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BYFC > SEC Filings for BYFC > Form 8-K on 28-Aug-2013All Recent SEC Filings

Show all filings for BROADWAY FINANCIAL CORP \DE\ | Request a Trial to NEW EDGAR Online Pro

Form 8-K for BROADWAY FINANCIAL CORP \DE\


28-Aug-2013

Entry into a Material Definitive Agreement, Unregistered Sale of Equ


Item 1.01 Entry into a Material Definitive Agreement.

On August 22, 2013, Broadway Financial Corporation ("Company") entered into, and concurrently completed, the preferred stock exchange, common stock sale and bank loan modification transactions provided for in the respective agreements described in the following paragraphs. Except as stated below, each such agreement was dated and effective as of August 22, 2013.

The agreements and transactions described herein were entered into in connection with the recapitalization of the Company (the "Recapitalization") contemplated in the previously reported Exchange Agreement, dated February 10, 2012, entered into by the Company with the United States Department of the Treasury (the "Treasury Department"), as amended by Amendment No. 1 to Exchange Agreement, dated as of August 8, 2013. The Exchange Agreement as so amended is referred to herein as the "Treasury Exchange Agreement". The purpose of the Recapitalization is to increase the Company's common equity, eliminate its outstanding preferred stock and accrued dividends thereon, reduce the obligations of its senior bank debt and provide capital for the Company's wholly-owned bank subsidiary, Broadway Federal Bank, f.s.b. (the "Bank"). The Company believes that completion of the Recapitalization, including receipt of the stockholder approval with respect to increasing the Company's authorized Common Stock described below, will facilitate raising additional common equity to meet the working capital needs of the Company and enhance the Company's ability to maintain the Bank's compliance with bank regulatory capital requirements.

Treasury Exchange Agreement

Pursuant to the Treasury Exchange Agreement, the Treasury Department agreed to exchange all of the 9,000 shares of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series D, having a liquidation amount of $1,000 per share, and the 6,000 shares of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series E, having a liquidation amount of $1,000 per share, the Company issued to the Treasury Department under the Troubled Assets Relief Program (collectively, the "TARP Preferred Stock"), including all accrued unpaid dividends thereon, for shares of the Company's common stock, par value $0.01 per share (the "Common Stock"). The Treasury Exchange Agreement further provided that the exchanges of preferred stock by the Treasury Department would be conducted on a discounted basis in which Common Stock having a value equal to 50% of the aggregate liquidation amount of the TARP Preferred Stock plus 100% of the unpaid accrued dividends on the TARP Preferred Stock would be issued in the exchange. The Treasury Exchange Agreement required as conditions to the exchange that the Company concurrently conduct one or more private placements of Common Stock for the purpose of raising additional capital (the "Subscription Offering"), enter into exchange agreements with the holders of each of the Company's other outstanding series of preferred stock providing for the exchange by such holders of their shares of preferred stock on terms substantially similar to those provided in the Treasury Exchange Agreement and pay down a portion of the Company's senior bank debt through an exchange for Common Stock. The Common Stock is to be deemed for purposes of each of the contemplated exchange transactions to have a value equal to the per share price at which the Common Stock is sold in the Subscription Offering.


The Company did not have a sufficient number of shares of authorized Common Stock to complete the contemplated exchanges. Accordingly, the Treasury Department agreed to exchange its shares of TARP Preferred Stock for shares of a new class of preferred stock of the Company, to be designated as Series F Common Stock Equivalent (the "Common Stock Equivalents"). The Common Stock Equivalents will automatically convert into Common Stock, at a conversion ratio of 1,000 shares of Common Stock for each share of Common Stock Equivalents, upon approval by the Company's stockholders of an amendment to the Company's Certificate of Incorporation sufficiently increasing the number shares of Common Stock that the Company is authorized to issue. The Company is required under the Treasury Exchange Agreement and the Subscription Agreements to hold a stockholders meeting for this purpose, which the Company intends to do as soon as reasonably practicable. The Common Stock Equivalents were to be valued for purposes of the . . .



Item 3.02 Unregistered Sales of Equity Securities.

On August 22, 2013, the Company issued 13,997 shares of its Common Stock Equivalents and 4,235,500 shares of its Common Stock pursuant to the respective Exchange Agreements, Subscription Agreements and DPC Agreement and other loan modification agreements described in Item 1.01 above.

Each of the exchanges and sales of Common Stock Equivalents and Common Stock was conducted without registration under the Securities Act in reliance on the exemption from such registration requirement provided by Section 4(a)(2) of the Securities Act and Rule 506 thereunder. Each of the exchanging and purchasing entities is believed by the Company to be an accredited investor and none were initially contacted through any advertising or other general solicitation efforts.

The shares of Common Stock were sold in the Subscription Offering for cash at a price of $1.00 per share. The Common Stock Equivalents were valued on an as-converted basis of $1,000 per share, reflecting the fact that they are mandatorily convertible into 1,000 shares of Common Stock upon receipt of the requisite stockholder vote, for purposes of determining the number of shares of Common Stock Equivalents to be issued in exchange for the shares of the respective series of the Company's outstanding preferred stock, accrued dividends on the TARP Preferred Stock and a portion of the principal amount of the BBCN Bank loan.



Item 5.01 Changes in Control of Registrant.

As a result of its exchange of all outstanding shares of the Company's TARP Preferred Stock pursuant to the Treasury Exchange Agreement described in Item 1.01 above, the Treasury Department now owns 10,146 shares of the Company's Common Stock Equivalents, which constitutes 52.18% of the voting power of the Company's outstanding stock having general voting rights. Each share of Common Stock Equivalents will automatically convert into 1,000 shares of Common Stock upon approval by the Company's stockholders of an amendment to the Company's Certificate of Incorporation to increase the number of shares of Common Stock that the Company is authorized to issue, as further described in Item 1.01 above. Each share of Common Stock Equivalents is entitled to vote on an as-converted basis and is therefore entitled to 1,000 votes.


In the Treasury Exchange Agreement, the Treasury Department agreed that it would vote its shares of Company stock, including both Common Stock Equivalents and Common Stock, in the same proportions (for, against or abstain) as all other holders of Common Stock on all matters on which holders of the Common Stock are entitled to vote, except with respect to certain Designated Maters. The Designated Matters are: (i) election and removal of directors, (ii) approval of any business combination, (iii) approval of a sale of all or substantially all of the assets or property of the Company, (iv) approval of a dissolution of the Company, (v) approval of any issuance of any securities of the Company on which holders of Common Stock are entitled to vote, (vi) approval of any amendment to the Company's Certificate of Incorporation or bylaws on which holders of Common Stock are entitled to vote and (vii) approval of any other matters reasonably incidental to the foregoing as determined by the Treasury Department. The Treasury Department also agreed to attend all meetings of the Company's stockholders, in person or by proxy, for purposes of obtaining a quorum.

In order to effectuate the foregoing agreements by the Treasury Department, the Treasury Department also granted a proxy appointing the Chief Executive Officer and the Chief Financial Officer of the Company as attorneys-in-fact and proxies for the Treasury Department and its controlled affiliates, with full power of substitution, to vote, express consent or dissent or otherwise utilize such voting power in the manner and on the terms provided in the Treasury Exchange Agreement.



Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in
Fiscal Year.

In connection with the agreements and transactions described in Item 1.01 above, the Company filed certificates of designations with the Secretary of State of the State of Delaware on August 21, 2013 for the purpose of designating and establishing the number of shares, and the voting and other powers, preferences and rights, and qualifications, limitations and restrictions of the Common Stock Equivalents and the Series G Preferred Stock described in Item 1.01. The certificates of designation became effective upon such filing.



Item 8.01 Other Events.

The Company issued a press release announcing the closing of the Recapitalization transactions described in Item. 1.01 above, a copy of which press release was attached as Exhibit 99.1 to the report on Form 8-K filed by the Company on August 23, 2013. A copy of that press release, as revised solely to change the description of the California Community Foundation contained therein, is attached as Exhibit 99.1 to this report.



Item 9.01 Financial Statements and Exhibits.

99.1 Modified version of the press release dated August 22, 2013


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