UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 31, 2003
BROADWAY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-27464 95-4547287
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(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification Number)
4800 Wilshire Boulevard, Los Angeles, California 90010
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(Address of principal executive offices) (Zip Code)
(323) 634-1700
Registrant's telephone number, including area code
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Item 5. Other Events and Regulation FD Disclosure.
On January 31, 2003, the Board of Directors of Broadway Financial
Corporation (the "Company") declared a dividend distribution of one preferred
share purchase right (a "Right") for each share of common stock, par value $0.01
per share (the "Common Shares") of the Company outstanding at the close business
on February 13, 2003 (the "Record Date"). The dividend will be paid on the
Record Date to holders of Common Shares on such date. The holders of any
additional Common Shares issued after the Record Date and before the redemption
or expiration of the Rights (or the Distribution Date, as defined below) will
also be entitled to one Right for each such additional Common Share. Each right
entitles the registered holder under certain circumstances to purchase from the
Company one one-hundredth of a Series A Junior Participating Preferred Share,
par value $0.01 per share (the "Participating Preferred Shares"), of the Company
at a price of $35.00 per one one-hundredth of a Participating Preferred Share
(the "Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in the Rights Agreement dated as of January 31, 2003
between the Company and US Stock Transfer Corporation, as rights agent (the
"Rights Agreement").
Initially, the Rights will be attached to and evidenced by certificates
evidencing Common Shares, and no separate certificates for the Rights will be
distributed. With certain exceptions, the Rights will become exercisable and
will be evidenced by separate certificates only after the earlier to occur of:
(1) 10 days following a public announcement that a person or group of
affiliated or associated persons has acquired beneficial ownership of 15%
or more of the outstanding Common Shares (thereby becoming an "Acquiring
Person"), or
(2) 15 business days (or such later date as may be determined by the Board of
Directors prior to such time as any person or group of affiliated or
associated persons becomes an Acquiring Person) following the commencement
of a tender or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of persons of 15% or more of the
outstanding Common Shares.
(3) 10 business days (or such later date as may be determined by action of the
Board of Directors prior to such time as any person or group of affiliated
or associated persons becomes an Acquiring Person) after the filing of any
application, request or other document with a governmental agency seeking
approval of, attempting to rebut any presumption of control upon, or
indicating an intention to enter into, any transaction or series of
transactions that would result in any person becoming the beneficial owner
of 15% or more of the outstanding Common Shares. (The first to occur of the
dates is referred to in the Rights Agreement and herein as the
"Distribution Date").
Notwithstanding the foregoing, the Distribution Date will not occur with
respect to any person who as of January 31, 2003 beneficially owns 15% or more
of the outstanding Common Shares (a "Grandfathered Person"), unless such person
acquires beneficial ownership of more than an additional 1/2% of such Common
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Shares. Upon any sale or other transfer of Common Shares by a Grandfathered
Person, the amount of Common Shares that the Grandfathered Person may continue
to beneficially own without causing the Distribution Date to occur will be
reduced to the Grandfathered Person's percentage beneficial ownership of the
outstanding Common Shares as of the time immediately after the sale or other
transfer, plus an additional 1/2%. A person will cease to be a Grandfathered
Person once such person's beneficial ownership of the outstanding Common Shares
falls below 15%.
Common Share certificates issued upon transfer or issuance of Common Shares
after the Record Date and prior to the Distribution Date (or earlier redemption
or expiration of the Rights) will contain a notation incorporating the Rights
Agreement by reference. If the Board of Directors in good faith determines that
a person who would otherwise be an Acquiring Person has become such
inadvertently, and such person divests as promptly as practicable a sufficient
number of Common Shares so that such person would no longer be an Acquiring
Person, then such person shall not be deemed to be an Acquiring Person for
purposes of the Rights Agreement.
The Rights will expire on January 31, 2013 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of Participating Preferred
Shares or other securities or property issuable, upon exercise of the Rights are
subject to adjustment under certain circumstances from time to time to prevent
dilution. With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price.
Participating Preferred Shares purchasable upon exercise of the Rights will
not be redeemable. Each Participating Preferred Share will be entitled to a
minimum preferential quarterly distribution payment, when, as and if authorized
by the Board of Directors out of funds legally available for such purpose, of
$1.00 per share but will be entitled to an aggregate distribution of 100 times
any distribution declared per Common Share. In the event of liquidation, the
holders of the Participating Preferred Shares will be entitled to a minimum
preferential liquidation payment of $1.00 per share but will be entitled to an
aggregate payment of 100 times the payment made per Common Share. Each
Participating Preferred Share will have 100 votes, voting together with the
Common Shares. In the event of any merger, consolidation or other transaction in
which Common Shares are exchanged, each Participating Preferred Share will be
entitled to receive 100 times the amount received per Common Share. In the event
of issuance of Participating Preferred Shares upon exercise of the Rights, in
order to facilitate trading, a depositary receipt may be issued for each one
one-hundredth of a Participating Preferred Share. The Rights will be protected
by customary antidilution provisions.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, proper provision will be made so that each holder
of a Right, other than Rights beneficially owned by the Acquiring Person (which
will thereafter be void), will thereafter have the right to receive, upon
exercise thereof, a number of Common Shares having a market value (determined in
accordance with the Rights Agreement) equal to two times the Purchase Price. In
lieu of the issuance of Common Shares upon exercise of Rights, the Board of
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Directors may under certain circumstances, and if there is an insufficient
number of Common Shares authorized but unissued to permit the exercise in full
of the Rights, the Board is required to, take such action as may be necessary to
cause the Company to issue or pay upon the exercise of Rights, cash (including
by way of a reduction of the Purchase Price), property, other securities or any
combination of the foregoing having an aggregate value equal to that of the
Common Shares which otherwise would have been issuable upon exercise of the
Rights. The Company may permit the Rights to be exercised for 50% of the Common
Shares (or cash, property or other securities that may be substituted for Common
Shares) that would otherwise be purchasable upon exercise thereof in
consideration of the surrender of the Rights so exercised and without other
payment of the Purchase Price.
In the event that, after any person or group becomes an Acquiring Person,
the Company is acquired in a merger or other business combination transaction or
50% or more of its consolidated assets or earning power are sold, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price,
a number of shares of common stock of the acquiring company having a market
value (determined in accordance with the Rights Agreement) equal to two times
the Purchase Price.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by that person or group of 50% or more of the outstanding
Common Shares, the Board of Directors may exchange the Rights (other than Rights
owned by that person or group which will have become void), in whole or in part,
at an exchange ratio of one Common Share (or one one-hundredth of a
Participating Preferred Share) per Right (subject to adjustment).
As soon as practicable after the Distribution Date, the Company is
obligated to use its best efforts to file a registration statement under the
Securities Act of 1933, as amended, relating to the securities issuable upon
exercise of Rights and to cause such registration statement to become effective
as soon as practicable.
At any time prior to the time a person or group of persons becomes an
Acquiring Person, the Board of Directors may redeem the Rights, in whole but not
in part, at a redemption price of $0.01 per Right (the "Redemption Price"),
payable in cash, Common Shares or any other form of consideration deemed
appropriate by the Board of Directors. The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish. Immediately upon the
effectiveness of any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
The terms of the Rights may be amended by the Board of Directors without
the consent of the holders of the Rights, except that from and after the time
any person or group of affiliated or associated persons becomes an Acquiring
Person, no such amendment may adversely affect the interests of the holders of
the Rights. Until a Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to shareholders or to the Company, shareholders may, depending
upon the circumstances, recognize taxable income in the event that the Rights
become exercisable.
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The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board of Directors. The Rights should not interfere
with any merger or other business combination approved by the Board of Directors
since the Rights may be redeemed by the Company at the Redemption Price prior to
the time that a person or group has acquired beneficial ownership of 15% or more
of the Common Shares.
The Rights Agreement, which specifies the terms of the Rights and the
Participating Preferred Shares, and the Company's February 3, 2003 press
release, in which the declaration of the dividend distribution of the Rights was
announced, have been filed as exhibits to this report and are incorporated
herein by reference. The foregoing description in this Item 5 is qualified in
its entirety by reference to the Rights Agreement, including the definitions
therein of certain terms.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
4.1 Rights Agreement dated as of January 31, 2003 between Broadway
Financial Corporation and US Stock Transfer Corporation, as Rights
Agent, including Exhibit A thereto (Form of Certificate of
Designation, Rights and Preferences relating to the Series A Junior
Participating Preferred Shares) and Exhibit B thereto (Form of Right
Certificate).
99.1 Press release issued by Broadway Financial Corporation on February 3,
2003 concerning the adoption of the Rights Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 3, 2003
BROADWAY FINANCIAL CORPORATION
By: /s/ Paul C. Hudson
--------------------------
Paul C. Hudson
Chief Executive Officer and President
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Exhibit 4.1
===============================================================================
RIGHTS AGREEMENT
between
BROADWAY FINANCIAL CORPORATION
and
US STOCK TRANSFER CORPORATION
Rights Agent
Dated as of January 31, 2003
===============================================================================
--------------------------------------------------------------------------------
RIGHTS AGREEMENT
Agreement, dated as of January 31, 2003 between Broadway Financial
Corporation, a Delaware corporation (the "Company"), and US Stock Transfer
Corporation, a California corporation (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Company outstanding as of the close of business
on February 13, 2003 (the "Record Date"), each Right representing the right to
purchase one one-hundredth of a Preferred Share (as hereinafter defined), upon
the terms and subject to the conditions herein set forth, and has further agreed
to authorize and direct the issuance of one Right with respect to each Common
Share that shall become outstanding between the Record Date and the first to
occur of the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the following
terms have the meanings indicated: -------------------
"Acquiring Person" shall mean any Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of 15%
or more of the Common Shares then outstanding, but shall not include (A) the
Company or any Affiliate or Subsidiary of the Company, (B) any employee benefit
plan of the Company or of any Affiliate or Subsidiary of the Company or any
entity holding Common Shares for or pursuant to the terms of any such plan, or
(C) any Grandfathered Person, unless such Grandfathered Person becomes the
Beneficial Owner of a percentage of the Common Shares then outstanding equal to
or exceeding such Grandfathered Person's Grandfathered Percentage.
Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as
the result of (X) an acquisition of Common Shares by the Company which, by
reducing the number of Common Shares outstanding, increases the proportionate
number of Common Shares beneficially owned by such Person to 15% (or in the case
of a Grandfathered Person, the Grandfathered Percentage applicable to such
Grandfathered Person) or more of the Common Shares of the Company then
outstanding, or (Y) the acquisition by such Person of newly issued Common Shares
directly from the Company (it being understood that a purchase from an
underwriter or other intermediary is not an acquisition directly from the
Company); provided, however, that if a Person shall become the Beneficial Owner
of 15% (or in the case of a Grandfathered Person, the Grandfathered Percentage
applicable to such Grandfathered Person) or more of the Common Shares of the
Company then outstanding by reason of Common Share purchases by the Company or
the acquisition of newly issued Common Shares directly from the Company and
shall, after such Common Share purchases or direct issuance by the Company,
become the Beneficial Owner of any additional Common Shares (other than pursuant
to a stock split, stock dividend or similar transaction) of the Company, then
such Person shall be deemed to be an "Acquiring Person"; and provided further,
that any transferee from such Person who becomes the Beneficial Owner of 15% or
more of the Common Shares of the Company then outstanding shall nevertheless be
deemed to be an "Acquiring Person." Notwithstanding the foregoing, if the Board
of Directors of the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph, has become such inadvertently (including, without
limitation, because (i) such Person was unaware that it beneficially owned a
percentage of Common Shares that would otherwise cause such Person to be an
"Acquiring Person" or (ii) such Person was aware of the extent of its Beneficial
Ownership of Common Shares but had no actual knowledge of the consequences of
such Beneficial Ownership under this Agreement), and such Person divests as
promptly as practicable (and in any event within ten Business Days after
notification by the Company) a sufficient number of Common Shares so that such
Person would no longer be an Acquiring Person, as defined pursuant to the
foregoing provisions of this paragraph, then such Person shall not be deemed to
be an "Acquiring Person" for any purposes of this Agreement.
"Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act, as in effect on the date of this Agreement.
A Person shall be deemed the "Beneficial Owner" of and shall be deemed to
"beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly.
(ii) which such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has (A) the right to acquire (whether such
right is exercisable immediately or only upon the occurrence of
certain events, or after the passage of time, or both) pursuant to any
agreement, arrangement or understanding, whether written or oral
(other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities tendered
pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange; (B) the
sole or shared right to vote or dispose of (including any such right
pursuant to any agreement, arrangement or understanding, whether
written or oral); provided, however, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1)
arises solely from a revocable proxy or consent given to such Person
in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations
promulgated under the Exchange Act and (2) is not also then reportable
on Schedule 13D under the Exchange Act (or any comparable or successor
report); or (C) "beneficial ownership" of as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange
Act; or
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(iii)which are beneficially owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof) with which such Person
or any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona
fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso to
clause (B) of subparagraph (ii) of this definition) or disposing of
any securities of the Company.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when used
with reference to the Beneficial Ownership of securities of the
Company by any Person, shall mean the number of such securities then
issued and outstanding together with the number of such securities not
then actually issued and outstanding which such Person would be deemed
to own beneficially hereunder.
"Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
"Close of business" on any given date shall mean 5:00 P.M.,
Pacific time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., Pacific time, on the next
succeeding Business Day.
"Common Shares" when used with reference to the Company shall
mean the shares of common stock, par value $0.01 per share, of the
Company. "Common Shares" when used with reference to any Person other
than the Company shall mean the capital stock (or equity interest)
with the greatest voting power of such other Person or the equity
securities or other equity interest having power to control or direct
the management of such other Person.
"Distribution Date" shall have the meaning set forth in Section 3
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Ratio" shall have the meaning set forth in Section 24
hereof.
"Expiration Date" shall have the meaning set forth in Section 7
hereof.
"Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
"Grandfathered Percentage" shall mean, with respect to any
Grandfathered Person at any time, the percentage of the then
outstanding Common Shares that such Grandfathered Person, together
with all Affiliates and Associates of such Grandfathered Person,
Beneficially Owns as of the Grandfathered Time, plus an additional
1/2%; provided, however, that, in the event any Grandfathered Person
shall sell, transfer, or otherwise dispose of any outstanding Common
Shares after the Grandfathered Time, the Grandfathered Percentage
shall, subsequent to such sale, transfer or disposition, mean, with
respect to such Grandfathered Person, the lesser of (i) the
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Grandfathered Percentage as in effect immediately prior to such sale,
transfer or disposition or (ii) the percentage of the then outstanding
Common Shares that such Grandfathered Person Beneficially Owns
immediately following such sale, transfer or disposition, plus an
additional 1/2%.
"Grandfathered Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, is, as of
the Grandfathered Time, the Beneficial Owner of 15% or more of the
then outstanding Common Shares. Notwithstanding anything to the
contrary provided in this Agreement, any Grandfathered Person who
after the Grandfathered Time becomes the Beneficial Owner of less than
15% of the then outstanding Common Shares shall cease to be a
Grandfathered Person and shall be subject to all of the provisions of
this Agreement in the same manner as any Person who is not and was not
a Grandfathered Person.
"Grandfathered Time" shall mean 5.00 p.m. Pacific time, on
January 31, 2003.
"Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of
such entity.
"Preferred Shares" shall mean the Series A Junior Participating
Preferred Shares, par value $0.01 per share, of the Company having the
rights and preferences set forth in the form of Certificate of
Designation, Preferences and Rights attached to this Agreement as
Exhibit A.
"Principal Party" shall have the meaning set forth in Section 13
hereof.
"Purchase Price" shall have the meaning set forth in Section 4
hereof.
"Redemption Date" shall have the meaning set forth in Section 7
hereof.
"Right Certificate" shall have the meaning set forth in Section 3
hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d)
promulgated under the Exchange Act) by the Company or an Acquiring
Person that an Acquiring Person has become such.
"Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by
such Person.
"Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
"Triggering Event" shall mean any event described in Section
11(a)(ii) or Section 13(a).
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Any determination or interpretation required in connection with any of the
definitions contained in this Section 1 shall be made by the Board of Directors
of the Company in their good faith judgment, which determination shall be final
and binding on the Rights Agent and on all shareholders of the Company.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable upon ten days' prior written notice to the Rights Agent.
The Rights Agent shall have no duty to supervise and shall in no event be liable
for acts or omissions of any such co-Rights Agents.
Section 3. Issuance of Right Certificates.
(a) Until the earlier of (i) the close of business on the tenth day after the
Shares Acquisition Date, (ii) the close of business on the fifteenth
Business Day (or such later date as may be determined by action of the
Board of Directors prior to such time as any Person becomes an Acquiring
Person) after the date of the commencement by any Person (other than the
Company, any Affiliate or Subsidiary of the Company, any employee benefit
plan of the Company or of any Affiliate or Subsidiary of the Company or any
entity holding Common Shares for or pursuant to the terms of any such plan)
of a tender or exchange offer the consummation of which would result in any
Person becoming the Beneficial Owner of Common Shares aggregating 15% or
more of the then outstanding Common Shares, or (iii) the close of business
on the tenth Business Day (or such later date as may be determined by
action of the Board of Directors prior to such time as any Person becomes
an Acquiring Person) after the date of filing by any Person of any
application, request, submission or other document with any federal or
state regulatory authority seeking approval of, attempting to rebut any
presumption of control of, or otherwise indicating an intention to enter
into, any transaction or series of transactions the consummation of which
would result in any Person becoming the Beneficial Owner of Common Shares
aggregating 15% or more of the then outstanding Common Shares, other than a
transaction in which newly issued Common Shares are issued directly by the
Company to such Person (including any such date which is after the date of
this Agreement and prior to the issuance of the Rights; the earlier of such
dates being herein referred to as the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of Section 3(b) hereof) by the
certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying Common
Shares (including a transfer to the Company). As soon as practicable after
the Distribution Date, the Company will prepare and execute, the Rights
Agent will countersign, and the Company will send or cause to be sent (and
the Rights Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares as of the
close of business on the Distribution Date, at the address of such holder
shown on the records of the Company, a Right Certificate, in substantially
the form of Exhibit B hereto (a "Right Certificate"), evidencing one Right
for each Common Share so held. As of the Distribution Date, the Rights will
be evidenced solely by such Right Certificates.
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(b) With respect to certificates for Common Shares outstanding as of the Record
Date, until the Distribution Date, the Rights will be evidenced by such
certificates registered in the names of the holders thereof, and registered
holders of Common Shares shall also be the registered holders of the
associated Rights (regardless of whether such ownership is indicated on the
Common Share certificates). Until the earliest of the Distribution Date,
the Redemption Date or the Final Expiration Date, the transfer of any
certificate for Common Shares shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby.
(c) Rights shall be issued in respect of all Common Shares which are issued
(whether or not previously issued) after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date or the Final
Expiration Date. Certificates evidencing such Common Shares shall also be
deemed to be certificates for Rights. Certificates evidencing both Common
Shares and Rights in accordance with this Section 3 which are executed and
delivered (whether or not the Common Shares evidenced thereby were
previously issued or are presented for transfer) by the Company (including,
without limitation, certificates representing reacquired Common Shares
referred to in the last sentence of this paragraph (c)) after the Record
Date but prior to the earliest of the Distribution Date, the Redemption
Date or the Final Expiration Date shall have impressed on, printed on,
written on or otherwise affixed to them a legend that by itself or together
with prior legends is substantially to the following effect: This
certificate also evidences and entitles the holder hereof to certain rights
as set forth in the Rights Agreement between Broadway Financial Corporation
(the "Company") and US Stock Transfer Corporation, dated as of January 31,
2003 (the "Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal offices
of the Company. Under certain circumstances, as set forth in the Rights
Agreement, the Rights will be evidenced by separate certificates and will
no longer be evidenced by this certificate. The Company will mail to the
holder of this certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after receipt of a written
request therefor. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or becomes
an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on behalf of
such Person or by any subsequent holder, shall become null and void.
Until the Distribution Date, the Rights associated with the Common Shares shall
be evidenced by the certificates evidencing the associated Common Shares alone
(regardless of whether any such certificate contains the above legend), and the
transfer of any such certificate shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby. In the event that
the Company purchases or acquires any Common Shares after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Shares
shall be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Shares which are no longer
outstanding.
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Section 4. Form of Right Certificates.
(a) The Right Certificates (and the forms of election to purchase Preferred
Shares and of assignment to be printed on the reverse thereof) shall be
substantially the same as Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required
to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on
which the Rights may from time to time be listed, or to conform to usage.
Subject to the provisions of Section 11 and Section 22 hereof, the Right
Certificates shall entitle the holders thereof to purchase such number of
one one-hundredths of a Preferred Share as shall be set forth therein at
the price per one one-hundredth of a Preferred Share set forth therein (the
"Purchase Price"), but the amount and type of securities purchasable upon
the exercise of each Right and the Purchase Price thereof shall be subject
to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22 hereof
that evidences Rights beneficially owned by: (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or any Associate or Affiliate) who becomes a transferee
after the Acquiring Person becomes an Acquiring Person, or (iii) a
transferee of an Acquiring Person (or any Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or
understanding, whether written or oral, regarding the transferred Rights or
(B) a transfer which is part of a plan, arrangement or understanding,
whether written or oral, which has as a primary purpose or effect the
avoidance of Section 7(e) hereof, and any Right Certificate issued pursuant
to Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence,
shall contain (to the extent feasible and otherwise reasonably identifiable
as such) the following legend:
The Rights evidenced by this Right Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Right Certificate and the Rights evidenced
hereby may become void in the circumstances specified in Section 7(e) of
such Agreement.
The provisions of Section 7(e) shall apply whether or not any Right Certificate
actually contains the foregoing legend.
Section 5. Countersignature and Registration. The Right Certificates shall
be executed on behalf of the Company by the Chairman of its Board of Directors,
its Chief Executive Officer or any of its Executive or Senior Vice Presidents,
or its Secretary, either manually or by facsimile signature, shall have affixed
thereto the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
7
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its office designated for such purpose, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates and the
date of each of the Right Certificates.
Section 6. Transfer, Division, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Sections 4(b), 7(e), 14 and 24 hereof, at any time after
the close of business on the Distribution Date, and at or prior to the close of
business on the earlier of the Redemption Date or the Final Expiration Date, any
Right Certificate or Right Certificates may be transferred, divided, combined or
exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of Preferred Shares (or, following a
Triggering Event, Common Shares or other securities or property, as the case may
be) as the Right Certificate or Right Certificates surrendered then entitled
such holder to purchase. Any registered holder desiring to transfer, divide,
combine or exchange any Right Certificate or Right Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be transferred, divided, combined or
exchanged at the office of the Rights Agent designated for such purpose. Neither
the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Right
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Right Certificate and the Company shall have been provided with such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Sections 4 and 7 hereof,
countersign and deliver to the person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, division, combination or exchange of
Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
8
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution
Date upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at
the office of the Rights Agent designated for such purpose, together with
payment of the Purchase Price with respect to each surrendered Right for
the total number of Preferred Shares (or Common Shares or other securities
or property, as the case may be) as to which the Rights are exercised, at
or prior to the earliest of (i) the close of business on January 31, 2013
(the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the "Redemption Date") or (iii)
the time at which such Rights are exchanged as provided in Section 24
hereof (the earliest to occur of the events described in (i), (ii) and
(iii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-hundredth of a Preferred Share pursuant
to the exercise of a Right shall initially be $35.00, shall be subject to
adjustment from time to time as provided in Sections 11 and 13 hereof and
shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate evidencing exercisable Rights, with the
form of election to purchase and the certificate on the reverse side of the
Right Certificate duly executed, accompanied by payment of the Purchase
Price for the Preferred Shares (or Common Shares or other securities or
property, as the case may be) to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check,
cashier's check or money order payable to the order of the Company, the
Rights Agent shall thereupon promptly (i) (A) requisition from any transfer
agent of the Preferred Shares (or make available, if the Rights Agent is
the transfer agent of the Preferred Shares) certificates for the number of
Preferred Shares to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B) if
the Company shall have elected to deposit the Preferred Shares issuable
upon exercise of the Rights with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of one
one-hundredths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares evidenced by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
will direct the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in
lieu of issuance of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt, deliver such cash to
9
or upon the order of the registered holder of such Right Certificate. In
the event that the Company is obligated to issue other securities
(including Common Shares) of the Company, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or property
are available for distribution by the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Right Certificate shall exercise less
than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by
the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and after
the occurrence of a Triggering Event, any Rights beneficially owned by (i)
an Acquiring Person or an Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes an
Acquiring Person or (iii) a transferee of an Acquiring Person (or any
Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming an Acquiring Person and receives such
Rights pursuant to either (x) a transfer (whether or not for consideration)
from the Acquiring Person to holders of equity interests in such Acquiring
Person or to any Person with whom the Acquiring Person has any continuing
agreement, arrangement or understanding, whether written or oral, regarding
the transferred Rights or (y) a transfer which the Board of Directors
otherwise concludes in good faith is part of a plan, arrangement or
understanding, whether written or oral, which has as a primary purpose or
effect the avoidance of this Section 7(e), shall become null and void
without any further action, and any holder of such Rights shall thereupon
have no rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise, from and after the occurrence of
a Triggering Event. The Company shall use all reasonable efforts to insure
that the provisions of this Section 7(e) hereof are complied with, but
shall have no liability to any holder of Rights for the inability to make
any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action
with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless the certificate contained in
the form of election to purchase set forth on the reverse side of the Right
Certificate surrendered for such exercise shall have been completed and
signed by the registered holder thereof and the Company shall have been
provided with such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or Associates thereof as
the Company shall reasonably request.
(g) The Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares or other
securities or property as contemplated by Section 11(a)(iii)), the number
10
of Preferred Shares (and, following the occurrence of a Triggering Event,
Common Shares and/or such other securities or property) that will be
sufficient to permit the exercise in full of all outstanding Rights.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, division,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, at the written request
of the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Preferred Shares; Payment of Taxes and Charges.
(a) The Company covenants and agrees that it will take all such action as may
be necessary to ensure that all Preferred Shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such
Preferred Shares, subject to payment of the Purchase Price, be duly and
validly authorized and issued and fully paid and nonassessable.
(b) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates
or of any Preferred Shares (or Common Shares and/or other securities, as
the case may be) upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right Certificates to a person other
than, or the issuance or delivery of certificates or depositary receipts
for the Preferred Shares (or Common Shares and/or other securities, as the
case may be) in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise or to issue or
to deliver any certificates or depositary receipts for Preferred Shares (or
Common Shares and/or other securities, as the case may be) upon the
exercise of any Rights until any such tax shall have been paid (any such
tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's reasonable
satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each person in whose name any
certificate for Preferred Shares (or Common Shares and/or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the shares or securities
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and any applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a date upon which the
transfer books of the Company for the Preferred Shares (or Common Shares and/or
other securities, as the case may be) are closed, such person shall be deemed to
have become the record holder of such shares or securities on, and such
certificate shall be dated, the next succeeding Business Day on which the
11
transfer books of the Company for the Preferred Shares (or Common Shares and/or
other securities, as the case may be) are open. Prior to the exercise of the
Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares (or Common Shares and/or
other securities, as the case may be) for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of
Preferred Shares or (D) issue any of its shares in a reclassification
of the Preferred Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing or surviving entity), except as otherwise provided in this
Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at
the time of the record date for such dividend or of the effective date
of such subdivision, combination or reclassification, and the number
and kind of shares issuable on such date, shall be proportionately
adjusted so that the holder of any Right exercised after such time
shall be entitled to receive the aggregate number and kind of shares
which, if such Right had been exercised immediately prior to such date
and at a time when the transfer books of the Company for the Preferred
Shares were open, he would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision,
combination or reclassification; provided, however, that in no event
shall the consideration to be paid upon -------- ------- the exercise
of one Right be less than the aggregate par value of the shares of the
Company issuable upon the exercise of one Right. If an event occurs
which would require an adjustment under both Section 11(a)(i) and
Section 11(a)(ii), the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24 of this Agreement, in the event any Person
becomes an Acquiring Person, each holder of a Right, except as
provided below and in Section 7(e) hereof, shall thereafter have a
right to receive, upon exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of one one-hundredths
of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred
Shares, such number of Common Shares of the Company as shall equal the
result obtained by (A) multiplying the then current Purchase Price by
the number of one one-hundredths of a Preferred Share for which a
Right is then exercisable and dividing that product by (B) 50% of the
then current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of the
occurrence of such event. In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company
shall not take any action which would eliminate or diminish the
benefits intended to be afforded by the Rights.
12
(iii)In lieu of issuing Common Shares of the Company in accordance with
Section 11(a)(ii) hereof, the Company may, in the sole discretion of
the Board of Directors, elect to (and, in the event that the Board of
Directors has not exercised the exchange right contained in Section 24
hereof and there are not sufficient issued but not outstanding and
authorized but unissued Common Shares to permit the exercise in full
of the Rights in accordance with the foregoing subparagraph (ii), the
Company shall) take all such action as may be necessary to authorize,
issue or pay, upon the exercise of the Rights, Preferred Shares or
other preferred shares which a majority of the Board of Directors
determines in good faith to be equivalent to one or more Common
Shares, or cash (including by way of a reduction of the Purchase
Price), property, other securities or any combination of cash,
property and such other securities having an aggregate value equal to
the value of the Common Shares of the Company which otherwise would
have been issuable pursuant to Section 11(a)(ii), which aggregate
value shall be determined in good faith by a majority of the Board of
Directors. For purposes of the preceding sentence, the value of the
Common Shares shall be determined pursuant to Section 11(d) hereof and
the value of any equity securities which a majority of the Board of
Directors determines in good faith to be equivalent to a Common Share
(including the Preferred Shares or other preferred shares determined
to be equivalent to one or more Common Shares, in such ratio as the
Board of Directors shall determine) shall be deemed to have the same
value as the Common Shares. Any such election by the Board of
Directors must be made and publicly announced within 60 days following
the date on which the event described in Section 11(a)(ii) shall have
occurred. Following the occurrence of the event described in Section
11(a)(ii), a majority of the Board of Directors then in office may
suspend the exercisability of the Rights for a period of up to 60 days
following the date on which the event described in Section 11(a)(ii)
shall have occurred to the extent that the Board of Directors has not
determined whether to exercise the Company's right of election under
this Section 11(a)(iii). In the event of any such suspension, the
Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended.
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Shares entitling them (for
a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or securities convertible into Preferred Shares or
equivalent preferred shares at a price per Preferred Share or equivalent
preferred share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred shares) less than
the then current per share market price of the Preferred Shares (as defined
in Section 11(d)) on such record date, the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of Preferred Shares outstanding on
such record date plus the number of Preferred Shares which the aggregate
offering price of the total number of Preferred Shares and/or equivalent
preferred shares so to be offered (and/or the aggregate initial conversion
price of the convertible securities so to be offered) would purchase at
such current market price and the denominator of which shall be the number
of Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares and/or equivalent preferred shares to be
13
offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however,
that in no event shall the consideration to be paid upon the exercise of
one Right be less than the aggregate par value of the shares of the Company
issuable upon exercise of one Right. In case such subscription price is
paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding
on the Rights Agent and on the holders of the Rights. Preferred Shares
owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall
be made successively whenever such a record date is fixed; and in the event
that such rights, options or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if
such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving entity) of evidences of indebtedness
or assets (other than a regular periodic cash dividend or a dividend
payable in Preferred Shares) or subscription rights or warrants (excluding
those referred to in Section 11(b) hereof), the Purchase Price to be in
effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the then current per share market
price of the Preferred Shares on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with
the Rights Agent) of the portion of the assets or evidences of indebtedness
so to be distributed or of such subscription rights or warrants
attributable to one Preferred Share and the denominator of which shall be
such current per share market price of the Preferred Shares; provided,
however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
the Company to be issued upon exercise of one Right. Such adjustments shall
be made successively whenever such a record date is fixed; and in the event
that such distribution is not so made, the Purchase Price shall again be
adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than under Section
11(a)(iii) hereof, the "current per share market price" of any
security (a "Security" for the purpose of this Section 11(d)(i)) on
any date shall be deemed to be the average of the daily closing prices
per share of such Security for the 30 consecutive Trading Days (as
such term is hereinafter defined) immediately prior to such date, and
for the purpose of any computation under Section 11(a)(iii) hereof,
the "current per share market price" of a Security on any date shall
be deemed to be the average of the daily closing prices per share of
such Security for thirty (30) consecutive Trading Days immediately
following such date; provided, however, that in the event that the
current per share market price of the Security is determined during a
period following the announcement by the issuer of such Security of
(A) a dividend or distribution on such Security payable in
14
shares of such Security or securities convertible into such shares
(other than the Rights), or (B) any subdivision, combination or
reclassification of such Security and prior to the expiration of 30
Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current per share
market price" shall be appropriately adjusted to reflect the current
market price per share equivalent (ex-dividend) of such Security. The
closing price for each day shall be the last sale price, regular way,
or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported
in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not
listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the last high
bid and low asked prices in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in use, or, if
on any such date the Security is not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Security selected by
the Board of Directors of the Company. If on any such date no market
maker is making a market in the Security, the fair value of such
Security on such date (as determined in good faith by the Board of
Directors of the Company) shall be used. The term "Trading Day" shall
mean a day on which the principal national securities exchange on
which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted
to trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "current per share
market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the
Preferred Shares are not publicly traded, the "current per share
market price" of the Preferred Shares shall be conclusively deemed to
be the current per share market price of the Common Shares of the
Company as determined pursuant to Section 11(d)(i) (as appropriately
adjusted to reflect any share split, share dividend or similar
transaction occurring after the date hereof), multiplied by one
hundred. If neither the Common Shares of the Company nor the Preferred
Shares are publicly held or so listed or traded, "current per share
market price" shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights
Agent.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided,
however, that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest one one-millionth of a Preferred
Share or one ten-thousandth of any other share or security, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any
15
adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transaction which requires
such adjustment or (ii) the date of the expiration of the right to exercise
any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a) or Section
13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of
any Right shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect
to the Preferred Shares contained in this Section 11, and the provisions of
Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares shall
apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any adjustment
made to the Purchase Price hereunder shall entitle the holder thereof to
purchase, at the adjusted Purchase Price, the number of one one-hundredths
of a Preferred Share purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in Section
11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter entitle
the holder thereof to purchase, at the adjusted Purchase Price, that number
of one one-hundredths of a Preferred Share (calculated to the nearest one
one-millionth of a Preferred Share) obtained by (i) multiplying (A) the
number of one one-hundredths of a Preferred Share covered by a Right
immediately prior to such adjustment by (B) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii)
dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be
exercisable for the number of one one-hundredths of a Preferred Share
for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the
nearest one ten-thousandth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to
be made. This record date may be the date on which the Purchase Price
is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the
public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date
16
Right Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result
of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to
the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which
such holders shall be entitled after such adjustment. Right
Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-hundredths of a Preferred Share which were expressed in the initial
Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-hundredth of the then par value, if any, of
the Preferred Shares issuable upon exercise of the Rights, the Company
shall take any action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully
paid and nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment in
the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event
the issuance to the holder of any Right exercised after such record date of
the Preferred Shares and other securities of the Company, if any, issuable
upon such exercise over and above the Preferred Shares and other securities
of the Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the Company
shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and
to the extent that it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the Preferred
Shares, issuance wholly for cash of any Preferred Shares at less than the
current market price, issuance wholly for cash of Preferred Shares or
securities which by their terms are convertible into or exchangeable for
Preferred Shares, dividends on Preferred Shares payable in Preferred Shares
or issuance of rights, options or warrants referred to hereinabove in
Section 11(b), hereafter made by the Company to holders of its Preferred
Shares shall not be taxable to such shareholders.
(n) In the event that at any time after the date of this Agreement and prior to
the Distribution Date, the Company shall (i) declare or pay any dividend on
the Common Shares payable in Common Shares or (ii) effect a subdivision,
17
combination or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares) into a greater or
lesser number of Common Shares, then in any such case (x) the number of one
one-hundredths of a Preferred Share purchasable after such event upon
proper exercise of each Right shall be determined by multiplying the number
of one one-hundredths of a Preferred Share so purchasable immediately prior
to such event by a fraction, the numerator of which is the number of Common
Shares outstanding immediately before such event and the denominator of
which is the number of Common Shares outstanding immediately after such
event, and (y) each Common Share outstanding immediately after such event
shall have issued with respect to it that number of Rights which each
Common Share outstanding immediately prior to such event had issued with
respect to it. The adjustments provided for in this Section 11(n) shall be
made successively whenever such a dividend is declared or paid or such a
subdivision, combination or consolidation is effected.
(o) So long as the shares issuable upon the exercise of the Rights may be
listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise.
(p) The Company shall use its best efforts to (i) file, as soon as practicable
following the first occurrence of a Triggering Event, a registration
statement under the Securities Act with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause
such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the date of the expiration of the Rights. The Company
will also take such action as may be appropriate under the blue sky laws of
the various states. The Company may temporarily suspend, for a period of
time not to exceed 90 days, the exercisability of the Rights in order to
prepare and file such registration statement or in order to comply with
such blue sky laws. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended.
(q) In the event that the Rights become exercisable following the occurrence of
a Triggering Event, the Company may permit the Rights, subject to Section
7(e) hereof, to be exercised for 50% of the Common Shares (or cash,
property or other securities to be substituted for Common Shares pursuant
to Section 11(a)(iii)) that would otherwise be purchasable under subsection
(a) in consideration of the surrender to the Company of the Rights so
exercised and without other payment of the Purchase Price. Rights exercised
under this subsection (q) shall be deemed to have been exercised in full
and shall be canceled.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file a
copy of such certificate with the Rights Agent and with each transfer agent for
the Common Shares or the Preferred Shares and (c) mail a brief summary thereof
18
to each holder of a Right Certificate in accordance with Section 25 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and may assume that no adjustment has been made
unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) If after the Shares Acquisition Date, directly or indirectly, (x) the
Company shall consolidate with, or merge with and into, any other Person,
(y) any Person shall consolidate with the Company, or merge with and into
the Company and the Company shall be the continuing or surviving entity of
such merger or the Company shall be a party to a share exchange and, in
connection with such consolidation, merger or share exchange, all or part
of the Common Shares shall be changed into or exchanged for stock or other
securities of any other Person or the Company, or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to
any Person or Persons other than the Company or one or more of its
wholly-owned Subsidiaries, then, and in each such case, proper provision
shall be made so that (i) each holder of a Right (except as otherwise
provided herein) shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the then current Purchase Price
multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of validly
authorized and issued, fully paid, non-assessable and freely tradable
common shares of the Principal Party, free and clear of all liens, rights
of call or first refusal, encumbrances or other adverse claims, as shall
equal the result obtained by (A) multiplying the then current Purchase
Price by the number of one one-hundredths of a Preferred Share for which a
Right is then exercisable (or, if such Right is not then exercisable for a
number of one one-hundredths of a Preferred Share, the number of such
fractional shares for which it was exercisable immediately prior to an
event described under Section 11(a)(ii) hereof) and dividing that product
by (B) 50% of the then current per share market price of the common shares
of such Principal Party (determined pursuant to Section 11(d) hereof) on
the date of consummation of such consolidation, merger, sale or transfer;
(ii) such Principal Party shall thereafter be liable for, and shall assume,
by virtue of such consolidation, merger, sale or transfer, or otherwise,
all the obligations and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such
Principal Party and (iv) such Principal Party shall take such steps
(including, but not limited to, the authorization and reservation of a
sufficient number of its common shares in accordance with Section 9 hereof)
in connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its common shares thereafter deliverable upon the
exercise of the Rights.
19
(b) "Principal Party" shall mean:
(i) In the case of any transaction described in (x) or (y) of the first
sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Shares of the Company are converted in
such merger or consolidation, and if no securities are so issued, the
Person that is the surviving entity of such merger or consolidation
(including the Company if applicable); and
(ii) in the case of any transaction described in (z) of the first sentence
in Section 13(a), the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such
transaction or transactions;
provided, however, that in any such case described in clauses (b)(i) and
(b)(ii): (1) if the common shares of such Person are not at such time and
have not been continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act, and such Person is a direct or
indirect Subsidiary of another Person the common shares of which are and
have been so registered, "Principal Party" shall refer to such other
Person; (2) in case such Person is a Subsidiary, directly or indirectly, of
more than one Person, the common shares of two or more of which are and
have been so registered, "Principal Party" shall refer to whichever of such
Persons is the issuer of the common shares having the greatest aggregate
market value; and (3) in case such Person is owned, directly or indirectly,
by a joint venture formed by two or more Persons that are not owned,
directly or indirectly, by the same Person, the rules set forth in (1) and
(2) above shall apply to each of the chains of ownership having an interest
in such joint venture as if such party were a "Subsidiary" of both or all
of such joint venturers and the Principal Parties in each such chain shall
bear the obligations set forth in this Section 13 in the same ratio as
their direct or indirect interests in such Person bear to the total of such
interests.
(c) The Company shall not consummate any such consolidation, merger, sale or
transfer unless the Principal Party shall have sufficient common shares
authorized to permit the full exercise of the Rights and prior thereto the
Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
paragraphs (a) and (b) of this Section 13 and further providing that, as
soon as practicable after the date of any consolidation, merger or sale of
assets mentioned in paragraph (a) of this Section 13, the Principal Party
will:
(i) prepare and file a registration statement under the Securities Act,
with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective
as soon as practicable after such filing and (B) remain effective
(with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date;
(ii) deliver to holders of the Rights historical financial statements for
the Principal Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act; and
(iii)take such actions as may be necessary or appropriate under the blue
sky laws of the various states.
20
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that one of the
transactions described in Section 13(a) shall occur at any time after the
occurrence of a transaction described in Section 11(a)(ii) hereof, the Rights
which have not theretofore been exercised shall thereafter become exercisable in
the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there may be paid to the registered holders of the
Right Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section
14(a), the current market value of a whole Right shall be the closing price
of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the New York Stock Exchange or, if the Rights are
not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are
not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the last high bid
and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the fair value
of the Rights on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred Shares
(other than fractions which are integral multiples of one one-hundredth of
a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share). Fractions of Preferred Shares in integral multiples of one
one-hundredth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate agreement
between the Company and a depositary selected by it; provided, that such
agreement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled
as beneficial owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not integral
multiples of one one-hundredth of a Preferred Share, the Company may, to
the extent necessary to reduce such fraction to an integral multiple of one
one-hundredth, pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one one-hundredth of a
Preferred Share. For the purposes of this Section 14(b), the current market
21
value of one one-hundredth of a Preferred Share shall be one one-hundredth
of the closing price of a Preferred Share (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall not be
required to issue fractions of Common Shares upon exercise of the Rights or
to distribute certificates which evidence fractional Common Shares. In lieu
of fractional Common Shares, the Company may pay to the registered holders
of Right Certificates at the time the Rights evidenced thereby are
exercised as herein provided an amount in cash equal to the same fraction
of the current market value of one Common Share. For purposes of this
Section 14(c), the current market value of one Common Share shall be the
closing price of one Common Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior
to the date of such exercise.
(d) The holder of a Right by the acceptance of the Right expressly waives his
right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are transferable only
on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper
instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the person in whose
name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
22
thereof and of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on the Right Certificates or the associated Common
Shares certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights
Agent shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a
Right or any other Person as a result of its inability to perform any of
its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority prohibiting or
otherwise restraining performance of such obligation.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
gross negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises. The
reimbursement and compensation (to the extent of accrued but unpaid compensation
as of the date of termination) provisions and the indemnity provisions of this
Section 18 shall survive the expiration of the Rights and the termination of
this Agreement.
The Rights Agent shall be protected and shall incur no liability for, or in
respect of any action taken, suffered or omitted by it in connection with, its
administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
23
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any
Person into which the Rights Agent or any successor Rights Agent may be merged
or with which it may be consolidated, or any Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any Person succeeding to the stock transfer or corporate trust
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, that such Person would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Right Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement, and no implied duties or obligations
shall be read into this Agreement against the Rights Agent, upon the following
terms and conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal counsel
for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the Rights
Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect
thereof is herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the Chairman of the
Board, the Chief Executive Officer, any Vice President, or the Secretary of
the Company and delivered to the Rights Agent; and such certificate shall
24
be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon
such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for any and all losses, liabilities, costs, damages and
expenses (including attorneys' fees) arising out of or in connection with
the Rights Agent's gross negligence, bad faith or willful misconduct.
Anything in this Agreement to the contrary notwithstanding, in no event
shall the Rights Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Rights Agent has been advised of the likelihood of
such loss or damage and regardless of the form of the action.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify
the same, and all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of the
validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof);
nor shall it be responsible for any breach by the Company of any covenant
or condition contained in this Agreement or in any Right Certificate; nor
shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 7(e) hereof) or any
adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the
ascertaining of the existence of facts that would require any such change
or adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after receipt of a certificate furnished pursuant to
Section 12 describing a change or adjustment); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares or Common Shares to be
issued pursuant to this Agreement or any Right Certificate or as to whether
any Preferred Shares or Common Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and deliver
or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept instructions
with respect to the performance of its duties hereunder from the Chairman
of the Board, the Chief Executive Officer, any Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers
for advice or instructions in connection with its duties, and it shall not
be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions. Any application by the Rights Agent
25
for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken or omitted by
the Rights Agent under this Agreement and the date on and/or after which
such action shall be taken or such omission shall be effective. The Rights
Agent shall not be liable for any action taken by, or omission of, the
Rights Agent in accordance with a proposal included in any such application
on or after the date specified in such application (which date shall not be
less than five Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instructions in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee of the
Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or its Subsidiaries or become pecuniarily interested in any
transaction in which the Company or its Subsidiaries may be interested, or
contract with or lend money to the Company or its Subsidiaries or otherwise
act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in
any other capacity for the Company or its Subsidiaries or for any other
legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct
of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued
employment thereof.
(j) If, with respect to any Right Certificate surrendered to the Rights Agent
for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or
2 thereof, the Rights Agent shall not take any further action with respect
to such requested exercise of transfer without first consulting with the
Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
26
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation or bank organized and doing business under the laws of the United
States or of any other state of the United States, which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $100 million. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares or Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement.
Section 23. Redemption.
(a) The Company may, at its option, at any time prior to such time as any
Person becomes an Acquiring Person, redeem all but not less than all of the
then outstanding Rights at a redemption price of $0.01 per Right,
appropriately adjusted to reflect any share split, share dividend or
similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption Price"). The redemption of
the Rights by the Company may be made effective at such time, on such basis
and with such conditions as the Board of Directors in its sole discretion
may establish. The Company may, at its option, pay the Redemption Price in
cash, Common Shares (based on the current per share market price of the
Common Shares at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights (or at the effective time of such
redemption established by the Board of Directors of the Company pursuant to
the last sentence of paragraph (a) of this Section 23), and without any
further action and without any notice, the right to exercise the Rights
will terminate and the only right thereafter of the holders of Rights shall
be to receive the Redemption Price. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give,
or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights or, if later, the effectiveness of
the redemption of the Rights pursuant to the last sentence of paragraph
27
(a), the Company shall mail a notice of redemption to all the holders of
the then outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the transfer agent for the Common Shares. Any notice
which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of
redemption shall state the method by which the payment of the Redemption
Price will be made. The Company may, at its option, discharge all of its
obligations with respect to the Rights by (i)issuing a press release
announcing the manner of redemption of the Rights, (ii) depositing with a
bank or trust company having a capital and surplus of at least
$100,000,000, funds necessary for such redemption, in trust, to be applied
to the redemption of the Rights so called for redemption and (iii)
arranging for the mailing of the Redemption Price to the registered holders
of the Rights; then, and upon such action, all outstanding Rights
Certificates shall be null and void without further action by the Company.
Neither the Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23, in Section 24 hereof,
or in connection with the purchase of Common Shares prior to the
Distribution Date.
Section 24. Exchange.
(a) The Company may, at its option, at any time after a Triggering Event,
exchange all or part of the then outstanding and exercisable Rights (which
shall not include Rights that have become void pursuant to the provisions
of Section 7(e) hereof) for Common Shares at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any share split,
share dividend or similar transaction occurring after the date hereof (such
exchange ratio being referred to herein as the "Exchange Ratio").
Notwithstanding the foregoing, the Company shall not be empowered to effect
such exchange at any time after any Person (other than the Company, any
Affiliate or Subsidiary of the Company, any employee benefit plan of the
Company or of any Affiliate or Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of Common Shares
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders of
such Rights at their last addresses as they appear upon the registry books
of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange shall state the method by which the
exchange of the Common Shares for Rights will be effected and, in the event
of any partial exchange, the number of Rights which will be exchanged. Any
28
partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of
Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its option,
may substitute Preferred Shares (or other preferred shares that a majority
of the Board of Directors determines in good faith to be equivalent to one
or more Common Shares) for Common Shares exchangeable for Rights, at the
initial rate of one one-hundredth of a Preferred Share (or such other
preferred share) for each Common Share, as appropriately adjusted to
reflect the voting rights at that time of the Preferred Shares (or such
other preferred shares) pursuant to the terms thereof, so that the fraction
of a Preferred Share (or other preferred share) delivered in lieu of each
Common Share shall have the same voting rights as one Common Share.
(d) In the event that there shall not be sufficient Common Shares or Preferred
Shares (or other preferred shares) issued but not outstanding or authorized
but unissued to permit any exchange of Rights as contemplated in accordance
with this Section 24, the Company shall take all such action as may be
necessary to authorize additional Common Shares or Preferred Shares (or
such other preferred shares) for issuance upon exchange of the Rights.
(e) The Company may, but shall not be required to, issue fractions of Common
Shares, Preferred Shares (or such other preferred shares) or to distribute
certificates which evidence fractional Common Shares. In lieu of any such
fractional shares, the Company shall pay to the registered holders of the
Right Certificates with regard to which such fractional Common Shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share. For the purposes of this
paragraph (e), the current market value of a whole Common Share shall be
the closing price of a Common Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior
to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose at any time after the Distribution Date
(i) to pay any dividend payable in shares of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of
its Preferred Shares (other than a regular quarterly cash dividend), (ii)
to offer to the holders of its Preferred Shares rights or warrants to
subscribe for or to purchase any additional Preferred Shares or shares of
any class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Shares (other than a reclassification
involving only the subdivision of outstanding Preferred Shares), (iv) to
effect any consolidation or merger into or with, or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one or more transactions, of 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the
Common Shares payable in Common Shares or to effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or
29
otherwise than by payment of dividends in Common Shares), then, in each
such case, the Company shall give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of such proposed action, which
shall specify the record date for the purposes of such share dividend, or
distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any
such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least 10 days prior to
the record date for determining holders of the Preferred Shares for
purposes of such action, and in the case of any such other action, at least
10 days prior to the date of the taking of such proposed action or the date
of participation therein by the holders of the Common Shares and/or
Preferred Shares, whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to
each holder of a Right Certificate, in accordance with Section 26 hereof, a
notice of the occurrence of such event, which notice shall describe such
event and the consequences of such event to holders of Rights under Section
11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Broadway Financial Corporation
4800 Wilshire Blvd.
Los Angeles, CA 91101
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
US Stock Transfer Corporation
1745 Gardena Avenue.
Glendale, CA 91204
Attention: Ms. Bridget Barela
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. The Company may from time to time,
and the Rights Agent shall if the Company so directs, supplement or amend this
Agreement in any respect (including, without limitation, to change the Purchase
Price or the Final Expiration Date) which the Company may deem necessary or
30
desirable, any such supplement or amendment to be evidenced by a writing signed
by the Company and the Rights Agent without the approval of any holders of Right
Certificates; provided, however, that from and after such time as any Person
becomes an Acquiring Person, this Agreement shall not be amended in any manner
which would adversely affect the interests of the holders of Rights.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement; and this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and construed in accordance
with the laws of such State applicable to contracts to be made and performed
entirely within such State, except that those provisions of this Agreement
affecting the rights, duties and responsibilities of the Rights Agent shall be
governed by and construed in accordance with the law of the State of California.
Section 32. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the Sections of
this Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
Section 34. Determinations and Actions by the Board of Directors. The Board
of Directors of the Company shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors or the Company or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (a) interpret the provisions of this
Agreement, and (b) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend this Agreement). All such actions, interpretations
and determinations (including, for purpose of clause (b) above, all omissions
with respect to the foregoing) which are done or made by the Board of Directors
31
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Right Certificates and all other parties, and
(y) not subject the Board of Directors to any liability to the holders of the
Right Certificates.
[This space intentionally left blank.]
32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
BROADWAY FINANCIAL CORPORATION
By: /s/ Paul C. Hudson
-------------------------------------------
Title: Chief Executive Officer and
President
Attest:
By: /s/ Alvin D. Kang
-------------------------------------------
Title: Chief Financial Officer
US STOCK TRANSFER CORPORATION
By: /s/ Bridget Barela
-------------------------------------------
Title: Assistant Vice President
Attest:
By: /s/ Mark Cano
-------------------------------------------
Title: Senior Vice President
33
Exhibit A
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK,
$0.01 PAR VALUE
of
BROADWAY FINANCIAL CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Broadway Financial Corporation, a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), in
accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation, as amended, the Board of
Directors on January 31, 2003 adopted the following resolution creating a series
of 25,000 shares of preferred stock designated as "Series A Junior Participating
Preferred Stock," $0.01 par value:
RESOLVED, that pursuant to the authority granted in the Certificate of
Incorporation, as amended, of the Corporation, the Board of Directors hereby
classifies 25,000, which number shall be subject to adjustment from time to time
in accordance with the Rights Agreement, shares, of the Corporation's authorized
but unissued shares of preferred stock as shares of Series A Junior
Participating Preferred Shares of Beneficial Interest, of which the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications, and terms and conditions of
redemption shall be as follows:
Section 1. Designation and Amount. There shall be a series of preferred
shares of the Corporation, $0.01 par value per share, which shall be designated
"Series A Junior Participating Preferred Shares" (the "Series A Preferred
Shares"), and the number of shares constituting that series shall be 25,000.
Such number of shares may be increased or decreased by resolution of the Board
of Directors and by the filing of a certificate in accordance with the
provisions of the General Corporation Law of the State of Delaware stating that
such increase or reduction has been so authorized; provided, however, that no
decrease shall reduce the number of Series A Preferred Shares to a number less
than the number of Series A Preferred Shares then outstanding plus the number of
Series A Preferred Shares issuable upon exercise of outstanding rights, options
or warrants or upon conversion of outstanding securities issued by the
Corporation.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares of
any class or series of preferred shares of the Corporation ranking prior
and superior to the Series A Preferred Shares with respect to dividends,
the holders of Series A Preferred Shares shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for such purpose, quarterly dividends payable in cash to holders
of record on the last Business Day of January, April, July and October in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date") (commencing on the first Quarterly Dividend Payment Date
after the first issuance of a Series A Preferred Share or fraction thereof)
in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and
100 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in Common
Shares (hereinafter defined) or a subdivision of the outstanding Common
Shares (by a reclassification or otherwise), authorized on the common
shares of beneficial interest, par value $0.01 per share, of the
Corporation (the "Common Shares") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any Series A Preferred Share or
fraction thereof. In the event the Corporation shall at any time following
February 13, 2003 (i) declare any dividend on Common Shares payable in
Common Shares, (ii) subdivide the outstanding Common Shares or (iii)
combine the outstanding Common Shares into a smaller number of shares, then
in each such case the amount to which holders of Series A Preferred Shares
were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying each such amount by a
fraction the numerator of which is the number of Common Shares outstanding
immediately after such event and the denominator of which is the number of
Common Shares that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series A
Preferred Shares as provided in paragraph (A) above at the time it declares
a dividend or distribution on the Common Shares (other than a dividend
payable in Common Shares).
(C) No dividend or distribution (other than a dividend or distribution payable
in Common Shares) shall be paid or payable to the holders of Common Shares
unless, prior thereto, all accrued but unpaid dividends to the date of that
dividend or distribution shall have been paid to the holders of Series A
Preferred Shares.
(D) Dividends shall begin to accrue and be cumulative on outstanding Series A
Preferred Shares from the Quarterly Dividend Payment Date next preceding
the date of issuance of such Series A Preferred Shares, unless the date of
issuance of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin
to accrue and be cumulative from the date of issuance of such shares, or
unless the date of issuance is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of Series A
Preferred Shares entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the Series A Preferred Shares in an amount less than the
total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of Series A Preferred Shares entitled
to receive payment of a dividend or distribution declared thereon, which
record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
2
Section 3. Voting Rights. The holders of Series A Preferred Shares shall
have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each one
one-hundredth of a Series A Preferred Share shall entitle the holder
thereof to one vote on all matters submitted to a vote of the shareholders
of the Corporation. In the event the Corporation shall at any time
following February 13, 2003 (i) declare any dividend on Common Shares
payable in Common Shares, (ii) subdivide the outstanding Common Shares or
(iii) combine the outstanding Common Shares into a smaller number of
shares, then in each such case the number of votes per share to which
holders of Series A Preferred Shares were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of Common Shares outstanding immediately
after such event and the denominator of which is the number of Common
Shares that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, the holders of Series A Preferred
Shares and the holders of Common Shares and any other shares of beneficial
interest of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of shareholders of
the Corporation.
(C) (i) Whenever, at any time or times, dividends payable on any Series A
Preferred Shares shall be in arrears in an amount equal to at least
six full quarterly dividends (whether or not declared and whether or
not consecutive), the holders of record of the outstanding Series A
Preferred Shares shall have the exclusive right, voting separately as
a single class, to elect two directors of the Corporation at a special
meeting of shareholders of the Corporation or at the Corporation's
next annual meeting of shareholders, and at each subsequent annual
meeting of shareholders, as provided below. At elections for such
directors, the holders of Series A Preferred Shares shall be entitled
to cast one vote for each one one-hundredth of a Series A Preferred
Share held, subject to adjustment.
(ii) Upon the vesting of such right of the holders of the Series A
Preferred Shares, the maximum authorized number of members of the
Board of Directors shall automatically be increased by two and the two
vacancies so created shall be filled by vote of the holders of the
outstanding Series A Preferred Shares as hereinafter set forth. A
special meeting of the shareholders of the Corporation then entitled
to vote shall be called by the Chairman of the Board, the Chief
Executive Officer, any Executive or Senior Vice President or the
Secretary of the Corporation, if requested in writing by the holders
of record of not less than 10% of the Series A Preferred Shares then
outstanding. At such special meeting, or, if no such special meeting
shall have been called, then at the next annual meeting of
shareholders of the Corporation, the holders of the Series A Preferred
Shares shall elect, voting as above provided, two directors of the
Corporation to fill the aforesaid vacancies created by the automatic
increase in the number of members of the Board of Directors. At any
and all such meetings for such election, the holders of a majority of
the outstanding Series A Preferred Shares shall be necessary to
constitute a quorum for such election, whether present in person or by
proxy, and such
3
two directors shall be elected by the vote of at least a plurality of
shares held by such shareholders present or represented at the
meeting. Any director elected by holders of Series A Preferred Shares
pursuant to this Section may be removed at any annual or special
meeting, by vote of a majority of the shareholders voting as a class
who elected such director, with or without cause. In case any vacancy
shall occur among the directors elected by the holders of the Series A
Preferred Shares pursuant to this Section, such vacancy may be filled
by the remaining director so elected, or his successor then in office,
and the director so elected to fill such vacancy shall serve until the
next meeting of shareholders for the election of directors. After the
holders of the Series A Preferred Shares shall have exercised their
right to elect directors in any default period and during the
continuance of such period, the number of directors shall not be
further increased or decreased except by vote of the holders of Series
A Preferred Shares as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A
Preferred Shares.
(iii)The right of the holders of the Series A Preferred Shares, voting
separately as a class, to elect two members of the Board of Directors
of the Corporation as aforesaid shall continue until, and only until,
such time as all arrears in dividends (whether or not declared) on the
Series A Preferred Shares shall have been paid or declared and set
apart for payment, at which time such right shall terminate, except as
herein or by law expressly provided, subject to revesting in the event
of each and every subsequent default of the character above-mentioned.
Upon any termination of the right of the holders of the Series A
Preferred Shares as a class to vote for directors as herein provided,
the term of office of all directors then in office elected by the
holders of Series A Preferred Shares pursuant to this Section shall
terminate immediately. Whenever the term of office of the directors
elected by the holders of the Series A Preferred Shares pursuant to
this Section shall terminate and the special voting powers vested in
the holders of the Series A Preferred Shares pursuant to this Section
shall have expired, the maximum number of members of the Board of
Directors of the Corporation shall be such number as may be provided
for in the Bylaws of the Corporation irrespective of any increase made
pursuant to the provisions of this Section.
(D) Except as otherwise provided herein or required by law, holders of Series A
Preferred Shares shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Shares as provided herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever any quarterly dividends or other dividends or distributions
payable on the Series A Preferred Shares as provided in Section 2 are in
arrears, then, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on Series A Preferred Shares
outstanding shall have been paid in full, the Corporation shall not:
4
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Shares, other
than dividends paid or payable in such junior shares;
(ii) declare or pay dividends on or make any other distributions on any
shares ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Shares, except dividends paid ratably on the Series A Preferred Shares
and all such parity shares on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii)redeem or purchase or otherwise acquire for consideration shares
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Shares,
provided that the Corporation may at any time redeem, purchase or
otherwise acquire any such parity shares in exchange for shares of the
Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred
Shares; or
(iv) purchase or otherwise acquire for consideration any Series A Preferred
Shares, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of the
Corporation unless the Corporation could, under paragraph (A) of this
Section, purchase or otherwise acquire such shares at such time and in such
manner.
Section 5. Reacquired Shares. Any Series A Preferred Shares purchased or
otherwise acquired by the Corporation in any manner whatsoever shall become
authorized but unissued shares and may be reissued as part of a new series of
preferred shares to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any voluntary liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Shares unless, prior thereto, the holders of
Series A Preferred Shares shall have received $1.00 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A
Liquidation Preference"). Following payment of the full amount of the
Series A Liquidation Preference, no additional distributions shall be made
to the holders of Series A Preferred Shares unless, prior thereto, the
holders of Common Shares shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the
Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as
5
set forth in subparagraph C below to reflect such events as share splits,
share dividends and recapitalizations with respect to the Common Shares)
(such number in clause (ii) being referred to herein as, the "Adjustment
Number"). Following the payment of the full amount of the Series A
Liquidation Preference and the Common Adjustment in respect of all
outstanding Series A Preferred Shares and Common Shares, respectively,
holders of Series A Preferred Shares and holders of Common Shares shall
receive their ratable and proportionate share of the remaining assets to be
distributed in the ratio, on a per share basis, of the Adjustment Number to
1 with respect to such Series A Preferred Shares and Common Shares, on a
per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available to
permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred shares, if any,
which rank on a parity with the Series A Preferred Shares, then such
remaining assets shall be distributed ratably to the holders of the Series
A Preferred Shares and such parity shares in proportion to their respective
liquidation preferences.
(C) In the event the Corporation shall at any time following February 13, 2003
(i) declare any dividend on Common Shares payable in Common Shares, (ii)
subdivide the outstanding Common Shares or (iii) combine the outstanding
Common Shares into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator
of which is the number of Common Shares outstanding immediately after such
event and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. If the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the Common
Shares are exchanged for or changed into other shares or securities, cash and/or
any other property, then in any such case, the Series A Preferred Shares shall
at the same time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to 100
times the aggregate amount of shares, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each Common Share
is exchanged or changed. In the event the Corporation shall at any time (i)
declare any dividend on Common Shares payable in Common Shares, (ii) subdivide
the outstanding Common Shares or (iii) combine the outstanding Common Shares
into a smaller number of shares, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of Series A
Preferred Shares shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
Section 8. Redemption. The Series A Preferred Shares shall not be
redeemable by the Corporation. The preceding sentence shall not limit the
ability of the Corporation to purchase or otherwise deal in such shares to the
extent permitted by law.
6
Section 9. Ranking. The Series A Preferred Shares shall rank junior to all
other series of the Corporation's preferred shares (whether with or without par
value) as to the payment of dividends and the distribution of assets, unless the
terms of any such series shall provide otherwise.
Section 10. Amendment. Neither the Corporation's Certificate of
Incorporation nor its Certificate of Designation, Preferences and Rights
relating to the Series A Preferred Shares shall be amended in any manner which
would materially and adversely alter or change the preferences, rights or other
terms of the Series A Preferred Shares without the affirmative vote of the
holders of a majority or more of the outstanding Series A Preferred Shares,
voting separately as a class.
Section 11. Fractional Shares. Series A Preferred Shares may be issued in
fractions of a share that are integral multiples of one-one hundredth of a
share, which shall entitle the holder, in proportion to such holder's fractional
shares, to exercise voting rights, receive dividends and participate in
distributions and to have the benefit of all other rights of holders of Series A
Preferred Shares.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly
executed by the undersigned officer this __ day of January, 2003.
BROADWAY FINANCIAL CORPORATION
By:
----------------------------------------------
Name:
Title:
7
Exhibit B
[Form of Right Certificate]
Certificate No. R- Rights
---------
NOT EXERCISABLE AFTER JANUARY 31, 2013 OR EARLIER IF THE RIGHTS EXPIRE
UNDER CERTAIN CIRCUMSTANCES OR ARE EXCHANGED OR REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS
SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHT
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]*
Right Certificate
BROADWAY FINANCIAL CORPORATION
This certifies that , or registered assigns, is the registered owner of the
number of Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights Agreement, dated
as of January 31, 2003 (the "Rights Agreement"), between Broadway Financial
Corporation, a Delaware corporation (the "Company"), and US Stock Transfer
Corporation (the "Rights Agent") to purchase from the Company at any time after
the Distribution Date (as such term is defined in the Rights Agreement) and
prior to 5:00 p.m. (Pacific time) on January 31, 2013 or notice of redemption or
exchange at the office of the Rights Agent (or its successors as Rights Agent)
designated for such purpose, one one-hundredth of a fully paid, non-assessable
Series A Junior Participating Preferred Share (a "Preferred Share") of the
Company, at a purchase price of $35.00 per one one-hundredth of a Preferred
Share (the "Purchase Price"), upon presentation and surrender of this Right
Certificate with the appropriate Form of Election to Purchase and related
Certificate duly executed. The number of Rights evidenced by this Right
Certificate (and the number of Preferred Shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per Preferred Share
set forth above, are the number and Purchase Price as of January 31, 2003 ,
based on the Preferred Shares as constituted at such date. Capitalized terms not
defined in this Right Certificate that are defined in the Rights Agreement shall
have the meanings ascribed to them in the Rights Agreement.
Upon the occurrence of a Triggering Event, if the Rights evidenced by this
Right Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person, (ii) under certain
circumstances specified in the Rights Agreement, a transferee of any such
Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of a person who, after such
transfer, became an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of any such Triggering Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of Preferred Shares or other securities, which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under certain circumstances specified in such Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal corporate trust office of the Rights Agent, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $0.01 per Right at any time prior to the earlier of (i) such time as
any Person becomes an Acquiring Person or (ii) the close of business on the
Final Expiration Date.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
2
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Preferred Shares or
of any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or, to receive notice of meetings or
other actions affecting shareholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its seal.
Dated as of ___, 20___.
------------------------
BROADWAY FINANCIAL CORPORATION
By:
-----------------------------------
Name:
Title:
Attest: (SEAL)
By:
-----------------------------------
Name:
Title:
Countersigned:
US STOCK TRANSFER CORPORATION
By:
--------------------------------------------
Authorized Signature
3
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
the Right Certificate.)
FOR VALUE RECEIVED ------------------------------------------hereby sells,
assigns and transfers unto ----------------------------------------
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint Attorney, to transfer the within
Right Certificate on the books of the within-named Company, with full power of
substitution.
Date: , 20___
----------------------------------- -------------------------------
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right Certificate [__] is [__] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [__]
did [__] did not acquire the Rights evidenced by this Right Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Date: , 20___
----------------------------------- ------------------------------
Signature
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights evidenced by the Right
Certificate.)
To: BROADWAY FINANCIAL CORPORATION
The undersigned hereby irrevocably elects to exercise _______ Rights
evidenced by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of the Rights (or such other securities of the Company or of
any other person as may be issuable upon the exercise of the Rights) and
requests that certificates for such shares be issued in the name of:
Please insert social security
or other identifying number:
--------------------------------------------------
--------------------------------------------------------------------------------
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance of such Rights shall
be registered in the name of and delivered to:
Please insert social security
or other identifying number:
--------------------------------------------------
--------------------------------------------------------------------------------
(Please print name and address)
Date: , 20___
----------------------------------- --------------------------------
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [__] are [__] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [__]
did [__] did not acquire the Rights evidenced by this Right Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Date: , 20___
----------------------------------- -------------------------------
Signature
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Right Certificate
in every particular, without alteration or enlargement or any change whatsoever.
Section 1. Certain Definitions................................................1
Section 2. Appointment of Rights Agent........................................5
Section 3. Issuance of Right Certificates.....................................5
Section 4. Form of Right Certificates.........................................7
Section 5. Countersignature and Registration..................................7
Section 6. Transfer, Division, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates............8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights......9
Section 8. Cancellation and Destruction of Right Certificates.................1
Section 9. Availability of Preferred Shares; Payment of Taxes and Charges.....1
Section 10. Preferred Shares Record Date.......................................1
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights.............................................................2
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.........8
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.............................................................18
Section 14. Fractional Rights and Fractional Shares...........................20
Section 15. Rights of Action..................................................21
Section 16. Agreement of Right Holders........................................22
Section 17. Right Certificate Holder Not Deemed a Shareholder.................22
Section 18. Concerning the Rights Agent.......................................23
Section 19. Merger or Consolidation or Change of Name of Rights Agent.........23
Section 20. Duties of Rights Agent............................................24
Section 21. Change of Rights Agent............................................26
Section 22. Issuance of New Right Certificates................................26
Section 23. Redemption........................................................26
Section 24. Exchange..........................................................27
Section 25. Notice of Certain Events..........................................28
Section 26. Notices...........................................................29
Section 27. Supplements and Amendments........................................30
Section 28. Successors........................................................30
Section 29. Benefits of this Agreement........................................30
Section 30. Severability......................................................30
Section 31. Governing Law.....................................................30
Section 32. Counterparts......................................................30
Section 33. Descriptive Headings..............................................30
Section 34. Determinations and Actions by the Board of Directors..............30
Exhibit A - Form of Certificate of Designation of Broadway Financial Corporation
Exhibit B - Form of Right Certificate
Exhibit 99.1
Broadway Financial Corporation February 3, 2003 Press Release
News Release
FOR IMMEDIATE RELEASE Contact: Paul C. Hudson, President/CEO
Alvin D. Kang, CFO
(323) 634-1700
www.broadwayfed.com
BROADWAY FINANCIAL CORPORATION
ANNOUNCES ADOPTION OF SHAREHOLDER RIGHTS PLAN
LOS ANGELES, CA - (BUSINESS WIRE) - February 3, 2003 - Broadway Financial
Corporation ("Company") (NASDAQ Small-Cap: BYFC), the holding company of
Broadway Federal Bank, f.s.b. ("Bank"), today announced Broadway Financial
Corporation's Board of Directors adopted a Shareholder Rights Plan (the Rights
Plan) on January 31, 2003. The Board's purpose in adopting the Rights Plan is to
protect shareholder value in the event of an unsolicited offer to acquire the
Company, particularly one that does not provide equitable treatment to all
shareholders. Adoption of the Rights Plan is designed to encourage a potential
acquiror of the Company to negotiate directly with the Board, and to provide the
Board with greater leverage in such negotiations so as to provide the greatest
value for the Company's shareholders. The Rights Plan will not interfere with
any merger, acquisition or business combination that the Company's Board
believes to be in the best interest of its shareholders.
Rights plans have become increasingly common. The Rights Plan is similar to
rights plans that have been adopted by many public companies.
In connection with the adoption of the Rights Plan, the Board declared a
dividend distribution of one Right for each outstanding common share held by
shareholders of record on February 13, 2003. The rights will not become
exercisable unless, with certain exceptions, an investor acquires 15 percent or
more of the Company's common shares, or announces a tender offer that would
result in the investor owning 15 percent or more of the common shares or makes
certain regulatory filings seeking authority to acquire 15 percent or more of
the common shares. If someone does acquire 15 percent or more of the Company's
common shares, or acquires the Company in a merger or other transaction, each
Right would entitle the holder, other than the investor triggering the Rights
and related persons, to purchase the Company's common shares, or shares of an
entity that acquires the Company, at half of the then current market price. The
Rights Plan can be terminated or amended by the Board at any time.
The Bank is a community-oriented savings bank, which primarily originates
residential mortgage loans in the Los Angeles geographic areas known as Mid-City
and South Central. The Bank operates four full service branches, three in the
city of Los Angeles, and one in the nearby city of Inglewood, California.
Shareholders, analysts and others seeking information about the Company or the
Bank are invited to write to: Broadway Financial Corporation, Investor
Relations, 4800 Wilshire Blvd., Los Angeles, CA 90010, or visit our website at
www.broadwayfed.com.
* The portion of the legend in brackets shall be inserted only if applicable and
shall replace the preceding sentence.