Exhibit 1.1
E XECUTION C OPY
TERRITORIAL BANCORP INC.
up to 10,637,500 Shares
(subject to increase up to 12,233,125
shares)
COMMON SHARES
($.01 Par Value)
Subscription Price $10.00 Per
Share
AGENCY AGREEMENT
May 14, 2009
Keefe, Bruyette & Woods,
Inc.
211 Bradenton Drive
Dublin, Ohio 43017-5034
Ladies and Gentlemen:
Territorial Bancorp Inc., a Maryland
corporation (the “Company”), Territorial Mutual Holding
Company, a federally chartered mutual holding company (the
“MHC”), Territorial Savings Group, Inc., a federal
corporation (“Territorial Savings Group”), and
Territorial Savings Bank, a federal savings bank located in
Honolulu, Hawaii (the “Bank” and, together with the
Company, the MHC and Territorial Savings Group, the
“Territorial Parties”) (references to the
“Bank” include the Bank in the mutual holding company
or stock holding company form of organization, as indicated by the
context), the deposit accounts of which are insured by the Federal
Deposit Insurance Corporation (“FDIC”), hereby confirm
their agreement with Keefe, Bruyette & Woods, Inc. (the
“Agent”) as follows:
Section 1. The
Offering. The Bank, in
accordance with the plan of conversion and reorganization adopted
by the Board of Directors of each of the Territorial Parties, as
amended (the “Plan”), intends to convert from the
mutual holding company form of organization to the stock holding
company form of organization (the “Conversion”). In
connection with the Conversion, the Bank will become a wholly owned
subsidiary of the Company, and the corporate existence of the MHC
and Territorial Savings Group will cease. Pursuant to the Plan, the
Company will offer and sell up to 10,637,500 shares (subject to
increase up to 12,233,125 shares) of its common stock, $.01 par
value per share (the “Shares” or “Common
Shares”), in a subscription offering (the “Subscription
Offering”) to (1) depositors of the Bank with Qualifying
Deposits (as defined in the Plan) as of September 30, 2007
(“Eligible Account Holders”), (2) the Bank’s
tax-qualified employee benefit plans, including the employee stock
ownership plan established by the Bank (the “ESOP”),
(3) depositors of the Bank with Qualifying Deposits as of
March 31, 2009 (“Supplemental Eligible Account
Holders”), and (4) other members of the MHC as defined
in the Plan. Subject to the prior subscription rights of the
above-listed parties, the Company may offer for sale in a community
offering (the “Community Offering” and when
referred to together with or subsequent to the
Subscription Offering, the “Subscription and Community
Offering”) the Shares not subscribed for or ordered in the
Subscription Offering to members of the general public to whom a
copy of the Prospectus (as hereinafter defined) is delivered with a
preference given first to natural persons residing in the State of
Hawaii. It is anticipated that shares not subscribed for in the
Subscription and Community Offering may be offered to certain
members of the general public on a best efforts basis through a
selected dealers agreement (the “Syndicated Community
Offering”) (the Subscription Offering, Community Offering and
Syndicated Community Offering are collectively referred to as the
“Offering”). It is acknowledged that the purchase of
Shares in the Offering is subject to the maximum and minimum
purchase limitations as described in the Plan and that the Company
may reject, in whole or in part, any orders received in the
Community Offering or Syndicated Community Offering.
In September 2002, the Bank’s
mutual predecessor reorganized into the mutual holding company form
of organization by forming the MHC. The MHC currently owns 100% of
the outstanding shares of Territorial Savings Group. The MHC is a
mutual holding company that has no stockholders and is controlled
by its members. Territorial Savings Group currently owns 100% of
the outstanding shares of common stock of the Bank. Territorial
Savings Group has not issued shares of its stock to the public.
Pursuant to the terms of the Plan, upon completion of the
Conversion and the Offering, the MHC and Territorial Savings Group
will cease to exist and the Bank will be a wholly owned subsidiary
of the Company.
The Company has filed with the
Securities and Exchange Commission (the “Commission”) a
registration statement on Form S-1 (File No. 333-155388) (the
“Registration Statement”), containing a prospectus
relating to the Offering, for the registration of the Shares under
the Securities Act of 1933 (the “1933 Act”), and has
filed such amendments thereof and such amended prospectuses as may
have been required to the date hereof. The term “Registration
Statement” shall include any documents incorporated by
reference therein and all financial schedules and exhibits thereto,
as amended, including post-effective amendments. The prospectus, as
amended, on file with the Commission at the time the Registration
Statement initially became effective is hereinafter called the
“Prospectus,” except that if any prospectus is filed by
the Company pursuant to Rule 424(b) or (c) of the rules and
regulations of the Commission under the 1933 Act (the “1933
Act Regulations”) differing from the prospectus on file at
the time the Registration Statement initially became effective, the
term “Prospectus” shall refer to the prospectus filed
pursuant to Rule 424(b) or (c) from and after the time said
prospectus is filed with the Commission.
In accordance with Title 12, Part
563b of the Code of Federal Regulations (the “Conversion
Regulations”), the MHC has filed with the Office of Thrift
Supervision (the “OTS”) an Application For Conversion
on Form AC (the “Form AC”), including the Prospectus
and the Conversion Valuation Appraisal Report prepared by FinPro,
Inc., dated February 27, 2009 and as amended or supplemented,
regarding the estimated pro forma value of the Common Shares (the
“Appraisal”), and has filed such amendments thereto as
may have been required by the OTS. The Form AC has been approved by
the OTS and the related Prospectus has been authorized for use by
the OTS. In addition, the Company has filed with the OTS an
Application H-(e)l-S (the “Holding Company
Application”) to become a savings and loan holding company
under the Home Owners’ Loan Act, as amended
(“HOLA”) and the regulations promulgated thereunder
(the “Control Act Regulations”).
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Section 2. Retention of
Agent; Compensation; Sale and Delivery of the Shares.
Subject to the terms and conditions
herein set forth, the Company and the Bank hereby appoint the Agent
as their exclusive financial advisor and marketing agent
(i) to utilize its best efforts to solicit subscriptions for
Common Shares and to advise and assist the Company and the Bank
with respect to the Company’s sale of the Shares in the
Offering and (ii) to participate in the Offering in the areas
of market making and in syndicate formation (if
necessary).
On the basis of the representations,
warranties, and agreements herein contained, but subject to the
terms and conditions herein set forth, the Agent accepts such
appointment and agrees to consult with and advise the Company and
the Bank as to the matters set forth in the letter agreement, dated
September 5, 2008, between the Bank and the Agent (a copy of
which is attached hereto as Exhibit A ). It is acknowledged
by the Company and the Bank that the Agent shall not be required to
purchase any Shares or be obligated to take any action which is
inconsistent with all applicable laws, regulations, decisions or
orders.
The obligations of the Agent
pursuant to this Agreement shall terminate upon termination of the
Offering, but in no event later than 45 days after the completion
of the Subscription Offering (the “End Date”). All fees
or expenses due to the Agent but unpaid will be payable to the
Agent in next day funds at the earlier of the Closing Date (as
hereinafter defined) or the End Date. In the event the Offering is
extended beyond the End Date, the Company and the Agent may agree
to renew this Agreement under mutually acceptable terms.
In the event the Company is unable
to sell a minimum of 6,460,000 Shares within the period herein
provided, this Agreement shall terminate and the Company shall
refund to any persons who have subscribed for any of the Shares the
full amount which it may have received from them plus accrued
interest, as set forth in the Prospectus; and none of the parties
to this Agreement shall have any obligation to the other parties
hereunder, except as set forth in this Section 2 and in
Sections 7, 9 and 10 hereof. In the event the Offering is
terminated for any reason not attributable to the action or
inaction of the Agent, the Agent shall be paid the fees due to the
date of such termination pursuant to subparagraphs (a) and
(d) below.
The Agent shall receive the
following compensation for its services hereunder:
(a) A management fee of $50,000
payable in four consecutive monthly installments of $12,500
commencing in October 2008, all of which has been paid as of the
date hereof. This fee shall be due as it is earned and shall be
non-refundable.
(b) A success fee upon completion of
the Offering of 1.00% of the aggregate purchase price of the Common
Shares sold in the Subscription Offering and Community Offering
excluding shares purchased by the Bank’s officers, directors,
or employees (or members of their immediate family), any
tax-qualified (including the ESOP) or stock-based compensation
plans (except IRAs for the benefit of persons other than officers,
directors or employees of the Bank or members of their immediate
families) or similar plan created by the Bank for some or all of
its directors or employees. The management fee will be credited
against the success fee.
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(c) If any of the Common Shares
remain available after the Subscription Offering and Community
Offering, at the request of the Company, the Agent will seek to
form a syndicate of registered broker-dealers (“Selected
Dealers”) to assist in the sale of such Common Shares on a
best efforts basis, subject to the terms and conditions set forth
in the selected dealers agreement. The Agent will endeavor to
distribute the Common Shares among the Selected Dealers in a
fashion which best meets the distribution objectives of the Bank
and the Plan. The Agent will be paid a fee not to exceed 5.5% of
the aggregate Purchase Price of the Shares sold by the Selected
Dealers. The Agent will pass onto the Selected Dealers who assist
in the Syndicated Community Offering an amount competitive with
gross underwriting discounts charged at such time for comparable
amounts of stock sold at a comparable price per share in a similar
market environment. Fees with respect to purchases effected with
the assistance of Selected Dealers other than the Agent shall be
transmitted by the Agent to such Selected Dealers. The decision to
utilize Selected Dealers will be made by the Company upon
consultation with the Agent. The fees set forth in this paragraph
2(c) shall be in addition to the fees to be earned by the Agent in
connection with the Subscription Offering and Community Offering
described in paragraph 2(b) above. However, in the event, with
respect to any stock purchases, that fees are paid pursuant to this
subparagraph 2(c), such fees shall be in lieu of, and not in
addition to, payment pursuant to paragraph 2(b).
(d) The Company and the Bank shall
reimburse the Agent for reasonable out-of-pocket expenses,
including costs of travel, meals and lodging, photocopying,
telephone, facsimile and couriers. The Company and the Bank will
reimburse the Agent for its reasonable out-of-pocket expenses an
amount not to exceed $175,000 (of which $125,000 will be related to
the Subscription Offering and Community Offering and the remaining
$50,000 would be utilized in the event of a Syndicated Community
Offering). In addition, the Company and the Bank will reimburse the
Agent for fees and expenses of its counsel not to exceed $100,000.
The Company will bear the expenses of the Offering customarily
borne by issuers including, without limitation, regulatory filing
fees, SEC, Blue Sky and Financial Institution Regulatory Authority
(“FINRA”) filing and registration fees; the fees of the
Company’s accountants, attorneys, appraiser, transfer agent
and registrar, printing, mailing and marketing expenses associated
with the reorganization; and the fees set forth under this
Section 2.
Conversion Agent
Services . The Agent
shall also receive a fee of up to a maximum of $100,000 for certain
conversion agent services set forth in the letter agreement, dated
September 5, 2008, between the Bank and the Agent (a copy of
which is attached hereto as Exhibit B ), $10,000 of which
has already been paid to the Agent and is nonrefundable and the
balance of which shall be payable to the Agent upon completion of
the Offering. The Company and the Bank will reimburse the Agent up
to a maximum of $10,000 for its reasonable out-of-pocket expenses
incurred in connection with its conversion agent
services.
Section 3. Sale and Delivery
of Shares. If all
conditions precedent to the consummation of the Conversion,
including without limitation, the sale of all Shares required
by
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the Plan to be sold, are satisfied, the Company
agrees to issue, or have issued, the Shares sold in the Offering
and to release for delivery certificates for such Shares on the
Closing Date against payment to the Company by any means authorized
by the Plan; provided, however, that no funds shall be released to
the Company until the conditions specified in Section 8 hereof
shall have been complied with to the reasonable satisfaction of the
Agent or its counsel. The release of Shares against payment
therefor shall be made on a date and at a place acceptable to the
Company, the Bank and the Agent as set forth in Section 14.
Certificates for shares shall be delivered directly to the
purchasers in accordance with their directions as provided by the
Company to the Company’s registrar and transfer agent. The
date upon which the Company shall release or deliver the Shares
sold in the Offering, in accordance with the terms herein, is
called the “Closing Date.”
Section 4. Representations
and Warranties of the Territorial Parties. The Territorial Parties jointly and severally
represent and warrant to and agree with the Agent as
follows:
(a) The Registration Statement,
which was prepared by the Company and the Bank and filed with the
Commission, has been declared effective by the Commission, no stop
order has been issued with respect thereto and no proceedings
therefor have been initiated or, to the knowledge of the Company or
the Bank, threatened by the Commission. At the time the
Registration Statement, including the Prospectus contained therein
(including any amendment or supplement), became effective, at the
Applicable Time (as defined in Section 4(c) hereof) and at the
Closing Date, the Registration Statement complied and will comply
in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations and the Registration Statement, including
the Prospectus contained therein (including any amendment or
supplement thereto), and any information regarding the Company
contained in Sales Information (as such term is defined in
Section 9 hereof) authorized by the Company for use in
connection with the 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, and at the time any Rule 424(b) or (c) Prospectus
is filed with the Commission and at the Closing Date referred to in
Section 2 hereof, the Prospectus (including any amendment or
supplement thereto) and any information regarding the Company
contained in Sales Information (as such term is defined in
Section 9 hereof) authorized by the Company for use in
connection with the Offering will contain all statements that are
required to be stated therein in accordance with the 1933 Act and
the 1933 Act Regulations and 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 4(a) shall
not apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Company by the
Agent or its counsel expressly regarding the Agent for use in the
Prospectus in the first sentence of the second paragraph under the
caption “The Conversion; Plan of Distribution—Marketing
and Distribution; Compensation.”
(b) Neither the Company nor the Bank
has directly or indirectly distributed or otherwise used and will
not directly or indirectly distribute or otherwise use
any
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prospectus, any “free writing
prospectus” (as defined in Rule 405 of the 1933 Act
Regulations) or other offering material (including, without
limitation, content on the Company’s website that may be
deemed to be a prospectus, free writing prospectus or other
offering material) in connection with the offering and sale of the
Shares other than any Permitted Free Writing Prospectus or the
Prospectus or other materials permitted by the 1933 Act and the
1933 Act Regulations distributed by the Company and reviewed and
approved in advance for distribution by the Agent. The Company has
not, directly or indirectly, prepared or used and will not directly
or indirectly, prepare or use, any Permitted Free Writing
Prospectus except in compliance with the filing and other
requirements of Rules 164 and 433 of the 1933 Act Regulations;
assuming that such Permitted Free Writing Prospectus is so sent or
given after the Registration Statement was filed with the
Commission (and after such Permitted Free Writing Prospectus was,
if required pursuant to Rule 433(d) under the Act, filed with the
Commission), the sending or giving, by the Agent, of any Permitted
Free Writing Prospectus will satisfy the provisions of Rules 164
and 433 (without reliance on subsections (b), (c) and
(d) for Rule 164); and the Company is not an “ineligible
issuer” (as defined in Rule 405 of the 1933 Act Regulations)
as of the eligibility determination date for purposes of Rules 164
and 433 of the 1933 Act Regulations with respect to the offering of
the Shares or otherwise precluded under Rule 164 from using free
writing prospectuses in connection with the offering of the
Shares.
(c) As of the Applicable Time (as
defined below), 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 the 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
Shares 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:
1. “Applicable Time”
means each and every date when a potential purchaser submitted a
subscription or otherwise committed to purchase Shares.
2. “Statutory
Prospectus,” as of any time, means the Prospectus relating to
the offered Shares that is included in the Registration Statement
relating to the offered Shares immediately prior to the Applicable
Time, including any document incorporated by reference
therein.
3. “Issuer-Represented Free
Writing Prospectus” means any “issuer free writing
prospectus,” as defined in Rule 433(h) of the 1933 Act
Regulations, relating to the offered Shares in the form filed or
required or,
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if not required to be filed, in the
form retained in the Company’s records pursuant to Rule
433(g) under the 1933 Act Regulations. The term does not include
any writing exempted from the definition of prospectus pursuant to
clause (a) of Section 2(a)(10) of the 1933 Act, without
regard to Rule 172 or Rule 173 of the 1933 Act
Regulations.
4. “Issuer-Represented General
Free Writing Prospectus” means any Issuer-Represented Free
Writing Prospectus that is intended for general distribution to
prospective investors.
5. “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 of the 1933 Act Regulations, that is made
available without restriction pursuant to Rule 433(d)(8)(ii)
of the 1933 Act Regulations or otherwise, even though not required
to be filed with the Commission.
6. “Permitted Free Writing
Prospectus” means any free writing prospectus as defined in
Rule 405 of the 1933 Act Regulations that is consented to by the
Company, the Bank and the Agent.
(d) 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 Shares 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, including any document
incorporated by reference therein that has not been superseded or
modified. 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 Shares 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. The foregoing two sentences do not apply to
statements in or omissions from 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.
(e) The Form AC, which was prepared
by the Territorial Parties and filed with the OTS, has been
approved by the OTS and the related Prospectus and proxy statement
to
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be delivered to members of the MHC
have been authorized for use by the OTS. No order has been issued
by the OTS preventing or suspending the use of the Prospectus or
the proxy statement, and no action by or before the OTS to revoke
any approval, authorization or order of effectiveness related to
the Offering is pending or, to the best knowledge of the Company,
threatened. At the time of the approval of the Form AC, including
the Prospectus (including any amendment or supplement thereto) by
the OTS and at all times subsequent thereto until the Closing Date,
the Form AC, including the Prospectus (including any amendment or
supplement thereto), will comply in all material respects with the
Conversion Regulations, except to the extent waived or otherwise
approved by the OTS. The Form AC, including the Prospectus
(including any amendment or supplement thereto), does not include
any 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; provided, however, that the
representations and warranties in this Section 4(e) shall not
apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Company by the
Agent or its counsel expressly regarding the Agent for use in the
Prospectus contained in the Form AC under the caption “The
Conversion; Plan of Distribution—Marketing and Distribution;
Compensation.”
(f) The Company has filed the
Holding Company Application with the OTS and has published notice
of such filing and the Holding Company Application is accurate and
complete in all material respects. The Company has received written
notice from the OTS of its approval of the acquisition of the Bank,
such approval remains in full force and effect and no order has
been issued by the OTS suspending or revoking such approval and no
proceedings therefor have been initiated or, to the knowledge of
the Company or the Bank, threatened by the OTS. At the date of such
approval, the Holding Company Application complied in all material
respects with the applicable provisions of HOLA and the regulations
promulgated thereunder, except as the OTS has expressly waived such
regulations in writing.
(g) The Company and the MHC have
filed the Prospectus and any supplemental sales literature with the
Commission and the OTS. The Prospectus and all supplemental sales
literature, as of the date the Registration Statement became
effective and on the Closing Date referred to in Section 2,
complied and will comply in all material respects with the
applicable requirements of the 1933 Act Regulations and, at or
prior to the time of their first use, will have received all
required authorizations of the OTS and Commission for use in final
form. No approval of any other regulatory or supervisory or other
public authority is required in connection with the distribution of
the Prospectus and any supplemental sales literature that has not
been obtained and a copy of which has been delivered to the Agent.
The Company and the MHC have not distributed any offering material
in connection with the Offering except for the Prospectus and any
supplemental sales material that has been filed with the
Registration Statement and the Form AC and authorized for use by
the Commission and the OTS. The information contained in the
supplemental sales material filed as an exhibit to both the
Registration Statement and the Form AC does not conflict in any
material respects with information contained in the Registration
Statement and the Prospectus.
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(h) The Plan has been adopted by the
Boards of Directors of each of the Territorial Parties and, at the
Closing Date, will have been approved by the members of the MHC,
and the offer and sale of the Shares will have been conducted in
all material respects in accordance with the Plan, the Conversion
Regulations except to the extent waived or otherwise approved by
the OTS, and all other applicable laws, regulations, decisions and
orders, including all terms, conditions, requirements and
provisions precedent to the Offering imposed upon the Company and
the Bank by the OTS, the Commission, or any other regulatory
authority and in the manner described in the Prospectus. To the
best knowledge of the Territorial Parties, no person has sought to
obtain review of the final action of the OTS in approving the
Conversion pursuant to the HOLA.
(i) The Bank has been duly organized
and validly existing as a federally-chartered savings bank in stock
form and upon completion of the Conversion will continue to be a
duly organized and validly existing federally-chartered savings
bank in stock form, in both instances duly authorized to conduct
its business and own its property as described in the Registration
Statement and the Prospectus; the Bank has obtained all licenses,
permits and other governmental authorizations currently required
for the conduct of its business, except those that individually or
in the aggregate would not have a material adverse effect on the
conduct of the business, financial condition, results of
operations, affairs or prospects of the Territorial Parties, taken
as a whole (a “Material Adverse Effect”); all such
licenses, permits and governmental authorizations are in full force
and effect, and the Bank is in compliance with all material laws,
rules, regulations and orders applicable to the operation of its
business, except where failure to be in compliance would not have a
Material Adverse Effect; the Bank is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which its ownership of property or leasing of
property or the conduct of its business requires such
qualification, unless the failure to be so qualified in one or more
of such jurisdictions would not have a Material Adverse Effect. The
Bank does not own equity securities or any equity interest in any
other business enterprise except as described in the Prospectus or
as would not be material to the operations of the Territorial
Parties, taken as a whole. The authorized capital stock of the Bank
consists of 10,000,000 shares of common stock, par value $0.01 per
share (the “Bank Common Stock”), and 1,000,000 shares
of preferred stock, par value $0.01 per share (the “Bank
Preferred Stock”), of which 100 shares of Bank Common Stock
and no shares of Bank Preferred Stock are issued and outstanding as
of the date hereof; no additional shares of Bank Common Stock and
no shares of Bank Preferred Stock will be issued prior to the
Closing (defined below); the issued and outstanding shares of Bank
Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable and have been issued in compliance
with all federal and state securities laws; the MHC owns,
indirectly, 100 shares of Bank Common Stock beneficially and of
record free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; the terms and provisions of the
Bank Common Stock conform to all statements thereto contained in
the Prospectus. At the Closing, (i) all of the outstanding
capital stock of the Bank will be duly authorized, validly issued
and fully paid and non-assessable and owned directly by the Company
free and clear of any security interest, mortgage, pledge, lien,
encumbrances or legal or equitable claim and (ii) the Company
will have no direct subsidiaries other than the Bank and
Territorial Savings Statutory Trust I, Territorial Savings
Statutory Trust II,
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Territorial Savings Statutory Trust
III, and no indirect subsidiaries other than Territorial Financial
Services, Inc., Territorial Holdings, Inc., Territorial Real Estate
Co., Inc. and Territorial Realty, Inc. (such direct and indirect
subsidiaries, other than the Bank, are referred to herein as the
“Subsidiaries”). The Conversion will be effected in all
material respects in accordance with all applicable statutes,
regulations, decisions and orders; and, except with respect to the
filing of certain post-sale, post-Conversion reports, and documents
in compliance with the 1933 Act Regulations, the Conversion
Regulations or letters of approval, at the Closing Date, all terms,
conditions, requirements and provisions with respect to the
Conversion imposed by the Commission and the OTS if any, will have
been complied with by the Territorial Parties in all material
respects or appropriate waivers will have been obtained and all
applicable notice and waiting periods will have been satisfied,
waived or elapsed.
(j) The Company is duly organized,
validly existing and in good standing as a corporation under the
laws of the State of Maryland with full corporate power and
authority to own, lease and operate its properties and to conduct
its business as described in the Registration Statement and the
Prospectus, and the Company is, and at the Closing Date will be,
qualified to do business as a foreign corporation in each
jurisdiction in which the conduct of its business requires such
qualification, except where the failure to so qualify would not
have a Material Adverse Effect. The Company has obtained all
licenses, permits and other governmental authorizations currently
required for the conduct of its business except those that
individually or in the aggregate would not have a Material Adverse
Effect; all such licenses, permits and governmental authorizations
are in full force and effect, and the Company is in all material
respects complying therewith and with all laws, rules, regulations
and orders applicable to the operation of its business. There are
no outstanding warrants or options to purchase any securities of
the Company.
(k) The MHC is duly organized,
validly existing and in good standing as a mutual holding company
organized under the laws of the United States of America with full
corporate power and authority to own and operate its properties and
to conduct its business as described in the Registration Statement
and the Prospectus and, at the Closing Date, the corporate
existence of the MHC will cease to exist. The MHC has obtained all
licenses, permits and other governmental authorizations currently
required for the conduct of its business except those that
individually or in the aggregate would not have a Material Adverse
Effect; all such licenses, permits and governmental authorizations
are in full force and effect, and the MHC is in all material
respects complying therewith and with all laws, rules, regulations
and orders applicable to the operation of its business.
(l) Territorial Savings Group is
duly organized, validly existing and in good standing as a stock
holding company organized under the laws of the United States of
America with full corporate power and authority to own and operate
its properties and to conduct its business as described in the
Registration Statement and the Prospectus and, at the Closing Date,
the corporate existence of Territorial Savings Group will cease to
exist. Territorial Savings Group has obtained all licenses, permits
and other governmental authorizations currently required for the
conduct of its business except those that
10
individually or in the aggregate
would not have a Material Adverse Effect; all such licenses,
permits and governmental authorizations are in full force and
effect, and Territorial Savings Group is in all material respects
complying therewith and with all laws, rules, regulations and
orders applicable to the operation of its business.
(m) Except as described in the
Prospectus there are no contractual encumbrances or restrictions or
requirements or material legal restrictions or requirements
required to be described therein, on the ability of any of the
Territorial Parties, (A) to pay dividends or make any other
distributions on its capital stock or to pay any indebtedness owed
to another party, (B) to make any loans or advances to, or
investments in, another party or (C) to transfer any of its
property or assets to another party. Except as described in the
Prospectus, there are no restrictions, encumbrances or requirements
affecting the payment of dividends or the making of any other
distributions on any of the capital stock of the
Company.
(n) The Bank and the Subsidiaries
have properly administered all accounts for which they act as a
fiduciary, including but not limited to accounts for which they
serve as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the
terms of the governing documents and applicable state and federal
law and regulation, except where the failure to do so would not
have a Material Adverse Effect. Neither the Bank, the Subsidiaries,
nor any of their respective directors, officers or employees has
committed any material breach of trust with respect to any such
fiduciary account, and the accountings for each such fiduciary
account are true and correct in all material respects and
accurately reflect the assets of such fiduciary account in all
material respects.
(o) Each of the Subsidiaries is duly
organized, validly existing and in good standing as a corporation
under the laws of the jurisdiction of its incorporation, with full
corporate power and authority to own, lease and operate its
properties and to conduct its businesses as described in the
Registration Statement and the Prospectus, and is duly qualified to
do business as a foreign corporation and is in good standing in
each jurisdiction in which the conduct of its business requires
such qualification, except where the failure to so qualify would
not have a Material Adverse Effect. The activities of the
Subsidiaries are permissible to subsidiaries of federal savings
banks. The Subsidiaries have obtained all licenses, permits and
other governmental authorizations currently required for the
conduct of their business except those that individually or in the
aggregate would not materially adversely affect the financial
condition, results of operations or business of the Company and the
Bank, taken as a whole; all such licenses, permits and governmental
authorizations will be in full force and effect, and the
Subsidiaries are in all material respects complying with all laws,
rules, regulations and orders applicable to the operation of their
businesses. All of the issued and outstanding capital stock of the
Subsidiaries have been duly authorized and validly issued, are
fully paid and non-assessable and owned by the Bank or Territorial
Savings Group directly, free and clear of any security interest,
mortgage, pledge, lien, encumbrance or legal or equitable
claim.
11
(p) The Bank is a member of the
Federal Home Loan Bank of Seattle (“FHLB-Seattle”). The
deposit accounts of the Bank are insured by the FDIC up to the
applicable limits, and no proceedings for the termination or
revocation of such insurance are pending or, to the best knowledge
of the Company or the Bank, threatened. The Bank is a
“qualified thrift lender” within the meaning of 12
U.S.C. § l467a(m).
(q) The Bank and the Company have
good and marketable title to all real property and good title to
all other assets material to the business of the Company and the
Bank, taken as a whole, and to those properties and assets
described in the Registration Statement and Prospectus as owned by
them, free and clear of all liens, charges, encumbrances or
restrictions, except such as are described in the Registration
Statement and Prospectus or as are not material to the business of
the Company and the Bank, taken as a whole; and all of the leases
and subleases material to the business of the Company and the Bank,
taken as a whole, under which the Company or the Bank hold
properties, including those described in the Registration Statement
and Prospectus, are in full force and effect.
(r) The Company has received an
opinion of its special counsel, Luse Gorman Pomerenk &
Schick, P.C., with respect to the federal income tax consequences
of the Conversion and the opinions of its tax advisor, KPMG LLP,
with respect to the Hawaii income tax consequences of the
Conversion and all material aspects of such opinions are accurately
summarized in the Registration Statement and the Prospectus. The
Company and the Bank represent and warrant that the facts upon
which such opinions are based are truthful, accurate and complete
in all material respects. Neither the Company nor the Bank will
take any action inconsistent therewith.
(s) Each of the Territorial Parties
has 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 issue and sell the Shares
to be sold by the Company as provided herein and as described in
the Prospectus, subject to approval or confirmation by the OTS of
the final Appraisal. The execution, delivery and performance of
this Agreement and the consummation of the transactions herein
contemplated have been duly and validly authorized by all necessary
corporate action on the part of each of the Territorial Parties.
This Agreement has been validly executed and delivered by each of
the Territorial Parties and, assuming due execution and delivery by
the Agent, is the valid, legal and binding agreement of each of the
Territorial Parties enforceable in accordance with its terms
(except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws relating to
or affecting the enforcement of creditors’ rights generally
or the rights of creditors of savings and loan holding companies,
the accounts of whose subsidiaries are insured by the FDIC, or by
general equity principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law,
and except to the extent, if any, that the provisions of Sections 9
and 10 hereof may be unenforceable as against public policy or
pursuant to applicable Federal law and the rules and regulations of
the Federal Reserve System).
12
(t) None of the Territorial Parties
is in violation of any directive received from the OTS, the FDIC,
or any other agency to make any material change in the method of
conducting its business 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 and the FDIC) and, except as may be set forth in the
Registration Statement, the General Disclosure Package and the
Prospectus, there is no suit or proceeding or charge or action
before or by any court, regulatory authority or governmental agency
or body, pending or, to the knowledge of any of the Territorial
Parties, threatened, which might materially and adversely affect
the Offering, or which might result in any Material Adverse
Effect.
(u) The consolidated financial
statements, schedules and notes related thereto which are included
in the General Disclosure Package and the Prospectus fairly present
the balance sheet, income statement, statement of changes in equity
capital and statement of cash flows of the MHC on a consolidated
basis at the respective dates indicated and for the respective
periods covered thereby and comply as to form in all material
respects with the applicable accounting requirements of the 1933
Act Regulations and Title 12 of the Code of Federal Regulations.
Such consolidated financial statements, schedules and notes related
thereto have been prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”) consistently
applied through the periods involved except as noted therein and
present fairly in all material respects the information required to
be stated therein and are consistent with financial statements and
other reports filed by the Bank with the OTS, except to the extent
that accounting principles employed in such filings conform to the
requirements of the OTS and not necessarily to GAAP. The other
financial, statistical and pro forma information and related notes
included in the Prospectus present fairly the information shown
therein on a basis consistent with the audited and unaudited
consolidated financial statements of the Bank included in the
Prospectus, and as to the pro forma adjustments, the adjustments
made therein have been properly applied on the basis described
therein.
(v) The Territorial Parties carry,
or are covered by, insurance in such amounts and covering such
risks as the Territorial Parties deem reasonably adequate for the
conduct of their respective businesses and the value of their
respective properties.
(w) Since the respective dates as of
which information is given in the Registration Statement including
the Prospectus and except as disclosed in the General Disclosure
Package and the Prospectus: (i) there has not been any
material adverse change, financial or otherwise, in the condition
of the Territorial Parties and their subsidiaries, considered as
one enterprise, or in the earnings, capital, properties, business
or prospects of the Territorial Parties and their subsidiaries
considered as one enterprise, whether or not arising in the
ordinary course of business; (ii) there has not been any
material increase in the long-term debt of any of the Territorial
Parties or the Subsidiaries or in the principal amount of the
Territorial Parties’ consolidated assets which are classified
by any of such entities or the Subsidiaries as impaired,
substandard, doubtful or loss or in loans past due 90 days or more
or real estate acquired by foreclosure, by deed-in-lieu of
foreclosure or deemed in-substance foreclosure or any material
decrease in equity capital or total assets of any of the
Territorial Parties or the Subsidiaries; nor has any of
13
the Territorial Parties or the
Subsidiaries issued any securities (other than in connection with
the incorporation of the Company) or incurred any liability or
obligation for borrowing other than in the ordinary course of
business; (iii) there have not been any material transactions
entered into by the Territorial Parties or the Subsidiaries;
(iv) there has not been any material adverse change in the
aggregate dollar amount (on a consolidated basis with the
Territorial Parties and the Subsidiaries) of the MHC’s
deposits or its net worth; (v) there has been no material
adverse change in any of the Territorial Parties’
relationship with its insurance carriers, including, without
limitation, cancellation or other termination of any of the
Territorial Parties’ fidelity bond or any other type of
insurance coverage; (vi) there has been no material change in
management of any of the Territorial Parties; (vii) none of
the Territorial Parties or the Subsidiaries has sustained any
material loss or interference with its respective business or
properties from fire, flood, windstorm, earthquake, accident or
other calamity, whether or not covered by insurance;
(viii) none of the Territorial Parties or the Subsidiaries has
defaulted in the payment of principal or interest on any
outstanding debt obligations; (ix) the capitalization,
liabilities, assets, properties and business of the Territorial
Parties and the Subsidiaries conform in all material respects to
the descriptions thereof contained in the General Disclosure
Package and the Prospectus; and (x) none of the Territorial
Parties or the Subsidiaries has any material liabilities,
contingent or otherwise, except as set forth in the
Prospectus.
(x) None of the Territorial Parties
or any of the Subsidiaries is (i) in violation of their
respective articles, charters or bylaws (and none of the
Territorial Parties or any of the Subsidiaries will not be in
violation of its articles of incorporation, charter or bylaws upon
completion of the Conversion), or (ii) in default in the
performance or observance of any obligation, agreement, covenant,
or condition contained in any material contract, lease, loan
agreement, indenture or other instrument to which it is a party or
by which it or any of its property may be bound. The execution and
delivery of this Agreement and the consummation of the transactions
herein contemplated will not: (i) conflict with or constitute
a breach of, or default under, or result in the creation of any
lien, charge or encumbrance upon any of the assets of any of the
Territorial Parties or the Subsidiaries pursuant to the respective
articles of incorporation, charters or bylaws of the Territorial
Parties or the Subsidiaries or any contract, lease or other
instrument in which the Territorial Parties or the Subsidiaries has
a beneficial interest, or any applicable law, rule, regulation or
order; (ii) violate any authorization, approval, judgment,
decree, order, statute, rule or regulation applicable to any of the
Territorial Parties or the Subsidiaries, except for such violations
which would not have a Material Adverse Effect; or
(iii) result in the creation of any material lien, charge or
encumbrance upon any property of the Territorial Parties or the
Subsidiaries.
(y) All documents made available or
delivered by, or to be made available to or delivered by the
Territorial Parties or the Subsidiaries or their representatives in
connection with the issuance and sale of the Shares, including
records of account holders and depositors of the Bank, or in
connection with the Agent’s exercise of due diligence, except
for those documents which were prepared by parties other than the
Territorial Parties or the Subsidiaries or their representatives,
to the best knowledge of the Territorial Parties and the
Subsidiaries, were on the dates on which they were delivered, or
will be on the dates on which they are to be delivered, true,
complete and correct in all material respects.
14
(z) Upon consummation of the
Conversion, the authorized, issued and outstanding equity capital
of the Company will be within the range set forth in the General
Disclosure Package and the Prospectus under the caption
“Capitalization,” and no Shares have been or will be
issued and outstanding prior to the Closing Date; the Shares will
have been duly and validly authorized for issuance and, when issued
and delivered by the Company pursuant to the Plan against payment
of the consideration calculated as set forth in the Plan and in the
Prospectus, will be duly and validly issued, fully paid and
non-assessable, except for shares purchased by the ESOP with funds
borrowed from the Company to the extent payment therefor in cash
has not been received by the Company; except to the extent that
subscription rights and priorities pursuant thereto exist pursuant
to the Plan, no preemptive rights exist with respect to the Shares;
and the terms and provisions of the Shares will conform in all
material respects to the description thereof contained in the
Registration Statement and the Prospectus. The Shares have been
approved for listing on the Nasdaq Global Select Market or Nasdaq
Global Market, as applicable, subject to issuance. Upon the
issuance of the Shares, good title to the Shares will be
transferred from the Company to the purchasers thereof against
payment therefor, subject to such claims as may be asserted against
the purchasers thereof by third-party claimants.
(aa) No default exists, and no event
has occurred which, with notice or lapse of time or both, would
constitute a default, on the part of any of the Territorial Parties
in the due performance and observance of any term, covenant,
agreement, obligation, representation, warranty or condition of any
indenture, mortgage, deed of trust, note, bank loan or credit
agreement, lease, license, Permit or any other instrument or
agreement to which the Territorial Parties or by which any of them
or any of their respective property is bound or affected which, in
any such case, could have, individually or in the aggregate with
other breaches, violations or defaults, a Material Adverse Effect;
each of such agreements is in full force and effect and is the
legal, valid and binding agreement of the applicable party and the
other parties thereto, enforceable, to the knowledge of the
Territorial Parties, in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity and no other
party to any such agreement has instituted or, to the knowledge of
the Territorial Parties, threatened any action or proceeding
wherein any of the Territorial Parties or any subsidiary thereof
would or might be alleged to be in default thereunder where such
action or proceeding, if determined adversely to the Territorial
Parties, would have a Material Adverse Effect. There are no
contracts or documents that are required to be filed as exhibits to
the Registration Statement or described in the Registration
Statement, the Prospectus, or any Permitted Free Writing Prospectus
which are not so filed or described as required, and such contracts
and documents as are summarized in the Registration Statement, the
Prospectus, and any Permitted Free Writing Prospectus are fairly
summarized in all material respects. No party has sent or received
any notice indicating the termination of or intention to terminate
any of the contracts or agreements referred to or described in the
Registration Statement, the
15
Prospectus, or any Permitted Free
Writing Prospectus, or filed as an exhibit to the Registration
Statement, and, to the knowledge of the Territorial Parties, no
such termination has been threatened by any party to any such
contract or agreement.
(bb) Subsequent to the date the
Registration Statement is declared effective by the Commission and
prior to the Closing Date, except as otherwise may be indicated or
contemplated in the Registration Statement, none of the Territorial
Parties has or will have issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money,
except borrowings from the same or similar sources indicated in the
Prospectus in the ordinary course of its business.
(cc) Except for the Bank’s
defined benefit pension plan and the profit sharing and 401(k)
plan, none of the Territorial Parties maintains any other
“pension plan,” as defined in the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”). In
addition, (A) the employee benefit plans, including employee
welfare benefit plans, of the Territorial Parties (the
“Employee Plans”) have been operated in compliance with
the applicable provisions of ERISA, the Internal Revenue Code of
1986, as amended (the “Code”), all regulations, rulings
and announcements promulgated or issued thereunder and all other
applicable laws and governmental regulations, (B) no
reportable event under Section 4043(c) of ERISA has occurred
with respect to any Employee Plan of the Territorial Parties for
which the reporting requirements have not been waived by the
Pension Benefit Guaranty Corporation, (C) no prohibited
transaction under Section 406 of ERISA, for which an exemption
does not apply, has occurred with respect to any Employee Plan of
the Territorial Parties and (D) all Employee Plans that are
group health plans have been operated in compliance with the group
health plan continuation coverage requirements of
Section 4980B of the Code, except to the extent such
noncompliance, reportable event or prohibited transaction would not
have, individually or in the aggregate, a Material Adverse Effect.
There are no pending or, to the knowledge of the Territorial
Parties, threatened, claims by or on behalf of any Employee Plan,
by any employee or beneficiary covered under any such Employee Plan
or by any governmental authority, or otherwise involving such
Employee Plans or any of their respective fiduciaries (other than
for routine claims for benefits).
(dd) No approval of any regulatory
or supervisory or other public authority is required in connection
with the execution and delivery of this Agreement or the issuance
of the Shares, except for the approval of the Commission and the
OTS, and any necessary qualification, notification, registration or
exemption under the securities or blue sky laws of the various
states in which the Shares are to be offered, and except as may be
required under the rules and regulations of the FINRA.
(ee) KPMG LLP, which has certified
the audited consolidated financial statements and schedules of the
MHC included in the Prospectus, has advised the Territorial Parties
in writing that they are, with respect to the Territorial Parties,
independent registered public accountants within the applicable
rules of the Public Company Accounting Oversight Board (United
States).
16
(ff) FinPro, Inc., which has
prepared the Appraisal, has advised the MHC in writing that it is
independent of the Territorial Parties within the meaning of the
Conversion Regulations and is believed by the Territorial Parties
to be experienced and expert in the valuation and the appraisal of
business entities, including savings institutions, and the
Territorial Parties believe that FinPro, Inc. has prepared the
pricing information set forth in the Prospectus in accordance with
the requirements of the Conversion Regulations.
(gg) The Territorial Parties have
timely filed or extended all required federal, state and local tax
returns; the Territorial Parties have paid all taxes that have
become due and payable in respect of such returns, except where
permitted to be extended or where such taxes may be contested in
good faith, have made adequate reserves for similar future tax
liabilities and no deficiency has been asserted with respect
thereto by any taxing authority. The Territorial Parties have no
knowledge of any tax deficiency which has been or might be assessed
against either of them which, if the subject of an unfavorable
decision, ruling or finding, could have, individually or in the
aggregate with other tax deficiencies, a Material Adverse Effect.
All material tax liabilities have been adequately provided for in
the financial statements of the Territorial Parties in accordance
with GAAP. There are no transfer taxes or other similar fees or
charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection
with the execution and delivery of this Agreement by the Company or
with the issuance or sale by the Company of the Shares.
(hh) Each of the Territorial Parties
is in compliance 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.
(ii) All Sales Information (as
defined in Section 9(a)) used by the Company in connection
with the Conversion that is required by the OTS to be filed has
been filed with and approved by the OTS.
(jj) To the knowledge of the
Territorial Parties, none of the Territorial Parties or the
employees of the Territorial Parties has made any payment of funds
of the Territorial Parties as a loan for the purchase of the Shares
or made any other payment of funds prohibited by law, and no funds
have been set aside to be used for any payment prohibited by
law.
(kk) None of the Territorial Parties
has: (i) issued any securities within the last 18 months
(except for notes to evidence bank loans and reverse repurchase
agreements or other liabilities in the ordinary course of business
or as described in the Prospectus); (ii) had any material
dealings within the 12 months prior to the date hereof with any
member of the FINRA, or any person related to or associated with
such member, other than discussions and meetings relating to the
proposed Offering and routine purchases and sales of United States
government and agency and other securities in the ordinary course
of business; (iii) entered into a financial or management
consulting agreement except as contemplated hereunder; and
(iv) engaged any intermediary between the Agent and the
Company or the Bank in connection with the offering of the Shares,
and no person is being compensated in any manner for such
service.
17
(ll) The Territorial Parties have
not relied upon the Agent or its legal counsel for any legal, tax
or accounting advice in connection with the Conversion.
(mm) The records used by the
Territorial Parties to determine the identities of Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members
are accurate and complete in all material respects.
(nn) None of the Territorial Parties
is, and neither intends to conduct business in a manner which would
cause it to become, an “investment company,” an entity
“controlled” by an “investment company” or
an “investment adviser” within the meaning of the
Investment Company Act of 1940, as amended, or the Investment
Advisers Act of 1940, as amended.
(oo) None of the Territorial Parties
or any properties owned or operated by any of the Territorial
Parties, is in violation of or liable under any Environmental Law
(as defined below), except for such violations or liabilities that,
individually or in the aggregate, would not have a Material Adverse
Effect. There are no actions, suits or proceedings, or demands,
claims, notices or investigations (including, without limitation,
notices, demand letters or requests for information from any
environmental agency) instituted or pending or, to the knowledge of
the Territorial Parties, threatened relating to the liability of
any property owned or operated by the Territorial Parties under any
Environmental Law.
