Document:

ex10-67.htm

Exhibit 10.67

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

NORTH BAY RESOURCES INC.

 

	  	  	  
	
Warrant Shares: 10,000,000

	
  

	
Initial Exercise Date: October 1, 2010

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Ruby Development Company (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after October 1, 2010 (the “Initial Exercise Date”) and on or prior to the close of business on December 30, 2012 (the “Termination Date”) but not thereafter, to subscribe for and purchase from North Bay Resources Inc., a Delaware corporation (the “Company”), up to Ten Million (10,000,000) shares (the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Ruby Mine Option and Purchase Agreement (the “Purchase Agreement”), dated September 1, 2010 among the Company and the Investors signatory thereto.

 

Section 2. Exercise.

 

a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company); and, within 3 Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within 3 Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within 1 Business Day of receipt of such notice. In the event of any dispute or discrepancy, the records of the Company shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

  

  

  

 

b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $0.02.

 

c) Exercise Limitations.

 

i. Holder’s Restrictions. The Company shall not affect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other person or entity acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(c)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(c)(i) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(c)(i), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company’s Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Beneficial Ownership Limitation provisions of this Section 2(c)(i) may be waived by the Holder, at the election of the Holder, upon not less than 61 days’ prior notice to the Company to change the Beneficial Ownership Limitation to 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant, and the provisions of this Section 2(c)(i) shall continue to apply. Upon such a change by a Holder of the Beneficial Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the Beneficial Ownership Limitation may not be further waived by the Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(c)(i) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

  

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d) Mechanics of Exercise.

 

i. Delivery of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be delivered to the address specified by the Holder in the Notice of Exercise within 3 Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(v) prior to the issuance of such shares, have been paid.

 

ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii. Rescission Rights. If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

v. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

vi. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

Section 3. Transfer of Warrant.

 

a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 3(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

  

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b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 3(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the original Issue Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.

 

Section 4. Miscellaneous.

 

a) No Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).

 

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

d) Authorized Shares.

 

The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

  

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Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

 

f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

g) Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.

 

h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any the Holder or holder of Warrant Shares.

 

k) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

l) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

m) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

********************

 

  

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       IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

	  	  	  
	
NORTHBAY RESOURCES, INC.

	  	  
	
By:

	  	

/s/ Perry Leopold                       

	
Name:

	  	
Perry Leopold

	
Title:

	  	
Chief Executive Officer

 

NOTICE OF EXERCISE

 

	
TO:

	
NORTHBAY RESOURCES, INC.

 

(1) The undersigned hereby elects to purchase                      Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall take the form of certified check or bank wire, in lawful money of the United States.

 

(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

                                                                         

 

The Warrant Shares shall be delivered by physical delivery of a certificate to:

 

                                                                         

 

                                                                         

 

                                                                         

 

(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

[SIGNATURE OF HOLDER]

	  	  	  
	
Name of Investing Entity:

	  	  

	  	  	  
	
Signature of Authorized Signatory of Investing Entity:

	
  

	  

	  	  	  
	
Name of Authorized Signatory:

	
  

	  

	  	  	  
	
Title of Authorized Signatory:

	
  

	  

	  	  	  
	
Date:

	
  

	  

 

  

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ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, [            ] all of or [            ] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

                                                                                                                                                                                                                                    whose address is

 

                                                                                                                                                                                                                                                                  .

 

                                                                                                                                                                                                                                                                  

   

            Dated:                     ,             

 

	  	  	  
	
Holder’s Signature:

	  	  
	  	  
	
Holder’s Address:

	  	  
	  	  
	  	  	  

 

Signature Guaranteed:                                                                                               

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

  

7ex10-1.htm

Exhibit 10.1

 

SUPERVISORY AGREEMENT

 

          This Supervisory Agreement (Agreement) is made this 28th day of September, by and through the Board of Directors (Board) of Brooklyn Federal Savings Bank, Brooklyn, New York, OTS Docket No. 03198 (Association) and the Office of Thrift Supervision (OTS), acting by and through its Regional Director for the Northeast Region (Regional Director);

 

          WHEREAS, the OTS, pursuant to 12 U.S.C. § 1818, has the statutory authority to enter into and enforce supervisory agreements to ensure the establishment and maintenance of appropriate safeguards in the operation of the entities it regulates; and

 

          WHEREAS, the Association is subject to examination, regulation and supervision by the OTS; and

 

          WHEREAS, based on its examination of the Association, the OTS finds that the Association has engaged in unsafe or unsound practices; and

 

          WHEREAS, in furtherance of their common goal to ensure that the Association addresses the unsafe or unsound practices identified by the OTS in the October 13, 2009 Report of Examination (2009 ROE), the Association and the OTS have mutually agreed to enter into this Agreement; and

 

          WHEREAS, on September 21, 2010, the Association’s Board, at a duly constituted meeting, adopted a resolution (Board Resolution) that authorizes the Association to enter into this Agreement and directs compliance by the Association and its directors, officers, employees, and other institution-affiliated parties with each and every provision of tills Agreement.

 

          NOW THEREFORE, in consideration of the above premises, it is agreed as follows:

 

Brooklyn Federal Savings Bank

Supervisory Agreement

Page 1 of 18

  

  

  

 

Business Plan.

 

1.       Within seventy (70) days, the Association shall submit an updated comprehensive business plan for the period of October 1, 2010 to September 30, 2013 (Business Plan) that addresses all corrective actions in the 2009 ROE relating to the Association’s Business Plan. At a minimum, the Business Plan shall conform to applicable laws, regulations and regulatory guidance and include:

 

	  	
(a)          plans to improve the Association’s core earnings, reduce expenses, maintain appropriate levels of liquidity, and achieve profitability on a consistent basis throughout the term of the Business Plan;

	  	  
	  	
(b)          strategies for ensuring that the Association has the financial and personnel resources necessary to implement and adhere to the Business Plan, adequately support the Association’s risk profile, maintain compliance with applicable regulatory capital requirements, and comply with this Agreement;

	  	  
	  	
(c)          quarterly pro forma financial projections (balance sheet, regulatory capital ratios, and income statement) for each quarter covered by the Business Plan that are presented in a format consistent with the Thrift Financial Report (TFR); and

	  	  
	  	
(d)          identification of all relevant assumptions made in formulating the Business Plan and a requirement that documentation supporting such assumptions be retained by the Association.

 

2.       Upon receipt of written notification from the Regional Director that the Business Plan is acceptable, the Association shall implement and adhere to the Business Plan. A copy of the Board meeting minutes reflecting the Board’s adoption thereof shall be provided to the Regional Director within fifteen (15) days after the Board meeting.

 

Brooklyn Federal Savings Bank

Supervisory Agreement

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3.       Any material modificationsl to the Business Plan must receive the prior written non-objection of the Regional Director. The Association shall submit proposed material modifications to the Regional Director at least forty-five (45) days prior to implementation.

 

4.       Within sixty (60) days after the end of each quarter, after implementation of the Business Plan, the Board shall review quarterly variance reports on the Association’s compliance with the Business Plan (Business Plan Variance Reports). The Business Plan Variance Reports shall:

	  	  
	  	
(a)          identify variances in the Association’s actual performance during the preceding quarter as compared to the projections set forth in the Business Plan;

	  	  
	  	
(b)          contain an analysis and explanation of identified variances; and

	  	  
	  	
(c)          discuss the specific measures taken or to be taken to address identified variances.

 

5.      A copy of the Business Plan Variance Reports and Board meeting minutes shall be provided to the Regional Director within fifteen (15) days after the Board meeting.

 

Concentrations of Credit.

 

6.      Within sixty (60), the Association shall develop a written program for identifying, monitoring, and controlling risks associated with concentrations of credit (Credit Concentration Program) that addresses all corrective actions set forth in the 2009 ROE relating to concentrations of credit. The Credit Concentration Program shall comply with all applicable laws, regulations and regulatory guidance and shall:

 

1A modification shall be considered material under this Section of the Order if the Association plans to: (a) engage in any activity that is inconsistent with the Business Plan; or (b) exceed the level of any activity contemplated in the Business Plan or fail to meet target amounts established in the Business Plan by more than ten percent (10%), unless the activity involves assets risk-weighted fifty percent (50%) or less, in which case a variance of more than twenty-five percent (25%) shall be deemed to be a material modification.

 

Brooklyn Federal Savings Bank

Supervisory Agreement

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(a)          establish comprehensive concentration limits expressed as a percentage of Tier 1 (Core) Capital plus allowance for loan and lease losses (ALLL), and document the appropriateness of such limits based on the Association’s risk profile;

	  	  
	  	
(b)          establish stratification categories of the Association’s concentrations of credit, such as land loans, construction loans, income property loans, nonresidential real estate loans, commercial loans and establish enhanced risk analysis, monitoring, and management for each stratification category;

	  	  
	  	
(c)          contain specific review procedures and reporting requirements, including written reports to the Board, designed to identify, monitor, and control the risks associated with concentrations of credit and periodic market analysis for the various property types and geographic markets represented in its portfolio; and

	  	  
	  	
(d)          contain a written action plan, including specific time frames, for bringing the Association into compliance with its concentration of credit limits.

 

7.       Within seventy-five (75) days, the Association shall submit its Credit Concentration Program to the Regional Director for review and comment. Upon receipt of written notification from the Regional Director that the Credit Concentration Program is acceptable, the Association shall implement and adhere to the Credit Concentration Program. The Board’s review of the Credit Concentration Program shall be documented in the Board meeting minutes.

 

8.       Within sixty (60) days after the end of each quarter, beginning with the quarter ending December 31, 2010, the Board shall review the appropriateness of the Association’s concentration limits given current conditions and the Association’s compliance with its Credit Concentration Program including the written action plan to revise the current level of concentrations. The Board’s review of the Association’s Credit Concentration Program shall be documented in the Board meeting minutes.

 

Brooklyn Federal Savings Bank

Supervisory Agreement

Page 4 of 18

  

  

  

 

Credit Administration.

 

9.       Within thirty (30) days, the Association shall revise its credit administration policies, procedures, practices, and controls (Credit Administration Policy) to address all corrective actions in the 2009 ROE relating to credit administration. The Credit Administration Policy shall comply with all applicable laws, regulations and regulatory guidance and:

	  	  
	  	
(a)          include restrictions on loan renewals granted without principal reductions (other than those secured by owner-occupied single-family dwellings and consumer loans);

	  	  
	  	
(b)          include restrictions on additional advances to borrowers who have an existing loan with the Association that is adversely classified;

	  	  
	  	
(c)          include polices, procedures, and systems to obtain and analyze, on an annual basis, updated borrower financial information on all loans and/or loan relationships (other than those secured by owner-occupied single-family dwellings and consumer loans) with an outstanding or committed balance greater than $500,000;

	  	  
	  	
(d)          include guidelines requiring that collateral properties be re-appraised prior to loans being modified, extended, or refinanced;

	  	  
	  	
(e)          include guidelines requiring that current financial statements from the borrower be provided to the Association prior to loans being modified, extended or refinanced and that such financial statements be reviewed to determine whether the borrower has the ability to repay at the modified loan terms;

	  	  
	  	
(f)          include an effective system for the retention, review, renewal, and updating by the Association of all required records, filings, and other credit related documents;

 

Brooklyn Federal Savings Bank

Supervisory Agreement

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(g)          include funding controls over costs on construction projects to prevent disbursements of loan funds in excess of completed construction costs;

	  	  
	  	
(h)          include restrictions on the capitalization of interest, loan fees, late fees, loan costs, and collection costs of problem loans;

	  	  
	  	
(i)           include polices, procedures, and systems for escrowing and monitoring of real estate taxes for commercial real estate loans;

	  	  
	  	
(j)           include polices and procedures for obtaining feasibility studies prior to approving loans for large land acquisition and construction projects;

	  	  
	  	
(k)          include policies and procedures for the implementation of a formal comprehensive appraisal review function; and

	  	  
	  	
(1)          establish monthly monitoring and reporting to the Board of all outstanding loan commitments, including the origin and expiration date of each commitment.

 

10.     Within forty-five (45) days, the Association shall submit its Credit Administration Policy to the Regional Director for review and comment. Upon receipt of written notification from the Regional Director that the Credit Administration Policy is acceptable, the Association shall implement and adhere to the Credit Administration Policy. The Board’s review of the Credit Administration Policy shall be documented in the Board meeting minutes. A copy of the Credit Administration Policy shall be provided to the Regional Director within thirty (30) days of adoption by the Board.

 

Department Resource Enhancement.

 

11.     Within thirty (30) days, the Association shall retain an independent consultant with expertise in loan underwriting and credit administration (Independent Consultant) to conduct a review and provide an evaluation of whether the staffing resources devoted by the Association are adequate to support the loan underwriting and credit administration functions at the Association.

 

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12.     Within sixty (60) days, the Independent Consultant shall prepare and submit a report to the Board of Directors. The report shall be documented in the Board minutes and shall describe both the evaluation process and the conclusions and recommendations of the Independent Consultant. At a minimum, the report shall: (a) evaluate whether the officers and employees associated with the loan underwriting and credit administration functions have the necessary training and expertise and resources to adequately support these functions at the Association; (b) determine whether the staffing resources applied to the loan underwriting and credit administration programs are adequate given the size, complexity, growth and composition of the non-homogeneous loan portfolio at the Association; and (c) assess whether the staffing resources are sufficient to ensure ongoing compliance with this Agreement.

 

13.     Within seventy-five (75) days, the Board shall develop and implement a plan for enhancement of staffing resources based on the conclusions and recommendations of the Independent Consultant (Plan). A copy of the Plan and the Board Resolution approving the Plan shall be provided to the Regional Director within fifteen (15) days of adoption by the Board.

 

Internal Asset Review and Classification.

 

14.     Within thirty (30) days, the Association shall develop a written internal asset review and classification program (IAR Program) that addresses all corrective actions set forth in the 2009 ROE relating to internal asset review and classification and that complies with all applicable laws, regulations and regulatory guidance. At a minimum, the IAR Program shall:

 

	  	
(a)          ensure the accurate and timely identification, classification, and reporting of the Association’s assets, including the designation of loans as special mention or placement of loans on a watch list where a borrower’s credit standing has deteriorated;

 

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(b)          detail the Association’s loan grading system and specify parameters for the identification of problem loans for each type of loan offered by the Association;

	  	  
	  	
(c)          require internal asset reviews and updates for all non-homogeneous loans to be conducted not less than every three (3) months; and

	  	  
	  	
(d)          require quarterly reports be submitted to the Board detailing the Association’s adversely classified, special mention and delinquency ratios.

 

15.     Within forty-five (45) days, the Association shall submit its IAR Program to the Regional Director for review and comment. Upon receipt of written notification from the Regional Director that the IAR Program is acceptable, the Association shall implement and adhere to the IAR Program. The Board’s review of the IAR Program shall be documented in the Board meeting minutes.

 

Allowance for Loan and Lease Losses.

 

16.     Within thirty (30) days, the Association shall revise its policies, procedures, and methodology relating to the timely establishment and maintenance of an adequate allowance for loan and lease losses (ALLL) level (ALLL Policy) to address all corrective actions set forth in the 2009 ROE relating to ALLL. The ALLL Policy shall comply with applicable laws, regulations, and regulatory guidance and shall include the appropriate use of FASB 114 impairment analysis.

 

17.     The Association shall submit a copy of the Board meeting minutes reflecting the Board’s discussion and adoption of the ALLL Policy to the Regional Director within thirty (30) days after the Board meeting.

 

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18.     Within thirty (30) days after the end of each quarter, beginning with the quarter ending December 31, 2010, the Association shall analyze the adequacy of the ALLL consistent with its ALLL Policy (Quarterly ALLL Report). The Board’s review of the Quarterly ALLL Report, including, but not limited to, all qualitative factors considered in determining the adequacy of the Association’s ALLL, shall be fully documented in the Board meeting minutes. Any deficiency in the ALLL shall be remedied by the Association in the quarter in which it is discovered and before the Association files its Thrift Financial Report (TFR) with the OTS. A copy of the Quarterly ALLL Report and the Board meeting minutes detailing the Board’s review shall be provided to the Regional Director within fifteen (15) days after the Board meeting.

 

Problem Assets.

 

19.     Within seventy (70) days, the Association shall develop a detailed, written plan with specific strategies, targets and timeframes to reduce3 the Association’s level of problem assets4 (Problem Asset Reduction Plan). The Problem Asset Reduction Plan, at a minimum, shall include:

	  	  
	  	
(a)          quarterly targets for the level of problem assets as a percentage of Tier 1 (Core) capital plus ALLL;

	  	  
	  	
(b)          a description of the methods for reducing the Association’s level of problem assets to the established targets; and

	  	  
	  	
(c)          all relevant assumptions and projections based on a best-case scenario, a worst-case scenario, and a most probable case scenario, and documentation supporting such assumptions and projections.

 

3 For purposes of this Paragraph, “reduce” means to collect, sell, charge off, or improve the quality of an asset sufficient to warrant its removal from adverse criticism.

4 The term “problem assets” shall include all classified assets, assets designated special mention, and all nonperforming assets.

 

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22.     Within sixty (60) days after the end of each quarter, a copy of the Quarterly Asset Report shall be provided to the Regional Director.

 

Loan Workout Plan.

 

23.     Within thirty (30) days, the Association shall engage a qualified, independent, third party (Consultant), acceptable to the Regional Director, to conduct a review and analysis of the non-homogeneous loan portfolio and prepare a written report that, at a minimum, sets forth a recommended, detailed, written, work-out plan and strategy for each loan and/or loan relationship greater than $500,000 (Loan Workout Plan).

 

24.     Within seventy (70) days, the Board shall approve, and the Association shall implement, the Loan Workout Plan. A copy of the Loan Workout Plan and the Board Resolution approving the Loan Workout Plan shall be provided to the Regional Director within fifteen (15) days of its adoption by the Board.

 

25.     Within sixty (60) days, the Association shall retain a qualified full-time workout officer, acceptable to the Regional Director, whose sole responsibility shall be to implement and supervise compliance with the Loan Workout Plan (Loan Workout Officer). The Loan Workout Officer shall be independent of the Lending Department of the Association.

 

26.     Within thirty (30) days after the end of each quarter, beginning with the quarter ending December 31, 2010, the Association shall submit a quarterly written loan workout status report (Quarterly Loan Workout Report) to the Board. The Board’s review of the Quarterly Loan Workout Report shall be documented in the Board meeting minutes.

 

Restrictions on Lending.

 

27.     Effective immediately, the Association shall not make, invest in, or purchase any new commercial real estate loans.

 

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28.     Effective immediately, the Association shall not, except with the prior written non-objection of the Regional Director, refinance, extend, or otherwise modify, any loans to borrowers whose existing loans or lines are classified or listed as special mention, unless the Association has: (i) developed and implemented a workout plan for that borrower, and (ii) strengthened its position through a reduction in the outstanding loan balance and/or obtained additional collateral.

 

Management and Directorate Oversight.

 

29.     Within fifteen (15) days, the Association shall retain an independent third-party, acceptable to the Regional Director, to conduct a review of current Management and Board supervision (Management Study). The Management Study shall be completed within forty-five (45) days after the consultant is retained, and, at a minimum, include an evaluation of the performance of the Association’s current Senior Executive Officers and members of the Board of directors, including an assessment of whether compensation is commensurate with job duties and responsibilities in compliance with 12 C.F.R. § 563 .161 (b).

 

30.     Within seventy-five (75) days, a copy of the Management Study shall be forwarded to the Board and the Regional Director. The Board’s review of the Management Study shall be documented in the Board meeting minutes.

 

Growth.

 

31.     Effective immediately, the Association shall not increase its total average assets during any quarter in excess of an amount equal to net interest credited on deposit liabilities during the prior quarter without the prior written notice of non-objection of the Regional Director.

 

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Brokered Deposits.

 

32.     Effective immediately, the Association shall comply with the requirements of 12 C.F.R. § 337.6(b).

 

Directorate and Management Changes.

 

33.     Effective immediately, the Association shall comply with the prior notification requirements for changes in directors and Senior Executive Officers5 set forth in 12 C.F.R. Part 563, Subpart H.

 

Golden Parachute and Indemnification Payments.

 

34.     Effective immediately, the Association shall not make any golden parachute payment6 or prohibited indemnification payment7 unless, with respect to each such payment, the Association has complied with the requirements of 12 C.F.R. Part 359 and, as to indemnification payments, 12 C.F.R. § 545.121.

 

Employment Contracts and Compensation Arrangements.

 

35.     Effective immediately, the Association shall not enter into, renew, extend or revise any contractual arrangement relating to compensation or benefits for any Senior Executive Officer or director of the Association, unless it first provides the Regional Director with not less than sixty (60) days prior written notice of the proposed transaction. The notice to the Regional Director shall include a copy of the proposed employment contract or compensation arrangement or a detailed, written description of the compensation arrangement to be offered to such officer or director, including all benefits and perquisites. The Board shall ensure that any contract, agreement or arrangement submitted to the Regional Director fully complies with the requirements of 12 C.F.R. Part 359, 12 C.F.R. §§ 563.39 and 563.161(b), and 12 C.F.R. Part 570 – Appendix A.

 

5 The term “Senior Executive Officer” is defined at 12 C.F.R. § 563.555.

 

6 The term “golden parachute payment” is defined at 12 C.F.R. § 359.1(f).

7 The term “prohibited indemnification payment” is defined at 12 C.F.R. § 359.1 (I).

 

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Dividends and Other Capital Distributions.

 

36.     Effective immediately, the Association shall not declare or pay dividends or make any other capital distributions, as that term is defined in 12 C.F.R. § 563.141, without receiving the prior written approval of the Regional Director in accordance with applicable regulations and regulatory guidance. The Association’s written request for approval shall be submitted to the Regional Director at least thirty (30) days prior to the anticipated date of the proposed declaration, dividend payment or distribution of capital.

 

Transactions with Affiliates.

 

37.     Effective immediately, the Association shall not engage in any transaction with an affiliate unless, with respect to each such transaction, the Association has complied with the notice requirements set forth in 12 C.F.R. § 563.41(c)(4), which shall include the information set forth in 12 C.F.R. § 563.41(c)(3). The Board shall ensure that any transaction with an affiliate for which notice is submitted pursuant to this Paragraph, complies with the requirements of 12 C.F.R. § 563.41 and Regulation W, 12 C.F.R. Part 223.

 

Effective Date.

 

38.     This Agreement is effective on the Effective Date as shown on the first page.

 

Duration.

 

39.     This Agreement shall remain in effect until terminated, modified or suspended, by written notice of such action by the OTS, acting by and through its authorized representatives.

 

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Time Calculations.

 

40.     Calculation of time limitations for compliance with the terms of this Agreement run from the Effective Date and shall be based on calendar days, unless otherwise noted.

 

Submissions and Notices.

 

41.     All submissions to the OTS that are required by or contemplated by the Agreement shall be submitted within the specified timeframes.

 

42.     Except as otherwise provided herein, all submissions, requests, communications, consents or other documents relating to this Agreement shall be in writing and sent by first class U.S. mail (or by reputable overnight carrier, electronic facsimile transmission or hand delivery by messenger) addressed as follows:

 

	  	
(a)

	
To:

	
OTS

	  	  	  	
Michael E. Finn, Regional Director

	  	  	  	
Office of Thrift Supervision

	  	  	  	
Harborside Financial Center Plaza Five

	  	  	  	
Suite 1600

	  	  	  	
Jersey City, New Jersey 07311

	  	  	  	  
	  	  	  	  
	  	
(b)

	
To:

	
Brooklyn Federal Savings Bank

	  	  	  	
Richard A. Kielty, President and Chief Executive Officer

	  	  	  	
81 Court Street

	  	  	  	
Brooklyn, New York 11201

 

No Violations Authorized.

 

43.     Nothing in this Agreement shall be construed as allowing the Association, its Board, officers or employees to violate any law, rule, or regulation.

 

OTS Authority Not Affected.

 

44.     Nothing in this Agreement shall inhibit, estop, bar or otherwise prevent the OTS from taking any other action affecting the Association if at any time the OTS deems it appropriate to do so to fulfill the responsibilities placed upon the OTS by law.

 

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Other Governmental Actions Not Affected.

 

45.     The Association acknowledges and agrees that its execution of the Agreement is solely for the purpose of resolving the matters addressed herein, consistent with Paragraph 44 above, and does not otherwise release, discharge, compromise, settle, dismiss, resolve, or in any way affect any actions, charges against, or liability of the Association that arise pursuant to this action or otherwise, and that may be or have been brought by any governmental entity other than the OTS.

 

Miscellaneous.

 

46.     The laws of the United States of America shall govern the construction and validity of this Agreement.

 

47.     If any provision of this Agreement is ruled to be invalid, illegal, or unenforceable by the decision of any Court of competent jurisdiction, the validity, legality, and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby, unless the Regional Director in his or her sole discretion determines otherwise.

 

48.     All references to the OTS in this Agreement shall also mean any of the OTS’s predecessors, successors, and assigns.

 

49.     The section and paragraph headings in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

 

50.     The terms of this Agreement represent the final agreement of the parties with respect to the subject matters thereof, and constitute the sole agreement of the parties with respect to such subject matters.

 

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Enforceability of Agreement.

 

51.     This Agreement is a “written agreement” entered into with an agency within the meaning and for the purposes of 12 U.S.C. § 1818.

 

Signature of Directors/Board Resolution.

 

52.     Each Director signing this Agreement attests that he or she voted in favor of a Board Resolution authorizing the consent of the Association to the issuance and execution of the Agreement. This Agreement may be executed in counterparts by the directors after approval of execution of the Agreement at a duly called board meeting. A copy of the Board Resolution authorizing execution of this Agreement shall be delivered to the OTS, along with the executed original(s) of this Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

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          WHEREFORE, the OTS, acting by and through its Regional Director, and the Board of the Association, hereby execute this Agreement.

 

	
BROOKLYN FEDERAL SAVINGS BANK

	  	OFFICE OF THRIFT SUPERVISION
	
Brooklyn, New York

	  	  	  
	  	  	  	  	  
	
By: 

	
/s/ Angelo J. Di Lorenzo

	  	
By: 

	
/s/ Michael E. Finn

	  	
Angelo J. Di Lorenzo, Director

	  	  	
Michael E. Finn

	  	  	  	  	
Regional Director, Northeast Region

	  	  	  	  	  
	
By:

	
/s/ Richard A. Kielty

	  	  	  
	  	
Richard A. Kielty, Director

	  	  	  
	  	  	  	  	  
	
By:

	
/s/ John C. Gallin

	  	  	  
	  	
John C. Gallin, Director

	  	  	  
	  	  	  	  	  
	
By:

	
/s/ John A. Loconsolo

	  	  	  
	  	
John A. Loconsolo, Director

	  	  	  
	  	  	  	  	  
	
By:

	
/s/ Daniel O. Reich

	  	  	  
	  	
Daniel O. Reich, Director

	  	  	  
	  	  	  	  	  
	
By:

	
/s/ Arthur R. Williams

	  	  	  
	  	
Arthur R. Williams, Director

	  	  	  

 

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