FFWM First Foundation Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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): July 8, 2024

 

 

FIRST FOUNDATION INC.

(Exact name of registrant as specified in its charter)

 

Delaware	001-36461	20-8639702
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

 

200 Crescent Court, Suite 1400
Dallas, Texas		75201
(Address of Principal Executive Offices)		(Zip Code)

 

(469) 638-9636

(Registrant’s Telephone Number, Including Area Code)

 

N/A

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
x	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		FFWM		New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

Item 1.01.

Entry into a Material Definitive Agreement

 

On July 8, 2024, First Foundation Inc. (the “Company”) completed its previously announced capital raise pursuant to investment agreements with (a) an affiliate of Fortress Credit Advisors LLC (“Fortress”), (b) affiliates of Canyon Partners, LLC (“Canyon”), (c) an affiliate of Strategic Value Bank Partners, LLC (“SVBP”) and (d) certain other investors (the “Other Investors” and, collectively with Fortress, Canyon and SVBP, the “Investors”, and the investment agreements entered into with each of the Investors on July 2, 2024, collectively, the “Investment Agreements”). The Investors invested an aggregate of approximately $228 million in the Company in exchange for the sale and issuance of: (a) 11,308,676 shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”), (b) 29,811 shares of a new series of preferred stock, par value $0.001 per share, of the Company designated as Series A Noncumulative Convertible Preferred Stock (the “Series A Preferred Stock”), each share of which is automatically convertible into 1,000 shares of Common Stock (or, in certain limited circumstances, one share of Series B Preferred Stock (as defined below)) in the event of a transfer by the holder thereof consistent with the rules and limitations of Regulation Y of the Bank Holding Company Act of 1956, as amended (the “BHCA”), subject to certain limitations (a “Reg Y Transfer”), and all of which shares of Series A Preferred Stock represent the right (on an as converted basis) to receive approximately 29,811,000 shares of Common Stock; (c) 14,490 shares of a new series of preferred stock, par value $0.001 per share, of the Company designated as Series B Noncumulative Convertible Preferred Stock (the “Series B Preferred Stock”), each share of which is automatically convertible into 1,000 shares of Common Stock upon the occurrence of certain events, and all of which shares of Series B Preferred Stock represent the right (on an as converted basis) to receive approximately 14,490,000 shares of Common Stock; and (d) net-settled warrants (the “Issued Warrants”), which are not exercisable for 180 days after the Closing, affording the holder thereof the right, until the seven-year anniversary of the issuance of such Issued Warrant, to purchase a total of 22,239 shares of a new class of non-voting, common-equivalent preferred stock of the Company (the “Series C NVCE Stock,” and together with the Series B Preferred Stock and the Series A Preferred Stock, the “Preferred Stock”), each share of which is convertible into 1,000 shares of Common Stock in a Reg Y Transfer, and all of which shares of Series C NVCE Stock, upon issuance, will represent the right (on an as converted basis) to receive 22,239,000 shares of Common Stock (clauses (a) through (d), collectively referred to herein as the “Investment”).

 

As required by the Investment Agreements, the Company will submit to its stockholders for their (a) adoption and approval an amendment to its Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to increase the number of authorized shares of Common Stock to 200,000,000 (the “Authorized Share Amendment”); and (b) approval the issuance of shares of Common Stock (including shares of Common Stock issuable upon conversion of the Preferred Stock) that is 20% or more of the total voting power of the Company’s securities (the “Share Issuance”) in accordance with the rules of the New York Stock Exchange (the “NYSE”). The stockholder approval necessary to duly and validly adopt and approve the Authorized Share Amendment and the Share Issuance is the affirmative vote of a majority of votes cast by holders of shares of Common Stock, at a duly held meeting of the Company’s stockholders at which a vote is taken with respect to such matters (collectively, the “Requisite Stockholder Vote”).

 

Registration Rights Agreement

 

In connection with the Investment, on July 8, 2024, the Company entered into a registration rights agreement with each Investor (the “Registration Rights Agreement”), pursuant to which the Company provides customary registration rights to the Investors and their affiliates and certain permitted transferees with respect to, among other things, (a) the shares of Common Stock purchased under the Investment Agreements, (b) shares of Common Stock issued upon the conversion of shares of the Preferred Stock purchased under the Investment Agreements or issued upon the exercise of the Issued Warrants and (c) if the Requisite Stockholder Vote is not received on or before 120 days after the Closing, the shares of Preferred Stock. Under the Registration Rights Agreement, the Investors are entitled to customary shelf registration rights, customary demand registration rights and customary piggyback registration rights, in each case, subject to certain limitations as set forth in the Registration Rights Agreement. The Investors will additionally be entitled to request a certain number of marketed and unmarketed underwritten shelf takedowns and shall have the right to select the managing underwriter to administer any underwritten shelf takedowns provided the selection is reasonably acceptable to the Company.

 

 

The foregoing description of the Registration Rights Agreement is subject to and qualified by reference to the full text of the Registration Rights Agreement, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1.

 

Issued Warrants

 

In connection with the Investment, on July 8, 2024, the Company issued the Issued Warrants to purchase (in the aggregate) 22,239 shares of Series C NVCE Stock, each at an exercise price of $5,125 per share, subject to customary anti-dilution adjustments provided under the Issued Warrants. On and following January 5, 2025, and prior to 5:00 p.m. (New York City time), on July 8, 2031, the Issued Warrants may be exercised, on a net share settlement basis, by the holder thereof.

 

The foregoing description of the Issued Warrants is subject to and qualified by reference to the full text of the Issued Warrants, the form of which is attached to this Current Report on Form 8-K as Exhibit 4.1.

 

Item 3.02.

Unregistered Sales of Equity Securities

 

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02. The issuances pursuant to the Investment Agreements of shares of Common Stock, Preferred Stock, and Warrants are exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of the exemption provided by Section 4(a)(2) of the Securities Act.

 

Item 3.03.

Material Modification to Rights of Security Holders

 

The information set forth in Item 1.01 and Item 5.03 of this Current Report on Form 8-K is incorporated by reference into this Item 3.03.

 

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

 

Appointment of Simone Lagomarsino as President of First Foundation Bank

 

On July 8, 2024, the Company appointed Simone Lagomarsino as President of First Foundation Bank, a California state-chartered bank and wholly-owned bank subsidiary of the Company (the “Bank”), effective immediately following completion of the Investment. Ms. Lagomarsino will receive an annual base salary of $800,000, subject to annual review, and be eligible for an annual bonus of $1,280,000 based on specific performance targets to be established by the Board of Directors of the Bank (the “Bank Board”). Ms. Lagomarsino may also participate in the other benefit programs of the Bank available to executive employees generally.

 

Ms. Lagomarsino, age 62, has been an executive officer of numerous publicly traded financial institutions, including most recently serving as CEO of Luther Burbank Savings and Luther Burbank Corporation (NASDAQ: LBC) from 2019 through February 2024 and as a director beginning in 2018. Ms. Lagomarsino served as Chair of the board of directors of the Federal Home Loan Bank of San Francisco from 2022 to 2023 and has served as a director since 2013. She served on the board of directors of the Federal Reserve Bank of San Francisco from 2022 to July 2024. Ms. Lagomarsino served as President and CEO of the Western Bankers Association from 2017 to 2018 and as a director of Pacific Premier Bancorp (Nasdaq: PPBI) from 2017 to 2018. From 2011 to 2017, she served as CEO of Heritage Oaks Bank and as President and CEO of Heritage Oaks Bancorp. Previous to that, she held executive positions with City National Bank, Hawthorne Savings, Kinecta Federal Credit Union, Ventura County National Bank and Warner Center Bank. Ms. Lagomarsino was named by American Banker as Community Banker of the Year in 2013. She served as a director of Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE: HASI) from 2019 to 2022. Ms. Lagomarsino holds an M.B.A. in Finance from Claremont Graduate University and a B.A. in Economics from Claremont McKenna College.

 

A trust affiliated with Ms. Lagomarsino invested $500,000 in the Company in the transaction described in Item 1.01, acquiring 121,951 shares of Common Stock and Issued Warrants to purchase 48 shares of Series C NVCE Stock on the same financial terms as the other Investors, and is party to the Registration Rights Agreement.

 

 

Resignation of Directors

 

In connection with the completion of the Investment, director Ulrich E. Keller, Jr. resigned from the Board of Directors of the Company (the “Company Board”) and the Bank Board, effective as of July 8, 2024. The decision of Mr. Keller to resign was not the result, in whole or in part, of any disagreement with the Company or the Bank or their respective management relating to the respective operations, policies or practices of the Company or the Bank.

 

Also in connection with the completion of the Investment, directors John A. Hakopian, David G. Lake, Diane M. Rubin, CPA, and Gabriel V. Vazquez (i) gave notice of their intent to resign from the Company Board, subject to the acceptance of such resignations by the Company, which is anticipated to occur concurrently with the appointment of their successors following receipt of all necessary regulatory approvals, and (ii) resigned from the Bank Board, effective as of July 8, 2024. Ms. Rubin and Mr. Vazquez serve on the Audit Committee of the Company Board. Mr. Lake and Ms. Rubin serve on the Compensation Committee of the Company Board. Mr. Vazquez, Mr. Lake and Ms. Rubin serve on the Risk Committee of the Company Board. The decision of these directors to resign was not the result, in whole or in part, of any disagreement with the Company or the Bank or their respective management relating to the respective operations, policies or practices of the Company or the Bank.

 

Following such resignations, the size of the Company Board and the Bank Board were each reduced from ten to nine directors.

 

Appointment of Directors

 

In connection with the completion of the Investment, Sam Edelson, Henchy R. Enden, Simone Lagomarsino, and Benjamin Mackovak (the “New Directors”) were appointed to the Bank Board, effective as of July 8, 2024. Mr. Edelson was appointed to serve as a director pursuant to the Canyon Investment Agreement, Ms. Enden was appointed to serve as a director pursuant to the Fortress Investment Agreement, and Mr. Mackovak was appointed to serve as a director pursuant to the SVBP Investment Agreement. Other than the aforementioned Investment Agreements, there are no arrangements between the New Directors and any other person pursuant to which the New Directors were selected as directors. In addition, and other than the acquisition of securities by a trust affiliated with Ms. Lagomarsino described above, there are no transactions in which any New Director has an interest requiring disclosure under Item 404(a) of Regulation S-K. The Company anticipates that such individuals will also be appointed to the Company Board following receipt of regulatory approvals. As directors, each New Director other than Ms. Lagomarsino, will be entitled to the Company’s customary non-employee director compensation, which compensation was last described in the Company’s Definitive Proxy Statement filed with the Securities and Exchange Commission on April 18, 2024, and is incorporated herein by reference, and each New Director will enter into the Company’s standard indemnification agreement, the form of which was filed as Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, and is incorporated by reference herein. Ms. Lagomarsino, who will serve as the Bank’s President, will receive no additional compensation for her service as a director of the Company or the Bank.

 

Biographical information for each New Director, other than Ms. Lagomarsino, is set forth below:

 

Sam Edelson. Mr. Edelson is a real estate developer, investor, and Founder and President of Exact Title, a Denver, Colorado based title insurance agency founded in 2021. Mr. Edelson also founded Force7Mgmt in 2020, where he focuses on preserving historically significant buildings while also adding attainably priced multifamily units to the housing stock. Prior to founding Exact Title and Force7Mgmt, Mr. Edelson worked at Cyrus Capital from 2015 to 2019, focusing on credit and structured credit investments. Since 2022, he has served on the executive board of the nonprofit organization One Mainstreet Colorado. Mr. Edelson began his career at Bain Capital Credit (previously called Sankaty Advisors). He graduated from the Wharton School at the University of Pennsylvania, with concentration in finance and real estate.

 

Henchy R. Enden. Ms. Enden has served as a managing director at Fortress Investment Group since January 2024. Immediately prior, Ms. Enden was a portfolio manager and equity analyst for MFP Investors LLC, an investment management company based in New York, a position she held since 2004. She previously served as a director of Avidbank Holdings, Inc. from August 2022 to January 2024. She also served as a director of Dynasty Financial Partners from November 2021 to January 2024, Atlantic Capital Bancshares Inc. from June 2015 to March 2022, when it was purchased by SouthState Bank, and First Security, a bank purchased by Atlantic Capital, from 2013 until 2015. In addition, Ms. Enden previously served as a director of Bridgeview Bancorp, a bank in Chicago, Illinois, from July 2015 until May 2019, when the bank was acquired by First Midwest Bancorp. Ms. Enden also served as a director of West Coast Bancorp, a bank in Lake Oswego, Oregon, from January 2012 until April 2013, when it was acquired by Columbia Banking System, Inc. Ms. Enden holds a B.S. degree from Touro College and an M.B.A. from the Columbia University Graduate School of Business.

 

 

Benjamin Mackovak. Mr. Mackovak is a Co-Founder and Managing Member of Strategic Value Bank Partners, an investment firm specializing in community banks founded in 2015. Prior to Strategic Value Bank Partners, Mr. Mackovak was the Founder and Portfolio Manager of Cavalier Capital, an investment firm based in Cleveland, Ohio, from 2012 to 2015. Mr. Mackovak was the Senior Analyst at Rivanna Capital, an investment firm based in Charlottesville, Virginia from 2006 to 2012. Mr. Mackovak worked at First American Trust as an Associate Portfolio Manager, an investment firm based in Newport Beach, California from 2004 to 2005. Mr. Mackovak began his career at Merrill Lynch.  Mr. Mackovak currently serves on the Board of Directors for BankFinancial Corp (NASDAQ: BFIN) since 2024, People’s Bank of Commerce since 2021, Community Bank of the Bay since 2018, and Keystone Bank since 2018. Previously, he served on the board of United Security Bancshares, First South Bancorp, Peak Bancorp, Foothills Community Bank, TIG Bancorp and First State Bank of Colorado. In his experience as a bank director, Mr. Mackovak has served on the Compensation Committee, Loan Committee, Corporate Governance Committee, Nominating Committee, ALCO Committee, M&A Committee, and Audit Committee of various community banks. In addition to serving on bank boards, Mr. Mackovak also serves on the Board of Directors for the Great Lakes Science Center.  Mr. Mackovak Holds an MBA from the University of Virginia’s Darden Graduate School of Business and a Bachelor of Arts from Kent State University, where he graduated magna cum laude.

 

Item 5.03

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

 

Certificates of Designations

 

As previously disclosed, on July 1, 2024, in connection with the Investment, the Company Board adopted (a) a Certificate of Designations to be filed with the Secretary of State of the State of Delaware (the “DE Secretary”) to create, out of the Company’s authorized but unissued preferred stock, the Series A Preferred Stock, (b) a Certificate of Designations to be filed with the DE Secretary to create, out of the Company’s authorized but unissued preferred stock, the Series B Preferred Stock, and (c) a Certificate of Designations to be filed with the DE Secretary to create, out of the Company’s authorized but unissued preferred stock, the Series C NVCE Stock (collectively, the “Certificates of Designations”). On July 5, 2024, the Certificates of Designations were filed with the DE Secretary.

 

Series A Preferred Stock

 

Each share of Series A Preferred Stock will automatically convert into 1,000 shares of Common Stock in a Reg Y Transfer, unless such conversion would require receipt of the Requisite Stockholder Vote, in which case, the maximum number shares of Series A Preferred Stock that can convert into Common Stock without receipt of such Requisite Stockholder Vote would convert into Common Stock and the remainder shall convert into one share of Series B Preferred Stock. The conversion rate applicable to the Series A Preferred Stock is subject to certain customary anti-dilution adjustments.

 

Holders of Series A Preferred Stock generally do not have voting rights, except with respect to certain protective matters such as amendments to the Certificate of Incorporation or the Certificate of Designations with respect to the Series A Preferred Stock that significantly and adversely affect the preferences, rights, privileges or powers of the Series A Preferred Stock.

 

For the period of time between November 16, 2024 and the receipt of the Requisite Stockholder Vote, the Certificate of Designations with respect to the Series A Preferred Stock provides for quarterly non-cumulative cash dividends at an annual rate of 13%, as and if declared by the Company Board. The Company Board cannot declare or pay any cash dividend or make cash distributions in respect of any parity Company preferred stock or the Common Stock unless the Company Board declares and pays to the holders of Series A Preferred Stock a dividend at the same time.

 

 

The Certificate of Designations with respect to the Series A Preferred Stock also provides for a per share liquidation preference equal to the Base Price of $4,100 per share. With respect to such liquidation preference, the Series A Preferred Stock ranks pari passu with the Company’s Series B Preferred Stock, and ranks senior to the Common Stock and Series C NVCE Stock. Following the satisfaction of the liquidation preference, the Series A Preferred Stock participates with the Common Stock on an as-converted basis in a liquidation, dissolution or winding up of the Company. Upon the occurrence of a Reorganization Event (as defined in the Certificate of Designations with respect to the Series A Preferred Stock) prior to the Company’s receipt of the Requisite Stockholder Vote, the Series A Preferred Stock is entitled to a liquidation preference equal to two times the liquidation preference discussed above. Under these circumstances, the Series A Preferred Stock ranks pari passu with the Company’s Series A Preferred Stock and Series B Preferred Stock, but senior to the Common Stock and Series C NVCE Stock.

 

From and after receipt of the Requisite Stockholder Vote, the foregoing dividend rights and liquidation preferences cease to apply and the holders of Series A Preferred Stock are thereafter entitled to receive dividends at the same time and on the same terms as the holders of Common Stock in an amount equal to the product of the conversion rate then in effect and the per share dividend amount being paid in respect of each share of Common Stock, and shall rank as equal to the Common Stock in any liquidation of the Company.

 

Series B Preferred Stock

 

Each share of Series B Preferred Stock will automatically convert into 1,000 shares of Common Stock in a Reg Y Transfer, unless such conversion would require receipt of the Requisite Stockholder Vote, in which case only the maximum number of shares of Series B Preferred Stock that can convert into Common Stock without receipt of the applicable Requisite Stockholder Vote will convert into shares of Common Stock.

 

Upon receipt of the Requisite Stockholder Vote, each share of Series B Preferred Stock will automatically convert into 1,000 shares of Common Stock. The conversion rate applicable to the Series B Preferred Stock is subject to certain customary anti-dilution adjustments.

 

Holders of Series B Preferred Stock generally do not have voting rights, except with respect to certain protective matters such as amendments to the Certificate of Incorporation or the Certificate of Designations with respect to the Series B Preferred Stock that significantly and adversely affect the preferences, rights, privileges or powers of the Series B Preferred Stock.

 

For the period of time between November 16, 2024 and the receipt of the Requisite Stockholder Vote, the Certificate of Designations with respect to the Series B Preferred Stock provides for quarterly non-cumulative cash dividends at an annual rate of 13%, as and if declared by the Company Board. The Company Board cannot declare or pay any cash dividend or make cash distributions in respect of any parity Company preferred stock or the Common Stock unless the Company Board declares and pays to the holders of Series B Preferred Stock a dividend at the same time.

 

The Certificate of Designations with respect to the Series B Preferred Stock also provides for a per share liquidation preference equal to the Base Price of $4,100 per share. With respect to such liquidation preference, the Series B Preferred Stock ranks pari passu with the Company’s Series A Preferred Stock, and ranks senior to the Common Stock and Series C NVCE Stock. Following the satisfaction of the liquidation preference, the Series B Preferred Stock participates with the Common Stock on an as-converted basis in a liquidation, dissolution or winding up of the Company. Upon the occurrence of a Reorganization Event (as defined in the Certificate of Designations with respect to the Series B Preferred Stock) prior to the Company’s receipt of the Requisite Stockholder Vote, the Series B Preferred Stock is entitled to a liquidation preference equal to two times the liquidation preference discussed above. Under these circumstances, the Series B Preferred Stock ranks pari passu with the Series A Preferred Stock, but senior to the Common Stock and Series C NVCE Stock.

 

Series C NVCE Stock

 

The Company will not issue any shares of Series C NVCE Stock at the closing of the Investment. The Series C NVCE Stock is issuable only upon exercise of the Issued Warrants, as described above.

 

Each share of Series C NVCE Stock will automatically convert into 1,000 shares of Common Stock in a Reg Y Transfer, unless such conversion would require the receipt of the Requisite Stockholder Vote, in which case, only the maximum number of shares of Series C NVCE Stock that can convert into Common Stock without receipt of the Requisite Stockholder Vote will convert into shares of Common Stock. The conversion rate applicable to the Series C NVCE Stock is subject to certain customary anti-dilution adjustments.

 

 

Holders of Series C NVCE Stock generally do not have voting rights, except with respect to certain protective matters such as amendments to the Certificate of Incorporation or the Certificate of Designations with respect to the Series C NVCE Stock that significantly and adversely affect the preferences, rights, privileges or powers of the Series C NVCE Stock.

 

Holders of Series C NVCE Stock are entitled to receive dividends at the same time and on the same terms as the holders of Common Stock in an amount equal to the product of the conversion rate then in effect and the per share dividend amount being paid in respect of each share of Common Stock. The Company Board cannot declare or pay any cash dividend or make cash distributions in respect of the Common Stock unless the Company Board declares and pays to the holders of Series C NVCE Stock at the same time and on the same terms as the holders of Common Stock, the dividend to which the shares of Series C NVCE Stock are entitled.

 

In the event of any liquidation, dissolution or winding up of the affairs of the Company, holders of the Series C NVCE Stock are entitled to receive, in preference to the holders of the Common Stock, an amount per share equal to $0.0001.

 

Neither the Company nor any holders will have redemption rights with respect to any series of Preferred Stock.

 

In addition, notwithstanding anything to the contrary set forth in their respective Investment Agreements, the Certificates of Designations or the Issued Warrants, certain Investors are restricted from converting, exchanging or exercising its Preferred Stock, and/or Issued Warrants to the extent such conversion, exchange or exercise would result in such Investor together with its affiliates beneficially owning in excess of 9.99% of the shares of Common Stock then outstanding.

 

The foregoing descriptions of the Certificates of Designations are subject to and qualified by reference to the full text of each Certificate of Designation, copies of which are attached to this Current Report on Form 8-K as Exhibits 3.1, 3.2 and 3.3.

 

Item 7.01

Regulation FD Disclosure

 

On July 9, 2024, the Company issued a press release announcing the Investment. A copy of the press release is attached hereto as Exhibit 99.1.

 

Item 9.01

Financial Statements and Exhibits

 

(d) Exhibits

 

Exhibit No.		Description of Exhibit
3.1		Certificate of Designations for Series A Noncumulative Convertible Preferred Stock
3.2		Certificate of Designations for Series B Noncumulative Convertible Preferred Stock
3.3		Certificate of Designations for Series C NVCE Stock
4.1		Form of Issued Warrant
10.1		Registration Rights Agreement, dated July 8, 2024, by and among the Company and the Purchasers
99.1		Press Release, dated July 9, 2024
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

Cautionary Note Regarding Forward Looking Statements

 

This report contains forward-looking statements by First Foundation Inc. (the “Company,” “we” or “us’) pertaining to such matters as our goals, intentions, and expectations regarding, among other things, the convertibility of the shares of preferred stock and exercisability of the warrants issued in connection with this capital raise transaction; the Company’s seeking (and the Company’s ability to obtain) approval of its stockholders of any necessary amendments of the Company’s organizational documents or approvals of the issuance of shares of common stock or preferred stock in connection with this capital raise transaction; receipt of any required regulatory approvals or non-objections in connection with this capital raise transaction or the appointment of directors or senior management; revenues, earnings, loan production, asset quality, capital levels, and acquisitions, among other matters; our estimates of future costs and benefits of the actions we may take; our assessments of probable losses on loans; our assessments of interest rate and other market risks; and our ability to achieve our financial and other strategic goals.

 

Forward-looking statements are typically identified by such words as “believe,” “expect,” “anticipate”, “intend,” “outlook,” “estimate,” “forecast,” “project,” “should,” and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. Additionally, forward-looking statements speak only as of the date they are made; the Company does not assume any duty, and does not undertake, to update our forward-looking statements. Furthermore, because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those anticipated in our statements, and our future performance could differ materially from our historical results.

 

The forward-looking statements in this report are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward-looking statements contained in this report and could cause us to make changes to our future plans. Those risks and uncertainties include, but are not limited to, the risk of incurring credit losses, which is an inherent risk of the banking business; the quality and quantity of our deposits; adverse developments in the financial services industry generally such as bank failures and any related impact on depositor behavior or investor sentiment; risks related to the sufficiency of liquidity; the risk that we will not be able to maintain growth at historic rates or at all; the risk that we will not be able to access the securitization market on favorable terms or at all; changes in general economic conditions, either nationally or locally in the areas in which we conduct or will conduct our business; risks associated with changes in interest rates, which could adversely affect our interest income, interest rate margin, and the value of our interest-earning assets, and therefore, our future operating results; the risk that the performance of our investment management business or of the equity and bond markets could lead clients to move their funds from or close their investment accounts with us, which would reduce our assets under management and adversely affect our operating results; negative impacts of news or analyst reports about us or the financial services industry; the impacts of inflation on us and our customers; results of examinations and other actions by regulatory authorities and the possibility that such regulatory authorities may, among other things, limit our business activities or our ability to pay dividends, or impose fines, penalties or sanctions; the risk that we may be unable or that our board of directors may determine that it is inadvisable to pay future dividends at historic levels or at all; risks associated with changes in income tax laws and regulations; and risks associated with seeking new client relationships and maintaining existing client relationships.

 

Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and other documents we file with the SEC from time to time. We urge readers of this report to review those reports and other documents we file with the SEC from time to time. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this report, which speak only as of the date of this report, or to make predictions based solely on historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this report or in the above-referenced reports, whether as a result of new information, future events or otherwise, except as may be required by law or NYSE rules.

 

 

Important Information and Where You Can Find It

 

This report and its exhibits may be deemed to be solicitation material in respect of the Requisite Stockholder Vote. In connection with the Requisite Stockholder Vote, the Company will file with the SEC a preliminary proxy statement and a definitive proxy statement, which will be sent to the stockholders of the Company, seeking certain approvals related to the issuances of shares of common stock issued under each investment agreement and to be issued upon the conversion of shares of the preferred stock issued under the Investment Agreements.

 

INVESTORS AND SECURITY HOLDERS OF FIRST FOUNDATION INC. AND THEIR RESPECTIVE AFFILIATES ARE URGED TO READ, WHEN AVAILABLE, THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY AND THE TRANSACTION.

 

Investors and security holders will be able to obtain a free copy of the proxy statement, as well as other relevant documents filed with the SEC containing information about First Foundation Inc. without charge, at the SEC's website (http://www.sec.gov). Copies of documents filed with the SEC by First Foundation can also be obtained, without charge, by directing a request to Investor Relations, First Foundation Inc., 18101 Von Karman Ave., Suite 750, Irvine, CA. 92612 or by telephone +1 (949) 476-0300.

 

Participants in the Solicitation of Proxies in Connection with Proposed Transaction

 

First Foundation Inc. and certain of its directors, executive officers and employees may be deemed to be participants in the solicitation of proxies in respect of the Requisite Stockholder Vote under the rules of the SEC. Information regarding First Foundation’s directors and executive officers is available in its definitive proxy statement for its 2024 annual stockholders meeting, which was filed with the SEC on April 18, 2024, and certain of its Current Reports on Form 8-K. Other information regarding the participants in the solicitation of proxies in respect of the proposed transaction and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other relevant materials to be filed with the SEC. Free copies of these documents, when available, may be obtained as described in the preceding paragraph.

 

Not an Offer of Securities

 

The information in this report is for informational purposes only and shall not constitute, or form a part of, an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities. The securities that are the subject of the private placement have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

 

 

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.

 

	FIRST FOUNDATION INC.
Date: July 9, 2024
	/s/ Scott F. Kavanaugh
	Scott F. Kavanaugh
	Chief Executive Officer

 

 

 

Exhibit 3.1

 

CERTIFICATE OF DESIGNATIONS
OF
SERIES A NONCUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
FIRST FOUNDATION INC.

 

FIRST FOUNDATION INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), in accordance with the provisions of Sections 103, 141 and 151 thereof, does hereby certify that:

 

In accordance with the provisions of the Corporation’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), the Corporation’s Bylaws, as amended (the “Bylaws”) and applicable law, the Board of Directors of the Corporation (the “Board”) duly adopted the following resolution on July 1, 2024, creating a series of Preferred Stock of the Corporation designated as “Series A Noncumulative Convertible Preferred Stock”:

 

RESOLVED, that pursuant to the Delaware General Corporation Law (the “DGCL”) and the Certificate of Incorporation and Bylaws of the Corporation, the Board hereby establishes a series of Preferred Stock, par value $0.001 per share, of the Corporation and fixes and determines the designation, powers, preferences, redemption rights, qualifications, privileges, limitations, restrictions and special or relative rights thereof as follows:

 

Section I                Designation and Amount.

 

A series of Preferred Stock designated as the “Series A Noncumulative Convertible Preferred Stock” (“Series A Preferred Stock”) is hereby established. The total number of authorized shares of Series A Preferred Stock shall be 29,811.

 

Section II               Definitions.

 

As used herein, the following terms shall have the following meanings, unless the context otherwise requires:

 

“Adjustment Event” has the meaning specified in Section VIII(a).

 

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person (as used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through ownership of voting securities, by contract or otherwise); provided, that Mubadala, members of the Mubadala Group and other direct or indirect owners of Fortress Investment Group LLC shall not be deemed Affiliates of Fortress Investment Group LLC or of any of its Affiliates. As used in this definition, “Mubadala” means Mubadala Investment Company PJSC, and “Mubadala Group” means any Person controlling, controlled by or under common control with Mubadala that is not also controlled by Fortress Investment Group LLC.

 

“Applicable Conversion Rate” means, for each share of Series A Preferred Stock, the number of shares of Common Stock equal to the product of (a) one thousand (1,000) multiplied by (b) the quotient of (i) the Base Price divided by (ii) the then-applicable Conversion Price, subject to adjustment pursuant to Section VIII for any applicable event occurring subsequent to the initial determination of the Applicable Conversion Rate.

 

 

“Base Price” means $4.10.

 

“BHC Act” means the Bank Holding Company Act of 1956 (as amended) and its implementing regulations.

 

“Board” means the Board of Directors of the Corporation.

 

“Business Day” means any day, other than a Saturday, Sunday or other day on which banking institutions in the city of New York, New York are required or authorized by Law to be closed.

 

“Certificate of Designations” means this Certificate of Designations of Series A Preferred Stock of the Corporation, dated July 5, 2024.

 

“Charter” means the Certificate of Incorporation of the Corporation, as amended, supplemented and/or restated from time to time.

 

“Charter Amendment Approval” means the approval of the proposal to amend the Charter in a manner to increase the total authorized number of shares of Common Stock to at least 200,000,000 by the affirmative vote of a majority of votes cast by the holders of shares of Common Stock, at the meeting of the Corporation’s stockholders at which a vote is taken with respect to such Charter amendment proposal.

 

“Class of Voting Security” shall be interpreted in a manner consistent with how “class of voting shares” is defined in 12 C.F.R. Section 225.2(q)(3) or any successor provision.

 

“Closing” has the meaning set forth in the Investment Agreement.

 

“Closing Date” means the date that any shares of Series A Preferred Stock are first issued.

 

“Closing Price” of the Common Stock (or other relevant capital stock or equity interest) on any date of determination means the closing sale price or, if no closing sale price is reported, the last reported sale price of the shares of the Common Stock (or other relevant capital stock or equity interest) on the NYSE on such date. If the Common Stock (or other relevant capital stock or equity interest) is not traded on the NYSE on any date of determination, the Closing Price of the Common Stock (or other relevant capital stock or equity interest) on such date of determination means the closing sale price as reported in the composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock (or other relevant capital stock or equity interest) is so listed or quoted, or, if no closing sale price is reported, the last reported sale price on the principal U.S. national or regional securities exchange on which the Common Stock (or other relevant capital stock or equity interest) is so listed or quoted, or if the Common Stock (or other relevant capital stock or equity interest) is not so listed or quoted on a U.S. national or regional securities exchange, the last quoted bid price for the Common Stock (or other relevant capital stock or equity interest) in the over-the-counter market as reported by OTC Markets Group Inc. or a similar organization, or, if that bid price is not available, the market price of the Common Stock (or other relevant capital stock or equity interest) on that date as determined by a nationally recognized independent investment banking firm retained by the Corporation for this purpose.

 

 

For purposes of this Certificate of Designations, all references herein to the “Closing Price” and “last reported sale price” of the Common Stock (or other relevant capital stock or equity interest) on the NYSE shall be such closing sale price and last reported sale price as reflected on the website of the NYSE (http://www.nyse.com) and as reported by Bloomberg Professional service; provided that in the event that there is a discrepancy between the closing sale price or last reported sale price as reflected on the website of the NYSE and as reported by Bloomberg Professional service, the closing sale price and last reported sale price on the website of the NYSE shall govern.

 

“Common Stock” means the common stock, $0.001 par value per share, of the Corporation authorized by the Corporation on or after the date hereof.

 

“Conversion Date” means the date on which any shares of Series A Preferred Stock shall become convertible into any shares of Common Stock or Series B Preferred Stock, as applicable, pursuant to Section III; provided, however, that if a Conversion Date would otherwise occur on or after an Ex-Date for an issuance, dividend or distribution that results in an adjustment of the Conversion Price pursuant to Section VIII and on or before the Record Date for such issuance, dividend or distribution, such Conversion Date shall instead occur on the first calendar day after the Record Date for such issuance, dividend or distribution.

 

“Conversion Price” means, for each share of Series A Preferred Stock, the Base Price, as the same may be adjusted from time to time in accordance with the terms of this Certificate of Designations.

 

“Convertible Transfer” means a transfer by the Holder that is both (i) to a Person who is not an affiliate of the Holder for purposes of the BHC Act and (ii) (A) to the Corporation; (B) in a widespread public distribution; (C) in which no transferee (or group of associated transferees) would receive 2% or more of the outstanding securities of any Class of Voting Securities of the Corporation; or (D) to a purchaser that would control more than 50% of every Class of Voting Securities of the Corporation without any transfer from the Holder.

 

“Corporation” has the meaning set forth in the Preamble.

 

“Current Market Price” means, on any date, the average of the daily Closing Price per share of the Common Stock or other securities on each of the five consecutive Trading Days preceding the earlier of the day before the date of the issuance, dividend or distribution in question and the day before the Ex-Date with respect to the issuance or distribution, giving rise to an adjustment to the Conversion Price pursuant to Section VIII.

 

“DGCL” means the Delaware General Corporation Law, as amended from time to time.

 

“Dividend Parity Stock” has the meaning specified in Section IV(c) with respect to dividends prior to the receipt of the Stockholder Approvals.

 

 

“Dividend Payment Date” means, with respect to the period between Closing and the Stockholder Approvals Date, August 16, November 16, February 16 and May 16 of each year, commencing February 16, 2025; provided, however, that if any such date is not a Business Day, then such date shall nevertheless be a Dividend Payment Date but dividends on the Series A Preferred Stock, when, as and if declared, shall be paid on the next succeeding Business Day (without adjustment in the amount of the dividend per share of Series A Preferred Stock). Each Dividend Payment Date “relates” to the Dividend Period most recently ending before such Dividend Payment Date, and vice versa (with the words “related” and “relating” having correlative meanings).

 

“Dividend Period” means, with respect to the period between Closing and the Stockholder Approvals Date, each period from and including a Dividend Payment Date (except that the initial Dividend Period shall commence on November 16, 2024) and continuing to, but excluding, the next succeeding Dividend Payment Date.

 

“Dividend Rate” means, with respect to dividends for the period between Closing and the Stockholder Approvals Date, 13%.

 

“Dividend Record Date” has the meaning specified in Section IV(a) with respect to dividends for the period between Closing and the Stockholder Approvals Date.

 

“Exchange Property” means the Preferred Exchange Property or the NVCE Exchange Property, as applicable.

 

“Ex-Date” means, when used with respect to any issuance, dividend or distribution giving rise to an adjustment to the Conversion Price pursuant to Section VIII, the first date on which the applicable Common Stock or other securities trade without the right to receive the issuance, dividend or distribution.

 

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

 

“Government Entity” means any (a) federal, state, local, municipal, foreign or other government; (b) governmental entity of any nature (including any governmental agency, branch, department, official, committee or entity and any court or other tribunal), whether foreign or domestic; or (c) body exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature, whether foreign or domestic, including any arbitral tribunal and self-regulatory organizations.

 

“Holder” means the Person in whose name any shares of Series A Preferred Stock are registered, which may be treated by the Corporation as the absolute owner of such shares of Series A Preferred Stock for the purpose of making payment and settling conversion and for all other purposes.

 

“Investment Agreements” means the investment agreements, by and between the Corporation and the investor parties thereto, dated as of July 2, 2024 (as amended, supplemented or restated from time to time).

 

 

“Junior Stock” means, prior to the Stockholder Approvals Date, the Common Stock and any other class or series of stock of the Corporation that ranks junior to the Series A Preferred Stock either or both as to the payment of dividends and/or as to the distribution of assets on any liquidation, dissolution or winding up of the Corporation.

 

“Law” means, with respect to any Person, any legal, regulatory and administrative laws, statutes, rules, Orders and regulations applicable to such Person.

 

“Liens” means any and all liens, charges, security interests, options, claims, mortgages, pledges, proxies, voting trusts or agreements, obligations, understandings or arrangements, or other restrictions on title or transfer of any nature whatsoever.

 

“Liquidation Preference” has the meaning specified in Section VII(a)(i)(1) with respect to the period between Closing and the Stockholder Approvals Date.

 

“NVCE Exchange Property” has the meaning specified in Section VIII(i)(ii)(1).

 

“NYSE” means the New York Stock Exchange.

 

“NYSE Limit” means a number of shares of Common Stock equal to 19.9% of the shares of Common Stock outstanding immediately prior to the execution of the Investment Agreements.

 

“NYSE Share Issuance Amount” means (a) the total number of shares of Common Stock issued upon conversion or exchange of any shares of Series A Preferred Stock plus (b) the total number of shares of Common Stock issued at the Closing plus (c) the total number of shares of Common Stock issued upon conversion of any shares of Series B Preferred Stock plus (d) the total number of shares of Common Stock issued upon conversion of any shares of Series C NVCE Stock.

 

“Order” means any applicable order, injunction, judgment, decree, ruling, or writ of any Government Entity.

 

“Person” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including a “person” as defined in Sections 13(d)(3) and 14(d) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.

 

“Preferred Exchange Property” has the meaning specified in Section VIII(i)(i).

 

“Preferred Stock” has the meaning set forth in the Charter.

 

“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the Common Stock have the right to receive any cash, securities or other property or in which the Common Stock is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of holders of the Common Stock entitled to receive such cash, securities or other property (whether such date is fixed by the Board or a duly authorized committee of the Board or by Law, contract or otherwise).

 

 

“Reorganization Event” has the meaning specified in Section VIII(i)(iii).

 

“Series A NVCE Dividend Amount” has the meaning specified in Section V(a).

 

“Series A Preferred Liquidation Amount” has the meaning specified in Section VII(a)(i) and applies solely during the period between Closing and the Stockholder Approvals Date.

 

“Series A Preferred Stock” has the meaning specified in Section I.

 

“Series B Preferred Stock” means the Series B Noncumulative Convertible Preferred Stock, par value $0.001 per share, of the Corporation, issued pursuant to the Investment Agreements.

 

“Series C NVCE Stock” means the Series C Non-Voting Common Equivalent Stock, par value $0.001 per share, of the Corporation, issuable upon conversion of a Warrant.

 

“Share Issuance Approval” means the approval, by the affirmative vote of a majority of votes cast by holders of shares of Common Stock at the meeting of the Corporation’s stockholders at which a vote is taken with respect to such issuance, that is required under applicable NYSE rules as a result of the NYSE Share Issuance Amount exceeding the NYSE Limit.

 

“Stockholder Approvals” means the Charter Amendment Approval and Share Issuance Approval.

 

“Stockholder Approvals Date” means the day that is the second Business Day after the date on which the Stockholder Approvals are obtained; provided, that, if the Charter Amendment Approval and the Share Issuance Approval are not obtained on the same date, the Stockholder Approvals Date shall mean the day that is the second Business Day after the later of the two approvals are obtained.

 

“Subject Series A Share” means a share of Series A Preferred Stock that is automatically converted pursuant to Section III(a).

 

“Trading Day” means a day on which the shares of Common Stock:

 

(i)            are not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business; and

 

(ii)           have traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.

 

“Warrant” has the meaning set forth in the Investment Agreements.

 

 

Section III             Conversion.

 

(a)            Conversion upon Convertible Transfer. The shares of Series A Preferred Stock shall not be convertible into any other class of capital stock of the Corporation, except in accordance with this Section III. On the terms and in the manner set forth in this Section III, upon the consummation of any Convertible Transfer of shares of Series A Preferred Stock, each outstanding share of Series A Preferred Stock subject to such Convertible Transfer (each, a “Subject Series A Share”) shall automatically convert into a number of shares of Common Stock equal to the Applicable Conversion Rate; provided that, if at that time of the Convertible Transfer, (A) the Stockholder Approvals are required for the conversion of the Subject Series A Shares into Common Stock and (B) the Stockholder Approvals have not yet been obtained, then (1) the maximum number of Subject Series A Shares that can convert into Common Stock without receipt of the Stockholder Approvals shall so convert into Common Stock based on the Applicable Conversion Rate and (2) each other Subject Series A Share shall automatically convert into one share of the Series B Preferred Stock.

 

(b)            On the Conversion Date, the Corporation shall effect the conversion of the Subject Series A Shares by delivering the shares of Common Stock or Series B Preferred Stock, as applicable, so converted pursuant to Section III(a).

 

(c)            The shares of Common Stock or Series B Preferred Stock, as applicable, issuable upon conversion of the Subject Series A Shares pursuant to Section III(a) shall be allocated among the applicable Holders in such Convertible Transfer on a pro rata basis of the aggregate dollar amount invested by the Holders on the Closing Date.

 

(d)            Prior to the close of business on any applicable Conversion Date, the shares of Common Stock or Series B Preferred Stock, as applicable, issuable upon conversion of any shares of Series A Preferred Stock pursuant to Section III(a) shall not be deemed outstanding for any purpose, and the Holders shall have no rights with respect to the Common Stock and Series B Preferred Stock, as applicable (including voting rights, rights to respond to tender offers for the Common Stock or Series B Preferred Stock, as applicable, and rights to receive any dividends or other distributions on the Common Stock or Series B Preferred Stock, as applicable) by virtue of holding shares of Series A Preferred Stock, except as otherwise expressly set forth in this Certificate of Designations.

 

(e)            Effective immediately prior to the close of business on any applicable Conversion Date, the rights of the Holders with respect to the shares of the Series A Preferred Stock so converted shall cease and the Persons entitled to receive shares of Common Stock or Series B Preferred Stock, as applicable, upon the conversion of such shares of Series A Preferred Stock shall be treated for all purposes as having become the record and beneficial owners of such shares of Common Stock or Series B Preferred Stock, as applicable. In the event that the Holders shall not by written notice to the Corporation designate the name in which shares of Common Stock or Series B Preferred Stock, as applicable, and/or cash, securities or other property (including payments of cash in lieu of fractional shares) to be issued or paid upon conversion of shares of Series A Preferred Stock should be registered or paid or the manner in which such shares should be delivered, the Corporation shall be entitled to register and deliver such shares, and make such payment, in the name of the Holders and in the manner shown on the records of the Corporation.

 

 

(f)            No fractional shares of Common Stock or Series B Preferred Stock, as applicable, shall be issued upon any conversion of shares of Series A Preferred Stock. If more than one share of Series A Preferred Stock shall be surrendered for conversion at any one time by the same Holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered. Instead of any fractional shares of Common Stock that would otherwise be issuable upon conversion of any Subject Series A Share, the Corporation shall pay an amount in cash (rounded to the nearest cent) equal to the fractional share of Common Stock, that otherwise would be issuable hereunder, multiplied by the Closing Price of the Common Stock determined as of the second Trading Day immediately preceding the applicable Conversion Date, in the case of Common Stock.

 

(g)            All shares of Common Stock or Series B Preferred Stock, as applicable, which may be issued upon conversion of the shares of Series A Preferred Stock will, upon issuance by the Corporation, be duly authorized, validly issued, fully paid and non-assessable, free and clear of all Liens (other than transfer restrictions imposed under applicable securities Laws) and not issued in violation of any preemptive right or Law.

 

(h)            Effective immediately prior to the Conversion Date, dividends or distributions shall no longer be declared on any Subject Series A Shares and such shares shall cease to be outstanding, in each case, subject to the rights of a Holder to receive any declared and unpaid dividends or distributions on such shares and any other payments to which they are otherwise entitled pursuant to Section IV or Section VIII.

 

Section IV             Dividend Rights Prior to the Stockholder Approvals Date.

 

(a)            The provisions of this Section IV shall only apply to dividends declared and payable prior to the Stockholder Approvals Date. Holders shall be entitled to receive, when, as and if declared by the Board (or a duly authorized committee of the Board), on each Dividend Payment Date, out of funds legally available therefor, non-cumulative cash dividends on the Series A Preferred Liquidation Amount per share of Series A Preferred Stock at a rate per annum equal to the Dividend Rate on each Dividend Payment Date for each Dividend Period. Such dividends shall be payable in arrears (as provided below in this Section IV(a)), but only when, as and if declared by the Board (or a duly authorized committee of the Board). Dividends on the Series A Preferred Stock shall not be cumulative; Holders shall not be entitled to receive any dividends not declared by the Board (or a duly authorized committee of the Board) and no interest, or sum of money in lieu of interest, shall be payable in respect of any dividend not so declared. Dividends on the Series A Preferred Stock shall not be declared or set aside for payment if and to the extent such dividends would cause the Corporation to fail to comply with the capital adequacy rules of the Federal Reserve Board (or, as and if applicable, the capital adequacy rules or regulations of any successor appropriate federal banking agency) applicable to the Corporation. Dividends that are payable on the Series A Preferred Stock on any Dividend Payment Date will be payable to Holders as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board (or a duly authorized committee of the Board) that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day. Dividends payable on the Series A Preferred Stock shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The Corporation’s determination of any dividend rate and its calculation of the amount of dividends for any Dividend Period will be maintained on file at the Corporation’s principal offices and will be available to any Holder upon request and will be final and binding in the absence of manifest error. Holders shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series A Preferred Stock as specified in this Section IV (subject to the other provisions of this Certificate of Designations); provided, that the foregoing shall not limit or modify the rights of any Holder to receive any dividend or other distribution pursuant to Section VIII.

 

 

(b)            So long as any share of Series A Preferred Stock remains outstanding, no dividend shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than any dividend in connection with the implementation of a shareholders’ rights plan or the redemption or repurchase of any rights under any such plan), unless full dividends for the last preceding Dividend Period on all outstanding shares of Series A Preferred Stock have been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The Corporation and its subsidiaries shall not purchase, redeem or otherwise acquire, directly or indirectly, for consideration any shares of Common Stock or other Junior Stock (other than (A) as a result of a reclassification of such Junior Stock for or into other Junior Stock, (B) the exchange or conversion of one share of such Junior Stock for or into another share of such Junior Stock, (C) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants, (D) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such securities or the security being converted or exchanged) nor shall the Corporation pay or make available any monies for a sinking fund for the redemption of any shares of Common Stock or any other shares of Junior Stock during a Dividend Period, unless the full dividends for the most recently completed Dividend Period on all outstanding shares of Series A Preferred Stock have been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing provision shall not restrict the ability of the Corporation or any affiliate of the Corporation to engage in any market-making transactions in Junior Stock in the ordinary course of business.

 

(c)            When dividends are not paid in full upon the shares of Series A Preferred Stock and other equity securities ranking on a parity, which, for avoidance of doubt, includes the Series B Preferred Stock with the Series A Preferred Stock as to payment of dividends (“Dividend Parity Stock”), all dividends declared and unpaid for payment on a dividend payment date with respect to the Series A Preferred Stock and the Dividend Parity Stock shall be shared ratably by the Holders and holders of any Dividend Parity Stock, in proportion to the respective amounts of the declared and unpaid dividends relating to the current dividend period. To the extent a dividend period with respect to any Dividend Parity Stock coincides with more than one Dividend Period with respect to the Series A Preferred Stock, for purposes of the immediately preceding sentence the Board shall treat such dividend period as two or more consecutive dividend periods, none of which coincides with more than one Dividend Period with respect to the Series A Preferred Stock, or shall treat such dividend period(s) with respect to any Dividend Parity Stock and Dividend Period(s) with respect to the Series A Preferred Stock for purposes of the immediately preceding sentence in any other manner that it deems to be fair and equitable in order to achieve ratable payments of dividends on such Dividend Parity Stock and the Series A Preferred Stock. To the extent a Dividend Period with respect to the Series A Preferred Stock coincides with more than one dividend period with respect to any Dividend Parity Stock, for purposes of the first sentence of this paragraph the Board shall treat such Dividend Period as two or more consecutive Dividend Periods, none of which coincides with more than one dividend period with respect to such Dividend Parity Stock, or shall treat such Dividend Period(s) with respect to the Series A Preferred Stock and dividend period(s) with respect to any Dividend Parity Stock for purposes of the first sentence of this paragraph in any other manner that it deems to be fair and equitable in order to achieve ratable payments of dividends on the Series A Preferred Stock and such Dividend Parity Stock. The term “dividend period” as used in this paragraph means such dividend periods as are provided for in the terms of any Dividend Parity Stock and, in the case of shares of Series A Preferred Stock, Dividend Periods applicable to shares of Series A Preferred Stock; and the term “dividend payment dates” as used in this paragraph means such dividend payment dates as are provided for in the terms of any Dividend Parity Stock and, in the case of shares of Series A Preferred Stock, Dividend Payment Dates applicable to shares of Series A Preferred Stock.

 

 

(d)           Subject to the foregoing, such dividends (payable in cash, securities or other property) as may be determined by the Board (or a duly authorized committee of the Board) may be declared and paid on any securities, including Common Stock, any other Junior Stock and any Dividend Parity Stock, from time to time out of any funds legally available for such payment. In the event such dividends are declared and paid, the Holders shall be entitled to receive the greater of the (i) dividends that would be due to the Holders on an as-converted basis or (ii) dividends such Holder receives on its shares of Series A Preferred Stock during the same period.

 

(e)            Notwithstanding any provision in this Certificate of Designations to the contrary, Holders shall not be entitled to receive any dividends or distributions on any shares of Series A Preferred Stock on or after the applicable Conversion Date (if prior to the Stockholder Approvals Date) in respect of such shares of Series A Preferred Stock that have been converted as provided herein, except to the extent that any such dividends or distributions have been declared by the Board or any duly authorized committee of the Board and the Record Date for such dividend occurs prior to such applicable Conversion Date.

 

Section V              Dividend Rights after the Stockholder Approvals Date.

 

(a)            The provisions of this Section V shall only apply to dividends declared and payable after the Stockholder Approvals Date. From and after the Stockholder Approvals Date to (but excluding) the applicable Conversion Date, (i) the Holders shall be entitled to receive, when, as and if declared by the Board or any duly authorized committee of the Board (but only out of assets legally available therefor under the DGCL) all cash dividends or distributions (including regular quarterly dividends or distributions) declared and paid or made in respect of the shares of Common Stock, at the same time and on the same terms as holders of Common Stock, in an amount per share of Series A Preferred Stock equal to the product of (x) the Applicable Conversion Rate then in effect and (y) any per share dividend or distribution, as applicable, declared and paid or made in respect of each share of Common Stock (the “Series A NVCE Dividend Amount”), and (ii) the Board or any duly authorized committee thereof may not declare and pay any cash dividend or make any cash distribution in respect of Common Stock unless the Board or any duly authorized committee of the Board declares and pays to the Holders, at the same time and on the same terms as holders of Common Stock, the Series A NVCE Dividend Amount per share of Series A Preferred Stock. Notwithstanding any provision in this Section V(a) to the contrary, no Holder of a share of Series A Preferred Stock shall be entitled to receive any dividend or distribution made with respect to the Common Stock where the Record Date for determination of holders of Common Stock entitled to receive such dividend or distribution occurs prior to the Stockholder Approvals Date or the date of issuance of such share of Series A Preferred Stock. The foregoing shall not limit or modify the rights of any Holder to receive any dividend or other distribution pursuant to Section VIII.

 

 

(b)            Each dividend or distribution declared and paid pursuant to Section V(a) will be payable to Holders of record of shares of Series A Preferred Stock as they appear in the records of the Corporation at the close of business on the same day as the Record Date for the corresponding dividend or distribution to the holders of shares of Common Stock.

 

(c)            Except as set forth in this Certificate of Designations, the Corporation shall have no obligation to pay, and the holders of shares of Series A Preferred Stock shall have no right to receive, dividends or distributions at any time, including with respect to dividends or distributions with respect to Common Stock or any other class or series of authorized Preferred Stock. To the extent the Corporation declares dividends or distributions on the Series A Preferred Stock and on any Common Stock and the Series C NVCE Stock, but does not make full payment of such declared dividends or distributions, the Corporation will allocate the dividend payments on a pro rata basis among the holders of the shares of Series A Preferred Stock and the holders of any Common Stock and Series C NVCE Stock then outstanding. For purposes of calculating the allocation of partial dividend payments, the Corporation will allocate dividend payments on a pro rata basis among the Holders and the holders of any Common Stock and Series C NVCE Stock so that the amount of dividends or distributions paid per share on the shares of Series A Preferred Stock and such Common Stock and Series C NVCE Stock shall in all cases bear to each other the same ratio that payable dividends or distributions per share on the shares of the Series A Preferred Stock and such Common Stock and Series C NVCE Stock (but without, in the case of any noncumulative Preferred Stock, accumulation of dividends or distributions for prior dividend periods) bear to each other. The foregoing right shall not be cumulative and shall not in any way create any claim or right in favor of Holders in the event that dividends or distributions have not been declared or paid in respect of any prior calendar quarter.

 

(d)            No interest or sum of money in lieu of interest will be payable in respect of any dividend payment or payments on shares of Series A Preferred Stock that may be in arrears.

 

(e)            Following the Stockholder Approvals Date, Holders shall not be entitled to any dividends or distributions, whether payable in cash, securities or other property, other than dividends or distributions (if any) declared and payable on shares of Series A Preferred Stock as specified in this Certificate of Designations.

 

(f)            Notwithstanding any provision in this Certificate of Designations to the contrary, Holders shall not be entitled to receive any dividends or distributions on any shares of Series A Preferred Stock on or after the applicable Conversion Date (if such date is after the Stockholder Approvals Date) in respect of such shares of Series A Preferred Stock that have been converted as provided herein, except to the extent that any such dividends or distributions have been declared by the Board or any duly authorized committee of the Board and the Record Date for such dividend occurs prior to such applicable Conversion Date.

 

 

Section VI             Voting.

 

(a)            Notwithstanding any stated or statutory voting rights, except as set forth in Section VI(b), the Holders shall not be entitled to vote (in their capacity as Holders) on any matter submitted to a vote of the stockholders of the Corporation.

 

(b)           So long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not, without the written consent or affirmative vote, given in person or by proxy, at a meeting called for that purpose by holders of at least a majority of the outstanding shares of Series A Preferred Stock, voting as a single and separate class, amend, alter or repeal (including by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions, other than a Reorganization Event pursuant to which the Series A Preferred Stock is treated in accordance with Section VIII(i)) any provision of (i) this Certificate of Designations or (ii) the Charter, in either case, that would alter, modify or change the preferences, rights, privileges or powers of the Series A Preferred Stock so as to, or in a manner that would, significantly and adversely affect the preferences, rights, privileges or powers of the Series A Preferred Stock; provided, that any such amendment or alteration to any provision of this Certificate of Designations or the Charter that alters, modifies or changes the preferences, rights, privileges or powers of a particular Holder so as to, or in a manner that would, significantly and adversely affect the preferences, rights, privileges or powers of such Holder in a manner disproportionate from any other Holder shall require the prior written consent of such significantly and adversely affected Holder; provided, further, that neither (x) any increase in the amount of the authorized or issued Series A Preferred Stock or any securities convertible into Series A Preferred Stock nor (y) the creation and issuance, or an increase in the authorized or issued amount, of any series of Preferred Stock, or any securities convertible into Preferred Stock, ranking equal with and/or junior to the Series A Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon the Corporation’s liquidation, dissolution or winding up, in either case, will, in and of itself, be deemed to significantly and adversely affect the preferences, rights, privileges or powers of the Series A Preferred Stock or any Holder and the Holders will have no right to vote their shares of Series A Preferred Stock or consent to such action solely by reason of such an increase, creation or issuance.

 

(c)            Notwithstanding the foregoing, the Corporation shall not, without the unanimous (x) written consent or (y) affirmative vote (whether given in person or by proxy at a meeting called for that purpose), in each case, of all of the holders of the outstanding shares of Series A Preferred Stock, amend, alter or repeal (including by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions, other than a Reorganization Event pursuant to which the Series A Preferred Stock is treated in accordance with Section VIII(i)) the definitions of Applicable Conversion Rate, Base Price, Conversion Price, Dividend Rate or, if prior to the Stockholder Approvals Date, Series A Preferred Liquidation Amount under this Certificate of Designations.

 

(d)           Notwithstanding the foregoing, the Holders shall not have any voting rights set out in Section VI(b) if, at or prior to the effective time of the act with respect to which such vote would otherwise be required, all outstanding shares of Series A Preferred Stock shall have been converted into shares of Common Stock.

 

 

Section VII            Rank; Liquidation.

 

(a)            The following provisions apply during the period between Closing and the Stockholder Approvals Date:

 

(i)            In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of the Series A Preferred Stock shall be entitled to receive, out of the assets of the Corporation, or proceeds thereof (whether capital or surplus), available for distribution to stockholders of the Corporation, and after satisfaction of all liabilities and obligations to creditors of the Corporation and subject to the rights of any securities ranking senior to the Series A Preferred Stock, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock, in full an amount per share equal to the Base Price multiplied by the Applicable Conversion Rate, together with an amount equal to all dividends (if any) that have been declared but not paid prior to the date of payment of such distribution (but without any amount in respect of dividends that have not been declared prior to such payment date) (the “Series A Preferred Liquidation Amount”). The rights of the Series A Preferred Stock pursuant to this Section VII(a) shall rank pari passu with the rights of the Series B Preferred Stock. Thereafter, the Series A Preferred Stock will participate with the Common Stock on an as-converted basis as if Series A Preferred Stock was converted immediately prior to such liquidation, dissolution or winding up.

 

(1)            If in any distribution described in Section VII(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preferences (as defined below) in full to all holders of the Series A Preferred Stock and all holders of any stock of the Corporation ranking equally with the Series A Preferred Stock as to such distribution, the amounts paid to the holders of the Series A Preferred Stock and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preferences of the holders of the Series A Preferred Stock and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than the Series A Preferred Stock and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable).

 

(b)            After the Stockholder Approvals Date, the Series A Preferred Stock shall, consistent with the requirements of 12 C.F.R. Section 217.20(b)(1) (or any successor regulation) with respect to common equity tier 1 capital, rank equally with, and have identical rights, preferences and privileges as, the Common Stock with respect to dividends or distributions (including regular quarterly dividends) declared by the Board and rights upon any liquidation, dissolution, winding up or similar proceeding of the Corporation, as provided in the Charter.

 

 

(c)            For purposes of this Section VII, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or Person or the merger, consolidation or any other business combination of any other corporation or Person into or with the Corporation be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation.

 

Section VIII          Adjustments.

 

(a)            The Conversion Price shall be subject to the adjustments described in this Section VIII (each such event set forth in clauses (b) through (j), an “Adjustment Event”).

 

(b)            Stock Dividends and Distributions. If the Corporation pays dividends or other distributions on the Common Stock in shares of Common Stock, then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the Ex-Date for such dividend or distribution by the following fraction:

 

	OS0
	OS1

 

Where,

 

OS0=	the number of shares of Common Stock outstanding immediately prior to Ex-Date for such dividend or distribution.
OS1=	the sum of (x) the number of shares of Common Stock outstanding immediately prior to the Ex-Date for such dividend or distribution, plus (y) the total number of shares of Common Stock issued in such dividend or distribution.

 

The adjustment pursuant to this clause (b) shall become effective at 9:00 a.m., New York City time on the Ex-Date for such dividend or distribution. For the purposes of this clause (b), the number of shares of Common Stock at the time outstanding shall not include shares held in treasury by the Corporation. If any dividend or distribution described in this clause (b) is declared but not so paid or made, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to make such dividend or distribution, to such Conversion Price that would be in effect if such dividend or distribution had not been declared.

 

(c)            Subdivisions, Splits and Combinations of Common Stock. If the Corporation subdivides, splits or combines the shares of Common Stock, then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the effective date of such share subdivision, split or combination by the following fraction:

 

	OS0
	OS1

 

 

Where,

 

OS0=	the number of shares of Common Stock outstanding immediately prior to the effective date of such share subdivision, split or combination.
OS1=	the number of shares of Common Stock outstanding immediately after the opening of business on the effective date of such share subdivision, split or combination.

 

The adjustment pursuant to this clause (c) shall become effective at 9:00 a.m., New York City time on the effective date of such subdivision, split or combination. For the purposes of this clause (c), the number of shares of Common Stock at the time outstanding shall not include shares held in treasury by the Corporation. If any subdivision, split or combination described in this clause (c) is announced but the outstanding shares of Common Stock are not subdivided, split or combined, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to subdivide, split or combine the outstanding shares of Common Stock, to such Conversion Price that would be in effect if such subdivision, split or combination had not been announced.

 

(d)            Issuance of Stock Purchase Rights. If the Corporation issues to all or substantially all holders of the shares of Common Stock rights or warrants (other than rights or warrants issued pursuant to a dividend reinvestment plan or share purchase plan or other similar plans) entitling them, for a period of up to 45 days from the date of issuance of such rights or warrants, to subscribe for or purchase the shares of Common Stock at less than the Current Market Price on the date immediately preceding the Ex-Date for such issuance, then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the Ex-Date for such issuance by the following fraction:

 

	OS0 + Y
	OS0 + X

 

Where,

 

OS0=	the number of shares of Common Stock outstanding immediately prior to the Ex-Date for such distribution.
X=	the total number of shares of Common Stock issuable pursuant to such rights or warrants.
Y=	the number of shares of Common Stock equal to the aggregate price payable to exercise such rights or warrants divided by the Current Market Price on the date immediately preceding the Ex-Date for the issuance of such rights or warrants.

 

 

Any adjustment pursuant to this Section VIII(d) shall become effective immediately prior to 9:00 a.m., New York City time, on the Ex-Date for such issuance. For the purposes of this Section VIII(d), the number of shares of Common Stock at the time outstanding shall not include shares held in treasury by the Corporation. The Corporation shall not issue any such rights or warrants in respect of shares of the Common Stock held in treasury by the Corporation. In the event that such rights or warrants described in this Section VIII(d) are not so issued, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to issue such rights or warrants, to the Conversion Price that would then be in effect if such issuance had not been declared. To the extent that such rights or warrants are not exercised prior to their expiration or shares of Common Stock are otherwise not delivered pursuant to such rights or warrants upon the exercise of such rights or warrants, the Conversion Price shall be readjusted to such Conversion Price that would then be in effect had the adjustment made upon the issuance of such rights or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered. In determining the aggregate offering price payable for such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants and the value of such consideration (if other than cash, to be reasonably determined by the Board).

 

(e)            Debt or Asset Distributions. If the Corporation distributes to all or substantially all holders of shares of Common Stock evidences of indebtedness, shares of capital stock, securities, cash or other assets (excluding any dividend or distribution referred to in clause (b) above, any dividend or distribution paid exclusively in cash, any consideration payable in connection with a tender or exchange offer made by the Corporation or any of its subsidiaries, and any dividend of shares of capital stock of any class or series, or similar equity interests, of or relating to a subsidiary or other business unit in the case of certain spin-off transactions as described below), then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the Ex-Date for such distribution by the following fraction:

 

	SP0 - FMV
	SP0

 

Where,

 

SP0=	the Current Market Price per share of Common Stock on such date.
FMV=	the fair market value of the portion of the distribution applicable to one share of Common Stock on such date as reasonably determined by the Board; provided that, if “FMV” as set forth above is equal to or greater than “SP0” as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall receive on the date on which such distribution is made to holders of Common Stock, for each share of Series A Preferred Stock, the amount of such distribution such Holder would have received had such holder owned a number of shares of Common Stock equal to the Applicable Conversion Rate on the Ex-Date for such distribution.

 

 

In a “spin-off”, where the Corporation makes a distribution to all holders of shares of Common Stock consisting of capital stock of any class or series, or similar equity interests of, or relating to, a subsidiary or other business unit, if a Holder did not participate in such distribution with respect to such shares of Series A Preferred Stock as provided for in (x) prior to the Stockholder Approvals Date, Section IV or (y) after the Stockholder Approvals Date, Section V, the Conversion Price with respect to such share held by such Holder will be adjusted on the 15^th Trading Day after the effective date of the distribution by multiplying such Conversion Price in effect immediately prior to such 15^th Trading Day by the following fraction:

 

	MP0
	MP0 + MPs

 

Where,

 

MP0=	the average of the Closing Prices of the Common Stock over the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution.
MPs=	the average of the Closing Prices of the capital stock or equity interests representing the portion of the distribution applicable to one share of Common Stock over the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution, or, if not traded on a national or regional securities exchange or over-the-counter market, the fair market value of the capital stock or equity interests representing the portion of the distribution applicable to one share of Common Stock on such date as reasonably determined by the Board.

 

Any adjustment pursuant to this clause (e) shall become effective immediately prior to 9:00 a.m., New York City time, on the Ex-Date for such distribution. In the event that such distribution described in this clause (e) is not so paid or made, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to pay or make such dividend or distribution, to the Conversion Price that would then be in effect if such dividend or distribution had not been declared.

 

(f)            Cash Distributions. If the Corporation makes a distribution consisting exclusively of cash to all holders of Common Stock, excluding any (i)(x) prior to the Stockholder Approvals Date, regular quarterly cash dividend on the Common Stock not in excess of $0.05 per share, which per share amount shall be adjusted accordingly in the event that the Corporation subdivides, splits or combines the shares of Common Stock and (y) after the Stockholder Approvals Date, cash dividend on the Common Stock to the extent a corresponding cash dividend is paid on the Series A Preferred Stock pursuant to Section V(a), (ii) cash that is distributed in a Reorganization Event or as part of a “spin-off” referred to in clause (e) above, (iii) dividend or distribution in connection with the Corporation’s liquidation, dissolution or winding-up, and (iv) consideration payable in connection with a tender or exchange offer made by the Corporation or any of its subsidiaries, then in each event, the Conversion Price in effect immediately prior to the Ex-Date for such distribution will be multiplied by the following fraction:

 

	SP0 - DIV
	SP0

 

Where,

 

 

SP0=	the Closing Price per share of Common Stock on the Trading Day immediately preceding the Ex-Date.
DIV	the amount per share of Common Stock of the cash distribution, as determined pursuant to the introduction to this clause (f).

 

In the event that any distribution described in this clause (f) is not so made, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to pay such distribution, to the Conversion Price which would then be in effect if such distribution had not been declared.

 

Notwithstanding the foregoing, if “DIV” as set forth above is equal to or greater than “SP₀” as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive on the date on which the relevant cash dividend or distribution is distributed to holders of Common Stock, for each share of Series A Preferred Stock, the amount of cash such Holder would have received had such holder owned a number of shares of Common Stock equal to the Applicable Conversion Rate on the Ex-Date for such distribution.

 

(g)            Self-Tender Offers and Exchange Offers. If the Corporation or any of its subsidiaries successfully completes a tender or exchange offer for the Common Stock where the cash and the value of any other consideration included in the payment per share of the Common Stock exceeds the Closing Price per share of the Common Stock on the Trading Day immediately succeeding the expiration of the tender or exchange offer, then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time prior to the commencement of the offer by the following fraction:

 

	OS0 x SP0
	AC + (SP0 x OS1)

 

Where,

 

SP0=	the Closing Price per share of Common Stock on the Trading Day immediately succeeding the commencement of the tender or exchange offer.
OS0=	the number of shares of Common Stock outstanding immediately prior to the expiration of the tender or exchange offer, including any shares validly tendered and not withdrawn.
OS1=	the number of shares of Common Stock outstanding immediately after the expiration of the tender or exchange offer (after giving effect to such tender offer or exchange offer).
AC=	the aggregate cash and fair market value of the other consideration payable in the tender or exchange offer, as reasonably determined by the Board.

 

 

Any adjustment made pursuant to this clause (g) shall become effective immediately prior to 9:00 a.m., New York City time, on the Trading Day immediately following the expiration of the tender or exchange offer. In the event that the Corporation or one of its subsidiaries is obligated to purchase shares of Common Stock pursuant to any such tender offer or exchange offer, but the Corporation or such subsidiary is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Price shall be readjusted to be such Conversion Price that would then be in effect if such tender offer or exchange offer had not been made.

 

(h)            Rights Plans. To the extent that the Corporation has a rights plan in effect with respect to the Common Stock on any Conversion Date, upon conversion of any shares of the Series A Preferred Stock, the Holders will receive, in addition to the shares of Common Stock, the rights under the rights plan, unless, prior to such Conversion Date, the rights have separated from the shares of Common Stock, in which case the Conversion Price will be adjusted at the time of separation as if the Corporation had made a distribution to all holders of Common Stock as described in clause (e) above, subject to readjustment in the event of the expiration, termination or redemption of such rights.

 

(i)            Reorganization Events.

 

(i)            Upon the occurrence of a Reorganization Event prior to an applicable Conversion Date, if such date is prior to the Stockholder Approvals Date, each share of Series A Preferred Stock outstanding immediately prior to such Reorganization Event shall, without the consent of any Holders, be entitled to receive, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Corporation, and after satisfaction of all liabilities and obligations to creditors of the Corporation and subject to the rights of any securities ranking senior to the Series A Preferred Stock, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other Junior Stock, in full, the greater of the (1) amount per share equal to two times the Series A Preferred Liquidation Amount or (2) amount equal to the distribution amount of such assets or proceeds of the Corporation as was receivable by a holder of the number of shares of Common Stock into which such share of Series A Preferred Stock was convertible immediately prior to such Reorganization Event (assuming the conversion of all outstanding shares of Series A Preferred Stock and Series B Preferred Stock into shares of Common Stock) (such payment, the “Preferred Exchange Property”).

 

(ii)

 

(1)            Upon the occurrence of a Reorganization Event prior to an applicable Conversion Date, if such date is after the Stockholder Approvals Date, each share of Series A Preferred Stock outstanding immediately prior to such Reorganization Event shall, without the consent of Holders, automatically convert into the types and amounts of securities, cash, and other property that is or was receivable in such Reorganization Event by a holder (other than the counterparty to the Reorganization Event or an Affiliate of such other party) of the number of shares of Common Stock into which such share of Series A Preferred Stock was convertible immediately prior to such Reorganization Event in exchange for such shares of Series A Preferred Stock (such securities, cash, and other property, the “NVCE Exchange Property”); provided that, to the extent receipt of any NVCE Exchange Property would be prohibited by Law or would require the Holder to obtain any consent, authorization, approval, license or permit of any Governmental Entity to acquire or hold the NVCE Exchange Property, then the portion of the Series A Preferred Stock of such Holder that such Holder is prohibited by Law or requires such action to acquire or hold shall instead either (A) convert into a substantially identical non-voting security (with commensurate voting powers and conversion rights as the Series A Preferred Stock hereunder) of the entity surviving such Reorganization Event or other entity in which holders of shares of Common Stock receive securities in connection with such Reorganization Event or (B) if proper provision is not made to give effect to the foregoing subclause (A), remain outstanding without any alterations to the terms thereof and be convertible into the NVCE Exchange Property.

 

 

(2)            In the event that holders of the shares of the Common Stock have the opportunity to elect the form of consideration to be received in such Reorganization Event, the Corporation shall ensure that the Holders of the Series A Preferred Stock have the same opportunity to elect the form of consideration in accordance with the same procedures and pro ration mechanics that apply to the election to be made by the holders of the Common Stock. The amount of NVCE Exchange Property receivable upon conversion of any Series A Preferred Stock shall be determined based upon the Conversion Price in effect on the date on which such Reorganization Event is consummated.

 

(3)            The Corporation shall not enter into any definitive agreement for a transaction constituting a Reorganization Event unless such definitive agreement provides for the conversion of the Series A Preferred Stock into the Exchange Property in a manner that is consistent with and gives effect to this Section VIII(i)(ii).

 

(iii)            A “Reorganization Event” shall mean:

 

(1)            any consolidation, merger, conversion, tender or exchange offer or other similar business combination of the Corporation with or into another Person, in each case, pursuant to which all or substantially all of the Common Stock outstanding will be converted into cash, securities, or other property of the Corporation or another Person;

 

(2)            any sale, transfer, lease, or conveyance to another Person of all or substantially all of the property and assets of the Corporation and its subsidiaries, taken as a whole, in each case pursuant to which all of the Common Stock outstanding will be converted into cash, securities, or other property of the Corporation or another Person;

 

(3)            any reclassification of the Common Stock into securities other than the Common Stock; or

 

 

(4)            any statutory exchange of all of the outstanding shares of Common Stock for securities of another Person (other than in connection with a merger or acquisition).

 

(iv)            The provisions of this Section VIII(i) shall similarly apply to successive Reorganization Events or any series of transactions that results in a Reorganization Event and the provisions of Section VIII(i) shall apply to any shares of capital stock of the Corporation (or any successor) received by the holders of the Common Stock in any such Reorganization Event.

 

(v)            The Corporation (or any successor) shall, at least twenty days prior to the occurrence of any Reorganization Event, use reasonable best efforts to provide written notice to the Holders of the anticipated occurrence of such event and of the type and amount of the cash, securities or other property that constitutes the Exchange Property; provided, that no such notice shall be required if the anticipated occurrence of any Reorganization Event is disclosed in any registration statement, prospectus, report, schedule or proxy statement filed with or furnished by the Corporation to the U.S. Securities and Exchange Commission. Failure to deliver such notice shall not affect the operation of this Section VIII.

 

(j)            No adjustment to the Conversion Price shall be made with respect to a share of Series A Preferred Stock if the Holder thereof has participated in the transaction that would otherwise give rise to an adjustment with respect to such share of Series A Preferred Stock, as a result of holding such share of Series A Preferred Stock at the time of such transaction (including pursuant to (x) prior to the Stockholder Approvals Date, Section IV or (y) after the Stockholder Approvals Date, Section V), without having to convert such share of Series A Preferred Stock, as if they held the full number of shares of Common Stock into which each such share of the Series A Preferred Stock held by them may then be converted.

 

(k)            Notwithstanding anything to the contrary herein, an Adjustment Event shall not allow the Holder to acquire a higher percentage of any Class of Voting Securities of the Corporation than the Holder (together with its affiliates for purposes of the BHC Act) beneficially owned immediately prior to such Adjustment Event.

 

Section IX             Reports as to Adjustments.

 

Whenever the number of shares of Common Stock into which the shares of the Series A Preferred Stock are convertible is adjusted as provided in Section VIII, the Corporation shall promptly, but in any event within ten days thereafter, compute such adjustment and furnish to the Holders a notice stating the number of shares of Common Stock into which each share of the Series A Preferred Stock is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment will become effective. Amounts resulting from any calculation hereunder will be rounded to the nearest 1/10,000th.

 

 

Section X              Reservation of Stock.

 

(a)            The Corporation shall, following the Charter Amendment Approval and the filing and acceptance of the Charter Amendment (as defined in the Investment Agreements), reserve and keep available out of its authorized and unissued Common Stock and shares of Series B Preferred Stock, solely for issuance upon the conversion of shares of Series A Preferred Stock as provided in this Certificate of Designations, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Series A Preferred Stock then outstanding.

 

(b)            Following the approval of the applicable supplemental listing application, the Corporation hereby covenants and agrees that, for so long as shares of the Common Stock are listed on the NYSE or any other national securities exchange or automated quotation system, the Corporation will, if permitted by the rules of such exchange or automated quotation system, list and keep listed that number of shares of Common Stock issuable upon conversion of shares of all the Series A Preferred Stock.

 

Section XI             Exclusion of Other Rights.

 

The shares of Series A Preferred Stock shall not have any voting powers except as expressly described herein, and, except as may otherwise be required by Law, shall not have any preferences or relative, participating, optional or other special rights, other than those specifically set forth herein (as this Certificate of Designations may be amended from time to time) and in the Charter. The shares of Series A Preferred Stock shall have no preemptive or subscription rights.

 

Section XII            Severability of Provisions.

 

If any voting powers, preferences or relative, participating, optional or other special rights of the Series A Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Designations (as this Certificate of Designations may be amended from time to time) are invalid, unlawful or incapable of being enforced by reason of any rule of Law, all other voting powers, preferences and relative, participating, optional and other special rights of Series A Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Designations (as so amended) which can be given effect without the invalid, unlawful or unenforceable voting powers, preferences or relative, participating, optional or other special rights of Series A Preferred Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences or relative, participating, optional or other special rights of Series A Preferred Stock or qualifications, limitations and restrictions thereof herein set forth shall be deemed dependent upon any other such voting powers, preferences or relative, participating, optional or other special rights of Series A Preferred Stock or qualifications, limitations and restrictions thereof unless so expressed herein.

 

Section XIII          Cancellation of Series A Preferred Stock.

 

Any shares of Series A Preferred Stock that have been duly converted in accordance with this Certificate of Designations, or reacquired by the Corporation, shall be cancelled promptly thereafter and revert to authorized but unissued shares of Preferred Stock undesignated as to series. Such shares may be designated or redesignated and issued or reissued, as the case may be, as part of any series of Preferred Stock. The Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized number of shares of Series A Preferred Stock solely in accordance with the foregoing.

 

 

Section XIV          Additional Authorized Shares.

 

Notwithstanding anything set forth in the Charter or this Certificate of Designations to the contrary, the Board or any authorized committee of the Board, without the vote of the Holders, may increase or decrease the number of authorized shares of Series A Preferred Stock or other stock ranking junior or senior to, or on parity with, the Series A Preferred Stock as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

 

Section XV           Determinations.

 

The Corporation shall have the sole right to make all calculations called for hereunder. Absent fraud or manifest error, such calculations shall be final and binding on all Holders. The Corporation shall have the power to resolve any ambiguity and its action in so doing, as evidenced by a resolution of the Board, shall be final and conclusive unless clearly inconsistent with the intent hereof. Amounts resulting from any calculation will be rounded, if necessary, to the nearest one ten-thousandth, with five one-hundred thousandths being rounded upwards.

 

Section XVI          No Redemption.

 

The Corporation may not, at any time, redeem the outstanding shares of the Series A Preferred Stock, other than as otherwise expressly set forth in Section VIII with the prior approval of the Federal Reserve Board.

 

Section XVII         Maturity.

 

The Series A Preferred Stock shall be perpetual, unless converted in accordance with this Certificate of Designations.

 

Section XVIII       Repurchases.

 

Subject to the limitations imposed herein, the Corporation may purchase and sell shares of Series A Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board or any duly authorized committee of the Board may determine; provided that any repurchase of shares of Series A Preferred Stock by the Corporation shall require prior approval of the Federal Reserve Board.

 

Section XIX          No Sinking Fund.

 

Shares of Series A Preferred Stock are not subject to the operation of a sinking fund.

 

 

Section XX           Notices.

 

All notices, demands or other communications to be given hereunder shall be in writing and shall be deemed to have been given (a) on the date of delivery if delivered personally to the recipient, or if by email, upon delivery (provided that no auto-generated error or non-delivery message is generated in response thereto), (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to (i) if to the Corporation, First Foundation, Inc., 200 Crescent Court, Suite 1400, Dallas, Texas, Attention: Chief Executive Officer, Email: skavanaugh@ff-inc.com; with a copy to: General Counsel, Email: edorsett@ff-inc.com or (ii) if to any Holder or holder of Common Stock, as the case may be, to such Holder or holder at the address listed in the stock record books of the Corporation, or, in each case, such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party.

 

Section XXI          Taxes.

 

(a)            The Corporation and each Holder shall bear their own costs, fees and expenses in connection with any conversion contemplated by Section III, except that the Corporation shall pay any and all transfer taxes, stamp taxes or duties, documentary taxes, or other similar taxes imposed upon the issuance of shares of Common Stock on account of any conversion contemplated by Section III; provided that the Corporation shall not be required to pay any such tax to the extent such tax is payable because a Holder requests Common Stock to be registered in a name other than such registered holder’s name (including in connection with any Convertible Transfer) and no such Common Stock will be so registered unless and until the registered holder making such request has paid such taxes to the Corporation or has established to the satisfaction of the Corporation that such taxes have been paid or are not payable.

 

(b)            Notwithstanding anything herein to the contrary, the Corporation and any applicable withholding agent shall be entitled to deduct and withhold from any consideration otherwise payable on or with respect to the Series A Preferred Stock (including upon conversion of any Series A Preferred Stock) such amounts as it is required to deduct or withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “Code”), or any other applicable tax Law. If the Holder is deemed for U.S. federal income tax purposes to have received a distribution with respect to the Series A Preferred Stock, the Corporation and any applicable withholding agent may satisfy any resulting applicable withholding obligations (including with respect to backup withholding) required by applicable Tax Law imposed in connection with such deemed distribution by withholding from any other payments due with respect to the Series A Preferred Stock, including any payments upon conversion, repurchase or redemption of the Series A Preferred Stock. If any amounts are so deducted or withheld and subsequently paid to the applicable Government Entity, such deducted or withheld amounts shall be treated for all purposes hereunder as having be paid to the person to which such amounts would have otherwise been payable.

 

 

(c)            The Corporation and each Holder each agree that there shall be no deemed distribution on the Series A Preferred Stock pursuant to Section 305(c) of the Code in respect of a difference between the “issue price” and the “redemption price” of the Series A Preferred Stock and except to the extent otherwise required by a “determination” within the meaning of Section 1313(a) of the Code, neither the Corporation nor Holder shall take any position inconsistent therewith.

 

Section XXII         No Stock Certificates.

 

Notwithstanding anything to the contrary contained in this Certificate of Designations, no shares of Series A Preferred Stock shall be issued in physical, certificated form. All shares of Series A Preferred Stock shall be evidenced by book-entry on the record books maintained by the Corporation or its transfer agent.

 

Section XXIII        Transfers.

 

The shares of Series A Preferred Stock are subject to the restrictions on transfer set forth in the Investment Agreements. Any purported transfer in violation of such restrictions shall be null and void.

 

[Remainder of page intentionally left blank]

 

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations to be signed by the undersigned on this 5th day of July, 2024.

 

	FIRST FOUNDATION INC.
	By:	/s/ Scott F. Kavanaugh
		Name:	Scott F. Kavanaugh
		Title:	Chief Executive Officer

 

[Signature Page to Certificate of Designations]

 

 

 

Exhibit 3.2

 

CERTIFICATE OF DESIGNATIONS
OF
SERIES B NONCUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
FIRST FOUNDATION INC.

 

FIRST FOUNDATION INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), in accordance with the provisions of Sections 103, 141 and 151 thereof, does hereby certify that:

 

In accordance with the provisions of the Corporation’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), the Corporation’s Bylaws, as amended (the “Bylaws”) and applicable law, the Board of Directors of the Corporation (the “Board”) duly adopted the following resolution on July 1, 2024, creating a series of Preferred Stock of the Corporation designated as “Series B Noncumulative Convertible Preferred Stock”:

 

RESOLVED, that pursuant to the Delaware General Corporation Law (the “DGCL”) and the Certificate of Incorporation and Bylaws of the Corporation, the Board hereby establishes a series of Preferred Stock, par value $0.001 per share, of the Corporation and fixes and determines the designation, powers, preferences, redemption rights, qualifications, privileges, limitations, restrictions and special or relative rights thereof as follows:

 

Section I               Designation and Amount.

 

A series of Preferred Stock designated as the “Series B Noncumulative Convertible Preferred Stock” (“Series B Preferred Stock”) is hereby established. The total number of authorized shares of Series B Preferred Stock shall be 14,490.

 

Section II              Definitions.

 

As used herein, the following terms shall have the following meanings, unless the context otherwise requires:

 

“Adjustment Event” has the meaning specified in Section VII(a).

 

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person (as used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through ownership of voting securities, by contract or otherwise); provided, that Mubadala, members of the Mubadala Group and other direct or indirect owners of Fortress Investment Group LLC shall not be deemed Affiliates of Fortress Investment Group LLC or of any of its Affiliates. As used in this definition, “Mubadala” means Mubadala Investment Company PJSC, and “Mubadala Group” means any Person controlling, controlled by or under common control with Mubadala that is not also controlled by Fortress Investment Group LLC.

 

 

“Applicable Conversion Rate” means, for each share of Series B Preferred Stock, the number of shares of Common Stock equal to the product of (a) one thousand (1,000) multiplied by (b) the quotient of (i) the Base Price divided by (ii) the then-applicable Conversion Price, subject to adjustment pursuant to Section VII for any applicable event occurring subsequent to the initial determination of the Applicable Conversion Rate.

 

“Authorized Shares Limit” means, at any time of determination, the total number of authorized shares of Common Stock under the Charter reduced by the number of shares of Common Stock that are issued and outstanding.

 

“Base Price” means $4.10.

 

“BHC Act” means the Bank Holding Company Act of 1956 (as amended) and its implementing regulations.

 

“Board” means the Board of Directors of the Corporation.

 

“Business Day” means any day, other than a Saturday, Sunday or other day on which banking institutions in the city of New York, New York are required or authorized by Law to be closed.

 

“Certificate of Designations” means this Certificate of Designations of Series B Preferred Stock of the Corporation, dated July 5, 2024.

 

“Charter” means the Certificate of Incorporation of the Corporation, as amended, supplemented and/or restated from time to time.

 

“Charter Amendment Approval” means the approval of the proposal to amend the Charter in a manner to increase the total authorized number of shares of Common Stock to at least 200,000,000 by the affirmative vote of a majority of votes cast by the holders of shares of Common Stock, at the meeting of the Corporation’s stockholders at which a vote is taken with respect to such Charter amendment proposal.

 

“Charter Amendment Approval Date” means the day that is the second Business Day after the date on which Charter Amendment Approval has been obtained.

 

“Class of Voting Security” shall be interpreted in a manner consistent with how “class of voting shares” is defined in 12 C.F.R. Section 225.2(q)(3) or any successor provision.

 

“Closing” has the meaning set forth in the Investment Agreement.

 

“Closing Date” means the date that any shares of Series B Preferred Stock are first issued.

 

 

“Closing Price” of the Common Stock (or other relevant capital stock or equity interest) on any date of determination means the closing sale price or, if no closing sale price is reported, the last reported sale price of the shares of the Common Stock (or other relevant capital stock or equity interest) on the NYSE on such date. If the Common Stock (or other relevant capital stock or equity interest) is not traded on the NYSE on any date of determination, the Closing Price of the Common Stock (or other relevant capital stock or equity interest) on such date of determination means the closing sale price as reported in the composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock (or other relevant capital stock or equity interest) is so listed or quoted, or, if no closing sale price is reported, the last reported sale price on the principal U.S. national or regional securities exchange on which the Common Stock (or other relevant capital stock or equity interest) is so listed or quoted, or if the Common Stock (or other relevant capital stock or equity interest) is not so listed or quoted on a U.S. national or regional securities exchange, the last quoted bid price for the Common Stock (or other relevant capital stock or equity interest) in the over-the-counter market as reported by OTC Markets Group Inc. or a similar organization, or, if that bid price is not available, the market price of the Common Stock (or other relevant capital stock or equity interest) on that date as determined by a nationally recognized independent investment banking firm retained by the Corporation for this purpose.

 

For purposes of this Certificate of Designations, all references herein to the “Closing Price” and “last reported sale price” of the Common Stock (or other relevant capital stock or equity interest) on the NYSE shall be such closing sale price and last reported sale price as reflected on the website of the NYSE (http://www.nyse.com) and as reported by Bloomberg Professional service; provided that in the event that there is a discrepancy between the closing sale price or last reported sale price as reflected on the website of the NYSE and as reported by Bloomberg Professional service, the closing sale price and last reported sale price on the website of the NYSE shall govern.

 

“Common Stock” means the common stock, $0.001 par value per share, of the Corporation authorized by the Corporation on or after the date hereof.

 

“Conversion Date” means the date on which any shares of Series B Preferred Stock shall become convertible into any shares of Common Stock pursuant to Section III; provided, however, that if a Conversion Date would otherwise occur on or after an Ex-Date for an issuance, dividend or distribution that results in an adjustment of the Conversion Price pursuant to Section VII and on or before the Record Date for such issuance, dividend or distribution, such Conversion Date shall instead occur on the first calendar day after the Record Date for such issuance, dividend or distribution.

 

“Conversion Price” means, for each share of Series B Preferred Stock, the Base Price, as the same may be adjusted from time to time in accordance with the terms of this Certificate of Designations.

 

“Convertible Transfer” means a transfer by the Holder that is both (i) to a Person who is not an affiliate of the Holder for purposes of the BHC Act and (ii) (A) to the Corporation; (B) in a widespread public distribution; (C) in which no transferee (or group of associated transferees) would receive 2% or more of the outstanding securities of any Class of Voting Securities of the Corporation; or (D) to a purchaser that would control more than 50% of every Class of Voting Securities of the Corporation without any transfer from the Holder.

 

“Corporation” has the meaning set forth in the Preamble.

 

“Current Market Price” means, on any date, the average of the daily Closing Price per share of the Common Stock or other securities on each of the five consecutive Trading Days preceding the earlier of the day before the date of the issuance, dividend or distribution in question and the day before the Ex-Date with respect to the issuance or distribution, giving rise to an adjustment to the Conversion Price pursuant to Section VII.

 

 

“DGCL” means the Delaware General Corporation Law, as amended from time to time.

 

“Dividend Parity Stock” has the meaning specified in Section IV(c).

 

“Dividend Payment Date” means August 16, November 16, February 16 and May 16 of each year, commencing February 16, 2025; provided, however, that if any such date is not a Business Day, then such date shall nevertheless be a Dividend Payment Date but dividends on the Series B Preferred Stock, when, as and if declared, shall be paid on the next succeeding Business Day (without adjustment in the amount of the dividend per share of Series B Preferred Stock). Each Dividend Payment Date “relates” to the Dividend Period most recently ending before such Dividend Payment Date, and vice versa (with the words “related” and “relating” having correlative meanings).

 

“Dividend Period” means each period from and including a Dividend Payment Date (except that the initial Dividend Period shall commence on November 16, 2024) and continuing to, but excluding, the next succeeding Dividend Payment Date.

 

“Dividend Rate” means 13%.

 

“Dividend Record Date” has the meaning specified in Section IV(a).

 

“Exchange Property” has the meaning specified in Section VII(h)(i).

 

“Ex-Date” means, when used with respect to any issuance, dividend or distribution giving rise to an adjustment to the Conversion Price pursuant to Section VII, the first date on which the applicable Common Stock or other securities trade without the right to receive the issuance, dividend or distribution.

 

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

 

“Government Entity” means any (a) federal, state, local, municipal, foreign or other government; (b) governmental entity of any nature (including any governmental agency, branch, department, official, committee or entity and any court or other tribunal), whether foreign or domestic; or (c) body exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature, whether foreign or domestic, including any arbitral tribunal and self-regulatory organizations.

 

“Holder” means the Person in whose name any shares of Series B Preferred Stock are registered, which may be treated by the Corporation as the absolute owner of such shares of Series B Preferred Stock for the purpose of making payment and settling conversion and for all other purposes.

 

“Investment Agreements” means the investment agreements, by and between the Corporation and the investor parties thereto, dated as of July 2, 2024 (as amended, supplemented or restated from time to time).

 

 

“Junior Stock” means the Common Stock and any other class or series of stock of the Corporation that ranks junior to the Series B Preferred Stock either or both as to the payment of dividends and/or as to the distribution of assets on any liquidation, dissolution or winding up of the Corporation.

 

“Law” means, with respect to any Person, any legal, regulatory and administrative laws, statutes, rules, Orders and regulations applicable to such Person.

 

“Liens” means any and all liens, charges, security interests, options, claims, mortgages, pledges, proxies, voting trusts or agreements, obligations, understandings or arrangements, or other restrictions on title or transfer of any nature whatsoever.

 

“Liquidation Preference” has the meaning specified in Section VI(b).

 

“NYSE” means the New York Stock Exchange.

 

“NYSE Limit” means a number of shares of Common Stock equal to 19.9% of the shares of Common Stock outstanding immediately prior to the execution of the Investment Agreements.

 

“NYSE Share Issuance Amount” means (a) the total number of shares of Common Stock issued upon conversion of any shares of Series B Preferred Stock plus (b) the total number of shares of Common Stock issued at the Closing plus (c) the total number of shares of Common Stock issued upon conversion or exchange of any shares of Series A Preferred Stock plus (d) the total number of shares of Common Stock issued upon conversion of any shares of Series C NVCE Stock.

 

“Order” means any applicable order, injunction, judgment, decree, ruling, or writ of any Government Entity.

 

“Person” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including a “person” as defined in Sections 13(d)(3) and 14(d) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.

 

“Preferred Stock” has the meaning set forth in the Charter.

 

“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the Common Stock have the right to receive any cash, securities or other property or in which the Common Stock is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of holders of the Common Stock entitled to receive such cash, securities or other property (whether such date is fixed by the Board or a duly authorized committee of the Board or by Law, contract or otherwise).

 

“Reorganization Event” has the meaning specified in Section VII(h)(ii).

 

“Series A Preferred Stock” means the Series A Noncumulative Convertible Preferred Stock, par value $0.001 per share, of the Corporation, issued pursuant to the Investment Agreements.

 

 

“Series B Preferred Liquidation Amount” has the meaning specified in Section VI(a).

 

“Series B Preferred Stock” has the meaning specified in Section I.

 

“Series C NVCE Stock” means the Series C Non-Voting Common Equivalent Stock, par value $0.001 per share, of the Corporation, issuable upon conversion of a Warrant.

 

“Share Issuance Approval” means the approval, by the affirmative vote of a majority of votes cast by holders of shares of Common Stock at the meeting of the Corporation’s stockholders at which a vote is taken with respect to such issuance, that is required under applicable NYSE rules as a result of the NYSE Share Issuance Amount exceeding the NYSE Limit.

 

“Share Issuance Approval Date” means the day that is the second Business Day after the date on which Share Issuance Approval has been obtained.

 

“Stockholder Approvals” means the Charter Amendment Approval and Share Issuance Approval.

 

“Subject Series B Share” means a share of Series B Preferred Stock that is automatically converted pursuant to Section III(a) or Section III(b).

 

“Trading Day” means a day on which the shares of Common Stock:

 

(i)            are not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business; and

 

(ii)           have traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.

 

“Warrant” has the meaning set forth in the Investment Agreements.

 

Section III            Conversion.

 

(a)          Conversion upon Convertible Transfer. On the terms and in the manner set forth in this Section III, upon the consummation of any Convertible Transfer of shares of Series B Preferred Stock, each outstanding share of Series B Preferred Stock subject to such Convertible Transfer (each, a “Subject Series B Share”) shall automatically convert into a number of shares of Common Stock equal to the Applicable Conversion Rate; provided that, if at that time of the Convertible Transfer, (A) Stockholder Approvals are required for the conversion of the Subject Series B Shares into Common Stock and (B) the Stockholder Approvals have not yet been obtained, then the maximum number of Subject Series B Shares that can convert into Common Stock without receipt of the Stockholder Approvals shall so convert into Common Stock based on the Applicable Conversion Rate.

 

(b)          Mandatory Conversion of All Shares on the Approval Date. On the terms and in the manner set forth in this Section III, effective as of the close of business on latest of the Share Issuance Approval Date and the Charter Amendment Approval Date (such date, the “Approval Date”), each and every share of Series B Preferred Stock shall automatically convert into a number of shares of Common Stock equal to the Applicable Conversion Rate.

 

 

(c)           The shares of Series B Preferred Stock shall not be convertible into any other class of capital stock of the Corporation, except in accordance with this Section III.

 

(d)          On the Conversion Date, the Corporation shall effect the conversion of the Subject Series B Shares by delivering the shares of Common Stock so converted pursuant to Section III(a) or Section III(b).

 

(e)           The Corporation and each Holder agree to, during the two Business Days prior to the Conversion Date, use commercially reasonable efforts to calculate the number of shares of Common Stock issuable upon conversion of the Series B Preferred Stock pursuant to Section III(a) or Section III(b) in accordance with this Section III.

 

(f)           Prior to the close of business on any applicable Conversion Date, the shares of Common Stock issuable upon conversion of any shares of Series B Preferred Stock pursuant to Section III shall not be deemed outstanding for any purpose, and the Holders shall have no rights with respect to the Common Stock (including voting rights, rights to respond to tender offers for the Common Stock and rights to receive any dividends or other distributions on the Common Stock) by virtue of holding shares of Series B Preferred Stock, except as otherwise expressly set forth in this Certificate of Designations.

 

(g)          Effective immediately prior to the close of business on any applicable Conversion Date, the rights of the Holders with respect to the shares of the Series B Preferred Stock so converted shall cease and the Persons entitled to receive shares of Common Stock upon the conversion of such shares of Series B Preferred Stock shall be treated for all purposes as having become the record and beneficial owners of such shares of Common Stock. In the event that the Holders shall not by written notice to the Corporation designate the name in which shares of Common Stock and/or cash, securities or other property (including payments of cash in lieu of fractional shares) to be issued or paid upon conversion of shares of Series B Preferred Stock should be registered or paid or the manner in which such shares should be delivered, the Corporation shall be entitled to register and deliver such shares, and make such payment, in the name of the Holders and in the manner shown on the records of the Corporation.

 

(h)          No fractional shares of Common Stock shall be issued upon any conversion of shares of Series B Preferred Stock. If more than one share of Series B Preferred Stock shall be surrendered for conversion at any one time by the same Holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series B Preferred Stock so surrendered. Instead of any fractional shares of Common Stock that would otherwise be issuable upon conversion of any Subject Series B Share, the Corporation shall pay an amount in cash (rounded to the nearest cent) equal to the fractional share of Common Stock that otherwise would be issuable hereunder, multiplied by the Closing Price of the Common Stock determined as of the second Trading Day immediately preceding the applicable Conversion Date.

 

 

(i)           All shares of Common Stock which may be issued upon conversion of the shares of Series B Preferred Stock will, upon issuance by the Corporation, be duly authorized, validly issued, fully paid and non-assessable, free and clear of all Liens (other than transfer restrictions imposed under applicable securities Laws) and not issued in violation of any preemptive right or Law.

 

(j)           Effective immediately prior to the Conversion Date, dividends or distributions shall no longer be declared on any Subject Series B Shares and such shares shall cease to be outstanding, in each case, subject to the rights of a Holder to receive any declared and unpaid dividends or distributions on such shares and any other payments to which they are otherwise entitled pursuant to Section IV or Section VII.

 

Section IV            Dividend Rights.

 

(a)           Holders shall be entitled to receive, when, as and if declared by the Board (or a duly authorized committee of the Board), on each Dividend Payment Date, out of funds legally available therefor, non-cumulative cash dividends on the Series B Preferred Liquidation Amount per share of Series B Preferred Stock at a rate per annum equal to the Dividend Rate on each Dividend Payment Date for each Dividend Period. Such dividends shall be payable in arrears (as provided below in this Section IV(a)), but only when, as and if declared by the Board (or a duly authorized committee of the Board). Dividends on the Series B Preferred Stock shall not be cumulative; Holders shall not be entitled to receive any dividends not declared by the Board (or a duly authorized committee of the Board) and no interest, or sum of money in lieu of interest, shall be payable in respect of any dividend not so declared. Dividends on the Series B Preferred Stock shall not be declared or set aside for payment if and to the extent such dividends would cause the Corporation to fail to comply with the capital adequacy rules of the Federal Reserve Board (or, as and if applicable, the capital adequacy rules or regulations of any successor appropriate federal banking agency) applicable to the Corporation. Dividends that are payable on the Series B Preferred Stock on any Dividend Payment Date will be payable to Holders as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date or such other record date fixed by the Board (or a duly authorized committee of the Board) that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day. Dividends payable on the Series B Preferred Stock shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The Corporation’s determination of any dividend rate and its calculation of the amount of dividends for any Dividend Period will be maintained on file at the Corporation’s principal offices and will be available to any Holder upon request and will be final and binding in the absence of manifest error. Holders shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series B Preferred Stock as specified in this Section IV (subject to the other provisions of this Certificate of Designations); provided, that the foregoing shall not limit or modify the rights of any Holder to receive any dividend or other distribution pursuant to Section VII.

 

 

(b)          So long as any share of Series B Preferred Stock remains outstanding, no dividend shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than any dividend in connection with the implementation of a shareholders’ rights plan or the redemption or repurchase of any rights under any such plan), unless full dividends for the last preceding Dividend Period on all outstanding shares of Series B Preferred Stock have been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The Corporation and its subsidiaries shall not purchase, redeem or otherwise acquire, directly or indirectly, for consideration any shares of Common Stock or other Junior Stock (other than (A) as a result of a reclassification of such Junior Stock for or into other Junior Stock, (B) the exchange or conversion of one share of such Junior Stock for or into another share of such Junior Stock, (C) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants or (D) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such securities or the security being converted or exchanged) nor shall the Corporation pay or make available any monies for a sinking fund for the redemption of any shares of Common Stock or any other shares of Junior Stock during a Dividend Period, unless the full dividends for the most recently completed Dividend Period on all outstanding shares of Series B Preferred Stock have been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside). The foregoing provision shall not restrict the ability of the Corporation or any affiliate of the Corporation to engage in any market-making transactions in Junior Stock in the ordinary course of business.

 

(c)          When dividends are not paid in full upon the shares of Series B Preferred Stock and other equity securities ranking on a parity, which, for avoidance of doubt, includes the Series A Preferred Stock with the Series B Preferred Stock as to payment of dividends (“Dividend Parity Stock”), all dividends declared and unpaid for payment on a dividend payment date with respect to the Series B Preferred Stock and the Dividend Parity Stock shall be shared ratably by the Holders and holders of any Dividend Parity Stock, in proportion to the respective amounts of the declared and unpaid dividends relating to the current dividend period. To the extent a dividend period with respect to any Dividend Parity Stock coincides with more than one Dividend Period with respect to the Series B Preferred Stock, for purposes of the immediately preceding sentence the Board shall treat such dividend period as two or more consecutive dividend periods, none of which coincides with more than one Dividend Period with respect to the Series B Preferred Stock, or shall treat such dividend period(s) with respect to any Dividend Parity Stock and Dividend Period(s) with respect to the Series B Preferred Stock for purposes of the immediately preceding sentence in any other manner that it deems to be fair and equitable in order to achieve ratable payments of dividends on such Dividend Parity Stock and the Series B Preferred Stock. To the extent a Dividend Period with respect to the Series B Preferred Stock coincides with more than one dividend period with respect to any Dividend Parity Stock, for purposes of the first sentence of this paragraph the Board shall treat such Dividend Period as two or more consecutive Dividend Periods, none of which coincides with more than one dividend period with respect to such Dividend Parity Stock, or shall treat such Dividend Period(s) with respect to the Series B Preferred Stock and dividend period(s) with respect to any Dividend Parity Stock for purposes of the first sentence of this paragraph in any other manner that it deems to be fair and equitable in order to achieve ratable payments of dividends on the Series B Preferred Stock and such Dividend Parity Stock. The term “dividend period” as used in this paragraph means such dividend periods as are provided for in the terms of any Dividend Parity Stock and, in the case of shares of Series B Preferred Stock, Dividend Periods applicable to shares of Series B Preferred Stock; and the term “dividend payment dates” as used in this paragraph means such dividend payment dates as are provided for in the terms of any Dividend Parity Stock and, in the case of shares of Series B Preferred Stock, Dividend Payment Dates applicable to shares of Series B Preferred Stock.

 

 

(d)          Subject to the foregoing, such dividends (payable in cash, securities or other property) as may be determined by the Board (or a duly authorized committee of the Board) may be declared and paid on any securities, including Common Stock, any other Junior Stock and any Dividend Parity Stock, from time to time out of any funds legally available for such payment. In the event such dividends are declared and paid, the Holders shall be entitled to receive the greater of the (i) dividends that would be due to the Holders on an as-converted basis or (ii) dividends such Holder receives on its shares of Series B Preferred Stock during the same period.

 

(e)          Notwithstanding any provision in this Certificate of Designations to the contrary, Holders shall not be entitled to receive any dividends or distributions on any shares of Series B Preferred Stock on or after the applicable Conversion Date in respect of such shares of Series B Preferred Stock that have been converted as provided herein, except to the extent that any such dividends or distributions have been declared by the Board or any duly authorized committee of the Board and the Record Date for such dividend occurs prior to such applicable Conversion Date.

 

Section V             Voting.

 

(a)          Notwithstanding any stated or statutory voting rights, except as set forth in Section V(b), the Holders shall not be entitled to vote (in their capacity as Holders) on any matter submitted to a vote of the stockholders of the Corporation.

 

(b)          So long as any shares of Series B Preferred Stock are outstanding, the Corporation shall not, without the written consent or affirmative vote, given in person or by proxy, at a meeting called for that purpose by holders of at least a majority of the outstanding shares of Series B Preferred Stock, voting as a single and separate class, amend, alter or repeal (including by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions, other than a Reorganization Event pursuant to which the Series B Preferred Stock is treated in accordance with Section VII(h)) any provision of (i) this Certificate of Designations or (ii) the Charter, in either case, that would alter, modify or change the preferences, rights, privileges or powers of the Series B Preferred Stock so as to, or in a manner that would, significantly and adversely affect the preferences, rights, privileges or powers of the Series B Preferred Stock; provided that any such amendment or alteration to any provision of this Certificate of Designations or the Charter that alters, modifies or changes the preferences, rights, privileges or powers of a particular Holder so as to, or in a manner that would, significantly and adversely affect the preferences, rights, privileges or powers of such Holder in a manner disproportionate from any other Holder shall require the prior written consent of such significantly and adversely affected Holder; provided, further, that neither (x) any increase in the amount of the authorized or issued Series B Preferred Stock or any securities convertible into Series B Preferred Stock nor (y) the creation and issuance, or an increase in the authorized or issued amount, of any series of Preferred Stock, or any securities convertible into Preferred Stock, ranking equal with and/or junior to the Series B Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon the Corporation’s liquidation, dissolution or winding up, in either case, will, in and of itself, be deemed to significantly and adversely affect the preferences, rights, privileges or powers of the Series B Preferred Stock or any Holder and the Holders will have no right to vote their shares of Series B Preferred Stock or consent to such action solely by reason of such an increase, creation or issuance.

 

 

(c)          Notwithstanding the foregoing, the Corporation shall not, without the unanimous (x) written consent or (y) affirmative vote (whether given in person or by proxy at a meeting called for that purpose), in each case, of all of the holders of the outstanding shares of Series B Preferred Stock, amend, alter or repeal (including by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions, other than a Reorganization Event pursuant to which the Series B Preferred Stock is treated in accordance with Section VII(h)) the definitions of Applicable Conversion Rate, Base Price, Conversion Price, Dividend Rate or Series B Preferred Liquidation Amount under this Certificate of Designations.

 

(d)          Notwithstanding the foregoing, the Holders shall not have any voting rights set out in Section V(b) if, at or prior to the effective time of the act with respect to which such vote would otherwise be required, all outstanding shares of Series B Preferred Stock shall have been converted into shares of Common Stock.

 

Section VI      Rank; Liquidation.

 

(a)          In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of the Series B Preferred Stock shall be entitled to receive, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Corporation, and after satisfaction of all liabilities and obligations to creditors of the Corporation and subject to the rights of any securities ranking senior to the Series B Preferred Stock, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock, in full an amount per share equal to the Base Price multiplied by the Applicable Conversion Rate, together with an amount equal to all dividends (if any) that have been declared but not paid prior to the date of payment of such distribution (but without any amount in respect of dividends that have not been declared prior to such payment date) (the “Series B Preferred Liquidation Amount”). The rights of the Series B Preferred Stock pursuant to this Section VI(a) shall rank pari passu with the rights of the Series A Preferred Stock. Thereafter, the Series B Preferred Stock will participate with the Common Stock on an as-converted basis as if Series B Preferred Stock was converted immediately prior to such liquidation, dissolution or winding up.

 

(b)          If in any distribution described in Section VI(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preferences (as defined below) in full to all holders of the Series B Preferred Stock and all holders of any stock of the Corporation ranking equally with the Series B Preferred Stock as to such distribution, the amounts paid to the holders of the Series B Preferred Stock and to the holders of all such other stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preferences of the holders of the Series B Preferred Stock and the holders of all such other stock. In any such distribution, the “Liquidation Preference” of any holder of stock of the Corporation shall mean the amount otherwise payable to such holder in such distribution (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any declared but unpaid dividends (and, in the case of any holder of stock other than the Series B Preferred Stock and on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not declared, as applicable).

 

 

(c)          For purposes of this Section VI, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or Person or the merger, consolidation or any other business combination of any other corporation or Person into or with the Corporation be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation.

 

Section VII           Adjustments.

 

(a)          The Conversion Price shall be subject to the adjustments described in this Section VII (each such event set forth in clauses (b) through (h), an “Adjustment Event”).

 

(b)          Stock Dividends and Distributions. If the Corporation pays dividends or other distributions on the Common Stock in shares of Common Stock, then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the Ex-Date for such dividend or distribution by the following fraction:

 

	OS0=
	OS1=

 

Where

 

OS0=	the number of shares of Common Stock outstanding immediately prior to Ex-Date for such dividend or distribution.
OS1=	the sum of (x) the number of shares of Common Stock outstanding immediately prior to the Ex-Date for such dividend or distribution, plus (y) the total number of shares of Common Stock issued in such dividend or distribution.

 

The adjustment pursuant to this clause (b) shall become effective at 9:00 a.m., New York City time on the Ex-Date for such dividend or distribution. For the purposes of this clause (b), the number of shares of Common Stock at the time outstanding shall not include shares held in treasury by the Corporation. If any dividend or distribution described in this clause (b) is declared but not so paid or made, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to make such dividend or distribution, to such Conversion Price that would be in effect if such dividend or distribution had not been declared.

 

(c)          Subdivisions, Splits and Combinations of Common Stock. If the Corporation subdivides, splits or combines the shares of Common Stock, then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the effective date of such share subdivision, split or combination by the following fraction:

 

 

	OS0=
	OS1=

 

Where

 

OS0=	the number of shares of Common Stock outstanding immediately prior to the effective date of such share subdivision, split or combination.
OS1=	the number of shares of Common Stock outstanding immediately after the opening of business on the effective date of such share subdivision, split or combination.

 

The adjustment pursuant to this clause (c) shall become effective at 9:00 a.m., New York City time on the effective date of such subdivision, split or combination. For the purposes of this clause (c), the number of shares of Common Stock at the time outstanding shall not include shares held in treasury by the Corporation. If any subdivision, split or combination described in this clause (c) is announced but the outstanding shares of Common Stock are not subdivided, split or combined, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to subdivide, split or combine the outstanding shares of Common Stock, to such Conversion Price that would be in effect if such subdivision, split or combination had not been announced.

 

(d)          Debt or Asset Distributions. If the Corporation distributes to all or substantially all holders of shares of Common Stock evidences of indebtedness, shares of capital stock, securities, cash or other assets (excluding any dividend or distribution referred to in clause (b) above, any dividend or distribution paid exclusively in cash, any consideration payable in connection with a tender or exchange offer made by the Corporation or any of its subsidiaries, and any dividend of shares of capital stock of any class or series, or similar equity interests, of or relating to a subsidiary or other business unit in the case of certain spin-off transactions as described below), then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the Ex-Date for such distribution by the following fraction:

 

	SP0 – FMV
	SP0

 

Where

 

SP0=	the Current Market Price per share of Common Stock on such date.
FMV=	the fair market value of the portion of the distribution applicable to one share of Common Stock on such date as reasonably determined by the Board; provided that, if “FMV” as set forth above is equal to or greater than “SP0” as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall receive on the date on which such distribution is made to holders of Common Stock, for each share of Series B Preferred Stock, the amount of such distribution such Holder would have received had such holder owned a number of shares of Common Stock equal to the Applicable Conversion Rate on the Ex-Date for such distribution.

 

 

In a “spin-off”, where the Corporation makes a distribution to all holders of shares of Common Stock consisting of capital stock of any class or series, or similar equity interests of, or relating to, a subsidiary or other business unit, if a Holder did not participate in such distribution with respect to such shares of Series B Preferred Stock as provided for in Section IV, the Conversion Price with respect to such share held by such Holder will be adjusted on the 15^th Trading Day after the effective date of the distribution by multiplying such Conversion Price in effect immediately prior to such 15^th Trading Day by the following fraction:

 

	MP0
	MP0+ MPs

 

Where

 

MP0	the average of the Closing Prices of the Common Stock over the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution.
MPs	the average of the Closing Prices of the capital stock or equity interests representing the portion of the distribution applicable to one share of Common Stock over the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution, or, if not traded on a national or regional securities exchange or over-the-counter market, the fair market value of the capital stock or equity interests representing the portion of the distribution applicable to one share of Common Stock on such date as reasonably determined by the Board.

 

Any adjustment pursuant to this clause (d) shall become effective immediately prior to 9:00 a.m., New York City time, on the Ex-Date for such distribution. In the event that such distribution described in this clause (d) is not so paid or made, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to pay or make such dividend or distribution, to the Conversion Price that would then be in effect if such dividend or distribution had not been declared.

 

(e)          Cash Distributions. If the Corporation makes a distribution consisting exclusively of cash to all holders of Common Stock, excluding any (i) regular quarterly cash dividend on the Common Stock not in excess of $0.05 per share, which per share amount shall be adjusted accordingly in the event that the Corporation subdivides, splits or combines the shares of Common Stock, (ii) cash that is distributed in a Reorganization Event or as part of a “spin-off” referred to in clause (d) above, (iii) dividend or distribution in connection with the Corporation’s liquidation, dissolution or winding-up, and (iv) consideration payable in connection with a tender or exchange offer made by the Corporation or any of its subsidiaries, then in each event, the Conversion Price in effect immediately prior to the Ex-Date for such distribution will be multiplied by the following fraction:

 

 

	SP0 – DIV
	SP0

 

Where

 

SP0=	the Closing Price per share of Common Stock on the Trading Day immediately preceding the Ex-Date.
DIV=	the amount per share of Common Stock of the cash distribution, as determined pursuant to the introduction to this clause (e).

 

In the event that any distribution described in this clause (e) is not so made, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to pay such distribution, to the Conversion Price which would then be in effect if such distribution had not been declared.

 

Notwithstanding the foregoing, if “DIV” as set forth above is equal to or greater than “SP₀” as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive on the date on which the relevant cash dividend or distribution is distributed to holders of Common Stock, for each share of Series B Preferred Stock, the amount of cash such Holder would have received had such holder owned a number of shares of Common Stock equal to the Applicable Conversion Rate on the Ex-Date for such distribution.

 

(f)           Self-Tender Offers and Exchange Offers. If the Corporation or any of its subsidiaries successfully completes a tender or exchange offer for the Common Stock where the cash and the value of any other consideration included in the payment per share of the Common Stock exceeds the Closing Price per share of the Common Stock on the Trading Day immediately succeeding the expiration of the tender or exchange offer, then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time prior to the commencement of the offer by the following fraction:

 

	OS0 x SP0
	AC + (SP0 x OS1)

 

Where

 

SP0=	the Closing Price per share of Common Stock on the Trading Day immediately succeeding the commencement of the tender or exchange offer.
OS0=	the number of shares of Common Stock outstanding immediately prior to the expiration of the tender or exchange offer, including any shares validly tendered and not withdrawn.

 

 

OS1=	the number of shares of Common Stock outstanding immediately after the expiration of the tender or exchange offer (after giving effect to such tender offer or exchange offer).
AC=	the aggregate cash and fair market value of the other consideration payable in the tender or exchange offer, as reasonably determined by the Board.

 

Any adjustment made pursuant to this clause (f) shall become effective immediately prior to 9:00 a.m., New York City time, on the Trading Day immediately following the expiration of the tender or exchange offer. In the event that the Corporation or one of its subsidiaries is obligated to purchase shares of Common Stock pursuant to any such tender offer or exchange offer, but the Corporation or such subsidiary is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Price shall be readjusted to be such Conversion Price that would then be in effect if such tender offer or exchange offer had not been made.

 

(g)          Rights Plans. To the extent that the Corporation has a rights plan in effect with respect to the Common Stock on any Conversion Date, upon conversion of any shares of the Series B Preferred Stock, the Holders will receive, in addition to the shares of Common Stock, the rights under the rights plan, unless, prior to such Conversion Date, the rights have separated from the shares of Common Stock, in which case the Conversion Price will be adjusted at the time of separation as if the Corporation had made a distribution to all holders of Common Stock as described in clause (d) above, subject to readjustment in the event of the expiration, termination or redemption of such rights.

 

(h)          Reorganization Events.

 

(i)            Upon the occurrence of a Reorganization Event prior to an applicable Conversion Date, each share of Series B Preferred Stock outstanding immediately prior to such Reorganization Event shall, without the consent of any Holders, be entitled to receive, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Corporation, and after satisfaction of all liabilities and obligations to creditors of the Corporation and subject to the rights of any securities ranking senior to the Series B Preferred Stock, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other Junior Stock, in full, the greater of the (1) amount per share equal to two times the Series B Preferred Liquidation Amount or (2) amount equal to the distribution amount of such assets or proceeds of the Corporation as was receivable by a holder of the number of shares of Common Stock into which such share of Series B Preferred Stock was convertible immediately prior to such Reorganization Event (assuming the conversion of all outstanding shares of Series A Preferred Stock and Series B Preferred Stock into shares of Common Stock) (such payment, the “Exchange Property”).

 

 

(ii)           A “Reorganization Event” shall mean:

 

(1)        any consolidation, merger, conversion, tender or exchange offer or other similar business combination of the Corporation with or into another Person, in each case, pursuant to which all or substantially all of the Common Stock outstanding will be converted into cash, securities, or other property of the Corporation or another Person;

 

(2)        any sale, transfer, lease, or conveyance to another Person of all or substantially all of the property and assets of the Corporation and its subsidiaries, taken as a whole, in each case pursuant to which all of the Common Stock outstanding will be converted into cash, securities, or other property of the Corporation or another Person;

 

(3)        any reclassification of the Common Stock into securities other than the Common Stock; or

 

(4)        any statutory exchange of all of the outstanding shares of Common Stock for securities of another Person (other than in connection with a merger or acquisition).

 

(iii)          The provisions of this Section VII(h) shall similarly apply to successive Reorganization Events or any series of transactions that results in a Reorganization Event and the provisions of Section VII(h) shall apply to any shares of capital stock of the Corporation (or any successor) received by the holders of the Common Stock in any such Reorganization Event.

 

(iv)          The Corporation (or any successor) shall, at least twenty days prior to the occurrence of any Reorganization Event, use reasonable best efforts to provide written notice to the Holders of the anticipated occurrence of such event and of the type and amount of the cash, securities or other property that constitutes the Exchange Property; provided, that no such notice shall be required if the anticipated occurrence of any Reorganization Event is disclosed in any registration statement, prospectus, report, schedule or proxy statement filed with or furnished by the Corporation to the U.S. Securities and Exchange Commission. Failure to deliver such notice shall not affect the operation of this Section VII.

 

(i)           No adjustment to the Conversion Price shall be made with respect to a share of Series B Preferred Stock if the Holder thereof has participated in the transaction that would otherwise give rise to an adjustment with respect to such share of Series B Preferred Stock, as a result of holding such share of Series B Preferred Stock at the time of such transaction (including pursuant to Section IV), without having to convert such share of Series B Preferred Stock, as if they held the full number of shares of Common Stock into which each such share of the Series B Preferred Stock held by them may then be converted.

 

(j)           Notwithstanding anything to the contrary herein, an Adjustment Event shall not allow the Holder to acquire a higher percentage of any Class of Voting Securities of the Corporation than the Holder (together with its affiliates for purposes of the BHC Act) beneficially owned immediately prior to such Adjustment Event.

 

 

Section VIII         Reports as to Adjustments.

 

Whenever the number of shares of Common Stock into which the shares of the Series B Preferred Stock are convertible is adjusted as provided in Section VII, the Corporation shall promptly, but in any event within ten days thereafter, compute such adjustment and furnish to the Holders a notice stating the number of shares of Common Stock into which each share of the Series B Preferred Stock is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment will become effective. Amounts resulting from any calculation hereunder will be rounded to the nearest 1/10,000th.

 

Section IX            Reservation of Stock.

 

(a)  The Corporation shall, following the Charter Amendment Approval and the filing and acceptance of the Charter Amendment (as defined in the Investment Agreements), reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of shares of Series B Preferred Stock as provided in this Certificate of Designations, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Series B Preferred Stock then outstanding.

 

(b)  Following the approval of the applicable supplemental listing application, the Corporation hereby covenants and agrees that, for so long as shares of the Common Stock are listed on the NYSE or any other national securities exchange or automated quotation system, the Corporation will, if permitted by the rules of such exchange or automated quotation system, list and keep listed that number of shares of Common Stock issuable upon conversion of shares of all the Series B Preferred Stock.

 

Section X             Exclusion of Other Rights.

 

The shares of Series B Preferred Stock shall not have any voting powers except as expressly described herein, and, except as may otherwise be required by Law, shall not have any preferences or relative, participating, optional or other special rights, other than those specifically set forth herein (as this Certificate of Designations may be amended from time to time) and in the Charter. The shares of Series B Preferred Stock shall have no preemptive or subscription rights.

 

Section XI            Severability of Provisions.

 

If any voting powers, preferences or relative, participating, optional or other special rights of the Series B Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Designations (as this Certificate of Designations may be amended from time to time) are invalid, unlawful or incapable of being enforced by reason of any rule of Law, all other voting powers, preferences and relative, participating, optional and other special rights of Series B Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Designations (as so amended) which can be given effect without the invalid, unlawful or unenforceable voting powers, preferences or relative, participating, optional or other special rights of Series B Preferred Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences or relative, participating, optional or other special rights of Series B Preferred Stock or qualifications, limitations and restrictions thereof herein set forth shall be deemed dependent upon any other such voting powers, preferences or relative, participating, optional or other special rights of Series B Preferred Stock or qualifications, limitations and restrictions thereof unless so expressed herein.

 

 

Section XII           Cancellation of Series B Preferred Stock.

 

Any shares of Series B Preferred Stock that have been duly converted in accordance with this Certificate of Designations, or reacquired by the Corporation, shall be cancelled promptly thereafter and revert to authorized but unissued shares of Preferred Stock undesignated as to series. Such shares may be designated or redesignated and issued or reissued, as the case may be, as part of any series of Preferred Stock. The Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized number of shares of Series B Preferred Stock solely in accordance with the foregoing.

 

Section XIII         Additional Authorized Shares.

 

Notwithstanding anything set forth in the Charter or this Certificate of Designations to the contrary, the Board or any authorized committee of the Board, without the vote of the Holders, may increase or decrease the number of authorized shares of Series B Preferred Stock or other stock ranking junior or senior to, or on parity with, the Series B Preferred Stock as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

 

Section XIV         Determinations.

 

The Corporation shall have the sole right to make all calculations called for hereunder. Absent fraud or manifest error, such calculations shall be final and binding on all Holders. The Corporation shall have the power to resolve any ambiguity and its action in so doing, as evidenced by a resolution of the Board, shall be final and conclusive unless clearly inconsistent with the intent hereof. Amounts resulting from any calculation will be rounded, if necessary, to the nearest one ten-thousandth, with five one-hundred thousandths being rounded upwards.

 

Section XV          No Redemption.

 

The Corporation may not, at any time, redeem the outstanding shares of the Series B Preferred Stock, other than as otherwise expressly set forth in Section VII with the prior approval of the Federal Reserve Board.

 

Section XVI         Maturity.

 

The Series B Preferred Stock shall be perpetual, unless converted in accordance with this Certificate of Designations.

 

 

Section XVII        Repurchases.

 

Subject to the limitations imposed herein, the Corporation may purchase and sell shares of Series B Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board or any duly authorized committee of the Board may determine; provided that any repurchase of shares of Series B Preferred Stock by the Corporation shall require prior approval of the Federal Reserve Board.

 

Section XVIII      No Sinking Fund.

 

Shares of Series B Preferred Stock are not subject to the operation of a sinking fund.

 

Section XIX         Notices.

 

All notices, demands or other communications to be given hereunder shall be in writing and shall be deemed to have been given (a) on the date of delivery if delivered personally to the recipient, or if by email, upon delivery (provided that no auto-generated error or non-delivery message is generated in response thereto), (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to (i) if to the Corporation, First Foundation, Inc., 200 Crescent Court, Suite 1400, Dallas, Texas, Attention: Chief Executive Officer, Email: skavanaugh@ff-inc.com; with a copy to: General Counsel, Email: edorsett@ff-inc.com or (ii) if to any Holder or holder of Common Stock, as the case may be, to such Holder or holder at the address listed in the stock record books of the Corporation, or, in each case, such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party.

 

Section XX          Taxes.

 

(a)          The Corporation and each Holder shall bear their own costs, fees and expenses in connection with any conversion contemplated by Section III, except that the Corporation shall pay any and all transfer taxes, stamp taxes or duties, documentary taxes, or other similar taxes imposed upon the issuance of shares of Common Stock on account of any conversion contemplated by Section III; provided that the Corporation shall not be required to pay any such tax to the extent such tax is payable because a Holder requests Common Stock to be registered in a name other than such registered holder’s name (including in connection with any Convertible Transfer) and no such Common Stock will be so registered unless and until the registered holder making such request has paid such taxes to the Corporation or has established to the satisfaction of the Corporation that such taxes have been paid or are not payable.

 

(b)          Notwithstanding anything herein to the contrary, the Corporation and any applicable withholding agent shall be entitled to deduct and withhold from any consideration otherwise payable on or with respect to the Series B Preferred Stock (including upon conversion of any Series B Preferred Stock) such amounts as it is required to deduct or withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “Code”), or any other applicable tax Law. If the Holder is deemed for U.S. federal income tax purposes to have received a distribution with respect to the Series B Preferred Stock, the Corporation and any applicable withholding agent may satisfy any resulting applicable withholding obligations (including with respect to backup withholding) required by applicable Tax Law imposed in connection with such deemed distribution by withholding from any other payments due with respect to the Series B Preferred Stock, including any payments upon conversion, repurchase or redemption of the Series B Preferred Stock. If any amounts are so deducted or withheld and subsequently paid to the applicable Government Entity, such deducted or withheld amounts shall be treated for all purposes hereunder as having be paid to the person to which such amounts would have otherwise been payable.

 

 

(c)  The Corporation and each Holder each agree that there shall be no deemed distribution on the Series B Preferred Stock pursuant to Section 305(c) of the Code in respect of a difference between the “issue price” and the “redemption price” of the Series B Preferred Stock and except to the extent otherwise required by a “determination” within the meaning of Section 1313(a) of the Code, neither the Corporation nor Holder shall take any position inconsistent therewith.

 

Section XXI          No Stock Certificates.

 

Notwithstanding anything to the contrary contained in this Certificate of Designations, no shares of Series B Preferred Stock shall be issued in physical, certificated form. All shares of Series B Preferred Stock shall be evidenced by book-entry on the record books maintained by the Corporation or its transfer agent.

 

Section XXII        Transfers.

 

The shares of Series B Preferred Stock are subject to the restrictions on transfer set forth in the Investment Agreements. Any purported transfer in violation of such restrictions shall be null and void.

 

[Remainder of page intentionally left blank]

 

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations to be signed by the undersigned on this 5th day of July, 2024.

 

	FIRST FOUNDATION INC.
	By:	/s/ Scott F. Kavanaugh
		Name:	Scott F. Kavanaugh
		Title:	Chief Executive Officer

 

[Signature Page to Certificate of Designations]

 

 

Exhibit 3.3

 

CERTIFICATE OF DESIGNATIONS
OF
SERIES C NON-VOTING COMMON EQUIVALENT STOCK
OF
FIRST FOUNDATION INC.

 

FIRST FOUNDATION INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), in accordance with the provisions of Sections 103, 141 and 151 thereof, does hereby certify that:

 

In accordance with the provisions of the Corporation’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), the Corporation’s Bylaws, as amended (the “Bylaws”) and applicable law, the Board of Directors of the Corporation (the “Board”) duly adopted the following resolution on July 1, 2024, creating a series of Preferred Stock of the Corporation designated as “Series C Non-Voting Common Equivalent Stock”:

 

RESOLVED, that pursuant to the Delaware General Corporation Law (the “DGCL”) and the Certificate of Incorporation and Bylaws of the Corporation, the Board hereby establishes a series of Preferred Stock, par value $0.001 per share, of the Corporation and fixes and determines the designation, powers, preferences, redemption rights, qualifications, privileges, limitations, restrictions and special or relative rights thereof as follows:

 

Section I                 Designation and Amount.

 

A series of Preferred Stock designated as the “Series C Non-Voting Common Equivalent Stock” (“Series C NVCE Stock”) is hereby established. The total number of authorized shares of Series C NVCE Stock shall be 22,239.

 

Section II                Definitions.

 

As used herein, the following terms shall have the following meanings, unless the context otherwise requires:

 

“Adjustment Event” has the meaning specified in Section VII(a).

 

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person (as used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through ownership of voting securities, by contract or otherwise); provided, that Mubadala, members of the Mubadala Group and other direct or indirect owners of Fortress Investment Group LLC shall not be deemed Affiliates of Fortress Investment Group LLC or of any of its Affiliates. As used in this definition, “Mubadala” means Mubadala Investment Company PJSC, and “Mubadala Group” means any Person controlling, controlled by or under common control with Mubadala that is not also controlled by Fortress Investment Group LLC.

 

 

“Applicable Conversion Rate” means, for each share of Series C NVCE Stock, the number of shares of Common Stock equal to the product of (a) one thousand (1,000) multiplied by (b) the quotient of (i) the Base Price divided by (ii) the then-applicable Conversion Price, subject to adjustment pursuant to Section VII for any applicable event occurring subsequent to the initial determination of the Applicable Conversion Rate.

 

“Base Price” means $4.10.

 

“BHC Act” means the Bank Holding Company Act of 1956 (as amended) and its implementing regulations.

 

“Board” means the Board of Directors of the Corporation.

 

“Business Day” means any day, other than a Saturday, Sunday or other day on which banking institutions in the city of New York, New York are required or authorized by Law to be closed.

 

“Certificate of Designations” means this Certificate of Designations of Series C NVCE Stock of the Corporation, dated July 5, 2024.

 

“Charter” means the Certificate of Incorporation of the Corporation, as amended, supplemented and/or restated from time to time.

 

“Charter Amendment Approval” means the approval of the proposal to amend the Charter in a manner to increase the total authorized number of shares of Common Stock to at least 200,000,000 by the affirmative vote of a majority of votes cast by the holders of shares of Common Stock, at the meeting of the Corporation’s stockholders at which a vote is taken with respect to such Charter amendment proposal.

 

“Class of Voting Security” shall be interpreted in a manner consistent with how “class of voting shares” is defined in 12 C.F.R. Section 225.2(q)(3) or any successor provision.

 

“Closing” has the meaning set forth in the Investment Agreement.

 

“Closing Date” means the date that any shares of Series C NVCE Stock are first issued.

 

“Closing Price” of the Common Stock (or other relevant capital stock or equity interest) on any date of determination means the closing sale price or, if no closing sale price is reported, the last reported sale price of the shares of the Common Stock (or other relevant capital stock or equity interest) on the NYSE on such date. If the Common Stock (or other relevant capital stock or equity interest) is not traded on the NYSE on any date of determination, the Closing Price of the Common Stock (or other relevant capital stock or equity interest) on such date of determination means the closing sale price as reported in the composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock (or other relevant capital stock or equity interest) is so listed or quoted, or, if no closing sale price is reported, the last reported sale price on the principal U.S. national or regional securities exchange on which the Common Stock (or other relevant capital stock or equity interest) is so listed or quoted, or if the Common Stock (or other relevant capital stock or equity interest) is not so listed or quoted on a U.S. national or regional securities exchange, the last quoted bid price for the Common Stock (or other relevant capital stock or equity interest) in the over-the-counter market as reported by OTC Markets Group Inc. or a similar organization, or, if that bid price is not available, the market price of the Common Stock (or other relevant capital stock or equity interest) on that date as determined by a nationally recognized independent investment banking firm retained by the Corporation for this purpose.

 

 

For purposes of this Certificate of Designations, all references herein to the “Closing Price” and “last reported sale price” of the Common Stock (or other relevant capital stock or equity interest) on the NYSE shall be such closing sale price and last reported sale price as reflected on the website of the NYSE (http://www.nyse.com) and as reported by Bloomberg Professional service; provided that in the event that there is a discrepancy between the closing sale price or last reported sale price as reflected on the website of the NYSE and as reported by Bloomberg Professional service, the closing sale price and last reported sale price on the website of the NYSE shall govern.

 

“Common Stock” means the common stock, $0.001 par value per share, of the Corporation authorized by the Corporation on or after the date hereof.

 

“Conversion Date” means the date on which any shares of Series C NVCE Stock shall become convertible into any shares of Common Stock pursuant to Section III(a); provided, however, that if a Conversion Date would otherwise occur on or after an Ex-Date for an issuance, dividend or distribution that results in an adjustment of the Conversion Price pursuant to Section VII and on or before the Record Date for such issuance, dividend or distribution, such Conversion Date shall instead occur on the first calendar day after the Record Date for such issuance, dividend or distribution.

 

“Conversion Price” means, for each share of Series C NVCE Stock, the Base Price, as the same may be adjusted from time to time in accordance with the terms of this Certificate of Designations.

 

“Convertible Transfer” means a transfer by the Holder that is both (i) to a Person who is not an affiliate of the Holder for purposes of the BHC Act and (ii) (A) to the Corporation; (B) in a widespread public distribution; (C) in which no transferee (or group of associated transferees) would receive 2% or more of the outstanding securities of any Class of Voting Securities of the Corporation; or (D) to a purchaser that would control more than 50% of every Class of Voting Securities of the Corporation without any transfer from the Holder.

 

“Corporation” has the meaning set forth in the Preamble.

 

“Current Market Price” means, on any date, the average of the daily Closing Price per share of the Common Stock or other securities on each of the five consecutive Trading Days preceding the earlier of the day before the date of the issuance, dividend or distribution in question and the day before the Ex-Date with respect to the issuance or distribution, giving rise to an adjustment to the Conversion Price pursuant to Section VII.

 

“DGCL” means the Delaware General Corporation Law, as amended from time to time.

 

“Exchange Property” has the meaning specified in Section VII(i)(i).

 

 

“Ex-Date” means, when used with respect to any issuance, dividend or distribution giving rise to an adjustment to the Conversion Price pursuant to Section VII, the first date on which the applicable Common Stock or other securities trade without the right to receive the issuance, dividend or distribution.

 

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

 

“Government Entity” means any (a) federal, state, local, municipal, foreign or other government; (b) governmental entity of any nature (including any governmental agency, branch, department, official, committee or entity and any court or other tribunal), whether foreign or domestic; or (c) body exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature, whether foreign or domestic, including any arbitral tribunal and self-regulatory organizations.

 

“Holder” means the Person in whose name any shares of Series C NVCE Stock are registered, which may be treated by the Corporation as the absolute owner of such shares of Series C NVCE Stock for the purpose of making payment and settling conversion and for all other purposes.

 

“Investment Agreements” means the investment agreements, by and between the Corporation and the investor parties thereto, dated as of July 2, 2024 (as amended, supplemented or restated from time to time).

 

“Law” means, with respect to any Person, any legal, regulatory and administrative laws, statutes, rules, Orders and regulations applicable to such Person.

 

“Liens” means any and all liens, charges, security interests, options, claims, mortgages, pledges, proxies, voting trusts or agreements, obligations, understandings or arrangements, or other restrictions on title or transfer of any nature whatsoever.

 

“NVCE Dividend Amount” has the meaning specified in Section IV(a).

 

“NYSE” means the New York Stock Exchange.

 

“NYSE Limit” means a number of shares of Common Stock equal to 19.9% of the shares of Common Stock outstanding immediately prior to the execution of the Investment Agreements.

 

“NYSE Share Issuance Amount” means the total number of (a) shares of Common Stock issued upon conversion of any shares of Series C NVCE Stock, plus (b) shares of Common Stock issued at the Closing, plus (c) shares of Common Stock issued upon conversion or exchange of any shares of Series A Preferred Stock, plus (d) shares of Common Stock issued upon conversion of any shares of Series B Preferred Stock.

 

“Order” means any applicable order, injunction, judgment, decree, ruling, or writ of any Government Entity.

 

“Person” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including a “person” as defined in Sections 13(d)(3) and 14(d) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.

 

 

“Preferred Stock” has the meaning set forth in the Charter.

 

“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the Common Stock have the right to receive any cash, securities or other property or in which the Common Stock is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of holders of the Common Stock entitled to receive such cash, securities or other property (whether such date is fixed by the Board or a duly authorized committee of the Board or by Law, contract or otherwise).

 

“Reorganization Event” has the meaning specified in Section VII(i)(ii).

 

“Series A Preferred Stock” means the Series A Noncumulative Convertible Preferred Stock, par value $0.001 per share, of the Corporation, issued pursuant to the Investment Agreements.

 

“Series B Preferred Stock” means the Series B Noncumulative Convertible Preferred Stock, par value $0.001 per share, of the Corporation, issued pursuant to the Investment Agreements.

 

“Series C NVCE Stock” has the meaning specified in Section I.

 

“Share Issuance Approval” means the approval, by the affirmative vote of a majority of votes cast by holders of shares of Common Stock at the meeting of the Corporation’s stockholders at which a vote is taken with respect to such issuance, that is required under applicable NYSE rules as a result of the NYSE Share Issuance Amount exceeding the NYSE Limit.

 

“Stockholder Approvals” means the Charter Amendment Approval and Share Issuance Approval.

 

“Subject Series C Share” means a share of Series C NVCE Stock that is automatically converted pursuant to Section III(a).

 

“Trading Day” means a day on which the shares of Common Stock:

 

(i) are not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business; and

 

(ii) have traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.

 

 

Section III              Conversion.

 

(a)            Conversion upon Convertible Transfer. The shares of Series C NVCE Stock shall not be convertible into any other class of capital stock of the Corporation, except in accordance with this Section III. On the terms and in the manner set forth in this Section III, upon the consummation of any Convertible Transfer of shares of Series C NVCE Stock, each outstanding share of Series C NVCE Stock subject to such Convertible Transfer (each, a “Subject Series C Share”) shall automatically convert into a number of shares of Common Stock equal to the Applicable Conversion Rate; provided that, if at that time of the Convertible Transfer, (A) the Stockholder Approvals are required for the conversion of the Subject Series C Shares into Common Stock and (B) the Stockholder Approvals have not yet been obtained, then the maximum number of Subject Series C Shares that can convert into Common Stock without receipt of the Stockholder Approvals shall so convert into Common Stock based on the Applicable Conversion Rate.

 

(b)            On the Conversion Date, the Corporation shall effect the conversion of the Subject Series C Shares by delivering the shares of Common Stock so converted pursuant to Section III(a).

 

(c)            The shares of Common Stock issuable upon conversion of the Subject Series C Shares pursuant to Section III(a) shall be allocated among the applicable Holders in such Convertible Transfer on a pro rata basis of the aggregate dollar amount invested by the Holders on the Closing Date.

 

(d)            Prior to the close of business on any applicable Conversion Date, the shares of Common Stock issuable upon conversion of any shares of Series C NVCE Stock pursuant to Section III(a) shall not be deemed outstanding for any purpose, and the Holders shall have no rights with respect to the Common Stock (including voting rights, rights to respond to tender offers for the Common Stock, and rights to receive any dividends or other distributions on the Common Stock) by virtue of holding shares of Series C NVCE Stock, except as otherwise expressly set forth in this Certificate of Designations.

 

(e)            Effective immediately prior to the close of business on any applicable Conversion Date, the rights of the Holders with respect to the shares of the Series C NVCE Stock so converted shall cease and the Persons entitled to receive shares of Common Stock upon the conversion of such shares of Series C NVCE Stock shall be treated for all purposes as having become the record and beneficial owners of such shares of Common Stock. In the event that the Holders shall not by written notice to the Corporation designate the name in which shares of Common Stock and/or cash, securities or other property (including payments of cash in lieu of fractional shares) to be issued or paid upon conversion of shares of Series C NVCE Stock should be registered or paid or the manner in which such shares should be delivered, the Corporation shall be entitled to register and deliver such shares, and make such payment, in the name of the Holders and in the manner shown on the records of the Corporation.

 

(f)            No fractional shares of Common Stock shall be issued upon any conversion of shares of Series C NVCE Stock. If more than one share of Series C NVCE Stock shall be surrendered for conversion at any one time by the same Holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series C NVCE Stock so surrendered. Instead of any fractional shares of Common Stock that would otherwise be issuable upon conversion of any Subject Series C Share, the Corporation shall pay an amount in cash (rounded to the nearest cent) equal to the fractional share of Common Stock, that otherwise would be issuable hereunder, multiplied by the Closing Price of the Common Stock determined as of the second Trading Day immediately preceding the applicable Conversion Date.

 

 

(g)            All shares of Common Stock which may be issued upon conversion of the shares of Series C NVCE Stock will, upon issuance by the Corporation, be duly authorized, validly issued, fully paid and non-assessable, free and clear of all Liens (other than transfer restrictions imposed under applicable securities Laws) and not issued in violation of any preemptive right or Law.

 

(h)            Effective immediately prior to the Conversion Date, dividends or distributions shall no longer be declared on any Subject Series C Shares and such shares shall cease to be outstanding, in each case, subject to the rights of a Holder to receive any declared and unpaid dividends or distributions on such shares and any other payments to which they are otherwise entitled pursuant to Section IV or Section VII.

 

Section IV              Dividend Rights.

 

(a)            From and after the Closing Date to (but excluding) the applicable Conversion Date, (i) the Holders shall be entitled to receive, when, as and if declared by the Board or any duly authorized committee of the Board (but only out of assets legally available therefor under the DGCL) all cash dividends or distributions (including regular quarterly dividends or distributions) declared and paid or made in respect of the shares of Common Stock, at the same time and on the same terms as holders of Common Stock, in an amount per share of Series C NVCE Stock equal to the product of (x) the Applicable Conversion Rate then in effect and (y) any per share dividend or distribution, as applicable, declared and paid or made in respect of each share of Common Stock (the “NVCE Dividend Amount”), and (ii) the Board or any duly authorized committee thereof may not declare and pay any cash dividend or make any cash distribution in respect of Common Stock unless the Board or any duly authorized committee of the Board declares and pays to the Holders, at the same time and on the same terms as holders of Common Stock, the NVCE Dividend Amount per share of Series C NVCE Stock. Notwithstanding any provision in this Section IV(a) to the contrary, no Holder of a share of Series C NVCE Stock shall be entitled to receive any dividend or distribution made with respect to the Common Stock where the Record Date for determination of holders of Common Stock entitled to receive such dividend or distribution occurs prior to the date of issuance of such share of Series C NVCE Stock. The foregoing shall not limit or modify the rights of any Holder to receive any dividend or other distribution pursuant to Section VII.

 

(b)            Each dividend or distribution declared and paid pursuant to Section IV(a) will be payable to Holders of record of shares of Series C NVCE Stock as they appear in the records of the Corporation at the close of business on the same day as the Record Date for the corresponding dividend or distribution to the holders of shares of Common Stock.

 

 

(c)            Except as set forth in this Certificate of Designations, the Corporation shall have no obligation to pay, and the holders of shares of Series C NVCE Stock shall have no right to receive, dividends or distributions at any time, including with respect to dividends or distributions with respect to Common Stock or any other class or series of authorized Preferred Stock. To the extent the Corporation declares dividends or distributions on the Series C NVCE Stock and on any Common Stock but does not make full payment of such declared dividends or distributions, the Corporation will allocate the dividend payments on a pro rata basis among the holders of the shares of Series C NVCE Stock and the holders of any Common Stock then outstanding. For purposes of calculating the allocation of partial dividend payments, the Corporation will allocate dividend payments on a pro rata basis among the Holders and the holders of any Common Stock so that the amount of dividends or distributions paid per share on the shares of Series C NVCE Stock and such Common Stock shall in all cases bear to each other the same ratio that payable dividends or distributions per share on the shares of the Series C NVCE Stock and such Common Stock (but without, in the case of any noncumulative Preferred Stock, accumulation of dividends or distributions for prior dividend periods) bear to each other. The foregoing right shall not be cumulative and shall not in any way create any claim or right in favor of Holders in the event that dividends or distributions have not been declared or paid in respect of any prior calendar quarter.

 

(d)            No interest or sum of money in lieu of interest will be payable in respect of any dividend payment or payments on shares of Series C NVCE Stock that may be in arrears.

 

(e)            Holders shall not be entitled to any dividends or distributions, whether payable in cash, securities or other property, other than dividends or distributions (if any) declared and payable on shares of Series C NVCE Stock as specified in this Certificate of Designations.

 

(f)            Notwithstanding any provision in this Certificate of Designations to the contrary, Holders shall not be entitled to receive any dividends or distributions on any shares of Series C NVCE Stock on or after the applicable Conversion Date in respect of such shares of Series C NVCE Stock that have been converted as provided herein, except to the extent that any such dividends or distributions have been declared by the Board or any duly authorized committee of the Board and the Record Date for such dividend occurs prior to such applicable Conversion Date.

 

Section V               Voting.

 

(a)            Notwithstanding any stated or statutory voting rights, except as set forth in Section V(b), the Holders shall not be entitled to vote (in their capacity as Holders) on any matter submitted to a vote of the stockholders of the Corporation.

 

(b)            So long as any shares of Series C NVCE Stock are outstanding, the Corporation shall not, without the written consent or affirmative vote, given in person or by proxy, at a meeting called for that purpose by holders of at least a majority of the outstanding shares of Series C NVCE Stock, voting as a single and separate class, amend, alter or repeal (including by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions, other than a Reorganization Event pursuant to which the Series C NVCE Stock is treated in accordance with Section VII(i)) any provision of (i) this Certificate of Designations or (ii) the Charter, in either case, that would alter, modify or change the preferences, rights, privileges or powers of the Series C NVCE Stock so as to, or in a manner that would, significantly and adversely affect the preferences, rights, privileges or powers of the Series C NVCE Stock; provided, that any such amendment or alteration to any provision of this Certificate of Designations or the Charter that alters, modifies or changes the preferences, rights, privileges or powers of a particular Holder so as to, or in a manner that would, significantly and adversely affect the preferences, rights, privileges or powers of such Holder in a manner disproportionate from any other Holder shall require the prior written consent of such significantly and adversely affected Holder; provided, further, that neither (x) any increase in the amount of the authorized or issued Series C NVCE Stock or any securities convertible into Series C NVCE Stock nor (y) the creation and issuance, or an increase in the authorized or issued amount, of any series of Preferred Stock, or any securities convertible into Preferred Stock, ranking equal with and/or junior to the Series C NVCE Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon the Corporation’s liquidation, dissolution or winding up, in either case, will, in and of itself, be deemed to significantly and adversely affect the preferences, rights, privileges or powers of the Series C NVCE Stock or any Holder and the Holders will have no right to vote their shares of Series C NVCE Stock or consent to such action solely by reason of such an increase, creation or issuance.

 

 

(c)            Notwithstanding the foregoing, the Corporation shall not, without the unanimous (x) written consent or (y) affirmative vote (whether given in person or by proxy at a meeting called for that purpose), in each case, of all of the holders of the outstanding shares of Series C NVCE Stock, amend, alter or repeal (including by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions, other than a Reorganization Event pursuant to which the Series C NVCE Stock is treated in accordance with Section VII(i)) the definitions of Base Price, Conversion Price or Applicable Conversion Rate under this Certificate of Designations.

 

(d)            Notwithstanding the foregoing, the Holders shall not have any voting rights set out in Section V(b) if, at or prior to the effective time of the act with respect to which such vote would otherwise be required, all outstanding shares of Series C NVCE Stock shall have been converted into shares of Common Stock.

 

Section VI              Liquidation.

 

(a)            Subject to the terms hereof, the Series C NVCE Stock shall, consistent with the requirements of 12 C.F.R. Section 217.20(b)(1) (or any successor regulation) with respect to common equity tier 1 capital, rank equally with the Common Stock with respect to dividends or distributions (including regular quarterly dividends) declared by the Board and rights upon any liquidation, dissolution, winding up or similar proceeding of the Corporation, as provided in the Charter; provided, that, in the event of any liquidation, dissolution or winding up of the affairs of the Corporation, holders of the Series C Preferred Stock shall be entitled to receive, in preference to the holders of the Common Stock, an amount per share equal to $0.0001.

 

(b)            For purposes of this Section VI, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or Person or the merger, consolidation or any other business combination of any other corporation or Person into or with the Corporation be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation.

 

 

Section VII             Adjustments.

 

(a)            The Conversion Price shall be subject to the adjustments described in this Section VII (each such event set forth in Section VII(b) through Section VII(i), an “Adjustment Event”).

 

(b)            Stock Dividends and Distributions. If the Corporation pays dividends or other distributions on the Common Stock in shares of Common Stock, then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the Ex-Date for such dividend or distribution by the following fraction:

 

	OS0
	OS1

 

Where,

 

OS0=	the number of shares of Common Stock outstanding immediately prior to Ex-Date for such dividend or distribution.
OS1=	the sum of (x) the number of shares of Common Stock outstanding immediately prior to the Ex-Date for such dividend or distribution, plus (y) the total number of shares of Common Stock issued in such dividend or distribution.

 

The adjustment pursuant to this Section VII(b) shall become effective at 9:00 a.m., New York City time on the Ex-Date for such dividend or distribution. For the purposes of this Section VII(b), the number of shares of Common Stock at the time outstanding shall not include shares held in treasury by the Corporation. If any dividend or distribution described in this Section VII(b) is declared but not so paid or made, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to make such dividend or distribution, to such Conversion Price that would be in effect if such dividend or distribution had not been declared.

 

(c)            Subdivisions, Splits and Combinations of Common Stock. If the Corporation subdivides, splits or combines the shares of Common Stock, then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the effective date of such share subdivision, split or combination by the following fraction:

 

	OS0
	OS1

 

Where,

 

OS0=	the number of shares of Common Stock outstanding immediately prior to the effective date of such share subdivision, split or combination.

 

 

OS1=	the number of shares of Common Stock outstanding immediately after the opening of business on the effective date of such share subdivision, split or combination.

 

The adjustment pursuant to this Section VII(c) shall become effective at 9:00 a.m., New York City time on the effective date of such subdivision, split or combination. For the purposes of this Section VII(c), the number of shares of Common Stock at the time outstanding shall not include shares held in treasury by the Corporation. If any subdivision, split or combination described in this Section VII(c) is announced but the outstanding shares of Common Stock are not subdivided, split or combined, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to subdivide, split or combine the outstanding shares of Common Stock, to such Conversion Price that would be in effect if such subdivision, split or combination had not been announced.

 

(d)            Issuance of Stock Purchase Rights. If the Corporation issues to all or substantially all holders of the shares of Common Stock rights or warrants (other than rights or warrants issued pursuant to a dividend reinvestment plan or share purchase plan or other similar plans) entitling them, for a period of up to 45 days from the date of issuance of such rights or warrants, to subscribe for or purchase the shares of Common Stock at less than the Current Market Price on the date immediately preceding the Ex-Date for such issuance, then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the Ex-Date for such issuance by the following fraction:

 

	OS0 + Y
	OS0 + X

 

Where,

 

OS0=	the number of shares of Common Stock outstanding immediately prior to the Ex-Date for such distribution.
X=	the total number of shares of Common Stock issuable pursuant to such rights or warrants.
Y=	the number of shares of Common Stock equal to the aggregate price payable to exercise such rights or warrants divided by the Current Market Price on the date immediately preceding the Ex-Date for the issuance of such rights or warrants.

 

 

Any adjustment pursuant to this Section VII(d) shall become effective immediately prior to 9:00 a.m., New York City time, on the Ex-Date for such issuance. For the purposes of this Section VII(d), the number of shares of Common Stock at the time outstanding shall not include shares held in treasury by the Corporation. The Corporation shall not issue any such rights or warrants in respect of shares of the Common Stock held in treasury by the Corporation. In the event that such rights or warrants described in this Section VII(d) are not so issued, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to issue such rights or warrants, to the Conversion Price that would then be in effect if such issuance had not been declared. To the extent that such rights or warrants are not exercised prior to their expiration or shares of Common Stock are otherwise not delivered pursuant to such rights or warrants upon the exercise of such rights or warrants, the Conversion Price shall be readjusted to such Conversion Price that would then be in effect had the adjustment made upon the issuance of such rights or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered. In determining the aggregate offering price payable for such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants and the value of such consideration (if other than cash, to be reasonably determined by the Board).

 

(e)            Debt or Asset Distributions. If the Corporation distributes to all or substantially all holders of shares of Common Stock evidences of indebtedness, shares of capital stock, securities, cash or other assets (excluding any dividend or distribution referred to in Section VII(b), any dividend or distribution paid exclusively in cash, any consideration payable in connection with a tender or exchange offer made by the Corporation or any of its subsidiaries, and any dividend of shares of capital stock of any class or series, or similar equity interests, of or relating to a subsidiary or other business unit in the case of certain spin-off transactions as described below), then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the Ex-Date for such distribution by the following fraction:

 

	SP0 – FMV
	SP0

 

Where,

 

SP0=	the Current Market Price per share of Common Stock on such date.
FMV=	the fair market value of the portion of the distribution applicable to one share of Common Stock on such date as reasonably determined by the Board; provided that, if “FMV” as set forth above is equal to or greater than “SP0” as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall receive on the date on which such distribution is made to holders of Common Stock, for each share of Series C NVCE Stock, the amount of such distribution such Holder would have received had such holder owned a number of shares of Common Stock equal to the Applicable Conversion Rate on the Ex-Date for such distribution.

 

In a “spin-off”, where the Corporation makes a distribution to all holders of shares of Common Stock consisting of capital stock of any class or series, or similar equity interests of, or relating to, a subsidiary or other business unit, if a Holder did not participate in such distribution with respect to such shares of Series C NVCE Stock as provided for in Section IV, the Conversion Price with respect to such share held by such Holder will be adjusted on the 15^th Trading Day after the effective date of the distribution by multiplying such Conversion Price in effect immediately prior to such 15^th Trading Day by the following fraction:

 

 

	MP0
	MP0 + MPs

 

Where,

 

MP0=	the average of the Closing Prices of the Common Stock over the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution.
MPs=	the average of the Closing Prices of the capital stock or equity interests representing the portion of the distribution applicable to one share of Common Stock over the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution, or, if not traded on a national or regional securities exchange or over-the-counter market, the fair market value of the capital stock or equity interests representing the portion of the distribution applicable to one share of Common Stock on such date as reasonably determined by the Board.

 

Any adjustment pursuant to this Section VII(e) shall become effective immediately prior to 9:00 a.m., New York City time, on the Ex-Date for such distribution. In the event that such distribution described in this Section VII(e) is not so paid or made, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to pay or make such dividend or distribution, to the Conversion Price that would then be in effect if such dividend or distribution had not been declared.

 

(f)            Cash Distributions. If the Corporation makes a distribution consisting exclusively of cash to all holders of Common Stock, excluding any (i) cash dividend on the Common Stock to the extent a corresponding cash dividend is paid on the Series C NVCE Stock pursuant to Section IV(a), (ii) cash that is distributed in a Reorganization Event or as part of a “spin-off” referred to in Section VII(e), (iii) dividend or distribution in connection with the Corporation’s liquidation, dissolution or winding-up, and (iv) consideration payable in connection with a tender or exchange offer made by the Corporation or any of its subsidiaries, then in each event, the Conversion Price in effect immediately prior to the Ex-Date for such distribution will be multiplied by the following fraction:

 

	SP0 – DIV
	SP0

 

Where,

 

SP0=	the Closing Price per share of Common Stock on the Trading Day immediately preceding the Ex-Date.
DIV=	the amount per share of Common Stock of the cash distribution, as determined pursuant to the introduction to this Section VII(f).

 

In the event that any distribution described in this Section VII(f) is not so made, the Conversion Price shall be readjusted, effective as of the date the Board publicly announces its decision not to pay such distribution, to the Conversion Price which would then be in effect if such distribution had not been declared.

 

 

Notwithstanding the foregoing, if “DIV” as set forth above is equal to or greater than “SP₀” as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive on the date on which the relevant cash dividend or distribution is distributed to holders of Common Stock, for each share of Series C NVCE Stock, the amount of cash such Holder would have received had such holder owned a number of shares of Common Stock equal to the Applicable Conversion Rate on the Ex-Date for such distribution.

 

(g)            Self-Tender Offers and Exchange Offers. If the Corporation or any of its subsidiaries successfully completes a tender or exchange offer for the Common Stock where the cash and the value of any other consideration included in the payment per share of the Common Stock exceeds the Closing Price per share of the Common Stock on the Trading Day immediately succeeding the expiration of the tender or exchange offer, then the Conversion Price will be adjusted by multiplying the Conversion Price in effect at 5:00 p.m., New York City time prior to the commencement of the offer by the following fraction:

 

	OS0 x SP0
	AC + (SP0 x OS1)

 

Where,

 

SP0=	the Closing Price per share of Common Stock on the Trading Day immediately succeeding the commencement of the tender or exchange offer.
OS0=	the number of shares of Common Stock outstanding immediately prior to the expiration of the tender or exchange offer, including any shares validly tendered and not withdrawn.
OS1=	the number of shares of Common Stock outstanding immediately after the expiration of the tender or exchange offer (after giving effect to such tender offer or exchange offer).
AC=	the aggregate cash and fair market value of the other consideration payable in the tender or exchange offer, as reasonably determined by the Board.

 

Any adjustment made pursuant to this Section VII(g) shall become effective immediately prior to 9:00 a.m., New York City time, on the Trading Day immediately following the expiration of the tender or exchange offer. In the event that the Corporation or one of its subsidiaries is obligated to purchase shares of Common Stock pursuant to any such tender offer or exchange offer, but the Corporation or such subsidiary is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Price shall be readjusted to be such Conversion Price that would then be in effect if such tender offer or exchange offer had not been made.

 

 

(h)            Rights Plans. To the extent that the Corporation has a rights plan in effect with respect to the Common Stock on any Conversion Date, upon conversion of any shares of the Series C NVCE Stock, the Holders will receive, in addition to the shares of Common Stock, the rights under the rights plan, unless, prior to such Conversion Date, the rights have separated from the shares of Common Stock, in which case the Conversion Price will be adjusted at the time of separation as if the Corporation had made a distribution to all holders of Common Stock as described in Section VII(e), subject to readjustment in the event of the expiration, termination or redemption of such rights.

 

(i)            Reorganization Events.

 

(i)            Upon the occurrence of a Reorganization Event prior to an applicable Conversion Date, each share of Series C NVCE Stock outstanding immediately prior to such Reorganization Event shall, without the consent of Holders, automatically convert into the types and amounts of securities, cash, and other property that is or was receivable in such Reorganization Event by a holder (other than the counterparty to the Reorganization Event or an Affiliate of such other party) of the number of shares of Common Stock into which such share of Series C NVCE Stock was convertible immediately prior to such Reorganization Event in exchange for such shares of Series C NVCE Stock (such securities, cash, and other property, the “Exchange Property”); provided that, to the extent receipt of any Exchange Property would be prohibited by Law or would require the Holder to obtain any consent, authorization, approval, license or permit of any Governmental Entity to acquire or hold the Exchange Property, then the portion of the Series C NVCE Stock of such Holder that such Holder is prohibited by Law or requires such action to acquire or hold shall instead either (A) convert into a substantially identical non-voting security (with commensurate voting powers and conversion rights as the Series C NVCE Stock hereunder) of the entity surviving such Reorganization Event or other entity in which holders of shares of Common Stock receive securities in connection with such Reorganization Event or (B) if proper provision is not made to give effect to the foregoing subclause (A), remain outstanding without any alterations to the terms thereof and be convertible into the Exchange Property.

 

(ii)           A “Reorganization Event” shall mean:

 

(1)            any consolidation, merger, conversion or other similar business combination of the Corporation with or into another Person, in each case, pursuant to which all or substantially all of the Common Stock outstanding will be converted into cash, securities, or other property of the Corporation or another Person;

 

(2)            any sale, transfer, lease, or conveyance to another Person of all or substantially all of the property and assets of the Corporation and its subsidiaries, taken as a whole, in each case pursuant to which all of the Common Stock outstanding will be converted into cash, securities, or other property of the Corporation or another Person;

 

(3)            any reclassification of the Common Stock into securities other than the Common Stock; or

 

 

(4)            any statutory exchange of all of the outstanding shares of Common Stock for securities of another Person (other than in connection with a merger or acquisition).

 

(iii)          In the event that holders of the shares of the Common Stock have the opportunity to elect the form of consideration to be received in such Reorganization Event, the Corporation shall ensure that the Holders have the same opportunity to elect the form of consideration in accordance with the same procedures and pro ration mechanics that apply to the election to be made by the holders of the Common Stock. The amount of Exchange Property receivable upon conversion of any Series C NVCE Stock shall be determined based upon the Conversion Price in effect on the date on which such Reorganization Event is consummated.

 

(iv)          The provisions of this Section VII(i) shall similarly apply to successive Reorganization Events or any series of transactions that results in a Reorganization Event and the provisions of Section VII(i) shall apply to any shares of capital stock of the Corporation (or any successor) received by the holders of the Common Stock in any such Reorganization Event.

 

(v)           The Corporation (or any successor) shall, at least twenty days prior to the occurrence of any Reorganization Event, use reasonable best efforts to provide written notice to the Holders of the anticipated occurrence of such event and of the type and amount of the cash, securities or other property that constitutes the Exchange Property; provided, that no such notice shall be required if the anticipated occurrence of any Reorganization Event is disclosed in any registration statement, prospectus, report, schedule or proxy statement filed with or furnished by the Corporation to the U.S. Securities and Exchange Commission. Failure to deliver such notice shall not affect the operation of this Section VII.

 

(vi)          The Corporation shall not enter into any agreement for a transaction constituting a Reorganization Event unless such agreement provides for the conversion of the Series C NVCE Stock into the Exchange Property in a manner that is consistent with and gives effect to this Section VII(i).

 

(j)            No adjustment to the Conversion Price shall be made with respect to a share of Series C NVCE Stock if the Holder thereof has participated in the transaction that would otherwise give rise to an adjustment with respect to such share of Series C NVCE Stock, as a result of holding such share of Series C NVCE Stock at the time of such transaction (including pursuant to Section IV), without having to convert such share of Series C NVCE Stock, as if they held the full number of shares of Common Stock into which each such share of the Series C NVCE Stock held by them may then be converted.

 

(k)            Notwithstanding anything to the contrary herein, an Adjustment Event shall not allow the Holder to acquire a higher percentage of any Class of Voting Securities of the Corporation than the Holder (together with its affiliates for purposes of the BHC Act) beneficially owned immediately prior to such Adjustment Event.

 

 

Section VIII           Reports as to Adjustments.

 

Whenever the number of shares of Common Stock into which the shares of the Series C NVCE Stock are convertible is adjusted as provided in Section VII, the Corporation shall promptly, but in any event within ten days thereafter, compute such adjustment and furnish to the Holders a notice stating the number of shares of Common Stock into which each share of the Series C NVCE Stock is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment will become effective. Amounts resulting from any calculation hereunder will be rounded to the nearest 1/10,000th.

 

Section IX              Reservation of Stock.

 

(a)            The Corporation shall, following the Charter Amendment Approval and the filing and acceptance of the Charter Amendment (as defined in the Investment Agreements), reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of shares of Series C NVCE Stock as provided in this Certificate of Designations, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Series C NVCE Stock then outstanding.

 

(b)            Following the approval of the applicable supplemental listing application with NYSE, the Corporation hereby covenants and agrees that, for so long as shares of the Common Stock are listed on the NYSE or any other national securities exchange or automated quotation system, the Corporation will, if permitted by the rules of such exchange or automated quotation system, list and keep listed that number of shares of Common Stock issuable upon conversion of shares of all the Series C NVCE Stock.

 

Section X               Exclusion of Other Rights.

 

The shares of Series C NVCE Stock shall not have any voting powers except as expressly described herein, and, except as may otherwise be required by Law, shall not have any preferences or relative, participating, optional or other special rights, other than those specifically set forth herein (as this Certificate of Designations may be amended from time to time) and in the Charter. The shares of Series C NVCE Stock shall have no preemptive or subscription rights.

 

Section XI              Severability of Provisions.

 

If any voting powers, preferences or relative, participating, optional or other special rights of the Series C NVCE Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Designations (as this Certificate of Designations may be amended from time to time) are invalid, unlawful or incapable of being enforced by reason of any rule of Law, all other voting powers, preferences and relative, participating, optional and other special rights of Series C NVCE Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Designations (as so amended) which can be given effect without the invalid, unlawful or unenforceable voting powers, preferences or relative, participating, optional or other special rights of Series C NVCE Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences or relative, participating, optional or other special rights of Series C NVCE Stock or qualifications, limitations and restrictions thereof herein set forth shall be deemed dependent upon any other such voting powers, preferences or relative, participating, optional or other special rights of Series C NVCE Stock or qualifications, limitations and restrictions thereof unless so expressed herein.

 

 

Section XII             Cancellation of Series C NVCE Stock.

 

Any shares of Series C NVCE Stock that have been duly converted in accordance with this Certificate of Designations, or reacquired by the Corporation, shall be cancelled promptly thereafter and revert to authorized but unissued shares of Preferred Stock undesignated as to series. Such shares may be designated or redesignated and issued or reissued, as the case may be, as part of any series of Preferred Stock. The Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized number of shares of Series C NVCE Stock solely in accordance with the foregoing.

 

Section XIII           Additional Authorized Shares.

 

Notwithstanding anything set forth in the Charter or this Certificate of Designations to the contrary, the Board or any authorized committee of the Board, without the vote of the Holders, may increase or decrease the number of authorized shares of Series C NVCE Stock or other stock ranking junior or senior to, or on parity with, the Series C NVCE Stock as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

 

Section XIV           Determinations.

 

The Corporation shall have the sole right to make all calculations called for hereunder. Absent fraud or manifest error, such calculations shall be final and binding on all Holders. The Corporation shall have the power to resolve any ambiguity and its action in so doing, as evidenced by a resolution of the Board, shall be final and conclusive unless clearly inconsistent with the intent hereof. Amounts resulting from any calculation will be rounded, if necessary, to the nearest one ten-thousandth, with five one-hundred thousandths being rounded upwards.

 

The Series C NVCE Stock is intended to qualify as common equity tier 1 capital for purposes of 12 C.F.R. Section 217.20(b)(1) (or any successor regulation), and the terms of this Certificate of Designation shall be interpreted, construed and applied to achieve such regulatory capital treatment.

 

Section XV            No Redemption.

 

The Corporation may not, at any time, redeem the outstanding shares of the Series C NVCE Stock, other than as otherwise expressly set forth in Section VII with the prior approval of the Board to the extent otherwise required by law or regulation.

 

Section XVI           Section XVI. Maturity.

 

The Series C NVCE Stock shall be perpetual, unless converted in accordance with this Certificate of Designations.

 

 

(a)            Section XVII. Repurchases.

 

Subject to the limitations imposed herein, the Corporation may purchase and sell shares of Series C NVCE Stock from time to time to such extent, in such manner, and upon such terms as the Board or any duly authorized committee of the Board may determine; provided that any repurchase of shares of Series C NVCE Stock by the Corporation shall require prior approval of the Board to the extent otherwise required by law or regulation.

 

Section XVII          No Sinking Fund.

 

Shares of Series C NVCE Stock are not subject to the operation of a sinking fund.

 

Section XVIII        Notices.

 

All notices, demands or other communications to be given hereunder shall be in writing and shall be deemed to have been given (a) on the date of delivery if delivered personally to the recipient, or if by email, upon delivery (provided that no auto-generated error or non-delivery message is generated in response thereto), (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to (i) if to the Corporation, First Foundation, Inc., 200 Crescent Court, Suite 1400, Dallas, Texas, Attention: Chief Executive Officer, Email: skavanaugh@ff-inc.com; with a copy to: General Counsel, Email: edorsett@ff-inc.com or (ii) if to any Holder or holder of Common Stock, as the case may be, to such Holder or holder at the address listed in the stock record books of the Corporation, or, in each case, such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party.

 

Section XIX           Taxes.

 

(a)            The Corporation and each Holder shall bear their own costs, fees and expenses in connection with any conversion contemplated by Section III(a), except that the Corporation shall pay any and all transfer taxes, stamp taxes or duties, documentary taxes, or other similar taxes in connection with, or arising by reason of, any issuance or delivery of shares of Series C NVCE Stock or Common Stock or other securities issued on account of Series C NVCE Stock pursuant hereto, including in connection with any conversion contemplated by Section III(a); provided that the Corporation shall not be required to pay any such tax that may be payable in connection with any conversion contemplated by Section III(a) to the extent such tax is payable because a registered holder of Series C NVCE Stock requests Common Stock to be registered in a name other than such registered holder’s name and no such Common Stock will be so registered unless and until the registered holder making such request has paid such taxes to the Corporation or has established to the satisfaction of the Corporation that such taxes have been paid or are not payable.

 

(b)            The Corporation and each Holder agree that (i) it is intended that the Series C NVCE Stock not constitute “preferred stock” within the meaning of Section 305 of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated thereunder and (ii) except to the extent otherwise required by a “determination” within the meaning of Section 1313(a) of the Code, neither the Corporation nor any Holder shall treat the Series C NVCE Stock as such for United States federal income tax or withholding tax purposes or otherwise take any position inconsistent with such treatment.

 

 

(c)            Notwithstanding anything herein to the contrary, the Corporation shall be entitled to deduct and withhold from any consideration otherwise payable on or with respect to the Series C NVCE Stock such amounts as it is required to deduct or withhold with respect to the making of such payment under the Code, or any other applicable tax Law. If any amounts are so deducted or withheld and subsequently paid to the applicable Government Entity, such deducted or withheld amounts shall be treated for all purposes hereunder as having been paid to the person to which such amounts would have otherwise been payable.

 

Section XX            No Stock Certificates.

 

Notwithstanding anything to the contrary contained in this Certificate of Designations, no shares of Series C NVCE Stock shall be issued in physical, certificated form. All shares of Series C NVCE Stock shall be evidenced by book-entry on the record books maintained by the Corporation or its transfer agent.

 

Section XXI           Transfers.

 

The shares of Series C NVCE Stock are subject to the restrictions on transfer set forth in the Investment Agreements. Any purported transfer in violation of such restrictions shall be null and void.

 

[Remainder of page intentionally left blank]

 

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations to be signed by the undersigned on this 5th day of July, 2024.

 

	FIRST FOUNDATION INC.
	By:	/s/ Scott F. Kavanaugh
		Name: Scott F. Kavanaugh
		Title: Chief Executive Officer

 

[Signature Page to Certificate of Designations]

 

 

 

Exhibit 4.1

 

THIS SECURITY HAS BEEN ACQUIRED FOR INVESTMENT AND WITHOUT A VIEW TO DISTRIBUTION AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER STATE SECURITIES LAWS. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS SECURITY OR ANY INTEREST OR PARTICIPATION THEREIN MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS AND, IN THE CASE OF CLAUSE (B), UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS.

 

WARRANT

 

to purchase

 

[•]

 

Shares of

 

Series C Non-Voting Common Equivalent Stock

 

of

 

FIRST FOUNDATION INC.

 

a Delaware Corporation

 

No. [•]

Issue Date: July 8, 2024

 

 

TABLE OF CONTENTS

 

		Page
1.	DEFINITIONS	1
2.	NUMBER OF SHARES; PERSONS ENTITLED TO EXERCISE WARRANT	4
3.	EXERCISE OF WARRANT; TERM	4
4.	LIMITATION OF EXERCISE	5
5.	COVENANTS AND REPRESENTATIONS OF THE COMPANY	6
6.	ISSUANCE OF SHARES; AUTHORIZATION; LISTING	6
7.	COMPLIANCE WITH SECURITIES LAWS	7
8.	NO FRACTIONAL SHARES OR SCRIP	8
9.	NO RIGHTS AS STOCKHOLDERS; TRANSFER BOOKS	8
10.	TRANSFER	8
11.	REGISTRY OF WARRANT	8
12.	LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT	9
13.	SATURDAYS, SUNDAYS, HOLIDAYS, ETC	9
14.	RULE 144 INFORMATION	9
15.	ADJUSTMENTS AND OTHER RIGHTS	9
16.	BUSINESS COMBINATIONS	17
17.	TRANSFER TAXES	17
18.	WITHHOLDING	18
19.	OTHER WARRANTS	18
20.	MISCELLANEOUS	18

 

 

Index of Defined Terms

 

	Page
affiliate	1
Applicable Price	1
Appraisal Procedure	1
Board of Directors	1
Business Combination	1
business day	2
Certificate of Designations	2
Company	4
Convertible Transfer	2
Current Market Price	2
Excluded Stock	2
Ex-Date	2
Exercise Price	2
Expiration Time	4
Fair Market Value	2
Group	3
Investment Agreement	3
Issue Date	3
Market Price	3
Notice of Exercise	3
NVCE Stock	3
person	3
SEC	9
Share Recipient	6
Shares	4
Standard Settlement Period	3
Subject Record Date	16
Trading Day	3
Transfer	4
Warrant	4
Warrant Agreement Amendment	18
Warrant Certificate	4
Warrantholder	4

 

 

 

1.            Definitions. Unless the context otherwise requires, when used herein the following terms shall have the meanings indicated. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Investment Agreement.

 

“affiliate” of a specified person is any person that, directly or indirectly, controls, is controlled by, or is under common control with, such specified person; provided that if the Warrantholder is controlled by a private equity sponsor or similar investment firm, “affiliate” shall not include any “portfolio company” (as such term is customarily used in the private equity industry), or any investment fund or vehicle (other than any such fund or vehicle with a direct or indirect interest in any Purchaser, of or related to or affiliated with or managed by such sponsor or firm). For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any person, means the possession, directly or indirectly, of the power to cause the direction of management or policies of such person, whether through the ownership of voting securities, by contract or otherwise.

 

“Applicable Price” means the applicable Conversion Price (as defined in the Certificate of Designations), as may be adjusted from time to time pursuant to the Certificate of Designations; provided that the Applicable Price shall also be adjusted as set forth in Section VII of the Certificate of Designations, without duplication, for the cumulative effect of all events occurring on or after the issuance of this Warrant and prior to the date the Warrant has been exercised in full for which no adjustment was made to the Conversion Price under the Certificate of Designations.

 

“Appraisal Procedure” means a procedure whereby two independent appraisers, one chosen by the Company and one chosen by the Warrantholder, shall mutually agree upon the determinations then the subject of appraisal. Each party shall deliver a notice to the other appointing its appraiser within fifteen (15) days after the Appraisal Procedure is invoked. If within thirty (30) days after appointment of the two appraisers they are unable to mutually agree upon the amount in question, a third independent appraiser shall be chosen within ten (10) days thereafter by the mutual agreement of such first two appraisers or, if such first two appraisers fail to agree upon the appointment of a third appraiser, such appointment shall be made by the American Arbitration Association, or any organization successor thereto, from a panel of arbitrators having experience in the appraisal of the subject matter to be appraised. The decision of the third appraiser so appointed and chosen shall be given within thirty (30) days after the selection of such third appraiser. If three appraisers shall be appointed and the determination of one appraiser is disparate from the middle determination by more than twice the amount by which the other determination is disparate from the middle determination, then the determination of such appraiser shall be excluded, the remaining two determinations shall be averaged and such average shall be binding and conclusive on the Company and the Warrantholder; otherwise, the average of all three determinations shall be binding and conclusive on the Company and the Warrantholder. The costs of conducting any Appraisal Procedure shall be borne by the Company; provided that, if the final determination of the appraisers is less than the fair market value determination of the Board of Directors, then such costs shall be borne solely by the Warrantholder.

 

“Board of Directors” means the board of directors of the Company.

 

“Business Combination” means, whether in a single transaction or series of related transactions, a merger, division, consolidation, share exchange, reorganization, sale of all or substantially all of the Company’s assets to another person or similar transaction (which may include a reclassification) involving the Company.

 

 

“business day” means any day other than a Saturday, a Sunday or a day on which banks in New York, New York are authorized by Law to be closed.

 

“Certificate of Designations” means the Certificate of Designations of the NVCE Stock, filed with the Delaware Secretary of State on July 5, 2024, effective as of July 5, 2024.

 

“Convertible Transfer” shall have the meaning set forth in the Certificate of Designations.

 

“Current Market Price” means, on any date, the average of the daily Market Price per share of the Common Stock or other securities on each of the five (5) consecutive Trading Days preceding the earlier of the day before the date of the issuance, dividend or distribution in question and the day before the Ex-Date with respect to the issuance or distribution, giving rise to an adjustment to the Exercise Price pursuant to Section 15.

 

“Excluded Stock” means (i) shares of Common Stock issued by the Company as a stock dividend payable in shares of Common Stock, or upon any subdivision or split-up of the outstanding shares of Common Stock, in each case, which is subject to Section VII(b) of the Certificate of Designations, or upon conversion of securities (but not the issuance of such securities convertible or exchangeable into Common Stock which will be subject to the provision of Section 15(b)), (ii) shares of Common Stock to be issued in good faith to directors, officers, employees, consultants or other agents of the Company or its Subsidiaries pursuant to options, restricted stock units, other equity-based awards or other compensatory arrangements approved by the Board of Directors in the ordinary course of providing equity compensation awards, (iii) any shares of Common Stock issued upon conversion of the NVCE Stock, (iv) any shares issued upon the conversion of the Shares issued under this Warrant or the Other Warrants (as such term is defined in the Investment Agreement), (v) any other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date hereof; provided that, in the case of this clause (v), such securities have not been amended subsequent to the issuance of this Warrant to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities or to extend the term of such securities, and (vi) any shares of capital stock issued or sold to the Warrantholder or any of its affiliates.

 

“Ex-Date” means, when used with respect to any issuance, dividend or distribution giving rise to an adjustment to the Exercise Price pursuant to Section 15, the first date on which the applicable Common Stock or other securities trade without the right to receive the issuance, dividend or distribution.

 

“Exercise Price” means $5,125; provided that the foregoing shall be subject to adjustment as expressly set forth herein.

 

“Fair Market Value” means, with respect to any security or other property, the fair market value of such security or other property as determined by the Board of Directors, acting in good faith in reliance on advice received by the Board of Directors from a nationally recognized independent investment banking firm retained by the Company for the purpose of determining the fair market value of shares of the NVCE Stock and certified in a resolution to the Warrantholder.

 

 

If the Warrantholder does not accept the Board of Director’s calculation of fair market value and, thereafter, the Warrantholder and the Company are unable to agree on fair market value, then the Appraisal Procedure shall be used to determine fair market value.

 

“Group” means a group as contemplated by Section 13(d)(3) of the Exchange Act.

 

“Investment Agreement” means the Investment Agreement, dated as of July 2, 2024, as it may be amended from time to time, by and between the Company and [Purchaser].

 

“Issue Date” means the date first set forth above opposite the heading Issue Date.

 

“Market Price” means, with respect to (1) the NVCE Stock, on any given day, (a) 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, of the shares of the NVCE Stock on the principal exchange or market on which the NVCE Stock is so listed or quoted, (b) if the NVCE Stock is not so publicly traded, the product of (i) the number of shares of Common Stock issuable upon conversion of the NVCE Stock multiplied by (ii) 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, of the shares of the Common Stock on the principal exchange or market on which the Common Stock is so listed or quoted or (c) if neither the foregoing clause (a) nor clause (b) applies, the Fair Market Value of a share of the NVCE Stock and (2) the Common Stock, on any given day, (a) 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, of the shares of the Common Stock on the principal exchange or market on which the Common Stock is so listed or quoted or (b) if the foregoing clause (a) does not apply, the Fair Market Value of a share of the Common Stock. “Market Price” shall be determined without reference to after-hours or extended-hours trading.

 

“NVCE Stock” means a series of preferred stock, par value $0.001 per share, of the Company designated as Series C Non-Voting Common Equivalent Stock.

 

“Notice of Exercise” means a duly completed and executed Notice of Exercise, the form of which is annexed hereto.

 

“person” means any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity or other entity of any kind or nature.

 

“Standard Settlement Period” means the standard settlement period, expressed in a number of trading days, on the Company’s primary trading market with respect to the Common Stock as in effect on the date of delivery of a Notice of Exercise.

 

“Trading Day” means a day on which the shares of Common Stock:

 

(i)            are not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business; and

 

 

(ii)            have traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.

 

“Transfer” means to sell, transfer, make any short sale of, loan, grant any option for the purchase of or interest in or otherwise dispose of this Warrant or any rights hereunder; provided, however, that a pledge or other encumbrance of this Warrant or any rights hereunder that creates a mere security interest in this Warrant or any rights hereunder shall not constitute a Transfer.

 

“Warrant” means this Warrant issued pursuant to the Investment Agreement.

 

“Warrant Certificate” means this certificate evidencing this Warrant.

 

“Warrantholder” means the person who shall from time to time own this Warrant, including any transferee thereof.

 

2.            Number of Shares; Persons Entitled to Exercise Warrant. On the terms and subject to the conditions, requirements and procedures set forth herein, First Foundation Inc., a Delaware corporation (the “Company”), hereby certifies that, unless this Warrant has been earlier redeemed, surrendered, cancelled or exercised in full, for value received, this Warrant is exercisable in whole at any time or in part from time to time, for, in the aggregate, [•] duly authorized, validly issued, fully-paid and nonassessable shares of NVCE Stock (“Shares”), as such number may be adjusted in accordance with the terms of this Warrant, free and clear of all Liens (other than transfer restrictions imposed under the Investment Agreement and applicable securities Laws), by the Warrantholder. The number of Shares and the Exercise Price are subject to adjustment as provided herein and in the Certificate of Designations, and all references to “Shares” and “Exercise Price” herein shall be deemed to include any such adjustment or series of adjustments. If this Warrant is transferred in a Convertible Transfer to any person for whom the underlying NVCE Stock would automatically convert into Common Stock pursuant to Section III(a) of the Certificate of Designations if transferred directly, then, notwithstanding anything to the contrary in this Warrant, this Warrant shall be exercisable by such person in whole at any time or in part from time to time for the number of shares of Common Stock into which the Shares would be convertible pursuant to the Certificate of Designations at the time of exercise, and the remaining terms of this Warrant shall apply to such exercise mutatis mutandis.

 

3.            Exercise of Warrant; Term.

 

(a)          On the terms and subject to the conditions, requirements and procedures set forth herein, on and after January 5, 2024, and prior to 5:00 p.m. New York City time, on the seven (7) year anniversary of the Issue Date (the “Expiration Time”) this Warrant may be exercised by the Warrantholder, in whole or in part, from time to time, at any time after 9:00 a.m., New York City time, on the Issue Date by (x) the delivery by the Warrantholder to the Company of a Notice of Exercise and (y) if applicable, payment by the Warrantholder to the Company of the Exercise Price for the Shares specified in such Notice of Exercise pursuant to Section 3(b).

 

(b)          Payment of the Exercise Price for the Shares in any exercise pursuant to Section 3(a) shall be effected by the Company withholding, from the Shares that would otherwise be delivered to the Warrantholder upon such exercise, an amount of Shares equal in value to the aggregate Exercise Price in respect of the Shares as to which this Warrant is so exercised, based on the Market Price on the business day immediately prior to the date on which this Warrant is exercised.

 

 

(c)           If the Warrantholder exercises a portion (but not all) of this Warrant pursuant to Section 3(a), the Warrantholder will, at the option of the Warrantholder, be entitled to receive from the Company, within a reasonable time, and in any event not exceeding three (3) business days after notice thereof to the Company, a new Warrant Certificate in substantially identical form to this Warrant Certificate, but for the purchase of that number of Shares that remain issuable pursuant to this Warrant.

 

(d)          If the Warrantholder does not elect to receive a new Warrant Certificate in accordance with Section 3(c), then, notwithstanding anything herein to the contrary, the Warrantholder shall not be required to physically surrender this Warrant to the Company until this Warrant has been exercised in full, in which case, the Warrantholder shall surrender this Warrant to the Company for cancellation within three (3) business days after the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in the issuance of a portion of the total number of Shares issuable hereunder shall have the effect of lowering the outstanding number of Shares issuable hereunder in an amount equal to the applicable number of Shares issued upon such partial exercises hereof. The Warrantholder and the Company shall maintain records showing the number of Shares issued upon partial exercises hereof and the date of such issuances. The Company shall inform the Warrantholder if a Notice of Exercise has not been duly completed within three (3) business days of receipt of such notice, but shall not refuse or object to the issuance of the Shares upon receipt of, and pursuant to, a duly completed Notice of Exercise. The Warrantholder, by acceptance of this Warrant, acknowledges and agrees that, by reason of the provisions of this Section 3, following the exercise of a portion of this Warrant, the number of Shares issuable hereunder at any given time may be less than the amount stated on the face hereof.

 

(e)           Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may, at the election of the Warrantholder (as set forth in the applicable Notice of Exercise), be conditioned upon the consummation of such transaction, in which case, such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

(f)           At the Expiration Time, this Warrant shall terminate and the Warrantholder shall have no right to acquire any shares pursuant hereto, other than settlement of any exercise pursuant to Section 3(a) that properly occurred prior to the Expiration Time.

 

4.            Limitation of Exercise. The Warrantholder shall have no right to exercise this Warrant, and the Company shall have no obligation to effect any exercise of this Warrant, to the extent that after giving effect to any exercise of this Warrant, such exercise would or would reasonably be expected to (a) cause the Warrantholder, its affiliates or any of their partners or principals to (i) “control” the Company or be required to become a bank holding company, in each case, pursuant to the BHC Act, its implementing regulations or the terms of any commitment made to the Federal Reserve by the Warrantholder or its affiliates; or (ii) serve as a source of financial strength to the Company pursuant to the BHC Act; or (b) require the Warrantholder, its affiliates or any of their partners or principals to have made any advance filing with, obtained any approval, authorization consent, permit or license of, or provided notice to, any Governmental Entity under Law (which such filing has not been made, or approval, authorization, consent, permit or license has not been obtained or such notice has not been duly provided), including the expiration of any waiting periods associated therewith (including any extensions thereof).

 

 

5.            Covenants and Representations of the Company. The Company hereby represents, covenants and agrees, as applicable:

 

(a)           Except and to the extent as waived or consented to by the Warrantholder, the Company shall not by any action, including amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or intentionally seek to avoid the observance or performance of any of the terms of this Warrant, but shall at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Warrantholder as set forth in this Warrant against impairment.

 

(b)          The Company shall (i) not increase the par value of any Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) issue duly authorized, validly issued, fully paid and non-assessable Shares upon the proper exercise of this Warrant, and (iii) use reasonable best efforts to (x) obtain all such authorizations, exemptions or consents required of the Company from any Governmental Entity as may be necessary to enable the Company to perform its express obligations under this Warrant and (y) take all necessary actions so that the Shares may be issued without violation of Law or any requirement of any securities exchange on which the Shares or the Common Stock are listed or traded.

 

(c)           Before taking any action which would result in an adjustment in the number of Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, and take all such corporate action, as may be necessary in order that the Company may validly and legally issue fully paid and non-assessable Shares at the Exercise Price as so adjusted.

 

(d)           The Company shall solely for the purpose of providing for the exercise of this Warrant (A) reserve that number of shares of NVCE Stock sufficient for issuance upon exercise of this Warrant and (B) promptly following the Company’s receipt of the Requisite Stockholder Vote and the filing and acceptance of the Charter Amendment with the Delaware Secretary of State, reserve Common Stock sufficient for issuance of shares of Common Stock upon conversion of such shares of NVCE Stock in full without regard to any limitation on such conversion in accordance with their terms.

 

6.            Issuance of Shares; Authorization; Listing. In the event of any exercise of this Warrant in accordance with and on the terms and subject to the conditions hereof, any Shares issued pursuant to such exercise, if applicable, shall be issued in such name(s) as the Warrantholder may designate and shall be delivered by the Company to such named person(s) within three (3) business days after the date on which this Warrant has been duly exercised in accordance with the terms hereof. Any such delivery shall be made via book-entry transfer crediting the account of the Warrantholder through the Company’s transfer agent and registrar for the NVCE Stock. The Company hereby represents and warrants that any Shares issued upon the exercise of this Warrant in accordance with Section 3 shall, subject to the Requisite Stockholder Vote and the filing and acceptance of the Charter Amendment with the Delaware Secretary of State, be duly authorized, validly issued, fully-paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company, and free and clear of all Liens (other than transfer restrictions imposed under Law or the Investment Agreement or Liens created by the Warrantholder occurring prior to, or contemporaneously with, such exercise). The Company agrees that the Shares so issued shall be deemed to have been issued if this Warrant is exercised pursuant to Section 3 (the person to whom such Shares shall be deemed to have been so issued in accordance with Section 2, the “Share Recipient”) as of the close of business on the date on which the Notice of Exercise is delivered to the Company in accordance with the terms hereof (it being agreed that payment of the Exercise Price by net settlement pursuant to Section 3(b) shall be deemed to occur by delivery to the Company of the Notice of Exercise), notwithstanding that the stock transfer books of the Company may then be closed or certificates representing such Shares may not be actually delivered on such date. The Company will (a) procure, at its sole expense, the listing of the Shares and other securities issuable upon exercise of this Warrant (solely to the extent they are shares of Common Stock), subject to issuance or notice of issuance on all stock exchanges on which the Common Stock is then listed or traded, and (b) use reasonable best efforts to maintain the listing of such Shares after issuance. The Company will use reasonable best efforts to ensure that the Shares may be issued without violation of any applicable law or regulation or of any requirement of any securities exchange on which the Shares are listed or traded.

 

 

7.            Compliance with Securities Laws.

 

(a)           The Warrantholder, by acceptance hereof, acknowledges that the offer and sale of this Warrant and any Shares to be issued upon exercise hereof have not been registered under the Securities Act or under any U.S. state security Law and are being acquired pursuant to an exemption from registration under the Securities Act solely for the Warrantholder’s own account, and not as a nominee for any other party, and for investment with no present intention to distribute this Warrant (or any Shares issuable upon exercise hereof) to any person in violation of the Securities Act or any U.S. state securities Law, and that the Warrantholder will not offer, sell or otherwise dispose of this Warrant or any Shares to be issued upon exercise hereof except pursuant to an effective registration statement, or an exemption from registration, under the Securities Act and any U.S. state securities Law.

 

(b)           Except as provided in Section 7(c), this Warrant and any Shares issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the form (which, in the case of the Shares, shall be in the form of an appropriate book entry notation) set forth in Section 4.4(a) of the Investment Agreement.

 

(c)           The Company shall promptly cause such legend to be removed from any certificate or other instrument for this Warrant or the Shares and the Company shall deliver all necessary documents to the transfer agent in connection therewith without charge as to this Warrant or any Shares upon request of (x) the Warrantholder, upon receipt by the Company of an opinion of counsel reasonably satisfactory to the Company to the effect that such legend is no longer required under the Securities Act and applicable state laws or (y) the Warrantholder at a time when the offer and sale of this Warrant or the Shares have been registered under the Securities Act (unless subject to any transfer restrictions under Rule 144 for affiliates) or may otherwise be transferred pursuant to any applicable rules thereunder, including eligibility to be transferred if Rule 144 under the Securities Act is available for the sale of this Warrant or the Shares without volume and manner of sale restrictions.

 

 

(d)           The Company and the Warrantholder acknowledge that the Shares issuable upon exercise of this Warrant, including the Common Stock issuable upon conversion of the Shares, shall be entitled to the benefits of the Registration Rights Agreement, as the same may be amended, amended and restated or supplemented from time to time.

 

8.            No Fractional Shares or Scrip. No fractional Shares or scrip representing fractional Shares shall be issued upon any exercise of this Warrant. In lieu of any fractional Share to which the Share Recipient would otherwise be entitled, the Share Recipient shall be entitled to receive a cash payment equal to the Market Price on the last business day preceding the date of exercise less the portion of the Exercise Price attributable to such fractional share; provided that, if the making of a cash payment in lieu of the issuance of a fractional share is prohibited by Law or contract, the number of shares issued by the Company upon exercise of this Warrant shall be rounded to the nearest whole share.

 

9.            No Rights as Stockholders; Transfer Books. This Warrant does not entitle the Warrantholder to any rights of a holder of NVCE Stock prior to the date of exercise hereof. Effective immediately prior to the close of business on such date of exercise, the Share Recipient shall have any rights as a holder of NVCE Stock. The Company will at no time close its transfer books against Transfer of this Warrant in any manner which interferes with the timely exercise of this Warrant.

 

10.          Transfer.

 

(a)           Subject to compliance with Law and Section 10(b), without obtaining the consent of the Company to assign or transfer this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, upon the books of the Company by the registered holder hereof in person or by duly authorized attorney, or by means of electronic transmission, and a new warrant shall be made and delivered by the Company, of the same tenor and date as this Warrant but registered in the name of the transferee, upon surrender of this Warrant, duly endorsed, to the office or agency of the Company described in Section 2, and delivery of the form of assignment annexed hereto, duly completed and executed. All expenses (other than stock transfer taxes) and other charges payable in connection with the preparation, execution and delivery of the new warrants certificate pursuant to this Section 10 shall be paid by the Company.

 

(b)          The Warrantholder shall be entitled to Transfer this Warrant only (i) in compliance with Section 4.2 of the Investment Agreement or (ii) to any person with the prior written consent of the Company.

 

11.           Registry of Warrant. The Company shall maintain a registry in which, subject to such reasonable regulations as it may prescribe, it shall register Warrant Certificates (showing the name and address of the Warrantholder as the registered holder of this Warrant) and exchanges and transfers thereof. This Warrant may be surrendered for exchange or exercise, in accordance with its terms, and the Company shall be entitled to rely in all respects upon such registry, and the Company shall not be affected by any notice to the contrary, except any Transfer of the Warrant effected in accordance with the provisions of this Warrant, including Section 10.

 

 

12.           Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of the Warrant Certificate and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of any such mutilation, upon surrender and cancellation of the Warrant Certificate, the Company shall execute and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant Certificate, a new Warrant Certificate of like tenor and representing the right to purchase the same aggregate number of Shares issuable pursuant to such lost, stolen, destroyed or mutilated Warrant Certificate, less the number of Shares previously issued upon any exercise of this Warrant pursuant to Section 3.

 

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

 

14.           Rule 144 Information. The Company covenants that it will use reasonable best efforts to timely file all reports and other documents that may be required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations promulgated by the U.S. Securities and Exchange Commission (the “SEC”) thereunder (or, if the Company is not required to file such reports under the Securities Act or the Exchange Act, it will, upon the request of any Warrantholder, make publicly available such information as may be necessary to permit sales pursuant to Rule 144), and it will use reasonable best efforts to take such further action as any Warrantholder may reasonably request, all to the extent required from time to time to enable such holder to sell the Warrants without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 or Regulation S under the Securities Act, as such rules may be amended from time to time, or (ii) any successor rule or regulation hereafter adopted by the SEC. Upon the written request of any Warrantholder, the Company will deliver to such Warrantholder a written statement that it has complied with such requirements.

 

15.           Adjustments and Other Rights. The Exercise Price and the number of Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as follows; provided that if more than one section or subsection of this Section 15 is applicable to a single event, the section or subsection shall be applied that produces the largest adjustment and no single event shall cause an adjustment under more than one section or subsection of this Section 15 so as to result in duplication.

 

(a)           Stock Splits, Subdivisions, Reclassifications or Combinations. If the Company shall (i) declare, order, and pay or make a dividend or make a distribution on its NVCE Stock payable in shares of NVCE Stock (which shall not include any shares of NVCE Stock issued by the Company upon exercise of this Warrant), (ii) split, subdivide or reclassify the outstanding shares of NVCE Stock into a greater number of shares or (iii) combine or reclassify the outstanding shares of NVCE Stock into a smaller number of shares, in each case, then the number of Shares issuable upon exercise of this Warrant at the time of the record date for such dividend or distribution or the effective date of such split, subdivision, combination or reclassification shall be proportionately adjusted so that the Warrantholder immediately after such record date or effective date, as applicable, upon exercise of this Warrant, shall be entitled to purchase the number of shares of NVCE Stock which such holder would have been entitled to receive in respect of the Shares after such date had this Warrant been exercised in full immediately prior to such record date or effective date, as applicable. In such event, the Exercise Price in effect at the time of the record date for such dividend or distribution or the effective date of such split, subdivision, combination or reclassification shall be adjusted to the number obtained by dividing (x) the product of (1) the number of Shares issuable upon the exercise of this Warrant before such adjustment determined pursuant to the immediately preceding sentence, multiplied by (2) the Exercise Price in effect immediately prior to the record or effective date, as applicable, with respect to the dividend, distribution, split, subdivision, reclassification or combination giving rise to this adjustment by (y) the new number of Shares issuable upon exercise of this Warrant in full determined pursuant to the immediately preceding sentence.

 

 

(b)          Common Stock Issued at Less than the Applicable Price.

 

(i)            If the Company issues or sells, or agrees to issue or sell, any Common Stock or other securities that are convertible into or exchangeable or exercisable for (or are otherwise linked to) Common Stock (in each case, other than Excluded Stock) for consideration per share less than the Applicable Price, then the Exercise Price in effect immediately prior to each such issuance or sale will immediately (except as provided below) be reduced to the price determined by multiplying the Exercise Price in effect immediately prior to such issuance or sale by a fraction, (x) the numerator of which shall be (1) the number of shares of Common Stock outstanding immediately prior to such issuance or sale, plus (2) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such additional shares of Common Stock so issued or sold would purchase at the Applicable Price absent the adjustments contemplated by this clause (b)(i), and (y) the denominator of which shall be the number of shares of Common Stock outstanding immediately after such issuance or sale. In such event, the number of shares of NVCE Stock issuable upon the exercise of this Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Shares issuable upon the exercise of this Warrant before such adjustment and (2) the Exercise Price in effect immediately prior to the issuance or sale giving rise to this adjustment, by (y) the new Exercise Price determined in accordance with the immediately preceding sentence. For the avoidance of doubt, no increase in the Exercise Price or reduction in the number of Shares issuable upon exercise of this Warrant shall be made pursuant to this subclause (i) of this Section 15(b), other than as would be contemplated by Section 15(b)(ii)(3)(D).

 

(ii)            For the purposes of any adjustment of the Exercise Price and the number of Shares issuable upon the exercise of this Warrant pursuant to this Section 15(b), the following provisions shall be applicable:

 

(1)

In the case of the issuance or sale of equity or equity-linked securities for cash, the amount of the consideration received by the Company shall be deemed to be the amount of the cash paid therefor before deducting therefrom any discounts, commissions or placement fees allowed, paid or incurred by the Company for any underwriter, placement agent or otherwise in connection with the issuance and sale thereof.

 

 

(2)

In the case of the issuance or sale of equity or equity-linked securities (otherwise than upon the conversion of securities of the Company) for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the Fair Market Value, before deducting therefrom any discounts, commissions or placement fees allowed, paid or incurred by the Company for any underwriter, placement agent or otherwise in connection with the issuance and sale thereof.

 

(3)

In the case of the issuance of (x) options, warrants or other rights to purchase or acquire equity or equity-linked securities (whether or not at the time exercisable) or (y) securities by their terms convertible into or exchangeable for equity or equity-linked securities (whether or not at the time so convertible or exchangeable) or options, warrants or rights to purchase such convertible or exchangeable securities (whether or not at the time exercisable):

 

(A)

The aggregate maximum number of shares of securities deliverable upon exercise of such options, warrants or other rights to purchase or acquire equity or equity-linked securities shall be deemed to have been issued at the time such options, warrants or rights are issued and for a consideration equal to the consideration (determined in the manner provided in Section 15(b)(i) and (ii)), if any, received by the Company upon the issuance or sale of such options, warrants or rights, plus the minimum purchase price provided in such options, warrants or rights for the equity or equity-linked securities covered thereby.

 

(B)

The aggregate maximum number of shares of equity or equity-linked securities deliverable upon conversion of or in exchange for any such convertible or exchangeable securities, or upon the exercise of options, warrants or other rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof, shall be deemed to have been issued at the time such securities were issued or such options, warrants or rights were issued and for a consideration equal to the consideration, if any, received by the Company for any such securities and related options, warrants or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration (in each case, determined in the manner provided in Section 15(b)(i) and (ii)), if any, to be received by the Company upon the conversion or exchange of such securities, or upon the exercise of any related options, warrants or rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof.

 

 

(C)

On any change in the number of shares of equity or equity-linked securities deliverable upon exercise of any such options, warrants or rights or conversion or exchange of such convertible or exchangeable securities or any change in the consideration to be received by the Company upon such exercise, conversion or exchange, but excluding changes resulting from the anti-dilution provisions thereof (to the extent comparable to (or less favorable than) the anti-dilution provisions contained herein), the Exercise Price and the number of Shares issuable upon exercise of this Warrant as then in effect shall forthwith be readjusted to such Exercise Price and number of Shares as would have been obtained had an adjustment been made upon the issuance or sale of such options, warrants or rights not exercised prior to such change, or of such convertible or exchangeable securities not converted or exchanged prior to such change, upon the basis of such change.

 

(D)

Upon the expiration of any options, warrants or rights to purchase equity or equity-linked securities, in each case, which shall not have been exercised and for which any adjustment was made pursuant to this Section 15(b) upon the issuance or sale thereof, the Exercise Price and the number of Shares issuable upon exercise of this Warrant as then in effect hereunder shall, upon such expiration, be recomputed to such Exercise Price and number of Shares as would have been obtained had an adjustment been made upon the issuance or sale of such options, warrants or rights on the basis of the issuance of only the number of shares of Common Stock actually issued upon the exercise of such options, warrants or rights.

 

(E)

If the Exercise Price and the number of Shares issuable upon exercise of this Warrant shall have been adjusted upon the issuance or sale of any such options, warrants, rights or convertible or exchangeable securities, no further adjustment of the Exercise Price or the number of Shares issuable upon the exercise of this Warrant shall be made for the actual issuance of NVCE Stock upon the exercise, conversion or exchange hereof.

 

(c)           Issuance of Stock Purchase Rights. If the Company issues to all or substantially all holders of the shares of Common Stock rights or warrants (other than rights or warrants issued pursuant to a dividend reinvestment plan or share purchase plan or other similar plans) entitling them, for a period of up to 45 days from the date of issuance of such rights or warrants, to subscribe for or purchase the shares of Common Stock at less than the Market Price on the date immediately preceding the Ex-Date for such issuance, then the Exercise Price will be adjusted by multiplying the Exercise Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the Ex-Date for such issuance by the following fraction:

 

	OS0 + Y
	OS0 + X

 

Where,

 

OS₀ = the number of shares of Common Stock outstanding immediately prior to the Ex-Date for such distribution.

 

X = the total number of shares of Common Stock issuable pursuant to such rights or warrants.

 

Y = the number of shares of Common Stock equal to the aggregate price payable to exercise such rights or warrants divided by the Market Price on the date immediately preceding the Ex-Date for the issuance of such rights or warrants.

 

Any adjustment pursuant to this Section 15(c) shall become effective immediately prior to 9:00 a.m., New York City time, on the Ex-Date for such issuance. For the purposes of this Section 15(c), the number of shares of Common Stock at the time outstanding shall not include shares held in treasury by the Company. The Company shall not issue any such rights or warrants in respect of shares of the Common Stock held in treasury by the Company. In the event that such rights or warrants described in this Section 15(c) are not so issued, the Exercise Price shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to issue such rights or warrants, to the Exercise Price that would then be in effect if such issuance had not been declared. To the extent that such rights or warrants are not exercised prior to their expiration or shares of Common Stock are otherwise not delivered pursuant to such rights or warrants upon the exercise of such rights or warrants, the Exercise Price shall be readjusted to such Exercise Price that would then be in effect had the adjustment made upon the issuance of such rights or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered. In determining the aggregate offering price payable for such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants and the value of such consideration (if other than cash, to be reasonably determined by the Board of Directors).

 

 

(d)          Debt or Asset Distributions. If the Company distributes to all or substantially all holders of shares of Common Stock evidences of indebtedness, shares of capital stock, securities, cash or other assets (excluding any dividend or distribution referred to in Section 15(a), any rights or warrants referred to in Section 15(c), any dividend or distribution paid exclusively in cash, any consideration payable in connection with a tender or exchange offer made by the Company or any of its Subsidiaries, and any dividend of shares of capital stock of any class or series, or similar equity interests, of or relating to a Subsidiary or other business unit in the case of certain spin-off transactions as described below), then the Exercise Price will be adjusted by multiplying the Exercise Price in effect at 5:00 p.m., New York City time on the Trading Day immediately prior to the Ex-Date for such distribution by the following fraction:

 

	SP0 – FMV
	SP0

 

Where,

 

SP₀ = the Current Market Price per share of Common Stock on such date.

 

FMV = the fair market value of the portion of the distribution applicable to one share of Common Stock on such date as reasonably determined by the Board of Directors; provided that, if “FMV” as set forth above is equal to or greater than “SP₀” as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of shares of Common Stock shall receive on the date on which such distribution is made to holders of Common Stock, for each share of Common Stock issuable upon exercise of this Warrant, the amount of such distribution such Warrantholder would have received had such Warrantholder owned a number of shares of Common Stock issuable (assuming payment of the Exercise Price in Shares) pursuant to this Warrant on the Ex-Date for such distribution.

 

In a “spin-off,” where the Company makes a distribution to all holders of shares of Common Stock consisting of capital stock of any class or series, or similar equity interests of, or relating to, a Subsidiary or other business unit, the Exercise Price with respect to such Warrantholder will be adjusted on the fifteenth (15th) Trading Day after the effective date of the distribution by multiplying such Exercise Price in effect immediately prior to such fifteenth (15th) Trading Day by the following fraction:

 

	MP0
	MP0+ MPs

 

Where,

 

MP₀ = the average of the Market Prices of the Common Stock over the first (1st) ten (10) Trading Days commencing on and including the fifth (5th) Trading Day following the effective date of such distribution.

 

MP_s = the average of the Market Prices of the capital stock or equity interests representing the portion of the distribution applicable to one share of Common Stock over the first (1st) ten (10) Trading Days commencing on and including the fifth (5th) Trading Day following the effective date of such distribution, or, if not traded on a national or regional securities exchange or over-the-counter market, the fair market value of the capital stock or equity interests representing the portion of the distribution applicable to one share of Common Stock on such date as reasonably determined by the Board of Directors.

 

 

Any adjustment pursuant to this Section 15(d) shall become effective immediately prior to 9:00 a.m., New York City time, on the Ex-Date for such distribution. In the event that such distribution described in this Section 15(d) is not so paid or made, the Exercise Price shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay or make such dividend or distribution, to the Exercise Price that would then be in effect if such dividend or distribution had not been declared.

 

(e)           Cash Distributions. If the Company makes a distribution consisting exclusively of cash to all holders of Common Stock, excluding (i) any cash that is distributed in a Business Combination or as part of a “spin-off” referred to in Section 15(d), (ii) any dividend or distribution in connection with the Company’s liquidation, dissolution or winding-up, and (iii) any consideration payable in connection with a tender or exchange offer made by the Company or any of its Subsidiaries, then in each event, the Exercise Price in effect immediately prior to the Ex-Date for such distribution will be multiplied by the following fraction:

 

	SP0 – DIV
	SP0

 

Where,

 

SP₀ =        the Market Price per share of Common Stock on the Trading Day immediately preceding the Ex-Date.

 

DIV =       the amount per share of Common Stock of the cash distribution, as determined pursuant to the introduction to this Section 15(e).

 

In the event that any distribution described in this Section 15(e) is not so made, the Exercise Price shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such distribution, to the Exercise Price which would then be in effect if such distribution had not been declared.

 

Notwithstanding the foregoing, if “DIV” as set forth above is equal to or greater than “SP₀” as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Warrantholder shall have the right to receive on the date on which the relevant cash dividend or distribution is distributed to holders of Common Stock, for each share of Common Stock issuable upon exercise of this Warrant, the amount of cash such Warrantholder would have received had such Warrantholder owned a number of shares of Common Stock issuable (assuming payment of the Exercise Price in Shares) pursuant to this Warrant on the Ex-Date for such distribution.

 

 

(f)           Self-Tender Offers and Exchange Offers. If the Company or any of its Subsidiaries successfully completes a tender or exchange offer for the Common Stock where the cash and the value of any other consideration included in the payment per share of the Common Stock exceeds the Market Price per share of the Common Stock on the Trading Day immediately succeeding the expiration of the tender or exchange offer, then the Exercise Price will be adjusted by multiplying the Exercise Price in effect at 5:00 p.m., New York City time prior to the commencement of the offer by the following fraction:

 

	OS0 x SP0
	AC + (SP0 x OS1)

 

Where,

 

SP₀ = the Market Price per share of Common Stock on the Trading Day immediately succeeding the commencement of the tender or exchange offer.

 

OS₀ = the number of shares of Common Stock outstanding immediately prior to the expiration of the tender or exchange offer, including any shares validly tendered and not withdrawn.

 

OS¹= the number of shares of Common Stock outstanding immediately after the expiration of the tender or exchange offer (after giving effect to such tender offer or exchange offer).

 

AC = the aggregate cash and fair market value of the other consideration payable in the tender or exchange offer, as reasonably determined by the Board of Directors.

 

Any adjustment made pursuant to this Section 15(f) shall become effective immediately prior to 9:00 a.m., New York City time, on the Trading Day immediately following the expiration of the tender or exchange offer. In the event that the Company or one of its Subsidiaries is obligated to purchase shares of Common Stock pursuant to any such tender offer or exchange offer, but the Company or such Subsidiary is permanently prevented by applicable Law from effecting any such purchases, or all such purchases are rescinded, then the Exercise Price shall be readjusted to be such Exercise Price that would then be in effect if such tender offer or exchange offer had not been made.

 

(g)          Rights Plans. To the extent that the Company has a rights plan in effect with respect to the Common Stock on any exercise date, upon issuance of any Common Stock, the Warrantholders will receive, in addition to the shares of Common Stock, the rights under the rights plan, unless, prior to such exercise date, the rights have separated from the shares of Common Stock, in which case the Exercise Price will be adjusted at the time of separation as if the Company had made a distribution to all holders of Common Stock as described in Section 15(d), subject to readjustment in the event of the expiration, termination or redemption of such rights.

 

(h)          Rounding of Calculations; Minimum Adjustments. All calculations under this Section 15 shall be made to the nearest one-hundredth (1/100th) of a cent or to the nearest one-hundredth (1/100th) of a share, as the case may be. No adjustment in the Exercise Price or the number of Shares into which this Warrant is exercisable shall be made if the amount of such adjustment would be less than $0.01 or one-hundredth (1/100th) of a share of NVCE Stock, but any such amount shall be carried forward and an adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate $0.01 or one-hundredth (1/100th) of a share of NVCE Stock or more.

 

 

(i)            Timing of Issuance of Additional NVCE Stock Upon Certain Adjustments. In any case in which (i) the provisions of this Section 15 shall require that an adjustment shall become effective immediately after a record date (the “Subject Record Date”) for an event, and (ii) the Warrantholder exercises this Warrant after the Subject Record Date and before the consummation of such event, the Company may defer until the consummation of such event, (A) issuing to the Warrantholder or Share Recipient (as applicable) the additional shares of NVCE Stock issuable upon such exercise by reason of the adjustment required by such event and (B) paying to such Warrantholder or Share Recipient (as applicable) any amount of cash in lieu of a fractional share of NVCE Stock; provided, however, that the Company upon request shall deliver to such Warrantholder or Share Recipient a due bill or other appropriate instrument evidencing such Warrantholder’s or Share Recipient’s right to receive such additional shares, and such cash, upon the occurrence of the event requiring such adjustment.

 

(j)            Statement Regarding Adjustments. Whenever the Exercise Price or the number of Shares into which this Warrant is exercisable shall be adjusted as provided in Section 15, the Company shall cause a statement setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof to be delivered the Warrantholder as promptly as practicable after the event giving rise to such adjustment at the address appearing in the Warrant registry.

 

(k)           Notice of Adjustment Event. In the event that the Company shall propose to take any action of the type described in this Section 15 (but only if the action of the type described in this Section 15 would result in an adjustment in the Exercise Price or the number of Shares into which this Warrant is exercisable or a change in the type of securities or property to be delivered upon exercise of this Warrant), the Company shall provide written notice to the Warrantholder, which notice shall specify the record date, if any, with respect to any such action and the approximate date on which such action is to take place. Such notice shall also set forth the facts with respect thereto as shall be reasonably necessary (provided that in no event shall such notice contain any information that, at the time such notice is delivered, the Company reasonably believes to be material, non-public information) to indicate the effect on the Exercise Price and the number, kind or class of shares or other securities or property which shall be deliverable upon exercise of this Warrant. In the case of any action that would require the fixing of a record date, such notice shall be given at least 10 days prior to the date so fixed, and in case of all other action, such notice shall be given at least 15 days prior to the taking of such proposed action. Failure to give such notice, or any defect therein, shall not affect the legality or validity of any such action.

 

(l)            Adjustment Rules. Any adjustments pursuant to this Section 15 shall be made successively whenever an event referred to herein shall occur. If an adjustment in Exercise Price made hereunder would reduce the Exercise Price to an amount below par value of the NVCE Stock, then such adjustment in Exercise Price made hereunder shall reduce the Exercise Price to the par value of the NVCE Stock.

 

 

(m)         Prohibited Actions.

 

(i)            The Company agrees that it will not take any action which would entitle the Warrantholder to an adjustment of the Exercise Price if the total number of shares of NVCE Stock issuable after such action upon exercise of this Warrant, together with all shares of NVCE Stock then outstanding and all shares of NVCE Stock then issuable upon the exercise of all outstanding options, warrants, conversion and other rights, would exceed the total number of shares of NVCE Stock then authorized by the Company Certificate of Incorporation.

 

(ii)            Notwithstanding anything herein to the contrary, no adjustment to the Exercise Price or the number of Shares shall be permitted to the extent that such adjustment would cause the Warrantholder (together with its affiliates or any other party with which the Warrantholder may be aggregated for purposes of the BHC Act, Change in Bank Control Act or any successor or similar law) to own or be deemed to control (A) [•]% or more of any class of voting securities of the Company (unless such holder has obtained approval to own more than 10%, and in such case, the applicable limit shall be 24.9% or such lower number contained in any approval) or (B) one-third or more of the Company’s “total equity,” in each case as interpreted and calculated in accordance the BHC Act, the Change in Bank Control Act, and their implementing regulations, including 12 CFR 225.34.

 

16.          Business Combinations. In case of any Business Combination, the Warrantholder’s right to receive Shares upon exercise of this Warrant shall be converted, effective upon the occurrence of such Business Combination, into the right to acquire the number of shares of stock or other securities or property (including cash) that a holder of the number of Shares immediately prior to such Business Combination would have been entitled to receive upon consummation of such Business Combination (without taking into account any limitations or restrictions on the exercisability of this Warrant). In determining the kind and amount of stock, securities or the property (including cash) receivable upon the occurrence of such Business Combination, if the holders of Common Stock have the right to elect the kind or amount of consideration receivable upon consummation of such Business Combination, then the Warrantholder shall have the right at the same time to make the same election with respect to the number of shares of stock or other securities or property which the Warrantholder would have been entitled to receive upon exercise of this Warrant by providing a written notice of such election to the Company.

 

17.          Transfer Taxes. The Company shall bear and pay any and all transfer taxes, stamp taxes or duties, documentary taxes, or other similar taxes in connection with, or arising by reason of, any issuance or delivery of this Warrant or any shares of NVCE Stock issuable upon exercise of this Warrant; provided that the Company shall not be required to pay any such tax that may be payable in connection with any exercise of this Warrant to the extent such tax is payable because the registered holder of this Warrant requests NVCE Stock to be registered in a name other than such registered holder’s name and no such NVCE Stock will be so registered unless and until the registered holder making such request has paid such taxes to the Company or has established to the satisfaction of the Company that such taxes have been paid or are not payable. The Company and the Warrantholder shall reasonably cooperate to avoid or minimize the imposition of transfer taxes, stamp taxes or duties, documentary taxes, or other similar taxes on the transactions described in the first sentence of this Section 17.

 

 

18.           Withholding. Notwithstanding any other provision of this Warrant, the Company and any applicable withholding agent shall be entitled to deduct and withhold from any amounts otherwise payable to the Warrantholder such amounts as are required to be deducted or withheld with respect to this Warrant under the Code or any other applicable Tax Law. If the Warrantholder is deemed for U.S. federal income Tax purposes to have received a distribution with respect to this Warrant, the Company or any applicable withholding agent may satisfy any resulting applicable withholding obligations (including backup withholding) required by applicable Law imposed in connection with such deemed distribution by withholding from any other payments due to, or amounts of, the Warrantholder.

 

19.           Other Warrants. Following the date hereof, if the Company or any Affiliate of the Company (i) amends any Other Warrant or enters into an agreement in connection with any Other Warrant or (ii) enters into any additional warrant purchase agreement or similar agreement with any other Person for the issuance of Securities or Warrants pursuant to any Other Warrant, (any such document in the foregoing clauses (i) or (ii), a “Warrant Agreement Amendment”), in each case, that that has the effect of establishing rights or otherwise benefiting any purchaser party to any Warrant Agreement Amendment in a manner that is more favorable compared to the rights, benefits and obligations of the Warrantholder under this Warrant, the Company agrees that the Warrantholder shall be entitled to the benefits of such provisions contained in such Warrant Agreement Amendment.

 

20.          Miscellaneous. The provisions of Article VI of the Investment Agreement are hereby incorporated by reference into this Warrant, mutatis mutandis, as if they were restated in full, with each reference to “this Agreement” in such sections of the Investment Agreement being deemed a reference to this Warrant.

 

[Remainder of page intentionally left blank]

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by a duly authorized officer as of the Issue Date.

 

	FIRST FOUNDATION INC.
	By:
		Name:
		Title:
		Address:
	Attest:
	By:
		Name:
		Title:

 

[Signature Page to Warrant]

 

 

 

Acknowledged and Agreed:
[PURCHASER]
By:
Name:
Title:

 

[Signature Page to Warrant]

 

 

[Form of Notice of Exercise]

 

Date: ______________

 

TO:        [__________]

 

FIRST FOUNDATION INC.

 

RE: Election to Subscribe for and Purchase Series C Non-Voting Common Equivalent Stock

 

The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby exercises the Warrant for the number of shares of the Series C Non-Voting Common Equivalent Stock (the “NVCE Stock”) set forth below and directs the Company to issue such shares of NVCE Stock to the Share Recipient set forth below. The undersigned, in accordance with Section 3(b) of the Warrant, hereby agrees to pay the aggregate Exercise Price for such shares (as such price may be adjusted in accordance with Section 15 of the Warrant) of NVCE Stock pursuant to the net settlement provisions of Section 3(b) of the Warrant. A new warrant evidencing the remaining shares of NVCE Stock covered by such Warrant, but not yet subscribed for and purchased, if any, should be issued in the name set forth below.

 

Number of Shares of NVCE Stock Exercised: _______________

 

Share Recipient(s): _______________

 

Number of Shares of NVCE Stock to be Delivered After Application of Net Settlement Provisions of Section 3(b): _______________

 

Name and Address of Person to be Issued New Warrant: ________________________________

 

	Holder:
	By:
	Name:
	Title:

 

[Form of Notice of Exercise]

 

 

[Form of Assignment to be Executed if Warrantholder
Desires to Transfer Warrants Evidenced Hereby]

 

FOR VALUE RECEIVED assigns and transfers unto		hereby sells,
(Please print name) identifying		(Please insert social security or other number)
Address
(City, including zip code)

 

the right to purchase ________ shares of Series C Non-Voting Common Equivalent Stock pursuant to the Warrant represented by the within Warrant Certificate and does hereby irrevocably constitute and appoint _______________ as attorney to transfer said Warrant Certificate with full power of substitution in the premises.

 

		Signature
		(Signature must conform in all respects to name of holder as specified on the face of the Warrant Certificate and must bear a signature guarantee by a bank, trust company or member broker of the New York, Midwest or Pacific Stock Exchange)
Signature Guaranteed

 

[Form of Assignment]

 

 

 

Exhibit 10.1

 

REGISTRATION RIGHTS AGREEMENT

 

by and among

 

First Foundation Inc.

 

and

 

the Purchasers party hereto

 

Dated as of July 8, 2024

 

 

TABLE OF CONTENTS

 

Page

 

Section 1.		Definitions	1
Section 2.		Registration Rights	6
(a)		Shelf Registration Statement	6
(b)		Right to Request Shelf Take-Down	7
(c)		[reserved]	7
(d)		Limitations on Shelf Take-Downs	7
(e)		Piggyback Registration	8
(f)		Selection of Underwriters; Right to Participate	8
(g)		Priority of Securities Offered Pursuant to Underwritten Shelf Take-Downs	9
(h)		Priority of Securities Offered Pursuant to Piggyback Registration	9
(i)		Postponement; Suspensions; Blackout Period	10
(j)		Supplements and Amendments	10
(k)		Subsequent Holder Notice	11
Section 3.		Registration Procedures	11
(a)		Filing and Other Procedures	11
(b)		Conditions to Registration Rights	15
Section 4.		Indemnification	16
(a)		Indemnification by the Company	16
(b)		Indemnification by the Stockholders	17
(c)		Notices of Claims, etc	17
(d)		Contribution	18
(e)		No Exclusivity	18
Section 5.		Covenants Relating to Rule 144	19
Section 6.		Termination; Survival	19
Section 7.		Miscellaneous	19
(a)		Governing Law	19
(b)		Waiver of Jury Trial	20
(c)		Entire Agreement	20
(d)		Amendments and Waivers	20
(e)		Successors and Assigns	21
(f)		Expenses	21
(g)		Counterparts, Execution	21
(h)		Severability	21
(i)		Notices	22
(j)		Specific Performance	22
(k)		Interpretation	23
(l)		Limitations on Subsequent Registration Rights	23
(m)		Further Assurances	23

 

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT, dated as of July 8, 2024 (this “Agreement”), is by and among First Foundation Inc., a Delaware corporation (the “Company”), and the undersigned parties listed as “Purchaser” on the signature pages hereto (each, a “Purchaser” and, collectively, the “Purchasers”).

 

RECITALS

 

WHEREAS, on the date hereof, in accordance with the terms of those certain Investment Agreements, between the Company and each Purchaser (the “Investment Agreements”), the Company issued to the Purchasers (a) an aggregate of 11,308,676 shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”), (b) an aggregate of 44,301 shares of Convertible Preferred Stock (as defined below), convertible into shares of Common Stock in accordance with the terms set forth in the Certificate of Designations, and (c) warrants to purchase an aggregate of 22,239 shares of Series C Preferred Stock (as defined below) (the “Warrants”), in each case in accordance with the terms of the applicable Warrant; and

 

WHEREAS, the Company and the Purchasers are entering into this Agreement in order to grant certain registration rights described herein.

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, and for other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

Section 1.                Definitions. As used herein, the following terms shall have the following meanings:

 

“Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with, such other Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any Person, means the possession, directly or indirectly, of the power to cause the direction of management or policies of such Person, whether through the ownership of voting securities by contract or otherwise, provided that “Affiliate” shall not include any portfolio company of any investment fund affiliated with or managed by such Person. For purposes of this Agreement, (a) the Company and its subsidiaries, on the one hand, and any Stockholder, on the other, shall not be considered Affiliates, and (b) Mubadala, members of the Mubadala Group and other direct or indirect owners of Fortress Investment Group LLC shall not be deemed Affiliates of the Anchor Stockholder or of any of its Affiliates. As used in this definition, “Mubadala” means Mubadala Investment Company PJSC, and “Mubadala Group” means any Person controlling, controlled by or under common control with Mubadala that is not also controlled by Fortress Investment Group LLC.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Anchor Stockholder” means CF 1Foundation Investors LP.

 

 

“As-Converted Basis” means, at any time, the applicable number of shares of Common Stock issued and outstanding, counting as shares of Common Stock issued and outstanding, without duplication, all shares of Common Stock (A) issued and outstanding, (B) into which shares of Convertible Preferred Stock issued and outstanding are convertible, and (C) into which shares of Convertible Preferred Stock issuable upon exercise of Warrants are convertible.

 

“Block Trade” means a registered securities offering in which an underwriter agrees to purchase Registrable Securities at an agreed price or pricing formula without a prior public marketing process (also may be commonly referred to as an overnight transaction).

 

“Board of Directors” means the board of directors of the Company, including, unless the context otherwise requires, any duly authorized committee thereof.

 

“Business Day” means any day, other than a Saturday, Sunday or other day on which banking institutions in the city of New York, New York are required or authorized by Law to be closed.

 

“Certificate of Designations” means, collectively, the Certificate of Designations (Series A), the Certificate of Designations (Series B) and the Certificate of Designations (Series C).

 

“Certificate of Designations (Series A)” means the Certificate of Designations of the Series A Preferred Stock, filed with the Secretary of State of the State of Delaware and effective on July 5, 2024.

 

“Certificate of Designations (Series B)” means the Certificate of Designations of the Series B Preferred Stock, filed with the Secretary of State of the State of Delaware and effective on July 5, 2024.

 

“Certificate of Designations (Series C)” means the Certificate of Designations of the Series C Preferred Stock, filed with the Secretary of State of the State of Delaware and effective on July 5, 2024.

 

“Closing” means the closing of the purchase and sale and issuance of (a) shares of Common Stock, (b) shares of Convertible Preferred Stock and (c) Warrants, in each case, pursuant to the Investment Agreements.

 

“Common Stock” has the meaning set forth in the Recitals.

 

“Company” has the meaning set forth in the Preamble.

 

“Convertible Preferred Stock” means, collectively, the Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock.

 

“End of Suspension Notice” has the meaning set forth in Section 2(i)(i).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

 

 

“Governmental Entity” means any court, administrative agency, commission, regulatory agency or other federal, state, local or foreign governmental authority or instrumentality or any applicable self-regulatory organization.

 

“Investment Agreements” has the meaning set forth in the Recitals.

 

“Law” means any applicable law, statute, code, ordinance, rule, regulation, requirement, policy or order of any Governmental Entity.

 

“Lock Up Period” means the period from the date of Closing to (and including) the one hundred eighty (180) day anniversary of the Closing.

 

“Losses” has the meaning set forth in Section 4(a).

 

“Minimum Amount” means $15 million.

 

“Permitted Reg Rights Holders” means (a) the Anchor Stockholder, (b) each Purchaser and its respective Affiliates and (c) any Person to whom Registrable Securities representing at least 2% of the then-outstanding shares of Common Stock (on an As-Converted Basis) are transferred in accordance with Section 7(e), other than in a transaction that results in such securities ceasing to be Registrable Securities.

 

“Person” means an individual, a corporation, a partnership, an association, a limited liability company, a Governmental Entity, a trust or other entity or organization.

 

“Piggyback Registration” has the meaning set forth in Section 2(e).

 

“Piggyback Stockholder” has the meaning set forth in Section 2(e).

 

“Preferred Stock Registration Event” means the date that is the one hundred and twentieth (120^th) day after the date of issuance of the Convertible Preferred Stock, if the Requisite Stockholder Vote is not obtained by the Company on or prior to such date.

 

“Prospectus” means the prospectus included in any Registration Statement (including a prospectus that discloses information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A under the Securities Act), as amended or supplemented by any prospectus supplement or any issuer free writing prospectus (as defined in Rule 433 under the Securities Act), with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus.

 

“Public Offering” means a public offering and sale of equity securities for cash pursuant to an effective Registration Statement under the Securities Act.

 

“Registrable Securities” means any (a) shares of Common Stock issued pursuant to any Investment Agreement, (b) following the occurrence of a Preferred Stock Registration Event, shares of Convertible Preferred Stock (including Convertible Preferred Stock issuable upon exercise of Warrants), and (c) shares of Common Stock issued or issuable upon conversion of shares of Convertible Preferred Stock and exercise of Warrants, including, in each case, any securities acquired as a result of any reclassification, recapitalization, stock split or combination, exchange or readjustment of such shares of Common Stock or Convertible Preferred Stock or the Warrants, or any stock dividend or stock distribution in respect of such share of Common Stock or Convertible Preferred Stock or the Warrants; provided that such securities shall cease to be Registrable Securities on the earliest to occur of (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such Registration Statement; (B) such securities shall have been sold in accordance with Rule 144 and the restrictive legend shall have been removed; (C) such securities shall have been transferred in a transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of the securities in accordance with the terms hereof; (D) such securities shall have been otherwise transferred, new certificates or book entries credits for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act; (E) such securities have ceased to be outstanding; or (F) with respect to the Stockholders other than the Anchor Stockholder, the date on which Rule 144 (or other similar exemption under the Securities Act then in force) is available for the sale of such shares of Common Stock without regard to volume limitations or manner of sale requirements of Rule 144.

 

 

“Registration Expenses” means all expenses incurred in effecting any registration or any offering and sale pursuant hereto or otherwise incident to the performance of or compliance with this Agreement, whether or not any Registrable Securities are sold under a Registration Statement in connection therewith, including registration, qualification, listing and filing fees (including all SEC, stock exchange and Financial Industry Regulatory Authority, Inc. (“FINRA”) filing fees, as applicable), word processing, printing and copying expenses, messenger, telephone and delivery expenses, all transfer agent and registrar fees and expenses, fees and disbursements of all law firms of the Company and all accountants and other persons retained by the Company (including the expenses of any opinions, audits/reviews or comfort letters and updates thereof required by or incident to such performance), any reasonable fees and disbursements of underwriters customarily paid by issuers or sellers of securities, all fees and expenses of any special experts or other persons retained by the Company in connection with any registration, all expenses related to the “road show” for any underwritten offering, including all travel, meals and lodging, and any blue sky (including reasonable fees and disbursements of counsel to any underwriter incurred in connection with blue sky qualifications of the Registrable Securities as may be set forth in any underwriting agreement) and other securities Laws fees and expenses, as well as all internal fees and expenses of the Company (including all salaries and expenses of its officers and employees performing legal or accounting duties) and any other fees and disbursements customarily paid by the issuers of securities. Notwithstanding anything herein to the contrary, Registration Expenses shall not include Selling Expenses. In addition, in connection with any registration or underwritten offering pursuant hereto, the Company shall pay or reimburse the Stockholders for the reasonable and documented fees and expenses of one (1) nationally recognized law firm, chosen by the holders of a majority of the Registrable Securities included in such registration or underwritten offering (or, in the case of a Block Trade, the Stockholder that initiated such Block Trade), as their counsel, including, for the avoidance of doubt, in connection with any Underwritten Shelf Take-Down or Piggyback Registration and filing of a Shelf Registration Statement; provided that the Company shall not be responsible for any such fees and expenses that exceed $150,000 for the first Underwritten Shelf Take-Down and $100,000 for any subsequent Underwritten Shelf Take-Down, in each case, pursuant hereto. Nothing in this definition shall impact any agreement on expenses solely between the Company and any underwriter.

 

 

“Registration Statement” means any registration statement (including any Shelf Registration Statement) of the Company under the Securities Act which permits the Public Offering of any of the Registrable Securities pursuant to the provisions hereof, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

 

“Requisite Stockholder Vote” has the meaning of such term in the Investment Agreements.

 

“Rule 144” means Rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

 

“Selling Expenses” means all underwriting discounts and selling commissions associated with effecting any sales of Registrable Securities under any Registration Statement by the Stockholders and all stock transfer taxes applicable to the sale or transfer by the Stockholders of Registrable Securities to the underwriter(s) pursuant hereto.

 

“Series A Preferred Stock” means the preferred stock, par value $0.001 per share, of the Company designated as Series A Noncumulative Convertible Preferred Stock, having the terms set forth in that certain Certificate of Designations (Series A).

 

“Series B Preferred Stock” means the preferred stock, par value $0.001 per share, of the Company designated as Series B Noncumulative Convertible Preferred Stock, having the terms set forth in that certain Certificate of Designations (Series B).

 

“Series C Preferred Stock” means the preferred stock, par value $0.001 per share, of the Company designated as Series C Non-Voting Common Equivalent Stock, having the terms set forth in that certain Certificate of Designations (Series C).

 

“Shelf Period” has the meaning set forth in Section 2(a).

 

“Shelf Registration Statement” has the meaning set forth in Section 2(a).

 

“Shelf Take-Down” has the meaning set forth in Section 2(b).

 

 

“Special Registration” means the registration (a) in connection with any employee stock option or other benefit plan, (b) for an exchange offer, as part of a merger, consolidation or similar transaction or for an offering of securities solely to the Company’s existing stockholders, (c) for an offering solely of debt that is convertible into equity securities of the Company, or (d) for a dividend reinvestment plan.

 

“Stockholders” means the Permitted Reg Rights Holders that hold Registrable Securities.

 

“Suspension” has the meaning set forth in Section 2(i)(i).

 

“Suspension Notice” has the meaning set forth in Section 2(i)(i).

 

“Underwritten Shelf Take-Down” has the meaning set forth in Section 2(b).

 

“Underwritten Shelf Take-Down Notice” has the meaning set forth in Section 2(b).

 

“Warrants” has the meaning set forth in the Recitals.

 

Section 2.                Registration Rights.

 

(a)               Shelf Registration Statement. The Company will use its reasonable best efforts to promptly file with the SEC, no later than 150 days following the date of this Agreement, a shelf registration statement on Form S-3 (or successor form) (except if the Company is then ineligible to register for resale the Registrable Securities on Form S-3, such registration shall be on such other form available to register for resale the Registrable Securities as a secondary offering (including Form S-1)) (the “Shelf Registration Statement”) covering the resale of all the Registrable Securities (determined as of two (2) business days prior to such submission or filing) on a delayed or continuous basis and shall use its commercially reasonable efforts to have such Shelf Registration Statement declared effective as soon as reasonably practicable after the filing thereof, but no later than the earlier of (i) 180 days following the date of this Agreement and (ii) the tenth (10th) business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that the Shelf Registration Statement will not be “reviewed” or will not be subject to further review. The Company shall promptly provide any SEC comments received to Stockholders named in such Registration Statement and will promptly respond to any such SEC comments. In the event the Company files the Shelf Registration Statement on a Form S-1, the Company shall use its reasonable best efforts to convert such Form S-1 to a Form S-3 as soon as practicable after the Company is eligible to use Form S-3. Such Shelf Registration Statement shall provide for the resale of the Registrable Securities included therein pursuant to any method or combination of methods legally available to, and requested by, any Stockholder named therein. The Shelf Registration Statement may also cover any other securities of the Company and other holders of the Company’s securities; provided that, for the avoidance of doubt, such other holders shall not be entitled to the rights of “Stockholders” hereunder. The Company shall maintain the continuous effectiveness of the Shelf Registration Statement for the maximum period permitted by SEC rules, subject to any Suspension that may occur as described in Section 2(i), and shall promptly prepare and file with the SEC such amendments, including post-effective amendments, and supplements as may be necessary to keep a Shelf Registration Statement effective until such time as there are no longer any Registrable Securities outstanding (such period during which a Shelf Registration Statement is effective, the “Shelf Period”). The Company shall use its reasonable best efforts to promptly replace any Shelf Registration Statement at or before expiration, if applicable, with a successor effective Shelf Registration Statement until such time as there are no longer any Registrable Securities outstanding.

 

 

(b)               Right to Request Shelf Take-Down. At any time and from time to time during the Shelf Period, one or more Stockholders may, by written notice to the Company, request an offering pursuant to the Shelf Registration Statement of all or part of the Registrable Securities held by such Stockholders (a “Shelf Take-Down”). Any Stockholder may, after any Shelf Registration Statement becomes effective, deliver a written notice to the Company (the “Underwritten Shelf Take-Down Notice”) specifying that a Shelf Take-Down is intended to be conducted through an underwritten offering (including by means of a Block Trade) (such underwritten offering, an “Underwritten Shelf Take-Down”), which notice shall specify the number and type of Registrable Securities intended to be included in such Underwritten Shelf Take-Down and the intended method(s) of distribution thereof; provided that the Stockholders may not, without the Company’s prior written consent, request an Underwritten Shelf Take-Down the reasonably anticipated aggregate gross proceeds of which shall be less than the Minimum Amount, unless the number of Registrable Securities to be sold in such offering represents all of such Stockholder’s remaining Registrable Securities. The Company and the Stockholders participating in an Underwritten Shelf Take-Down will enter into an underwriting agreement (including a customary lock-up, not to exceed ninety (90) days, if requested by the managing underwriter(s) in customary form with the managing underwriter(s) selected for such offering). The Company may include in any Underwritten Shelf Take-Down (other than a Block Trade) pursuant to this Section 2(b) any additional securities of the same class without the prior written consent of the Stockholders participating in the Underwritten Shelf Take Down. Notwithstanding anything to the contrary herein, (A) if a Stockholder wishes to engage in (i) a Shelf Take-Down in the form of a Block Trade, (1) such Stockholder shall notify the Company of the Block Trade not less than three (3) Business Days prior to the day such Block Trade is to commence, (2) Persons other than the Stockholder shall not be entitled to make a demand for, receive notice of, or elect to participate in, such Block Trade and (3) such Stockholder shall not be required to notify any other Person (except the Anchor Stockholder) of such Block Trade or permit any other Person to participate in such Block Trade, or (ii) a Shelf Take-Down that is not an Underwritten Shelf Take-Down, (1) such Shelf Take-Down may be made for less than the Minimum Amount, (2) Persons other than the Anchor Stockholder shall not be entitled to make a demand for, receive notice of, or elect to participate in, such Shelf Take-Down and (3) such Stockholder shall not be required to notify any other Person of such Shelf Take-Down or permit any other Person to participate in such Shelf Take-Down, and (B) any Stockholder not included in a Block Trade shall not be subject to any underwriter lock-up or be required to enter into or sign any lock-up in connection with such Block Trade. Notwithstanding anything to the contrary contained herein, the Company will not be in breach of this Agreement if an underwriter will not agree to the lock-up terms required by this Section 2(b).

 

(c)               [reserved].

 

(d)               Limitations on Shelf Take-Downs. Following the expiration of the Lock Up Period, the Stockholders shall be entitled to request a maximum of three (4) Underwritten Shelf Take-Downs (including Block Trades) pursuant to Section 2(b); provided that the Company shall not be obligated to effect any Underwritten Shelf Take-Down (including a Block Trade) within ninety (90) days after the pricing date of a previous Underwritten Shelf Take-Down, in each case, that is a marketed underwritten deal (for the avoidance of doubt, excluding a Block Trade). Any Underwritten Shelf Take-Down (including a Block Trade) must be for at least the Minimum Amount, unless the number of Registrable Securities to be sold in such offering represents all of the remaining Registrable Securities of the initiating Stockholder. Notwithstanding anything to the contrary herein, Stockholders shall be entitled to an unlimited number of Shelf Take-Downs that are not Underwritten Shelf-Take Downs and such Shelf Take-Downs may be made for less than the Minimum Amount (for the avoidance of doubt, in the case of such non-underwritten Shelf-Take Downs, the Company shall not be required to perform the obligations applicable to underwritten offerings as set forth in Section 3).

 

 

(e)               Piggyback Registration. If the Company proposes or is required to file a registration statement under the Securities Act with respect to an offering of Common Stock or similar equity securities of the Company, or the Company proposes a shelf take-down (other than (i) a Block Trade or (ii) an at-the-market offering), whether for its own account or for the account of one or more securityholders of the Company, on a form and in a manner that would permit registration of the Registrable Securities, other than any Special Registration, the Company shall give written notice as promptly as practicable, but not later than ten (10) days prior to the anticipated date of filing of such Registration Statement, or in the case of a shelf take-down, no later than five (5) days prior to the anticipated shelf take-down, to the Stockholders of its intention to effect such registration or shelf take-down and, in the case of each Stockholder, shall include in such registration or shelf take-down all of such Stockholder’s Registrable Securities (subject to Section 2(h)) with respect to which the Company has received a written request from such Stockholder for inclusion therein within three (3) days after the Company’s notice is given to such Stockholder (a “Piggyback Registration” and any such requesting Stockholder that has not withdrawn its Registrable Securities from such Piggyback Registration, a “Piggyback Stockholder” with respect to such Piggyback Registration). In the event that a Stockholder makes such written request, such Stockholder may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter(s), if any, at any time at least two (2) Business Days prior to the effective date of the Registration Statement relating to such Piggyback Registration or the date of the launch of the shelf take-down. The Company may postpone (provided that Piggyback Stockholders are given the option to withdraw their Registrable Securities from such postponed Piggyback Registration), terminate or withdraw any Piggyback Registration under this Section 2(e), whether or not any Stockholder has elected to include Registrable Securities in such registration. No Piggyback Registration shall count as an Underwritten Shelf Take-Down to which the Stockholders are entitled.

 

(f)                Selection of Underwriters; Right to Participate. The Stockholders delivering the Underwritten Shelf Take-Down Notice shall (as determined by holders of a majority of the Registrable Securities proposed to be included in the Underwritten Shelf Take-Down) shall have the right to select the managing underwriter(s) to administer an Underwritten Shelf Take-Down; provided that such managing underwriter(s) are reasonably acceptable to the Company. If a Piggyback Registration under Section 2(e) hereof is proposed to be underwritten, the Company shall so advise the Stockholders as a part of the written notice given pursuant to Section 2(e) hereof. In such event, the managing underwriter(s) to administer the offering shall be chosen solely by the Company. A Stockholder may participate in a registration or offering hereunder only if such Stockholder agrees to sell such Registrable Securities on the basis provided in any underwriting agreement with the underwriter(s) and completes and executes all customary questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up agreements and other documents reasonably requested by the Company or the managing underwriter(s) under the terms of such underwriting arrangements customary for selling Stockholders to enter into in secondary underwritten public offerings; provided that the Stockholders shall only be required to make representations and warranties to the Company or the underwriters that are customary for such offerings under the circumstances (in no event, however, will the Stockholders be required to represent to the accuracy of the Company’s disclosure, other than information specifically related to such Stockholder’s ownership position (including the lack of liens on such shares), the number of Registrable Securities proposed to be sold by such Stockholder and the name and address of such Stockholder). Notwithstanding anything to the contrary herein, any underwriting agreement shall contain such representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of the Stockholders as are customarily made by issuers to selling Stockholders in secondary underwritten public offerings.

 

 

(g)               Priority of Securities Offered Pursuant to Underwritten Shelf Take-Downs. If the managing underwriter(s) of an offering pursuant to an Underwritten Shelf Take-Down shall advise the Company and the Stockholders in writing that, in its good faith opinion, the total number or dollar amount of shares of Common Stock requested to be included in such Underwritten Shelf Take-Down exceeds the number or dollar amount that can be sold in such offering without having an adverse effect on such offering, including the price at which such shares can be sold, then the Company shall include in such Underwritten Shelf Take-Down the maximum number of shares that such underwriter advises can be so sold without having such adverse effect, allocated (i) first, to Registrable Securities requested by the Stockholders to be included in such Underwritten Shelf Take-Down, pro rata among all such Stockholders on the basis of the number of Registrable Securities held by such Stockholders, (ii) second, if the maximum number of shares that such underwriter advises can be so sold without having such adverse effect is not reached under the foregoing subclause (i), to any securities requested to be included therein by the Company and (iii) third, if the maximum number of shares that such underwriter advises can be so sold without having such adverse effect is not reached under the foregoing subclauses (i) and (ii), to any securities requested to be included therein by any other Persons, allocated among such Persons on a pro rata basis or in such other manner as they may agree.

 

(h)               Priority of Securities Offered Pursuant to Piggyback Registration. If the managing underwriter(s) of a registration of shares of Common Stock giving rise to a right to Piggyback Registration shall advise the Company and the Piggyback Stockholders with respect to such Piggyback Registration in writing that, in its good faith opinion, the total number or dollar amount of shares of Common Stock proposed to be sold in such offering and Registrable Securities requested by such Piggyback Stockholders to be included therein, in the aggregate, exceeds the number or dollar amount that can be sold in such offering without having an adverse effect on such offering, including the price at which such shares can be sold, then the Company shall include in such registration the maximum number of shares that such underwriter advises can be so sold without having such adverse effect, allocated, if the Piggyback Registration is initiated as an underwritten:

 

 

(i)                  primary offering for the account of the Company: (w) first, to shares of Common Stock to be included by the Company, (x) second, if the maximum number of shares that such underwriter advises can be so sold without having such adverse effect is not reached under the foregoing subclause (w), among the Registrable Securities requested to be included therein by the Stockholders, pro-rata among such Stockholders on the basis of Registrable Securities then held by such Stockholders, (y) third, if the maximum number of shares that such underwriter advises can be sold without having such adverse effect is not reached under the foregoing subclauses (w) and (x), among securities requested to be included therein by other securityholders with applicable registration rights, pro rata among such Persons on the basis of the number of shares requested to be included therein by each of them, and (z) fourth, if the maximum number of shares that such underwriter advises can be so sold without having such adverse effect is not reached under the foregoing subclauses (w), (x) and (y), among the securities requested to be included therein by other securityholders, pro rata among such Persons on the basis of the number of shares requested to be included therein by each of them or in such other manner as they may agree; and

 

(ii)                 offering for the account of holder(s) of the Company’s securities other than the Company: (v) first, among the securities requested to be included therein by such holder who initiated the Piggyback Registration, (w) second, if the maximum number of shares that such underwriter advises can be so sold without having such adverse effect is not reached under the foregoing subclause (v), among the Registrable Securities requested to be included therein by the Stockholders, pro-rata among such Stockholders on the basis of Registrable Securities then held by such Stockholders, (x) third, if the maximum number of shares that such underwriter advises can be sold without having such adverse effect is not reached under the foregoing subclauses (v) and (w), among securities requested to be included therein by other securityholders with applicable registration rights, pro rata among such Persons on the basis of the number of shares requested to be included therein by each of them, (y) fourth, if the maximum number of shares that such underwriter advises can be so sold without having such adverse effect is not reached under the foregoing subclauses (v), (w) and (x), to any securities requested to be included therein by the Company and (z) fifth, if the maximum number of shares that such underwriter advises can be so sold without having such adverse effect is not reached under the foregoing subclauses (v), (w), (x), and (y), to any securities requested to be included therein by any other Persons, allocated among such Persons on a pro rata basis or in such other manner as they may agree.

 

(i)                 Postponement; Suspensions; Blackout Period.

 

    (i)              The Company may postpone the filing or the effectiveness of a Shelf Registration Statement or the commencement of a Shelf Take-Down (or suspend the continued use of a Shelf Registration Statement), including requiring the Stockholders to suspend any offerings of Registrable Securities pursuant hereto (a “Suspension”), (A) for a period of up to three (3) days following the date on which the Company files information with the SEC that must be incorporated by a post-effective amendment to the Shelf Registration Statement; provided that such post-effective amendment must be filed promptly following such date, (B) during the pendency of a stop order issued by the SEC suspending the use of any registration statement of the Company or proceedings initiated by the SEC with respect to any such registration statement under Section 8(d) or 8(e) of the Securities Act or (C) if, based on the good faith judgment of the Board of Directors, such postponement or suspension is necessary in order to avoid materially detrimental disclosure of material non-public information that the Board of Directors, after consultation with outside counsel to the Company, has in good faith determined (1) would be required to be made in any Shelf Registration Statement so that such Registration Statement does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (2) would not be required to be made at such time but for the filing or continued use of such Registration Statement, and (3) the Company has a bona fide business purpose for not disclosing publicly, and the Company delivers to the Stockholders participating in such registration notice (a “Suspension Notice”) of the Company’s determination to postpone or suspend use of the Shelf Registration Statement, as applicable; provided that, in each case, the Stockholders requesting a Shelf Take-Down shall be entitled, at any time after receiving a Suspension Notice or similar notice and before such Shelf Take-Down is commenced, to withdraw such request and, if such request is withdrawn, the Company shall pay all expenses incurred by the Stockholders, including fees of one legal counsel (subject to the caps contained herein), in connection with such withdrawn registration and such Shelf Take-Down shall not count against the number of Underwritten Shelf Take-Downs permitted pursuant to Section 2(d). If Stockholders otherwise withdraw a request for a Shelf Take-Down, other than following the receipt of a Suspension Notice, the Stockholders shall pay all expenses incurred by the Stockholders, including fees of legal counsel, in connection with such withdrawn registration and such Shelf Take-Down shall not count as an Underwritten Shelf Take-Down; provided that, at the option of the Stockholders, the Company shall pay all expenses incurred by the Stockholders, including fees and one legal counsel (subject to the caps contained herein), in connection with such withdrawn registration if such Shelf Take-Down counts against the number of Underwritten Shelf Take-Downs pursuant to Section 2(d). The Company shall provide prompt written notice to the Stockholders (an “End of Suspension Notice”) of (x) the fact that the circumstances giving rise to such Suspension no longer exist, (y) the Company’s decision to commence such Shelf Take-Down following such Suspension and (z) the commencement of such Shelf Take-Down. Notwithstanding the provisions of this Section 2(i)(i), with respect to Section 2(i)(i)(C), the Company shall not effect any Suspension(s) more than two (2) times during any twelve (12)-month period or for more than sixty (60) consecutive calendar days or for a period in the aggregate exceeding ninety (90) calendar days in any twelve (12)-month period. No Stockholder shall effect any sales of shares of Common Stock pursuant to a Shelf Registration Statement at any time after it has received a Suspension Notice from the Company and prior to receipt of an End of Suspension Notice. The Company may not effect any other Registration Statement during the term of any Suspension.

 

(ii)                 Each Stockholder agrees that, except as required by Law, it shall treat as confidential the receipt of any Suspension Notice; provided that in no event shall such Suspension Notice contain any material nonpublic information of the Company (other than the existence of such Suspension Notice).

 

(j)                Supplements and Amendments. The Company shall supplement and amend any Shelf Registration Statement if required by the Securities Act or the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement.

 

 

(k)               Subsequent Holder Notice. If a Person becomes entitled to the benefits of this Agreement as a Stockholder pursuant to Section 7 after a Shelf Registration Statement becomes effective under the Securities Act, the Company shall, as promptly as practicable, following delivery of written notice to the Company of a request for such Person’s name to be included as a selling securityholder in the prospectus related to the Shelf Registration Statement:

 

(i)                  if required and permitted by Law, file with the SEC a supplement to the related prospectus or a post-effective amendment to the Shelf Registration Statement so that such Person is named as a selling securityholder in the Shelf Registration Statement and the related prospectus in such a manner as to permit such Person to deliver a prospectus to the purchaser of the Registrable Securities in accordance with Law;

 

(ii)                 if, pursuant to Section 3(a)(ii), the Company shall have filed a post-effective amendment to the Shelf Registration Statement that is not automatically effective, use its reasonable best efforts to cause such post-effective amendment to become promptly effective under the Securities Act; and

 

(iii)                promptly notify the Stockholders after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 3(a)(ii); provided that the Company shall not be required to file more than one (1) post-effective amendment or supplement to the related prospectus pursuant to this Section 2(k) for any fiscal quarter.

 

Section 3.                Registration Procedures.

 

(a)               Filing and Other Procedures. If and whenever the Company is required to use its reasonable best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Section 2, the Company shall effect such registration to permit the sale of such Registrable Securities in accordance with the intended method(s) of disposition thereof, and pursuant thereto the Company shall cooperate in the sale of the securities and shall, as promptly as practicable:

 

(i)                  prepare and file with the SEC as promptly as reasonably practicable, but no later than five (5) days after a request for an Underwritten Shelf Take-Down, subject to the postponement provisions herein, the post-effective amendments and supplements to a Shelf Registration Statement, and the Prospectus used in connection therewith or any free writing prospectus (as defined in SEC rules) as may be required by applicable securities Laws or reasonably requested by the Stockholders or any managing underwriter(s), to effect such registration and, subject to the efforts standard herein, cause such Registration Statement to become effective, and provide copies of all such documents proposed to be filed or furnished to (A) counsel of the Stockholders, and provide such legal counsel a reasonable opportunity to review and comment on such documents (other than Exchange Act reports incorporated by reference thereto not related to such offering), and (B) the other representative(s) on behalf of the Stockholders included in such Registration Statement (to be chosen by the Stockholders) and any managing underwriter(s), and the representative(s) and the managing underwriter(s) and their respective counsel shall have the reasonable opportunity to review and comment thereon, and the Company will make such changes and additions thereto as may reasonably be requested by such counsel and the representative(s) and the managing underwriter(s) and their respective counsel prior to such filing, unless the Company reasonably objects to such changes or additions;

 

 

(ii)                 prepare and file with the SEC such pre-and post-effective amendments and supplements to a Shelf Registration Statement, and the Prospectus used in connection therewith or any free writing prospectus (as defined in SEC rules) as may be required by applicable securities Laws or reasonably requested by the Stockholders or any managing underwriter(s) to maintain the effectiveness of such registration and to comply with the provisions of applicable securities Laws with respect to the disposition of all securities covered by such registration statement during the period in which such Registration Statement is required to be kept effective, and before filing such amendments or supplements, provide copies of all such documents proposed to be filed or furnished to counsel of such Stockholders, which documents shall be subject to the review and comment of such counsel (other than Exchange Act reports incorporated by reference thereto not related to such offering);

 

(iii)                furnish to each Stockholder of the securities being registered and each managing underwriter without charge, such reasonable number of conformed copies of such Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits other than those which are being incorporated into such Registration Statement by reference and that are publicly available), such reasonable number of copies of the Prospectus contained in such Registration Statement and any other Prospectus filed under Rule 424 under the Securities Act in conformity with the requirements of the Securities Act, and such other documents, as the Stockholders and any managing underwriter(s) may reasonably request;

 

(iv)               use its reasonable best efforts to register or qualify all Registrable Securities under such other securities or “blue sky” Laws of such jurisdictions as the Stockholders and any managing underwriter(s) may reasonably request; provided that the Company shall not for any such purpose be required to qualify generally to do business as a foreign company in any jurisdiction where it would not otherwise be required to qualify but for this Section 3, or to consent to general service of process in any such jurisdiction, or to be subject to any tax obligation in any such jurisdiction where it is not then so subject;

 

(v)                as promptly as reasonably practicable, notify the Stockholders and any managing underwriter(s) at any time when the Company becomes aware that a Prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, and, to, as promptly as is reasonably practicable, prepare and furnish without charge to the Stockholders and any managing underwriter(s) a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the purchaser of such securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made;

 

 

(vi)                provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such Registration Statement not later than the effective date of such Registration Statement;

 

(vii)              use its reasonable best efforts to list all Registrable Securities covered by such Registration Statement on the principal securities exchange on which any such class of securities is then listed and cause to be satisfied all requirements and conditions of such securities exchange to the listing of such securities that are reasonably within the control of the Company;

 

(viii)              notify each Stockholder and any managing underwriter(s), as soon as is reasonably practicable after it shall receive notice thereof, of the time when such Registration Statement, or any post-effective amendments to the Registration Statement, shall have become effective, after it shall receive notice thereof;

 

(ix)                to make available to each Stockholder whose Registrable Securities are included in such Registration Statement and any managing underwriter(s) as soon as reasonably practicable after the same is prepared and distributed, filed with the SEC, or received by the Company, an executed copy of each letter written by or on behalf of the Company to the SEC or the staff of the SEC (or other governmental agency or self-regulatory body or other body having jurisdiction, including any domestic or foreign securities exchange), and any item of correspondence received from the SEC or the staff of the SEC (or other governmental agency or self-regulatory body or other body having jurisdiction, including any domestic or foreign securities exchange), in each case relating to such Registration Statement, it being understood that each Stockholder receiving such material from the Company that is confidential shall and shall cause its Affiliates and representatives to keep such materials confidential. The Company shall as soon as reasonably practicable (A) notify the Stockholders and any managing underwriter(s) of the effectiveness of such Registration Statement or any post-effective amendment or the filing of the prospectus supplement contemplated herein, (B) respond reasonably and completely to any and all comments received from the SEC or the staff of the SEC, with a view towards causing such Registration Statement or any amendment thereto to be declared effective by the SEC as soon as reasonably practicable, and (C) file an acceleration request following the resolution or clearance of all SEC comments or, if applicable, following notification by the SEC that any such Registration Statement or any amendment thereto will not be subject to review;

 

(x)                 advise each Stockholder and any managing underwriter(s), promptly after it shall receive notice or obtain knowledge thereof, of (A) the issuance of any stop order, injunction or other order or requirement by the SEC suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and use its reasonable best efforts to prevent the issuance of any stop order, injunction or other order or requirement or to obtain its withdrawal if such stop order, injunction or other order or requirement should be issued, (B) the suspension of the registration of the subject shares of the Registrable Securities in any state jurisdiction and (C) the removal of any such stop order, injunction or other order or requirement or proceeding or the lifting of any such suspension;

 

 

(xi)                in connection with a customary due diligence review, make available for inspection by one representative on behalf of each Stockholder whose Registrable Securities are included in such registration statement and any managing underwriter(s), and any attorney, accountant or other agent retained by, or other representative of, any such Stockholder or underwriter, at reasonable times and in a reasonable manner, all pertinent financial and other records and corporate documents of the Company, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such Stockholder, underwriter(s), attorney, accountant or agent to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act that is customary for a participant in a securities offering in connection with such registration statement; provided that the foregoing investigation and information gathering shall be coordinated on behalf of such parties by one (1) firm of counsel designated by and on behalf of such parties, and that any information that is not generally publicly available at the time of delivery of such information shall be kept confidential by such parties pursuant to customary confidentiality agreements;

 

(xii)               if requested by any Stockholder or any managing underwriter(s), as promptly as is reasonably practicable, incorporate in a prospectus supplement or post-effective amendment such information as such Stockholder or managing underwriter(s) reasonably requests to be included therein, including with respect to the Registrable Securities being sold by such Stockholder, the purchase price being paid therefor by any underwriter(s) and with respect to any other terms of an underwritten offering of the Registrable Securities to be sold in such offering, and as promptly as is reasonably practicable, make all required filings of such prospectus supplement or post-effective amendment;

 

(xiii)              reasonably cooperate with each Stockholder and any managing underwriter(s) participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA;

 

(xiv)              in the case of an underwritten offering, (1) enter into such customary agreements (including an underwriting agreement in customary form), (2) take all such other customary actions as the managing underwriter(s) reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including causing senior management and other Company personnel to reasonably cooperate with the Stockholder(s) whose Registrable Securities are included in a Registration Statement and the underwriter(s) in connection with performing customary due diligence and the customary marketing of such offering, including management presentations, investor calls and road show presentations, subject to the limitations on marketed offerings contained herein) and (3) cause its counsel to issue opinions of counsel addressed and delivered to the underwriter(s) in form, substance and scope as are customary in underwritten offerings, subject to customary limitations, assumptions and exclusions;

 

(xv)               if requested by the managing underwriter(s) of an underwritten offering, use its reasonable best efforts to cause to be delivered, upon the pricing of any underwritten offering, and at the time of closing of a sale of Registrable Securities pursuant thereto, “comfort” letters from the Company’s independent registered public accountants addressed to the underwriter(s), and otherwise in customary form and covering such financial and accounting matters as are customarily covered by “comfort” letters of the independent registered public accountants delivered at pricing or closing, as applicable, in connection with primary underwritten public offerings; provided that such recipients furnish such written representations or acknowledgements as are customarily required to receive such comfort letters; and

 

 

(xvi)              the Company agrees not to file or make any amendment to any Registration Statement with respect to any Registrable Securities, or any amendment of or supplement to the prospectus, or any free writing prospectus, which amendment refers to any Stockholder covered thereby by name, or otherwise identifies such Stockholder, without the consent of such Stockholder, such consent not to be unreasonably withheld or delayed, unless such disclosure is required by Law, in which case the Company shall provide written notice to such Stockholders no less than two (2) Business Days prior to the filing.

 

(b)               Conditions to Registration Rights.

 

   (i)               As a condition precedent to the obligations of the Company to file any Registration Statement, each Stockholder shall furnish in writing to the Company such information regarding such Stockholder (and any of its Affiliates), the Registrable Securities to be sold and the intended method of distribution of such Registrable Securities reasonably requested by the Company as is reasonably necessary for inclusion in the Registration Statement relating to such offering pursuant to the Securities Act; provided that the Company shall only use such information in connection with such registration or related offering. Notwithstanding the foregoing, in no event will any party be required to disclose to any other party any personally identifiable information or personal financial information in respect of any individual.

 

   (ii)              Each Stockholder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in (x) Section 3(a)(ii) or (v), such Stockholder shall forthwith discontinue its disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such Stockholder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(a)(ii) or (v); (y) clause (A) of Section 3(a)(x), such Stockholder shall discontinue its disposition of Registrable Securities pursuant to such registration statement until such Stockholder’s receipt of the notice described in clause (C) of Section 3(a)(x); and (z) clause (B) of Section 3(a)(x), such Stockholder shall discontinue its disposition of Registrable Securities pursuant to such registration statement in the applicable state jurisdiction(s) until such Stockholder’s receipt of the notice described in clause (C) of Section 3(a)(x). The length of time that any registration statement is required to remain effective shall be extended by any period of time that such registration statement is unavailable for use pursuant to this paragraph; provided that in no event shall any Registration Statement be required to remain effective after there are no longer any Registrable Securities outstanding.

 

    (iii)            If requested by the managing underwriter(s), each Stockholder that (A) beneficially owns at least 5% of the Common Stock (on an As-Converted Basis) and (B) was offered the opportunity to participate in a marketed underwritten offering, shall enter into a customary lockup agreement not to exceed ninety (90) days in respect of such underwritten offering by the Company; provided that the Company shall cause each of its executive officers and directors and shall use its reasonable best efforts to cause any other holders of Common Stock that beneficially own at least 5% of the Common Stock (on an As-Converted Basis) (excluding any passive investors) and were offered the opportunity to and elects to participate in such marketed underwritten offering, to enter into lockup agreements that contain restrictions that are no less restrictive than the restrictions contained in the lockup agreements executed by the Stockholders; provided, further, that if such lockup agreement is released or waived for any of the Company’s executive officers or directors or other holders of Common Stock that beneficially own at least 5% of the Common Stock (on an As-Converted Basis), the Stockholders shall receive a comparable release or waiver on a pro rata basis. The Stockholders acknowledge that (i) the Company may be subject to a lock-up with the managing underwriter(s) in connection with any underwritten offering by the Company, whether or not a Stockholder participated in the last Underwritten Shelf Take-Down, and (ii) the Company will use its reasonable best efforts to cause itself not to be subject to any lock-up with the requesting underwriter(s) in a Block Trade.

 

 

Section 4.                Indemnification.

 

(a)               Indemnification by the Company. The Company agrees to indemnify, hold harmless and reimburse, to the fullest extent permitted by Law, each Stockholder, its Affiliates, partners, officers, directors, employees, advisors, representatives and agents and each Person, if any, who controls such Stockholder within the meaning of the Securities Act or the Exchange Act, against any and all losses, penalties, liabilities, claims, damages and expenses, joint or several (including reasonable and documented attorneys’ fees and any expenses and reasonable and documented costs of investigation) (“Losses”), as incurred, to which the Stockholders or any such indemnitees may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement under which such Registrable Securities were registered and sold under the Securities Act, any Prospectus contained therein, or any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided that the Company shall not be liable in any such case to the extent that any Loss arises out of or is based upon an untrue statement or alleged statement or omission or alleged omission made in such Registration Statement, any such Prospectus, amendment or supplement in reliance upon and in conformity with written information about a Stockholder that is furnished to the Company by such Stockholder or its authorized representative expressly for use therein, it being understood and agreed that the only such information furnished by any Stockholder for any purpose of this Agreement (including Section 4(b)) consists of the number of shares of Common Stock owned by such Stockholder, the number of Registrable Securities proposed to be sold by such Stockholder and the name and address of such Stockholder or (ii) any violation (or alleged violation) by the Company of the Securities Act, the Exchange Act, any state securities laws or any rule or regulation thereunder in connection with any registration or offering hereunder. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Stockholder or any indemnified party and shall survive the transfer of such securities by such Stockholder.

 

 

(b)               Indemnification by the Stockholders. Each Stockholder agrees to indemnify, hold harmless and reimburse, to the fullest extent permitted by Law (in the same manner and to the same extent as set forth in Section 4(a)), the Company, its Affiliates, officers, directors, and each Person, if any, who controls any of the foregoing within the meaning of the Securities Act or the Exchange Act, with respect to any untrue statement or alleged untrue statement of a material fact in or omission or alleged omission to state a material fact from such Registration Statement, any Prospectus contained therein, or any amendment or supplement thereto, to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information about such Stockholder furnished to the Company by such Stockholder or its authorized representative expressly for inclusion therein, it being understood and agreed that the only such information furnished by any Stockholder consists of the information described as such in Section 4(a); provided that a Stockholder shall not be liable for any amounts in excess of the net proceeds received by such Stockholder from sales of Registrable Securities pursuant to the Registration Statement to which the claims relate; provided, further, that the obligations of the Stockholders shall be several and not joint and several. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any indemnified party and shall survive the transfer of such securities by the Company.

 

(c)               Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraphs of this Section 4, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, give written notice to such indemnifying party of the commencement of such action or proceeding; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 4, except to the extent that the indemnifying party is prejudiced by such failure to give notice. In case any such action or proceeding is brought against an indemnified party, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, such indemnified party shall permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (i) the indemnifying party has agreed to pay such fees or expenses, (ii) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person within a reasonable time after receipt of notice of such claim from the person entitled to indemnification hereunder or (iii) in the indemnified party’s reasonable judgment (based upon advice of its counsel) there may be material legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party or a conflict of interest may exist between it or other indemnified parties and the indemnifying party with respect to any such claim. If such defense is not assumed by the indemnifying party as permitted hereunder, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent. If such defense is assumed by the indemnifying party pursuant to the provisions hereof, such indemnifying party shall not settle or otherwise compromise, except with the consent of the indemnified party, unless (x) such settlement or compromise (i) contains a full and unconditional release of all indemnified parties of all liability in respect of or arising out of all such claims or proceedings that are the subject matter of such proceeding and all claims and proceedings in respect of which the indemnified party could have been subject to claims or proceedings based upon the actions or inactions underlying such claims or proceedings, (ii) imposes no liability or obligation on the indemnified party, (iii) does not contain any statement of wrongdoing, culpability, malfeasance or fault by or on behalf of the indemnified party and (iv) provides only for a cash payment that is paid in full by the indemnifying party or (y) the indemnified party otherwise consents in writing. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel (plus local counsel) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party, a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the reasonable fees and disbursements of such additional counsel or counsels. The indemnifying party shall not be liable for any settlement of any proceeding effected without its prior written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment.

 

 

(d)               Contribution. If the foregoing indemnity is held by a Governmental Entity of competent jurisdiction to be unavailable to the Company or any Stockholder, or is insufficient to hold harmless an indemnified party, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of the Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, and the relative benefits received by the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation. In connection with any registration statement filed with the SEC by the Company, the relative fault of the indemnifying party on the one hand and of the indemnified party on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party, and by such party’s relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding the provisions of this Section 4, no Stockholder shall be required to contribute an amount greater than the net proceeds received by such Stockholder from sales of Registrable Securities pursuant to the Registration Statement to which the claims relate (after taking into account the amount of damages which such Stockholder has otherwise been required to pay by reason of any and all untrue or alleged untrue statements of material fact or omissions or alleged omissions of material fact made in any Registration Statement or Prospectus or any amendment thereof or supplement thereto related to such sale of Registrable Securities).

 

(e)               No Exclusivity. The remedies provided for in this Section 4 are not exclusive and shall not limit any rights or remedies which may be available to any indemnified party at Law or in equity or pursuant to any other agreement.

 

 

Section 5.                Covenants Relating to Rule 144. The Company shall use its reasonable best efforts to (x) timely file all reports and other documents required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations promulgated by the SEC thereunder (provided, that if the Company is not required to file such reports, it will, upon the request of any Stockholder, make publicly available such information as necessary to permit sales pursuant to Rule 144 under the Securities Act), and (y) take such further action as any Stockholder may reasonably request in writing, in each case, to the extent required from time to time to enable such Stockholder to, if permitted by the terms of this Agreement, the applicable Investment Agreement and the Registrable Securities, transfer such Registrable Securities without registration under the Securities Act within the limitations of the exemptions provided by (a) Rule 144 or Regulation S under the Securities Act, as such rules may be amended from time to time, or (b) any successor rule or regulation hereafter adopted by the SEC. Upon the written request of any Stockholder, the Company will deliver to such Stockholder a written statement that it has complied with such requirements, subject to its compliance with such requirements. The Company shall, upon any request by a Stockholder in connection with a sale, transfer or other disposition by any Stockholder of any Registrable Securities permitted by Rule 144, (i) use its reasonable best efforts to promptly (and in no event longer than five (5) Business Days after such request) cause the removal of any restrictive legend or similar restriction on the Registrable Securities, and, in the case of book-entry shares, make or cause to be made appropriate notifications on the books of the Company’s transfer agent for such number of shares and registered in such names as the Stockholders may reasonably request and (ii) provide a customary opinion of counsel and instruction letter required by the Company’s transfer agent in connection with such sale, transfer or disposition of such Registrable Securities; provided that the taking of such action by the Company is conditioned on the Company receiving all information and documentation reasonably necessary to support such actions and make a determination that such transfer applies with Law.

 

Section 6.                Termination; Survival. The rights of each Stockholder hereunder shall terminate upon the date that all of the Registrable Securities held by such Stockholder cease to be Registrable Securities. Notwithstanding the foregoing, the obligations of the parties under Sections 4, 5 and 7 and this Section 6 shall survive the termination hereof.

 

Section 7.                Miscellaneous.

 

(a)               Governing Law. This Agreement, and all matters arising out of this Agreement and the transactions contemplated hereby, shall be governed by and construed in accordance with the internal Laws of the State of Delaware without giving effect to any Laws of the State of Delaware that would cause the application of the Laws of any jurisdiction other than the State of Delaware. The parties hereto (i) submit to the exclusive jurisdiction of the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware, or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any federal or state court of competent jurisdiction located in the State of Delaware in respect of the interpretation and enforcement of the provisions hereof and of any related agreement, certificate or other document delivered in connection herewith, (ii) waive, and agree not to assert, any defense in any action for the interpretation or enforcement of this Agreement and any related agreement, certificate or other document delivered in connection herewith that they are not subject to such jurisdiction or that such action may not be brought or is not maintainable in such courts or that this Agreement may not be enforced in or by such courts, that the action is brought in an inconvenient forum, or that the venue of the action is improper, (iii) agrees that service in person or by certified or by nationally recognized overnight courier to its address set forth in Section 7(i) shall constitute valid in personam service upon such party and its successors and assigns in any action commenced pursuant to this Section 7(a) and (iv) acknowledges that this is a commercial transaction, that the foregoing provisions for service of process and the following provisions for waiver of jury trial have been read, understood and voluntarily agreed to by each party and that by agreeing to such provisions each party is waiving important legal rights.

 

 

(b)               Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY CLAIM, ACTION, HEARING, CHARGE, DISPUTE, SUIT, INVESTIGATION, AUDIT OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

(c)               Entire Agreement. This Agreement (including the documents and the instruments referred to herein), the Certificate of Designations and the Investment Agreements, and the documents referenced herein and therein, constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes any and all prior discussions, negotiations, proposals, undertakings, understandings, and agreements (including any draft agreements) with respect thereto, whether written or oral, none of which shall be used as evidence of the parties’ intent.

 

(d)               Amendments and Waivers. No amendment of any provision hereof shall be valid and binding unless it is in writing and signed by the Company and the Anchor Stockholder (or, in the event that the Anchor Stockholder no longer holds Registrable Securities, Stockholders holding at least fifty percent (50%) of the Registrable Securities then outstanding, with each share of Common Stock issued pursuant to the Investment Agreements and each share of Common Stock to be received upon conversion of the Convertible Preferred Stock issued pursuant to the Investment Agreements, in each case, counting as one Registrable Security for this purpose (whether or not then convertible)). No waiver of any right or remedy hereunder, to the extent legally allowed, shall be valid unless the same shall be in writing and signed by the party making such waiver. No waiver by any party of any breach or violation of, default under, or inaccuracy in any representation, warranty, covenant, or agreement hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent breach, violation, default of, or inaccuracy in, any such representation, warranty, covenant, or agreement hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. No delay or omission on the part of any party in exercising any right, power, or remedy under this Agreement shall operate as a waiver thereof. Notwithstanding the foregoing, (i) no amendments may be made hereto that adversely affect the rights of any Stockholder hereunder without the prior written consent of such Stockholder, and (ii) no amendments shall be made to Section 3(b)(iii), Section 4 or Section 5 with respect to a Stockholder without the prior written consent of such Stockholder.

 

 

(e)               Successors and Assigns. The Stockholders may transfer or assign all or any portion of their respective rights provided in this Agreement in connection with the transfer of shares of Common Stock or Convertible Preferred Stock or Warrants issued under the Investment Agreements pursuant to the terms of the Investment Agreements without the prior written consent of the Company; provided that reasonably promptly following any such transfer or assignment, (i) the Stockholder provides a written notice to the Company stating the name and address of such transferee and identifying the amount of Registrable Securities with respect to which the rights under this Agreement were transferred and the nature of the rights so transferred, and (ii) such transferee or assignee agrees in writing with the Company to be bound by this Agreement as fully as if it were an initial signatory hereto pursuant to a written instrument in form and substance reasonably acceptable to the Company, and any such transferee may thereafter make corresponding assignments in accordance with this Section 7(e); provided, further, that rights under this Agreement may only be assigned to a Person that is a Permitted Reg Rights Holder or that becomes a Permitted Reg Rights Holder as a result of a transfer of Registrable Securities concurrent with such assignment pursuant to this Section 7(e).

 

(f)                Expenses. Except as otherwise set forth herein (including under Section 2(i)), (i) all Registration Expenses incurred in connection with any Registration Statement under this Agreement shall be borne by the Company, (ii) all Selling Expenses relating to securities registered on behalf of the Stockholders shall be borne by the Stockholders of the Registrable Securities included in such registration and (iii) the obligation of the Company to bear the expenses provided for in this Section 7(f) shall apply irrespective of whether a Registration Statement becomes effective, is withdrawn or suspended, or converted to any other form of registration and irrespective of when any of the foregoing shall occur.

 

(g)               Counterparts, Execution. For the convenience of the parties hereto, this Agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. This Agreement may be executed by facsimile, email or electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act, or other Law (e.g., www.docusign.com or by .pdf signature) by any party and such signature shall be deemed binding for all purposes hereof without delivery of an original signature being thereafter required.

 

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

 

 

(i)                Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly delivered (i) four (4) Business Days after being sent by registered or certified mail, return receipt requested, postage prepaid, (ii) one (1) Business Day after being sent for next Business Day delivery, fees prepaid, via a reputable nationwide overnight courier service or (iii) when sent, if delivered by email (provided that no “error message” or other notification of non-delivery is generated), in each case to the intended recipient as set forth below:

 

    If to a Purchaser, at such Purchaser’s address referenced in Schedule A.

 

                          If to the Company, as follows:

                          First Foundation, Inc.

                          200 Crescent Court, Suite 1400

                          Dallas, Texas 75201

                          Attn:        Erica Dorsett

                                            General Counsel

                                            Email: edorsett@ff-inc.com

 

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

 

                                            Sheppard, Mullin, Richter & Hampton LLP

                                            650 Town Center Drive, 10^th Floor

                                            Costa Mesa, California 92626

                                            Attention: Josh Dean

                                            Email: jdean@sheppardmullin.com

 

Any party may, from time to time, by written notice to the other parties, designate a different address, which shall be substituted for the one specified above for such party.

 

(j)                Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties hereto shall be entitled to specific performance of the terms hereof, this being in addition to any other remedies to which they are entitled at Law or equity. Each of the parties hereto hereby further waives any (i) defense in any action for specific performance that a remedy at Law would be adequate and (ii) requirement under Law to post security or a bond as a prerequisite to obtaining equitable relief.

 

 

(k)               Interpretation.

 

   (i)               The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

 

    (ii)             The table of contents and headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation hereof.

 

    (iii)           Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

 

   (iv)            References to “the date hereof” mean the date of this Agreement.

 

   (v)               Notwithstanding anything herein to the contrary, neither the Company nor Purchaser nor any of their respective subsidiaries shall be required to take any action that is prohibited by Law or inconsistent with any requirement or directive of any Governmental Entity.

 

   (vi)            Any reference herein to any statute, includes all amendments thereto and all rules and regulations promulgated thereunder.

 

   (vii)           All references to “dollars” or “$” herein are to United States dollars.

 

    (viii)         The definitions contained herein are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neutral genders of such term

 

    (ix)            The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends and such phrase shall not mean simply “if.”

 

(l)                 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not enter into, and is not currently a party to, any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights the terms of which are senior to or conflict with the registration rights granted to the Stockholders hereunder, including, for clarity, allowing any other holder of Common Stock to have registration rights in the nature or substantially in the nature of those set forth in this Agreement that would have priority over the Registrable Securities with respect to the inclusion of such securities in any Registration Statement.

 

(m)             Further Assurances. From and after the Closing, subject to the terms of the applicable Certificate of Designations, the Company will take such actions as reasonably necessary to effect any conversion of the Convertible Preferred Stock upon the reasonable request of the applicable Purchaser in connection with any registration or any offering and sale pursuant hereto involving the Common Stock underlying such Convertible Preferred Stock.

 

[Signature Pages Follow]

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.

  

	COMPANY:
	FIRST FOUNDATION INC.
	By:	/s/ Scott F. Kavanaugh
	Name:	Scott F. Kavanaugh
	Title:	Chief Executive Officer

 

[Signature Page to Registration Rights Agreement]

 

 

Exhibit 99.1

 

 

 

NEWS RELEASE	Investor Contact:
FOR IMMEDIATE RELEASE	Jamie Britton, CFO
	+1 (949) 476-0300

 

FIRST FOUNDATION INC. CLOSES $228 MILLION EQUITY INVESTMENT ANCHORED BY FORTRESS INVESTMENT GROUP, CANYON PARTNERS, STRATEGIC VALUE BANK PARTNERS, AND NORTH REEF CAPITAL

 

Dallas, TX, July 09, 2024 – First Foundation Inc. (NYSE: FFWM) ("First Foundation" or the "Company'') today announced the closing of its individual investments aggregating to $228 million in the Company from affiliates of Fortress Investment Group, Canyon Partners, Strategic Value Bank Partners, North Reef Capital and other investors.

 

Scott F. Kavanaugh, President and CEO of the Company stated, "We want to thank all of our new investor partners for their effort and significant confidence in First Foundation and our talented employees. We very much look forward to building a top tier regional bank and creating long term shareholder value.”

 

Transaction Details

 

First Foundation sold and issued (i) 11,308,676 shares of common stock, par value $0.001 per share at a price per share of $4.10, (ii) 29,811 shares of a new series of preferred stock, par value $0.001 per share, designated as Series A Noncumulative Convertible Preferred Stock, and (iii) 14,490 shares of a new series of preferred stock, par value $0.001 per share, designated as Series B Noncumulative Convertible Preferred Stock. In addition, investors received seven-year warrants to purchase a new series of preferred stock designated as Series C Non-Voting Common Equivalent Stock.

 

Advisors

 

Jefferies LLC acted as exclusive financial advisor and sole placement agent to First Foundation. Sheppard, Mullin, Richter & Hampton LLP served as legal counsel to First Foundation. Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel to Fortress Investment Group. Cleary Gottlieb Steen & Hamilton LLP served as legal counsel to Canyon Partners. Sullivan & Cromwell LLP served as legal counsel to Jefferies LLC.

 

About First Foundation Inc.

 

Headquartered in Texas, First Foundation Inc. (NYSE: FFWM), and its subsidiaries offer personal banking, business banking, and private wealth management services, including investment, trust, insurance, and philanthropy services. This comprehensive platform of financial services is designed to help clients at any stage in their financial journey. The broad range of financial products and services offered by First Foundation are more consistent with those offered by larger financial institutions, while its high level of personalized service, accessibility, and responsiveness to clients is more aligned with community banks and boutique wealth management firms. This combination of an integrated platform of comprehensive financial products and personalized service differentiates First Foundation from many of its competitors and has contributed to the growth of its client base and business. At March 31, 2024, the Company had $13.6 billion of assets, $10.1 billion of loans, deposits of $10.6 billion, and total stockholders' equity of $929 million.

 

 

 

About Fortress Investment Group

 

Fortress Investment Group LLC is a leading, highly diversified global investment manager. Founded in 1998, Fortress manages $49.0 billion of assets under management as of March 31, 2024, on behalf of approximately 2,000 institutional clients and private investors worldwide across a range of credit and real estate, private equity and permanent capital investment strategies.

 

About Canyon Partners

 

Founded in 1990, Canyon employs a deep value, credit intensive approach across public and private corporate credit, structured credit, and direct real estate lending and investing. The firm seeks to capture excess returns available to those investors with specialized expertise, rigorous research capabilities, and the ability to underwrite complexity. Canyon invests on behalf of a broad range of institutions globally. For more information visit: www.canyonpartners.com.

 

About Strategic Value Bank Partners

 

Strategic Value Bank Partners is an investment manager focused on the community banking industry. Founded in 2015, Strategic Value combines industry operating experience with the rigorous analysis of an institutional investor. The firm invests across public and private banks throughout the United States.

 

Forward Looking Statements

 

This press release may include forward-looking statements by the Company pertaining to such matters as our goals, intentions, and expectations regarding, among other things, the convertibility of the shares of preferred stock and exercisability of the warrants issued in connection with this capital raise transaction; the Company’s seeking (and the Company’s ability to obtain) approval of its stockholders of any necessary amendments of the Company’s organizational documents or approvals of the issuance of shares of common stock or preferred stock in connection with this capital raise transaction; receipt of any required regulatory approvals or non-objections in connection with this capital raise transaction or the appointment of directors or senior management; revenues, earnings, loan production, asset quality, capital levels, and acquisitions, among other matters; our estimates of future costs and benefits of the actions we may take; our assessments of probable losses on loans; our assessments of interest rate and other market risks; and our ability to achieve our financial and other strategic goals.

 

 

 

Forward-looking statements are typically identified by such words as “believe,” “expect,” “anticipate”, “intend,” “outlook,” “estimate,” “forecast,” “project,” “should,” and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. Additionally, forward-looking statements speak only as of the date they are made; the Company does not assume any duty, and does not undertake, to update our forward-looking statements. Furthermore, because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those anticipated in our statements, and our future performance could differ materially from our historical results.

 

The forward-looking statements in this release are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward-looking statements contained in this release and could cause us to make changes to our future plans. Those risks and uncertainties include, but are not limited to, the risk of incurring credit losses, which is an inherent risk of the banking business; the quality and quantity of our deposits; adverse developments in the financial services industry generally such as bank failures and any related impact on depositor behavior or investor sentiment; risks related to the sufficiency of liquidity; risk that we will not be able to maintain growth at historic rates or at all; the risk that we will not be able to access the securitization market on favorable terms or at all; changes in general economic conditions, either nationally or locally in the areas in which we conduct or will conduct our business; risks associated with changes in interest rates, which could adversely affect our interest income, interest rate margin, and the value of our interest-earning assets, and therefore, our future operating results; the risk that the performance of our investment management business or of the equity and bond markets could lead clients to move their funds from or close their investment accounts with us, which would reduce our assets under management and adversely affect our operating results; negative impacts of news or analyst reports about us or the financial services industry; the impacts of inflation on us and our customers; results of examinations by regulatory authorities and the possibility that such regulatory authorities may, among other things, limit our business activities or our ability to pay dividends, or impose fines, penalties or sanctions; the risk that we may be unable or that our board of directors may determine that it is inadvisable to pay future dividends at historic levels or at all; risks associated with changes in income tax laws and regulations; and risks associated with seeking new client relationships and maintaining existing client relationships.

 

 

 

 

Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and other documents we file with the SEC from time to time. We urge readers of this report to review those reports and other documents we file with the SEC from time to time. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this report, which speak only as of today's date, or to make predictions based solely on historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this report or in the above-referenced reports, whether as a result of new information, future events or otherwise, except as may be required by law or NYSE rules.

 

Important Information and Where You Can Find It

 

This press release may be deemed to be solicitation material in respect of the Requisite Stockholder Approvals. In connection with the Requisite Stockholder Approval, First Foundation will file with the SEC a preliminary proxy statement and a definitive proxy statement, which will be sent to the stockholders of First Foundation, seeking certain approvals related to the issuances of shares of common stock issued under each investment agreement and to be issued upon the conversion of shares of the preferred stock issued under the investment agreements.

 

INVESTORS AND SECURITY HOLDERS OF FIRST FOUNDATION AND THEIR RESPECTIVE AFFILIATES ARE URGED TO READ, WHEN AVAILABLE, THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT FIRST FOUNDATION AND THE TRANSACTION.

 

Investors and security holders will be able to obtain a free copy of the proxy statement, as well as other relevant documents filed with the SEC containing information about First Foundation, without charge, at the SEC's website (http://www.sec.gov). Copies of documents filed with the SEC by First Foundation can also be obtained, without charge, by directing a request to Investor Relations, First Foundation Inc., 18101 Von Karman Ave., Suite 750, Irvine, CA. 92612 or by telephone +1 (949) 476-0300.

 

Participants in the Solicitation of Proxies in Connection with Proposed Transaction

 

First Foundation and certain of their respective directors, executive officers and employees may be deemed to be participants in the solicitation of proxies in respect of the Requisite Stockholder Approvals under the rules of the SEC. Information regarding First Foundation 's directors and executive officers is available in its definitive proxy statement for its 2024 annual stockholders meeting, which was filed with the SEC on April 18, 2024, and certain of its Current Reports on Form 8-K. Other information regarding the participants in the solicitation of proxies in respect of the proposed transaction and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other relevant materials to be filed with the SEC. Free copies of these documents, when available, may be obtained as described in the preceding paragraph.

 

Not an Offer of Securities

 

The information in this communication is for informational purposes only and shall not constitute, or form a part of, an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities. The securities that are the subject of the private placement have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

 

 

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