding comments from the SEC or any other Governmental Entity with
respect to any Company Report that were the subject of written correspondence
that have not been resolved.  The Company Reports, including the documents
incorporated by reference in each of them, each contained all the information
required to be included in it and, when it was filed and, as of the date of each
such Company Report filed with the SEC, or if amended prior to the date of this
Agreement, as of the date of such amendment, did not contain an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements made in it, in light of the circumstances under which they were
made, not misleading and complied as to form in all material respects with the
applicable requirements of the Securities Act and the Securities Exchange Act of
1934, as amended (the “Exchange Act”).  No executive officer of

 

9

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the Company has failed in any respect to make the certifications required of him
or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.

 

(i)                                     Internal Accounting and Disclosure
Controls.  The records, systems, controls, data and information of the Company
and the Company Subsidiaries are recorded, stored, maintained and operated under
means (including any electronic, mechanical or photographic process, whether
computerized or not) that are under the exclusive ownership and direct control
of the Company or the Company Subsidiaries or accountants (including all means
of access thereto and therefrom) or reputable banking industry service
providers, except for any non-exclusive ownership and non-direct control that
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the system of internal accounting controls described
below in this Section 2.2(i).  The Company (i) has implemented and maintains
disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange
Act) intended to ensure that material information relating to the Company,
including its consolidated Subsidiaries, is made known to the chief executive
officer or executive chairman and the chief financial officer of the Company by
others within those entities, and (ii) has disclosed, based on its most recent
evaluation prior to the date of this Agreement, to the Company’s outside
auditors and the audit committee of the Board of Directors (A) any significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting (as defined in Rule 13a-15(f) of the Exchange
Act) that are reasonably likely to adversely affect the Company’s ability to
record, process, summarize and report financial information, and (B) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the Company’s internal controls over financial reporting. 
As of the date of this Agreement, the Company has no Knowledge of any reason
that its outside auditors and its chief executive officer or executive chairman
and chief financial officer shall not be able to give the certifications and
attestations required pursuant to the rules and regulations adopted pursuant to
Section 404 of the Sarbanes-Oxley Act of 2002, without qualification, when next
due.  Since December 31, 2010, neither the Company nor any Company Subsidiary
nor, to the Knowledge of the Company, any director, officer, employee, auditor,
accountant or representative of the Company or any Company Subsidiary has
received or otherwise had or obtained knowledge of any material complaint,
allegation, assertion or claim, whether written or oral, regarding the
accounting or auditing practices, procedures, methodologies or methods of the
Company or any Company Subsidiary or their respective internal accounting
controls, including any material complaint, allegation, assertion or claim that
the Company or any Company Subsidiary has engaged in questionable accounting or
auditing practices.

 

(j)                                    Risk Management Instruments.  All
material derivative instruments, including swaps, caps, floors and option
agreements entered into for the Company’s or any of the Company Subsidiaries’
own account were entered into (i) only in the ordinary course of business,
(ii) in accordance with prudent practices and in all material respects with all
applicable Laws and (iii) with counterparties believed to be financially
responsible at the time; and each of them constitutes the valid and legally
binding obligation of the Company or any Company Subsidiary, as applicable,
enforceable in accordance with its terms.  Neither the Company nor, to the
Knowledge of the Company, any other party thereto is in breach of any of its
material obligations under any such agreement or arrangement.

 

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(k)                                 No Undisclosed Liabilities.  There are no
liabilities of the Company or any of the Company Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, except for (i) liabilities adequately reflected or reserved against
in accordance with GAAP in the Company’s audited balance sheet as of
December 31, 2013 and (ii) liabilities that have arisen in the ordinary and
usual course of business and consistent with past practice since December 31,
2013 and that have not or would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.

 

(l)                                     Mortgage Lending.  The Company and each
of the Company Subsidiaries have complied in all material respects with, and all
documentation in connection with the origination, processing, underwriting and
credit approval of any mortgage loan originated, purchased or serviced by the
Company or any Company Subsidiary has satisfied, in all material respects
(i) all Laws with respect to the origination, insuring, purchase, sale,
servicing, or filing of claims in connection with mortgage loans, including all
Laws relating to real estate settlement procedures, consumer credit protection,
truth in lending laws, usury limitations, fair housing, transfers of servicing,
collection practices, equal credit opportunity and adjustable rate mortgages,
(ii) the responsibilities and obligations relating to mortgage loans set forth
in any agreement between the Company and any Agency, Loan Investor or Insurer,
(iii) the applicable rules, regulations, guidelines, handbooks and other
requirements of any Agency, Loan Investor or Insurer and (iv) the terms and
provisions of any mortgage or other collateral documents and other loan
documents with respect to each mortgage loan.

 

(m)                             Bank Secrecy Act; Anti-Money Laundering; OFAC;
and Customer Information.  The Company is not aware of, has not been advised of,
and, to the Knowledge of the Company, has no reason to believe that any facts or
circumstances exist that would cause it or any Company Subsidiary to be deemed
to be not operating in compliance, in all material respects, with the Bank
Secrecy Act of 1970, as amended, the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (also known as the USA PATRIOT Act), any order or regulation issued by the
U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), or
any other applicable anti-money laundering or anti-terrorist-financing statute,
rule or regulation.  The Company is not aware of any facts or circumstances that
would cause it to believe that any nonpublic customer information has been
disclosed to or accessed by an unauthorized third party in a manner that would
cause it to undertake any material remedial action.  The Company and each of the
Company Subsidiaries have adopted and implemented an anti-money laundering
program that contains adequate and appropriate customer identification
verification procedures that comply with the USA PATRIOT Act and such anti-money
laundering program meets the requirements in all material respects of
Section 352 of the USA PATRIOT Act and the regulations thereunder, and they have
complied in all respects with any requirements to file reports and other
necessary documents as required by the USA PATRIOT Act and the regulations
thereunder.  The Company will not directly or indirectly use the proceeds of the
sale of the Common Stock pursuant to transactions contemplated by this
Agreement, or lend, contribute or otherwise make available such proceeds to any
Company Subsidiary, joint venture partner or other Person, towards any sales or
operations in any country appearing on the OFAC Specially Designated Nationals
List (“SDN List”) or for the purpose of financing the activities of any Person
currently appearing on the SDN List.

 

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(n)                                 Certain Payments.  Neither the Company nor
any of the Company Subsidiaries, nor any directors, officers, nor to the
Knowledge of the Company, employees or any of their Affiliates or any other
Person who to the Knowledge of the Company is associated with or acting on
behalf of the Company or any of the Company Subsidiaries has directly or
indirectly (i) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment in material violation of any Law to any
Person, private or public, regardless of form, whether in money, property, or
services (A) to obtain favorable treatment in securing business for the Company
or any of the Company Subsidiaries, (B) to pay for favorable treatment for
business secured by the Company or any of the Company Subsidiaries, or (C) to
obtain special concessions or for special concessions already obtained, for or
in respect of the Company or any of the Company Subsidiaries or (ii) established
or maintained any fund or asset with respect to the Company or any of the
Company Subsidiaries that was required by Law or GAAP to have been recorded and
was not recorded in the books and records of the Company or any of the Company
Subsidiaries.

 

(o)                                 Absence of Certain Changes.  Since
December 31, 2013 and except as Previously Disclosed or as required or
contemplated by the terms of this Agreement, (i) the Company and the Company
Subsidiaries have conducted their respective businesses in all material respects
in the ordinary and usual course of business consistent with past practices,
(ii) none of the Company or any Company Subsidiary has issued any securities
(other than Common Stock and other equity-based awards issued prior to the date
of this Agreement pursuant to the Company Stock Plans and reflected in the
numbers set forth in Section 2.2(c)), (iii) the Company has not made or declared
any distribution in cash or in kind to its shareholders or issued or repurchased
any shares of its Capital Stock, (iv) through (and including) the date of this
Agreement, no fact, event, change, condition, development, circumstance or
effect has occurred that has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and (v) no material
default (or event which, with notice or lapse of time, or both, would constitute
a material default) exists on the part of the Company or any Company Subsidiary
in the due performance and observance of any term, covenant or condition of any
agreement to which the Company or any Company Subsidiary is a party and which
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

(p)                                 Compliance with Laws.  The Company and each
Company Subsidiary have all material permits, licenses, franchises,
authorizations, orders and approvals of, and have made all filings, applications
and registrations with, Governmental Entities that are required in order to
permit them to own or lease their properties and assets and to carry on their
business as presently conducted and that are material to the business of the
Company and each Company Subsidiary.  The Company and each Company Subsidiary
have complied in all material respects and (i) are not in default or violation
in any respect of, (ii) are not under investigation with respect to, and
(iii) have not been threatened to be charged with or given notice of any
material violation of, any applicable material domestic (federal, state or
local) or foreign law, statute, ordinance, license, rule, regulation, policy or
guideline, order, demand, writ, injunction, decree or judgment of any
Governmental Entity (each, a “Law”), other than such noncompliance, defaults or
violations as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.  Except for statutory or regulatory
restrictions of general application, restrictions applicable to recipients of
funds under the Troubled Asset Relief Program of the Treasury, the Order to
Cease and Desist issued by the Office of Thrift

 

12

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Supervision to the Company with the Company’s consent, effective September 9,
2010, and the Consent Order issued by the Office of the Comptroller of the
Currency to the Bank with the Bank’s consent, effective October 30, 2013 (each,
individually a “Regulatory Order” and, together, the “Regulatory Orders”), no
Governmental Entity has placed any material restriction on the business or
properties of the Company or any of the Company Subsidiaries.  As of the date
hereof, the Bank has a Community Reinvestment Act rating of “outstanding.”

 

(q)                                 Agreements with Regulatory Agencies.  Except
for the Regulatory Orders, (i) the Company and the Company Subsidiaries (A) are
not subject to any cease-and-desist or other similar order or enforcement action
issued by, (B) are not a party to any written agreement, consent agreement or
memorandum of understanding with, (C) are not a party to any commitment letter
or similar undertaking to, and (D) are not subject to any capital directive by,
and (ii) since December 31, 2013, neither the Company nor any of the Company
Subsidiaries has adopted any board resolutions at the request of any
Governmental Entity that currently restricts in any material respect the conduct
of its business or that in any material manner relates to its capital adequacy,
its liquidity and funding policies and practices, its ability to pay dividends,
its credit, risk management or compliance policies, its internal controls, its
management or its operations or business (each item in this sentence, including
the Regulatory Orders, being referred to herein as a “Regulatory Agreement”),
nor has the Company nor any of the Company Subsidiaries been advised since
December 31, 2013 by any Governmental Entity that it is considering issuing,
initiating, ordering, or requesting any such Regulatory Agreement.  Except as
set forth on Section 2.2(q) of the Disclosure Schedule, the Company and the
Company Subsidiaries are in compliance in all material respects with each
Regulatory Agreement to which they are party or subject, and the Company and the
Company Subsidiaries have not received any notice from any Governmental Entity
indicating that either the Company or any of the Company Subsidiaries is not in
compliance in all material respects with any such Regulatory Agreement.

 

(r)                                    Contracts.  The Company has Previously
Disclosed or provided (by hard copy, electronic data room or otherwise) to the
Investor or its representatives true, correct and complete copies of each of the
following to which the Company or any Company Subsidiary is a party, each of
which is set forth on Section 2.2(r) of the Disclosure Schedule (each, a
“Material Contract”):

 

(i)                                     any contract or agreement relating to
indebtedness of the Company or any Company Subsidiary for borrowed money,
letters of credit, capital lease obligations, obligations secured by a Lien or
interest rate or currency hedging agreements (including guarantees in respect of
any of the foregoing, but in any event excluding trade payables, securities
transactions and brokerage agreements arising in the ordinary course of
business, intercompany indebtedness and immaterial leases for telephones, copy
machines, facsimile machines and other office equipment) in excess of $200,000,
except for those issued in the ordinary course of business;

 

(ii)                                  any contract or agreement that is a
“material contract” within the meaning of Item 601(b)(10) of Regulation S-K;

 

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(iii)                               any contract or agreement limiting, in any
material respect, the ability of the Company or any of the Company Subsidiaries
to engage in any line of business or to compete, whether by restricting
territories, customers or otherwise, or in any other material respect, with any
Person;

 

(iv)                              any contract or agreement that concerns the
sale or acquisition of any material portion of the Company’s business;

 

(v)                                 any alliance, cooperation, joint venture,
shareholders, partnership or similar agreement involving a sharing of profits or
losses relating to the Company or any Company Subsidiary;

 

(vi)                              any contract or agreement involving annual
payments in excess of $200,000 that cannot be cancelled by the Company or a
Company Subsidiary without penalty on not more than 90 days’ notice;

 

(vii)                           any material hedge, collar, option, forward
purchasing, swap, derivative or similar agreement, understanding or undertaking;

 

(viii)                        any contract or agreement with respect to the
employment or service of any current or former directors, officers, employees or
consultants of the Company or any of the Company Subsidiaries other than, with
respect to non-executive employees and consultants, in the ordinary course of
business; and

 

(ix)                              any contract or agreement containing any
(x) non-competition or exclusive dealing obligations or other obligation which
purports to limit or restrict in any respect the ability of the Company or any
Company Subsidiary to solicit customers or the manner in which, or the
localities in which, all or any portion of the business of the Company or the
Company Subsidiaries is or can be conducted, or (y) right of first refusal or
right of first offer or similar right or that limits or purports to limit the
ability of the Company or any of the Company Subsidiaries to own, operate, sell,
transfer, pledge or otherwise dispose of any material assets or business.

 

Each Material Contract (A) is legal, valid and binding on the Company and the
Company Subsidiaries which are a party to such contract, (B) is in full force
and effect and enforceable in accordance with its terms and (C) will continue to
be legal, valid, binding, enforceable, and in full force and effect in all
material respects following the consummation of the transactions contemplated by
this Agreement.  Neither the Company nor any of the Company Subsidiaries, nor to
the Knowledge of the Company, any other party thereto is in material violation
or default under any Material Contract.  No benefits under any Material Contract
will be increased, and no vesting of any benefits under any Material Contract
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement, nor will the value of any of the benefits under any Material
Contract be calculated on the basis of any of the transactions contemplated by
this Agreement.  The Company and the Company Subsidiaries, and to the Knowledge
of the Company, each of the other parties thereto, have performed in all
material respects all material obligations required to be performed by them
under each Material Contract, and to the

 

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Knowledge of the Company, no event has occurred that with notice or lapse of
time would constitute a material breach or default or permit termination,
modification, or acceleration, under the Material Contracts.

 

(s)                                   Insurance.  The Company and each of the
Company Subsidiaries are presently insured, and have been insured for at least
the past two years, for reasonable amounts with financially sound and reputable
insurance companies against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured.  All of the policies, bonds and other arrangements providing for the
foregoing (the “Company Insurance Policies”) are in full force and effect, the
premiums due and payable thereon have been or will be timely paid through the
Closing Date, and there is no material breach or default (and no condition
exists or event has occurred that, with the giving of notice or lapse of time or
both, would constitute such a material breach or default) by the Company or any
of the Company Subsidiaries under any of the Company Insurance Policies or, to
the Knowledge of the Company, by any other party to the Company Insurance
Policies.  Neither the Company nor any of the Company Subsidiaries has received
any written notice of cancellation or non-renewal of any Company Insurance
Policy nor, to the Knowledge of the Company, is the termination of any such
policies threatened in writing by the insurer, and there is no material claim
for coverage by the Company, or any of the Company Subsidiaries, pending under
any of such Company Insurance Policies as to which coverage has been denied or
disputed by the underwriters of such Company Insurance Policies or in respect of
which such underwriters have reserved their rights.

 

(t)                                    Title.  The Company and the Company
Subsidiaries have good and marketable title in fee simple to all real property
owned by them and good and valid title to all material personal property owned
by them, in each case free and clear of all Liens, except for Liens which do not
materially affect the value of such property or do not interfere with the use
made and proposed to be made of such property by the Company or any Company
Subsidiary.  Any real property and facilities held under lease by the Company or
the Company Subsidiaries are valid, subsisting and enforceable leases with such
exceptions that are not material and do not interfere with the use made and
proposed to be made of such property and facilities by the Company or the
Company Subsidiaries.

 

(u)                                 Employee Benefits.

 

(i)                                     Section 2.2(u) of the Disclosure
Schedule sets forth a correct and complete list of each “employee benefit plan”
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”), including, without limitation, multiemployer
plans within the meaning of Section 3(37) of ERISA), and all stock purchase,
stock option, severance, employment, change-in-control, fringe benefit, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA (including any funding mechanism therefor now in effect or required in the
future as a result of the transactions contemplated by this Agreement or
otherwise), whether formal or informal, oral or written, under which (A) any
current or former employee or director of the Company or any of the Company
Subsidiaries

 

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(the “Company Employees”) has any present or future right to benefits and which
are contributed to, sponsored by or maintained by the Company or any of the
Company Subsidiaries or (B) the Company or any Company Subsidiary has had or has
any present or future liability.  All such plans, agreements, programs, policies
and arrangements shall be collectively referred to as the “Benefit Plans.”

 

(ii)                                  (A) Each Benefit Plan has been established
and administered in all material respects in accordance with its terms, and in
compliance with the applicable provisions of ERISA, the Code and other Laws;
(B) no “reportable event” (as such term is defined in Section 4043 of ERISA)
that could reasonably be expected to result in material liability has occurred
with respect to any Benefit Plan, and (C) no non-exempt “prohibited transaction”
(as such term is defined in Section 406 of ERISA and Section 4975 of the Code)
has been engaged in by the Company or any Company Subsidiary with respect to any
Benefit Plan that has or is expected to result in any material liability or
“accumulated funding deficiency” (as such term is defined in Section 302 of
ERISA and Section 412 of the Code (whether or not waived)).

 

(iii)                               The Company and the Company Subsidiaries
will be in compliance, as of the Closing Date, with Sections 111 and 302 of the
Emergency Economic Stabilization Act of 2008, as amended by the U.S. American
Recovery and Reinvestment Act of 2009, including all guidance issued thereunder
by a Governmental Entity (collectively “EESA”).

 

(v)                                 Taxes.  All material Tax Returns required to
be filed by, or on behalf of, Company or the Company Subsidiaries have been
timely filed, or will be timely filed, in accordance with all Laws, and all such
Tax Returns are, or shall be at the time of filing, complete and correct in all
material respects.  The Company and the Company Subsidiaries have timely paid
all material Taxes due and payable (whether or not shown on such Tax Returns),
or, where payment is not yet due, have made adequate provisions in accordance
with GAAP.  There are no Liens with respect to Taxes upon any of the assets or
properties of either the Company or the Company Subsidiaries other than with
respect to Taxes not yet due and payable.

 

(w)                               Labor.

 

(i)                                     Employees of the Company and the Company
Subsidiaries are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees.  No
labor organization or group of employees of the Company or any Company
Subsidiary has made a pending demand for recognition or certification, and there
are no representation or certification proceedings or petitions presently
pending or threatened to be brought or filed with the National Labor Relations
Board or any other labor relations tribunal or authority, nor have there been in
the last three years.  There are no strikes, work stoppages, slowdowns, labor
picketing lockouts, material arbitrations or material grievances, or other
material labor disputes pending or, to the Knowledge of the Company, threatened
against or involving the Company or any Company Subsidiary, nor have there been
any in the past year.

 

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(ii)                                  Except as would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect, the
Company and the Company Subsidiaries are in compliance with all federal and
state Laws and requirements respecting employment and employment practices,
terms and conditions of employment, collective bargaining, disability,
immigration, health and safety, wages, hours and benefits, non-discrimination in
employment, workers’ compensation and the collection and payment of withholding
and/or payroll taxes and similar taxes.

 

(iii)                               Except as would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect, there is
no charge or complaint pending or threatened before any Governmental Entity
alleging unlawful discrimination in employment practices, unfair labor practices
or other unlawful employment practices by the Company or any Company Subsidiary.

 

(x)                                 Brokers and Finders.  Except for BlackTorch
Securities, LLC (the “Placement Agent”) and the fees payable thereto or to its
assigns (which fees are to be paid by the Company), neither the Company nor any
of its officers, directors, employees or agents has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder’s fees, and no broker or finder has acted directly
or indirectly for the Company in connection with this Agreement or the
transactions contemplated hereby.

 

(y)                                 Loan Portfolio.  As of the date of this
Agreement, the characteristics of the loan portfolio of the Company have not
materially and adversely changed from the characteristics of the loan portfolio
as of December 31, 2013.

 

(z)                                  Offering of Securities.  Neither the
Company nor any Person acting on its behalf has taken any action (including any
offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of any of the Common
Stock to be issued pursuant to this Agreement under the Securities Act and the
rules and regulations of the SEC promulgated thereunder) which would subject the
offering, issuance or sale of any of the Common Stock to be issued pursuant to
this Agreement to be subject to the registration requirements of the Securities
Act.  Neither the Company nor any Person acting on its behalf has engaged or
will engage in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act) in connection with any
offer or sale of the Common Stock pursuant to the transactions contemplated by
this Agreement.  Assuming the accuracy of the Investor’s representations and
warranties set forth in this Agreement, no registration under the Securities Act
is required for the offer and sale of the Common Stock by the Company to the
Investor.

 

(aa)                          Investment Company Status.  The Company is not,
and upon consummation of the transactions contemplated by this Agreement will
not be, an “investment company,” a company controlled by an “investment company”
or an “affiliated Person” of, or “promoter” or “principal underwriter” of, an
“investment company,” as such terms are defined in the Investment Company Act of
1940, as amended.

 

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(bb)                          Affiliate Transactions.  No officer, director,
five percent (5%) shareholder or other Affiliate of the Company (or any Company
Subsidiary), or any individual who, to the Knowledge of the Company, is related
by marriage or adoption to or shares the same home as any such Person, or any
entity which, to the Knowledge of the Company, is controlled by any such Person
(collectively, an “Insider”), is a party to any contract or transaction with the
Company (or any Company Subsidiary) which pertains to the business of the
Company (or any Company Subsidiary) or has any interest in any property, real or
personal or mixed, tangible or intangible, used in or pertaining to the business
of the Company (or any Company Subsidiary).  The foregoing representation and
warranty does not include deposits at the Company (or any Company Subsidiary) or
loans of $250,000 or less made in the ordinary course of business in compliance
with Regulation O and other applicable Law.

 

(cc)                            Anti-takeover Provisions Not Applicable.  The
Board of Directors has taken all necessary action to ensure that the
transactions contemplated by this Agreement and the consummation of the
transactions contemplated hereby will be exempt from any anti-takeover or
similar provisions of the Company’s certificate of incorporation and bylaws, and
any provisions of any applicable “moratorium”, “control share”, “fair price”,
“interested shareholder” or other anti-takeover Laws and regulations of any
jurisdiction.

 

(dd)                          Issuance of the Common Stock.  Upon receipt of the
stockholder approvals referred to in Section 2.2(d)(i), the issuance of the
Common Stock in connection with the transactions contemplated by this Agreement
has been duly authorized and such Common Stock, when issued and paid for in
accordance with the terms of this Agreement, will be duly and validly issued,
fully paid and nonassessable and free and clear of all Liens, other than
restrictions on transfer imposed by applicable securities Laws, and shall not be
subject to preemptive or similar rights except as set forth in
Section 2.2(c)(iv).

 

2.3                               Representations and Warranties of the
Investor.  Except as Previously Disclosed, the Investor hereby represents and
warrants to the Company, as of the date hereof and as of the Closing Date
(except for the representations and warranties that are as of a specific date
which are made as of that date) that:

 

(a)                                 Organization and Authority.  The Investor is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, is duly qualified to do business and is in
good standing in all jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and where failure to
be so qualified would be reasonably expected to materially and adversely impair
or delay its ability to perform its obligations under this Agreement or to
consummate the transactions contemplated hereby.

 

(b)                                 Authorization; No Conflicts.

 

(i)                                     The Investor has the necessary power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder.  The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by its board of directors, general partner or managing members, investment
committee,

 

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investment adviser or other authorized person, as the case may be, and no
further approval or authorization by any of its shareholders, partners or other
equity owners, as the case may be, is required.  This Agreement has been duly
and validly executed and delivered by the Investor and, assuming due
authorization, execution and delivery by the Company is the valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms (except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors’ rights or by general
equity principles).

 

(ii)                                  Neither the execution, delivery and
performance by the Investor of this Agreement nor the consummation of the
transactions contemplated hereby, nor compliance by the Investor with any of the
provisions hereof, will (A) violate, conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of any Liens upon any
of the properties or assets of the Investor under any of the terms, conditions
or provisions of (1) its certificate of incorporation or bylaws, its certificate
of limited partnership or partnership agreement or its similar governing
documents or (2) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the Investor is a
party or by which the Investor may be bound, or to which the Investor or any of
the properties or assets of the Investor may be subject, or (B) violate any Law
applicable to the Investor or any of its properties or assets except in the case
of clauses (A)(2) and (B) for such violations, conflicts and breaches as would
not reasonably be expected to materially adversely affect the Investor’s ability
to perform its obligations under this Agreement or consummate the transactions
contemplated hereby on a timely basis.

 

(c)                                  Governmental Consents.  Except as set forth
in the Disclosure Schedule, no Governmental Consents are necessary for the
execution and delivery of this Agreement or for the purchase by the Investor of
the Common Stock pursuant to this Agreement.

 

(d)                                 Purchase for Investment; Accredited Investor
Status.  The Investor acknowledges that the Common Stock to be purchased by the
Investor pursuant to this Agreement has not been registered under the Securities
Act or under any state securities laws and may not be resold or transferred by
the Investor without such registration or appropriate reliance on any available
exemption from such requirements.  The Investor (i) is acquiring the Common
Stock pursuant to an exemption from the registration requirements of the
Securities Act and other applicable securities laws solely for investment with
no present intention to distribute any of the Common Stock to any Person,
(ii) will not sell or otherwise dispose of any of the Common Stock, except in
compliance with the registration requirements or exemption provisions of the
Securities Act and any other applicable securities laws, (iii) has such
knowledge and experience in financial and business matters and in investments of
this type that it is capable of evaluating the merits and risks of its
investment in the Common Stock and of making an informed

 

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investment decision and (iv) is an “accredited investor” (as that term is
defined by Rule 501 of the Securities Act).

 

(e)                                  Brokers and Finders.  Neither the Investor,
nor its respective Affiliates nor any of their respective officers or directors,
has employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder’s fees, and no broker or
finder has acted directly or indirectly for the Investor in connection with this
Agreement or the transactions contemplated hereby.  The Investor acknowledges
that it is purchasing the Common Stock directly from the Company and not from
the Placement Agent.

 

(f)                                   Investment Decision.  The Investor, or the
duly appointed investment manager to the Investor (the “Investment Manager”), if
applicable, has independently evaluated the merits of its decision to purchase
the Common Stock pursuant to this Agreement, and the Investor confirms that
neither it, nor its Investment Manager, if applicable, has relied on the advice
of any other person’s business and/or legal counsel in making such decision. 
The Investor understands that nothing in this Agreement or any other materials
presented by or on behalf of the Company to the Investor in connection with the
purchase of the Common Stock constitutes legal, tax or investment advice.  The
Investor has consulted such accounting, legal, tax and investment advisors as it
has deemed necessary or appropriate in connection with its purchase of the
Common Stock.  The Investor understands that the Placement Agent has acted
solely as the agent of the Company in this placement of the Common Stock and the
Investor has not relied on the business or legal advice of the Placement Agent
or any of its agents, counsel or Affiliates in making its investment decision
hereunder, and confirms that none of such persons has made any representations
or warranties to the Investor in connection with the transactions contemplated
by this Agreement.  Except as Previously Disclosed and except for this Agreement
and the Side Letter, there are no agreements or understandings with respect to
the transactions contemplated by this Agreement between the Investor or any of
its Affiliates, on the one hand, and (i) any of the Other Investors or any of
their respective Affiliates, in each case, the identity of which is known to the
Investor, (ii) the Company or (iii) the Company Subsidiaries, on the other hand.

 

(g)                                  Financial Capability.  At the Closing, the
Investor shall have available all funds necessary to consummate the purchase of
Common Stock on the terms and conditions contemplated by this Agreement.

 

(h)                                 Access to Information.  The Investor
acknowledges that it has been afforded (i) the opportunity to ask such questions
as it has deemed necessary of, and to receive answers from, representatives of
the Company concerning the terms and conditions of the offering of the Common
Stock and the merits and risks of investing in the Common Stock; (ii) access to
information about the Company and the Company Subsidiaries and their respective
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; (iii) the
opportunity to obtain such additional information that the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the Investment; and (iv) the
opportunity to ask questions of management.

 

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(i)                                     No Reliance.  The Investor has not
relied on any representation or warranty in connection with the Investment other
than those contained in this Agreement.

 

(j)                                    No Coordinated Acquisition.  Except as
Previously Disclosed, the Investor (i) reached its decision to invest in the
Common Stock independently from any other Person known by the Investor to be a
potential investor in the Company, other than any Affiliates of the Investor
that are also investing in the Other Private Placements, (any such person, a
“Potential Investor”), (ii) is not affiliated with any other Potential Investor,
(iii) is not advised or managed by an advisor or manager that advises or manages
any other Potential Investor, other than any Affiliates of the Investor that are
also investing in the Other Private Placements, (iv) has not entered into any
agreement or understanding, whether written or not reduced to writing, with any
other Potential Investor to act in concert for the purpose of exercising a
controlling influence over the Company or any Company Subsidiaries, including,
but not limited to, any agreements or understandings regarding the voting or
transfer of shares of the Company, (v) has not shared due diligence materials
prepared by such Investor or any of its advisors or representatives with respect
to the Company or any Company Subsidiaries with any other Potential Investor,
(vi) has not been induced, nor has induced any other Potential Investor, to
enter into the transactions contemplated by this Agreement by any other
Potential Investor, (vii) was not notified of or provided the opportunity to
enter into the transactions contemplated by this Agreement pursuant to the terms
of any agreement or informal understanding with, or otherwise acting in concert
with, any other Potential Investor and was not required by the terms of any
agreement or informal understanding to so notify any other Potential Investor,
(viii) is not a party to any formal or informal understanding with any other
Potential Investor to make a coordinated acquisition of stock of the Company,
and the investment decision of the Investor is not based on the investment
decision of any other Potential Investor, (ix) is not a party to any formal or
informal agreement or understanding concerning the appointment of any individual
to the Board of Directors (other than as set forth in the Side Letters, the CJA
Letter Agreement and the NCIF Letter Agreement), (x) will not, by reason of the
Investment, file, be required to file, or be required to be included in a
Schedule 13D or Schedule 13G pursuant to the United States federal securities
laws, (xi) has not engaged as part of a group consisting of substantially the
same entities as the Potential Investors, in substantially the same combination
of interests, in any additional banking or nonbanking activities or business
ventures in the United States and (xii) will not pay any other Potential
Investor any fee in connection with the transactions contemplated hereby. 
Except as Previously Disclosed, the Investor does not presently hold any capital
stock of the Company.

 

ARTICLE 3

 

COVENANTS

 

3.1                               Conduct of Business Prior to Closing.  Except
as otherwise expressly required or contemplated by this Agreement or applicable
Law or in the performance of any Material Contract that was Previously
Disclosed, or with the prior written consent of the Investor, between the date
of this Agreement and the Closing, the Company shall, and the Company shall
cause each Company Subsidiary to:

 

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(a)                                 use commercially reasonable efforts to
conduct its business only in the ordinary course of business; and

 

(b)                                 use commercially reasonable efforts to
(i) preserve the present business operations, organization (including officers
and employees) and goodwill of the Company and any Company Subsidiary and
(ii) preserve business relationships with customers, suppliers, consultants and
others having business dealings with the Company; provided, however, that
nothing in this clause (b) shall place any limit on the ability of the Board of
Directors to act, or require any actions that the Board of Directors may, in
good faith, determine to be inconsistent with their duties or the Company’s
obligations under applicable Law or imposed by any Governmental Entity.

 

3.2                               Confidentiality.  The Investor acknowledges
that the information being provided to it in connection with the transactions
contemplated hereby is subject to the terms of the Confidentiality Agreement
heretofore entered into between Gapstow and the Company (the “Confidentiality
Agreement”), the terms of which are incorporated herein by reference, as if the
Investor were a party thereto.

 

3.3                               Commercially Reasonable Efforts.  Upon the
terms and subject to the conditions herein provided, except as otherwise
provided in this Agreement, each of the parties hereto agrees to use its
commercially reasonable efforts to take or cause to be taken all action, to do
or cause to be done and to assist and cooperate with the other parties hereto in
doing all things necessary, proper or advisable under applicable Laws to
consummate and make effective the transactions contemplated hereby, including
but not limited to: (a) the satisfaction of the conditions precedent to the
obligations of the parties hereto; (b) the obtaining of applicable Governmental
Consents, and consents, waivers and approvals of any other third parties;
(c) defending of any claim, action, suit, investigation or proceeding, whether
judicial or administrative, challenging this Agreement or the performance of the
obligations hereunder; and (d) the execution and delivery of such instruments,
and the taking of such other actions as the other parties hereto may reasonably
request in order to carry out the intent of this Agreement.  Notwithstanding the
foregoing, under no circumstances will the Investor be required to disclose to
the Company, the Company Subsidiaries or any third party any information the
disclosure of which is prohibited by Law, nor shall it be required to agree to
any restrictions, conditions or commitments imposed or otherwise required by any
Government Entity that are determined by the Investor in its sole discretion to
be unduly burdensome, other than customary passivity commitments, in order to
consummate and make effective the transactions contemplated hereby.

 

3.4                               Legend.

 

(a)                                 The Investor agrees that all certificates or
other instruments representing the Common Stock subject to this Agreement shall
bear a legend substantially to the following effect, until such time as they are
not required under Section 3.4(b):

 

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF

 

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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.”

 

(b)                                 Upon request of the Investor, the Company
shall promptly cause such legend to be removed from any certificate for any
Common Stock to be so transferred if (i) such Common Stock is being transferred
pursuant to a registration statement in effect with respect to such transfer or
(ii) such Common Stock is being transferred pursuant to an exemption from
registration under the Securities Act and applicable state laws subject to
receipt by the Company of an opinion of counsel for the Investor reasonably
satisfactory to the Company to the effect that such legend is no longer required
under the Securities Act and applicable state laws.  The Investor acknowledges
that the Common Stock has not been registered under the Securities Act or under
any state securities laws and agrees that it shall not sell or otherwise dispose
of any of the Common Stock, except in compliance with the registration
requirements or exemption provisions of the Securities Act and any other
applicable securities laws.

 

3.5                               Certain Other Transactions.

 

(a)                                 Prior to the Closing, notwithstanding
anything in this Agreement to the contrary, the Company shall not directly or
indirectly effect or cause to be effected any transaction with a third party
that would reasonably be expected to result in a Change in Control unless such
third party shall have provided prior assurance in writing to the Investor (in a
form that is reasonably satisfactory to the Investor) that the terms of this
Agreement shall be fully performed (i) by the Company or (ii) by such third
party if it is the successor of the Company or if the Company is its direct or
indirect Subsidiary.  For the avoidance of doubt, it is understood and agreed
that, in the event that a Change in Control occurs on or prior to the Closing,
the Investor shall maintain the right under this Agreement to acquire, pursuant
to the terms and conditions of this Agreement, the Common Stock that is to be
purchased by the Investor pursuant to this Agreement (or such other securities
or property (including cash) into which the Common Stock that is to be purchased
by Investor pursuant to this Agreement may have become exchangeable as a result
of such Change in Control), as if the Closing had occurred immediately prior to
such Change in Control.

 

(b)                                 In the event that, at or prior to the
Closing, (i) the number of shares of Common Stock, or securities convertible or
exchangeable into or exercisable for shares of Common Stock, issued and
outstanding is changed as a result of any reclassification, stock split
(including reverse split), stock dividend or distribution (including any
dividend or distribution of securities convertible or exchangeable into or
exercisable for shares of Common Stock), merger, tender or exchange offer or
other similar transaction, or (ii) the Company fixes a record date that is at or
prior to the Closing Date for the payment of any non-stock dividend or
distribution on the Common Stock, then the number of shares of Common Stock to
be issued to the Investor at the Closing under this Agreement, together with the
applicable implied per share price, shall be equitably adjusted and/or the
shares of Common Stock to be issued to the Investor at the applicable Closing
under this Agreement shall be equitably replaced with shares of other stock or
securities or property (including cash), in each case, to provide the Investor
with substantially the same economic benefit from this Agreement as the Investor
had prior to the applicable

 

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transaction.  Notwithstanding anything in this Agreement to the contrary, in no
event shall the Purchase Price or any component thereof, or the aggregate
percentage of shares to be purchased by the Investor, be changed by the
foregoing.

 

(c)                                  Notwithstanding anything in the foregoing
to the contrary, the provisions of this Section 3.5 shall not be implicated by
(i) the transactions contemplated by this Agreement or the Other Private
Placements, or (ii) any issuances of options, restricted stock units or other
equity-based awards granted to newly-appointed directors, employees or
consultants of the Company at or around the same time as the transactions
contemplated by this Agreement to such Persons, including upon exercise of any
such options.

 

3.6                               Exchange Listing.  The Company shall use its
reasonable best efforts to cause the Common Stock to be issued pursuant to this
Agreement to be approved for listing on NASDAQ or such other market on which the
Common Stock is then listed or quoted, subject to official notice of issuance,
as promptly as possible and in any event prior to the Closing.

 

3.7                               Stockholders Meeting.  Prior to the Closing
Date, the Company shall give notice of and hold a meeting of its stockholders in
accordance with applicable law and the corporate governance rules of NASDAQ for
the purpose of obtaining stockholder approval of the sale of Common Stock by the
Company pursuant to the Agreements to the extent required by
Sections 5635(c) and (d), and any other applicable provisions, of the NASDAQ
Listing Rules and stockholder approval of the amendment to Article FOURTH of the
Company’s Certificate of Incorporation referred to in Section 2.2(d)(i).  To the
extent permitted by the NASDAQ corporate governance rules, the Investor agrees
to vote all shares of Common Stock that it owns or has the power to direct the
voting of for this purpose in favor of such amendment and such issuances.

 

3.8                               Registration Rights.

 

(a)                                 Registration.

 

(i)                                     Subject to the terms and conditions of
this Agreement, the Company covenants and agrees that upon the expiration of
ninety (90) days after the Closing Date (the “Filing Deadline”), the Company
shall have prepared and filed with the SEC one or more Shelf Registration
Statements covering the resale of all of the Registrable Securities (or, if
permitted by the rules of the SEC, otherwise designated an existing Shelf
Registration Statement filed with the SEC to cover such Registrable Securities),
and, to the extent the Shelf Registration Statement has not theretofore been
declared effective or is not automatically effective upon such filing, the
Company shall use reasonable best efforts to cause such Shelf Registration
Statement to be declared or become effective as soon as practicable (and in any
event no later than the Effectiveness Deadline) and to keep such Shelf
Registration Statement continuously effective and in compliance with the
Securities Act and usable for resale of such Registrable Securities until the
date that is 12 months after the initial effective date thereof (the
“Registration Termination Date”).

 

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(ii)                                  Any registration pursuant to this
Section 3.8(a) shall be effected by means of a shelf registration under the
Securities Act (a “Shelf Registration Statement”) in accordance with the methods
and distribution set forth in the Shelf Registration Statement and Rule 415.

 

(b)                                 Expenses of Registration.  All Registration
Expenses incurred in connection with any registration, qualification or
compliance hereunder shall be borne by the Company.  All Selling Expenses
incurred in connection with any registrations hereunder shall be borne by the
Holders selling in such registration pro rata on the basis of the aggregate
number of securities or shares being sold.

 

(c)                                  Obligations of the Company.  The Company
shall use its reasonable best efforts, for so long as there are Registrable
Securities outstanding, to take such actions as are under its control to not
become an ineligible issuer (as defined in Rule 405 under the Securities Act). 
In addition, whenever required to effect the registration of any Registrable
Securities or facilitate the distribution of Registrable Securities pursuant to
an effective Shelf Registration Statement, the Company shall, as expeditiously
as reasonably practicable:

 

(i)                                     Prepare and file with the SEC a
prospectus supplement with respect to a proposed offering of Registrable
Securities pursuant to an effective registration statement and, subject to this
Section 3.8(c), keep such registration statement effective or such prospectus
supplement current.

 

(ii)                                  Prepare and file with the SEC such
amendments and supplements to the applicable registration statement and the
prospectus or prospectus supplement used in connection with such registration
statement as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement.

 

(iii)                               Furnish to the Holders such number of
correct and complete copies of the applicable registration statement and each
such amendment and supplement thereto (including in each case all exhibits) and
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned or to be distributed by them.

 

(iv)                              Use its reasonable best efforts to register
and qualify the securities covered by such registration statement under such
other securities or blue sky Laws of such jurisdictions as shall be reasonably
requested by the Holders, to keep such registration or qualification in effect
for so long as such registration statement remains in effect, and to take any
other action which may be reasonably necessary to enable such seller to
consummate the disposition in such jurisdictions of the securities owned by such
Holder; provided, that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.

 

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(v)                                 Notify each Holder of Registrable Securities
at any time when a prospectus relating thereto is required to be delivered under
the Securities Act of the happening of any event as a result of which the
applicable prospectus, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing (which notice shall not contain any material
non-public information).

 

(vi)                              Give written notice to the Holders (which
notice shall not contain any material, non-public information):

 

(A)                               when any registration statement filed pursuant
to Section 3.8(a) or any amendment thereto has been filed with the SEC (except
for any amendment effected by the filing of a document with the SEC pursuant to
the Exchange Act) and when such registration statement or any post-effective
amendment thereto has become effective;

 

(B)                               of any request by the SEC for amendments or
supplements to any registration statement or the prospectus included therein or
for additional information;

 

(C)                               of the issuance by the SEC of any stop order
suspending the effectiveness of any registration statement or the initiation of
any proceedings for that purpose;

 

(D)                               of the receipt by the Company or its legal
counsel of any notification with respect to the suspension of the qualification
of the Common Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and

 

(E)                                of the happening of any event that requires
the Company to make changes in any effective registration statement or the
prospectus related to the registration statement in order to make the statements
therein not misleading (which notice shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite changes have been made).

 

(vii)                           Use its reasonable best efforts to prevent the
issuance or obtain the withdrawal of any order suspending the effectiveness of
any registration statement referred to in Section 3.8(c)(vi)(C) at the earliest
practicable time.

 

(viii)                        Upon the occurrence of any event contemplated by
Section 3.8(c)(v) or 3.8(c)(vi)(E) and subject to the Company’s rights under
Section 3.8(d), promptly prepare a post-effective amendment to such registration
statement or a supplement to the related prospectus or file any other required
document so that, as thereafter delivered to the Holders, the prospectus shall
not contain an untrue statement of a material fact or omit to state any material
fact

 

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necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

 

(ix)                              Cause all such Registrable Securities to be
listed on each securities exchange on which the same class of securities issued
by the Company are then listed or, if the same class of securities is not then
listed on any securities exchange, use its reasonable best efforts to cause all
such Registrable Securities of such class to be listed on the NASDAQ Capital
Market.

 

(x)                                 If requested by Holders of a majority of the
Registrable Securities being registered and/or sold in connection therewith,
promptly include in a prospectus supplement or amendment such information as the
Holders of a majority of the Registrable Securities being registered and/or sold
in connection therewith may reasonably request in order to permit the intended
method of distribution of such securities and make all required filings of such
prospectus supplement or such amendment as soon as practicable after the Company
has received such request.

 

(xi)                              Timely provide to its security holders
earnings statements satisfying the provisions of Section 9(a) of the Securities
Act and Rule 158 thereunder.

 

(d)                                 Suspension of Sales.  Upon receipt of
written notice from the Company that a registration statement, prospectus or
prospectus supplement contains or may contain an untrue statement of a material
fact or omits or may omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that circumstances
exist that make use of such registration statement, prospectus or prospectus
supplement inadvisable, each Holder of Registrable Securities shall forthwith
discontinue disposition of Registrable Securities pursuant to such registration
statement until such Holder has received copies of a supplemented or amended
prospectus or prospectus supplement, or until such Holder is advised in writing
by the Company that the use of the prospectus and, if applicable, prospectus
supplement may be resumed, and, if so directed by the Company, such Holder shall
deliver to the Company (at the Company’s expense) all copies, other than
permanent file copies then in such Holder’s possession, of the prospectus and,
if applicable, prospectus supplement covering such Registrable Securities
current at the time of receipt of such notice (each such suspension, a
“Suspension Period”).  No single Suspension Period shall exceed forty-five (45)
consecutive days and the aggregate of all Suspension Periods shall not exceed
one hundred twenty (120) days during any twelve (12) month period.

 

(e)                                  Termination of Registration Rights.  A
Holder’s registration rights as to any securities held by such Holder (and its
Affiliates, partners, members and former members) shall not be available unless
such securities are Registrable Securities.

 

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(f)                                   Furnishing Information.

 

(i)                                     Neither the Investor nor any Holder
shall use any free writing prospectus (as defined in Rule 405) in connection
with the sale of Registrable Securities without the prior written consent of the
Company.

 

(ii)                                  It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 3.8(c) as to a
selling Holder that such selling Holder shall furnish to the Company such
information regarding themselves, the Registrable Securities held by them and
the intended method of disposition of such securities as shall be required to
effect the registered offering of their Registrable Securities.

 

(g)                                  Indemnification.

 

(i)                                     The Company agrees to indemnify each
Holder and, if a Holder is a person other than an individual, such Holder’s
officers, directors, employees, agents, representatives and Affiliates, and each
Person, if any, that controls a Holder within the meaning of the Securities Act
(each, an “Indemnitee”), against any and all Losses, joint or several, arising
out of or based upon any untrue statement or alleged untrue statement of
material fact contained in any registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto or any documents incorporated therein by reference or
contained in any free writing prospectus (as such term is defined in Rule 405)
prepared by the Company or authorized by it in writing for use by such Holder
(or any amendment or supplement thereto), or any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, that the Company shall not be liable to such Indemnitee in
any such case to the extent that any such Loss is based solely upon (i) an
untrue statement or omission made in such registration statement, including any
such preliminary prospectus or final prospectus contained therein or any such
amendments or supplements thereto or contained in any free writing prospectus
(as such term is defined in Rule 405) prepared by the Company or authorized by
it in writing for use by such Holder (or any amendment or supplement thereto),
in reliance upon and in conformity with information regarding such Indemnitee or
its plan of distribution or ownership interests which was furnished in writing
to the Company by such Indemnitee expressly for use in connection with such
registration statement, including any such preliminary prospectus or final
prospectus contained therein or any such amendments or supplements thereto, or
(ii) offers or sales effected by or on behalf such Indemnitee “by means of” (as
defined in Rule 159A) a “free writing prospectus” (as defined in Rule 405) that
was not authorized in writing by the Company.  Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of an
Indemnitee and shall survive the transfer of the Registrable Securities by the
Holders.

 

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(ii)                                  If any proceeding shall be brought or
asserted against any Indemnitee, such Indemnitee shall promptly notify the
Company in writing, and the Company shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnitee and the payment of all reasonable fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnitee to
give such notice shall not relieve the Company of its obligations or liabilities
pursuant to this Agreement, except to the extent that the Company is materially
and adversely prejudiced in its ability to defend such action.  An Indemnitee
shall have the right to employ separate counsel in any such proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnitee or Indemnitees unless: (1) the
Company has agreed in writing to pay such fees and expenses; (2) the Company
shall have failed promptly to assume the defense of such proceeding and to
employ counsel reasonably satisfactory to such Indemnitee in any such
proceeding; or (3) the named parties to any such proceeding (including any
impleaded parties) include both such Indemnitee and the Company, and such
Indemnitee shall have been advised by counsel that a conflict of interest exists
if the same counsel were to represent such Indemnitee and the Company; provided,
that the Company shall not be liable for the fees and expenses of more than one
separate firm of attorneys at any time for all Indemnitees and all similarly
situated Persons who are “Indemnitees” as defined in the other Agreements.  The
Company shall not be liable for any settlement of any such proceeding effected
without its written consent, which consent shall not be unreasonably withheld or
delayed.  The Company shall not, without the prior written consent of the
Indemnitee, effect any settlement of any pending proceeding in respect of which
any Indemnitee is a party, unless such settlement includes an unconditional
release of such Indemnitee from all liability on claims that are the subject
matter of such proceeding.  Subject to the terms of this Agreement, all fees and
expenses of the Indemnitee (including reasonable fees and expenses to the extent
incurred in connection with investigating or preparing to defend such proceeding
in a manner not inconsistent with this Section 3.8(g)(ii)) shall be paid to the
Indemnitee, as incurred, within thirty (30) days of written notice thereof to
the Company; provided, that the Indemnitee shall promptly reimburse the Company
for that portion of such fees and expenses applicable to such actions for which
such Indemnitee is finally judicially determined to not be entitled to
indemnification hereunder).

 

(iii)                               If the indemnification provided for in
Section 3.8(g)(i) is unavailable to an Indemnitee with respect to any Losses,
then the Company, in lieu of indemnifying such Indemnitee, shall contribute to
the amount paid or payable by such Indemnitee as a result of such Losses in such
proportion as is appropriate to reflect the relative fault of the Indemnitee, on
the one hand, and the Company, on the other hand, in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations.  The relative fault of the Company, on the
one hand, and of the Indemnitee, on the other hand, shall be determined by
reference to, among other factors, whether the untrue statement of a material
fact or omission to state a

 

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material fact relates to information supplied by the Company or by the
Indemnitee and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission; the Company
and each Holder agree that it would not be just and equitable if contribution
pursuant to this Section 3.8(g)(iii) were determined by pro rata allocation or
by any other method of allocation that does not take account of the equitable
considerations referred to in Section 3.8(g)(i).  No Indemnitee guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from the Company if the
Company was not guilty of such fraudulent misrepresentation.

 

(iv)                              The indemnity and contribution agreements
contained in this Section 3.8(g) are in addition to any liability that the
Company may have to the Indemnitees and are not in diminution or limitation of
the indemnification provisions under Article 5 of this Agreement.

 

(h)                                 Assignment of Registration Rights.  The
rights of the Investor to registration of Registrable Securities pursuant to
Section 3.8(a) may be assigned by the Investor to a transferee or assignee of
Registrable Securities to which (i) there is transferred to such transferee no
less than $1 million in Registrable Securities or all of the Registrable
Securities held by the Investor and (ii) such transfer is permitted under the
terms hereof; provided, however, that the transferor shall, within ten (10) days
after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the number and type of Registrable
Securities that are being assigned.

 

(i)                                     Rule 144 Reporting.  With a view to
making available to the Investor and Holders the benefits of certain rules and
regulations of the SEC which may permit the sale of the Registrable Securities
to the public without registration, the Company agrees to use its reasonable
best efforts to:

 

(i)                                     make and keep adequate current public
information with respect to the Company available, as those terms are understood
and defined in Rule 144(c)(1) or any similar or analogous rule promulgated under
the Securities Act, at all times after the effective date of this Agreement;

 

(ii)                                  so long as the Investor or a Holder owns
any Registrable Securities, furnish to the Investor or such Holder forthwith
upon request: (A) a written statement by the Company as to its compliance with
the reporting requirements of Rule 144 under the Securities Act, and of the
Exchange Act; (B) a copy of the most recent annual or quarterly report of the
Company; and (C) such other reports and documents as the Investor or Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration; and

 

(iii)                               to take such further action as any Holder
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act.

 

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(j)                                    As used in this Section 3.8, the
following terms shall have the following respective meanings:

 

(i)                                     “Effective Date” means the date that the
Shelf Registration Statement filed pursuant to Section 3.8(a)(i) is first
declared effective by the SEC.

 

(ii)                                  “Effectiveness Deadline” means, with
respect to the Shelf Registration Statement required to be filed pursuant to
Section 3.8(a)(i), the earlier of (i) the 90th calendar day following the Filing
Deadline and (ii) the 5th Business Day after the date the Company is notified
(orally or in writing, whichever is earlier) by the SEC that such Shelf
Registration Statement will not be “reviewed” or will not be subject to further
review; provided, that if the Effectiveness Deadline falls on a Saturday, Sunday
or other day that the SEC is closed for business, the Effectiveness Deadline
shall be extended to the next Business Day on which the SEC is open for
business.

 

(iii)                               “Holder” means the Investor and any other
holder of Registrable Securities to whom the registration rights conferred by
this Agreement have been transferred in compliance with Section 3.8(h) hereof.

 

(iv)                              “Register,” “registered” and “registration”
shall refer to a registration effected by preparing and (A) filing a
registration statement in compliance with the Securities Act and applicable
rules and regulations thereunder, and the declaration or ordering of
effectiveness of such registration statement or (B) filing a prospectus and/or
prospectus supplement in respect of an appropriate effective registration
statement.

 

(v)                                 “Registrable Securities” means (A) all
Common Stock purchased by the Investor pursuant to this Agreement and (B) any
equity securities issued or issuable directly or indirectly with respect to the
securities referred to in clause (A) by way of conversion, exercise or exchange
thereof or stock dividend or stock split or in connection with a combination of
shares, recapitalization, reclassification, merger, amalgamation, arrangement,
consolidation or other reorganization, provided that, once issued, such
securities shall not be Registrable Securities after (1) they are sold pursuant
to an effective registration statement under the Securities Act, (2) they may be
sold pursuant to Rule 144 without limitation thereunder on volume or manner of
sale and without the requirement for the Company to be in compliance with the
current public information required under Rule 144(e)(1) (or Rule 144(i)(2), if
applicable), (3) they have ceased to be outstanding or (4) they have been sold
in a private transaction in which the transferor’s rights under this Agreement
are not permitted by this Agreement to be assigned to the transferee of the
securities.  No Registrable Securities may be registered under more than one
registration statement at one time.

 

(vi)                              “Registration Expenses” means all expenses
incurred by the Company in effecting any registration pursuant to this Agreement
(whether or not any registration or prospectus becomes effective or final) or
otherwise complying

 

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with its obligations under this Section 3.8, including, without limitation, all
registration, filing and listing fees, printing expenses, fees and disbursements
of counsel for the Company and blue sky fees and expenses, but shall not include
Selling Expenses and the compensation of regular employees of the Company, which
shall be paid in any event by the Company.

 

(vii)                           “Rule 158,” “Rule 159A,” “Rule 405” and
“Rule 415” mean, in each case, such rule promulgated under the Securities Act
(or any successor provision), as the same shall be amended from time to time.

 

(viii)                        “Selling Expenses” means all discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and fees and disbursements of counsel for any Holder.

 

(k)                                 On or prior to the Acceptance Date, the
Investor shall furnish to the Company a fully completed Selling Shareholder
Questionnaire in the form attached as Appendix I hereto for use in the
preparation of the Registration Statement and all of the information contained
therein will be true and correct as of the Closing Date.

 

ARTICLE 4

 

TERMINATION

 

4.1                               Termination.  This Agreement may be terminated
prior to the Closing:

 

(a)                                 by mutual written agreement of the Company
and the Investor;

 

(b)                                 by any party, upon written notice to the
other party, in the event that the Closing does not occur on or before
December 31, 2014; provided, however, that the right to terminate this Agreement
pursuant to this Section 4.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been the cause
of, or shall have resulted in, the failure of the Closing to occur on or prior
to such date;

 

(c)                                  by the Investor, upon written notice to the
Company, if (i) there has been a breach of any representation, warranty,
covenant or agreement made by the Company in this Agreement, or any such
representation and warranty shall have become untrue after the date of this
Agreement, such that Section 1.2(c)(ii)(A) would not be satisfied and (ii) such
breach or condition is not curable or, if curable, is not cured prior to the
date that would otherwise be the Closing Date in absence of such breach or
condition; provided that this Section 4.1(c) shall only apply if the Investor is
not in material breach of any of the terms of this Agreement;

 

(d)                                 by the Company, upon written notice to the
Investor, if (i) there has been a breach of any representation, warranty,
covenant or agreement made by the Investor in this Agreement, or any such
representation and warranty shall have become untrue after the date of this
Agreement, such that Section 1.2(c)(iii)(A) would not be satisfied and (ii) such
breach or condition is not curable or, if curable, is not cured prior to the
date that would otherwise be the Closing Date in absence of such breach or
condition; provided that this Section 4.1(d) shall only apply if the Company is
not in material breach of any of the terms of this Agreement; or

 

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(e)                                  by any party, upon written notice to the
other parties, in the event that any Governmental Entity shall have issued any
order, decree or injunction or taken any other action restraining, enjoining or
prohibiting any of the transactions contemplated by this Agreement, and such
order, decree, injunction or other action shall have become final and
nonappealable.

 

4.2                               Effects of Termination.  In the event of any
termination of this Agreement as provided in Section 4.1, this Agreement (other
than Section 3.2, this Article 4 and Article 6 of this Agreement, which shall
remain in full force and effect) shall forthwith become wholly void and of no
further force and effect; provided that nothing herein shall relieve any party
from liability for fraud or willful breach of this Agreement.

 

ARTICLE 5

 

INDEMNITY

 

5.1                               Indemnification by the Company.

 

(a)                                 After the Closing, and subject to Sections
5.1(b), 5.3 and 5.4, the Company shall indemnify, defend and hold harmless to
the fullest extent permitted by Law the Investor and its Affiliates, and their
successors and assigns, officers, directors, partners, members and employees, as
applicable, (the “Investor Indemnified Parties”) against, and reimburse any of
the Investor Indemnified Parties for, all Losses that any of the Investor
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with (1) the inaccuracy or breach of any
representation or warranty made by the Company in this Agreement or any
certificate delivered pursuant hereto or (2) any breach or failure by the
Company to perform any of its covenants or agreements contained in this
Agreement.  Notwithstanding anything herein to the contrary, the obligations of
the Company under this Section 5.1(a) shall not be applicable to or inure to the
benefit of any transferee of the Common Stock sold pursuant to this Agreement
who is not an Affiliate of the Investor.

 

(b)                                 Notwithstanding anything to the contrary
contained herein, the Company shall not be required to indemnify, defend or hold
harmless any of the Investor Indemnified Parties against, or reimburse any of
the Investor Indemnified Parties for, any Losses pursuant to
Section 5.1(a)(1) (other than Losses arising out of the inaccuracy or breach of
any Company Specified Representations) until the aggregate amount of the
Investor Indemnified Parties’ Losses for which the Investor Indemnified Parties
are finally determined to be otherwise entitled to indemnification under
Section 5.1(a) exceeds $100,000 (the “Deductible”), after which the Company
shall be obligated for all of the Investor Indemnified Parties’ Losses for which
the Investor Indemnified Parties are finally determined to be otherwise entitled
to indemnification under Section 5.1(a)(1) that are in excess of the
Deductible.  Notwithstanding anything to the contrary contained herein, the
Company shall not be required to indemnify, defend or hold harmless the Investor
Indemnified Parties against, or reimburse the Investor Indemnified Parties for,
any Losses pursuant to Section 5.1(a)(1) in a cumulative aggregate amount
exceeding the aggregate purchase price paid by the Investor to the Company
pursuant to Section 1.1 (other than Losses arising out of the inaccuracy or
breach of any Company Specified Representations).

 

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(c)                                  For purposes of Section 5.1(a), in
determining whether there has been a breach of a representation or warranty, the
parties hereto shall ignore any “materiality,” “Material Adverse Effect” or
similar qualifications.

 

5.2                               Indemnification by the Investor.

 

(a)                                 After the Closing, and subject to Sections
5.2(b), 5.3 and 5.4, the Investor shall indemnify, defend and hold harmless to
the fullest extent permitted by Law the Company, the Placement Agent and their
respective Affiliates and their respective successors and assigns, officers,
directors, partners, members and employees (collectively, the “Company
Indemnified Parties”) against, and reimburse any of the Company Indemnified
Parties for, all Losses that the Company Indemnified Parties may at any time
suffer or incur, or become subject to, as a result of or in connection with
(1) the inaccuracy or breach of any representation or warranty made by the
Investor in this Agreement or any certificate delivered pursuant hereto or
(2) any breach or failure by such Investor to perform any of its covenants or
agreements contained in this Agreement.

 

(b)                                 Notwithstanding anything to the contrary
contained herein, the Investor shall not be required to indemnify, defend or
hold harmless any of the Company Indemnified Parties against, or reimburse any
of the Company Indemnified Parties for any Losses pursuant to
Section 5.2(a)(1) (other than Losses arising out of the inaccuracy or breach of
any Investor Specified Representations) until the aggregate amount of the
Company Indemnified Parties’ Losses for which the Company Indemnified Parties
are finally determined to be otherwise entitled to indemnification under
Section 5.2(a) exceeds the Deductible, after which the Investor shall be
obligated for all of the Company Indemnified Parties’ Losses for which the
Company Indemnified Parties are finally determined to be otherwise entitled to
indemnification under Section 5.2(a)(1) that are in excess of such Deductible. 
Notwithstanding anything to the contrary contained herein, the Investor shall
not be required to indemnify, defend or hold harmless the Company Indemnified
Parties against, or reimburse the Company Indemnified Parties for, any Losses
pursuant to Section 5.2(a)(1) in a cumulative aggregate amount exceeding the
aggregate purchase paid by the Investor to the Company pursuant to Section 1.1
hereof (other than Losses arising out of the inaccuracy or breach of any of the
Investor Specified Representations).

 

(c)                                  For purposes of Section 5.2(a), in
determining whether there has been a breach of a representation or warranty, the
parties hereto shall ignore any “materiality” or similar qualifications.

 

5.3                               Notification of Claims.

 

(a)                                 Any Person that may be entitled to be
indemnified under this Article 5 (the “Indemnified Party”) shall promptly notify
the party or parties liable for such indemnification (the “Indemnifying Party”)
in writing of any claim in respect of which indemnity may be sought hereunder,
including any pending or threatened claim or demand by a third party that the
Indemnified Party has determined has given or could reasonably give rise to a
right of indemnification under this Agreement (including a pending or threatened
claim or demand asserted by a third party against the Indemnified Party) (each,
a “Third Party Claim”), describing in reasonable detail the facts and
circumstances with respect to the subject matter of

 

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such claim or demand; provided, however, that the failure to provide such notice
shall not release the Indemnifying Party from any of its obligations under this
Agreement except to the extent that the Indemnifying Party is materially
prejudiced by such failure.  The parties agree that notices for claims in
respect of a breach of a representation, warranty, covenant or agreement must be
delivered prior to the expiration of any applicable survival period specified in
Section 6.1 for such representation, warranty, covenant or agreement; provided,
that if, prior to such applicable date, a party hereto shall have notified the
other parties hereto in accordance with the requirements of this
Section 5.3(a) of a claim for indemnification under this Agreement (whether or
not formal legal action shall have been commenced based upon such claim), such
claim shall continue to be subject to indemnification in accordance with this
Agreement notwithstanding the passing of such applicable date.

 

(b)                                 Upon receipt of a notice of a claim for
indemnity from an Indemnified Party pursuant to Section 5.3(a) in respect of a
Third Party Claim, the Indemnifying Party may, by notice to the Indemnified
Party delivered within twenty (20) Business Days of the receipt of notice of
such Third Party Claim, assume the defense and control of any Third Party Claim,
with its own counsel reasonably acceptable to the Indemnified Party and at its
own expense.  The Indemnified Party shall have the right to employ counsel on
its own behalf for, and otherwise participate in the defense of, any such Third
Party Claim, but the fees and expenses of its counsel will be at its own expense
unless (A) the employment of counsel by the Indemnified Party at the
Indemnifying Party’s expense has been authorized in writing by the Indemnifying
Party, as applicable, (B) the Indemnified Party reasonably believes there may be
a conflict of interest between the Indemnified Party and the Indemnifying Party
in the conduct of the defense of such Third Party Claim, (C) the Indemnified
Party reasonably believes there are legal defenses available to it that are
different from, additional to or inconsistent with those available to the
Indemnifying Party, or (D) the Indemnifying Party has not in fact employed
counsel to assume the defense of such Third Party Claim within a reasonable time
after receipt of notice of the commencement of such Third Party Claim, in each
of which cases the fees and expenses of such Indemnified Party’s counsel shall
be at the expense of the Indemnifying Party; provided, however, that in the
event any Investor Indemnified Party is similarly situated with any other
“Investor Indemnified Party” under any of the other Agreements with respect to
any Third Party Claim, and does not have any conflict of interest with such
Person in the conduct of the defense of such Third Party Claim or have legal
defenses available to it that are different from, additional to or inconsistent
with those available to such Person, such Investor Indemnified Party shall be
required to employ the same counsel as such Person and the Company shall be
responsible for the fees and expenses of only one such counsel for such Investor
Indemnified Party and such other Person or Persons (assuming any of clauses
(A) through (D) is satisfied).  The Indemnified Party may take any actions
reasonably necessary to defend such Third Party Claim prior to the time that it
receives a notice from the Indemnifying Party as contemplated by the immediately
preceding sentence.  The Indemnified Party shall, and shall cause each of their
Affiliates and representatives to, use reasonable best efforts to cooperate with
the Indemnifying Party in the defense of any Third Party Claim.  The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which shall not be unreasonably withheld), consent to a
settlement, compromise or discharge of, or the entry of any judgment arising
from, any Third Party Claim, unless such settlement, compromise, discharge or
entry of any judgment does not involve any statement, finding or admission of
any fault, culpability, failure to act, violation of Law or admission of any
wrongdoing by or on behalf of the Indemnified Party, and the

 

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Indemnifying Party shall (i) pay or cause to be paid all amounts arising out of
such settlement or judgment concurrently with the effectiveness of such
settlement or judgment (unless otherwise provided in such judgment), (ii) not
encumber any of the assets of any Indemnified Party or agree to any restriction
or condition that would apply to or materially adversely affect any Indemnified
Party or the conduct of any Indemnified Party’s business and (iii) obtain, as a
condition of any settlement, compromise, discharge, entry of judgment (if
applicable), or other resolution, a complete and unconditional release of each
Indemnified Party in form and substance reasonably satisfactory to such 
Indemnified Party from any and all liabilities in respect of such Third Party
Claim.  An Indemnified Party shall not settle, compromise or consent to the
entry of any judgment with respect to any claim or demand for which it is
seeking indemnification from the Indemnifying Party or admit to any liability
with respect to such claim or demand without the prior written consent of the
Indemnifying Party (which consent shall not be unreasonably withheld or
delayed); provided that such consent shall not be required if the Indemnifying
Party has not fulfilled any material obligations under this Section 5.3(b).

 

(c)                                  In the event any Indemnifying Party
receives a notice of a claim for indemnity from an Indemnified Party pursuant to
Section 5.3(a) that does not involve a Third Party Claim, the Indemnifying Party
shall notify the Indemnified Party within twenty (20) Business Days following
its receipt of such notice whether the Indemnifying Party disputes its liability
to the Indemnified Party under this Agreement.  The Indemnified Party shall
reasonably cooperate with and assist the Indemnifying Party in determining the
validity of any such claim for indemnity by the Indemnified Party.

 

5.4                               Indemnification Payment.  In the event a claim
or any Action for indemnification hereunder has been finally determined, the
amount of such final determination shall be paid by the Indemnifying Party to
the Indemnified Party on demand in immediately available funds; provided,
however, that any reasonable and documented out-of-pocket expenses incurred by
the Indemnified Party as a result of such claim or Action shall be reimbursed
promptly by the Indemnifying Party upon receipt of an invoice describing such
costs incurred by the Indemnified Party.  A claim or an Action, and the
liability for and amount of damages therefor, shall be deemed to be “finally
determined” for purposes of this Agreement when the parties hereto have so
determined by mutual agreement or, if disputed, when a final non-appealable
judicial order has been entered into with respect to such claim or Action.

 

5.5                               Exclusive Remedies.  Each party hereto
acknowledges and agrees that following the Closing, the indemnification
provisions hereunder shall be the sole and exclusive remedies of the parties
hereto for any breach of the representations, warranties or covenants contained
in the this Agreement.  No investigation of the Company by the Investor, or of
the Investor by the Company, whether prior to or after the date of this
Agreement, shall limit any Indemnified Party’s exercise of any right hereunder
or be deemed to be a waiver of any such right.  The parties agree that any
indemnification payment made pursuant to this Agreement shall be treated as an
adjustment to the Purchase Price for Tax purposes, unless otherwise required by
Law.

 

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ARTICLE 6

 

MISCELLANEOUS

 

6.1                               Survival.  The representations and warranties
of the parties hereto contained in this Agreement shall survive in full force
and effect until the date that is fifteen (15) months after the Closing Date (or
until final resolution of any claim or action arising from the breach of any
such representation and warranty, if notice of such breach was provided prior to
the end of such period), at which time they shall terminate and no claims shall
be made for indemnification under Section 5.1 or Section 5.2, as applicable, for
breaches of representations or warranties thereafter, except the Company
Specified Representations (other than the representations and warranties made in
Section 2.2(x), which shall survive until the expiration of the applicable
statute of limitations) and the Investor Specified Representations shall survive
the Closing indefinitely.  The covenants and agreements set forth in this
Agreement shall survive until the earliest of the duration of any applicable
statute of limitations or until performed or no longer operative in accordance
with their respective terms.

 

6.2                               Other Definitions.  Wherever required by the
context of this Agreement, the singular shall include the plural and vice versa,
and the masculine gender shall include the feminine and neuter genders and vice
versa, and references to any agreement, document or instrument shall be deemed
to refer to such agreement, document or instrument as amended, supplemented or
modified from time to time.  In addition, the following terms shall have the
meanings assigned to them below:

 

(a)                                 the term “Affiliate” means, with respect to
any Person, any Person directly or indirectly controlling, controlled by or
under common control with, such other Person provided that no security holder of
the Company shall be deemed to be an Affiliate of any other security holder or
of the Company or any of the Company Subsidiaries solely by reason of any
investment in the Company and, for purposes of this definition, “control”
(including, with correlative meanings, the terms “controlling”, “controlled by”
and “under common control with”) when used with respect to any Person, means the
possession, directly or indirectly, of the power to cause the direction of
management or policies of such Person, whether through the ownership of voting
securities by contract or otherwise;

 

(b)                                 the term “Agency” means the Federal Housing
Administration, the Federal Home Loan Mortgage Corporation, the Farmers Home
Administration (now known as Rural Housing and Community Development Services),
the Federal National Mortgage Association, the United States Department of
Veterans’ Affairs, the Rural Housing Service of the U.S. Department of
Agriculture or any other federal or state agency with authority to (i) determine
any investment, origination, lending or servicing requirements with regard to
mortgage loans originated, purchased or serviced by the Company or
(ii) originate, purchase, or service mortgage loans, or otherwise promote
mortgage lending, including state and local housing finance authorities;

 

(c)                                  the term “Board of Directors” means the
Board of Directors of the Company;

 

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(d)                                 the term “Business Day” means any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on which
banking institutions in the State of New York or in the State of California
generally are authorized or required by Law or other governmental actions to
close;

 

(e)                                  the term “Capital Stock” means the capital
stock or other applicable type of equity interest in a Person;

 

(f)                                   the term “Change in Control” means, with
respect to the Company, that any Person, other than the Investors and their
Affiliates, becomes a beneficial owner (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act) directly or indirectly, of twenty percent
(20%) of the aggregate voting power of the Voting Securities.

 

(g)                                  the term “Code” means the Internal Revenue
Code of 1986, as amended;

 

(h)                                 the term “Company Specified Representations”
means the representations and warranties made in Section 2.2(a), Section 2.2(c),
Section 2.2(d)(i) and Section 2.2(z);

 

(i)                                     the term “Disclosure Schedule” shall
mean a schedule delivered, on or prior to the date of this Agreement, by (i) the
Investor to the Company and (ii) the Company to the Investor setting forth,
among other things, items the disclosure of which is necessary or appropriate
either in response to an express disclosure requirement contained in a provision
hereof or as an exception to one or more representations or warranties contained
in Section 2.2 with respect to the Company, or in Section 2.3 with respect to
the Investor, or to one or more covenants contained in Article 3;

 

(j)                                    the term “GAAP” means United States
generally accepted accounting principles and practices as in effect from time to
time;

 

(k)                                 the term “Governmental Consent” means any
notice to, registration, declaration or filing with, exemption or review by, or
authorization, order, consent or approval of, any Governmental Entity, or the
expiration or termination of any statutory waiting periods;

 

(l)                                     the term “Governmental Entity” means any
court, administrative agency or commission or other governmental authority or
instrumentality, whether federal, state, local or foreign, and any applicable
industry self-regulatory organization or securities exchange;

 

(m)                             the term “Insurer” means a Person who insures or
guarantees for the benefit of the mortgagee all or any portion of the risk of
loss upon borrower default on any of the mortgage loans originated, purchased or
serviced by the Bank, including the Federal Housing Administration, the United
States Department of Veterans’ Affairs, the Rural Housing Service of the U.S.
Department of Agriculture and any private mortgage insurer, and providers of
hazard, title or other insurance with respect to such mortgage loans or the
related collateral;

 

(n)                                 the term “Investor Specified
Representations” means the representations and warranties made in
Section 2.3(b)(i), Section 2.3(d) and Section 2.3(e);

 

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(o)                                 the term “Knowledge” of the Company and
words of similar import mean the knowledge of any directors or executive
officers of the Company listed on the Disclosure Schedule hereto;

 

(p)                                 the term “Loan Investor” means any Person
(including an Agency) having a beneficial interest in any mortgage loan
originated, purchased or serviced by the Bank or a security backed by or
representing an interest in any such mortgage loan;

 

(q)                                 the term “Losses” means any and all losses,
damages, reasonable costs, reasonable expenses (including reasonable attorneys’
fees and disbursements), liabilities, settlement payments, awards, judgments,
fines, obligations, claims, and deficiencies of any kind, excluding special,
consequential, exemplary and punitive damages;

 

(r)                                    the term “Person” means any individual,
firm, corporation, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, limited liability company,
Governmental Entity or other entity of any kind, and shall include any successor
(by merger or otherwise) of such entity;

 

(s)                                   the term “Subsidiary” means, with respect
to any Person, any corporation, partnership, joint venture, limited liability
company or other entity (x) of which such Person or a Subsidiary of such Person
is a general partner or (y) of which a majority of the voting securities or
other voting interests, or a majority of the securities or other interests of
which having by their terms ordinary voting power to elect a majority of the
board of directors or persons performing similar functions with respect to such
entity, is directly or indirectly owned by such Person and/or one or more
Subsidiaries thereof;

 

(t)                                    the term “Tax” or “Taxes” means all
United States federal, state, local or foreign income, profits, estimated, gross
receipts, windfall profits, severance, property, intangible property,
occupation, production, sales, use, license, excise, emergency excise,
franchise, capital gains, capital stock, employment, withholding, transfer,
stamp, payroll, goods and services, value added, alternative or add-on minimum
tax, or any other tax, custom, duty or governmental fee, or other like
assessment or charge of any kind whatsoever, together with any interest,
penalties, fines, related liabilities or additions to tax that may become
payable in respect thereof imposed by any Governmental Entity, whether or not
disputed;

 

(u)                                 the term “Tax Return” means any return,
declaration, report or similar statement required to be filed with respect to
any Taxes (including any attached schedules), including, without limitation, any
information return, claim or refund, amended return and declaration of estimated
Tax;

 

(v)                                 the term “Voting Securities” means at any
time shares of any class of Capital Stock of the Company that are then entitled
to vote generally in the election of directors;

 

(w)                               the word “or” is not exclusive;

 

(x)                                 the words “including,” “includes,”
“included” and “include” are deemed to be followed by the words “without
limitation”;

 

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(y)                                 the terms “herein,” “hereof” and “hereunder”
and other words of similar import refer to this Agreement as a whole and not to
any particular section, paragraph or subdivision; and

 

(z)                                  all article, section, paragraph or clause
references not attributed to a particular document shall be references to such
parts of this Agreement, and all exhibit and schedule references not attributed
to a particular document shall be references to such exhibits and schedules to
this Agreement.

 

6.3                               Amendment and Waivers.  The conditions to each
party’s obligation to consummate the Closing are for the sole benefit of such
party and may be waived by such party in whole or in part to the extent
permitted by Law.  No amendment or waiver of any provision of this Agreement
will be effective against any party hereto unless it is in a writing signed by a
duly authorized officer of such party.

 

6.4                               Counterparts and Facsimile.  For the
convenience of the parties hereto, this Agreement 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 Agreement may be delivered by
facsimile or other electronic transmission and such transmitted copies shall be
deemed as sufficient as if manually signed signature pages had been delivered.

 

6.5                               Governing Law.  This Agreement will be
governed by and construed in accordance with the Laws of the State of New York
applicable to contracts made and to be performed entirely within such State.

 

6.6                               Jurisdiction.  The parties hereby agree that
any suit, action or proceeding seeking to enforce any provision of, or based on
any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby shall be brought in the United States District
Court for the Southern District of New York sitting in the Borough of Manhattan,
New York, New York, so long as such court shall have subject matter jurisdiction
over such suit, action or proceeding or, if it does not have subject matter
jurisdiction, in any New York State court sitting in the Borough of Manhattan,
New York, New York, and each of the parties hereby irrevocably consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by Law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum.  Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court.  Without limiting the foregoing,
each party agrees that service of process on such party as provided in
Section 6.8 shall be deemed effective service of process on such party.  The
parties hereby irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the state and federal courts referred to above for any
actions, suits or proceedings arising out of or relating to this Agreement and
the transactions contemplated hereby

 

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6.7                               WAIVER OF JURY TRIAL.  EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

6.8                               Notices.  Any notice, request, instruction or
other document to be given hereunder by any party to the other will be in
writing and will be deemed to have been duly given (a) on the date of delivery
if delivered personally or by telecopy or facsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service, or (c) on the third Business
Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid.  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.

 

(a)                                 If to the Investor, at the address set forth
on the signature page to this Agreement:

 

(b)                                 If to the Company:

 

Broadway Financial Corporation

5055 Wilshire Boulevard, Suite 500

Los Angeles, California  90036

Attn:                    Wayne-Kent A. Bradshaw, President and Chief Executive
Officer

Fax:                       (323) 556-3216

 

with a copy (which copy shall not constitute notice) to:

 

Arnold & Porter LLP

777 South Figueroa Street,

44th Floor

Los Angeles, California  90017

Attn:                    James R. Walther, Esq.

Fax:                       (213) 243-4199

 

6.9                               Entire Agreement.  This Agreement (including
the Annexes, the Gapstow Side Letter and Schedules hereto) and the
Confidentiality Agreement constitute the entire agreement, and supersede all
other prior agreements, understandings, representations and warranties,
inducements or conditions, both written and oral, among the parties, with
respect to the subject matter hereof and thereof.

 

6.10                        Successors and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Common Stock to be
issued pursuant to this Agreement.  The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the
Investor.  The Investor may assign some or all of its rights hereunder or
thereunder without the consent of the Company to any Affiliate of the Investor,
and such assignee shall be deemed to be

 

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an Investor hereunder with respect to such assigned rights and shall be bound by
the terms and conditions of this Agreement that apply to the Investor.

 

6.11                        Captions.  The article, section, paragraph and
clause captions herein are for convenience of reference only, do not constitute
part of this Agreement and will not be deemed to limit or otherwise affect any
of the provisions hereof.

 

6.12                        Severability.  If any provision of this Agreement or
the application thereof to any Person or circumstance is determined by a court
of competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, will remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.  Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon a suitable and equitable
substitute provision to effect the original intent of the parties.

 

6.13                        Third Party Beneficiaries.  Nothing contained in
this Agreement, expressed or implied, is intended to confer upon any Person
(including any of the Other Investors) other than the parties hereto, any
benefit right or remedies, except that the provisions of Sections 5.1 and 5.2
shall inure to the benefit of the Persons referred to in such Sections. 
Notwithstanding the foregoing, the Company and the Investor agree that the
Placement Agent, as placement agent for the Common Stock sold pursuant to this
Agreement, shall be a third party beneficiary of the representations, warranties
and agreements made or given by the parties hereunder.

 

6.14                        Public Announcements.  The Investor will not make
(and will use its reasonable best efforts to ensure that its Affiliates and
representatives do not make) any news release or public disclosure with respect
to this Agreement and any of the transactions contemplated hereby, without first
consulting with the Company and, in each case, also receiving the Company’s
consent (which shall not be unreasonably withheld or delayed).

 

6.15                        Specific Performance.  The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms.  It is
accordingly agreed that the parties shall be entitled to seek specific
performance of the terms hereof, this being in addition to any other remedies to
which they are entitled at law or equity.

 

6.16                        No Recourse.  This Agreement may only be enforced
against the named parties hereto.  All claims or causes of action that may be
based upon, arise out of or relate to this Agreement, or the negotiation,
execution or performance of this Agreement may be made only against the entities
that are expressly identified as parties hereto or that are subject to the terms
hereof, and no past, present or future director, officer, employee,
incorporator, member, manager, partner, shareholder, Affiliate, agent, attorney
or representative of any party hereto (including any person negotiating or
executing this Agreement on behalf of a party hereto) shall have any liability
or obligation with respect to this Agreement or with respect to any claim or
cause of action, whether in tort, contract or otherwise, that may arise out of
or relate to this

 

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Agreement, or the negotiation, execution or performance of this Agreement and
the transactions contemplated hereby.

 

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EXHIBIT A

 

Summary of Modification Terms

 

1.                          The Company will redeem $900,000 aggregate principal
amount of the Debentures pro rata from all holders of Debentures.

 

2.                          The Company will pay all interest accrued on the
Debentures through the Closing Date.

 

3.                          The maturity date of the Debentures will be extended
to March 17, 2024.

 

4.                          The payment terms of the Debentures will be amended
to require the principal amount thereof to be repaid in equal quarterly payments
of principal, together with accrued interest, over the period commencing
June 17, 2019 and ending March 17, 2024, with the obligation to make each such
payment to be subject to receipt by the Company of required approval or
non-disapproval from applicable bank regulatory authorities.

 

5.                          The Company will pay certain fees and expenses of
the Trustee.

 

6.                          Completion of the Modification will require the:

 

(i)                                     approval of the holder or holders of
Senior Indebtedness of the Company;

 

(ii)                                  written approval or confirmation of
non-disapproval by applicable bank regulatory authorities;

 

(iii)                               closing of a private placement of Common
Stock by the Company for at least $6 million of gross proceeds; and

 

(iv)                              approval by the Company’s stockholders,
including the U.S. Treasury Department.

 

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EXHIBIT B

 

Gapstow Side Letter

 

SEE ATTACHED

 

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Appendix I

 

SELLING STOCKHOLDER QUESTIONNAIRE

 

The undersigned beneficial owner of Common Stock (the “Common Stock”) of
Broadway Financial Corporation (the “Company”) understands that the Company has
filed or intends to file with the Securities and Exchange Commission (the
“Commission”) a Registration Statement for the registration and resale of Common
Stock that qualifies as Registrable Securities, in accordance with the terms of
a Subscription Agreement (the “Subscription Agreement”) between the Company and
the Investor(s) named therein.  All capitalized terms used and not otherwise
defined herein shall have the meanings ascribed thereto in the Subscription
Agreement.

 

The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:

 

QUESTIONNAIRE

 

1.                                      Name.

 

(a)                                 Full Legal Name of Selling Securityholder

 

 

 

(b)                                 Full Legal Name of Registered Holder (if not
the same as (a) above) through which Registrable Securities Listed in Item 3
below are held:

 

 

 

(c)                                  Full Legal Name of Natural Control Person
(which means a natural person who directly or indirectly alone or with others
has power to vote or dispose of the securities covered by the questionnaire):

 

 

 

2.                                      Address for Notices to Selling
Securityholder:

 

 

 

Telephone:

 

Fax:

 

Contact Person:

 

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3.                                      Beneficial Ownership of Registrable
Securities:

 

Number of Shares of Registrable Securities beneficially owned(1) and purchased
pursuant to the Subscription Agreement:

 

 

 

4.                                      Broker-Dealer Status:

 

(a)                                 Are you a broker-dealer?

 

Yes  o          No  o

 

Note: If yes, the Commission’s staff has indicated that you should be identified
as an underwriter in the Registration Statement.

 

(b)                                 Are you an affiliate of a broker-dealer?

 

Yes  o          No  o

 

(c)                                  If you are an affiliate of a broker-dealer,
do you certify that you bought the Registrable Securities in the ordinary course
of business, and at the time of the purchase of the Registrable Securities to be
resold, you had no agreements or understandings, directly or indirectly, with
any person to distribute the Registrable Securities?

 

Yes  o          No  o

 

Note: If no, the Commission’s staff has indicated that you should be identified
as an underwriter in the Registration Statement.

 

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(1)  Securities “beneficially owned” would include securities held by you for
your own benefit, whether in bearer form or registered in your own name or
otherwise (regardless of whether or how they are registered), such as, for
example, securities held for you by custodians, brokers, relatives, executors,
administrators or trustees, and securities held for your account by pledgees,
securities owned by a partnership in which you are a member, and securities
owned by any corporation which is or should be regarded as a personal holding
corporation of yours.  You are also considered to be the beneficial owner of a
security if you, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise have or share: (1) voting power, which
includes the power to vote, or to direct the voting of, such security or
(2) investment power, which includes the power to dispose, or to direct the
disposition, of such security.  You are also the beneficial owner of a security
if you, directly or indirectly, create or use a trust, proxy, power of attorney,
pooling arrangement or any other contract, arrangement or device with the
purpose or effect of divesting yourself of beneficial ownership of a security or
preventing the vesting of such beneficial ownership.  Finally, you are deemed to
be the beneficial owner of a security if you have the right to acquire
beneficial ownership of such security at any time within sixty days, including
but not limited to any right to acquire (a) through the exercise of any option,
warrant or right, (b) through the conversion of a security, (c) pursuant to the
power to revoke a trust, discretionary account or similar arrangement or
(d) pursuant to the automatic termination of a trust, discretionary account or
similar arrangement.

 

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5.                                      Beneficial Ownership of Securities of
the Company Other than the Registrable Securities Owned by the Selling
Securityholder.

 

Except as set forth below in this Item 5, the undersigned is not the beneficial
or registered owner of any securities of the Company other than the Registrable
Securities listed above in Item 3.

 

Type and Amount of Other Securities beneficially owned by the Selling
Securityholder:

 

 

 

6.                                      Relationships with the Company:

 

Except as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal equity holders (owners of 5% of more of the
equity securities of the undersigned) has held any position or office or has had
any other material relationship with the Company (or its predecessors or
affiliates) during the past three years.

 

State any exceptions here:

 

 

 

7.                                      Please fill in the table below as you
would like it to appear in the Registration Statement.  Include footnotes where
appropriate.

 

Name of Selling
Shareholder

 

Number of Shares of
Common Stock
Beneficially Owned Prior
to Offering

 

Maximum Number of
Shares of Common Stock
to be Sold Pursuant to this
Prospectus

 

Number of Shares of
Common Stock
Beneficially Owned After
Offering

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The undersigned agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein that may occur subsequent to the date
hereof and prior to the Effective Date for the Registration Statement.

 

By signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 7 and the inclusion of such
information in the Registration Statement and the related prospectus.  The
undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of the Registration Statement
and the related prospectus.

 

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IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.

 

Dated:

 

 

Beneficial Owner:

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

PLEASE (1) FAX OR EMAIL A COPY OF THE COMPLETED AND EXECUTED
NOTICE AND QUESTIONNAIRE, AND (2) RETURN THE ORIGINAL BY
OVERNIGHT MAIL, TO:

 

Broadway Financial Corporation
5055 Wilshire Boulevard
Suite 500
Los Angeles, CA  90036
Attn:  Chief Financial Officer
Facsimile: (213) 634-1723

 

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