EXHIBIT 1.2
FORM OF
BANKS OF THE CHESAPEAKE, INC.
Up to 2,975,625 Shares
of
Common Stock
($0.01 Par Value Per Share)
$10.00 Per Share
SALES AGENCY AGREEMENT
_______________, 2003
Trident Securities, A Division
of McDonald Investments Inc.
0000 Xxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Dear Sirs:
Banks of the Chesapeake, M.H.C., a federally-chartered mutual holding
company (the "MHC"), Banks of the Chesapeake, Inc., a Maryland corporation (the
"Company"), and Chesapeake Bank of Maryland, a federally-chartered stock savings
bank (the "Bank"), hereby confirm as of the date above their respective
agreements with Trident Securities, a Division of McDonald Investments Inc.,
("McDonald"), a broker-dealer registered with the Securities and Exchange
Commission ("Commission") and a member of the National Association of Securities
Dealers, Inc. ("NASD"), as follows:
1. Introduction. The MHC intends to undertake a mutual-to-stock
conversion pursuant to a plan of conversion adopted by the Boards of Directors
of the MHC and the Bank on June 19, 2002 (the "Plan"), pursuant to the following
steps: (i) the Company will form CB Interim Savings Bank under federal law as
its first-tier wholly-owned subsidiary, (ii) the MHC will convert into Interim
Mutual Holdings, an interim federal savings bank, and simultaneously will merge
with and into the Bank, pursuant to which the MHC will cease to exist and the
shares of the Bank held by the MHC will be canceled and (iii) the Bank will
merge with CB Interim Savings Bank, with the Bank surviving (together with the
Offerings, as defined below, the acquisition of the common stock of the Bank by
the Company, and the incorporation of the Company, collectively the
"Conversion"). In accordance with the Plan, the Company is offering shares of
its common stock, $0.01 par value (the "Shares" or the "Common Stock"), pursuant
to nontransferable subscription rights in a subscription offering ("Subscription
Offering") to certain depositors of the Bank and to the Bank's employee
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stock ownership plan. Shares of the Common Stock not sold in the Subscription
Offering may be offered to the general public in a direct community offering,
with preference being given to natural persons residing in Baltimore City,
Maryland and the Maryland counties of Xxxx Arundel, Baltimore, Xxxxxxx,
Xxxxxxxxx, Harford and Xxxxxx (the "Community Offering") and, if necessary,
through a syndicate of registered broker-dealers managed by McDonald in a
syndicated community offering (the "Syndicated Community Offering"). The
Subscription Offering, the Community Offering and the Syndicated Community
Offering are collectively referred to as the "Offerings." Purchases of Shares in
the Offerings are subject to certain limitations and restrictions as described
in the Plan.
The Company has been advised by McDonald that McDonald will utilize its
best efforts to assist the Company with the sale of the Shares in the Offerings.
Prior to the execution of this Agreement, the Company has delivered to McDonald
a prospectus dated as of the date hereof and all supplements thereto to be used
in the Offerings. Such prospectus contains information with respect to the MHC,
the Company, the Bank, the Shares and the Conversion.
2. Representations and Warranties. The MHC, the Company and the Bank
jointly and severally represent and warrant to McDonald that:
(a) The Company has filed with the Commission a registration
statement, including a prospectus relating to the Offerings and
exhibits, and an amendment or amendments thereto, on Form SB-2 (No.
333-______) for the registration of the Shares under the Securities Act
of 1933, as amended ("Securities Act"); and such registration statement
has been declared effective under the Securities Act and no stop order
has been issued with respect thereto and no proceedings therefor have
been initiated or, to the knowledge of the Company, threatened by the
Commission. Except as the context may otherwise require, such
registration statement, as amended or supplemented, on file with the
Commission at the time the registration statement became effective,
including the prospectus, financial statements, schedules, exhibits and
all other documents filed as part thereof is herein called the
"Registration Statement," and the prospectus, as amended or
supplemented, on file with the Commission at the time the Registration
Statement became effective is herein called the "Prospectus," except
that if any prospectus filed by the Company with the Commission
pursuant to Rule 424(b) of the general rules and regulations of the
Commission under the Securities Act (together with the enforceable
published policies, releases and actions of the Commission thereunder,
hereinafter referred to as the "Securities Act Regulations") differs
from the form of prospectus on file at the time the Registration
Statement became effective, the term "Prospectus" shall refer to the
Rule 424(b) prospectus from and after the time it is filed with the
Commission and shall include any amendments or supplements thereto from
and after their dates of effectiveness or use, respectively.
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of McDonald Investments, Inc.
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(b) The MHC has filed a Form AC Application for Conversion,
including exhibits (as amended or supplemented, the "Conversion
Application") with the Office of Thrift Supervision (the "OTS") under
the Home Owners' Loan Act, as amended ("HOLA"), and the rules and
regulations of the OTS thereunder (the "OTS Regulations"), which has
been approved by the OTS; and the Prospectus and the proxy statement
for the solicitation of proxies from members of the MHC for the special
meeting to approve the Plan ("Proxy Statement") included as part of the
Conversion Application have been approved for use by the OTS. The
Company has filed with the OTS the Company's application to acquire
ownership of the Bank on Form H-(e)1-S ("Holding Company Application")
promulgated under the savings and loan holding company provisions of
the HOLA and the regulations promulgated thereunder and has received
approval of its acquisition of the Bank from the OTS. No order has been
issued by the OTS preventing or suspending the use of the Prospectus or
Proxy Statement, and no action by or before the OTS or any court or
other tribunal challenging or seeking to challenge the OTS's approval
of the use of the Prospectus or Proxy Statement or its approval of the
Conversion Application or the OTS's approval of the Holding Company
application is pending, or to the knowledge of the MHC, the Company or
the Bank, threatened.
(c) As of the date hereof (i) the Registration Statement and
the Prospectus comply as to form in all material respects with the
Securities Act and the Securities Act Regulations, (ii) the
Registration Statement does not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (iii) the
Prospectus does not contain any untrue statement of a material fact or
omit to state any 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. Representations or
warranties in this subsection shall not apply to statements or
omissions made in reliance upon and in conformity with written
information relating to McDonald furnished to the Company or the Bank
by or on behalf of McDonald and expressly provided for use in the
Registration Statement or Prospectus.
(d) The MHC is duly organized as a federally-chartered mutual
holding company under the laws of the United States; the Company is
incorporated as a Maryland corporation; the Bank is duly organized as a
federally-chartered stock savings bank under the laws of the United
States, and each of them is validly existing and in good standing under
the laws of its jurisdiction of organization, with full power and
authority to own its property and conduct its business as described in
the Registration Statement and Prospectus; the Bank is a member of the
Federal Home Loan Bank of Atlanta, and the deposit accounts of the Bank
are insured by the Savings Association Insurance Fund ("SAIF")
administered by the Federal Deposit Insurance Corporation ("FDIC") up
to the applicable legal limits. Each of the MHC, the Company and the
Bank is qualified to transact business as a foreign corporation in all
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jurisdictions except those where non-qualification would reasonably be
expected not to have a material adverse effect on the condition
(financial or otherwise), operations, business, earnings or properties
of the MHC, the Company and the Bank, considered as one enterprise
("Material Adverse Effect").
(e) The only direct-subsidiary of the MHC is the Bank. The Bank
does not have any active subsidiaries. Superior Service Corporation is
a wholly-owned service corporation subsidiary of the Bank.
(f) The MHC, the Company and the Bank have good and marketable
title to all assets material to their respective businesses and to
those assets described in the Prospectus as owned by them, free and
clear of all liens, charges, encumbrances or restrictions, except for
liens for ad valorem taxes not yet due, except as described in the
Prospectus and except as do not, in the aggregate, have a Material
Adverse Effect; and all of the leases and subleases material to the
operations of the MHC, the Company or the Bank, under which it holds
properties, including those described in the Prospectus, are in full
force and effect as described therein.
(g) The MHC, the Company and the Bank have obtained all
licenses, permits and other governmental authorizations currently
required for the conduct of their respective businesses except where
the failure to obtain such licenses, permits and governmental
authorizations would reasonably be expected not to have a Material
Adverse Effect; all such licenses, permits and other governmental
authorizations are in full force and effect, and the MHC, the Company
and the Bank are complying therewith in all material respects.
(h) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary actions on the part of each of the
MHC, the Company, and the Bank, and this Agreement is a valid and
binding obligation of each of the MHC, the Company and the Bank,
enforceable in accordance with its terms except as the enforceability
thereof may be limited by (a) bankruptcy, insolvency, moratorium,
reorganization, conservatorship, receivership or similar laws relating
to or affecting the enforcement of creditors' rights generally or the
rights of creditors of insured financial institutions and their holding
companies, the accounts of whose subsidiaries are insured by the FDIC;
(b) general equity principles, regardless of whether such principles
are applied in a proceeding in equity or at law; (c) laws relating to
the safety and soundness of insured depository institutions and their
affiliates, and except to the extent that the provisions of Sections 8
and 9 hereof may be unenforceable as against public policy or by
applicable law, including without limitation, Section 23A of the
Federal Reserve Act, 12 U.S.C. Section 371c ("Section 23A").
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of McDonald Investments, Inc.
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(i) Except as described in the Prospectus, there is no
litigation or governmental proceeding pending or, to the knowledge of
the MHC, the Company or the Bank, threatened against or involving the
MHC, the Company, the Bank or any subsidiary, or any of their
respective assets which individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect.
(j) Each of the MHC, the Company and the Bank has all power,
authority, authorizations, approvals and orders as may be required to
enter into this Agreement, to carry out the provisions and conditions
hereof and, in the case of the Company, to issue and sell the Shares to
be sold by it as provided herein and to acquire all of the shares of
capital stock of the Bank as provided in the Plan.
(k) The MHC, the Company and the Bank have received the opinion
of Ober, Kaler, Xxxxxx & Xxxxxxx with respect to the federal income tax
consequences of the Conversion to the effect that the Conversion will
constitute a tax-free reorganization under the Internal Revenue Code of
1986, as amended (the "Code"), and the MHC, the Company and the Bank
have received the opinion of Ober, Kaler, Xxxxxx & Xxxxxxx with respect
to the state income tax consequences of the Conversion to the effect
that the Conversion will not be a taxable transaction under the laws of
Maryland; and the facts and representations provided by the MHC, the
Company and the Bank and relied upon in the rendering of such opinions
are accurate and complete, and none of the MHC, the Company or the Bank
has taken any action inconsistent therewith.
(l) Neither the MHC, the Company or the Bank is in violation of
any rule or regulation of the OTS, the FDIC or any state department or
agency regulating the banking or other activities of the MHC, the
Company, or the Bank that has resulted or reasonably could result in
any enforcement action against the MHC, the Company, or the Bank, or
their officers or directors, that could reasonably be expected to have
a Material Adverse Effect.
(m) Xxxxxxx Financial Advisors, Inc., the firm that prepared
the independent appraisal included in the Conversion Application, is
independent with respect to the MHC, the Company, or the Bank within
the meaning of the OTS Regulations. The MHC, the Company, and the Bank
believe such firm to be experienced and expert in providing appraisals
of thrift institutions, and nothing has come to their attention which
has caused them to believe that the appraisal included in the
Conversion Application was not prepared in accordance with the
requirements of the OTS Regulations.
(n) Xxxxxxxx Associates, LLP, the firm that audited the
consolidated financial statements for the two year period ended March
31, 2002 of the MHC filed as part of the Registration Statement and the
Conversion Application is independent with respect to the MHC, the
Company, and the Bank as required by the Securities Act, the Securities
Act
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Regulations, the Code of Professional Ethics of the American Institute
of Certified Public Accountants and Title 12 of the Code of Federal
Regulations Parts 563c. Nothing has come to the attention of the MHC,
the Company or the Bank that has caused them to believe that such firm
is not independent within the meaning of such provisions.
(o) The consolidated financial statements and related notes
which are included in the Registration Statement and the Prospectus
fairly present the consolidated financial condition, results of
operations, retained earnings and cash flows of the MHC on a
consolidated basis at the respective dates thereof and for the
respective periods covered thereby and comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act Regulations and the OTS Regulations. Such financial
statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the
periods involved, except as set forth therein, and such financial
statements are consistent with financial statements and other reports
filed by the Bank with the OTS, except as GAAP may otherwise require.
The financial tables in the Prospectus accurately present the
information purported to be shown thereby at the respective dates
thereof and for the respective periods covered thereby.
(p) There has been no material adverse change in the condition
(financial or otherwise), results of operations, business, assets or
properties, of the MHC, the Company, and the Bank, taken as a whole,
since the latest date as of which such condition is set forth in the
Prospectus, except as set forth therein; and the capitalization,
assets, properties and business of each of the MHC, the Company, and
the Bank conform in all material aspects to the descriptions thereof
contained in the Prospectus. Neither the MHC, the Company, or the Bank
has any material liabilities of any kind, contingent or otherwise,
except as set forth in the Prospectus.
(q) There has been no breach or default (or the occurrence of
any event which, with notice or lapse of time or both, would constitute
a default) under, or creation or imposition of any lien, charge or
other encumbrance upon any of the properties or assets of the MHC, the
Company, or the Bank pursuant to any of the terms, provisions or
conditions of any agreement, contract, indenture, lease, bond,
debenture, note, instrument or obligation to which the MHC, the
Company, or the Bank is a party or by which any of them or any of their
respective assets or properties may be bound or is subject or any
violation of any governmental license or permit or any enforceable
published law, administrative regulation or order or court order, writ,
injunction or decree, which breach, default, lien, charge, encumbrance
or violation would reasonably be expected to have a Material Adverse
Effect. All agreements which are material to the financial condition,
results of operations, business, assets or properties of the MHC, the
Company, and the Bank, taken as a whole, are in full force and effect,
and no party to any such agreement has instituted or, to the knowledge
of
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the MHC, the Company or the Bank, threatened any action or proceeding
wherein the MHC, the Company or the Bank would be alleged to be in
default thereunder.
(r) Neither the MHC, the Company, or the Bank is in violation
of its respective charter or articles of incorporation or bylaws. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the MHC, the Company and the Bank
do not conflict with or result in a breach of the charter or articles
of incorporation or bylaws of the MHC, the Company, or the Bank, or
violate, conflict with or constitute a material breach or default (or
an event which, with notice or lapse of time or both, would constitute
a default) under, give rise to any right of termination, cancellation
or acceleration contained in, or result in the creation or imposition
of any lien, charge or other encumbrance upon any of the properties or
assets of the MHC, the Company, or the Bank pursuant to any of the
terms, provisions or conditions of, any agreement, contract, indenture,
lease, bond, debenture, note, instrument or obligation to which the
MHC, the Company or the Bank is a party (other than the establishment
of a liquidation account pursuant to the Plan) or violate any
governmental license or permit or any law, administrative regulation or
order or court order, writ, injunction or decree (subject to the
satisfaction of certain conditions imposed by the OTS in connection
with its approval of the Conversion Application), which breach,
default, encumbrance or violation would reasonably be expected to have
a Material Adverse Effect.
(s) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, except as
otherwise may be indicated or contemplated therein, neither the MHC,
the Company, or the Bank has issued any securities which will remain
issued at the Closing Date (as defined below) or incurred any liability
or obligation, direct or contingent, or borrowed money, except
borrowings or liabilities incurred in the ordinary course of business,
or entered into any other transaction not in the ordinary course of
business and not consistent with prior practices, which is material in
light of the business of the MHC, the Company, and the Bank, taken as a
whole.
(t) Upon consummation of the Conversion, the authorized, issued
and outstanding equity capital of the Company shall be as set forth in
the Prospectus under the heading "Our Capitalization," and no equity
securities of the Company shall be outstanding immediately prior to the
Closing Date other than any shares of capital stock issued in
connection with the formation of the Company, which shares shall be
canceled on the Closing Date. The issuance and the sale of the Shares
of the Company have been duly authorized by all necessary action of the
Company and approved by the OTS and, when issued in accordance with the
terms of the Plan and paid for as set forth in the Prospectus, shall be
validly issued, fully paid and nonassessable and shall conform in all
material respects to the description thereof contained in the
Prospectus; the issuance of the Shares is not subject to preemptive
rights; and good title to the Shares will be transferred by the
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Company upon issuance thereof against payment therefor, free and clear
of all claims, encumbrances, security interests and liens against the
Company whatsoever. The acquisition of the capital stock of the Bank by
the Company has been duly authorized by all necessary action of the
Bank and the Company and all appropriate regulatory authorities
(subject to the satisfaction of various conditions imposed by the OTS
in connection with its approval of the Conversion Application and the
Holding Company Application), and such capital stock is validly issued,
fully paid and nonassessable and conforms in all material respects to
the description thereof contained in the Prospectus.
(u) No approval of any regulatory or supervisory or other
public authority is required of the MHC, the Company or the Bank in
connection with the execution and delivery of this Agreement or the
issuance of the Shares, except such approvals as have been obtained,
except for the declaration of effectiveness by the Commission of any
required post-effective amendment of the Registration Statement not yet
filed, except as may be required by the "blue sky" or securities laws
of various jurisdictions, and except as may be required by the
conditions of the approval of the Conversion Application or the Holding
Company Application by the OTS.
(v) All contracts and other documents required to be filed as
exhibits to the Registration Statement, the Conversion Application or
the Holding Company Application have been filed with the Commission, or
the OTS or both, as the case may be.
(w) The MHC, the Company, and the Bank have timely filed all
required federal, state and local franchise tax returns, and no
deficiency has been asserted with respect to such returns by any taxing
authorities. The MHC, the Company, and the Bank have paid all taxes
that have become due and have made adequate reserves for future tax
liabilities, except where any failure to make such filings, payments
and reserves, or the assertion of such a deficiency, would not
reasonably be expected to have a Material Adverse Effect.
(x) All of the loans represented as assets of the Bank as of
the most recent date for which financial condition data is included in
the Prospectus meet or are exempt from all requirements of federal,
state or local law pertaining to lending, including without limitation
truth in lending (including the requirements of Regulation 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, would not reasonably be
expected to have a Material Adverse Effect.
(y) The records of depositors and account holders of the Bank
delivered to McDonald by the Bank or its agent for use during the
Conversion are believed to be accurate, reliable and complete in all
material respects.
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(z) None of the MHC, the Company or the Bank, nor any of their
employees has made any payment of funds of the MHC, the Company or the
Bank prohibited by law, and no funds of the MHC, the Company or the
Bank have been set aside to be used for any payment prohibited by law.
(aa) The MHC, the Company and the Bank are in compliance with
all laws, rules and regulations relating to environmental protection,
and neither the MHC, the Company, or the Bank is subject to liability
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or any similar law, except for
liabilities which, would not have a Material Adverse Effect. There are
no actions, suits, regulatory investigations or other proceedings
pending or, threatened against the MHC, the Company or the Bank
relating to environmental protection. 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 been caused by the MHC, the Company or
the Bank, or has occurred on, in or at any of the facilities or
properties owned or leased by the MHC, the Company, or the Bank or on
any properties pledged to the Bank as security for any indebtedness,
except such disposal, release or discharge as would not reasonably be
expected to have a Material Adverse Effect.
(bb) All documents delivered by the MHC, the Company, or the
Bank or their representatives in connection with the issuance and sale
of the Shares, were, on the dates on which they were delivered, true,
complete and correct in all material respects.
(cc) At the Closing Date, the MHC, the Company and the Bank will
have completed the conditions precedent to, and will have conducted the
Conversion in all material respects in accordance with, the Plan, the
HOLA, and OTS Regulations and all other applicable laws, regulations,
published decisions and orders, including all terms, conditions,
requirements and provisions precedent to the Conversion imposed by the
OTS.
3. Employment of McDonald; Sale and Delivery of the Shares. On the
basis of the representations and warranties herein contained, but subject to the
terms and conditions herein set forth, the MHC, the Company and the Bank hereby
employ McDonald as their agent to utilize its best efforts to assist the Company
with the Company's sale of the Shares in the Offerings. The employment of
McDonald hereunder shall terminate (a) forty-five days after the Subscription
Offering closes, unless the MHC, the Company and the Bank, with the approval of
the OTS, if required, are permitted to extend such period of time, or (b) upon
consummation of the Conversion, whichever date shall first occur.
In the event the Company is unable to sell a minimum of 1,912,500
Shares (or such lesser amount as the OTS may permit) within the period of
McDonald's employment, this Agreement shall terminate, and the Company shall
refund promptly to any persons who have subscribed for any of the
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Shares, the full amount which it may have received from them, together with
interest as provided in the Prospectus, and no party to this Agreement shall
have any obligation to the other party hereunder, except as set forth in
Sections 3, 6, 8, 9 and 10 hereof. Appropriate arrangements for placing the
funds received from subscriptions for Shares in special interest-bearing
accounts with the Bank until the minimum number of Shares required by the Plan
to be sold are sold and paid for will be made prior to the commencement of the
Subscription Offering, with provision for prompt refund to the purchasers as set
forth above, or for delivery to the Company if the minimum number of Shares
required by the Plan to be sold are sold.
If all conditions precedent to the consummation of the Conversion are
satisfied, including the sale of the minimum number of Shares required by the
Plan to be sold, the Company agrees to issue or have issued such Shares and to
release for delivery certificates to subscribers for such Shares on or as soon
as possible following the Closing Date against payment to the Company by any
means authorized pursuant to the Prospectus, at the principal executive office
of the Bank or at such other place as shall be agreed upon between the parties
hereto. The date upon which the Company shall release or deliver the Shares sold
in the Offerings, in accordance with the terms hereof, is herein called the
"Closing Date."
McDonald agrees either (a) upon receipt of an executed order form of a
subscriber to forward to the Bank for deposit in a segregated account the
offering price of the Common Stock ordered on or before twelve o'clock noon on
the next business day following receipt of an order form by McDonald or (b) to
solicit indications of interest in which event (i) McDonald will subsequently
contact any potential subscriber indicating interest to confirm the interest and
give instructions to execute and return an order form or to receive
authorization to execute the order form on the subscriber's behalf, (ii)
McDonald will mail acknowledgments of receipt of orders to each subscriber
confirming interest on the business day following such confirmation, (iii)
McDonald will debit accounts of such subscribers on the third business day
("Debit Date") following receipt of the confirmation referred to in (i), and
(iv) McDonald will forward completed order forms together with such funds to the
Bank on or before twelve o'clock noon on the next business day following the
Debit Date for deposit in a segregated account. McDonald acknowledges that if
the procedure in (b) is adopted, subscribers' funds are not required to be in
their accounts until the Debit Date.
The Bank agrees to pay McDonald the following compensation and expense
reimbursement for its services hereunder:
(i) A conversion center management and proxy solicitation management
fee in the amount of $25,000, receipt of which is acknowledged.
(ii) A commission fee equal to two percent (2%) of the aggregate
dollar amount of shares of Common Stock sold in the Subscription
Offering or Community Offering (excluding shares of Common Stock
sold to the Company's and Bank's directors and
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executive officers and the Bank's employee stock ownership plan).
For shares of Common Stock sold by other NASD member firms under
a selected dealer agreements, the commission paid to those firms
shall not exceed a fee of four and one-half percent (4.5%),
unless such amount is approved in advance by the Board of
Directors of the Bank. All such fees shall be paid in next-day
funds on the Closing Date.
(iii) McDonald shall be reimbursed for its legal and out-of-pocket
expenses incurred by them and their counsel, whether or not the
agreement is consummated. McDonald's legal expenses and
out-of-pocket expenses will not exceed $50,000. McDonald shall
bill the Bank periodically for expenses throughout the term of
this Agreement. To the extent not already paid, reimbursement of
McDonald shall be made in next-day funds on the Closing Date or,
if the Conversion is not completed and is terminated for any
reason, within ten (10) business days of actual receipt by the
Company of a written request from McDonald detailing its
allocable expenses. In the event that a resolicitation or other
event causes the offerings to be extended beyond the original
expiration date of the Subscription Offering, as set forth in the
Prospectus, McDonald shall be reimbursed for reasonable
out-of-pocket expenses incurred during the extended period as
well.
(iv) The Bank shall also pay all other expenses of the Conversion
incurred by them or on their behalf in connection with the
Conversion, including but not limited to their attorneys' fees,
NASD fairness filing fees, filing and registration fees, and
attorneys' fees relating to any required state securities laws
research and filings, telephone charges, air freight, rental
equipment, supplies, transfer agent charges, fees relating to
auditing and accounting and costs of printing all documents
necessary in connection with the Conversion.
4. Offering. Subject to the provisions of Section 7 hereof, McDonald
is assisting the MHC, the Company and the Bank on a best efforts basis in
offering a minimum of 1,912,500 and a maximum of 2,587,500 Shares, subject to
adjustment up to 2,975,625 Shares, in the Offerings, subject to such other
adjustments as may be permitted by the OTS. The Shares are to be offered to the
public at the price set forth on the cover page of the Prospectus and the first
page of this Agreement.
5. Further Agreements.
5.1 The MHC, the Company and the Bank jointly and severally covenant
and agree that:
(a) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus and through and
including the Closing Date, except as
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otherwise may be indicated or contemplated therein, none of the MHC,
the Company, the Bank will issue any securities (except for notes to
evidence bank loans or other liabilities in the ordinary course of
business or as described in the Prospectus) which will remain issued at
the Closing Date or incur any liability or obligation, direct or
contingent, or borrow money, except borrowings or liabilities in the
ordinary course of business, or enter into any other transaction not in
the ordinary course of business and consistent with prior practices,
which is material in light of the financial condition or operations of
the MHC, the Company and the Bank, taken as a whole.
(b) If any Shares remain unsubscribed following completion of
the Subscription Offering and the Community Offerings, the Company (i)
will, if required by the Securities Act Regulations, promptly file with
the Commission a post-effective amendment to such Registration
Statement relating to the results of the Subscription and the Community
Offerings, any additional information with respect to the proposed plan
of distribution and any revised pricing information or (ii) if no such
post-effective amendment is required, will, if required by the
Securities Act Regulations, file with the Commission a prospectus or
prospectus supplement containing information relating to the results of
the Subscription and Community Offerings and pricing information
pursuant to Rule 424(c) of the Securities Act Regulations, in either
case in a form reasonably acceptable to McDonald.
(c) Upon consummation of the Conversion, the authorized, issued
and outstanding equity capital of the Company shall be within the range
as set forth in the Prospectus under the caption "Our Capitalization,"
and no Common Stock of the Company shall be outstanding immediately
prior to the Closing Date (other than shares of Common Stock issued in
connection with the initial capitalization of the Company, which shares
will be canceled upon consummation of the Conversion), and the
certificates representing the Shares will conform in all material
respects with the requirements of applicable laws and regulations.
(d) Upon amendment of the Bank's charter and bylaws as provided
in the OTS Regulations and completion of the sale by the Company of the
Shares as contemplated by the Prospectus, (i) the Bank's charter will
provide for a liquidation account in a manner consistent with the
requirements and the Plan, and the Bank will continue as a
federally-chartered capital stock savings bank with full power and
authority to own its property and conduct its business as described in
the Prospectus, (ii) all of the authorized and outstanding capital
stock of the Bank will be owned of record and beneficially by the
Company, and (iii) the Company will have no direct subsidiary other
than the Bank.
(e) The Company shall deliver to McDonald, from time to time,
such number of copies of the Prospectus as McDonald reasonably may
request. The Company authorizes McDonald to use the Prospectus in any
lawful manner in connection with the offer and sale
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of the Shares.
(f) The Company will notify McDonald immediately, and confirm
the notice in writing, (i) when any post-effective amendment to the
Registration Statement becomes effective or any supplement to the
Prospectus has been filed, (ii) of the issuance by the Commission of
any stop order relating to the Registration Statement or of the
initiation or the threat of any proceedings for that purpose, (iii) of
the receipt of any notice with respect to the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
(iv) of the receipt of any comments from the staff of the Commission
relating to the Registration Statement and (v) of the issuance by the
OTS of any stop order relating to the Conversion or the use of the
Prospectus or Proxy Statement or the initiation or threat of any
proceedings for that purpose. If the Commission enters a stop order
relating to the Registration Statement at any time, the Company will
make every reasonable effort to obtain the lifting of such order at the
earliest possible moment.
(g) During the time when a prospectus is required to be
delivered under the Securities Act, the Company will comply in all
material respects with all requirements imposed upon it by the
Securities Act and by the Securities Act Regulations to permit the
continuance of offers and sales of or dealings in the Shares in
accordance with the provisions hereof and the Prospectus. If during the
period when the Prospectus is required to be delivered in connection
with the offer and sale of the Shares any event relating to or
affecting the MHC, the Company or the Bank, shall occur as a result of
which it is necessary, in the reasonable opinion of counsel for
McDonald after consultation with counsel for the MHC, the Company and
the Bank, to amend or supplement the Prospectus in order to make the
Prospectus not false or misleading in light of the circumstances
existing at the time it is delivered to a purchaser of the Shares, the
Company shall prepare and furnish to McDonald a reasonable number of
copies of an amendment or amendments or of a supplement or supplements
to the Prospectus (in form and substance reasonably satisfactory to
counsel for McDonald) which shall amend or supplement the Prospectus so
that, as amended or supplemented, the Prospectus shall 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 existing at the time the Prospectus is delivered to a
purchaser of the Shares, not misleading. The Company will not file or
use any amendment or supplement to the Registration Statement or the
Prospectus unless McDonald has been first furnished a copy or to which
McDonald shall reasonably object after having been furnished such copy.
For the purposes of this subsection, the MHC, the Company and the Bank
shall furnish such information with respect to themselves as McDonald
from time to time may reasonably request.
(h) The MHC, the Company and the Bank will take all necessary
action and furnish to Ober, Kaler, Xxxxxx & Xxxxxxx, special counsel
for the Company, all information as may be required to qualify or
register the Shares for offer and sale by the Company under
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the securities or blue sky laws of such jurisdictions as McDonald and
the Company or its counsel may agree upon; provided, however, that the
Company shall not be obligated to qualify as a foreign corporation to
do business under the laws of any such jurisdiction. In each
jurisdiction where such qualification or registration shall be
effected, the Company, unless McDonald agrees that such action is not
necessary or advisable in connection with the distribution of the
Shares, shall file and make such statements or reports as are, or
reasonably may be, required by the laws of such jurisdiction.
(i) Appropriate entries will be made in the financial records
of the Bank to establish a liquidation account in accordance with the
OTS Regulations.
(j) The Company will file a registration statement for the
Common Stock under Section 12(g) of the Exchange Act prior to
completion of the Offerings and shall request that such registration
statement be effective upon or before completion of the Conversion. The
Company shall maintain the effectiveness of such registration for a
minimum period of three years.
(k) The Company will make generally available to its security
holders as soon as practicable, but not later than 90 days after the
close of the period covered thereby, copies of any Form 10-QSB or
10-KSB filed by the Company with the Commission.
(l) For a period of three years from the date of this
Agreement, the Company will furnish to McDonald, upon request and as
soon as publicly available after the end of each fiscal year, a copy of
its annual report to shareholders for such year; and the Company will
furnish to McDonald (i) as soon as publicly available, a copy of each
report or definitive proxy statement of the Company filed with the
Commission under the Exchange Act or mailed to shareholders, and (ii)
from time to time, such other public information concerning the Company
as McDonald may reasonably request.
(m) The Company will use the net proceeds from the sale of the
Shares in the manner set forth in the Prospectus.
(n) The Company will not deliver the Shares until each and
every condition set forth in Section 7 hereof has been satisfied,
unless such condition is waived in writing by McDonald.
(o) The Company and the Bank shall advise McDonald, if
necessary, as to the allocation of deposits, in the case of Eligible
Account Holders and Supplemental Eligible Account Holders, and votes,
in the case of Other Depositors (as defined in the Plan), and of the
Shares in the event of an oversubscription and shall provide McDonald
final instructions as to the allocation of the Shares ("Allocation
Instructions') and such information shall be
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of McDonald Investments, Inc.
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accurate and reliable. McDonald shall be entitled to rely upon such
information and instructions and shall have no liability related to its
reliance thereon, including, without limitation, any liability for or
related to any denial or satisfaction of any subscription in whole or
in part based on its good faith reliance on such information and
instructions.
(p) The MHC, the Company and the Bank will take such actions
and furnish such information as are reasonably requested by McDonald in
order for McDonald to comply with the NASD's "Interpretation Relating
to Free-Riding and Withholding."
(q) At the Closing Date, the MHC, the Company and the Bank will
have completed all conditions precedent to, and shall have conducted
the Conversion in all material respects in accordance with, the Plan,
OTS Regulations and all other applicable laws, regulations, published
decisions and orders, including all terms, conditions, requirements and
provisions precedent to the Conversion imposed by the OTS.
(r) The Company will use its best efforts to assist McDonald in
obtaining approval for and maintaining quotation of the Shares on the
OTC Bulletin Board effective on or prior to the Closing Date.
(s) The Company will not sell or issue, contract to sell or
otherwise dispose of, for a period of ninety days after the Closing
Date, without McDonald's prior written consent, any Shares other than
as described in the Prospectus.
(t) The MHC, the Company and the Bank will maintain appropriate
arrangements for depositing all funds received from persons mailing
subscriptions for or orders to purchase Common Stock in the
Subscription and Community Offerings on an interest bearing basis at
the rate described in the Prospectus until the Closing Date and
satisfaction of all conditions precedent to the delivery of
certificates for the Shares to subscribers or until refunds of such
funds have been made to the persons entitled thereto in accordance with
the Plan and as described in the Prospectus.
6. Payment of Expenses. Whether or not the Conversion is
consummated, the MHC, the Company and the Bank shall pay or reimburse McDonald
for allocable expenses incurred by McDonald relating to the offering of the
Shares as provided in Section 3 hereof.
7. Conditions of McDonald's Obligations. Except as may be waived in
writing by McDonald, the obligations of McDonald as provided herein shall be
subject to the accuracy of the representations and warranties contained in
Section 2 hereof as of the date hereof and as of the Closing Date, to the
performance by the MHC, the Company and the Bank of their obligations hereunder,
and to the following conditions:
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(a) On the Closing Date, McDonald shall receive the favorable
opinion of Xxxx, Xxxxx, Xxxxxx & Xxxxxxx, special counsel for the MHC,
the Company and the Bank, dated the Closing Date, addressed to
McDonald, in form and substance satisfactory to counsel for McDonald
and stating that:
(i) the MHC is duly organized and validly existing as a
mutual holding company under the laws of the United States; the
Company is duly incorporated and is validly existing as a
corporation under the laws of the State of Maryland; the Bank is
duly organized and validly existing as a stock savings bank under
the laws of the United States; the Subsidiary is duly organized
and validly existing as a corporation under the laws of Maryland
and each of the MHC, the Company, the Bank the Subsidiary have
full power and authority to own their properties and conduct
their businesses as described in the Prospectus;
(ii) the Bank is a member of the Federal Home Loan Bank
of Atlanta, and the deposit accounts of the Bank are insured by
the SAIF up to the applicable legal limits, and to such counsel's
knowledge, no actions or proceedings are pending or, to such
counsel's knowledge, threatened to revoke such membership or
insurance coverage;
(iii) each of the MHC, the Company, the Bank is qualified
to do business as a foreign corporation in each jurisdiction
where the ownership or leasing of its properties or the conduct
of its business requires such qualification, unless the failure
to be so qualified would not reasonably be expected to have a
Material Adverse Effect;
(iv) each of the MHC, the Company and the Bank has
obtained all licenses, permits and other governmental
authorizations required for the conduct of their businesses as
described in the Prospectus, except where the failure to obtain
such licenses, permits or governmental authorizations would not
reasonably be expected to have a Material Adverse Effect; all of
the leases and subleases material to the business of the MHC, the
Company and the Bank under which the MHC, the Company or the Bank
holds properties are in full force and effect;
(v) the Plan has been duly adopted by the Boards of
Directors of the MHC, the Bank and the Company and approved by
the members of the MHC; the Plan complies in all material
respects with and the Conversion has been effected by the MHC,
the Company and the Bank in all material respects in accordance
with, the HOLA, or the OTS Regulations and applicable OTS
approvals issued thereunder; all of the terms, conditions,
requirements and provisions with respect to the filing or
submission of the Registration Statement, the Conversion
Application and the
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Holding Company Application by the Company or the Bank, have been
complied with by the MHC, the Company and the Bank in all
material respects except for reports and items required to be
filed or submitted after the Closing Date; and, to such counsel's
knowledge, no person has sought to obtain regulatory or judicial
review of the final action of the OTS in approving the Plan;
(vi) the Company has authorized Common Stock as set forth
in the Registration Statement and the Prospectus, and the
description thereof in the Registration Statement and the
Prospectus is accurate and complete in all material respects;
(vii) upon the effectiveness of the Conversion as
contemplated by the Prospectus and Plan, (a) the MHC will cease
to exist, and (b) all of the outstanding capital stock of the
Bank will be owned of record and beneficially by the Company free
and clear of all material liens, charges, encumbrances and
restrictions created by the Company;
(viii) the issuance and sale of the Shares have been duly
authorized by all necessary corporate action on the part of the
Company; the Shares, upon receipt of consideration and issuance
in accordance with the terms of the Plan and this Agreement, will
be validly issued, fully paid, nonassessable and, except as
disclosed in the Prospectus, free of statutory preemptive rights,
and purchasers of such shares from the Company, upon issuance
thereof against payment therefor, will acquire such shares free
and clear of all material claims, encumbrances, security
interests and liens created by the Company;
(ix) the form of the certificate used to evidence the
Shares is in proper form and complies in all material respects
with the applicable law of the jurisdiction in which the Company
is incorporated.
(x) the acquisition of the capital stock of the Bank by
the Company has been duly authorized by all necessary corporate
action of the Bank and the Company and has received the approval
of the OTS, and such capital stock is validly issued, fully paid
and free of preemptive rights;
(xi) subject to the satisfaction of the conditions to the
OTS approval of the Conversion Application and the Holding
Company Application, no further approval, authorization, consent
or other order of any regulatory agency is required of the MHC,
the Company and the Bank in connection with the execution and
delivery of this Agreement, the issuance and sale of the Shares
and the consummation of the Conversion, except with respect to
the issuance of the Bank's amended charter by the
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OTS, and except as may be required under the blue sky securities
laws of various jurisdictions;
(xii) the execution and delivery of this Agreement and the
consummation of the Conversion have been duly authorized by all
necessary corporate action on the part of each of the MHC, the
Company and the Bank, and this Agreement is a legal, valid and
binding obligation of each of the MHC, the Company and the Bank,
enforceable in accordance with its terms except as the
enforceability thereof may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization, receivership,
conservatorship or other similar laws relating to or affecting
the enforcement of creditors' rights generally or the rights of
creditors of depository banks whose accounts are insured by the
FDIC or savings and loan holding companies the accounts of whose
subsidiaries are insured by the FDIC; (ii) general equity
principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law, or (iii) laws
relating to the safety and soundness of insured depository banks
and their affiliates, and except to the extent that the
provisions of Sections 8 and 9 hereof may be unenforceable as
against public policy or applicable law, including but not
limited to, Section 23A;
(xiii) the Bank is not subject to any directive from the
OTS to make any change in the method of conducting its business
and there are no legal or governmental proceedings pending or,
threatened against or involving the assets of the MHC, the
Company or the Bank, which violation or proceedings would
reasonably be expected to have a Material Adverse Effect
(provided that for this purpose such counsel need not regard any
litigation or governmental proceeding to be "threatened" unless
the potential litigant or government authority has manifested to
the management of the Company or the Bank, or to such counsel, a
present intention to initiate such litigation or proceeding);
(xiv) the Conversion Application has been approved by the
OTS, the Holding Company Application has been approved by the
OTS, and the Prospectus and the Proxy Statement have been
authorized for use by the OTS; the Registration Statement and any
post-effective amendment thereto have been declared effective by
the Commission; and no proceedings are pending by or before the
Commission or the OTS seeking to revoke or rescind the orders
declaring the Registration Statement or any post-effective
amendment thereto effective or approving the Conversion
Application or the Holding Company Application and, to such
counsel's knowledge, no such proceedings are contemplated or
threatened (provided that for this purpose such counsel need not
regard any litigation or governmental proceeding to be
"threatened" unless the potential litigant or government
authority has manifested to the management of the Company or the
Bank, or to such counsel, a present intention to initiate such
litigation or proceeding);
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(xv) the execution and delivery of this Agreement and
the consummation of the Conversion by the MHC, the Company and
the Bank do not (i) violate or conflict with the charter or
articles of incorporation or bylaws of the MHC, the Company or
the Bank or (ii) violate Maryland statutes or regulations, the
HOLA or the OTS Regulations or any law or administrative
regulation or any court order, writ, injunction or decree to
which the MHC, the Company and the Bank is a party (subject to
the satisfaction of certain post-closing conditions imposed by
the OTS in connection with its approval of the Conversion
Application and the Holding Company Application);
(xvi) statements in the Prospectus that are, or refer to,
statements of law or legal conclusions (excluding financial or
statistical data or stock valuation information included therein,
as to which an opinion need not be expressed), have been prepared
or reviewed by such counsel and are accurate in all material
respects;
(xvii) the execution and delivery of this Agreement and
the consummation of the Conversion by the MHC, the Company and
the Bank do not constitute a breach of or default (or an event
which, with notice or lapse of time or both, would constitute a
default) under, give rise to any right of termination,
cancellation or acceleration contained in, or result in the
creation or imposition of any lien, charge or other encumbrance
upon any of the properties or assets of the MHC, the Company, the
Bank pursuant to any of the terms, provisions or conditions of,
any agreement, contract, indenture, bond, lease, debenture, note,
instrument or obligation to which the MHC, the Company or the
Bank is a party (other than the required establishment of the
liquidation account pursuant to the Plan) which in any such event
would reasonably be expected to result in a Material Adverse
Effect;
(xviii) there has been no violation of any provision of the
MHC's, the Company's, the Bank's `s charter, articles of
incorporation or bylaws or breach or default (or the occurrence
of any event which, with notice or lapse of time or both, would
constitute a default) by the MHC, the Company, the Bank under any
agreement, contract, indenture, lease, bond, debenture, note,
instrument or obligation to which the MHC, the Company, the Bank
is a party or by which any of them or any of their respective
assets or properties may be bound, or violation of any license,
permit, law, administrative regulation or order, court order,
injunction or decree which violation, breach or default would
reasonably be expected to have a Material Adverse Effect;
(xix) the Conversion Application, the Holding Company
Application, the Registration Statement, the Prospectus and the
Proxy Statement, in each case, as
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amended and supplemented, comply as to form in all material
respects with the requirements of Maryland statutes, the
Securities Act, the Securities Act Regulations, the HOLA and OTS
Regulations, as the case may be (except as to information
provided in writing by McDonald with respect to McDonald included
therein and financial statements, notes to financial statements,
financial tables and other financial and statistical data and
appraisal information included therein, as to which no opinion
need be rendered); all documents and exhibits required to be
filed with the Conversion Application and the Registration
Statement have been so filed; and the descriptions in the
Conversion Application and the Registration Statement of the
documents filed as exhibits to the Registration Statement and the
Conversion Application are accurate in all material respects.
In rendering such opinion, such counsel may rely as to matters of
fact on certificates of officers and directors of the MHC, the Company
and the Bank and certificates of public officials delivered pursuant to
this Agreement. Such counsel may assume that any agreement is the valid
and binding obligation of any parties to such agreement other than the
MHC, the Company and the Bank.
(b) At the Closing Date, McDonald shall receive the letter of
Xxxx, Kaler, Xxxxxx & Xxxxxxx, special counsel for the Company and the
Bank, dated the Closing Date, addressed to McDonald, in form and
substance reasonably satisfactory to counsel for McDonald and to the
effect that nothing has come to such counsel's attention that would
lead it to believe that the Registration Statement, as amended or
supplemented (except as to information in respect of McDonald contained
therein and except as to the financial statements, notes to financial
statements, financial tables and other financial and statistical data
and appraisal information contained therein, as to which such counsel
need express no view), at the time it became effective and at the time
any post-effective amendment thereto became effective, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading, or that the Prospectus, as amended or supplemented (except
as to information in respect of McDonald contained therein and except
as to financial statements, notes to financial statements, financial
tables and other financial and statistical data and appraisal
information contained therein as to which such counsel need express no
view), as of its date, at the time the Prospectus was filed with the
Commission under Rule 424(b) of the Securities Act regulations and at
the Closing Date, contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (in issuing such letter, such counsel may indicate that it
has not confirmed the accuracy or completeness of or otherwise verified
the factual information contained in the Registration Statement or the
Prospectus and that it does not assume any responsibility for the
accuracy or completeness thereof).
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(c) Counsel for McDonald shall have been furnished such documents
as they reasonably may require for the purpose of enabling them to
review or pass upon the matters required by McDonald, and for the
purpose of evidencing the accuracy, completeness or satisfaction of any
of the representations, warranties or conditions herein contained,
including but not limited to, resolutions of the Board of Directors of
the MHC, the Company and the Bank regarding the authorization of this
Agreement and the transactions contemplated hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion
of McDonald, (i) there shall have been no material adverse change in
the financial condition, results of operations, business or prospects
of the Company, the Bank, taken as a whole, since the latest date as of
which such condition is set forth in the Prospectus, except as referred
to or contemplated therein; (ii) there shall have been no transaction
entered into by the MHC, the Company or the Bank after the latest date
as of which the consolidated financial condition of the MHC and the
Bank is set forth in the Prospectus other than transactions referred to
or contemplated therein, transactions in the ordinary course of
business, and transactions that are not material to the MHC, the
Company, the Bank, taken as a whole; (iii) neither the MHC, the Company
nor the Bank shall have received from the OTS, or Commission any
directive (oral or written) to make any change in the method of
conducting their respective businesses which is material to the
business of the MHC, the Company and the Bank, taken as a whole, with
which they have not complied; (iv) no action, suit or proceeding, at
law or in equity or before or by any federal or state commission, board
or other administrative agency, shall be pending or threatened against
the MHC, the Company or the Bank or affecting any of their respective
assets, wherein an unfavorable decision, ruling or finding could have a
Material Adverse Effect; and (v) the Shares shall have been qualified
or registered for offering and sale by the Company under the securities
or blue sky laws of such jurisdictions as McDonald and the Company
shall have agreed upon.
(e) On the Closing Date, McDonald shall receive a certificate of
the principal executive officer and the principal financial officer of
each of the MHC, the Company and the Bank, dated the Closing Date, to
the effect that: (i) they have examined the Prospectus, and the
Prospectus does 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 with respect to the MHC, the Company or the Bank; (ii) since
the date the Prospectus became authorized for final use, no event has
occurred which should have been set forth in an amendment or supplement
to the Prospectus which has not been so set forth, including
specifically, but without limitation, any material adverse change in
the business, financial condition, or results of operations of the MHC,
the Company, the Bank, and the conditions set forth in clauses (i)
through (v) inclusive of subsection (d) of this Section 7 have been
satisfied; (iii) to the knowledge of such officers, no
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order has been issued by the Commission or the OTS to suspend the
Offerings or the effectiveness of the Prospectus, and no action for
such purposes has been instituted or, to the knowledge of such
officers, threatened by the Commission or the OTS; (iv) to the
knowledge of such officers, no person has sought to obtain review of
the final action of the OTS approving the Plan; and (v) all of the
representations and warranties contained in Section 2 of this Agreement
are true and correct, with the same force and effect as though
expressly made on the Closing Date.
(f) At the Closing Date, McDonald shall receive, among other
documents, (i) copies of the letters from the OTS authorizing the use
of the Prospectus and the Proxy Statement, (ii) a copy of the order of
the Commission declaring the Registration Statement effective; (iii) a
copy of the certificate from the OTS evidencing the corporate existence
of the Bank; (iv) a copy of the certificate from the FDIC evidencing
the insured status of the Bank, (v) a copy of the letter from the
appropriate state authority evidencing the incorporation and good
standing of the Company (vi) a copy of the charter or articles of
incorporation of the MHC, the Company, the Bank each certified by the
appropriate governmental authority; and (vii) evidence of payment of
all taxes, including any franchise taxes by each of the MHC, the
Company, the Bank.
(g) Concurrently with the execution of this Agreement, McDonald
acknowledges receipt of a letter from Xxxxxxxx Associates, LLP,
addressed to McDonald and the Company, in substance and form
satisfactory to counsel for McDonald, with respect to the consolidated
financial statements of the MHC and the Bank and certain financial
information contained in the Prospectus.
(h) At the Closing Date, McDonald shall receive a letter from
Xxxxxxxx Associates, LLP, dated the Closing Date and addressed to
McDonald and the Company, in form and substance satisfactory to counsel
for McDonald, confirming the statements made by such accountants in the
letter delivered by them pursuant to the preceding subsection and dated
as of a specified date not more than five days prior to the Closing
Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the reasonable
opinion of McDonald and its counsel, satisfactory to McDonald and its counsel.
Any certificates signed by an officer or director of the Company or the Bank
prepared for McDonald's reliance and delivered to McDonald or to counsel for
McDonald shall be deemed a representation and warranty by the MHC, the Company
or the Bank to McDonald as to the statements made therein. If any condition to
McDonald's obligations hereunder to be fulfilled prior to or at the Closing Date
is not so fulfilled, McDonald may terminate this Agreement or, if McDonald so
elects, may waive in writing any such conditions which have not been fulfilled,
or may extend the time of their fulfillment. If McDonald terminates this
Agreement as aforesaid, the MHC, the Company and the Bank shall reimburse
McDonald for its expenses as
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provided in Section 3 hereof.
8. Indemnification.
(a) The MHC, the Company and the Bank jointly and severally
agree to indemnify and hold harmless McDonald, its officers, directors
and employees and each person, if any, who controls McDonald within the
meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, against any and all loss, liability, claim, damage and
expense whatsoever and shall further promptly reimburse such persons
for any legal or other expenses reasonably incurred by each or any of
them in investigating, preparing to defend or defending against any
action, proceeding or claim (whether commenced or threatened) arising
out of or based upon (A) any untrue or alleged untrue statement of a
material fact or the omission or alleged omission of a material fact
required to be stated or necessary to make the statements, in light of
the circumstances under which they were made, not misleading contained
in (i) the Registration Statement or the Prospectus or (ii) any
application (including the Conversion Application) or other document or
communication (in this Section 8 collectively called "Application")
prepared or executed by or on behalf of the Company or the Bank or
based upon written information furnished by or on behalf of the Company
or the Bank, filed in any jurisdiction to register or qualify the
Shares under the securities laws thereof or filed with the OTS or
Commission with respect to the offering of the Shares, unless such
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company or the Bank with
respect to McDonald by or on behalf of McDonald expressly for use in
the Registration Statement or Prospectus or any amendment or supplement
thereto or in any Application, as the case may be, (B) any written or
oral statement made to a purchaser of the Shares by any director,
officer or employee of the MHC, the Company or the Bank, (C) the
inaccuracy of any representation or warranty set forth in Section 2(a)
above or the breach of any covenant or agreement of the Company or the
Bank set forth herein or (D) the participation by McDonald in the
Conversion and the Offering, provided however, that this
indemnification agreement will not apply to any loss, liability, claim,
damage or expense found in a final judgement by a court of competent
jurisdiction to have resulted principally and directly from the bad
faith, willful misconduct or gross negligence of McDonald. This
indemnity shall be in addition to any liability the MHC, the Company or
the Bank may otherwise have to Trident.
(b) The MHC, the Company and the Bank jointly and severally
agree to indemnify and hold harmless McDonald, its officers, directors
and employees and each person, if any, who controls McDonald within the
meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, for any liability whatsoever arising out of (i) any
instructions given to McDonald as set forth in Section 5(o) above or
(ii) any records of account holders and depositors of the Bank and
members of the MHC delivered to McDonald by the Bank or its agents for
use during the Conversion, provided, however, that
Trident Securities, A Division
of McDonald Investments, Inc.
_______________, 2003
Page 24
this indemnification shall not apply to any loss, liability, claim,
damage or expense found in a final judgment of a court of competent
jurisdiction to have resulted principally and directly from the bad
faith, willful misconduct or gross negligence of McDonald. This
indemnity shall be in addition to any liability the MHC, the Company or
the Bank may otherwise have to Trident.
(c) McDonald agrees to indemnify and hold harmless the MHC, the
Company and the Bank, their officers, directors and employees and each
person, if any, who controls the MHC, the Company or the Bank within
the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the
MHC, the Company and the Bank to McDonald, but only with respect to (A)
statements or omissions, if any, made in the Prospectus or any
amendment or supplement thereof, in any Application or to a purchaser
of the Shares in reliance upon, and in conformity with, information
furnished in writing to the Company or the Bank with respect to
McDonald by or on behalf of McDonald expressly for use in the
Prospectus or any amendment or supplement thereof or in any Application
or (B) the inaccuracy of any representation or warranty set forth in
Section 2(b) above or the breach of any covenant or agreement of
McDonald set forth herein, provided however, that this indemnification
agreement will not apply to any loss, liability, claim, damage or
expense found in a final judgement by a court of competent jurisdiction
to have resulted principally and directly from the bad faith, willful
misconduct or gross negligence of the MHC, the Company or the Bank.
This indemnity shall be in addition to any liability McDonald may
otherwise have to the MHC, the Company or the Bank.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of any action, proceeding or claim (whether
commenced or threatened) such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party of such action, proceeding or
claim; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified
party otherwise than under this Section 8. In case any such action is
brought against any indemnified party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
this Section 8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other
than the reasonable cost of investigation except as otherwise provided
herein. In the event the indemnifying party elects to assume the
defense of any such action and retain counsel reasonably acceptable to
the indemnified party, the indemnified party may retain additional
counsel, but shall bear the
Trident Securities, A Division
of McDonald Investments, Inc.
_______________, 2003
Page 25
fees and expenses of such counsel unless (i) the indemnifying party
shall have specifically authorized the indemnified party to retain such
counsel or (ii) the parties to such suit include such indemnifying
party and the indemnified party, and such indemnified party shall have
been advised by counsel that there are substantive or procedural issues
which raise conflicts of interest between the indemnified party and
indemnifying party, in which case the indemnifying party shall not be
entitled to assume the defense of such suit notwithstanding the
indemnifying party's obligation to bear the fees and expenses of such
counsel. An indemnifying party against whom indemnity may be sought
shall not be liable to indemnify an indemnified party under this
Section 8 if any settlement of any such action is effected without such
indemnifying party's consent.
9. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 8 above is for any reason held to be unavailable to McDonald, the MHC,
the Company and/or the Bank other than in accordance with its terms, the MHC,
the Company and the Bank or McDonald shall contribute to the aggregate losses,
liabilities, claims, damages, and expenses of the nature contemplated by said
indemnity agreement incurred by the MHC, the Company and the Bank or McDonald(i)
in such proportion as is appropriate to reflect the relative benefits received
by the MHC, the Company and the Bank on the one hand and McDonald on the other
from the offering of the Shares or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above, but
also the relative fault of the Company or the Bank on the one hand and McDonald
on the other hand in connection with the statements, acts or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations. The relative benefits received by
the MHC, the Company and the Bank on the one hand and McDonald on the other
shall be deemed to be in the same proportion as the total net proceeds from the
Conversion received by the MHC, the Company and the Bank bear to the total fees
received by McDonald under this Agreement. The relative fault of the Company or
the Bank on the one hand and McDonald on the other shall be determined by
reference to, among other things, whether any untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Bank or by McDonald and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The MHC, the Company and the Bank and McDonald agree that it would not
be just and equitable if contribution pursuant to this Section 9 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by the indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, McDonald
Trident Securities, A Division
of McDonald Investments, Inc.
_______________, 2003
Page 26
shall not be required to contribute any amount in excess of the amount by which
fees owed McDonald pursuant to this Agreement exceed the amount of any damages
which McDonald has otherwise been required to pay by reason of such untrue or
alleged untrue statement, act, omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
10. Survival of Agreements, Representations and Indemnities. The
respective indemnities of the MHC, the Company and the Bank and McDonald and the
representations and warranties of the MHC, the Company and the Bank and of
McDonald set forth in or made pursuant to this Agreement shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of McDonald or the Company
or the Bank or any controlling person or indemnified party referred to in
Section 8 hereof, and shall survive any termination or consummation of this
Agreement and/or the issuance of the Shares, and any legal representative of
McDonald, the MHC, the Company, the Bank and any such controlling persons shall
be entitled to the benefit of the respective agreements, indemnities, warranties
and representations.
11. Termination. The parties may terminate this Agreement by giving
the notice indicated below in this Section at any time after this Agreement
becomes effective as follows:
(a) McDonald may terminate this Agreement if any domestic or
international event or act or occurrence has materially disrupted the
United States securities markets such as to make it, in McDonald's
reasonable opinion, impracticable to proceed with the offering of the
Shares; or if trading on the New York Stock Exchange or the Nasdaq
Stock Market shall have suspended; or if the United States shall have
become involved in a war or major hostilities; or if a general banking
moratorium has been declared by a state or federal authority which has
material effect on the Bank or the Conversion; or if a moratorium in
foreign exchange trading by major international banks or persons has
been declared; or if there shall have been a material adverse change in
the capitalization, financial condition or business of the MHC, the
Company and the Bank, taken as a whole; or if the MHC, the Company and
the Bank, taken as a whole, shall have sustained a material or
substantial loss by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act, whether or not said
loss shall have been insured; or if there shall have been a material
adverse change in the condition, financial or otherwise, or in the
prospects of the MHC, the Company and the Bank, taken as a whole.
(b) The MHC, the Company and the Bank may terminate the
Conversion in accordance with the terms of the Plan. Such termination
shall be without liability to any party, except that the MHC, the
Company and the Bank shall be required to fulfill their obligations
pursuant to Sections 3, 6, 8, and 9 of this Agreement.
Trident Securities, A Division
of McDonald Investments, Inc.
_______________, 2003
Page 27
(c) The MHC, the Company and the Bank, and McDonald, may
terminate this Agreement by mutual written agreement.
(d) If this Agreement is terminated by McDonald for any of the
reasons set forth in subsections (a) above, and to fulfill their
obligations, if any, pursuant to Sections 3, 6, 8 and 9 of this
Agreement and upon demand, the MHC, the Company and the Bank shall pay
McDonald the full amount so owing thereunder.
(e) If this Agreement is terminated as provided in this Section
11, the party terminating this Agreement shall notify any
non-terminating party promptly by telephone or telegram, confirmed by
letter.
12. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to McDonald shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, a Division
of McDonald Investments Inc., 0000 Xxx Xxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx
Xxxxxxxx 00000, Attention: Xxxx X. Xxxx, Senior Vice President (with a copy to
Xxxxxxx Xxxxx & Xxxxx, PC, 0000 Xxx Xxxx Xxxxxx, XX, Xxxxx 000 Xxxx, Xxxxxxxxxx,
XX, 00000, Attention: Xxxxxxx X. Xxxxxxxx, Esquire) and if sent to the MHC, the
Company or the Bank, shall be mailed, delivered or telegraphed and confirmed to
Chesapeake Bank of Maryland, 0000 Xxxx Xxxxx Xxxx, Xxxxxx, Xxxxxxxx 00000,
Attention: X. Xxxxxx Xxxxxxxxx, President and Chief Executive Officer (with a
copy to Ober, Kaler, Xxxxxx & Xxxxxxx, 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxx 00000, Attention: Xxxxxxx X. Xxxx, Esquire.
13. Parties. The MHC, the Company and the Bank shall be entitled to
act and rely on any request, notice, consent, waiver or agreement purportedly
given on behalf of McDonald when the same shall have been given by the
undersigned or any other officer of McDonald. McDonald shall be entitled to act
and rely on any request, notice, consent, waiver or agreement purportedly given
on behalf of the Company or the Bank, when the same shall have been given by the
undersigned or any other officer of the Company or the Bank. This Agreement
shall inure solely to the benefit of, and shall be binding upon, McDonald, the
MHC, the Company, the Bank and the controlling and other persons referred to in
Section 8 hereof, and their respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provision herein contained. The undersigned consent to the
assignment of rights and obligations of Trident Securities hereunder to McDonald
Investments Inc.
14. Construction. Unless preempted by federal law, this Agreement
shall be governed by and construed in accordance with the substantive laws of
North Carolina.
15. Counterparts and Definitions. This Agreement may be executed in
separate
Trident Securities, A Division
of McDonald Investments, Inc.
_______________, 2003
Page 28
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument. Any
initially capitalized terms not defined herein shall have the meanings ascribed
thereto in the Prospectus.
16. Amendment. This Agreement may be amended at any time only by a
writing signed by all parties hereto.
[SIGNATURES APPEAR ON FOLLOWING PAGE.]
Trident Securities, A Division
of McDonald Investments, Inc.
_______________, 2003
Page 29
Please acknowledge your agreement to the foregoing as of the date above
written by signing below and returning to the Company one copy of this
Agreement.
BANKS OF THE CHESAPEAKE, M.H.C.
By:
X. Xxxxxx Xxxxxxxxx
President and Chief Executive Officer
BANKS OF THE CHESAPEAKE, INC.
By:
X. Xxxxxx Xxxxxxxxx
President and Chief Executive Officer
CHESAPEAKE BANK OF MARYLAND
By:
X. Xxxxxx Xxxxxxxxx
President and Chief Executive Officer
Agreed to and accepted as of the date first written above:
TRIDENT SECURITIES, a Division of McDonald Investments Inc.
By: _________________________________
