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Exhibit
10.1
Execution
Copy
AGENCY AGREEMENT
Federal Trust
Corporation
(a Florida
corporation)
Up to 40,000,000 Shares of
Common Stock
Subscription Rights to
Purchase Shares of Common Stock
Warrants to Purchase Shares
of Common Stock
May 8, 2008
Stifel, Nicolaus & Company,
Incorporated
18 Columbia Turnpike
Florham Park, New Jersey
07932
Ladies and Gentlemen:
Federal Trust Corporation, a
Florida corporation (the “Company”), and Federal Trust
Bank, a federally-chartered stock savings bank (the
“Bank”), hereby confirm, jointly and severally, their
agreement with Stifel, Nicolaus & Company, Incorporated
(the “Agent”), subject to the terms and conditions set
forth below, with respect to the proposed distribution by the
Company to its shareholders of rights entitling their holders to
subscribe for shares of the Company’s common stock, par value
$0.01 per share (the “Common Stock”).
Section 1. The
Offering The Company is distributing, at no charge,
subscription rights to purchase shares of Common Stock to the
holders of record of its Common Stock (a “Record Date
Shareholder”) at the close of business on May 6, 2008
(the “Record Date”) and, subject to the rights of such
holders described below, to certain other purchasers on a standby
basis. Each Record Date Shareholder will receive one
non-transferable subscription right (a “Right”) for
every share of Common Stock held of record at the close of business
on the Record Date. Each Right will entitle the holder thereof to
subscribe for a certain number shares of Common Stock (the
“Underlying Shares”) at the subscription price per
share (the “Subscription Price”) (the “Basic
Subscription Privilege”). Each Record Date Shareholder who
exercises in full its Basic Subscription Privilege will also be
eligible to subscribe at the Subscription Price for shares of
Common Stock (the “Excess Shares”) not otherwise
purchased pursuant to the exercise of the Basic Subscription
Privilege up to the total number of Underlying Shares, subject to
availability, proration and reduction by the Company in certain
circumstances and, in all instances, to a limit on ownership of the
Common Stock (the “Over-Subscription Privilege”). The
offer and sale of the Underlying Shares pursuant to the exercise of
the Basic Subscription Privilege and the Over-Subscription
Privilege are referred to herein as the “Rights
Offering.”
The Company also intends to
enter into Standby Purchase Agreements pursuant to which certain
institutional investors and high net worth individuals (the
“Standby Purchasers”) have severally agreed, subject in
each case to a maximum standby commitment under certain conditions,
to acquire from the Company at the Subscription Price the
Underlying Shares remaining upon completion of the Rights Offering.
The Standby Purchase Agreements will
require that the Standby Purchasers
agree to purchase and the Company agrees to sell, and thus
guarantee the availability of, a minimum number of shares of Common
Stock (the “Additional Shares”) at the Subscription
Price if a sufficient number of Underlying Shares are not available
after the exercise of the Basic Subscription Privilege and the
Over-Subscription Privilege to satisfy the purchase commitments of
the Standby Purchasers, subject to reduction to a minimum number of
shares to the extent Record Date Shareholders subscribe for all of
the Rights distributed to them (the “Minimum Standby
Obligation”). Pursuant to the Standby Purchase Agreement, the
Company has agreed to provide two of the Standby Purchasers
warrants (the “Warrants”) that would entitle these
investors to purchase shares of Common Stock at the Subscription
Price. The Rights Offering and the offering to the Standby
Purchasers are together referred to herein as the “Stock
Offering,” and the Underlying Shares, the Additional Shares
and the Warrants are together referred to herein as the
“Securities.”
In connection with the Stock
Offering, the Company has filed with the Securities and Exchange
Commission (the “Commission”) a registration statement
on Form S-1 (No. 333-150051) including the related preliminary
prospectus or prospectuses covering the registration of the
Securities under the Securities Act of 1933, as amended (the
“Securities Act”). Promptly after execution and
delivery of this Agreement, the Company will prepare and file a
prospectus in accordance with the provisions of Rule 430A
(“Rule 430A”) of the rules and regulations of the
Commission under the Securities Act (the “Securities Act
Regulations”) and paragraph (b) of Rule 424 (“Rule
424(b)”) of the Securities Act Regulations. The information
included in such prospectus that was omitted from such registration
statement at the time it became effective but that is deemed to be
part of such registration statement at the time it became effective
pursuant to paragraph (b) of Rule 430A is referred to as
“Rule 430A Information.” Each prospectus used before
such registration statement became effective, and any prospectus
that omitted Rule 430A Information that was used after such
effectiveness and prior to the execution and delivery of this
Agreement, is herein called a “preliminary prospectus.”
Such registration statement, including the exhibits, and the
schedules thereto, if any, and any documents incorporated by
reference therein pursuant to Item 12 of Form S-1 under the
Securities Act at the time it became effective and including the
Rule 430A Information, is herein called the “Registration
Statement.” The final prospectus, including the preliminary
prospectus, and any documents incorporated by reference therein, in
the form first furnished to the Agent for use in connection with
the offering of the Securities is herein called the
“Prospectus.” For purposes of this Agreement, all
references to the Registration Statement, any preliminary
prospectus, the Prospectus or any amendment or supplement to any of
the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system (“EDGAR”).
Section 2.
Appointment of Agent Subject to the terms and
conditions of this Agreement, the Company hereby appoints the Agent
as its exclusive financial advisor and marketing agent to use its
best efforts to solicit the exercise of Rights and to advise and
assist the Company in connection with the Stock Offering. It is
acknowledged by the Company that the Agent shall not be obligated
to purchase any shares of Common Stock, Rights, or Securities and
shall not be obligated to take any action that is inconsistent with
any applicable law, regulation, decision or order.
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The Company and the Agent
agree that the Agent is an independent contractor with respect to
its solicitation of the Standby Purchasers and the exercise of
Rights contemplated by this Agreement and the performance of any
financial advisory services to the Company contemplated by this
Agreement or otherwise.
In rendering the services
contemplated by this Agreement, the Agent will not be subject to
any liability to the Company or any of its affiliates for any act
or omission on the part of any securities broker or dealer (other
than the Agent or employees of the Agent) or any other person, and
the Agent will not be liable for acts or omissions in performing
its obligations under this Agreement, except for any losses,
claims, damages, liabilities and expenses determined in a final
judgment by a court of competent jurisdiction to have resulted from
any acts or omissions undertaken or omitted to be taken by the
Agent through its gross negligence or willful
misconduct.
Section 3.
Fees In addition to the expenses specified in
Section 8 hereof, as compensation for the Agent’s
services under this Agreement, the Agent has received or will
receive the following fees from the Company; provided, however,
notwithstanding anything to the contrary in this Agreement or the
Letter Agreement, in the event the offering is not completed the
Agent will receive only a reimbursement of out-of-pocket
accountable expenses actually incurred:
(a) an advisory and
management fee of $100,000 (the “Advisory Fee”) in
connection with the advisory, marketing and administrative services
provided by the Agent as listed on Schedule A, which shall be paid
as follows: (i) $50,000 was paid upon the execution of the
letter agreement, dated January 17, 2008 (as amended on
May 1, 2008 and May 7, 2008, the “Letter
Agreement”) and (ii) $50,000 will be paid upon the
Registration Statement being declared effective by the Commission;
provided, however, in compliance with Financial Industry Regulatory
Authority (“FINRA”) Rule 2710(f)(2)(C), the Agent will
not receive any payment of commissions or reimbursement of expenses
prior to the commencement of the Stock Offering, except a
reasonable advance against out-of-pocket accountable expenses
actually anticipated to be incurred by the Agent, which advance is
reimbursed to the Company to the extent not actually incurred;
and
(b) a placement fee (the
“Placement Fee”) consisting of one percent
(1.0%) of the dollar amount of Common Stock sold to Record
Date Shareholders pursuant to the Rights Offering, plus a fee of
five percent (5.0%) of the dollar amount of the Common Stock
and any warrants for Common Stock or other securities of the
Company issued or sold to the Standby Purchasers (whether they
purchase in the Rights Offering or otherwise); provided, however,
notwithstanding anything to the contrary in this Agreement or the
Letter Agreement, in the event the Stock Offering is completed, the
maximum Placement Fee that the Agent will receive will be
$3,000,000 and the total maximum compensation to be received by the
Agent will be $3,400,000, which includes the Advisory Fee, the
Placement Fee, the Opinion Fee (as defined below) and the maximum
out-of-pocket expenses and legal fees as set forth in
Section 8 of this Agreement.
Notwithstanding anything to
the contrary herein, the Agent may, in its sole discretion,
establish a concession to be paid for Common Stock sold to Standby
Purchasers and other investors arranged by the Agent or selected
FINRA member broker-dealers (the “Selling Group”) and
the Company shall have no further fee obligation associated with
these sales.
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If either the Advisory Fee or
the Placement Fee is not fully paid when due, the Company shall pay
all costs of collection or other enforcement of the Agent’s
rights hereunder, including but not limited to, attorneys’
fees and expenses, whether collected or enforced by suit or
otherwise. The Advisory Fee and Placement Fee are non-negotiable
and are not subject to any reduction, set-off, counterclaim or
refund for any reason.
(c) In addition, if requested
by the Company, the Agent shall render an opinion to the Board of
Directors of the Company as to the fairness to the Company, from a
financial point of view, of the consideration to be paid to the
Company in connection with the Rights Offering (an
“Opinion”). It is understood that an Opinion will be
dated as of a date reasonably proximate to the closing of the
Rights Offering and will be subject to such qualifications and
assumptions as the Agent deems necessary or advisable in its
professional judgment. It is further understood that, if an
Opinion is requested to be included in a proxy statement
distributed in connection with a shareholders’ meeting of the
Company and the Agent consents to such inclusion, the Opinion will
be reproduced in such proxy statement in full, and any description
of or reference to the Agent or summary of the Opinion in such
proxy statement will be in a form reasonably acceptable to the
Agent and its counsel and consistent with similar descriptions or
references in transactions of this type. In rendering an
Opinion, the Agent will direct its advice solely to the Board of
Directors of the Company and such advice will not constitute a
recommendation to any shareholder of the Company as to how such
shareholder should vote at any shareholders’ meeting held in
connection with the Rights Offering or whether or not to exercise
any rights granted to such shareholder in the Rights
Offering. An Opinion will not be reproduced, summarized,
described or referred to without the Agent’s prior written
consent.
In consideration for the
Agent rendering the Opinion, the Company shall pay the Agent a fee
of $100,000, payable upon delivery of the Agent’s Opinion
(the “Opinion Fee”). The Opinion Fee shall be
earned when delivered and shall be nonrefundable, even in the event
that the Agent is unable to provide its opinion that the
consideration to be paid to the Company in connection with the
Rights Offering is fair, from a financial point of view, to the
Company or if the Company determines not to proceed with such
transaction.
If this Agreement is
terminated in accordance with the provisions of Section 9 or
13 hereof or the sale of the Securities is not consummated,
notwithstanding anything to the contrary in this Agreement or the
Letter Agreement, the Agent will receive only a reimbursement of
out-of-pocket accountable expenses actually incurred.
Section 4.
Closing If at least the minimum number of Securities,
as disclosed on the cover of the Prospectus, is sold, the Company
agrees to issue or have issued the Securities sold and to deliver
the certificates, or other evidence, for such Securities at the
Closing Time against payment therefore by release of funds from the
subscription agent referred to herein. The closing (the
“Closing”) shall be held at the offices of Luse Gorman
Pomerenk & Schick, P.C. in Washington, D.C., at 10:00
a.m., Eastern Time, or at such other place and time as shall be
agreed upon by the parties hereto, on a business day to be agreed
upon by the parties hereto. At the
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Closing, the Company shall deliver to
the Agent by wire transfer in same-day funds the commissions, fees
and expenses owing to the Agent as set forth in Sections 3 and 8
hereof and the opinions required hereby and other documents deemed
reasonably necessary by the Agent shall be executed and delivered
to effect the Stock Offering and the issuance of the Securities as
contemplated hereby and pursuant to the terms of the Prospectus.
The Company shall notify the Agent by telephone, confirmed in
writing, when funds shall have been received for all the
Securities. Certificates or other evidence of the Securities shall
be delivered directly to the purchasers thereof in accordance with
their instructions. The date upon which the Company shall release
for delivery all of the Securities, in accordance with the terms
hereof, is herein called the “Closing Date.” The hour
on the Closing Date at which the Company shall release for delivery
all of the Securities in accordance with the terms hereof is called
the “Closing Time.”
Section 5.
Representations and Warranties of the Company and the
Bank
The Bank and the Company
jointly and severally represent and warrant to the Agent that,
except as disclosed in the Prospectus:
(a) The Bank and the Company
have all such power, authority, authorizations, approvals and
orders as may be required to enter into this Agreement, to carry
out the provisions and conditions hereof and to distribute the
Rights and issue and sell the Securities as provided herein and as
described in the Prospectus. Subject to receipt of shareholder
approval of the sale to Standby Purchasers and an amendment to the
Company’s Restated Articles of Incorporation, the execution,
delivery and performance of this Agreement and the consummation of
the transactions contemplated herein have been duly and validly
authorized by all necessary corporate action on the part of the
Bank and the Company. This Agreement has been validly executed and
delivered by the Company and the Bank, and is a valid, legal and
binding obligation of the Company and the Bank enforceable in
accordance with its terms, except to the extent that such
enforceability may be limited by bankruptcy laws, insolvency laws,
or other laws affecting the enforcement of creditors’ rights
generally, or the rights of creditors of savings institutions
insured by the Federal Deposit Insurance Corporation
(“FDIC”) (including the laws relating to the rights of
the contracting parties to equitable remedies) (the
“Bankruptcy and Equitable Relief
Exception”).
(b) The Subscription Agent
Agreement has been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution and delivery by
the Subscription Agent, constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms,
except to the extent limited by the Bankruptcy and Equitable Relief
Exception.
(c) The Registration
Statement was declared effective by the Commission on May 8,
2008; and no stop order has been issued with respect thereto and no
proceedings therefore have been initiated or, to the knowledge of
the Company, threatened by the Commission, and any request on the
part of the Commission for additional information has been complied
with. At the time the Registration Statement, including the
Prospectus contained therein (including any amendment or supplement
thereto), became effective, the Registration Statement complied as
to form in all material respects with the Securities Act, the
Securities Act Regulations and the Registration Statement,
including the Prospectus contained therein
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(including any amendment or supplement
thereto), any Blue Sky Application or any Sales Information (as
such terms are defined in Section 10 hereof) authorized by the
Company for use in connection with the Stock Offering, did 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, in light of the circumstances under which
they were made, not misleading. At the time the subscription ratio
and subscription price are determined, at the time any Rule 424(b)
or 424(c) Prospectus is filed with the Commission and at the
Closing Time referred to in Section 4, the Registration
Statement, including the Prospectus contained therein (including
any amendment or supplement thereto), and any Blue Sky Application
or any Sales Information authorized by the Company for use in
connection with the Stock Offering, will not contain an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this
Section 5(c) shall not apply to statements or omissions made
in reliance upon and in conformity with written information
furnished to the Company by the Agent regarding the Agent expressly
for use under the caption “Plan of Distribution –
Financial Advisor” in the Prospectus and in Blue Sky
Applications.
(d) At the time of filing the
Registration Statement and any post-effective amendments thereto,
at the earliest time thereafter that the Company or another
offering participant made a bona fide offer (within the meaning of
Rule 164(h)(2) of the Securities Act Regulations) of the Securities
and at the date hereof, the Company was not an “ineligible
issuer” as defined in Rule 405 of the Securities Act
Regulations (“Rule 405”). At the time of the filing of
the Registration Statement and at the time of the use of any issuer
free writing prospectus, as defined in Rule 433(h), the Company met
the conditions required by Rules 164 and 433 for the use of a free
writing prospectus. If required to be filed, the Company has timely
filed or will timely file any issuer free writing prospectus
related to the offered Securities at the time it is required to be
filed under Rule 433 and, if not required to be filed, will retain
such free writing prospectus in the Company’s records
pursuant to Rule 433(g) and if any issuer free writing prospectus
is used after the date hereof in connection with the offering of
the Securities the Company will file or retain such free writing
prospectus as required by Rule 433.
(e) As of the Applicable
Time, neither (i) the Issuer-Represented General Free Writing
Prospectus(es) issued at or prior to the Applicable Time and the
Statutory Prospectus, all considered together (collectively, the
“General Disclosure Package”), nor (ii) any
individual Issuer-Represented Limited-Use Free Writing Prospectus,
when considered together with the General Disclosure Package,
included any untrue statement of a material fact or omitted to
state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading. The preceding sentence does not apply to statements
in or omissions from any Prospectus included in the Registration
Statement relating to the offered Securities or any
Issuer-Represented Free Writing Prospectus based upon and in
conformity with written information furnished to the Company by the
Agent specifically for use therein. As used in this paragraph and
elsewhere in this Agreement:
(i) “Applicable
Time” means each and every date when a potential purchaser
submitted a subscription or otherwise committed to purchase
Securities.
(ii) “Statutory
Prospectus,” as of any time, means the Prospectus
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relating to the offered
Securities that is included in the Registration Statement relating
to the offered Securities immediately prior to that
time, including any document incorporated by reference
therein.
(iii)
“Issuer-Represented Free Writing Prospectus” means any
“issuer free writing prospectus,” as defined in
Rule 433(h), relating to the offered Securities that is
required to be filed with the Commission by the Company or required
to be filed with the Commission. The term does not include any
writing exempted from the definition of prospectus pursuant to
clause (a) of Section 2(a)(10) of the Securities Act,
without regard to Rule 172 or Rule 173.
(iv)
“Issuer-Represented General Free Writing Prospectus”
means any Issuer-Represented Free Writing Prospectus that is
intended for general distribution to prospective
investors.
(v) “Issuer-Represented
Limited-Use Free Writing Prospectus” means any
Issuer-Represented Free Writing Prospectus that is not an
Issuer-Represented General Free Writing Prospectus. The term
Issuer-Represented Limited-Use Free Writing Prospectus also
includes any “ bona fide electronic road show,”
as defined in Rule 433, that is made available without
restriction pursuant to Rule 433(d)(8)(ii) or otherwise, even
though not required to be filed with the Commission.
(f) Each Issuer-Represented
Free Writing Prospectus, as of its date of first use and at all
subsequent times through the completion of the Offering and sale of
the offered Securities or until any earlier date that the Company
notified or notifies the Agent (as described in the next sentence),
did not, does not and will not include any information that
conflicted, conflicts or will conflict with the information
contained in the Registration Statement relating to the offered;
provided, however this sentence shall not apply to statements or
omissions made in reliance upon and in conformity with written
information furnished to the Company by the Agent expressly for use
therein. If at any time following the date of first use of an
Issuer-Represented Free Writing Prospectus there occurred or occurs
an event or development as a result of which such
Issuer-Represented Free Writing Prospectus conflicted or would
conflict with the information contained in the Registration
Statement relating to the offered Securities or included or would
include an untrue statement of a material fact or omitted or would
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances prevailing at
that subsequent time, not misleading, the Company has notified or
will notify promptly the Agent so that any use of such
Issuer-Represented Free-Writing Prospectus may cease until it is
amended or supplemented and the Company has promptly amended or
will promptly amend or supplement such Issuer-Represented Free
Writing Prospectus to eliminate or correct such conflict, untrue
statement or omission.
(g) The documents
incorporated or deemed to be incorporated by reference in the
Registration Statement and the Prospectus, at the time they were or
hereafter are filed with the Commission, complied and will comply
in all material respects with the requirements of the Securities
Act and the Securities Act Regulations or the Exchange Act, and the
Exchange Act Regulations, as applicable, and, when read together
with the other information in the Prospectus, at the time the
Registration Statement became effective, at the time the Prospectus
was issued
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and at the Closing Time referred to in
Section 4 hereof, did not and will 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, in light of the circumstances under which they were made,
not misleading
(h) Hacker, Johnson and Smith
PA, the accounting firm that certified the financial statements and
supporting schedules of the Company included in the Registration
Statement and the Prospectus, has advised the Company that it is an
independent registered public accounting firm with the Public
Company Accounting Oversight Board as required by the Securities
Act and the Securities Act Regulations. With respect to the
Company, Hacker, Johnson and Smith PA has advised the Company that
it is not and has not been in violation of the auditor independence
requirements of the Sarbanes-Oxley Act of 2002
(“Sarbanes-Oxley Act”) and the related rules and
regulations of the Commission.
(i) The consolidated
financial statements of the Company, together with the related
schedules and notes, included in the Registration Statement,
General Disclosure Package and the Prospectus, present fairly the
financial condition and results of operations of the Company and
its consolidated subsidiaries at the dates indicated and the
periods specified on its balance sheet, income statement, statement
of shareholders’ equity and statement of cash flows. The
financial statements comply in all material respects with the
applicable accounting requirements of Title 12 of the Code of
Federal Regulations, Regulation S-X of the Commission, and
accounting principles generally accepted in the United States of
America (“GAAP”) applied on a consistent basis during
the periods presented except as otherwise noted therein, and
present fairly in all material respects the information required to
be stated therein. The other financial, statistical and pro forma
information and related notes included in the Registration
Statement, the General Disclosure Package and the Prospectus
present fairly the information shown therein and have been compiled
on a basis consistent with that of the audited financial statements
included in the Registration Statement. No other financial
statements or supporting schedules are required to be included in
the Registration Statement, the General Disclosure Package and the
Prospectus. To the extent applicable, all disclosures contained in
the Registration Statement or the Prospectus regarding
“non-GAAP financial measures” (as such term is defined
by the rules and regulations of the Commission) comply with
Regulation G of the Exchange Act, the Exchange Act Regulations and
Item 10 of Regulation S-K under the Securities Act, to the
extent applicable.
(j) Since the respective
dates as of which information is given in the Registration
Statement, the General Disclosure Package and Prospectus, and
except as described in or specifically contemplated by the
Prospectus: (i) the Company and its subsidiaries have not
incurred any material liabilities or obligations, indirect, direct
or contingent, or entered into any material verbal or written
agreement or other transaction whether or not arising in the
ordinary course of business or that could result in a material
reduction in the future earnings of the Company and its
subsidiaries (taken as a whole); (ii) there has not been any
material increase in the long-term debt of the Company and its
subsidiaries’ (taken as a whole) or in the aggregate dollar
or principal amount of the Company’s and its subsidiaries
(taken as a whole) assets that are classified as substandard,
doubtful or loss or loans that are 90 days or more past due or real
estate acquired by foreclosure; (iii) there has not been any
condition, event, change or occurrence that has or may reasonably
be expected to have a material adverse effect on the condition
(financial or otherwise), business, assets, liabilities, prospects
or operations of Company and its
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subsidiaries on a consolidated basis (a
“Material Adverse Effect”) on the aggregate dollar
amount of the Company’s and its subsidiaries’ (taken as
a whole) deposits or their consolidated net worth or spread;
(iv) there has been no material adverse change in the
Company’s and its subsidiaries’ relationship with its
insurance carriers, including, without limitation, cancellation or
other termination of the Company’s or its subsidiaries’
fidelity bond or any other type of insurance coverage;
(v) except as disclosed in the Prospectus there has been no
material change in management of the Company or its subsidiaries;
(vi) the Company and its subsidiaries have not sustained any
material loss or interference with their respective business or
properties from fire, flood, windstorm, earthquake, accident or
other calamity, whether or not covered by insurance; (vii) the
Company has not paid or declared any dividends or other
distributions with respect to its capital stock and the Company and
its subsidiaries are not in default in the payment of principal or
interest on any outstanding debt obligations; and (viii) there
has not been any change in the capital stock (other than upon the
sale of the Common Stock hereunder.
(k) The Company is a
registered savings and loan holding company under the Home
Owners’ Loan Act, as amended (“HOLA”), has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of Florida, with the corporate
power and authority to own its properties and to conduct its
business as described in the General Disclosure Package and the
Prospectus, and is qualified to transact business and in good
standing in each jurisdiction in which the conduct of business
requires such qualification unless the failure to qualify in one or
more of such jurisdictions would not have a Material Adverse
Effect. The Company has obtained all licenses, permits and other
governmental authorizations required for the conduct of its
business, except those that individually or in the aggregate would
not have a Materially Adverse Effect; and all such licenses,
permits and governmental authorizations are in full force and
effect, and the Company is in compliance therewith in all material
respects.
(l) Each direct or indirect
subsidiary of the Company, other than the Bank, has been duly
organized and is validly existing in good standing under the laws
of the jurisdiction of its incorporation or organization, has
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the General
Disclosure Package and the Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, except
where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect. The Bank is a duly organized
and validly existing federally-chartered stock savings bank
chartered under the laws of the United States. All of the issued
and outstanding capital stock of each such subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and
is owned by the Company, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity (except with respect to the preferred
stock of Federal Trust Statutory Trust I); none of the outstanding
shares of capital stock of the Company or any subsidiary was issued
in violation of the preemptive or similar rights of any
securityholder of such subsidiary. The only subsidiaries of the
Company are the subsidiaries listed on Exhibit 21 to the
Registration Statement.
(m) The deposit accounts of
the Bank are insured by the FDIC to the legal maximum, and the Bank
has paid all premiums and assessments required by the FDIC and the
regulations thereunder and no proceeding for the termination or
revocation of such insurance is pending or, to the Bank’s
knowledge, threatened. Except as disclosed in the Prospectus, the
Bank is a member of the Federal Home Loan Bank of
Atlanta.
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(n) The Securities have been
duly authorized for issuance and sale as provided herein and as
described in the General Disclosure Package and the Prospectus, the
Company has a duly authorized and outstanding capitalization as set
forth under “Capitalization” in the General Disclosure
Package and the Prospectus, and all the issued and outstanding
shares of capital stock are, and the Securities when issued,
delivered and paid for as described in the General Disclosure
Package and the Prospectus will be, validly issued and outstanding,
fully paid and nonassessable with no personal liability attaching
to the ownership of them; the issuance of the Securities is not
subject to preemptive rights; and the terms and provisions of the
Securities will conform in all material respects to the description
thereof contained in the General Disclosure Package and the
Prospectus. Upon issuance of the Securities sold, good title to the
Securities will be transferred from the Company to the purchasers
of Common Stock against payment therefor as set forth in the
General Disclosure Package and Prospectus and any applicable
certificates used to evidence the Securities will be in due and
proper form.
(o) Neither the Company nor
any of its subsidiaries is in violation of their respective
articles of incorporation or charter or their respective bylaws, or
in material breach or default in the performance or observance of
any obligation, agreement, covenant, or condition contained in any
agreement, judgment, decree, order, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which
the Company or any subsidiary is a party or by which they, or any
of their respective property, may be bound (collectively,
“Agreements and Instruments”) that would result in a
Material Adverse Effect and there does not exist any state of facts
that constitutes an event of default on the part of the Company or
any of its subsidiaries as defined in the Agreements and
Instruments or that, with notice or lapse of time or both, would
constitute such an event of default that individually or in the
aggregate would result in a Material Adverse Effect. The execution,
delivery and performance of this Agreement, the Subscription Agent
Agreement and the consummation of the transactions contemplated by
this Agreement, the Subscription Agent Agreement and in the
Registration Statement (including, without limitation, the
distribution of the Rights and the allotment, issuance and sale of
the Securities and the use of the proceeds from the sale of the
Securities as described in the General Disclosure Package and
Prospectus under the caption “Use of Proceeds”) and
compliance by the Company with its obligations hereunder and
thereunder have been duly authorized by all necessary corporate
action and do not and will not, whether with or without the giving
of notice or passage of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined below) under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any
subsidiary pursuant to, the Agreements and Instruments (except for
such conflicts, breaches or defaults, Repayment Events, or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the
provisions of the articles of incorporation or charter or bylaws of
the Company or any subsidiary or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations except for violations that would
not, individually or in the aggregate, result in a Material Adverse
Effect. As used herein, a “Repayment Event” means any
event or condition that gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such
holder’s behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by
the Company or any subsidiary.
10
(p) Except as disclosed in
the General Disclosure Package and the Prospectus, no enforcement
proceeding, whether formal or informal, has been commenced against
the Company or any of its subsidiaries by the Office of Thrift
Supervision (“OTS”) or FDIC or, to the Company’s
and its subsidiaries’ knowledge, any other governmental
authority, nor have any such proceedings been instituted, or to the
Company’s knowledge, threatened or recommended. Except as
disclosed in the General Disclosure Package and the Prospectus, the
Company and its subsidiaries are not in material violation of any
directive from the OTS, the FDIC, or any other agency that has
directed the Company to make any material change in the method of
conducting their respective businesses; the Company and its
subsidiaries have conducted and are conducting their respective
businesses so as to comply in all material respects with all
applicable statutes and regulations (including, without limitation,
regulations, decisions, directives and orders of the OTS, the
Commission and the FDIC), except where the failure to so comply
would not reasonably be expected to result in a Material Adverse
Effect; and there is no legal or regulatory action, injunction,
judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body pending or, to the
knowledge of the Company, threatened to which the Company or any of
its subsidiaries is or may be a party or of which property owned or
leased by the Company or any of its subsidiaries is or may be the
subject, or related to environmental, discrimination or financial
regulatory matters, which actions, suits or proceedings might,
individually or in the aggregate, prevent or adversely affect the
transactions contemplated by this Agreement or are likely to result
in a Material Adverse Effect.
(q) No labor dispute with the
employees of the Company or any subsidiary exists or, to the
knowledge of the Company, is imminent, and the Company is not aware
of any existing or imminent labor disturbance by the employees of
any of its or any subsidiary’s principal suppliers,
manufacturers, customers or contractors, which, in either case, may
reasonably be expected to result in a Material Adverse
Effect.
(r) The Company has or its
subsidiaries have good and marketable title to all their properties
and assets, free and clear of all liens, charges, encumbrances or
restrictions (other than pledges with respect to Federal Home Loan
Bank borrowings, pledges to the Federal Reserve Bank of Atlanta and
securities pledged to secure local government deposits and as
collateral for repurchase agreements), except such as do not
materially adversely affect the value of such properties and assets
and do not interfere with the use made or proposed to be made of
such properties and assets by the Company and its subsidiaries; all
of the leases and subleases material to the business of the Company
or its subsidiaries or under which the Company holds properties
described in the General Disclosure Package and the Prospectus are
in full force and effect; and the Company has or its subsidiaries
have no notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or its
subsidiaries as owner or as lessee or sublessee under any of the
leases or subleases mentioned above, or materially affecting or
questioning the rights of the Company or its subsidiaries to the
continued possession of the leased or subleased premises under any
such lease or sublease. Except as disclosed in the General
Disclosure Package and the Prospectus and other than such leases
and properties as are immaterial in the aggregate, the Company or
its subsidiaries owns or leases all such properties as are
necessary to its operations as now conducted or, as proposed to be
conducted.
11
(s) Except as disclosed in or
specifically contemplated by the General Disclosure Package and the
Prospectus, the Company and its subsidiaries have sufficient
trademarks, trade names, patent rights, copyrights, licenses,
approvals and governmental authorizations to conduct their
businesses as now conducted; the expiration of any trademarks,
trade names, patent rights, copyrights, licenses, approvals or
governmental authorizations would not, individually or in the
aggregate, have a Material Adverse Effect; and the Company and its
subsidiaries have no knowledge of any material infringement by them
of trademarks, trade names, patent rights, copyrights, licenses,
trade secrets or other similar rights of others, and, to the
Company’s and its subsidiaries’ knowledge, there is no
claim being made against the Company or any of its subsidiaries
regarding trademark, trade name, patent, copyright, license, trade
secret or other infringement that could, individually or in the
aggregate, have a Material Adverse Effect.
(t) The Company and the Bank
have timely filed or requested an extension of all required
federal, state and local tax returns, have paid all taxes that have
become due and payable in respect of such returns, except where
permitted to be extended, have made adequate reserves for similar
future tax liabilities, and no deficiency has been asserted with
respect thereto by any taxing authority.
(u) The statistical and
market related data contained in the General Disclosure Package,
the Prospectus and the Registration Statement are based on or
derived from sources that the Company believes are reliable and
accurate.
(v) The Company and its
subsidiaries maintain disclosure controls and procedures and
internal control over financial reporting (as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The
Company’s independent registered public accounting firm and
the Audit Committee of the Board of Directors have been advised of:
(i) any significant deficiencies or material weaknesses in the
design or operation of internal control over financial reporting
that are reasonably likely to adversely affect the Company’s
ability to record, process, summarize, and report financial data;
and (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Company’s internal control over financial
reporting.
(w) The Registration
Statement is not the subject of a pending proceeding or examination
under Section 8(d) and 8(e) of the Securities Act, and the
Company is not the subject of a pending proceeding under
Section 8A of the Securities Act in connection with the
offering of the Securities.
(x) Except for the consents
required by the OTS and FINRA, which have been or will be obtained,
no approval, authorization, consent or other order of any
regulatory or supervisory or other public authority is required for
the execution, delivery and performance of this Agreement or the
Subscription Agent Agreement by the Company, the consummation by
the Company of the transactions contemplated by this Agreement, or
by the Subscription Agent Agreement, including, without limitation,
the distribution of the Rights and the allotment, issue
12
and sale of the Common Stock, except
those that have been obtained and those that may be required under
the Securities Act or under state securities laws or blue sky laws
of the various states in which the Common Stock is to be
offered.
(y) Other than as disclosed
in the General Disclosure Package and the Prospectus, the Company
has not: (i) issued any securities within the last 18 months
(except for notes to evidence bank loans or other liabilities in
the ordinary course of business); (ii) had any dealings with
respect to sales of securities within the 12 months prior to the
date hereof with any other member of FINRA, or any person related
to or associated with another member, other than discussions and
meetings relating to the Stock Offering and purchases and sales of
United States government and agency and other securities in the
ordinary course of business; (iii) engaged any intermediary
between the Agent and the Company in connection with the Stock
Offering, and no person is being compensated in any manner for such
services; or (iv) entered into a financial or management
consulting agreement except for the Letter Agreement and as
contemplated hereunder.
(z) There are no material
contracts or other documents that are required to be described in
the General Disclosure Package and the Prospectus or filed as
exhibits to the Registration Statement by the Securities Act or by
the Securities Act Regulations that have not been described in the
General Disclosure Package and the Prospectus or filed as exhibits
to the Registration Statement or incorporated in the Registration
Statement by reference as permitted by the Securities Act
Regulations; the contracts so described in the General Disclosure
Package and the Prospectus are in full force and effect on the date
hereof; the descriptions thereof or references thereto are correct
in all material respects; and neither the Company nor any of its
subsidiaries, nor, to the knowledge of the Company, any other party
is in breach of or default under any of such contracts
(aa) Neither the Company nor
any of its subsidiaries nor, to the knowledge of the Company, any
director, officer, agent, employee or other person associated with
or acting on behalf of the Company or any of its subsidiaries has
(i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or
(iv) made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
(bb) The Company is in
compliance with the applicable provisions of the Sarbanes-Oxley
Act, the rules and regulations of the Commission thereunder, and
the corporate governance and other rules and requirements of
American Stock Exchange and will comply in all material respects
with any such provisions that will become effective in the future
upon their effectiveness. The Bank complies in all material
respects with the applicable financial record keeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act
of 1970, as amended, and the regulations and rules
thereunder.
(cc) The Company and the Bank
have not relied upon Agent or its counsel for any legal, tax or
accounting advice in connection with the Stock Offering.
13
(dd) The Company and the Bank
comply in all material respects with all laws, rules and
regulations relating to environmental protection, and none of them
has been notified or is otherwise aware that any of them is
potentially liable, or is considered potentially liable, under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, or any other Federal, state or local
environmental laws and regulations; no action, suit, regulatory
investigation or other proceeding is pending, or to the knowledge
of the Company or the Bank, threatened against the Company or the
Bank relating to environmental protection, nor do the Company or
the Bank have any reason to believe any such proceedings may be
brought against any of them; and no disposal, release or discharge
of hazardous or toxic substances, pollutants or contaminants,
including petroleum and gas products, as any of such terms may be
defined under federal, state or local law, has occurred on, in, at
or about any facilities or properties owned or leased by the
Company or the Bank or in which the Company or the Bank have a
security interest, unless such disposal, release or discharge would
not have a Material Adverse Effect on the Company or the
Bank.
(ee) The Company and each of
it subsidiaries or their “ERISA Affiliates” (as defined
below) are in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder (“ERISA”); no
“reportable event” (as defined in ERISA) has occurred
with respect to any “employee benefit plan” (as defined
in ERISA) for which the Company or any of it subsidiaries or ERISA
Affiliates would have any liability; the Company and each of its
subsidiaries or their ERISA Affiliates have not incurred and do not
expect to incur liability under (A) Title IV of ERISA with
respect to termination of, or withdrawal from, any “employee
benefit plan” or (B) Sections 412, 4971, 4975 or 4980B
of the United States Internal Revenue Code of 1986, as amended, and
the regulations and published interpretations thereunder
(collectively the “Code”); and each “employee
benefit plan” for which the Company and each of its
Subsidiaries or any of their ERISA Affiliates would have any
liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material
respects and nothing as occurred, whether by action or by failure
to act, which would cause the loss of such qualification.
“ERISA Affiliate” means, with respect to the Company or
a subsidiary, any member of any group of organizations described in
Sections 414(b), (c), (m) or (o) of the Code or
Section 400(b) of ERISA of which the Company or such
subsidiary is a member.
(ff) All of the loans
represented as assets on the most recent financial statements or
selected financial information of the Bank and the Company included
in the General Disclosure Package or the Prospectus comply with or
are exempt from all requirements of federal, state and local law
pertaining to lending, including, without limitation, truth in
lending (including the requirements of Regulations Z and 12 C.F.R.
Part 226), real estate settlement procedures, consumer credit
protection, equal credit opportunity and all disclosure laws
applicable to such loans, except for violations which, if asserted,
would not result in a Material Adverse Effect on the Company and
the Bank taken as a whole.
(gg) The Company and its
subsidiaries maintain insurance of the type and in the amount
generally deemed adequate for their respective businesses,
including, but not limited to, general liability insurance,
fidelity bond insurance and insurance covering real and personal
property owned or leased by the Company or its subsidiaries against
theft, forgery, damage, destruction, acts of vandalism and all
other risks customarily insured against, all of which insurance is
in full force and effect.
14
(hh) The Company is not, and
upon the issuance and sale of the Securities as herein contemplated
and the application of the net proceeds therefrom as described in
the General Disclosure Package and the Prospectus will not be, an
“investment company” or an entity
“controlled” by an “investment company” as
such terms are defined in the Investment Company Act of 1940, as
amended (the “1940 Act”).
(ii) The Company has not
distributed and, prior to the later to occur of (i) the
Closing Time and (ii) completion of the distribution of the
Securities, will not distribute any prospectus (as such term is
defined in the Securities Act and the Securities Act Regulations)
in connection with the offering and sale of the Securities other
than the Registration Statement, any preliminary prospectus, the
Prospectus or other materials, if any, permitted by the Securities
Act or by the Securities Act Regulations and approved by the
Agent.
(jj) No relationship, direct
or indirect, exists between or among the Company or any of its
subsidiaries, on the one hand, and the directors, officers,
shareholders, customers or suppliers of the Company or any of its
subsidiaries, on the other, that is required by the Securities Act
or by Securities Act Regulations to be described in the
Registration Statement and/or the General Disclosure Package and
the Prospectus and that is not so described.
Any certificates signed by an
officer of the Company and delivered to the Agent or its counsel
that refer to this Agreement shall be deemed to be a representation
and warranty by the Company to the Agent as to the matters covered
thereby with the same effect as if such representation and warranty
were set forth herein. Any certificate delivered by the Company to
its counsel for purposes of enabling such counsel to render the
opinions referred to in Section 9(b)(i) will also be furnished
to the Agent and its counsel and shall be deemed to be additional
representations and warranties by the Company to the Agent as to
the matters covered thereby and the Agent and its counsel are
entitled to rely thereon.
Section 6.
Representations and Warranties of the Agent The Agent
represents and warrants to the Company and the Bank
that:
(a) The Agent is a
corporation and is validly existing and in good standing under the
laws of the State of Missouri with full power and authority to
provide the services to be furnished to the Company and the
Bank.
(b) The execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated herein have been duly and validly
authorized by all necessary corporate action on the part of the
Agent, and this Agreement is the legal, valid and binding agreement
of the Agent, enforceable in accordance with its terms, except to
the extent limited by the Bankruptcy and Equity
Exception.
(c) Each of the Agent and its
employees, agents and representatives who shall perform any of the
services hereunder shall have, and until the Stock Offering is
consummated or terminated shall maintain, all licenses, approvals
and permits necessary to perform such services and shall comply in
all material respects with all applicable laws and regulations in
connection with the performance of such services.
15
(d) No action, suit, charge
or any proceeding before the Commission, FINRA, any state
securities commission or any court is pending, or to the knowledge
of the Agent threatened against the Agent which, if determined
adversely to the Agent, would have a material adverse
effe
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