Document:

Exhibit 10.11

 

 

 

 

 

 

STOCK PURCHASE AND EXCHANGE AGREEMENT

 

between

 

BROADWAY FINANCIAL CORPORATION

 

and

 

NATIONAL COMMUNITY INVESTMENT FUND

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
ARTICLE I
    	
DEFINITIONS
    	
2
    
	
Section 1.01
    	
Definitions   of Certain Terms
    	
2
    
	
Section 1.02
    	
Interpretation
    	
4
    
	
ARTICLE II
    	
SHARE   PURCHASE AND EXCHANGE
    	
4
    
	
Section 2.01
    	
Purchase   and Exchange of Shares
    	
4
    
	
Section 2.02
    	
Closing   of Share Purchase and Share Exchange
    	
4
    
	
ARTICLE III
    	
REPRESENTATIONS   AND WARRANTIES
    	
5
    
	
Section 3.01
    	
Representations   and Warranties of the Company
    	
5
    
	
Section 3.02
    	
Representations   and Warranties of NCIF
    	
6
    
	
ARTICLE IV
    	
COVENANTS
    	
7
    
	
Section 4.01
    	
Forbearances   of NCIF
    	
7
    
	
Section 4.02
    	
Further   Action
    	
7
    
	
ARTICLE V
    	
CONDITIONS   TO THE CLOSING
    	
7
    
	
Section 5.01
    	
Conditions   to Each Party’s Obligations
    	
7
    
	
Section 5.02
    	
Condition   to Obligations of NCIF
    	
8
    
	
ARTICLE VI
    	
TERMINATION
    	
9
    
	
Section 6.01
    	
Termination   Events
    	
9
    
	
Section 6.02
    	
Effect   of Termination
    	
9
    
	
ARTICLE VII
    	
MISCELLANEOUS
    	
9
    
	
Section 7.01
    	
Waiver;   Amendment
    	
9
    
	
Section 7.02
    	
Counterparts
    	
9
    
	
Section 7.03
    	
Governing   Law; Choice of Forum; Waiver of Jury Trial
    	
10
    
	
Section 7.04
    	
Notices
    	
10
    
	
Section 7.05
    	
Entire   Understanding; No Third Party Beneficiaries
    	
11
    
	
Section 7.06
    	
Assignment
    	
11
    
	
Section 7.07
    	
Severability
    	
11
    

 

-i-

 

STOCK PURCHASE AND EXCHANGE AGREEMENT

 

THIS SECURITIES AND EXCHANGE PURCHASE AGREEMENT (as amended, supplemented or otherwise modified from time to time, this “Agreement”) is dated as of December 21, 2016, and is entered into by and among Broadway Financial Corporation, a Delaware corporation (the “Company”), and National Community Investment Fund (“NCIF”).

 

RECITALS

 

WHEREAS, NCIF currently owns shares of Common Stock of the Company having full voting rights and, pursuant to that certain letter agreement, dated August 22, 2013, that certain Exchange Agreement, dated August 22, 2013 and that certain letter agreement, dated October 16, 2014, each entered into between NCIF and the Company, NCIF has the right to require the Company to purchase a portion of the shares of such stock NCIF owns, and also has the right to exchange a portion of the shares of such stock NCIF owns for shares of Non-Voting Common Stock of the Company, in each case to the extent necessary to maintain the percentage ownership by NCIF of voting stock of the Company below a specified level;

 

WHEREAS, NCIF desires to sell to the Company, and the Company agrees to purchase from NCIF, subject to the terms and conditions contained in this Agreement and in the contractual arrangements referred to above, 50,000 shares of Common Stock (the “Purchased Shares”) at a purchase price of $1.59 per share (the “Share Purchase”);

 

WHEREAS, NCIF also desires to exercise its right pursuant to the contractual arrangements referred to above and on the terms and conditions contained in this Agreement, to exchange 62,340 shares of Common Stock (the “Exchanged Shares”) for 62,340 shares of Non-Voting Common Stock (the “Replacement Shares”) (such exchange being referred to herein as the “Share Exchange”);

 

WHEREAS, the Share Purchase and the Share Exchange are only intended by the parties hereto to take place concurrently with certain sales of shares of Common Stock currently held by the U.S. Treasury Department that are proposed to be made pursuant to that certain Share Purchase Agreement, dated the date hereof, entered into by and among the U. S. Treasury Department and the Purchasers named therein (such purchase transactions being collectively referred to herein as the “Treasury Sale”).

 

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and other agreements of the parties hereto, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

-1-

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01                Definitions of Certain Terms. For purposes of this Agreement, the following terms are used with the meanings assigned below (such definitions to be equally applicable to both the singular and plural forms of the terms herein defined):

 

“Affiliate” means, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with, such other person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any person, means the possession, directly or indirectly, of the power to cause the direction of management and/or policies of such person, whether through the ownership of voting securities, by contract or otherwise.

 

“Agreement” has the meaning set forth in the introductory paragraph of this agreement.

 

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banking organizations in the State of California are required or authorized by Law to be closed.

 

“Closing” has the meaning set forth in Section 2.02(A).

 

“Closing Date” has the meaning set forth in Section 2.02(A).

 

“Common Stock” means the common stock, par value $0.01 per share, of the Company having full voting rights.

 

“Company” has the meaning set forth in the introductory paragraph of this Agreement.

 

“Company Material Adverse Effect” means a material adverse effect on the business, results of operations or financial condition of the Company and its consolidated Subsidiaries taken as a whole; provided, however, that Company Material Adverse Effect shall not be deemed to include the effects of (i) changes after the date hereof in general business, economic or market conditions (including, without limitation, changes generally in prevailing interest rates, credit availability and liquidity, currency exchange rates and price levels or trading volumes in the United States or foreign securities or credit markets), or any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism, in each case generally affecting the industries in which the Company and its Subsidiaries operate, (ii) changes or proposed changes after the date hereof in United States generally accepted accounting principles or regulatory accounting requirements, or authoritative interpretations thereof, (iii) changes or proposed changes after date hereof in securities, banking and other Laws of general applicability or related policies or interpretations of Governmental Entities (in the case of each of these clauses (i), (ii) and (iii), other than changes or occurrences to the extent that such changes or occurrences have or would reasonably be expected to have a materially disproportionate adverse effect on the Company and its consolidated Subsidiaries taken as a whole relative to comparable 

 

-2-

 

United States banking or financial services organizations), or (iv) changes in the market price or trading volume of the Common Stock or any other equity, equity-related or debt securities of the Company or its consolidated Subsidiaries (it being understood and agreed that the exception set forth in this clause (iv) does not apply to the underlying reason giving rise to or contributing to any such change).

 

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

 

“Exchanged Shares” has the meaning set forth in the recitals to this Agreement.

 

“Governmental Entity” means any court, administrative agency or commission or other governmental or regulatory authority or instrumentality or self-regulatory organization.

 

“Law” means any law, statute, code, ordinance, rule, regulation, judgment, order, award, writ, decree or injunction issued, promulgated or entered into by or with any Governmental Entity.

 

“Liens” means any liens, licenses, pledges, charges, encumbrances, adverse rights or claims and security interests whatsoever.

 

“NCIF” has the meaning set forth in the introductory paragraph of this Agreement.

 

“Purchase Price” has the meaning set forth in Section 2.01.

 

“Purchased Shares” has the meaning set forth in the recitals to this Agreement.

 

“Replacement Shares” has the meaning set forth in the recitals to this Agreement.

 

“Securities Act” means the U.S. Securities Act of 1933, as amended.

 

“Share Exchange” has the meaning set forth in the recitals to this Agreement

 

“Share Purchase” has the meaning set forth in the recitals to this Agreement.

 

“NCIF” has the meaning set forth in the introductory paragraph of this Agreement.

 

“Subsidiary” means, with respect to any person, any bank, corporation, partnership, joint venture, limited liability company or other organization, whether incorporated or unincorporated, (i) of which such person or a subsidiary of such person is a general partner or managing member or (ii) at least 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.

 

“Non-Voting Common Stock” means the non-voting common stock, par value $0.01 per share, of the Company.

 

-3-

 

Section 1.02                Interpretation.  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section references are to this Agreement unless otherwise specified.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  The term “person” as used in this Agreement shall mean any individual, corporation, limited liability company, limited or general partnership, joint venture, government or any agency or political subdivision thereof, or any other entity or any group (as defined in Section 13(d)(3) of the Exchange Act) comprised of two or more of the foregoing.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  In this Agreement, all references to “dollars” or “$” are to United States dollars.  This Agreement and any documents or instruments delivered pursuant hereto or in connection herewith shall be construed without regard to the identity of the person who drafted the various provisions of the same.  Each and every provision of this Agreement and such other documents and instruments shall be construed as though all of the parties participated equally in the drafting of the same.  Consequently, the parties acknowledge and agree that any rule of construction that a document is to be construed against the drafting party shall not be applicable either to this Agreement or such other documents and instruments.

 

ARTICLE II

 

SHARE PURCHASE AND EXCHANGE

 

Section 2.01                Purchase and Exchange of Shares.  Subject to, and on the terms and conditions of, this Agreement, effective at the Closing:

 

(a)                               The Company will purchase from NCIF, and NCIF will sell, transfer, convey, assign and deliver to the Company, the Purchased Shares set forth herein, free and clear of all Liens.  The aggregate purchase price for the Purchased Shares shall be an amount in cash equal to $79,500.00 (the “Purchase Price”).

 

(b)                              NCIF will exchange the Exchanged Shares with the Company for the Replacement Shares.

 

Section 2.02                Closing of Share Purchase and Share Exchange.

 

(a)                               Subject to Article V, the closing of the Share Purchase and the Share Exchange (the “Closing”) shall occur at 9 a.m. Eastern Time on December 22, 2016 or at such time or date as shall be agreed to in writing by the Company and NCIF.  The date on which the Closing occurs is referred to herein as the “Closing Date”.  The Closing shall be held at such place as the Company and NCIF shall mutually agree.

 

-4-

 

(b)                              At the Closing, or simultaneously therewith, the following shall occur:

 

(1)                              the Company will pay the Purchase Price to NCIF by wire transfer in immediately available funds to an account designated in writing by NCIF to the Company;

 

(2)                              NCIF will deliver the Purchased Shares in book entry form without any restrictive legends and transferred via Deposit/Withdrawal At Custodian to the account designated in writing by the Company to NCIF, such designation to be made not later than two Business Days prior to the Closing Date; and

 

(3)                              NCIF will deliver the Exchanged Shares to the Company via Deposit/Withdrawal At Custodian, retaining its ownership of the remaining shares of Common Stock it then owns, and in exchange for the Exchanged Shares the Company shall issue and deliver the Replacement Shares to NCIF in certificated form registered in NCIF’s name.  The Replacement Shares shall have the same rights, preferences and privileges as set forth in: (i) the Investor Rights Agreement dated August 22, 2013; (ii) the Investor Rights Agreement dated October 16, 2014; and (iii) the Company’s certificate of incorporation.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

 

Section 3.01                Representations and Warranties of the Company.  The Company hereby represents and warrants to NCIF as follows:

 

(a)                               Due Organization, Power and Authority.  The Company is duly organized and has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement.

 

(b)                              Authorization.  The execution and delivery of this Agreement, and the consummation by the Company of the transactions contemplated hereby, have been duly and validly approved in accordance with all requirements and procedures applicable to the Company, and no other proceedings on the part of the Company are necessary to approve this Agreement or to consummate the transactions contemplated hereby.  This Agreement has been duly and validly executed and delivered by the Company, and (assuming the due authorization, execution and delivery of this Agreement by NCIF) this Agreement constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement may be limited by general principles of equity, whether applied in a court of law or a court of equity, and by bankruptcy, insolvency and similar Laws affecting creditors’ rights and remedies generally.

 

(c)                               Non-Contravention.  Neither the execution and delivery of this Agreement nor the consummation by the Company of the transactions contemplated hereby will violate the Company’s certificate of incorporation or bylaws, any agreement, arrangement, note, contract or other binding instrument to which the Company is a party or bound, or applicable Law.

 

-5-

 

(d)                             Consents and Approvals.  No consents or approvals of, or filings or registrations with, any Governmental Entity, shareholders or any other third party by or on behalf of the Company are necessary in connection with the execution and delivery by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby.

 

(e)                               Availability of Funds.  The Company has and will have as of the Closing sufficient funds available to consummate the transactions contemplated hereunder.

 

Section 3.02                Representations and Warranties of NCIF.  NCIF hereby represents and warrants to the Company as follows:

 

(a)                               Power and Authority.  NCIF has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement.

 

(b)                              Authorization.  The execution and delivery of this Agreement, and the consummation by NCIF of the transactions contemplated hereby, have been duly and validly approved in accordance with all requirements and procedures applicable to NCIF, and no other proceedings on the part of NCIF are necessary to approve this Agreement or to consummate the transactions contemplated hereby.  This Agreement has been duly and validly executed and delivered by NCIF, and (assuming the due authorization, execution and delivery of this Agreement by the other parties hereto) this Agreement constitutes a valid and binding obligation of NCIF, enforceable against NCIF in accordance with its terms, except as enforcement may be limited by general principles of equity, whether applied in a court of law or a court of equity, and by bankruptcy, insolvency and similar Laws affecting creditors’ rights and remedies generally.

 

(c)                               Non-Contravention.  Neither the execution and delivery of this Agreement nor the consummation by NCIF of the transactions contemplated hereby, will violate any provision of any agreement to which NCIF is a party or any applicable Law.  Without limiting the foregoing, NCIF is the sole record and beneficial owner of the Purchased Shares, free and clear of any Lien, but subject to the restrictions on transfer imposed by federal and state laws, and NCIF has the unrestricted right to sell the Purchased Shares to the Company as herein provided.

 

(d)                             Consents and Approvals.  No consents or approvals of, or filings or registrations with, any Governmental Entity or any other third party by and on behalf of NCIF are necessary in connection with the execution and delivery by NCIF of this Agreement and the consummation by NCIF of the transactions contemplated hereby.

 

-6-

 

ARTICLE IV

 

COVENANTS

 

Section 4.01                Forbearances of NCIF.  From the date hereof until the Closing, without the prior written consent of the Company, NCIF will not:

 

(a)                               directly or indirectly transfer, sell, assign, distribute, exchange, pledge, hypothecate, mortgage, encumber or otherwise dispose of or engage in or enter into any hedging transactions with respect to, any of the Purchased Shares or the Exchanged Shares or any portion thereof or interest therein (other than pursuant to the Share Purchase and the Securities Exchange); or

 

(b)                              agree, commit to or enter into any agreement to take any of the actions referred to in Section 4.01(A).

 

Section 4.02                Further Action.  The Company and NCIF (A) shall each execute and deliver, or shall cause to be executed and delivered, such documents and other instruments and shall take, or shall cause to be taken, such further action as may be reasonably necessary to carry out the provisions of this Agreement and give effect to the transactions contemplated by this Agreement and (B) shall refrain from taking any actions that could reasonably be expected to impair, delay or impede the Closing or the consummation of the transactions contemplated by this Agreement.

 

Section 4.03                Reservation and Listing of Shares.  The Company shall at all times reserve a number of unissued shares of Common Stock sufficient to convert automatically, in accordance with the terms of the certificate of incorporation of the Company, all of the shares of Non-Voting Common Stock then outstanding and shall use its reasonable best efforts to cause any shares of Voting Common Stock into which the Replacement Shares may be converted in connection with resale of the Replacement Shares by NCIF in compliance with the restrictions set forth in the certificate of incorporation of the Company to be approved for listing on the Nasdaq Stock Market as promptly as possible.

 

ARTICLE V

 

CONDITIONS TO THE CLOSING

 

Section 5.01                Conditions to Each Party’s Obligations.  The respective obligations of the Company and NCIF to consummate the transactions provided for herein are subject to the fulfillment, or written waiver by the Company and NCIF, at or prior to the Closing, of each of the following conditions:

 

(a)                               No Injunctions or Restraints; Illegality.  No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the transactions provided for herein shall be in effect.  No Law shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits or makes illegal the consummation of the transactions provided for herein.

 

-7-

 

(b)                              Representations and Warranties.  The representations and warranties set forth in Article III of this Agreement shall be true and correct as though made on and as of the Closing Date.

 

(c)                               Other Events.  None of the following shall have occurred since the date hereof:

 

(1)                              the Company or any of its Subsidiaries shall have (a)  become insolvent or unable to pay its debts or failed or admitted in writing its inability generally to pay its debts as they become due; (b) made a general assignment, arrangement or composition with or for the benefit of its creditors; (c)  have instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or have a petition presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition shall have resulted in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation; (d) had a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (e) sought or shall have become subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (f) had a secured party take possession of all or substantially all its assets or had a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets; (g) caused or shall have been subject to any event with respect to it which, under the applicable laws of any jurisdiction, had an analogous effect to any of the events specified in clauses (a) to (f) (inclusive); or (g) taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts;

 

(2)                              a Governmental Entity in any jurisdiction shall have (a) commenced an action or proceeding against the Company or any of its Subsidiaries; or (b) issued or entered a temporary restraining order, preliminary or permanent injunction or other order binding upon the Company or any of its Subsidiaries, which in the case of (a) and (b) shall have had or be reasonably expected to have a Company Material Adverse Effect; or

 

(3)                              any fact, circumstance, event, change, occurrence, condition or development shall have occurred that, individually or in the aggregate, shall have had or shall be reasonably likely to have a Company Material Adverse Effect.

 

(d)                             The Treasury Sale and the other transactions reflected in Schedule I to this Agreement shall be completed concurrently with the transaction provided for herein.

 

Section 5.02                Condition to Obligations of NCIF.  The obligation of NCIF to consummate the Share Purchase is also subject to the fulfillment, or written waiver by NCIF, prior to the Closing, of the following conditions:

 

-8-

 

(a)                               Performance of Obligations.  The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing.

 

(b)                              Closing Certificates.  The Company shall deliver to NCIF a certificate, dated as of the Closing Date, certifying to the effect that all conditions precedent to the Closing have been satisfied.

 

ARTICLE VI

 

TERMINATION

 

Section 6.01                Termination Events.  This Agreement may be terminated at any time prior to the Closing:

 

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

 

(b)                              by the Company, upon written notice to NCIF, or by NCIF, upon written notice to the Company, in the event that the Closing Date does not occur on or before December 31, 2016, 2016; provided, however, that the respective rights to terminate this Agreement pursuant to this Section 6.01(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.

 

Section 6.02                Effect of Termination.  In the event of termination of this Agreement as provided in Section 6.01, this Agreement shall forthwith become void and have no effect, and none of the Company, NCIF or any officers, directors or employees of the Company or NCIF, or any of their respective Affiliates, shall have any liability of any nature whatsoever hereunder, or in connection with the transactions contemplated hereby, except that this Section 6.02 and Sections 7.03, 7.04, 7.05 and 7.06 shall survive any termination of this Agreement.

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.01                Waiver; Amendment.  Any provision of this Agreement may be (A) waived in writing by the party benefiting by the provision, or (B) amended or modified at any time by an agreement in writing signed by each of the parties hereto.  Neither any failure nor any delay by any party in exercising any right, power or privilege under this Agreement or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege.

 

Section 7.02                Counterparts.  This Agreement may be executed by facsimile or other electronic means and in counterparts, all of which shall be considered an original and one and the same agreement and shall become effective when counterparts have been signed by each 

 

-9-

 

of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

 

Section 7.03                Governing Law; Choice of Forum; Waiver of Jury Trial.  (a)  This Agreement and any claim, controversy or dispute arising under or related to this Agreement, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties shall be enforced, governed, and construed in all respects (whether in contract or in tort) in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.  Each of the parties hereto agrees (a) to submit to the exclusive jurisdictions and venue of the United States District Court of the District of Columbia and the United States Court of Federal Claims for any and all civil actions, suits or proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, and (b) that notice may be served upon (i) the Company at the address and in the manner set forth for notices to the Company in Section 7.04, and (ii) NCIF at the address and in the manner set forth for notices to NCIF in Section 7.04.

 

(b)                              To the extent permitted by applicable Law, each of the parties hereto hereby unconditionally waives trial by jury in any civil legal action or proceeding relating to this Agreement or the transactions contemplated hereby.

 

Section 7.04                Notices.  All notices and other communications hereunder shall be in writing and shall be deemed given on the date of delivery if delivered personally or telecopied (upon telephonic confirmation of receipt), on the first Business Day following the date of dispatch if delivered by a recognized next day courier service, or 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 on the signature page hereof, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

 

If to the Company to:

 

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

Facsimile: (323) 634-1723
 Attention:  Chief Financial Officer

 

With a copy to:

 

Arnold & Porter LLP

777 South Figueroa Street,

Suite 4400
 Los Angeles, California 90017
 Facsimile: (213) 243-4199
 Attention:  James. R. Walther

 

-10-

 

If to NCIF to:

 

National Community Investment Fund
 135 South LaSalle Street
 Suite 2040
 Chicago, Illinois 60603
 Facsimile: (312) 662-6100
 Attention: Chief Executive Officer

 

Section 7.05                Entire Understanding; No Third Party Beneficiaries.  This Agreement (together with the documents, agreements and instruments referred to herein) represents the entire understanding of the parties with respect to the Share Exchange and the Share Purchase and supersedes any and all other oral or written agreements heretofore made with respect to the subject matter hereof.  Nothing in this Agreement, expressed or implied, is intended to confer upon any person, other than the parties hereto, any rights or remedies hereunder.

 

Section 7.06                Assignment.  Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by any party hereto without the prior written consent of the other parties, and any attempt to assign any right, remedy, obligation or liability hereunder without such consent shall be null and void; provided, however, that NCIF may assign this Agreement to an Affiliate of NCIF.  If NCIF assigns this Agreement to an Affiliate, NCIF shall be relieved of its obligations and liabilities under this Agreement but (i) all rights, remedies, obligations and liabilities of NCIF hereunder shall continue and be enforceable by and against and assumed by such Affiliate, (ii) NCIF’s obligations and liabilities hereunder shall continue to be outstanding and (iii) all references to NCIF herein shall be deemed to be references to such Affiliate.  NCIF will give the Company notice of any such assignment; provided, that the failure to provide such notice shall not void any such assignment.

 

Section 7.07                Severability.  Any term or provision of this Agreement which is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid, illegal or unenforceable the remaining terms and provisions of this Agreement. or affecting the validity, legality or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction, and if any provision of this Agreement is determined to be so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable, in all cases so long as neither the economic nor legal substance of the transactions contemplated hereby is affected in any manner materially adverse to any party or its shareholders.  Upon any 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.

 

[remainder of page intentionally left blank]

 

-11-

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

 

	
BROADWAY   FINANCIAL CORPORATION
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Wayne-Kent A. Bradshaw
    	
 
    
	
Name:    Wayne-Kent A. Bradshaw
    	
 
    
	
Title:  President and Chief Executive Officer
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NATIONAL   COMMUNITY INVESTMENT
    
	
 
    	
FUND
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Saurabh Narain
    
	
 
    	
 
    	
Name:  
    
	
 
    	
 
    	
Title:
    
				

 

[Signature Page to Securities Purchase Agreement]

 

 

Broadway Financial Corporation 
 Pro Forma Share Ownership

 

	
 
    	
 
    	
Existing Ownership - Pre Transactions
    

 

	
 
    	
 
    	
Voting
    	
 
    	
%
    	
 
    	
Non-Voting
    	
 
    	
%
    	
 
    	
Total
    	
 
    	
%
    	
 
    
	
U.S. Treasury
    	
 
    	
10,146,000
    	
 
    	
47.40
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
10,146,000
    	
 
    	
34.89
    	
%
    
	
CJA
    	
 
    	
2,129,816
    	
 
    	
9.95
    	
%
    	
6,169,320
    	
 
    	
80.42
    	
%
    	
8,299,136
    	
 
    	
28.54
    	
%
    
	
Hope Bancorp
    	
 
    	
1,925,000
    	
 
    	
8.99
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
1,925,000
    	
 
    	
6.62
    	
%
    
	
Grace &   White 
    	
 
    	
1,343,076
    	
 
    	
6.27
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
1,343,076
    	
 
    	
4.62
    	
%
    
	
NCIF
    	
 
    	
1,021,000
    	
 
    	
4.77
    	
%
    	
1,502,200
    	
 
    	
19.58
    	
%
    	
2,523,200
    	
 
    	
8.68
    	
%
    
	
AAA 
    	
 
    	
361,232
    	
 
    	
1.69
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
361,232
    	
 
    	
1.24
    	
%
    
	
ESOP
    	
 
    	
360,752
    	
 
    	
1.69
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
360,752
    	
 
    	
1.24
    	
%
    
	
First Republic 
    	
 
    	
-    
    	
 
    	
0.00
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    
	
All Other   Holders
    	
 
    	
4,118,312
    	
 
    	
19.24
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
4,118,312
    	
 
    	
14.16
    	
%
    
	
Total
    	
 
    	
21,405,188
    	
 
    	
100.00
    	
%
    	
7,671,520
    	
 
    	
100.00
    	
%
    	
29,076,708
    	
 
    	
100.00
    	
%
    

 

 

	
 
    	
 
    	
Pro Forma Ownership - Post Contemplated   Transactions
    

 

	
 
    	
 
    	
Voting
    	
 
    	
%
    	
 
    	
Non-Voting
    	
 
    	
%
    	
 
    	
Total
    	
 
    	
%
    	
 
    
	
U.S. Treasury
    	
 
    	
5,443,140
    	
 
    	
29.35
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
5,443,140
    	
 
    	
19.94
    	
%
    
	
CJA
    	
 
    	
1,845,141
    	
 
    	
9.94989
    	
%
    	
6,453,995
    	
 
    	
73.71
    	
%
    	
8,299,136
    	
 
    	
30.40
    	
%
    
	
Hope Bancorp
    	
 
    	
1,835,881
    	
 
    	
9.89995
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
1,835,881
    	
 
    	
6.72
    	
%
    
	
Grace &   White 
    	
 
    	
1,343,076
    	
 
    	
7.24
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
1,343,076
    	
 
    	
4.92
    	
%
    
	
NCIF
    	
 
    	
908,660
    	
 
    	
4.89993
    	
%
    	
1,564,540
    	
 
    	
17.87
    	
%
    	
2,473,200
    	
 
    	
9.06
    	
%
    
	
AAA 
    	
 
    	
361,232
    	
 
    	
1.95
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
361,232
    	
 
    	
1.32
    	
%
    
	
ESOP
    	
 
    	
1,854,431
    	
 
    	
9.99998
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
1,854,431
    	
 
    	
6.79
    	
%
    
	
First Republic 
    	
 
    	
834,465
    	
 
    	
4.49984
    	
%
    	
737,861
    	
 
    	
8.43
    	
%
    	
1,572,326
    	
 
    	
5.76
    	
%
    
	
All Other   Holders
    	
 
    	
4,118,312
    	
 
    	
22.21
    	
%
    	
-    
    	
 
    	
0.00
    	
%
    	
4,118,312
    	
 
    	
15.08
    	
%
    
	
Total
    	
 
    	
18,544,338
    	
 
    	
100.00
    	
%
    	
8,756,396
    	
 
    	
100.00
    	
%
    	
27,300,734
    	
 
    	
100.00
    	
%
    

 

 

Schedule IExhibit 10.12

 

ESOP LOAN AGREEMENT

 

This Loan Agreement (the “Agreement”), dated December 19, 2016, is entered into by and between Broadway Financial Corporation, a Delaware corporation (“Lender”), and Nicholas L. Saakvitne (the “Trustee”) as trustee for the Broadway Federal Bank, f.s.b. Employee Stock Ownership Plan Trust (the “Borrower”).

 

RECITALS

 

The Lender owns all of the outstanding capital stock of Broadway Federal Bank, f.s.b., a federal savings bank (“BFB”).  BFB has adopted an employee ownership plan (the “ESOP”) to purchase and hold shares of voting common stock of the Lender on behalf of eligible employees of BFB and its affiliates and the Borrower is a trust established in connection with implementation of the ESOP.  The ESOP is intended to qualify as an employee stock ownership plan under section 4975(e)(7) of the Internal Revenue Code of 1986, as amended (the “Code”), and Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  The ESOP provides that the ESOP may obtain loans to purchase shares of the Lender’s stock.  It is intended that the loan made pursuant to this Agreement shall qualify for an exemption under Section 4975(d) of the Code from being prohibited transactions under Section 4975(c) of the Code.

 

The Lender is willing to lend and the Borrower is willing to borrow $1,176,200.00 (the “Principal Amount”) in order to finance the Borrower’s purchase of 739,748 shares of Lender’s voting common stock.  The undersigned therefore agree to the following:

 

ARTICLE 1
  THE ESOP LOAN

 

1.1                            Subject to the terms set forth herein, the Lender agrees to lend to the Borrower the Principal Amount (the “Loan”).

 

1.2                            The Borrower hereby agrees that it will use the entire proceeds of the Loan to acquire Lender’s voting common stock pursuant to the Securities Purchase Agreement by and among Borrower, the U.S. Department of the Treasury and certain other persons (as amended, restated, modified or supplemented from time to time, the “Purchase Agreement”).  If for any reason such purchases cannot be effected pursuant to the terms of the Purchase Agreement, the Borrower must make a principal prepayment of the Loan with all such unused proceeds.

 

1.3                            The Borrower’s indebtedness is evidenced by a Promissory Note of even date (as amended, restated, modified or supplemented from time to time, the “Note”) in the form attached hereto as Exhibit A.

 

1.4                            Interest shall accrue on the balance of unpaid principal as provided in the Note from the date thereof until all such principal and interest accrued thereon is paid in full.  The Note will mature, and all unpaid principal and interest accrued thereon shall be paid in full, on December 19, 2036.

 

1

 

1.5                            To secure payment of the Promissory Note, the Borrower is granting the Lender a security interest concurrently herewith in the shares purchased with proceeds of the Loan pursuant to the ESOP Pledge Agreement in the form attached hereto as Exhibit B (as amended, restated, modified or supplemented from time to time, the “Pledge Agreement”).

 

1.6                            The Borrower shall make principal and interest payments to the Lender according to the terms of the Note.  The date and amount of each payment of principal or interest shall be entered on the schedule to the Note.

 

1.7                            The Lender agrees to make, or cause to be made by BFB, contributions to the ESOP in cash or by cancellation of indebtedness from time to time and in amounts sufficient to permit the Borrower to make timely repayments of principal and interest due under the terms of the Note.  Subject to the preceding sentence, the amount and timing of such contribution(s) shall be in the sole discretion of the Lender.  The Lender shall not be required to make contributions to the ESOP in amounts in excess of the limitations under Sections 404(a) and 415(c) of the Code.  The Borrower agrees that so long as any interest or principal amount remains payable pursuant to the Loan, the Borrower will use all cash contributions, earnings thereon and cash dividends received by the ESOP on shares of the Lender’s voting common stock to make payments on the Loan.  The Borrower’s obligation to make payments on the Loan is limited to the excess of the aggregate of such contributions, earnings and dividends over prior Loan payments.  The Lender shall have no recourse against the Borrower’s assets other than such contributions, the shares of Lender’s voting common stock then pledged under the Pledge Agreement, earnings attributable to such voting common stock and the investment of such contributions.

 

1.8                            The Borrower may prepay principal or interest without premium or penalty.  Any such prepayment shall be applied to the principal installments in the inverse order of maturities.

 

1.9                            The ESOP may elect to apply the proceeds from the sale of any Shares remaining subject to pledge to pay principal and interest due on the Loan in the event of the termination of the ESOP or if the ESOP ceases to be an employee stock ownership plan under Section 4975(e)(7) of the Code.

 

ARTICLE 2
  Representations and Warranties of Borrower

 

The Borrower hereby makes the following representations and warranties:

 

2.1                            The Borrower has duly authorized the execution, delivery and performance of this Agreement, the Note, and the Pledge Agreement and any other documents in connection with the Loan. These documents that have been or will be executed and delivered pursuant to this Agreement constitute valid, binding obligations of the ESOP, each enforceable according to its terms.

 

2.2                            The Borrower is an employee stock ownership plan established by the BFB and has all requisite power and authority, as described in the plan document for the ESOP, to execute, deliver and perform its obligations under this Agreement.

 

2

 

2.3                            All of the proceeds of the Loan will be used by the Trustee to purchase for the ESOP shares of “employer securities” as defined in Section 409(1) of the Code, subject to Section 1.3 above.

 

2.4                            This Agreement is executed by Nicholas L. Saakvitne solely in his capacity as Trustee of the Broadway Federal Bank, F.S.B. Employee Stock Ownership Plan pursuant to directions from the ESOP and not in his individual capacity.

 

2.5                            No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the execution, delivery and performance of this Agreement.

 

ARTICLE 3
  Lender Representations and Warranties

 

The Lender hereby makes the following representations and warranties:

 

3.1                            The Lender is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware.

 

3.2                            The Lender has all requisite power and authority to deliver and perform its obligations under this Agreement. The Lender has taken all corporate action necessary to establish the ESOP and to authorize this Agreement. This Agreement has been duly executed and delivered by the Lender and is a legal, valid and binding obligation of the Lender.

 

3.3                            Neither the execution of this Agreement nor the fulfillment of any of the Lender’s obligations under this Agreement will conflict with or result in a breach or violation of or constitute any default under any  rule, law, regulation, judgement or order applicable to the Lender or any contract or agreement of the Lender.

 

ARTICLE 4
  Event of Default

 

4.1                            As used in this Agreement, the term “Event of Default” shall mean a failure of  the Borrower  to make any installment of principal or interest due under the Note within ten (10) days after receipt of written notice of non-payment from the Lender.

 

4.2                            The Lender shall have all rights and remedies afforded a secured party, and all other rights and remedies available, under the Uniform Commercial Code in effect in the State of California (the “UCC”) or under other applicable law, all of which (i) shall be cumulative, but shall be subject to all limitations set forth herein, in the Pledge Agreement, in the Note, under Section 4975 of the Code, or under any applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, and (ii) may be exercised with or, if allowed by law, without notice to the Borrower.  Notwithstanding anything herein or in the Pledge Agreement to the contrary, the value of the Borrower’s assets transferred to the Lender following an Event of Default in satisfaction of the due and unpaid amount of the Loan shall not exceed the amount in default.

 

3

 

ARTICLE 5
  Miscellaneous

 

5.1                            No amendment or waiver of any provision of the Agreement shall be effective unless set forth in an instrument in writing and signed by both parties to this Agreement.

 

5.2                            No delay or omission of Lender in exercising any right or remedy under this Agreement shall impair such right or remedy or be construed to be a waiver of any default or  an acquiescence therein, and any single or partial exercise of any such right or remedy shall not preclude other or further exercise thereof or the exercise of any other right or remedy, and no waiver, amendment or other variation of the terms, conditions or provisions of this Agreement whatsoever shall be valid unless in writing signed by the Lender, and then only to the extent specifically set forth in such writing. All rights and remedies described in this Agreement, the Note or other Loan documents shall be cumulative and all shall be available to the Lender until all terms of the Loan  have been satisfied.

 

5.3                            This Agreement, the Purchase Agreement, the Pledge Agreement and the Note, including the exhibits and schedules hereto or thereto, constitute the entire agreement between the parties hereto with respect to the Loan and supersedes any and all representations, warranties, agreements or undertakings heretofore or contemporaneously made that are not set forth herein, in the Note or in such other agreements.

 

5.4                            This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors or assigns.  The Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Lender, and any purported assignment without such consent shall be null and void.

 

5.5                            All provisions hereof shall be construed so as to maintain (a) the ESOP as a tax-qualified, leveraged employee stock ownership plan under Section 401(a) and 4975(e)(7) of the Code, and (b) the Loan as an exempt loan under Section 54.4975-7(b) of the Treasury Regulations and as described in Department of Labor Regulation Section 2550.408b-3.

 

5.6                            Any notice, consent, approval or directions required or permitted to be given hereunder shall be in writing and shall be deemed duly given and received upon personal delivery to the addressee stated below or if mailed, forty-eight (48) hours after deposit in the United States Mail, with first class postage prepaid and addressed as required below:

 

LENDER:

Broadway Financial Corporation

5055 Wilshire Boulevard, Suite 500

Los Angeles, California 90010

Attention:  Chief Financial Officer

 

4

 

BORROWER:

Broadway Federal Bank, f.s.b. Employee Stock Ownership Plan Trust

c/o Nicholas L. Saakvitne, as Trustee

11900 W. Olympic Boulevard, Suite 410

Los Angeles, California 90064

 

5

 

IN WITNESS WHEREOF, the parties have executed this ESOP Loan Agreement as of the date first above written.

 

 

 

	
LENDER:
    	
 
    
	
 
    	
 
    
	
Broadway   Financial Corporation
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Wayne-Kent A. Bradshaw
    	
 
    
	
Name:
    	
Wayne-Kent   A. Bradshaw
    	
 
    
	
Title:
    	
President/CEO
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
BORROWER:
    	
 
    
	
 
    	
 
    
	
Broadway Federal Bank, f.s.b. Employee   Stock Ownership Plan Trust
    
	
 
    	
 
    
	
By:
    	
/s/   Nicholas L. Saakvitne
    	
 
    	
 
    
	
Name: Nicholas L. Saakvitne
    	
 
    
	
Title:   Trustee
    	
 
    
							

 

 

 

 

ESOP Loan Agreement

 

 

ESOP PLEDGE AGREEMENT

 

This ESOP Pledge Agreement (the “Pledge Agreement”) dated December 19, 2016 is entered into by and between Broadway Financial Corporation, a Delaware corporation (the “Lender”), and Nicholas L. Saakvitne (the “Trustee”) as trustee for the Broadway Federal Bank, f.s.b. Employee Stock Ownership Plan Trust (the “Borrower”).

 

RECITALS

 

The Lender owns all of the outstanding capital stock of Broadway Federal Bank, f.s.b., a federal savings bank (“BFB”).  BFB has adopted an employee stock ownership plan (the “ESOP”) to purchase and hold shares of voting common stock of the Lender on behalf of eligible employees of BFB and its affiliates and the Borrower is a trust established in connection with implementation of the ESOP.  The ESOP is intended to qualify as an employee stock ownership plan under section 4975(e)(7) of the Internal Revenue Code of 1986, as amended (the “Code”), and Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  The ESOP provides that the ESOP may obtain loans to purchase shares of Lender’s stock.

 

In accordance with the terms and conditions of the ESOP Loan Agreement of even date herewith (as amended, restated or modified from time to time, the “Loan Agreement”) and the Promissory Note of even date herewith (as amended, restated, modified or supplemented from time to time, the “Note”), the Borrower desires to purchase securities with the proceeds of a loan from the Lender (the “Loan”).  Under the Loan Agreement, Borrower agrees to borrow and Lender agrees to lend $1,176,200.00 to purchase shares of voting common stock of the Lender (the “Shares”).

 

AGREEMENT

 

1.                          Pledge and Grant of Security Interest.

 

In consideration of the Lender making the Loan to the Borrower for the purchase of Shares, and as security for the Note and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Borrower hereby pledges and grants to the Lender a first priority security interest in all of the Borrower’s right, title and interest in and to the following (the “Collateral”) for the full performance and payment of the Secured Obligations (as defined below): (i) the Shares and all dividends or other distributions on or attributable to the Shares; (ii) all contributions made to the ESOP; and (iii) all earnings received from investment of such contributions.  The Borrower hereby transfers to the Lender all of the Borrower’s right, title and interest in and to the Collateral, and agrees to transfer the Borrower’s right, title and interest in all future Collateral to the Lender, to be held in the physical possession of the Lender or, in the case of the Shares or of any other certificated or uncertificated shares of stock or other securities that may be included in the Collateral from time to time, registered in the name of the Lender, as pledgee and holder of a security interest granted pursuant to this Pledge Agreement, upon the terms and conditions set forth in this Pledge Agreement.

 

1

 

2.                          Obligations Secured.

 

The pledge of the Collateral hereunder secures the full payment and performance of all of the Borrower’s present and future obligations, duties and liabilities under the Note, this Pledge Agreement and the Loan Agreement and all renewals, extensions, modifications and notations thereof (collectively, the “Secured Obligations”).

 

3.                          Borrower Covenants.

 

Until this Pledge Agreement is terminated, the Borrower shall:

 

3.1                            Deliver to the Lender all Collateral purchased with Loan proceeds.

 

3.2                            Not create, incur or suffer to exist any lien, encumbrance or security interest against the Collateral except the security interest created by this Pledge Agreement.

 

4.                          Borrower Representations and Warranties.

 

The Borrower represents and warrants that:

 

4.1                            The Borrower on the date hereof is, and at all times hereafter shall be, the sole legal, record and beneficial owner of the Collateral free and clear of all liens, claims, charges, restrictions, encumbrances, and rights of others (collectively, “Liens”), other than Liens in favor of the Lender and restrictions on transfer under applicable federal and state securities laws, the articles of incorporation of Lender and any agreements among stockholders relating to the Shares (collectively, “Permitted Liens”).  The Borrower shall maintain, preserve and defend the title to the Collateral and the lien of the Lender thereon against the claim of any other person.  The Borrower will not, without the prior written consent of the Lender sell, transfer, assign or otherwise dispose of, or grant any option or warrant with respect to, any of the Collateral.  If any Collateral is sold, transferred, assigned or otherwise disposed of in violation of this Section 4, the security interest of the Lender shall continue in the Collateral notwithstanding such sale, transfer, assignment or other disposition, and the Borrower will deliver any proceeds thereof to the Lender to be held as Collateral hereunder.

 

4.2                            This Pledge Agreement creates a valid and perfected first priority security interest in the Collateral, securing the full payment and performance of all of the Secured Obligations.

 

4.3                            The execution, delivery and performance of this Pledge Agreement (including without limitation the pledge of the Collateral and foreclosure by the Lender on the Collateral) do not and will not conflict with, constitute a default under, or result in the creation of a Lien on any Collateral under, any agreement, instrument, judgment, order, writ or decree to which the Borrower is a party or by which the Borrower or the Collateral is bound.

 

4.4                            No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the execution, delivery and performance of this Pledge Agreement (including without limitation the pledge of the Collateral 

 

2

 

and foreclosure by the Lender on the Collateral), or for the exercise by the Lender of the voting and other rights provided for in this Pledge Agreement.

 

4.5                            All certificates representing or evidencing the Collateral in existence on the date hereof have been delivered to the Lender in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank and (assuming continuing possession by the Lender of all such Collateral) the Lender has a perfected First Priority security interest therein.

 

4.6                            The Lender has a perfected first priority security interest in all Collateral that consists of uncertificated securities pledged by Borrower hereunder.

 

4.7                            On the date hereof all financing statements, agreements, instruments and other documents necessary to perfect the security interest granted by the Borrower to the Lender in respect of the Collateral have been delivered to the Lender in completed and, to the extent necessary or appropriate, duly executed form for filing in each governmental, municipal or other office required by law to perfect, continue and maintain a valid, enforceable, first priority security interest in the Collateral as provided herein.

 

4.8                            This Agreement is effective to create in favor of the Lender, a legal, valid and enforceable security interest in the Collateral and the proceeds thereof.  All filings and other actions necessary or appropriate to perfect the security interest in the Collateral granted by the Borrower hereunder have been duly made or taken and are in full force and effect; and such security interest is first priority.

 

4.9                            The Borrower is a trust organized in accordance with the laws of the State of California.  The Borrower’s legal name is “Broadway Federal Bank, f.s.b. Employee Stock Ownership Plan Trust” and its chief executive office or principal place of business is located at 5055 Wilshire Boulevard Suite 500, Los Angeles, California 90010.  Trustee’s legal name is Nicholas L. Saakvitne and his principal place of business is 11900 W. Olympic Boulevard, Suite 410, Los Angeles, California 90064.

 

5.                          Borrower Authorization of Financing Statements.

 

The Borrower hereby irrevocably authorizes the Lender at any time and from time to time to file in any relevant jurisdiction any financing statements and amendments thereto that contain the information required by Article 9 of the UCC of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Collateral where permitted by law. The Borrower agrees to provide all necessary information related to such filings to the Lender promptly upon request by the Lender.

 

6.                          Lender Agreements.

 

The Lender agrees as follows:

 

6.1                            Except upon the occurrence of an Event of Default (as defined in the Loan Agreement), the Lender shall not sell, exchange or otherwise dispose of any of the Collateral without the prior consent of the Borrower, which consent shall not be withheld unreasonably.

 

3

 

6.2                            Within ten (10) days after each annual payment of principal under the Loan, the Lender shall release a number of the Shares held hereunder as provided in this Section 6.2.  The number of Shares to be released shall be calculated by multiplying the number of Shares held by the Lender immediately before the release by a fraction the numerator of which is the amount of the principal and interest payment paid for the year and the denominator of which is the sum of the numerator and the principal and interest to be paid for all future years of the Loan, using for this purpose the rate of interest in effect for the Loan as of the end of the most recent plan year of the ESOP.

 

7.                          Voting of Shares.

 

So long as no Event of Default has occurred and is continuing, the Borrower shall have the right to vote the Shares, grant or withhold consent, or exercise any other right or privilege with respect to the Shares allowed under the Broadway Federal Bank, f.s.b. Employee Stock Ownership Plan (the “Plan Document”) for any purpose not inconsistent with the terms of this Pledge Agreement, the Loan Agreement or the Note, provided that the Borrower shall not exercise or shall refrain from exercising any of those rights if, in the judgment of the Lender, such action would have a material adverse effect on the value of the Collateral or any part thereof.  After the occurrence and during the continuation of an Event of Default, all voting and other consensual rights pertaining to any or all of the Collateral shall automatically become vested in the Lender, which shall then have the sole right and authority to exercise such rights.

 

8.                          Effects of Default.

 

Upon the occurrence and during the continuation of an Event of Default:

 

8.1                            The Lender shall have all rights and remedies afforded a secured party and all other rights and remedies available under the Uniform Commercial Code in effect in the State of California (the “UCC”) at that time or under other applicable law, all of which shall be cumulative, but subject to all limitations set forth herein, in the Loan Agreement or in the Note, or under Section 4975 of the Code, or under the Employee Retirement Income Security Act of 1974, as amended, all of which may be exercised with or, if allowed by law, without notice to the Borrower.  Notwithstanding anything herein or in the Loan Agreement to the contrary, the value of the Borrower’s assets that may be transferred to the Lender in satisfaction of the Loan upon an Event of Default shall not exceed the amount of the default.

 

8.2                            The Lender shall have the right at any time after the occurrence of an Event of Default to sell or otherwise convert to cash, including sale to the Lender in exchange for cancellation of indebtedness due under the Loan, all or any portion of the Shares remaining subject to pledge, provided that such Shares may be so applied only in an amount necessary to cure the Event of Default.

 

8.3                            The Borrower authorizes the Lender without notice (except notice required by applicable law) or demand and without affecting its liability hereunder or under the Note from time to time to: (i) exchange, enforce, waive and release the Collateral herein described or any part thereof or any such other security; and (ii) apply such Collateral or other security and direct the order or manner of sale thereof as Lender in its discretion may determine.

 

4

 

8.4                            The powers conferred on the Lender under this Pledge Agreement are solely to protect its interests in the Collateral and shall not impose on it any duty to exercise such powers. Except as provided in Section 9-207 of the Uniform Commercial Code in effect in the State of California (the “UCC”), the Lender shall have no duty with respect to the Collateral or any responsibility for taking any necessary steps to preserve rights against any persons with respect to any of the Collateral.

 

8.5                            In any sale of any of the Collateral after an Event of Default shall have occurred, the Lender is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid violation of applicable law (including, without limitation, compliance with such procedures as may restrict the number of prospective bidders and purchasers or further restrict such prospective bidders or purchasers to persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain such required approval of the sale or of the purchase by any governmental regulatory authority or official, and the Borrower further agrees that such compliance shall not result in such sale’s being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Lender be liable or accountable to the Borrower for any discount allowed by reason of the fact that such Collateral is sold in compliance with any such limitation or restriction.  The Borrower acknowledges and agrees that in order to protect the Lender’s interest it may be necessary to sell the Collateral at a price less than the maximum price attainable if a sale were delayed or were made in another manner, such as a registered public offering under the Securities Act of 1933.  The Borrower has no objection to sale in such a manner and agrees that the Lender shall have no obligation to obtain the maximum possible price for the Collateral.  To the maximum extent permitted by applicable law, the Lender may be the purchaser of any or all of the Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public or private sale, to use and apply all or any part of the Obligations as a credit on account of the purchase price of any Collateral payable at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of the Borrower, and the Borrower hereby waives (to the extent permitted by law) all rights of redemption, stay, or appraisal that it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.  The Borrower acknowledges and agrees that if the Lender is the only purchaser at any such sale, then a good faith determination of the then current fair market value of the Collateral by the board of directors of the Lender shall be deemed a commercially reasonable purchase price for the Collateral.

 

9.                          Taxes.

 

The Borrower agrees to pay when due all taxes, charges, Liens and assessments (“Taxes”) against the Collateral, unless being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves have been established and evidenced to the satisfaction of the Lender, and provided that all enforcement proceedings in the nature of levy or foreclosure against the Collateral are effectively stayed.  If the Borrower fails to pay Taxes or to perform any obligation pursuant to the Loan Agreement, this Pledge Agreement or the Note, the Lender may perform, or cause to be performed, that obligation, but shall not have 

 

5

 

any obligation to do so.  All amounts paid and expenses incurred by the Lender in connection with the exercise of its rights under this Section 9 shall be payable by the Borrower as provided in Section 11.

 

10.                  Waivers by Borrower.

 

The Borrower waives to the extent permitted by applicable law (a) any right to require the Lender to (i) proceed against any person or entity, (ii) proceed against or exhaust any Collateral or other collateral for the Secured Obligations, or (iii) pursue any other remedy in its power, (b) any defense arising by reason of any disability or other defense of any other person, or by reason of the cessation from any cause whatsoever of the liability of any other person or entity, (c) any right of subrogation, and (d) any right to enforce any remedy which the Lender now has or may hereafter have against any other person and any benefit of and any right to participate in any collateral or security whatsoever now or hereafter held by the Lender.  The Lender shall not be under any duty or obligation whatsoever to make or give any presentments, demands for performances, notices of nonperformance, protests, notice of protest or notice of dishonor in connection with any obligations or evidences of indebtedness held hereby as Collateral, or in connection with any obligations or evidences of indebtedness which constitute in whole or in part the Secured Obligations hereunder.

 

11.                  Security Interest Absolute.

 

All rights and security interests of the Lender, and all obligations of the Borrower, under this Pledge Agreement shall be absolute and unconditional irrespective of:  (i) any lack of validity or enforceability of either of the Notes or any other agreement or instrument relating to it or the Secured Obligations; (ii) any change in the time, manner, or place of payment of, or in any other term of, any of the Secured Obligations, or any other amendment or waiver of or consent to any departure from either of the Notes or any other agreement or instrument relating to it or to the Secured Obligations; (iii) any exchange, release, or non-perfection of any other collateral, or any release, amendment, or waiver of any of the Secured Obligations; or (iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower in respect of the Secured Obligations or of this Pledge Agreement.

 

12.                  Reinstatement.

 

The security interest in the Collateral granted in or pursuant to this Pledge Agreement and the other provisions of this Pledge Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Secured Obligations is rescinded or must otherwise be returned by Lender or is repaid by Lender in whole or in part in good faith settlement of a pending or threatened claim, whether upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, and whether as a “voidable preference,” “fraudulent conveyance” or otherwise, all as though such payment had not been made.  This Section 13 shall survive repayment of all of the Secured Obligations and the termination or expiration of this Pledge Agreement in any manner.

 

6

 

13.                  Further Assurances.

 

The Borrower agrees that at any time and from time to time, at the Borrower’s expense, the Borrower will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Lender may request, in order to perfect, protect, confirm or assure any security interest granted or purported to be granted by this Pledge Agreement or to enable the Lender to exercise and enforce its rights and remedies under this Pledge Agreement with respect to any Collateral, including without limitation executing and delivering, and authorizing the Lender to execute, deliver and/or file, additional conveyances, assignments, financing statements, control agreements, documents, certificates, stock powers, agreements and instruments.

 

14.                  Power of Attorney.

 

The Borrower hereby irrevocably appoints the Lender as the Borrower’s attorney-in-fact, with full authority in the place and stead of the Borrower and in the name of the Borrower, the Lender or otherwise, from time to time at the Lender’s discretion, to take any action and to execute any instrument that Lender may reasonably deem necessary or advisable to accomplish the purposes of this Pledge, including: (i) upon the occurrence and during the continuance of an Event of Default, to receive, indorse, and collect all instruments made payable to the Borrower representing any dividend, interest payment or other distribution in respect of the Collateral or any part thereof to the extent permitted hereunder and to give full discharge for the same and to execute and file governmental notifications and reporting forms; (ii) to enter into any control agreements the Lender deems necessary; or (iii) to arrange for the transfer of the Collateral on the books of the Lender or any other Person to the name of the Lender or to the name of the Lender’s nominee.  In addition to the designation of the Lender as the Borrower’s attorney-in-fact pursuant to this Section 15.1, the Borrower hereby irrevocably appoints the Lender as the Borrower’s agent and attorney-in-fact to make, execute and deliver any and all documents and writings which may be necessary or appropriate for approval of, or be required by, any regulatory authority located in any city, county, state or country where the Borrower engages in business, in order to transfer or to more effectively transfer any of the Collateral or otherwise enforce the Lender’s rights hereunder.

 

15.                  No Implied Waiver.

 

No failure to exercise, delay in exercising or partial exercise of any right or remedy hereunder shall operate as a waiver of any provision of this Pledge Agreement.  No waiver of any provision of this Pledge Agreement shall operate as a waiver of any other provision (whether or not similar), nor shall it operate as a continuing waiver, unless so provided in writing by the waiving party.

 

16.                  Governing Law.

 

This Pledge Agreement and the rights and obligations of the parties hereunder shall be governed by and construed under the laws of the State of California, without regard to choice of law or conflicts of law provisions.

 

7

 

17.                  Entire Agreement.

 

This Pledge Agreement, the Loan Agreement and the Note, including the exhibits and schedules thereto, constitute the entire agreement of the parties with respect to the subject matter hereof, and supersede any and all prior or contemporaneous agreements, understandings or representations between the parties with respect thereto that are not set forth or specifically referred to herein, in the Loan Agreement or in the Note.

 

18.                  Successors and Assigns.

 

This Pledge Agreement, and any consents or stipulations hereunder, shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

 

19.                  Notices.

 

All notices required or permitted hereunder shall be in writing and shall be delivered in accordance with the Loan Agreement.

 

20.                  Severability.

 

If any provision of this Pledge Agreement is declared illegal, invalid or unenforceable in any jurisdiction, such declaration shall not affect the legality, validity or enforceability of the remainder of this Pledge Agreement in such jurisdiction, or of the entirety of this Pledge Agreement in any other jurisdiction.

 

21.                  Amendment.

 

21.1                    This Pledge Agreement may be modified, amended or terminated, and any provision hereof waived, either generally or in a particular instance and either retroactively or prospectively, only by a writing signed by the Lender and the Borrower.

 

22.                  Assignment.

 

The Borrower may not assign or transfer any of its rights or obligations under this Pledge Agreement without the prior written consent of the Lender, and any purported assignment without such consent shall be null and void.

 

23.                  Headings; Counterparts.

 

The headings used in this Pledge Agreement are for convenience only and are not to be considered in construing this Pledge Agreement.  This Pledge Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute a single instrument.  Facsimile signatures hereto shall be valid.

 

8

 

IN WITNESS WHEREOF, the parties hereto have executed this Pledge Agreement as of the date first above written.

 

 

 

	
BORROWER:
    	
 
    
	
 
    	
 
    
	
Broadway Federal Bank, f.s.b. Employee   Stock Ownership Plan Trust
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Nicholas L. Saakvitne
    	
 
    
	
Name:
    	
Nicholas   L. Saakvitne
    	
 
    
	
Title:
    	
Trustee
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
LENDER:
    	
 
    
	
 
    	
 
    	
 
    
	
Broadway Financial Corporation
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Wayne-Kent A. Bradshaw
    	
 
    
	
Name:
    	
Wayne-Kent   A. Bradshaw
    	
 
    
	
Title:
    	
President/CEO
    	
 
    	
 
    
				

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP Pledge Agreement

 

 

PROMISSORY NOTE

 

	
$1,176,200.00
    	
 
    	
December 19, 2016
    

 

For value received, Nicholas L. Saakvitne (the “Trustee”) as trustee for the Broadway Federal Bank, f.s.b. Employee Stock Ownership Plan Trust (the “Borrower”) promises to pay to the order of Broadway Financial Corporation, a Delaware corporation (the “Lender”), at 5055 Wilshire Boulevard Suite, 500, Los Angeles, California, 90010 or at such other place as the holder of this Promissory Note (“Note”) may designate, the principal sum of One Million One Hundred Seventy-Six Thousand and Two Hundred Dollars ($1,176,200.00) with interest thereon as provided in this Note.

 

This Note shall bear interest from the date made at the applicable federal rate (the “AFR”) set forth in Table 1 of the Applicable Federal Rate Rulings of the Internal Revenue Service, or any successor publication (the “Applicable Federal Rate”) established and adjusted from time to time as provided herein.  Interest shall be compounded annually as of September 15 each year.  Due and unpaid interest shall bear interest in the same manner as principal.

 

Principal is payable in annual installments on September 15th of each year beginning September 15, 2017 in an amount equal to the unpaid principal balance divided by the number of years remaining until maturity of this Note on December 19, 2036, when the entire unpaid principal balance shall be due and payable.  Interest on unpaid principal shall be paid annually on September 15th concurrently with such principal installments.  The maturity of this Note is not subject to acceleration by the Lender.

 

Payments shall be applied first to interest then accrued and the remainder to principal, whereupon interest shall cease to accrue on the principal so paid.  Principal and interest shall be payable in lawful money of the United States of America.

 

This Note evidences the indebtedness incurred by the Borrower to the Lender under the ESOP Loan Agreement, dated December 19, 2016, by and between the Borrower and the Lender (as amended, restated, modified or supplemented from time to time, the “Loan Agreement”) the terms of which are made a part hereof.

 

This Note may be prepaid in whole or in part at any time, without premium or penalty.  Partial prepayments shall be applied in inverse order of maturity.

 

Except as otherwise provided in the Loan Agreement, payments of principal and interest hereunder shall be made by the Borrower only from cash contributions (or contributions in the form of cancellation of indebtedness), from any earnings attributable to such contributions and from any cash dividends paid on the shares of common stock of the Lender purchased with the proceeds of the loan evidenced hereby.  The Lender’s recourse against the Borrower is limited as provided in Section 1.8 of the Loan Agreement.

 

All obligations of Borrower, and all rights, powers and remedies of the Lender, expressed herein shall be in addition to, and not in limitation of, those provided by law or in the Loan Agreement, Pledge Agreement.

 

1

 

This Note is secured by a pledge of stock under the Pledge Agreement.

 

This Note is governed by the laws of the State of California, except to the extent preempted by federal laws.

 

Borrower waives presentment, demand, protest and notice of every kind in connection with the enforcement and collection of this Note.

 

This Note, together with the Purchase Agreement, the Loan Agreement, the Pledge Agreement and any documents delivered pursuant hereto or thereto, constitute the full and complete understanding and agreement of the parties hereto with respect to the subject matter hereof, and supersede any prior agreements between such parties with respect thereto.  If any provision of this Note is declared illegal, invalid or unenforceable in any jurisdiction, such declaration shall not affect the legality, validity or enforceability of the remainder of this Note in such jurisdiction, or of the entirety of this Note in any other jurisdiction.

 

This Note, and any consents or stipulations hereunder, shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  The Borrower may not assign or transfer any of its rights or obligations under this Note without the prior written consent of the Lender, and any purported assignment without such consent shall be null and void.

 

The Trustee has executed this Note solely in his capacity as Trustee of the Borrower and not in his individual capacity, and no personal liabilities or responsibilities are assumed by, or shall at any time be asserted against, the Trustee in his individual capacity, under or with respect to this Note, the Loan Agreement or the Pledge Agreement referred to herein.

 

BORROWER:

 

Broadway Federal Bank, f.s.b. Employee Stock Ownership Plan Trust

 

	
By:
    	
/s/   Nicholas L. Saakvitne
    	
 
    
	
Name:
    	
Nicholas   L. Saakvitne
    	
 
    
	
Title:
    	
Trustee
    	
 
    

 

2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00268-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00268-of-00352.parquet"}]]