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| NSFC > SEC Filings for NSFC > Form 8-K on 23-Feb-2009 | All Recent SEC Filings |
23-Feb-2009
Entry into a Material Definitive Agreement, Unregistered Sale
On February 20, 2009, as part of the Troubled Asset Relief Program ("TARP") Capital Purchase Program established by the United States Department of the Treasury (the "U.S. Treasury") under the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009 ("EESA"), Northern States Financial Corporation (the "Company") entered into a Letter Agreement and the Securities Purchase Agreement - Standard Terms attached thereto (the "Securities Purchase Agreement") with the U.S. Treasury, pursuant to which the Company agreed to issue and sell, and the U.S. Treasury agreed to purchase, (i) 17,211 shares of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the "Preferred Stock") having a liquidation amount per share equal to $1,000, and (ii) a ten-year warrant (the "Warrant") to purchase up to 584,084 shares of the Company's common stock (the "Common Stock"), or 15% of the aggregate dollar amount of Preferred Stock purchased by the U.S. Treasury, at an exercise price of $4.42 per share, for an aggregate purchase price of $17,211,000 in cash. Both the Preferred Stock and the Warrant will qualify as Tier 1 capital.
The Preferred Stock will pay cumulative dividends at a rate of 5% per year for the first five years, and 9% per year thereafter. Also, pursuant to recent amendments to EESA, the Company may, subject to consultation with the Federal Reserve Bank of Chicago, redeem the Preferred Stock at any time for its aggregate liquidation amount plus any accrued and unpaid dividends without first raising additional capital in an equity offering. Upon such redemption of the Preferred Stock, the Warrant will be liquidated at the then current market price. The Preferred Stock is generally non-voting.
Prior to February 20, 2012, unless the Company has redeemed the Preferred Stock or the U.S. Treasury has transferred the Preferred Stock to a third party, the consent of the U.S. Treasury will be required for the Company to increase its common stock dividend or redeem, repurchase or acquire any shares of its Common Stock or other capital stock or other equity securities or any trust preferred securities, other than in connection with employee benefit plans consistent with past practice and certain other circumstances specified in the Securities Purchase Agreement.
The Warrant is immediately exercisable upon its issuance. The Warrant provides for the adjustment of the exercise price and the number of shares of Common Stock issuable upon exercise pursuant to customary anti-dilution provisions, such as upon stock splits or distributions of securities or other assets by the Company to holders of its Common Stock, and upon certain issuances of Common Stock at or below a specified price relative to the initial exercise price. In the event the Company completes one or more "qualified equity offerings" on or prior to December 31, 2009 that result in the Company receiving aggregate gross proceeds of at least $17,211,000, the number of shares of Common Stock underlying the portion of the Warrant then held by the U.S. Treasury will be reduced by one-half of the shares of Common Stock originally covered by the Warrant. Pursuant to the Securities Purchase Agreement, the U.S. Treasury has agreed not to exercise voting power with respect to any shares of Common Stock issued upon exercise of the Warrant.
Pursuant to the terms of the Securities Purchase Agreement, the Company agreed that, until such time as the U.S. Treasury ceases to own any securities of the Company acquired pursuant to the Securities Purchase Agreement, the Company will take all necessary action to ensure that its benefit plans with respect to its senior executive officers comply with Section 111(b) of the EESA as implemented by any guidance or regulation under the EESA that has been issued and is in effect as of the date of issuance of the Preferred Stock and the Warrant, and has agreed to not adopt any benefit plans with respect to, or which cover, its senior executive officers that do not comply with the EESA. These requirements include certain restrictions on executive compensation that limit the bonus, incentive and severance compensation and tax deductibility of compensation the Company pays to its senior executive officers and other highly compensated officers as specified in the EESA. Each of the applicable executives of the Company has consented to be bound by the foregoing requirements and restrictions.
. . .
The information set forth under "Item 1.01 - Entry into a Material Definitive Agreement" is incorporated by reference into this Item 3.02.
Prior to February 20, 2012, unless the Company has redeemed the Preferred Stock or the U.S. Treasury has transferred the Preferred Stock to a third party, the consent of the U.S. Treasury will be required for the Company to (1) declare or pay any dividend or make any distribution on its Common Stock (other than regular quarterly cash dividends of not more than $0.20 per share of common stock) or (2) redeem, purchase or acquire any shares of its Common Stock or other capital stock or other equity securities or any trust preferred securities, other than in connection with employee benefit plans consistent with past practice and certain other circumstances specified in the Securities Purchase Agreement.
In addition, pursuant to the Certificate of Designations, the ability of the Company to declare or pay dividends or distributions on, or repurchase, redeem or otherwise acquire for consideration, shares of its Common Stock will be subject to restrictions in the event the Company fails to declare and pay full dividends (or declare and set aside a sum sufficient for payment thereof) on the Preferred Stock. These restrictions are set forth in the Certificate of Designations.
The Securities Purchase Agreement also grants the holders of the Preferred Stock, the Warrant and the Warrant Shares certain registration rights.
The information concerning executive compensation set forth under "Item 1.01 - Entry into a Material Definitive Agreement" is incorporated by reference into this Item 5.02.
On February 18, 2009, the Company filed a Certificate of Designations (the "Certificate of Designations") to its Certificate of Incorporation, as amended, with the Delaware Secretary of State for the purpose of designating the Preferred Stock and fixing the designations, preferences, qualifications,
limitations, restrictions and relative rights of the Preferred Stock. The Certificate of Designations is attached hereto as Exhibit 3.1 and is incorporated by reference herein.
(d) Exhibits.
3.1 Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, dated February 18, 2009
4.1 Form of Certificate of the Preferred Stock
4.2 Warrant to purchase shares of Common Stock
10.1 Letter Agreement including the Securities Purchase Agreement - Standard Terms attached thereto, dated February 20, 2009, between Northern States Financial Corporation and the United States Department of the Treasury, with respect to the issuance and sale of the Preferred Stock and the Warrant
10.2 Side Letter with the U.S. Treasury, dated February 20, 2009, relating to the Letter Agreement and Securities Purchase Agreement
99.1 Press release dated February 23, 2009
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