Document:

EXHIBIT 10.2

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

This Intellectual Property
Security Agreement (together with all amendments, if any, from time to time, this “Agreement”), dated
as of November 7, 2014, is made by OryonTechnologies, LLC, (“Oryon”), a Texas limited liability company,
and Oryon Technologies, Inc., (“Parent”), a Nevada corporation and their affiliates (including Oryon
Technologies Licensing, LLC) (collectively, the “Grantors”, and each a “Grantor”)
(but excluding EFL Tech International Group, N.V., a Netherlands Corporation, EFL Tech B.V., a Netherlands Corporation, EFL Tech
Pty. Ltd., an Australian Corporation, and EFL Holdings Pty. Ltd., an Australian Corporation (collectively, “EFL”))
in favor of Myant Capital Partners, Inc., M. Richard Marcus, MRM Acquisitions, LLC, and Oryon Capital, LLC (each, a “Secured
Party” and collectively, the “Secured Parties”).

 

RECITALS

 

A.           Grantors
are makers of a promissory note of even date herewith, payable to the order of the Secured Parties (the “Secured Note”).

 

B.           The
Secured Note is secured pursuant to the terms of this Intellectual Property Security Agreement.

 

C.           In
order to induce each Secured Party to enter into a Settlement Agreement and accept the Secured Note, Grantors have agreed to enter
into this Agreement.

 

STATEMENT OF AGREEMENT

 

NOW, THEREFORE,
in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.            Defined
Terms. All terms contained in this Agreement, unless the context indicates otherwise, and not defined herein have the meanings
provided for by the UCC to the extent the same are used or defined therein. In addition, as used herein, the following terms shall
have (unless otherwise provided elsewhere in this Agreement) the following respective meanings (such meanings being equally applicable
to both the singular and plural form of the terms defined):

 

“Copyright
Licenses” means all licenses, contracts or other agreements, whether written or oral, now owned by a Grantor, naming
a Grantor as licensee or licensor and providing for the grant of any right to use or sell any works covered by any Copyright or
Copyright registration (including, without limitation, all Copyright Licenses set forth in Schedule III hereto) and any
receivables derived from the Copyrights.

 

“Copyrights”
means all of the following in which a Grantor now holds any interest: all domestic and foreign copyrights, whether registered or
not, including, without limitation, all copyright rights, including revisions, derivative works, works-in-progress, or unfinished
works throughout the universe in any and all media, in and to all original works of authorship fixed in any tangible medium of
expression, used by a Grantor (including, without limitation, all registered copyrights described in Schedule III hereto),
all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings
in the United States Copyright Office or in any similar office or agency of the United States or any other country or any political
subdivision thereof).

 

    	 

    	 

    

 

“Licenses”
means any Copyright Licenses, Trademark Licenses, Patent Licenses or other license of rights, entire interests and partial interests
now held by a Grantor.

 

“Patent Licenses”
means all licenses, contracts, patent rights or other agreements, whether written or oral, now owned by a Grantor, naming a Grantor
as licensee or licensor and providing for the grant of any right to manufacture, use or sell any invention covered by any Patent
(including, without limitation, all Patent Licenses set forth in Schedule I hereto) or otherwise granting rights with respect
to any invention on which a Patent is in existence.

 

“Obligations”
means the prompt payment by the Grantors, as and when due and payable, of all amounts of principal and interest from time
to time owing by them in request of the Secured Note and the due performance and observance by each Grantor of all of its other
obligations from time to time existing in respect of the Secured Note.

 

“Other Intellectual
Property” means industrial designs, inventions, trade secrets, ideas, concepts, methods, techniques,
processes, proprietary information, technology, know-how, formulae, rights of publicity and other general intangibles of like nature,
now existing.

 

“Patents”
means all of the following in which a Grantor now holds any interest: (a) all domestic and foreign letters patent, design patents,
and utility patents now existing (including, without limitation, all domestic and foreign letters patent, design patents, and utility
patents described in Schedule I hereto), (b) all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States Patent and Trademark Office, or in any similar office
or agency of the United States or any other country or any political subdivision thereof), and (c) all reissues, reexaminations,
divisions, continuations, continuations in part, extensions or renewals thereof, and any other applications or patents claiming
priority thereof, or applications for claimed inventions reasonably determined to be enabled thereby, filed after the date of this
Agreement.

 

“Secured
Note” means that certain Secured Note, dated as of the date hereof, made by Grantors payable to the order of the
Secured Parties as referenced in the Recitals.

 

“Trademark
Licenses” means all licenses, contracts or other agreements, whether written or oral, now owned by a Grantor, naming
a Grantor as licensor or licensee and providing for the grant of any right concerning any Trademark, together with any goodwill
connected with and symbolized by any such trademark licenses, contracts or agreements (including, without limitation, all Trademark
Licenses described in Schedule II hereto).

 

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“Trademarks”
means all of the following in which a Grantor now holds: (a) all domestic and foreign trademarks, service marks, collective marks,
certification marks, trade names, business names, d/b/a’s, Internet domain names, trade styles, design marks, logos and other
source or business identifiers and all general intangibles of like nature, now owned or used by a Grantor (including, without limitation,
all registered domestic and foreign trademarks, service marks, collective marks, certification marks, trade names, business names,
d/b/a’s, Internet domain names, trade styles, design marks, logos and other source or business identifiers described in Schedule
II hereto), (b) all applications, registrations and recordings thereof (including, without limitation, applications, registrations
and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state
thereof or any other country or any political subdivision thereof), and (c) all extensions or renewals thereof, together with the
goodwill of the products or services symbolized by such marks.

 

The following terms shall
have the respective meanings provided for in the UCC: “Cash Proceeds”, “Noncash Proceeds”,
and “Proceeds”.

 

2.            Grant
of Security Interest in Intellectual Property Collateral. To secure the prompt and complete payment, performance and observance
of all the Obligations, Grantors hereby grant, assign, convey, mortgage, pledge, hypothecate and transfer to each Secured Party
a continuing security interest in and Lien upon all of its right, title and interest in, to and under the following, whether owned
or consigned by or to, or licensed to, a Grantor (collectively, the “Intellectual Property Collateral”
or “Collateral”):

 

(a)          all
of its Patents and Patent Licenses to which it is a party, including those referred to on Schedule I hereto;

 

(b)          all
of its Trademarks and Trademark Licenses to which it is a party, including those referred to on Schedule II hereto;

 

(c)          all
of its Copyrights and Copyright Licenses to which it is a party, including those referred to on Schedule III hereto;

 

(d)          the
goodwill of the products or services symbolized by the Trademarks;

 

(e)          all
Other Intellectual Property;

 

(f)          all
divisionals, reissues, renewals, continuations or extensions, as may be appropriate, of the foregoing; and

 

(g)          all
Proceeds of the foregoing, including, without limitation, any authorized claim by a Grantor against third parties for past or present
(i) infringement of any Patent or Patent licensed under any Patent License; (ii) infringement or dilution of any Trademark or Trademark
licensed under any Trademark License; (iii) injury to the goodwill associated with any Trademark or any Trademark licensed under
any Trademark License; (iv) infringement of any Copyright or Copyright licensed under any Copyright License.

 

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3.            Representations
and Warranties. Each Grantor represents and warrants that such Grantor does not have any interest in, or title to, any registered
or issued Patent, Trademark or Copyright, or pending applications for registration or issuance of any Patent, Trademark, or Copyright,
except as set forth in Schedule I, Schedule II and Schedule III, respectively, hereto. This Agreement is effective
to create a valid and continuing Lien on and, upon the filing hereof with the United States Patent and Trademark Office and the
United States Copyright Office and the filing of appropriate financing statements pursuant to this Security Agreement, perfected
security interests in favor of Secured Parties in all of a Grantor’s Intellectual Property Collateral and such perfected
security interests are enforceable as such as against any and all creditors of, and purchasers from, a Grantor. Upon the filing
by a Secured Party of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office
and the filing of appropriate financing statements pursuant to this Security Agreement, all action necessary to protect and perfect
Secured Parties’ Lien on a Grantor’s Intellectual Property Collateral shall have been duly taken.

 

4.            Covenants.
Each Grantor covenants and agrees with each Secured Party, for the benefit of Secured Parties, that from and after the date of
this Agreement and until this Agreement is terminated pursuant to Section 13(l) hereof:

 

(a)          Except
as otherwise provided in Section 4(c), each Grantor shall take all reasonable actions necessary to maintain and pursue each
application, to obtain the relevant registration and to maintain the registration of each of the Patents or Trademarks (now or
hereafter existing), including the filing of renewals, Section 8 affidavits of use, Section 15 affidavits of non-contestability,
opposition, interference and cancellation proceedings in all jurisdictions where any application or registration for any Patent
or Trademark has been filed by a Grantor and such Grantor shall timely pay all fees and expenses associated therewith, including,
but not limited to, maintenance fees, delay fees or other fees payable in any jurisdiction to obtain or maintain any rights related
to the Intellectual Property Collateral. Grantors shall immediately disclose to Secured Parties any failure by Grantors to maintain
all of a Grantor’s rights in and to any Intellectual Property Collateral, including any failure to pay when due any filing,
maintenance or fees or expenditures required to be paid in any jurisdiction to maintain a Grantor’s rights to any Intellectual
Property Collateral. Grantors acknowledge that a Secured Party may, in its sole discretion, advance any fees payable by Grantors
to obtain or maintain any rights with respect to Intellectual Property Collateral and the amount of any such advances shall constitute
an Obligation of Grantors payable to the Secured Party on demand and secured by the Intellectual Property Collateral.

 

(b)          Except
as otherwise provided in Section 4(c), each Grantor shall notify Secured Party promptly, in writing, if it knows or has
reason to know that any application or registration relating to any Intellectual Property Collateral (now or hereafter existing)
may become abandoned or dedicated to the public (other than through expiration of the statutory term of Patents and Copyrights),
or of any adverse determination or development (including the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court or any governmental
authority or court of any state or foreign jurisdiction) regarding a Grantor’s ownership of any Intellectual Property Collateral,
its right to register the same, or to keep and maintain the same.

 

(c)          Notwithstanding
Sections 4(a) and (b), if in the ordinary course of business, Grantors elect to discontinue using or not begin use of any
of the Trademarks, the obligations relating to notice of abandonment or dedication to the public of the Trademarks, and the obligations
to maintain, pursue, and obtain Trademarks, as set forth in Sections 4(a) and (b), shall not apply. Grantors shall provide
twenty (20) days advance notice of their intent to discontinue use or abandon any of the Trademarks. Section 4(c) shall apply only
to Trademarks.

 

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(d)          If
a Grantor, either directly or through any agent, employee, licensee or designee, files an application for the registration of any
Intellectual Property Collateral with the United States Patent and Trademark Office, the United States Copyright Office or any
similar office or agency of any state or foreign jurisdiction, such Grantor shall give Secured Party written notice of such filed
applications within twenty (20) days after such application was made and such Grantor shall execute and deliver a supplement hereto
(in form of Exhibit A attached hereto) to evidence Secured Party’s Lien on such Intellectual Property Collateral.

 

(e)          In
the event that any of the Intellectual Property Collateral is infringed upon, or misappropriated or diluted by a third party, Grantors
shall notify Secured Parties in writing reasonably promptly after a Grantor learns thereof. Grantor, at its sole discretion and
with the advice of counsel of its choice, shall promptly take such reasonable and appropriate actions to enforce its rights and
protect such Intellectual Property Collateral, whether by action, suit, proceeding or otherwise.

 

5.            Covenants
as to the Intellectual Property Collateral. So long as any of the Obligations under the Secured Note remain outstanding or
unless each Secured Party shall otherwise consent in writing:

 

(a)          Further
Assurances. Subject to the terms and conditions of this Agreement, each Grantor will at its expense, at any time and from time
to time, promptly execute and deliver all further instruments and documents and take all further action that may be reasonably
necessary or appropriate or that a Secured Party may reasonably request in order to (i) perfect and protect the security interest
purported to be created hereby; (ii) enable a Secured Party to exercise and enforce its rights and remedies hereunder in respect
of the Intellectual Property Collateral; or (iii) otherwise effect the purposes of this Agreement, including, without limitation:
(A) marking conspicuously each License and, at the request of a Secured Party, each of its Records pertaining to the Intellectual
Property Collateral with a legend, in form and substance satisfactory to a Secured Party, indicating that such License or Intellectual
Property Collateral is subject to the security interest created hereby, (B) executing and filing (to the extent, if any, that
Grantor’s signature is required thereon) or authenticating the filing of, such financing or continuation statements, or amendments
thereto, as may be necessary or desirable or that a Secured Party may request in order to perfect and preserve the security interest
purported to be created hereby, (C) furnishing to a Secured Party from time to time statements and schedules further identifying
and describing the Intellectual Property Collateral and such other reports in connection with the Collateral as a Secured Party
may reasonably request, all in reasonable detail, (D) if any Intellectual Property Collateral shall be in the possession of
a third party, notifying such Person of a Secured Party security interest created hereby and obtaining a written acknowledgment
from such Person that such Person holds possession of the Collateral for the benefit of a Secured Party, which such written acknowledgement
shall be in form and substance satisfactory to a Secured Party, (E) if required by Section 7 herein, executing and delivering
an assignment for security relating to the Intellectual Property Collateral, and (F) taking all actions required by applicable
law or by other law as applicable in any foreign jurisdiction.

 

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(b)          Maintenance
of Intellectual Property Collateral. Grantors shall not, without the express prior written consent of a Secured Party, sell,
encumber, pledge, hypothecate, dispose of or grant any other security interest in the Intellectual Property Collateral, regardless
of whether same is allegedly or expressly inferior to the security interest granted hereby. Grantors shall pay, at the cost and
expense of Grantors, prior to delinquency, any tax, charge, lien or assessment against the Intellectual Property Collateral. Subject
to Sections 4(c) and 4(d) herein, Grantors shall take all actions necessary or reasonable to maintain the value of all Intellectual
Property Collateral, including, but not limited to, the payment of all fees and expenses required to be paid to maintain, renew,
file, document or otherwise maintain in effect all Patents, Trademarks, Copyrights and other Intellectual Property Collateral in
all jurisdictions where such Intellectual Property Collateral has been filed or where any patent applications have been made or
filed. Grantors shall perform all covenants and obligations of Grantors under the Intellectual Property Security Agreement. Any
licenses of the Intellectual Property Collateral shall be on commercially reasonable terms.

 

(c)          Conduct
of Business. Subject to the terms and conditions of this Agreement, each Grantor shall: (i) preserve and maintain its legal
existence and all of its material rights, privileges, licenses and franchises, including, but not limited to, all its Patent rights;
(ii) comply with the requirements of all applicable laws, rules, regulations and orders of governmental or regulatory authorities;
(iii) pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or
on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment , charge or levy
the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained;
and (iv) keep adequate records and books of account, in which complete entries will be made in accordance with generally accepted
accounting principles consistently applied.

 

6.            Additional
Provisions Concerning the Collateral.

 

(a)          Each
Grantor hereby authorizes Secured Parties to file, one or more financing or continuation statements, and amendments thereto, relating
to the Collateral. A photocopy or other reproduction of this Agreement or any financing statement covering the Intellectual Property
Collateral or any part thereof shall be sufficient as a financing statement or other filing with the U.S. Patent and Trademark
Office where permitted by law.

 

(b)          Each
Grantor hereby irrevocably appoints Secured Parties as its attorneys-in-fact and proxy, with full authority in the place and stead
of such Grantor and in the name of such Grantor or otherwise, from time to time in Secured Parties’ discretion, to take any
action and to execute any instrument which any Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, (i) to ask, demand, collect, sue for, recover, compound, receive and give acquittance
and receipts for moneys past due and currently due and to become due under or in respect of any Collateral; (ii) to receive, endorse,
and collect any drafts or other instruments, documents and chattel paper in connection with clause (i) above; (iii) to file any
claims or take any action or institute any proceedings which any Secured Party may deem necessary to enforce the rights of Secured
Parties’ with respect to any Collateral; and (iv) to execute assignments, licenses and other documents to enforce the rights
of Secured Parties with respect to any Collateral. This power is coupled with an interest and is irrevocable until all of the Obligations
are paid in full after the termination of the Secured Note.

 

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(c)          For
the purpose of enabling Secured Parties to exercise rights and remedies hereunder, only at such time as any Secured Party shall
be lawfully entitled to exercise such rights and remedies, and subject to the terms and conditions of this Agreement, and for no
other purpose, each Grantor hereby grants to each Secured Party, to the extent assignable, an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to such Grantor) to use, assign, license or sublicense any
Intellectual Property Collateral owned by such Grantor, with the exception of the exclusive license granted to Myant Capital Partners,
Inc. in Canadian Patents No. 2,276,448, wherever the same may be located, including in such license reasonable access to all media
in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout
thereof. Upon the payment in full of all of the Obligations after the cancellation or termination of the Secured Note, each Secured
Party (subject to Section 13(l) hereof) shall release and reassign to the applicable Grantor (exercisable without payment
of royalty or other compensation to such Secured Party) all of Secured Party’s right, title and interest in and to the
Intellectual Property Collateral, and the Licenses, all without recourse, representation or warranty whatsoever and at such Grantor’s
sole expense. Each Grantor hereby releases Secured Parties from any claims, causes of action and demands at any time arising out
of or with respect to any actions taken or omitted to be taken by any Secured Party under the powers of attorney granted herein
other than actions taken or omitted to be taken through any Secured Party’s gross negligence or willful misconduct, as determined
by a final determination of a court of competent jurisdiction.

 

(d)          If
any Grantor fails to perform any agreement or covenant contained herein, Secured Party may itself perform, or cause performance
of, such agreement or obligation, in the name of Grantors, or any one of them, or any Secured Party, and the expenses of any Secured
Party incurred in connection therewith, including, but not limited to, the amount of any fees or expenses advanced by any Secured
Party, in its sole discretion, to maintain any Patent or Trademark rights or filings in any jurisdiction, shall be payable by Grantors
pursuant to Section 8 hereof and shall be secured by the Collateral.

 

(e)          The
powers conferred on each Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, Secured Parties shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to any Collateral.

 

Anything herein to the
contrary notwithstanding (i) each Grantor shall remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations thereunder to the same extent as if this Agreement
had not been executed; (ii) the exercise by any Secured Party of any of its rights hereunder shall not release any Grantor
from any of its obligations under the Licenses or otherwise in respect of the Collateral; and (iii) Secured Parties’
agents shall not have any obligation or liability by reason of this Agreement under the Licenses or with respect to any of the
other Collateral, nor shall any Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned hereunder.

 

7.            Remedies
Upon Default. If any Default or Event of Default shall have occurred and be continuing:

 

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(a)          any
Secured Party may exercise in respect of the Collateral, in addition to any other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to
the affected Collateral), and also may (i) take absolute control of the Collateral, including, without limitation, transfer
into Secured Parties’ names or into the name of their nominee or nominees (to the extent a Secured Party has not theretofore
done so) and thereafter receive, for the benefit of any Secured Party, all payments made thereon, give all consents, waivers and
ratifications in respect thereof and otherwise act with respect thereto as though it were the outright owner thereof; (ii) require
each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of any Secured Party forthwith, assemble
all or part of the Collateral as directed by Secured Party and make it available to Secured Party at a place or places to be designated
by mutual agreement, and a Secured Party may enter into and occupy during normal business hours any premises owned or leased by
the Grantors, or any one of them, where the Collateral or any part thereof is located or assembled for a reasonable period in order
to effectuate Secured Parties’ rights and remedies hereunder or under law, without obligation to any Grantor in respect of
such occupation; and (iii) without notice except as specified below and without any obligation to prepare or process the Collateral
for sale, (A) sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Secured
Party’s offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other
terms as Secured Party may deem commercially reasonable and/or (B) lease, license or dispose of the Collateral or any part
thereof upon such terms as Secured Party may deem commercially reasonable. Secured Party may be the purchaser of all or any part
of the Collateral so sold and may purchase Collateral by set-off against the amount of Obligations secured hereby. Each Grantor
agrees that, to the extent notice of sale or any other disposition of the Collateral shall be required by law, at least twenty
(20) days’ notice to Grantors, or any one of them, of the time and place of any public sale or the time after which any private
sale or other disposition of the Collateral is to be made shall constitute reasonable notification. A Secured Party shall not be
obligated to make any sale or other disposition of Collateral regardless of notice of sale having been given. A Secured Party may
adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. Each Grantor hereby waives any claims against the Secured
Parties arising by reason of the fact that the price at which the Collateral may have been sold at a private sale was less than
the price which might have been obtained at a public sale or was less than the aggregate amount of the Obligations, even if a Secured
Party is the purchaser or accepts the first offer received and does not offer the Collateral to more than one offeree, and waives
all rights that any Grantor may have to require that all or any part of the Collateral be marshaled upon any sale (public or private)
thereof. Each Grantor hereby acknowledges that (i) any such sale of the Collateral by Secured Party shall be made without
warranty; (ii) a Secured Party may specifically disclaim any warranties of title, possession, quiet enjoyment or the like;
and (iii) such actions set forth in clauses (i) and (ii) above shall not adversely affect the commercial reasonableness
of any such sale of the Collateral. Upon any such sale, a Secured Party shall have the right to deliver, assign and transfer to
the purchaser the Collateral. Each purchaser at any such sale shall hold the purchased property absolutely free from any claim
or right of any nature, including any equity or right of redemption, of a Grantor, and each Grantor specifically waives all rights
of redemption, stay or appraisal which such Grantor has or may have hereunder under any rule or law or statute. In addition to
the foregoing, (i) upon written notice to any Grantor from a Secured Party, each Grantor shall cease any use of the Intellectual
Property Collateral or any trademark, patent or copyright similar thereto for any purpose described in such notice; (ii) a Secured
Party may, at any time and from time to time, upon twenty (20) days’ prior notice to any Grantor, license, whether general,
special or otherwise, and whether on an exclusive or non-exclusive basis, subject to any preexisting Licenses, any of the Intellectual
Property Collateral, throughout the universe for such term or terms, on such conditions, and in such manner, as Secured Party shall,
in its sole discretion, determine; and (iii) Secured Party may, at any time, pursuant to the authority granted in Section 6
hereof (such authority being effective upon the occurrence of a Default or an Event of Default execute and deliver on behalf of
the Grantors, or any one of them, one or more instruments of assignment of the Intellectual Property Collateral (or any application
or registration thereof), in form suitable for filing, recording or registration in any country.

 

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(b)          All
Cash Proceeds received by a Secured Party in respect of any sale of or collection from, or other realization upon, all or any part
of the Collateral may, in the discretion of a Secured Party, be held by a Secured Party as collateral for, and/or then or at any
time thereafter applied (after payment of any amounts payable to Secured Party pursuant to Section 8 hereof) in whole or
in part by a Secured Party against, all or any part of the Obligations in such order as the Secured Party shall elect. Any surplus
of such cash or Cash Proceeds held by a Secured Party and remaining after payment in full of all of the Obligations after termination
of the Secured Note shall be paid over to Grantors or whomsoever shall be contractually and/or lawfully entitled to receive the
same or as a court of competent jurisdiction shall direct.

 

(c)          In
the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which Secured Parties
are legally entitled, each Grantor shall be liable for the deficiency, together with interest thereon at the rate specified in
the Secured Note for interest on overdue principal thereof or such other rate as shall be fixed by applicable law, together with
the reasonable costs of collection and the reasonable fees, costs, expenses and other client charges of any attorneys employed
by any Secured Party to collect such deficiency.

 

(d)          Each
Grantor hereby acknowledges that if a Secured Party complies with any applicable state or federal law requirements in connection
with a disposition of the Collateral (including, but not limited to, complying with private placement offering restrictions and
requiring investment representatives from purchasers of the Pledged Interests or other securities), such compliance will not adversely
affect the commercial reasonableness of any sale or other disposition of the Collateral.

 

(e)          Secured
Parties shall not be required to marshal any present or future collateral security (including, but not limited to, this Agreement
and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security
or other assurances of payment in any particular order, and all of Secured Party’s rights hereunder and in respect of such
collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or
arising. To the extent that the Grantors lawfully may, each Grantor hereby agrees that it will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement of Secured Party’s rights under this Agreement
or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding
or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may,
each Grantor hereby irrevocably waive the benefits of all such laws.

 

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8.            Indemnity
and Expenses.

 

(a)          Each
Grantor agrees to defend, protect, indemnify and hold harmless each Secured Party (and its partners, officers, directors, employees,
attorneys, consultants and agents) from and against any and all claims, damages, losses, liabilities, obligations, penalties, fees,
costs and expenses (including, without limitation, reasonable legal fees, costs, expenses and disbursements of a Secured Party’s
counsel) to the extent that they arise out of or otherwise result from this Agreement (including, without limitation, enforcement
of this Agreement), except claims, losses or liabilities resulting solely and directly from a Secured Party’s gross negligence
or willful misconduct, as determined by a final judgment of a court of competent jurisdiction.

 

(b)          Each
Grantor agrees to pay to Secured Parties upon demand the amount of any and all costs and expenses, including the reasonable fees,
costs, expenses and disbursements of counsel for a Secured Party and of any experts (including, without limitation, any collateral
trustee which may act as collateral agents of Secured Party), which a Secured Party may incur in connection with (i) the termination
of this Agreement; (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization
upon, any Collateral; (iii) the enforcement of any of the rights of Secured Parties hereunder; or (iv) the failure by
any Grantor to perform or observe any of the provisions hereof.

 

9.            Security
Interest Absolute. All rights of Secured Parties, all Liens and all obligations of Grantors hereunder shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability of the Secured Note or any other agreement or instrument
relating thereto, (b) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of
the Obligations, or any other amendment, modification or waiver of or consent to any departure from the Secured Note, (c) any exchange
or release of, or non-perfection of any Lien on any Collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available
to, or a discharge of, any Grantor in respect of the Obligations. All authorizations and agencies contained herein with respect
to any of the Collateral are irrevocable and powers coupled with an interest.

 

10.          Reinstatement.
This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against a
Grantor for liquidation or reorganization, should a Grantor become insolvent or make an assignment for the benefit of any creditor
or creditors or should a receiver or trustee be appointed for all or any significant part of a Grantor’s assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any
obligee of the Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise,
all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

 

    	10

    	 

    

  

11.          Notices.
Whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by any other party, or whenever any of the parties desires to give or serve
upon another any such communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration
or other communication shall be in writing and shall be addressed to the party to be notified at the address set forth in this
Security Agreement, and given in the manner required by this Security Agreement.

 

12.          Advice
of Counsel. Each of the parties represents to each other party hereto that it has discussed this Agreement with its counsel.

 

13.          Miscellaneous.

 

(a)          No
amendment of any provision of this Agreement shall be effective unless it is in writing and signed by Grantors and each Secured
Party, and no waiver of any provision of this Agreement, and no consent to any departure by a party, or any one of them, therefrom,
shall be effective unless it is in writing and signed by the other party, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.

 

(b)          No
failure on the part of Secured Party to exercise, and no delay in exercising, any right hereunder or on the part of Secured Party
to exercise, and no delay in exercising, any rights under the Secured Note shall operate as a waiver thereof; nor shall any single
or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The rights
and remedies of each Secured Party provided in the Secured Note are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of each Secured Party under the Secured Note against any party thereto are not conditional
or contingent on any attempt by such Person to exercise any of its rights under the Secured Note against such party or against
any other Person, including, but not limited to, each Grantor.

 

(c)          Any
provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or thereof or affecting
the validity or enforceability of such provision in any other jurisdiction.

 

(d)          THIS
AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT AS REQUIRED
BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION
OR NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED
BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.

 

    	11

    	 

    

  

(e)          ANY
LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN THE COURTS OF
THE STATE OF TEXAS OR THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF TEXAS, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS
AND CONSENTS TO THE AUTHORITY TO GRANT SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

 

(f)          Each
Grantor irrevocably consents to the service of process of any of the aforesaid courts in any such action, suit or proceeding by
the mailing of copies thereof by registered or certified mail (or any substantially similar form of mail); postage prepaid, to
the Grantors at its address provided herein, such service to become effective ten (10) days after such mailing.

 

(g)          Nothing
contained herein shall affect the right of Secured Party to serve process in any other manner permitted by law or commence legal
proceedings or otherwise proceed against the Grantors, or any one of them, or any property of any Grantor in any other jurisdiction.

 

(h)          Each
Grantor irrevocably and unconditionally waives any right it may have to claim or recover in any legal action, suit or proceeding
referred to in this Section any special, exemplary, punitive or consequential damages.

 

(i)          EACH
GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) SECURED PARTY WAIVE ANY RIGHT THEY MAY HAVE TO TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE SECURED NOTE, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.

 

(j)          All
of the covenants, stipulations, promises and agreements in this Agreement contained by or on behalf of Grantors shall bind their
successors and assigns, whether so expressed or not; provided, however, that Grantors may not, without the prior
written consent of Secured Party, assign any rights, duties or obligations under this Agreement. Without the consent of Grantors,
a Secured Party may, in its sole discretion, at any time or from time to time while any portion of the indebtedness evidenced hereby
remains unpaid, transfer, sell, assign or pledge this Agreement (or any portion thereof), the Secured Note, and any of the other
documents or agreements executed by Grantors to secure the Secured Note.

 

(k)          This
Agreement shall create a continuing security interest in each of the Grantor’s Collateral and shall (i) remain in full force
and effect until the later of (A) the payment in full of the Obligations and (B) the termination of the Secured Note and (ii) be
binding on each Grantor and all other Persons who become bound as debtor to this Agreement in accordance with Section 9-203(d)
of the UCC and shall inure, together with all rights and remedies of Secured Party hereunder, to the benefit of Secured Party and
its successors, transferees and assigns.

 

    	12

    	 

    

  

(l)          Upon
the satisfaction in full of the Obligations and the payment in full of the Secured Note, (i) this Agreement and the security interests
created hereby shall terminate and all rights to the Collateral shall revert to Grantors and (ii) each Secured Party will, upon
Grantors’ request and at Grantors’ expense, without any representation, warranty or recourse whatsoever, (A) return
to Grantors such of the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof
and (B) execute and deliver to Grantors such documents as Grantors shall reasonably request to evidence such termination.

 

(m)          Section
headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other
purpose.

 

(n)          This
Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which
shall be deemed to be an original, but all of which taken together constitute one in the same Agreement. Delivery of an executed
counterpart of this Agreement by facsimile shall be equally effective as delivery of an original executed counterpart.

 

[SIGNATURE PAGE FOLLOWS]

 

    	13

    	 

    

  

IN WITNESS WHEREOF,
each Grantor has caused this Agreement to be executed and delivered by its duly authorized officer as of the date first set forth
above.

 

	 	GRANTORS:
	 	 
	 	ORYON TECHNOLOGIES, LLC

  

	 	By:	 
	 	Name:	 
	 	Title:	 

  

	 	ORYON TECHNOLOGIES, INC.

  

	 	By:	 
	 	Name:	 
	 	Title:	 

  

	 	ORYON TECHNOLOGIES LICENSING LLC

  

	 	By:	 
	 	Name:	 
	 	Title:	 

  

	 	SECURED PARTY:
	 	 
	 	MYANT CAPITAL PARTNERS, INC.

  

	 	By:	 
	 	Name:	 
	 	Title:	 

  

Signature Page to

Intellectual Property Security Agreement

  

    	 

    	 

    

   

	 	SECURED PARTY:
	 	 
	 	TONY CHAHINE

  

	 	By:	 
	 	Name:	 
	 	Title:	 

  

	 	SECURED PARTY:
	 	 
	 	M. RICHARD MARCUS

  

	 	By:	 
	 	Name:	 
	 	Title:	 

  

	 	SECURED PARTY:
	 	 
	 	MRM ACQUISITIONS, LLC

  

	 	By:	 
	 	Name:	 
	 	Title:	 

  

	 	SECURED PARTY:
	 	 
	 	ORYON CAPITAL, LLC

  

	 	By:	 
	 	Name:	 
	 	Title:	 

 

Signature Page to

Intellectual Property Security Agreement

 

    	 

    	 

    

  

ACKNOWLEDGEMENT OF GRANTORS

 

	STATE OF	 	 	§

	 	 	 	§

	COUNTY OF	 	 	§

 

On this _____ day of
November, 2014, before me personally appeared                              ,
proved to me on the basis of satisfactory evidence to be the person who executed the foregoing instrument on behalf of Oryon Technologies,
Inc., a Nevada corporation, who being by me duly sworn did depose and say that he is an authorized officer of said corporation,
the said instrument was signed on behalf of said corporation as authorized by its Board of Directors and that he acknowledged said
instrument to be the free act and deed of said corporation.

 

	 	 
	 	Notary Public in and for the State of                                        

 

	STATE OF	 	 	§

	 	§

	COUNTY OF	 	 	§

 

On this _____ day of
November, 2014, before me personally appeared                                ,
proved to me on the basis of satisfactory evidence to be the person who executed the foregoing instrument on behalf of Oryon Technologies,
LLC, a Texas limited liability company, who being by me duly sworn did depose and say that he is an authorized officer of said
limited liability company, the said instrument was signed on behalf of said limited liability company as authorized by its Board
of Managers and that he acknowledged said instrument to be the free act and deed of said limited liability company.

 

	 	 
	 	Notary Public in and for the State of                                        

 

Acknowledgment of Grantors to

Intellectual Property Security Agreement

  

    	 

    	 

    

  

EXHIBIT A

 

SUPPLEMENT TO

INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

This supplement, dated
_____________________, 2014, is delivered pursuant to Section 4(b) of that certain Intellectual Property Security Agreement, dated
as of July __, 2014 (as from time to time amended, modified or supplemented, the “Agreement”; the terms
defined therein and not otherwise defined herein being used as therein defined), made by Oryon Technologies, LLC and Oryon Technologies,
Inc. in favor of Myant Capital Partners, Inc., Tony Chahine, M. Richard Marcus, MRM Acquisitions, LLC, and Oryon Capital, LLC.
The undersigned hereby agrees that (i) this supplement may be attached to the Agreement; (ii) that it is a Grantor under the Agreement;
and (iii) that it will comply with and be subject to, including representations and warranties, all the terms and conditions of
the Agreement, including its schedules as supplemented hereby.

 

Schedules I, II and
III of the Agreement are hereby supplemented with the information relating to the undersigned set forth as Schedules I,
II and III hereto, respectively. All references in the Agreement to such Schedules shall be deemed to refer to such
Schedules, as supplemented hereby.

 

 

	 	[NAME OF GRANTOR]

  

	 	By:	 
	 	Name:	 
	 	Title:	 

 

Exhibit A to

Intellectual Property Security Agreement

 

    	 

    	 

    

 

Schedule I – Patents and Patent
Licenses

 

	 	 	Name	 	 	 	Country	 	patent No.	 	Application Number
	 	 	 	 	 	 	 	 	 	 	 
	1	 	Addressable PTF Receptor for Irradiated Images (Biometrics)	 		 	US	 	6936335	 	10/450,708
	 	 	 	 	 	 	 	 	 	 	 
	2	 	Addressable PTF Receptor for Irradiated Images (Biometrics)	 	 	 	PCT	 	 	 	PCT/US2001/050573 EPO 2001/987,503.8
	 	 	 	 	 	 	 	 	 	 	 
	3	 	Alerting System Using Elastomeric EL Lamp Structure	 	 	 	US	 	6271631	 	09/482,389
	4	 	Alerting System Using Elastomeric EL Lamp Structure	 	 	 	Taiwan	 	NI-147212	 	90100634
	 	 	 	 	 	 	 	 	 	 	 
	5	 	Deployment of EL Structures on Porous or Fibrous Substrates	 	 	 	US	 	6551726	 	09/870,184
	 	 	 	 	 	 	 	 	 	 	 
	6	 	Elastomeric EL Lamp on Apparel	 	 	 	US	 	6309764	 	09/523,434
	 	 	 	 	 	 	 	 	 	 	 
	7	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	US	 	5856030	 	08/774,743
	 	 	 	 	 	 	 	 	 	 	 
	8	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	South Korea	 	0307474	 	1999-7006007
	 	 	 	 	 	 	 	 	 	 	 
	9	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	Brazil	 	P099467	 	 
	 	 	 	 	 	 	 	 	 	 	 
	10	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	Australia	 	727172	 	57243/98
	 	 	 	 	 	 	 	 	 	 	 
	11	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	Belgium	 	0958713	 	97953511.9
	 	 	 	 	 	 	 	 	 	 	 
	12	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	France	 	0958713	 	97953511.9
	 	 	 	 	 	 	 	 	 	 	 
	13	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	Great Britain	 	0958713	 	97953511.9

 

    	 

    	 

    

  

	 	 	Name	 	 	 	Country	 	patent No.	 	Application Number
	 	 	 	 	 	 	 	 	 	 	 
	14	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	italy	 	0958713	 	97953511.9
	 	 	 	 	 	 	 	 	 	 	 
	15	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	Netherlands	 	0958713	 	97953511.9
	 	 	 	 	 	 	 	 	 	 	 
	16	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	Canada	 	 	 	2276448
	 	 	 	 	 	 	 	 	 	 	 
	17	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	Germany	 	69739899.4	 	97953511.9
	 	 	 	 	 	 	 	 	 	 	 
	18	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	Spain	 	0958713	 	97953511.9
	 	 	 	 	 	 	 	 	 	 	 
	19	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	Hong Kong	 	1023902	 	00102904.1
	 	 	 	 	 	 	 	 	 	 	 
	20	 	Elastomeric Electroluminescent Lamp	 	Main Patent	 	Mexico	 	216800	 	996183
	 	 	 	 	 	 	 	 	 	 	 
	21	 	Electroluminescent Lamp Membrane Switch (Continuation)	 	 	 	US	 	7,186,936	 	11/438,182
	 	 	 	 	 	 	 	 	 	 	 
	22	 	Electroluminescent Lamp Membrane Switch (Continuation)	 	 	 	EPO	 	 	 	6749406.2
	 	 	 	 	 	 	 	 	 	 	 
	23	 	Electroluminescent Lamp Membrane Switch (Continuation)	 	 	 	China	 	200680020154	 	200680020154
	 	 	 	 	 	 	 	 	 	 	 
	24	 	Electroluminescent Lamp Membrane Switch (Continuation)	 	 	 	Japan	 	 	 	Patent applicat 2008-515691
	 	 	 	 	 	 	 	 	 	 	 
	25	 	Electroluminescent Lamp Membrane Switch	 	 	 	US	 	7,049,536	 	11/148,216
	 	 	 	 	 	 	 	 	 	 	 
	26	 	Electroluminescent Lamp Membrane Switch (CIP)	 	 	 	US	 	58068114.54	 	11/452,441

 

    	-2-

    	 

    

 

	 	 	Name	 	 	 	Country	 	patent No.	 	Application Number
	 	 	 	 	 	 	 	 	 	 	 
	27	 	Electroluminescent Lamp Membrane Switch (CIP)	 		 	China	 		 	200780026715.2
	 	 	 	 	 	 	 	 	 	 	 
	28	 	Electroluminescent Lamp Membrane Switch (CIP)	 	 	 	Taiwan	 	 	 	096121099
	 	 	 	 	 	 	 	 	 	 	 
	29	 	Electroluminescent Lamp Membrane Switch (CIP)	 	 	 	EU	 	 	 	App No. 07835790.2
	 	 	 	 	 	 	 	 	 	 	 
	30	 	Electroluminescent System in Monolithic Structure	 	 	 	US	 	5,856,029	 	08/656,435
	 	 	 	 	 	 	 	 	 	 	 
	31	 	Electroluminescent System in Monolithic Structure	 	 	 	Spain	 	97928691.1	 	97928691.1
	 	 	 	 	 	 	 	 	 	 	 
	32	 	Electroluminescent System in Monolithic Structure	 	 	 	Great Britain	 	0906714	 	97928691.1
	 	 	 	 	 	 	 	 	 	 	 
	33	 	Electroluminescent System in Monolithic Structure	 	 	 	Germany	 	69729867.1	 	97928691.1
	 	 	 	 	 	 	 	 	 	 	 
	34	 	Electroluminescent System in Monolithic Structure	 	 	 	Hong Kong	 	1019184	 	99104302.7
	 	 	 	 	 	 	 	 	 	 	 
	35	 	Irradiated Images Described by Electrical Contact	 	 	 	US	 	6091838	 	09/093,549
	 	 	 	 	 	 	 	 	 	 	 
	36	 	Irradiated Images Described by Electrical Contact	 	 	 	Singapore	 	77972	 	200007177.9
	 	 	 	 	 	 	 	 	 	 	 
	37	 	Irradiated Images Described by Electrical Contact	 	 	 	Taiwan	 	NI-169617	 	88121056
	 	 	 	 	 	 	 	 	 	 	 
	38	 	Irradiated Images Described by Electrical Contact	 	 	 	Canada	 	 	 	2334620
	 	 	 	 	 	 	 	 	 	 	 
	39	 	Irradiated Images Described by Electrical Contact	 	 	 	Japan	 	4508417	 	2000-553915
	 	 	 	 	 	 	 	 	 	 	 
	40	 	Irradiated Images Described by Electrical Contact	 	 	 	South Korea	 	0603917	 	2000-7013978

 

    	-3-

    	 

    

  

	 	 	Name	 	 	 	Country	 	patent No.	 	Application Number
	 	 	 	 	 	 	 	 	 	 	 
	41	 	Irradiated Images Described by Electrical Contact	 		 	EPC	 		 	99927327.9
	 	 	 	 	 	 	 	 	 	 	 
	42	 	Membranous EL System in UV-Cured Urethane Envelope	 	 	 	US	 	6717361	 	09/974,941
	 	 	 	 	 	 	 	 	 	 	 
	43	 	Membranous EL System in UV-Cured Urethane Envelope	 	 	 	china	 	01817197.4	 	01817197.4
	 	 	 	 	 	 	 	 	 	 	 
	44	 	Membranous EL System in UV-Cured Urethane Envelope	 	 	 	EU	 	 	 	01988130.9 PCT/US01/42660
	 	 	 	 	 	 	 	 	 	 	 
	45	 	Membranous EL System in UV-Cured Urethane Envelope	 	 	 	Taiwan	 	NI-185118	 	90125110
	 	 	 	 	 	 	 	 	 	 	 
	46	 	Membranous EL System in UV-Cured Urethane Envelope	 	 	 	Japan	 	 	 	2002-548747 is JP app. no.  PCT/US01/42660
	 	 	 	 	 	 	 	 	 	 	 
	47	 	Membranous Monolithic EL Structure with Urethane Carrier Patent	 	 	 	US	 	6696786	 	09/974,918
	 	 	 	 	 	 	 	 	 	 	 
	48	 	Membranous Monolithic EL Structure with Urethane Carrier Patent	 	 	 	Japan	 	4190884	 	2000-5354006
	 	 	 	 	 	 	 	 	 	 	 
	49	 	Membranous Monolithic EL Structure with Urethane Carrier Patent	 	 	 	Taiwan	 	NI-185542	 	90125106
	 	 	 	 	 	 	 	 	 	 	 
	50	 	Membranous Monolithic EL Structure with Urethane Carrier Patent	 	 	 	China	 	01817193.1	 	01817193.1

 

    	-4-

    	 

    

 

	 	 	Name	 	 	 	Country	 	patent No.	 	Application Number
	 	 	 	 	 	 	 	 	 	 	 
	51	 	Method of Construction of Elastomeric EL Lamp	 		 	US	 	6270834	 	09/173,404
	 	 	 	 	 	 	 	 	 	 	 
	52	 	Method of Construction of Elastomeric EL Lamp	 	 	 	China	 	99125456.2	 	99125456.2
	 	 	 	 	 	 	 	 	 	 	 
	53	 	Method and Apparatus for Illuminating a Key Pad	 	 	 	US	 	6824288	 	10/163,749
	 	 	 	 	 	 	 	 	 	 	 
	54	 	Method for Constructing EL System in Monoithic Structure	 	 	 	US	 	5980976	 	09173104
	 	 	 	 	 	 	 	 	 	 	 
	55	 	PTF Touch Enabled Image Generator	 	 	 	US	 	6606399	 	09/924,436
	 	 	 	 	 	 	 	 	 	 	 
	56	 	UV-Curable Inks for PTF Laminates (Including Flexible Circuitry)	 	 	 	US	 	 	 	10/476,494
	 	 	 	 	 	 	 	 	 	 	 
	57	 	UV-Curable Inks for PTF Laminates (Including Flexible Circuitry)	 	 	 	Japan	 	2003-505946	 	 
	 	 	 	 	 	 	 	 	 	 	 
	58	 	UV-Curable Inks for PTF Laminates (Including Flexible Circuitry)	 	 	 	China	 	02802649.7	 	02802649.7
	 	 	 	 	 	 	 	 	 	 	 
	59	 	Transparent EL Lamp Patent	 	 	 	US	 	8,106,578	 	11/638,304
	 	 	 	 	 	 	 	 	 	 	 
	60	 	Highly Transmissive Electroluminescent Lamp	 	 	 	PCT	 	 	 	PCT/US2007/024820
	 	 	 	 	 	 	 	 	 	 	 
	61	 	Translucent Layer including Metal/Metal Oxide	 	 	 	US	 	6,261,633	 	09/173,521

 

    	-5-

    	 

    

 

	 	 	Name	 	 	 	Country	 	patent No.	 	Application Number
	 	 	 	 	 	 	 	 	 	 	 
	62	 	Elastomeric Electroluminescent Lamp	 		 	Japan	 		 	530275/98
	 	 	 	 	 	 	 	 	 	 	 
	63	 	Electroluminescent Lamp Graphic Overlay	 	 	 	US	 	 	 	11/148,215
	 	 	 	 	 	 	 	 	 	 	 
	64	 	Electroluminescent Lamp Membrane Switch	 	 	 	PCT	 	2006/012801	 	 
	 	 	 	 	 	 	 	 	 	 	 
	65	 	Electroluminescent Lamp Membrane Switch	 	 	 	US	 	8,110,765 B2	 	11/452,441
	 	 	 	 	 	 	 	 	 	 	 
	66	 	Hybrid Electroluminescent Assembly	 	 	 	US	 	8,727,550	 	12/402,648
	 	 	 	 	 	 	 	 	 	 	 
	67	 	Flexible Interconnect Circuitry System	 	 	 	US	 	 	 	14/252,027
	 	 	 	 	 	 	 	 	 	 	 
	68	 	Electroluminescent Lamp Membrane Switch (CIP)	 	 	 	 Hong Kong	 	 	 	Pending

 

Patent Licenses

 

The License Agreement referenced in the Subscription Agreement
by and between Oryon Technologies, Inc. and EFL Tech, B.V., and attached thereto as Exhibit G.

License Agreement by and among Oryon Technologies, Inc., Oryon
Technologies, LLC, and Oryon Technologies Licensing, LLC and Calmatech B.V., made as of March 28, 2104 (the “Calmatech License”),
provided however that Grantors state that the Calmatech License is void, terminated, and not in effect and therefore the Calmatech
License will be deemed removed from this schedule if Grantors provide evidence of its termination and voidness, or provide representations
and warranties of its termination and voidness.

 

    	-6-

    	 

    

  

Schedule II - Trademarks

 

	Serial
 Number	 	Reg.
 Number	 	Word Mark	 	Check
 Status	 	Live/Dead	 	Registered Under
	 	 	 	 	 	 	 	 	 	 	 
	85762309	 	4499030	 	E Elastolite Personal Lighting System	 	TSDR	 	LIVE	 	OryonTechnologies, LLC
	 	 	 	 	 	 	 	 	 	 	 
	85762301	 	4499029	 	Elastolite Personal Lighting System	 	TSDR	 	LIVE	 	OryonTechnologies, LLC
	 	 	 	 	 	 	 	 	 	 	 
	78847064	 	3327569	 	Elastolite	 	TSDR	 	LIVE	 	OryonTechnologies, LLC
	 	 	 	 	 	 	 	 	 	 	 
	75894559	 	2687776	 	Elastolite	 	TSDR	 	LIVE	 	OryonTechnologies, LLC

 

    	 

    	 

    

  

Schedule III – Copyrights
and Copyright Licenses

 

NoneExhibit 10.1

 

SUBSCRIPTION AGREEMENT

 

October  16, 2014

 

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

 

Ladies and Gentlemen:

 

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

 

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

 

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

 

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

 

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

 

 

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

 

	
 
    	
Subscription   amount in shares and U.S. dollars:
    
	
 
    	
 
    
	
 
    	
 
    	
Dollars:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Shares:
    	
 
    
	
 
    	
 
    
	
 
    	
Name   of Investor:
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Print   Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
Mailing   Address:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
with   a copy to:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Type   of Entity:
    
	
 
    	
Jurisdiction   of Organization:
    
	
 
    	
Tax   ID No.:
    
	
 
    	
Contact   Name:
    
	
 
    	
Telephone:
    
	
 
    	
Email   Address:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name   under which Common Stock is to be issued (if different from above): same as   above
    
	
 
    	
 
    
	
 
    	
Address   to which share certificates or statement of ownership are to be sent (if   different from mailing address above):
    

 

2

 

	
Agreed   and Accepted as of the date first set forth above:
    	
 
    	
 
    
	
BROADWAY   FINANCIAL CORPORATION
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
Name:
    	
Wayne-Kent   A. Bradshaw
    	
 
    	
 
    
	
Title:
    	
President   and Chief Executive Officer
    	
 
    	
 
    

 

3

 

INSTRUCTION SHEET FOR INVESTOR

 

(to be read in conjunction with the entire Agreement)

 

Complete the following items in the Agreement:

 

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

 

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

 

3.                                      Return the signed Agreement to:

 

Broadway Financial Corporation

5055 Wilshire Boulevard, Suite 500

Los Angeles, California  90036

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

Fax:                       (323) 634-1732

Email:  WBradshaw@broadwayfederalbank.com

 

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

 

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

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

Bank ABA #:                                                                                              322070145

Bank Account #:                                                                           80-000931-9

 

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

 

4

 

ANNEX A

 

TERMS AND CONDITIONS FOR THE PURCHASE OF COMMON STOCK

 

5

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE 1 PURCHASE; CLOSING
    	
1
    
	
 
    	
 
    
	
1.1
    	
Issuance, Sale and Purchase
    	
1
    
	
 
    	
 
    	
 
    
	
1.2
    	
Closing; Deliverables for the Closing; Conditions to the   Closing
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE 2 REPRESENTATIONS   AND WARRANTIES
    	
4
    
	
 
    	
 
    
	
2.1
    	
Certain Terms
    	
4
    
	
 
    	
 
    	
 
    
	
2.2
    	
Representations and Warranties of the Company
    	
5
    
	
 
    	
 
    	
 
    
	
2.3
    	
Representations and Warranties of the Investor
    	
18
    
	
 
    	
 
    	
 
    
	
ARTICLE 3 COVENANTS
    	
21
    
	
 
    	
 
    
	
3.1
    	
Conduct of Business Prior to Closing
    	
21
    
	
 
    	
 
    	
 
    
	
3.2
    	
Confidentiality
    	
21
    
	
 
    	
 
    	
 
    
	
3.3
    	
Commercially Reasonable Efforts
    	
21
    
	
 
    	
 
    	
 
    
	
3.4
    	
Legend
    	
22
    
	
 
    	
 
    	
 
    
	
3.5
    	
Certain Other Transactions
    	
22
    
	
 
    	
 
    	
 
    
	
3.6
    	
Exchange Listing
    	
23
    
	
 
    	
 
    	
 
    
	
3.7
    	
Stockholders Meeting
    	
23
    
	
 
    	
 
    	
 
    
	
3.8
    	
Registration Rights
    	
24
    
	
 
    	
 
    	
 
    
	
ARTICLE 4 TERMINATION
    	
31
    
	
 
    	
 
    
	
4.1
    	
Termination
    	
31
    
	
 
    	
 
    	
 
    
	
4.2
    	
Effects of Termination
    	
32
    
	
 
    	
 
    	
 
    
	
ARTICLE 5 INDEMNITY
    	
32
    
	
 
    	
 
    
	
5.1
    	
Indemnification by the Company
    	
32
    
	
 
    	
 
    	
 
    
	
5.2
    	
Indemnification by the Investor
    	
33
    
	
 
    	
 
    	
 
    
	
5.3
    	
Notification of Claims
    	
34
    
	
 
    	
 
    	
 
    
	
5.4
    	
Indemnification Payment
    	
35
    
	
 
    	
 
    	
 
    
	
5.5
    	
Exclusive Remedies
    	
36
    
	
 
    	
 
    	
 
    
	
ARTICLE 6 MISCELLANEOUS
    	
36
    
	
 
    	
 
    
	
6.1
    	
Survival
    	
36
    
	
 
    	
 
    	
 
    
	
6.2
    	
Other Definitions
    	
36
    
	
 
    	
 
    	
 
    
	
6.3
    	
Amendment and Waivers
    	
39
    
	
 
    	
 
    	
 
    
	
6.4
    	
Counterparts and Facsimile
    	
39
    

 

i

 

	
6.5
    	
Governing Law
    	
39
    
	
 
    	
 
    	
 
    
	
6.6
    	
Jurisdiction
    	
39
    
	
 
    	
 
    	
 
    
	
6.7
    	
WAIVER OF JURY TRIAL
    	
40
    
	
 
    	
 
    	
 
    
	
6.8
    	
Notices
    	
40
    
	
 
    	
 
    	
 
    
	
6.9
    	
Entire Agreement
    	
41
    
	
 
    	
 
    	
 
    
	
6.10
    	
Successors and Assigns
    	
41
    
	
 
    	
 
    	
 
    
	
6.11
    	
Captions
    	
41
    
	
 
    	
 
    	
 
    
	
6.12
    	
Severability
    	
41
    
	
 
    	
 
    	
 
    
	
6.13
    	
Third Party Beneficiaries
    	
41
    
	
 
    	
 
    	
 
    
	
6.14
    	
Public Announcements
    	
42
    
	
 
    	
 
    	
 
    
	
6.15
    	
Specific Performance
    	
42
    
	
 
    	
 
    	
 
    
	
6.16
    	
No Recourse
    	
42
    
	
 
    	
 
    	
 
    
	
Exhibit A - Summary of Modification Terms
    	
 
    
	
 
    	
 
    
	
Appendix I - Selling Stockholder Questionnaire
    	
 
    

 

ii

 

INDEX OF DEFINED TERMS

 

	
Defined Term
    	
 
    	
Section
    
	
 
    	
 
    	
 
    
	
Acceptance Date
    	
 
    	
Subscription Agreement
    
	
Action
    	
 
    	
2.2(f)
    
	
Affiliate
    	
 
    	
6.2(a)
    
	
Agency
    	
 
    	
6.2(b)
    
	
Agreement
    	
 
    	
Subscription Agreement
    
	
Agreements
    	
 
    	
Recital B
    
	
Bank
    	
 
    	
2.2(a)
    
	
Benefit Plans
    	
 
    	
2.2(u)(i)
    
	
Board of Directors
    	
 
    	
6.2(c)
    
	
Business Day
    	
 
    	
6.2(d)
    
	
Capital Stock
    	
 
    	
6.2(e)
    
	
Capitalization Date
    	
 
    	
2.2(c)(ii)
    
	
Change in Control
    	
 
    	
6.2(f)
    
	
CJA Letter Agreement
    	
 
    	
2.3(j)
    
	
Closing
    	
 
    	
1.2(a)
    
	
Closing Date
    	
 
    	
1.2(a)
    
	
Code
    	
 
    	
6.2(g)
    
	
Common Stock
    	
 
    	
Subscription Agreement
    
	
Company
    	
 
    	
Subscription Agreement
    
	
Company Employees
    	
 
    	
2.2(u)(i)
    
	
Company Financial Statements
    	
 
    	
2.2(g)
    
	
Company Indemnified Parties
    	
 
    	
5.2(a)
    
	
Company Insurance Policies
    	
 
    	
2.2(s)
    
	
Company Preferred Stock
    	
 
    	
2.2(c)(i)
    
	
Company Reports
    	
 
    	
2.2(h)
    
	
Company Specified Representations
    	
 
    	
6.2(h)
    
	
Company Stock Plans
    	
 
    	
2.2(c)(iii)
    
	
Company Subsidiaries
    	
 
    	
2.2(b)
    
	
Company Subsidiary
    	
 
    	
2.2(b)
    
	
Confidentiality Agreement
    	
 
    	
3.2
    
	
control, controlling, controlled by and under common   control with
    	
 
    	
6.2(a)
    
	
Debentures
    	
 
    	
Recital   C
    
	
Deductible
    	
 
    	
5.1(b)
    
	
Disclosure Schedule
    	
 
    	
6.2(i)
    
	
EESA
    	
 
    	
2.2(u)(iii)
    
	
Effective Date
    	
 
    	
3.8(j)(i)
    
	
Effectiveness Deadline
    	
 
    	
3.8(j)(ii)
    
	
employee benefit plan
    	
 
    	
2.2(u)(i)
    

 

iii

 

	
Defined Term
    	
 
    	
Section
    
	
 
    	
 
    	
 
    
	
ERISA
    	
 
    	
2.2(u)(i)
    
	
Exchange Act
    	
 
    	
2.2(h)
    
	
FDI Act
    	
 
    	
2.2(b)
    
	
FDIC
    	
 
    	
2.2(b)
    
	
Federal Reserve
    	
 
    	
2.2(a)
    
	
Filing Deadline
    	
 
    	
3.8(a)(i)
    
	
finally determined
    	
 
    	
5.4
    
	
GAAP
    	
 
    	
6.2(j)
    
	
Governmental Consent
    	
 
    	
6.2(k)
    
	
Governmental Entity
    	
 
    	
6.2(l)
    
	
Holder
    	
 
    	
3.8(j)(iii)
    
	
Indemnified Party
    	
 
    	
5.3(a)
    
	
Indemnifying Party
    	
 
    	
5.3(a)
    
	
Indemnitee
    	
 
    	
3.8(g)(i)
    
	
Indenture
    	
 
    	
Recital   C
    
	
Insider
    	
 
    	
2.2(bb)
    
	
Insurer
    	
 
    	
6.2(m)
    
	
Investment
    	
 
    	
Recital A
    
	
Investment Manager
    	
 
    	
2.3(f)
    
	
Investor
    	
 
    	
Subscription Agreement
    
	
Investor Indemnified Parties
    	
 
    	
5.1(a)
    
	
Investor Specified Representations
    	
 
    	
6.2(n)
    
	
Investors
    	
 
    	
Recital B
    
	
Knowledge
    	
 
    	
6.2(o)
    
	
Law
    	
 
    	
2.2(p)
    
	
Liens
    	
 
    	
2.2(d)(ii)
    
	
Loan Investor
    	
 
    	
6.2(p)
    
	
Losses
    	
 
    	
6.2(q)
    
	
Material Adverse Effect
    	
 
    	
2.1(a)
    
	
Material Contract
    	
 
    	
2.2(r)
    
	
Modification
    	
 
    	
Recital   C
    
	
NASDAQ
    	
 
    	
2.2(d)
    
	
Non-Voting   Common Stock
    	
 
    	
2.2(c)(i)
    
	
OFAC
    	
 
    	
2.2(m)
    
	
Other Investors
    	
 
    	
Recital B
    
	
Other Private Placements
    	
 
    	
Recital B
    
	
Per Share Purchase Price
    	
 
    	
Subscription Agreement
    
	
Person
    	
 
    	
6.2(r)
    
	
Placement Agent
    	
 
    	
2.2(x)
    
	
Potential Investor
    	
 
    	
2.3(j)
    
	
Previously Disclosed
    	
 
    	
2.1(b)
    
	
Purchase Price
    	
 
    	
1.1
    
	
Register, registered and registration
    	
 
    	
3.8(j)(iv)
    
	
Registrable Securities
    	
 
    	
3.8(j)(v)
    
	
Registration Expenses
    	
 
    	
3.8(j)(vi)
    
	
Registration Termination Date
    	
 
    	
3.8(a)(i)
    

 

iv

 

	
Defined Term
    	
 
    	
Section
    
	
 
    	
 
    	
 
    
	
Regulatory Agreement
    	
 
    	
2.2(q)
    
	
Regulatory Order or Regulatory Orders
    	
 
    	
2.2(p)
    
	
Rule 158, Rule 159A, Rule 405 and   Rule 415
    	
 
    	
3.8(j)(vii)
    
	
SDN List
    	
 
    	
2.2(m)
    
	
SEC
    	
 
    	
2.1(b)
    
	
Securities Act
    	
 
    	
Subscription Agreement
    
	
Selling Expenses
    	
 
    	
3.8(j)(viii)
    
	
Shelf Registration Statement
    	
 
    	
3.8(a)(ii)
    
	
SLHC Act
    	
 
    	
2.2(a)
    
	
Subsidiary
    	
 
    	
6.2(s)
    
	
Suspension Period
    	
 
    	
3.8(d)
    
	
Tax or Taxes
    	
 
    	
6.2(t)
    
	
Tax Return
    	
 
    	
6.2(u)
    
	
Third Party Claim
    	
 
    	
5.3(a)
    
	
Transfer Agent
    	
 
    	
Subscription Agreement
    
	
Trustee
    	
 
    	
Recital   C
    
	
Voting Debt
    	
 
    	
2.2(c)(iv)
    
	
Voting Securities
    	
 
    	
6.2(v)
    

 

v

 

RECITALS

 

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

 

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

 

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

 

ARTICLE 1

 

PURCHASE; CLOSING

 

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

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

(c)                                  Closing Conditions.

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

ARTICLE 2

 

REPRESENTATIONS AND WARRANTIES

 

2.1                               Certain Terms.

 

(a)                                 As used in this Agreement, the term “Material Adverse Effect” means any circumstance, event, change, development or effect that, individually or in the aggregate, would reasonably be expected to (i) result in a material adverse effect on the assets, liabilities, business, financial condition or results of operations of the Company and the Company Subsidiaries, taken as a whole, or (ii) materially impair or delay the ability of the Company or any of the Company Subsidiaries to perform its or their obligations under this Agreement to consummate the Closing or any of the transactions contemplated hereby; provided, however, that in determining whether a Material Adverse Effect has occurred under clause (i), there shall be excluded any circumstance, event, change, development or effect to the extent resulting from (A) actions or omissions of the Company or any Company Subsidiary expressly required or contemplated by the terms of this Agreement, (B) changes after the date hereof in general economic conditions in the United States, including financial market volatility or downturns, or in the markets in which the Company and the Company Subsidiaries operate, (C) changes after the date hereof affecting the banking industry generally, (D) any changes after the date hereof in applicable Laws or accounting rules or principles, including changes in GAAP, (E) changes in the market price or trading volume of the Common Stock or the Company’s other outstanding securities (but not the underlying causes of such changes) or (F) any failure by the Company or any of the Company Subsidiaries to meet any internal projections or forecasts with regard to the assets, liabilities, business, financial condition or results of operations of the Company and the Company Subsidiaries, taken as a whole (but not the underlying causes of such failure), in each

 

4

 

case to the extent that such circumstance, event, change, development or effect referred to in clauses (B), (C) and (D) do not have a disproportionate effect on the Company and the Company Subsidiaries compared to other participants in the industries or markets in which the Company and the Company Subsidiaries operate.

 

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

 

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

 

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

 

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under the Savings and Loan Holding Company Act, as amended, 12 U.S.C. 1467a (the “SLHC Act”).

 

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

 

(c)                                  Capitalization.

 

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

 

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

 

(iii)                               As of the close of business on the Capitalization Date, other than in respect of awards outstanding under or issuable pursuant to the Company’s 1996 Long-Term Incentive Plan, 1996 Stock Option Plan and 2008 Long-Term Incentive Plan (the “Company Stock Plans”) in respect of which an aggregate of 2,000,000 shares of Common Stock have been reserved for issuance, no shares of Common Stock or Company Preferred Stock were reserved for issuance.  Since the Capitalization Date and through the date of this Agreement, except in connection with this Agreement and the transactions contemplated hereby, including the Investment and the Other Private Placements, the Company has not (A) issued or authorized the issuance of any shares of Common Stock or Company Preferred Stock, or any securities convertible into or exchangeable or exercisable for shares of Common Stock or Company Preferred Stock, (B) reserved for issuance any shares of Common Stock or Company Preferred Stock or (C) repurchased or redeemed, or authorized the repurchase or redemption of, any shares of Common Stock or Company Preferred Stock.

 

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(iv)                              All of the issued and outstanding shares of Common Stock and Company Preferred Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, except as set forth in the CJA Letter Agreement (as defined below).  None of the outstanding shares of Capital Stock or other securities of the Company or any of the Company Subsidiaries was issued, sold or offered by the Company or any Company Subsidiary in violation of the Securities Act or the securities or blue sky laws of any state or jurisdiction.  No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which the shareholders of the Company may vote (“Voting Debt”) are issued and outstanding.

 

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

 

(d)                                 Authorization; No Conflicts; Shareholder Approval.

 

(i)                                     The Company has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  Subject to receipt of the approval by the Company’s stockholders required by the NASDAQ Stock Market (“NASDAQ”) pursuant to Rule 5635 (c) and (d) and any other applicable provisions of the Nasdaq Listing Rules to issue Common Stock in connection with the Investment and the Other Private Placements and the approval by the Company’s stockholders of an amendment to Article FOURTH of the Company’s Certificate of Incorporation to increase the number of shares of Non-Voting Common Stock the Company is authorized to issue to a number that will permit the issuance and sale of all of such stock contemplated by the Agreements, the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no further approval or authorization is required on the part of the Company or its shareholders.  The Board of Directors has unanimously approved the transactions contemplated by this Agreement, including the Investment, the Other Private Placements and the Modification.  This Agreement has been duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery by the Investor, is the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles (whether applied in equity or at law).

 

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

 

(e)                                  Governmental Consents.  Except as set forth on Section 2.2(e) of the Disclosure Schedule, no Governmental Consents are necessary for the execution and delivery of this Agreement or for the sale by the Company of Common Stock to the Investor pursuant to this Agreement.

 

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

 

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

 

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thereto, (iii) have been prepared in accordance with GAAP applied on a consistent basis and (iv) present fairly in all material respects the consolidated financial position of the Company and the Company Subsidiaries at the dates and the consolidated results of operations, changes in shareholders’ equity and cash flows of the Company and the Company Subsidiaries for the periods stated therein.

 

(h)                                 Reports.  Since December 31, 2010, the Company and each Company Subsidiary have filed all material reports, registrations, documents, filings, statements and submissions, together with any required amendments thereto, that they were required to file with any Governmental Entity (the foregoing, collectively, being referred to herein as the “Company Reports”) and have paid all material fees and assessments due and payable in connection therewith.  As of their respective filing dates, or as subsequently amended prior to the date hereof, the Company Reports complied in all material respects with all statutes and applicable rules and regulations of the applicable Governmental Entities.  As of the date of this Agreement, there are no outstanding comments from the SEC or any other Governmental Entity with respect to any Company Report that were the subject of written correspondence that have not been resolved.  The Company Reports, including the documents incorporated by reference in each of them, each contained all the information required to be included in it and, when it was filed and, as of the date of each such Company Report filed with the SEC, or if amended prior to the date of this Agreement, as of the date of such amendment, did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made in it, in light of the circumstances under which they were made, not misleading and complied as to form in all material respects with the applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  No executive officer of the Company has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.

 

(i)                                     Internal Accounting and Disclosure Controls.  The records, systems, controls, data and information of the Company and the Company Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Company or the Company Subsidiaries or accountants (including all means of access thereto and therefrom) or reputable banking industry service providers, except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the system of internal accounting controls described below in this Section 2.2(i).  The Company (i) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) intended to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the chief executive officer or executive chairman and the chief financial officer of the Company by others within those entities, and (ii) has disclosed, based on its most recent evaluation prior to the date of this Agreement, to the Company’s outside auditors and the audit committee of the Board of Directors (A) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information, and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.  As of the date of this

 

9

 

Agreement, the Company has no Knowledge of any reason that its outside auditors and its chief executive officer or executive chairman and chief financial officer shall not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, without qualification, when next due.  Since December 31, 2010, neither the Company nor any Company Subsidiary nor, to the Knowledge of the Company, any director, officer, employee, auditor, accountant or representative of the Company or any Company Subsidiary has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any Company Subsidiary or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that the Company or any Company Subsidiary has engaged in questionable accounting or auditing practices.

 

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

 

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

 

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

 

(m)                             Bank Secrecy Act; Anti-Money Laundering; OFAC; and Customer Information.  The Company is not aware of, has not been advised of, and, to the Knowledge of

 

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

 

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

 

(o)                                 Absence of Certain Changes.  Since December 31, 2013 and except as Previously Disclosed or as required or contemplated by the terms of this Agreement, (i) the Company and the Company Subsidiaries have conducted their respective businesses in all material respects in the ordinary and usual course of business consistent with past practices, (ii) none of the Company or any Company Subsidiary has issued any securities (other than Common Stock and other equity-based awards issued prior to the date of this Agreement pursuant to the Company Stock Plans and reflected in the numbers set forth in Section 2.2(c)), (iii) the Company has not made or declared any distribution in cash or in kind to its shareholders or issued or repurchased any shares of its Capital Stock, (iv) through (and including) the date of

 

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this Agreement, no fact, event, change, condition, development, circumstance or effect has occurred that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (v) no material default (or event which, with notice or lapse of time, or both, would constitute a material default) exists on the part of the Company or any Company Subsidiary in the due performance and observance of any term, covenant or condition of any agreement to which the Company or any Company Subsidiary is a party and which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(p)                                 Compliance with Laws.  The Company and each Company Subsidiary have all material permits, licenses, franchises, authorizations, orders and approvals of, and have made all filings, applications and registrations with, Governmental Entities that are required in order to permit them to own or lease their properties and assets and to carry on their business as presently conducted and that are material to the business of the Company and each Company Subsidiary.  The Company and each Company Subsidiary have complied in all material respects and (i) are not in default or violation in any respect of, (ii) are not under investigation with respect to, and (iii) have not been threatened to be charged with or given notice of any material violation of, any applicable material domestic (federal, state or local) or foreign law, statute, ordinance, license, rule, regulation, policy or guideline, order, demand, writ, injunction, decree or judgment of any Governmental Entity (each, a “Law”), other than such noncompliance, defaults or violations as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  Except for statutory or regulatory restrictions of general application, restrictions applicable to recipients of funds under the Troubled Asset Relief Program of the Treasury, the Order to Cease and Desist issued by the Office of Thrift Supervision to the Company with the Company’s consent, effective September 9, 2010, and the Consent Order issued by the Office of the Comptroller of the Currency to the Bank with the Bank’s consent, effective October 30, 2013 (each, individually a “Regulatory Order” and, together, the “Regulatory Orders”), no Governmental Entity has placed any material restriction on the business or properties of the Company or any of the Company Subsidiaries.  As of the date hereof, the Bank has a Community Reinvestment Act rating of “outstanding.”

 

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

 

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notice from any Governmental Entity indicating that either the Company or any of the Company Subsidiaries is not in compliance in all material respects with any such Regulatory Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(ix)                              any contract or agreement containing any (x) non-competition or exclusive dealing obligations or other obligation which purports to limit or restrict

 

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in any respect the ability of the Company or any Company Subsidiary to solicit customers or the manner in which, or the localities in which, all or any portion of the business of the Company or the Company Subsidiaries is or can be conducted, or (y) right of first refusal or right of first offer or similar right or that limits or purports to limit the ability of the Company or any of the Company Subsidiaries to own, operate, sell, transfer, pledge or otherwise dispose of any material assets or business.

 

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

 

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

 

(t)                                    Title.  The Company and the Company Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and valid title to all material personal property owned by them, in each case free and clear of all Liens, except for

 

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Liens which do not materially affect the value of such property or do not interfere with the use made and proposed to be made of such property by the Company or any Company Subsidiary.  Any real property and facilities held under lease by the Company or the Company Subsidiaries are valid, subsisting and enforceable leases with such exceptions that are not material and do not interfere with the use made and proposed to be made of such property and facilities by the Company or the Company Subsidiaries.

 

(u)                                 Employee Benefits.

 

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

 

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

 

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

 

(v)                                 Taxes.  All material Tax Returns required to be filed by, or on behalf of, Company or the Company Subsidiaries have been timely filed, or will be timely filed, in

 

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

 

(w)                               Labor.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(b)                                 Authorization; No Conflicts.

 

(i)                                     The Investor has the necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by its board of directors, general partner or managing members, investment committee, investment adviser or other authorized person, as the case may be, and no further approval or authorization by any of its shareholders, partners or other equity owners, as the case may be, is required.  This Agreement has been duly and validly executed and delivered by the Investor and, assuming due authorization, execution and delivery by the Company is the valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms (except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).

 

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

 

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perform its obligations under this Agreement or consummate the transactions contemplated hereby on a timely basis.

 

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

 

(d)                                 Purchase for Investment; Accredited Investor Status.  The Investor acknowledges that the Common Stock to be purchased by the Investor pursuant to this Agreement has not been registered under the Securities Act or under any state securities laws and may not be resold or transferred by the Investor without such registration or appropriate reliance on any available exemption from such requirements.  The Investor (i) is acquiring the Common Stock pursuant to an exemption from the registration requirements of the Securities Act and other applicable securities laws solely for investment with no present intention to distribute any of the Common Stock to any Person, (ii) will not sell or otherwise dispose of any of the Common Stock, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws, (iii) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of its investment in the Common Stock and of making an informed investment decision and (iv) is an “accredited investor” (as that term is defined by Rule 501 of the Securities Act).

 

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

 

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

 

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Investors or any of their respective Affiliates, in each case, the identity of which is known to the Investor, (ii) the Company or (iii) the Company Subsidiaries, on the other hand.

 

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

 

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

 

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

 

(j)                                    No Coordinated Acquisition.  Except as Previously Disclosed, the Investor (i) reached its decision to invest in the Common Stock independently from any other Person known by the Investor to be a potential investor in the Company, other than any Affiliates of the Investor that are also investing in the Other Private Placements, (any such person, a “Potential Investor”), (ii) is not affiliated with any other Potential Investor, (iii) is not advised or managed by an advisor or manager that advises or manages any other Potential Investor, other than any Affiliates of the Investor that are also investing in the Other Private Placements, (iv) has not entered into any agreement or understanding, whether written or not reduced to writing, with any other Potential Investor to act in concert for the purpose of exercising a controlling influence over the Company or any Company Subsidiaries, including, but not limited to, any agreements or understandings regarding the voting or transfer of shares of the Company, (v) has not shared due diligence materials prepared by such Investor or any of its advisors or representatives with respect to the Company or any Company Subsidiaries with any other Potential Investor, (vi) has not been induced, nor has induced any other Potential Investor, to enter into the transactions contemplated by this Agreement by any other Potential Investor, (vii) was not notified of or provided the opportunity to enter into the transactions contemplated by this Agreement pursuant to the terms of any agreement or informal understanding with, or otherwise acting in concert with, any other Potential Investor and was not required by the terms of any agreement or informal understanding to so notify any other Potential Investor, (viii) is not a party to any formal or informal understanding with any other Potential Investor to make a coordinated acquisition of stock of the Company, and the investment decision of the Investor is not based on the investment decision of any other Potential Investor, (ix) is not a party to any formal or informal agreement or understanding concerning the appointment of any individual to the Board of Directors (other than as set forth in that certain Letter Agreement dated as of August 22, 2013 by and between the Company and CJA Private Equity Financial Restructuring Master Fund I L.P. (as amended, restated or otherwise modified from time to time, the “CJA Letter

 

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Agreement”)), (x) will not, by reason of the Investment, file, be required to file, or be required to be included in a Schedule 13D or Schedule 13G pursuant to the United States federal securities laws, (xi) has not engaged as part of a group consisting of substantially the same entities as the Potential Investors, in substantially the same combination of interests, in any additional banking or nonbanking activities or business ventures in the United States and (xii) will not pay any other Potential Investor any fee in connection with the transactions contemplated hereby.  Except as Previously Disclosed, the Investor does not presently hold any capital stock of the Company.

 

ARTICLE 3

 

COVENANTS

 

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

 

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

 

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

 

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

 

3.3                               Commercially Reasonable Efforts.  Upon the terms and subject to the conditions herein provided, except as otherwise provided in this Agreement, each of the parties hereto agrees to use its commercially reasonable efforts to take or cause to be taken all action, to do or cause to be done and to assist and cooperate with the other parties hereto in doing all things necessary, proper or advisable under applicable Laws to consummate and make effective the transactions contemplated hereby, including but not limited to: (a) the satisfaction of the conditions precedent to the obligations of the parties hereto; (b) the obtaining of applicable Governmental Consents, and consents, waivers and approvals of any other third parties; (c) defending of any claim, action, suit, investigation or proceeding, whether judicial or administrative, challenging this Agreement or the performance of the obligations hereunder; and

 

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(d) the execution and delivery of such instruments, and the taking of such other actions as the other parties hereto may reasonably request in order to carry out the intent of this Agreement.  Notwithstanding the foregoing, under no circumstances will the Investor be required to disclose to the Company, the Company Subsidiaries or any third party any information the disclosure of which is prohibited by Law, nor shall it be required to agree to any restrictions, conditions or commitments imposed or otherwise required by any Government Entity that are determined by the Investor in its sole discretion to be unduly burdensome, other than customary passivity commitments, in order to consummate and make effective the transactions contemplated hereby.

 

3.4                               Legend.

 

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

 

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.”

 

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

 

3.5                               Certain Other Transactions.

 

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

 

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conditions of this Agreement, the Common Stock that is to be purchased by the Investor pursuant to this Agreement (or such other securities or property (including cash) into which the Common Stock that is to be purchased by Investor pursuant to this Agreement may have become exchangeable as a result of such Change in Control), as if the Closing had occurred immediately prior to such Change in Control.

 

(b)                                 In the event that, at or prior to the Closing, (i) the number of shares of Common Stock, or securities convertible or exchangeable into or exercisable for shares of Common Stock, issued and outstanding is changed as a result of any reclassification, stock split (including reverse split), stock dividend or distribution (including any dividend or distribution of securities convertible or exchangeable into or exercisable for shares of Common Stock), merger, tender or exchange offer or other similar transaction, or (ii) the Company fixes a record date that is at or prior to the Closing Date for the payment of any non-stock dividend or distribution on the Common Stock, then the number of shares of Common Stock to be issued to the Investor at the Closing under this Agreement, together with the applicable implied per share price, shall be equitably adjusted and/or the shares of Common Stock to be issued to the Investor at the applicable Closing under this Agreement shall be equitably replaced with shares of other stock or securities or property (including cash), in each case, to provide the Investor with substantially the same economic benefit from this Agreement as the Investor had prior to the applicable transaction.  Notwithstanding anything in this Agreement to the contrary, in no event shall the Purchase Price or any component thereof, or the aggregate percentage of shares to be purchased by the Investor, be changed by the foregoing.

 

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

 

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

 

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

 

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3.8                               Registration Rights.

 

(a)                                 Registration.

 

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

 

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

 

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

 

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

 

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

 

(ii)                                  Prepare and file with the SEC such amendments and supplements to the applicable registration statement and the prospectus or prospectus supplement used in connection with such registration statement as may be

 

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necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(D)                               of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the

 

25

 

Common Stock for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

 

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

 

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

 

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

 

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

 

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

 

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

 

(d)                                 Suspension of Sales.  Upon receipt of written notice from the Company that a registration statement, prospectus or prospectus supplement contains or may contain an untrue statement of a material fact or omits or may omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that circumstances exist that make use of such registration statement, prospectus or prospectus supplement

 

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inadvisable, each Holder of Registrable Securities shall forthwith discontinue disposition of Registrable Securities pursuant to such registration statement until such Holder has received copies of a supplemented or amended prospectus or prospectus supplement, or until such Holder is advised in writing by the Company that the use of the prospectus and, if applicable, prospectus supplement may be resumed, and, if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the prospectus and, if applicable, prospectus supplement covering such Registrable Securities current at the time of receipt of such notice (each such suspension, a “Suspension Period”).  No single Suspension Period shall exceed forty-five (45) consecutive days and the aggregate of all Suspension Periods shall not exceed one hundred twenty (120) days during any twelve (12) month period.

 

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

 

(f)                                   Furnishing Information.

 

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

 

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

 

(g)                                  Indemnification.

 

(i)                                     The Company agrees to indemnify each Holder and, if a Holder is a person other than an individual, such Holder’s officers, directors, employees, agents, representatives and Affiliates, and each Person, if any, that controls a Holder within the meaning of the Securities Act (each, an “Indemnitee”), against any and all Losses, joint or several, arising out of or based upon any untrue statement or alleged untrue statement of material fact contained in any registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto or any documents incorporated therein by reference or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto), or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, that the Company shall not be liable to such Indemnitee in any such case to the extent that any such Loss is based solely upon (i) an untrue statement or omission made in such registration statement, including any such

 

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preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto), in reliance upon and in conformity with information regarding such Indemnitee or its plan of distribution or ownership interests which was furnished in writing to the Company by such Indemnitee expressly for use in connection with such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto, or (ii) offers or sales effected by or on behalf such Indemnitee “by means of” (as defined in Rule 159A) a “free writing prospectus” (as defined in Rule 405) that was not authorized in writing by the Company.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an Indemnitee and shall survive the transfer of the Registrable Securities by the Holders.

 

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

 

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3.8(g)(ii)) shall be paid to the Indemnitee, as incurred, within thirty (30) days of written notice thereof to the Company; provided, that the Indemnitee shall promptly reimburse the Company for that portion of such fees and expenses applicable to such actions for which such Indemnitee is finally judicially determined to not be entitled to indemnification hereunder).

 

(iii)                               If the indemnification provided for in Section 3.8(g)(i) is unavailable to an Indemnitee with respect to any Losses, then the Company, in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the Company, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations.  The relative fault of the Company, on the one hand, and of the Indemnitee, on the other hand, shall be determined by reference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company or by the Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; the Company and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 3.8(g)(iii) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 3.8(g)(i).  No Indemnitee guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Company if the Company was not guilty of such fraudulent misrepresentation.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)                                 “Registrable Securities” means (A) all Common Stock purchased by the Investor pursuant to this Agreement and (B) any equity securities issued or issuable directly or indirectly with respect to the securities referred to in clause

 

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

 

(vi)                              “Registration Expenses” means all expenses incurred by the Company in effecting any registration pursuant to this Agreement (whether or not any registration or prospectus becomes effective or final) or otherwise complying with its obligations under this Section 3.8, including, without limitation, all registration, filing and listing fees, printing expenses, fees and disbursements of counsel for the Company and blue sky fees and expenses, but shall not include Selling Expenses and the compensation of regular employees of the Company, which shall be paid in any event by the Company.

 

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

 

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

 

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

 

ARTICLE 4

 

TERMINATION

 

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

 

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

 

(b)                                 by any party, upon written notice to the other party, in the event that the Closing does not occur on or before December 31, 2014; provided, however, that the right to terminate this Agreement pursuant to this Section 4.1(b) shall not be available to any party

 

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whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date;

 

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

 

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

 

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

 

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

 

ARTICLE 5

 

INDEMNITY

 

5.1                               Indemnification by the Company.

 

(a)                                 After the Closing, and subject to Sections 5.1(b), 5.3 and 5.4, the Company shall indemnify, defend and hold harmless to the fullest extent permitted by Law the Investor and its Affiliates, and their successors and assigns, officers, directors, partners, members and employees, as applicable, (the “Investor Indemnified Parties”) against, and reimburse any of the Investor Indemnified Parties for, all Losses that any of the Investor Indemnified Parties may at any time suffer or incur, or become subject to, as a result of or in connection with (1) the inaccuracy or breach of any representation or warranty made by the Company in this Agreement or any certificate delivered pursuant hereto or (2) any breach or failure by the Company to perform any of its covenants or agreements contained in this Agreement.  Notwithstanding anything herein to the contrary, the obligations of the Company under this Section 5.1(a) shall

 

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not be applicable to or inure to the benefit of any transferee of the Common Stock sold pursuant to this Agreement who is not an Affiliate of the Investor.

 

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

 

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

 

5.2                               Indemnification by the Investor.

 

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

 

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

 

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Company Indemnified Parties against, or reimburse the Company Indemnified Parties for, any Losses pursuant to Section 5.2(a)(1) in a cumulative aggregate amount exceeding the aggregate purchase paid by the Investor to the Company pursuant to Section 1.1 hereof (other than Losses arising out of the inaccuracy or breach of any of the Investor Specified Representations).

 

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

 

5.3                               Notification of Claims.

 

(a)                                 Any Person that may be entitled to be indemnified under this Article 5 (the “Indemnified Party”) shall promptly notify the party or parties liable for such indemnification (the “Indemnifying Party”) in writing of any claim in respect of which indemnity may be sought hereunder, including any pending or threatened claim or demand by a third party that the Indemnified Party has determined has given or could reasonably give rise to a right of indemnification under this Agreement (including a pending or threatened claim or demand asserted by a third party against the Indemnified Party) (each, a “Third Party Claim”), describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or demand; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Agreement except to the extent that the Indemnifying Party is materially prejudiced by such failure.  The parties agree that notices for claims in respect of a breach of a representation, warranty, covenant or agreement must be delivered prior to the expiration of any applicable survival period specified in Section 6.1 for such representation, warranty, covenant or agreement; provided, that if, prior to such applicable date, a party hereto shall have notified the other parties hereto in accordance with the requirements of this Section 5.3(a) of a claim for indemnification under this Agreement (whether or not formal legal action shall have been commenced based upon such claim), such claim shall continue to be subject to indemnification in accordance with this Agreement notwithstanding the passing of such applicable date.

 

(b)                                 Upon receipt of a notice of a claim for indemnity from an Indemnified Party pursuant to Section 5.3(a) in respect of a Third Party Claim, the Indemnifying Party may, by notice to the Indemnified Party delivered within twenty (20) Business Days of the receipt of notice of such Third Party Claim, assume the defense and control of any Third Party Claim, with its own counsel reasonably acceptable to the Indemnified Party and at its own expense.  The Indemnified Party shall have the right to employ counsel on its own behalf for, and otherwise participate in the defense of, any such Third Party Claim, but the fees and expenses of its counsel will be at its own expense unless (A) the employment of counsel by the Indemnified Party at the Indemnifying Party’s expense has been authorized in writing by the Indemnifying Party, as applicable, (B) the Indemnified Party reasonably believes there may be a conflict of interest between the Indemnified Party and the Indemnifying Party in the conduct of the defense of such Third Party Claim, (C) the Indemnified Party reasonably believes there are legal defenses available to it that are different from, additional to or inconsistent with those available to the Indemnifying Party, or (D) the Indemnifying Party has not in fact employed counsel to assume the defense of such Third Party Claim within a reasonable time after receipt of notice of the commencement of such Third Party Claim, in each of which cases the fees and expenses of such

 

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Indemnified Party’s counsel shall be at the expense of the Indemnifying Party; provided, however, that in the event any Investor Indemnified Party is similarly situated with any other “Investor Indemnified Party” under any of the other Agreements with respect to any Third Party Claim, and does not have any conflict of interest with such Person in the conduct of the defense of such Third Party Claim or have legal defenses available to it that are different from, additional to or inconsistent with those available to such Person, such Investor Indemnified Party shall be required to employ the same counsel as such Person and the Company shall be responsible for the fees and expenses of only one such counsel for such Investor Indemnified Party and such other Person or Persons (assuming any of clauses (A) through (D) is satisfied).  The Indemnified Party may take any actions reasonably necessary to defend such Third Party Claim prior to the time that it receives a notice from the Indemnifying Party as contemplated by the immediately preceding sentence.  The Indemnified Party shall, and shall cause each of their Affiliates and representatives to, use reasonable best efforts to cooperate with the Indemnifying Party in the defense of any Third Party Claim.  The Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which shall not be unreasonably withheld), consent to a settlement, compromise or discharge of, or the entry of any judgment arising from, any Third Party Claim, unless such settlement, compromise, discharge or entry of any judgment does not involve any statement, finding or admission of any fault, culpability, failure to act, violation of Law or admission of any wrongdoing by or on behalf of the Indemnified Party, and the Indemnifying Party shall (i) pay or cause to be paid all amounts arising out of such settlement or judgment concurrently with the effectiveness of such settlement or judgment (unless otherwise provided in such judgment), (ii) not encumber any of the assets of any Indemnified Party or agree to any restriction or condition that would apply to or materially adversely affect any Indemnified Party or the conduct of any Indemnified Party’s business and (iii) obtain, as a condition of any settlement, compromise, discharge, entry of judgment (if applicable), or other resolution, a complete and unconditional release of each Indemnified Party in form and substance reasonably satisfactory to such Indemnified Party from any and all liabilities in respect of such Third Party Claim.  An Indemnified Party shall not settle, compromise or consent to the entry of any judgment with respect to any claim or demand for which it is seeking indemnification from the Indemnifying Party or admit to any liability with respect to such claim or demand without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed); provided that such consent shall not be required if the Indemnifying Party has not fulfilled any material obligations under this Section 5.3(b).

 

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

 

5.4                               Indemnification Payment.  In the event a claim or any Action for indemnification hereunder has been finally determined, the amount of such final determination shall be paid by the Indemnifying Party to the Indemnified Party on demand in immediately available funds; provided, however, that any reasonable and documented out-of-pocket expenses incurred by the Indemnified Party as a result of such claim or Action shall be reimbursed

 

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promptly by the Indemnifying Party upon receipt of an invoice describing such costs incurred by the Indemnified Party.  A claim or an Action, and the liability for and amount of damages therefor, shall be deemed to be “finally determined” for purposes of this Agreement when the parties hereto have so determined by mutual agreement or, if disputed, when a final non-appealable judicial order has been entered into with respect to such claim or Action.

 

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

 

ARTICLE 6

 

MISCELLANEOUS

 

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

 

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

 

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

 

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power to cause the direction of management or policies of such Person, whether through the ownership of voting securities by contract or otherwise;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(t)                                    the term “Tax” or “Taxes” means all United States federal, state, local or foreign income, profits, estimated, gross receipts, windfall profits, severance, property, intangible property, occupation, production, sales, use, license, excise, emergency excise, franchise, capital gains, capital stock, employment, withholding, transfer, stamp, payroll, goods

 

38

 

and services, value added, alternative or add-on minimum tax, or any other tax, custom, duty or governmental fee, or other like assessment or charge of any kind whatsoever, together with any interest, penalties, fines, related liabilities or additions to tax that may become payable in respect thereof imposed by any Governmental Entity, whether or not disputed;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6.4                               Counterparts and Facsimile.  For the convenience of the parties hereto, this Agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement.  Executed signature pages to this Agreement may be delivered by facsimile or other electronic transmission and such transmitted copies shall be deemed as sufficient as if manually signed signature pages had been delivered.

 

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

 

6.6                               Jurisdiction.  The parties hereby agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the United States District Court for the Southern District of New York sitting in the Borough of Manhattan, New York,

 

39

 

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

 

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

 

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

 

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

 

(b)                                 If to the Company:

 

Broadway Financial Corporation

5055 Wilshire Boulevard, Suite 500

Los Angeles, California  90036

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

Fax:                       (323) 556-3216

 

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

 

Arnold & Porter LLP

777 South Figueroa Street,

44th Floor

Los Angeles, California  90017

Attn:                    James R. Walther, Esq.

Fax:                       (213) 243-4199

 

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

 

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

 

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

 

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

 

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

 

41

 

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

 

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

 

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

 

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EXHIBIT A

 

Summary of Modification Terms

 

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

 

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

 

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

 

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

 

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

 

6.                          Completion of the Modification will require the:

 

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

 

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

 

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

 

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

 

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Appendix I

 

SELLING STOCKHOLDER QUESTIONNAIRE

 

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

 

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

 

QUESTIONNAIRE

 

1.                                      Name.

 

(a)                                 Full Legal Name of Selling Securityholder

 

 

 

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

 

 

 

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

 

 

 

2.                                      Address for Notices to Selling Securityholder:

 

 

 

Telephone:

 

Fax:

 

Contact Person:

 

44

 

3.                                      Beneficial Ownership of Registrable Securities:

 

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

 

 

 

4.                                      Broker-Dealer Status:

 

(a)                                 Are you a broker-dealer?

 

Yes  o          No  o

 

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

 

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

 

Yes  o          No  o

 

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

 

Yes  o          No  o

 

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

 

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

 

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

 

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

 

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

 

 

 

6.                                      Relationships with the Company:

 

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

 

State any exceptions here:

 

 

 

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

 

	
Name of Selling
   Shareholder
    	
 
    	
Number of Shares of
   Common Stock
   Beneficially Owned Prior
   to Offering
    	
 
    	
Maximum Number of
   Shares of Common Stock
   to be Sold Pursuant to this
   Prospectus
    	
 
    	
Number of Shares of
   Common Stock
   Beneficially Owned After
   Offering
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

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

 

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

 

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

 

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Dated:
    	
 
    	
 
    	
Beneficial   Owner:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
						

 

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

 

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

 

47

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