MFS FINANCIAL, INC.
6,348,000 Shares
COMMON SHARES
(Par Value $.01 Per Share)
Subscription Price $10.00 Per Share
AGENCY AGREEMENT
____________________, 1999
Xxxxxxx Xxxx & Company, a Division of
Xxxxx, Xxxxxxxx & Xxxxx, Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000-0000
Ladies and Gentlemen:
MFS Financial, Inc., a Maryland corporation (the "Company"), and Mutual
Federal Savings Bank, Muncie, Indiana, a federally chartered mutual savings bank
(the "Bank") (references to the "Bank" include the Bank in the mutual or stock
form, as indicated by the context), with its deposit accounts insured by the
Savings Association Insurance Fund ("SAIF") administered by the Federal Deposit
Insurance Corporation ("FDIC"), hereby confirm their agreement with Xxxxxxx Xxxx
& Company, a Division of Xxxxx, Xxxxxxxx & Xxxxx, Inc. ("Xxxx", "KBW" or "the
Agent"), as follows:
Section 1. The Offering. The Bank, in accordance with its plan of
conversion adopted by its Board of Directors (the "Plan"), intends to convert
from a federally chartered mutual savings bank to a federally chartered stock
savings bank, and will issue all of its issued and outstanding capital stock to
the Company. In addition, pursuant to the Plan, the Company will offer and sell
up to 6,348,000 of its common shares, par value $.01 per share ("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
July 31, 1998 ("Eligible Account Holders"), (2) the Mutual Federal Savings Bank
Employee Stock Ownership Plan (the "ESOP"), (3) depositors of the Bank with
Qualifying Deposits as of September 30, 1999 ("Supplemental Eligible Account
Holders"), (4) the Bank's Other Members as defined in the Plan and (5)
directors, officers and employees of the Bank. The Common Shares to be sold by
the Company in the Offering (as defined below) are hereinafter called the
"Shares." Subject to the prior subscription rights of the above-listed parties,
the Company is offering for sale in a community offering (the "Community
Offering" and when referred to together with the Subscription Offering, the
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"Subscription and Community Offering") conducted concurrently with the
Subscription 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 to
residents of Delaware, Xxxxxxxx and Kosciusko Counties, Indiana. It is
anticipated that shares not subscribed for in the Subscription and Community
Offering will 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"). In addition,
as described in the Plan, the Company and the Bank expect to contribute cash and
Common Shares in an amount equal to 8% of the Shares sold in the Offering to The
Mutual Federal Savings Bank Charitable Foundation (the "Foundation"). Such
Common Shares are referred to herein as the "Foundation Shares." 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 and the Bank may reject, in whole or in part, any orders received in the
Community Offering or Syndicated Community Offering. Collectively, these
transactions are referred to herein as the "Conversion."
Immediately following the consummation of the Conversion, subject to the
approval of the establishment of the Foundation by the members of the Bank and
compliance with certain conditions as may be imposed by regulatory authorities,
the Company will contribute to the Foundation newly issued Common Shares in an
amount equal to 4% of the Shares sold in the Conversion and the Bank will
contribute to the Foundation cash in an amount equal to 4% of the Shares sold in
the Conversion (based upon the $10.00 per share subscription price).
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (File No. 333-_____) (the
"Registration Statement") containing a prospectus relating to the Offering for
the registration of the Shares and the Foundation 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 becomes
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 Bank has filed with the Office of Thrift
Supervision (the "OTS") an Application for Conversion (the "Conversion
Application"), including the Prospectus and the Conversion Valuation Appraisal
Report prepared by RP Financial and has filed such amendments thereto as may
have been required by the OTS. The Conversion Application has been approved by
the OTS and the related Prospectus has been authorized for use by the OTS. In
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addition, the Company has filed with the OTS its application on Form H-(e)1 (the
"Holding Company Application") to become a registered savings and loan holding
company under the Home Owners' Loan Act, as amended ("HOLA"), which has been
approved.
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 to utilize its best efforts to solicit subscriptions for Shares
and to advise and assist the Company and the Bank with respect to the Company's
sale of the Shares in the Offering.
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 April 27,
1999, between the Bank and Xxxx (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 the completion or termination or abandonment of the Plan by the Company or
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, the Bank 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 4,080,000 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 6, 8 and 9 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.
If all conditions precedent to the consummation of the Conversion,
including, without limitation, the sale of all Shares required by 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 (as hereinafter defined) 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 7 hereof shall have
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been complied with to the reasonable satisfaction of the Agent and 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. Certificates for shares
shall be delivered directly to the purchasers in accordance with their
directions. 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."
The Agent shall receive the following compensation for its services
hereunder:
(a) A management fee of $40,000, payable in four consecutive monthly
installments of $10,000, of which $___________ has been paid. Such fees shall be
deemed to have been earned when due. Should the Conversion be terminated for any
reason not attributable to the action or inaction of the Agent, the Agent shall
have earned and be entitled to be paid fees accruing through the stage at which
the termination occurred, including any accrued legal fees expended by the
Agent.
(b) A Success Fee of $725,000 upon completion of the Offering. The
management fee described in subparagraph 2(a) shall be applied against the
Success Fee described in this subparagraph 2(b).
(c) If any of the Common Shares remain available after the Subscription
Offering, at the request of the Bank, Xxxx 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. Xxxx 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. Xxxx will be paid a fee not to
exceed 5.5% of the aggregate purchase price of the Shares sold by the Selected
Dealers. Xxxx 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
affected with the assistance of Selected Dealers other than Xxxx shall be
transmitted by Xxxx to such Selected Dealers. The decision to utilize Selected
Dealers will be made by the Bank upon consultation with Xxxx.
(d) The Agent shall be reimbursed for reasonable out-of-pocket expenses,
including travel, meals and lodging, photocopying, telephone, facsimile and
couriers and expenses of its counsel. Reimbursement of the Agent's total
out-of-pocket expenses shall not exceed $45,000, of which $40,000 shall be for
legal fees, without the prior consent of the Bank. The Bank will bear the
expenses of the Offering customarily borne by issuers including, without
limitation, regulatory filing fees, Commission, "Blue Sky," and NASD filing and
registration fees; the fees of the Bank's accountants, attorneys, appraiser,
transfer agent and registrar,
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printing, mailing and marketing expenses associated with the conversion; and the
fees set forth under this Section 2; and fees for "Blue sky" legal work. The
Company or the Bank will reimburse Xxxx for expenses incurred by Xxxx on their
behalf.
Full payment of Agent's fees and expenses, as described above, shall be
made in next day funds on the earlier of the Closing Date or a determination by
the Bank to terminate or abandon the Plan.
Section 3. Prospectus; Offering. The Shares are to be initially offered in
the Offering at the purchase price set forth on the cover page of the
Prospectus.
Section 4. Representations and Warranties.
(a) The Company and the Bank jointly and severally represent and warrant to
and agree with the Agent as follows:
(i) The Registration Statement which was prepared by the Company and
the Bank and filed with the Commission was declared effective by the
Commission on ______________, 1999. At the time the Registration Statement,
including the Prospectus contained therein (including any amendment or
supplement), became effective, the Registration Statement contained all
statements that were required to be stated therein in accordance with the
1933 Act and the 1933 Act Regulations, complied 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 or the Bank contained in Sales Information (as such
term is defined in Section 8 hereof) authorized by the Company or the Bank
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 was filed with the Commission and at
the Closing Date referred to in Section 2, the Registration Statement,
including the Prospectus contained therein (including any amendment or
supplement thereto), and any information regarding the Company or the Bank
contained in Sales Information (as such term is defined in Section 8
hereof) authorized by the Company or the Bank 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
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which they were made, not misleading; provided, however, that the
representations and warranties in this Section 4(a)(i) shall not apply to
statements or omissions made in reliance upon and in conformity with
written information furnished to the Company or the Bank by the Agent or
its counsel expressly regarding the Agent for use in the Prospectus under
the caption "Mutual Federal's Conversion-Marketing Arrangements" or in any
Sales Information.
(ii) The Conversion Application which was prepared by the Company and
the Bank and filed with the OTS was approved on ______________, 1999 and
the related Prospectus has been authorized for use by the OTS. At the time
of the approval of the Conversion Application, including the Prospectus
(including any amendment or supplement thereto), by the OTS and at all
times subsequent thereto until the Closing Date, the Conversion
Application, including the Prospectus (including any amendment or
supplement thereto), will comply in all material respects with the
Conversion Regulations, except to the extent waived in writing by the OTS.
The Conversion Application, 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(a)(ii)
shall not apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Company or the Bank by
the Agent or its counsel expressly regarding the Agent for use in the
Prospectus contained in the Conversion Application under the caption
"Mutual Federal's Conversion-Marketing Arrangements" or in any Sales
Information
(iii) The Holding Company Application has been prepared by the Bank
and the Company in material conformity with the requirements of all
applicable regulations and has been filed with and approved by the OTS. A
conformed copy of the Holding Company Application has been delivered to the
Agent.
(iv) No order has been issued by the Commission, the OTS, any state
securities administrator or the FDIC (hereinafter any reference to the FDIC
shall include the SAIF) preventing or suspending the use of the Prospectus,
and no action by or before any such government entity to revoke any
approval, authorization or order of effectiveness related to the Conversion
is pending or, to the best knowledge of the Company or the Bank,
threatened.
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(v) The Plan has been adopted by the Boards of Directors of both the
Company and the Bank and, at the Closing Date, will have been approved by
the members of the Bank; at the Closing Date, the offer and sale of the
Shares will have been conducted in all material respects in accordance with
the Plan, the Conversion Regulations, and all other applicable laws,
regulations, decisions and orders, including all terms, conditions,
requirements and provisions precedent to the Conversion imposed upon the
Company or the Bank by the OTS, the Commission, or any other regulatory
authority and in the manner described in the Prospectus. No person has
sought to obtain review of the final action of the OTS in approving the
Plan or in approving the Conversion or the Holding Company Application
pursuant to the HOLA or any other statute or regulation.
(vi) The Bank has been organized and is a validly existing federally
chartered savings bank in mutual form of organization and upon the
Conversion will become a duly organized and validly existing federally
chartered savings bank in permanent capital stock form of organization, 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 materially adversely affect the
financial condition, earnings, capital, assets, properties or business of
the Company and the Bank, taken as a whole; 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; 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
individually or in the aggregate have a material adverse effect on the
financial condition, earnings, capital, assets, properties or business of
the Bank. The Bank does not own equity securities or any equity interest in
any other business enterprise except for First X.X.X.X. Corporation and
Third X.X.X.X. Corporation ("Subsidiaries") and as described in the
Prospectus or as would not be material to the operations of the Bank. Upon
completion of the Conversion, (i) all of the authorized and outstanding
capital stock of the Bank will be owned by the Company and (ii) the Company
will have no direct subsidiaries other than the Bank. At the Closing Date,
the Conversion will have been 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,
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and documents in compliance with the 1933 Act Regulations, the OTS's
resolutions or letters of approval, all terms, conditions, requirements and
provisions with respect to the Conversion imposed by the Commission, the
OTS and the FDIC, if any, will have been complied with by the Company and
the Bank in all material respects or appropriate waivers will have been
obtained and all material notice and waiting periods will have been
satisfied, waived or elapsed.
(vii) The Foundation has been duly incorporated and is validly
existing as a non-stock corporation in good standing under the laws of the
State of Indiana with corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus. The Foundation will not be a savings and loan holding company
within the meaning of 12 C.F.R. Section 574.2(q) as a result of the
issuance of the Foundation Shares to it in accordance with the terms of the
Plan and in the amounts as described in the Prospectus. No approvals are
required to establish the Foundation and to contribute the cash and the
Foundation Shares thereto as described in the Prospectus other than those
set forth in the OTS's approval of the Conversion Application. Except as
specifically disclosed in the Prospectus and the Proxy Statement, there are
no agreements and/or understandings, written or oral, between the Company
and/or the Bank and the Foundation with respect to the control, directly or
indirectly, over the voting and the acquisition or disposition of the
Foundation Shares. The Internal Revenue Service has recognized the
Foundation as a tax-exempt organization under Section 503(c) of the
Internal Revenue Code of 1986, as amended.
(viii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Maryland
with 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; the Company is qualified to do business as a foreign
corporation in Indiana and 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 on the financial
condition, earnings, capital, assets, properties or business of the
Company. 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
materially adversely affect the financial condition, earnings, capital,
assets, properties or business of the Company and the Bank, taken as a
whole; all such licenses, permits and governmental authorizations are in
full force and effect,
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and the Company is in all material respects complying with all laws, rules,
regulations and orders applicable to the operation of its business.
(ix) The Bank is a member of the Federal Home Loan Bank of
Indianapolis ("FHLB-Indianapolis"). 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. Upon consummation of the
Conversion, the liquidation account for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders will be duly established
in accordance with the requirements of the Conversion Regulations.
(x) The Subsidiaries are organized, validly existing and in good
standing under the laws of the State of Indiana; with full power and
authority to own their property and conduct their business; each of the
Subsidiaries is duly qualified as a foreign corporation to transact
business in each jurisdiction in which failure to so qualify would have a
material adverse effect on the financial condition, earnings, capital,
assets or properties of the Bank and the Subsidiaries, taken as a whole;
the Subsidiaries hold all licenses, certificates and permits from
governmental authorities necessary for the conduct of their business,
except where failure to hold such licences, permit or authorizations would
not have a material adverse effect on the financial condition, earnings,
capital, assets or properties of the Bank and the Subsidiaries, taken as a
whole; all of the outstanding capital stock of the Subsidiaries has been
duly authorized and is fully paid and non-assessable, and is owned directly
or indirectly by the Bank, free and clear of any liens or encumbrances; the
activities of the Subsidiaries are permitted to be conducted by
subsidiaries of a federally-chartered savings bank pursuant to the HOLA and
the Federal Deposit Insurance Act and the regulations promulgated
thereunder.
(xi) The Company and the Bank 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, in each case free and clear of all liens, charges, encumbrances or
restrictions, except such as are described in the Registration Statement
and Prospectus, or 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.
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(xii) The Company and the Bank have received an opinion of their
special counsel, Silver, Xxxxxxxx & Xxxx, LLP, with respect to the federal
income tax consequences of the Conversion and an opinion from Olive LLP
with respect to the Indiana income tax consequences of the Conversion; all
material aspects of the opinions of Silver, Xxxxxxxx & Xxxx, LLP and Olive
LLP are accurately summarized in the Registration Statement and Prospectus;
the facts upon which such opinions are based are truthful, accurate and
complete.
(xiii) The Company and the Bank have all such power, authority,
authorizations, approvals and orders as may be required to enter into this
Agreement, to carry out the provisions and conditions hereof and to issue
and sell the Shares to be sold by the Company as provided herein and as
described in the Prospectus, except approval or confirmation by the OTS of
the final appraisal of the Bank. The consummation of the Conversion, 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 the Company and
the Bank and this Agreement has been validly executed and delivered by the
Company and the Bank and is the valid, legal and binding agreement of the
Company and the Bank 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 8 and 9
hereof may be unenforceable as against public policy).
(xiv) Neither the Company nor the Bank 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 their businesses so as to
comply in all material respects with all applicable statutes and
regulations (including, without limitation, regulations, decisions,
directives and orders of the OTS and the FDIC) and, except as set forth in
the Registration Statement and the Prospectus, there is no suit,
proceeding, charge or action before or by any court, regulatory authority
or governmental agency or body, pending or, to the best knowledge of the
Company or the Bank, threatened, which might materially and adversely
affect the Conversion, the performance of this Agreement or the
consummation of the transactions contemplated in the Plan and as described
in the Registration Statement and the Prospectus or which might result in
any material adverse change in the financial
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condition, earnings, capital, assets, properties or business of the Company
and the Bank, taken as a whole.
(xv) The financial statements, schedules and notes related thereto
which are included in the Prospectus fairly present the financial
condition, results of operations, retained earnings and cash flows of the
Bank 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 Title 12 of the Code of Federal
Regulations, Regulation S- X of the Commission and generally accepted
accounting principles (including those requiring the recording of certain
assets at their current market value). Such financial statements, schedules
and notes related thereto have been prepared in accordance with generally
accepted accounting principles consistently applied through the periods
involved, present fairly in all material respects the information required
to be stated therein and are consistent with the most recent financial
statements and other reports filed by the Bank with the OTS, except that
accounting principles employed in such regulatory 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 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.
(xvi) Since the respective dates as of which information is given in
the Registration Statement including the Prospectus: (i) there has not been
any material adverse change in the financial condition, earnings, capital,
assets, properties or business of the Company and the Bank, taken as a
whole, whether or not arising in the ordinary course of business; (ii)
there has not been any material increase in the long-term debt of the Bank
or in the principal amount of the Bank's assets which are classified by the
Bank as 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 the Bank, nor has the Company or the Bank 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 Company or the Bank; (iv) there has not
been any material adverse change in the aggregate dollar amount of the
Bank's deposits or its consolidated net worth; (v) there has been no
material adverse change in the Company's or the Bank's relationship
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with its insurance carriers, including, without limitation, cancellation or
other termination of the Company's or the Bank's fidelity bond or any other
type of insurance coverage; (vi) except as disclosed in the Prospectus,
there has been no material change in management of the Company or the Bank,
neither of which has any material undisclosed liability of any kind,
contingent or otherwise; (vii) neither the Company nor the Bank 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) neither the Company
nor the Bank is in default in the payment of principal or interest on any
outstanding debt obligations; (ix) the capitalization, liabilities, assets,
properties and business of the Company and the Bank conform in all material
respects to the descriptions thereof contained in the Prospectus; and (x)
neither the Company nor the Bank has any material contingent liabilities,
except as set forth in the Prospectus.
(xvii) All documents made available to or delivered or to be made
available to or delivered by the Bank or the Company or their
representatives in connection with the issuance and sale of the Shares,
including records of account holders, depositors, borrowers and other
members 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 Bank, the Company or their representatives 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.
(xviii) Neither the Company nor the Bank is (i) in violation of its
articles of incorporation or charter or bylaws, respectively (and the Bank
will not be in violation of its charter or bylaws in capital stock form
upon consummation of the Conversion), or (ii) in default in the performance
or observance of any material 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 material lien, charge or encumbrance (with the exception of the
liquidation account established in the Conversion) upon any of the assets
of the Company or the Bank pursuant to the Articles of Incorporation and
Bylaws of the Company or the Charter and Bylaws of the Bank (in either
mutual or capital stock form) or any material contract, lease or other
instrument in which the Company or the Bank has a beneficial interest, or
any applicable law, rule, regulation or order; (ii) violate
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any authorization approval, judgement, decree, order, statute, rule or
regulation applicable to the Company or the Bank, except for such
violations which would not have a material adverse effect on the financial
condition and results of operations of the Company and the Bank on a
consolidated basis; or (iii) with the exception of the liquidation account
established in the Conversion, result in the creation of any material lien,
charge or encumbrance upon any property of the Company or the Bank.
(xix) 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 the
Company or the Bank in the due performance and observance of any term,
covenant or condition of any indenture, mortgage, deed of trust, note, bank
loan or credit agreement or any other instrument or agreement to which the
Company or the Bank is a party or by which any of them or any of their
property is bound or affected, except such defaults which would not have a
material adverse affect on the financial condition or results of operations
of the Company and the Bank on a consolidated basis; such agreements are in
full force and effect; and no other party to any such agreements has
instituted or, to the best knowledge of the Company and the Bank,
threatened any action or proceeding wherein the Company or the Bank would
or might be alleged to be in default thereunder, where such action or
proceeding, if determined adversely to the Company or the Bank, would have
a material adverse effect on the financial condition, earnings, capital,
assets, properties or business of the Company and the Bank, taken as a
whole.
(xx) Upon consummation of the Conversion, the authorized, issued and
outstanding equity capital of the Company will be within the range set
forth in the Prospectus under the caption "Capitalization," and no Common
Shares have been or will be issued and outstanding prior to the Closing
Date; the Shares and the Foundation 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 or the Foundation
Shares; and the terms and provisions of the Common Shares conform in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus. To the best knowledge of the Company and the
Bank, upon the issuance of the Shares, good title to the Shares will be
-13-
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.
(xxi) 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 or the Foundation 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 National Association of Securities Dealers, Inc. ("NASD") and/or The
Nasdaq Stock Market.
(xxii) Olive LLP, which has certified the audited financial statements
and schedules of the Bank included in the Prospectus, has advised the
Company and the Bank in writing that they are, with respect to the Company
and the Bank, independent public accountants within the meaning of the Code
of Professional Ethics of the American Institute of Certified Public
Accountants and applicable regulations of the OTS.
(xxiii) RP Financial, which has prepared the Bank's Conversion
Valuation Appraisal Report as of September 10, 1999 (as amended or
supplemented, if so amended or supplemented) (the "Appraisal"), has advised
the Company in writing that it is independent of the Company and the Bank
within the meaning of the Conversion Regulations.
(xxiv) The Company and the Bank have timely filed all required
federal, state and local tax returns; the Company and the Bank have paid
all taxes that have become due and payable in respect of such returns,
except where permitted to be extended, have made adequate reserves for
similar future tax liabilities and no deficiency has been asserted with
respect thereto by any taxing authority.
(xxv) The Bank 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.
(xxvi) To the knowledge of the Company and the Bank, neither the
Company, the Bank nor employees of the Company or the Bank has made any
payment of funds of the Company or the Bank 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.
-14-
(xxvii) Neither the Company nor the Bank 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 NASD, 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 and the Bank in connection with the offering of the Shares,
and no person is being compensated in any manner for such service.
Appropriate arrangements have been made for placing the funds received from
subscriptions for Shares in a special interest-bearing account with the
Bank until all Shares are sold and paid for, with provision for refund to
the purchasers in the event that the Conversion is not completed for
whatever reason or for delivery to the Company if all Shares are sold.
(xxviii) The Company and the Bank have not relied upon the Agent or
its legal counsel or other advisors for any legal, tax or accounting advice
in connection with the Conversion.
(xxix) The Company is not required to be registered under the
Investment Company Act of 1940, as amended.
(xxx) Any certificates signed by an officer of the Company or the Bank
pursuant to the conditions of this Agreement and delivered to the Agent or
their counsel that refers to this Agreement shall be deemed to be a
representation and warranty by the Company or the Bank to the Agent as to
the matters covered thereby with the same effect as if such representation
and warranty were set forth herein.
(b) The Agent represents and warrants to the Company and the Bank that:
(i) KWB is a corporation validly existing in good standing under the
laws of the State of New York and licensed to conduct business in the State
of Indiana and that Xxxx is an unincorporated division thereof with full
power and authority to provide the services to be furnished to the Bank and
the Company hereunder.
-15-
(ii) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of the Agent, and this
Agreement has been duly and validly executed and delivered by the Agent and
is a legal, valid and binding agreement of the Agent, 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 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 8 and 9
hereof may be unenforceable as against public policy).
(iii) Each of the Agent and its employees, agents and representatives
who shall perform any of the services hereunder shall be duly authorized
and empowered, and shall have all licenses, approvals and permits necessary
to perform such services; and the Agent is a registered selling agent in
each of the jurisdictions in which the Shares are to be offered by the
Company in reliance upon the Agent as a registered selling agent as set
forth in the blue sky memorandum prepared with respect to the Offering.
(iv) The execution and delivery of this Agreement by the Agent, the
consummation of the transactions contemplated hereby and compliance with
the terms and provisions hereof will not conflict with, or result in a
breach of, any of the terms, provisions or conditions of, or constitute a
default (or an event which with notice or lapse of time or both would
constitute a default) under, the Articles of Incorporation or Bylaws of the
Agent or any material agreement, indenture or other instrument to which the
Agent is a party or by which it or its property is bound.
(v) No approval of any regulatory or supervisory or other public
authority is required in connection with the Agent's execution and delivery
of this Agreement, except as may have been received.
(vi) There is no suit or proceeding or charge or action before or by
any court, regulatory authority or government agency or body or, to the
knowledge of the Agent, pending or threatened, which might materially
adversely affect the Agent's performance of this Agreement.
Section 5. Covenants of the Company and the Bank. The Company and the Bank
hereby jointly and severally covenant with the Agent as follows:
(a) The Company will not file any amendment or supplement to the
Registration Statement without providing the Agent and its
-16-
counsel an opportunity to review such amendment or supplement or file any
amendment or supplement to which amendment or supplement the Agent or its
counsel shall reasonably object.
(b) The Bank will not file any amendment or supplement to the Conversion
Application without providing the Agent and its counsel an opportunity to review
such amendment or supplement or file any amendment or supplement to which
amendment or supplement the Agent or its counsel shall reasonably object.
(c) The Company will not file any amendment or supplement to the Holding
Company Application without providing the Agent and its counsel an opportunity
to review the nonconfidential portions of such amendment or supplement or file
any amendment or supplement to which amendment or supplement the Agent or its
counsel shall reasonably object.
(d) The Company and the Bank will use their best efforts to cause any post
effective amendment to the Registration Statement to be declared effective by
the Commission and any post-approval amendment to the Conversion Application to
be approved by the OTS and will immediately upon receipt of any information
concerning the events listed below notify the Agent: (i) when the Registration
Statement, as amended, has become effective; (ii) when the Conversion
Application, as amended, has been approved by the OTS; (iii) when the Bank or
the Company receives any comments from the Commission, the OTS, or any other
governmental entity with respect to the Conversion or the transactions
contemplated by this Agreement; (iv) when the Commission, the OTS, or any other
governmental entity requests any amendment or supplement to the Registration
Statement, the Conversion Application or any additional information; (v) the
issuance by the Commission, the OTS, or any other governmental entity of any
order or other action suspending the Offering or the use of the Registration
Statement or the Prospectus or any other filing of the Company or the Bank under
the Conversion Regulations, or other applicable law, or the threat of any such
action; (vi) the issuance by the Commission, the OTS, or any authority of any
stop order suspending the effectiveness of the Registration Statement or of the
initiation or threat of initiation or threat of any proceedings for that
purpose; or (vii) the occurrence of any event mentioned in paragraph (h) below.
The Company and the Bank will make every reasonable effort (i) to prevent the
issuance by the Commission, the OTS, or any other state authority of any such
order and, if any such order shall at any time be issued, (ii) to obtain the
lifting thereof at the earliest possible time.
-17-
(e) The Company and the Bank will deliver to the Agent and to its counsel
two conformed copies of the Registration Statement, the Conversion Application
and the Holding Company Application, as originally filed and of each amendment
or supplement thereto, including all exhibits. Further, the Company and the Bank
will deliver such additional copies of the foregoing documents to counsel to the
Agent as may be required for any NASD filings.
(f) The Company and the Bank will furnish to the Agent, from time to time
during the period when the Prospectus (or any later prospectus related to this
offering) is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934 (the "1934 Act"), such number of copies of such Prospectus
(as amended or supplemented) as the Agent may reasonably request for the
purposes contemplated by the 1933 Act, the 1933 Act Regulations, the 1934 Act or
the rules and regulations promulgated under the 1934 Act (the "1934 Act
Regulations"). The Company authorizes the Agent to use the Prospectus (as
amended or supplemented, if amended or supplemented) in any lawful manner
contemplated by the Plan in connection with the sale of the Shares by the Agent.
(g) The Company and the Bank will comply with any and all material terms,
conditions, requirements and provisions with respect to the Conversion and the
transactions contemplated thereby (including those conditions relating to the
establishment and operations of the Foundation) imposed by the Commission, the
OTS or the Conversion Regulations, and by the 1933 Act, the 1933 Act
Regulations, the 1934 Act and the 1934 Act Regulations to be complied with prior
to or subsequent to the Closing Date and when the Prospectus is required to be
delivered, and during such time period the Company and the Bank will comply, at
their own expense, with all material requirements imposed upon them by the
Commission, the OTS or the Conversion Regulations, and by the 1933 Act, the 1933
Act Regulations, the 1934 Act and the 1934 Act Regulations, including, without
limitation, Rule 10b-5 under the 1934 Act, in each case as from time to time in
force, so far as necessary to permit the continuance of sales or dealing in the
Common Shares during such period in accordance with the provisions hereof and
the Prospectus.
(h) If, at any time during the period when the Prospectus is required to be
delivered, any event relating to or affecting the Company or the Bank shall
occur, as a result of which it is necessary or appropriate, in the opinion of
the Agent's counsel, to amend or supplement the Registration Statement or
Prospectus in order to make the Registration Statement or Prospectus not
misleading in light of the circumstances existing at the time the Prospectus is
delivered, the Company and the Bank will at their own expense, prepare
-18-
and file with the Commission, and the OTS and furnish to the Agent a reasonable
number of copies of an amendment or amendments of, or a supplement or
supplements to, the Registration Statement or Prospectus (in form and substance
reasonably satisfactory to the Agent and its counsel after a reasonable time for
review) which will amend or supplement the Registration Statement or Prospectus
so that as amended or supplemented it 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 existing at the time the
Prospectus is delivered to a purchaser, not misleading. For the purpose of this
Agreement, the Company and the Bank each will timely furnish to the Agent such
information with respect to itself as the Agent may from time to time reasonably
request.
(i) The Company and the Bank will take all necessary actions in cooperating
with the Agent and furnish to whomever the Agent may direct such information as
may be required to qualify or register the Shares for offering and sale by the
Company or to exempt such Shares from registration, or to exempt the Company as
a broker-dealer and its officers, directors and employees as broker-dealers or
agents under the applicable securities or blue sky laws of such jurisdictions in
which the Shares are required under the Conversion Regulations to be sold or as
the Agent and the Company and the Bank may reasonably agree upon; provided,
however, that the Company shall not be obligated to file any general consent to
service of process, to qualify to do business in any jurisdiction in which it is
not so qualified, or to register its directors or officers as brokers, dealers,
salesmen or agents in any jurisdiction. In each jurisdiction where any of the
Shares shall have been qualified or registered as above provided, the Company
will make and file such statements and reports in each fiscal period as are or
may be required by the laws of such jurisdiction.
(j) The Bank shall duly establish and maintain the liquidation account for
the benefit of Eligible Account Holders and Supplemental Eligible Account
Holders in accordance with the requirements of the OTS, and such Eligible
Account Holders and Supplemental Eligible Account Holders who continue to
maintain their savings accounts in the Bank will have an inchoate interest in
their pro rata portion of the liquidation account, which shall have a priority
superior to that of the holders of the Common Shares in the event of a complete
liquidation of the Bank.
(k) The Company and the Bank will not sell or issue, contract to sell or
otherwise dispose of, for a period of 180 days after the Closing Date, without
the Agent's prior written consent, any of their capital stock, other than in
connection with any plan or arrangement described in the Prospectus.
-19-
(l) The Company shall register its Common Shares under Section 12(g) of the
1934 Act concurrently with the Offering and shall request that such registration
be effective prior to or upon completion of the Conversion. The Company shall
maintain the effectiveness of such registration for not less than three years or
such shorter period as may be required by the OTS.
(m) During the period during which the Common Shares are registered under
the 1934 Act or for three (3) years from the date hereof, whichever period is
greater, the Company will furnish to its shareholders as soon as practicable
after the end of each fiscal year an annual report of the Company in accordance
with the 1934 Act Regulations (including a consolidated balance sheet and
statements of consolidated income, shareholders' equity and cash flows of the
Company and its subsidiaries as at the end of and for such year, certified by
independent public accountants in accordance with Regulation S-X under the 1933
Act and the 1934 Act).
(n) During the period of three years from the date hereof, the Company will
furnish to the Agent: (i) as soon as practicable after such information is
publicly available, a copy of each report of the Company furnished to or filed
with the Commission under the 1934 Act or any national securities exchange or
system on which any class of securities of the Company is listed or quoted
(including, but not limited to, reports on Forms 10-K, 10-Q and 8-K and all
proxy statements and annual reports to stockholders), (ii) a copy of each other
non-confidential report of the Company mailed to its shareholders or filed with
the Commission, the OTS or any other supervisory or regulatory authority or any
national securities exchange or system on which any class of securities of the
Company is listed or quoted, each press release and material news items and
additional documents and information with respect to the Company or the Bank as
the Agent may reasonably request; and (iii) from time to time, such other
nonconfidential information concerning the Company or the Bank as the Agent may
reasonably request.
(o) The Company and the Bank will use the net proceeds from the sale of the
Shares in the manner set forth in the Prospectus under the caption "How We
Intend to Use the Proceeds."
(p) Other than as permitted by the Conversion Regulations, the HOLA, the
1933 Act, the 1933 Act Regulations and its rules and regulations and the laws of
any state in which the Shares are registered or qualified for sale or exempt
from registration, neither the Company nor the Bank will distribute any
prospectus, offering circular or other offering material in connection with the
offer and sale of the Shares.
-20-
(q) The Company will use its best efforts to (i) encourage and assist three
market makers to establish and maintain a market for the Shares and (ii) list
and maintain quotation of the Shares on a national or regional securities
exchange or on The Nasdaq Stock Market effective on or prior to the Closing
Date.
(r) The Bank will maintain appropriate arrangements for depositing all
funds received from persons mailing subscriptions for or orders to purchase
Shares in the Offering on an interest-bearing basis at the rate described in the
Prospectus until the Closing Date and satisfaction of all conditions precedent
to the release of the Bank's obligation to refund payments received from persons
subscribing for or ordering Shares in the Offering in accordance with the Plan
and as described in the Prospectus or until refunds of such funds have been made
to the persons entitled thereto or withdrawal authorizations canceled in
accordance with the Plan and as described in the Prospectus. The Bank will
maintain such records of all funds received to permit the funds of each
subscriber to be separately insured by the FDIC (to the maximum extent
allowable) and to enable the Bank to make the appropriate refunds of such funds
in the event that such refunds are required to be made in accordance with the
Plan and as described in the Prospectus.
(s) The Company will promptly take all necessary action to register as a
savings and loan holding company under the HOLA.
(t) The Company and the Bank will take such actions and furnish such
information as are reasonably requested by the Agent in order for the Agent to
ensure compliance with the NASD's "Interpretation Relating to Free Riding and
Withholding."
(u) Neither the Company nor the Bank will amend the Plan of Conversion
without notifying the Agent prior thereto.
(v) The Company shall assist the Agent, if necessary, in connection with
the allocation of the Shares in the event of an oversubscription and shall
provide the Agent with any information necessary to assist the Company in
allocating the Shares in such event and such information shall be accurate and
reliable in all material respects.
(w) Prior to the Closing Date, the Company and the Bank will inform the
Agent of any event or circumstances of which it is aware as a result of which
the Registration Statement and/or Prospectus, as then amended or supplemented,
would contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading.
-21-
(x) 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 therein or set forth in an amendment or supplement
thereto, neither the Company nor the Bank will have: (i) 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, or (ii) entered into any
transaction which is material in light of the business and properties of the
Company and the Bank, taken as a whole.
(y) The Company and the Bank will take no action which will result in the
possible loss of the Foundation's tax-exempt status; and neither the Company nor
the Bank will contribute any additional assets to the Foundation until such time
that such additional contributions will be deductible for federal and state
income tax purposes.
Section 6. Payment of Expenses. Whether or not the Conversion is completed
or the sale of the Shares by the Company is consummated, the Company and the
Bank jointly and severally agree to pay or reimburse the Agent for: (a) all
filing fees in connection with all filings related to the Offering with the
NASD; (b) any stock issue or transfer taxes which may be payable with respect to
the sale of the Shares; (c) all reasonable expenses of the Conversion, including
but not limited to the Company's and the Bank's, and the Agent's attorneys' fees
(not to exceed $45,000 without the Bank's consent) and expenses, blue sky fees,
transfer agent, registrar and other agent charges, fees relating to auditing and
accounting or other advisors and costs of printing all documents necessary in
connection with the Conversion; provided, however, there will be no
out-of-pocket expenses charged by the Agent for expenses such as travel,
photocopying lodging and meals. In the event the Company is unable to sell a
minimum of 4,080,000 Shares or the Conversion is terminated or otherwise
abandoned, the Company and the Bank shall promptly reimburse the Agent in
accordance with Section 2(d) hereof.
Section 7. Conditions to the Agent's Obligations. The obligations of the
Agent hereunder are subject, to the extent not waived in writing by the Agent,
to the condition that all representations and warranties of the Company and the
Bank herein are, at and as of the commencement of the Offering and at and as of
the Closing Date, true and correct in all material respects, the condition that
the Company and the Bank shall have performed all of their obligations hereunder
to be performed on or before such dates, and to the following further
conditions:
(a) At the Closing Date, the Company and the Bank shall have conducted the
Conversion in all material respects in accordance with the Plan, the Conversion
Regulations and all other applicable laws, regulations, decisions and orders,
including all terms, conditions, requirements and provisions precedent to the
Conversion imposed upon them by the OTS, the Commission and any state securities
agency.
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(b) The Registration Statement shall have been declared effective by the
Commission and the Conversion Application approved by the OTS not later than
5:30 p.m. on the date of this Agreement, or with the Agent's consent at a later
time and date; and at the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act or proceedings therefor initiated or threatened by the Commission or
any state authority, and no order or other action suspending the authorization
of the Prospectus or the consummation of the Conversion shall have been issued
or proceedings therefor initiated or, to the Company's or the Bank's knowledge,
threatened by the Commission, the OTS, the FDIC, or any other governmental
authority.
(c) At the Closing Date, the Agent shall have received:
(1) The favorable opinion, dated as of the Closing Date and addressed
to the Agent and for its benefit, of Silver, Xxxxxxxx & Xxxx, LLP, special
counsel for the Company and the Bank, in form and substance to the effect
that:
(i) The Company has been duly incorporated and is validly
existing in good standing as a corporation under the laws of the State
of Maryland. The Company is qualified to do business in Indiana.
(ii) The Company has 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.
(iii) The Bank is a validly existing federally chartered savings
bank in mutual form and immediately following the completion of the
Conversion will be a validly existing federally chartered savings bank
in permanent capital stock form of organization, in both instances
duly authorized to conduct its business and own its property as
described in the Registration Statement and the Prospectus. All of the
capital stock of the Bank outstanding upon completion of the
Conversion will be duly authorized and, upon payment therefor, will be
validly issued, fully paid and non-assessable and will be owned by the
Company, to such counsel's Actual Knowledge, free and clear of any
liens, encumbrances, claims or other restrictions.
(iv) The Bank is a member of the FHLB-Indianapolis. The deposit
accounts of the Bank are insured by the FDIC up to the maximum amount
allowed under law and no proceedings for the termination or revocation
of such insurance are pending or, to such counsel's Actual Knowledge,
threatened; the description of the liquidation account as set forth in
the Prospectus under the captions "Mutual Federal's Conversion-
-23-
Effects of the Conversion-Depositors' Rights if We Liquidate," to
the extent that such information constitutes matters of law and legal
conclusions, has been reviewed by such counsel and is accurately
described in all material respects.
(v) Immediately following the consummation of the Conversion, the
authorized, issued and outstanding Common Shares of the Company will
be within the range set forth in the Prospectus under the caption
"Capitalization," and no Common Shares have been issued prior to the
Closing Date; the Shares subscribed for pursuant to the Offering and
the Foundation Shares 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 the Prospectus, will be duly and validly issued and 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, the issuance of the Shares and the Foundation Shares is not
subject to preemptive rights and the terms and provisions of the
Common Shares conform in all material respects to the description
thereof contained in the Prospectus. The form of certificate used to
evidence the Common Shares complies with applicable laws. To such
counsel's Actual Knowledge, 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.
(vi) The Foundation has been duly incorporated and is validly
existing as a non-stock corporation in good standing under the laws of
the State of Indiana with corporate power and authority to own lease,
and operate its properties and to conduct its business as described in
the Prospectus; the Foundation is not a savings and loan holding
company within the meaning of 12 C.F.R. Section 574.2(q) as a result
of the issuance of the Foundation Shares to it in accordance with the
terms of the Plan and in the amounts as described in the Prospectus;
no approvals are required to establish the Foundation and to
contribute the cash and the Foundation Shares thereto as described in
the Prospectus other than those set forth in any written notice or
order of approval of the Conversion, the Conversion Application, the
Holding Company Application.
(vii) The Bank and the Company have full corporate power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby and by the Plan. The execution and
delivery of this Agreement and the consummation of the transactions
-24-
contemplated hereby have been duly and validly authorized by all
necessary action on the part of the Company and the Bank; and this
Agreement is a valid and binding obligation of the Company and the
Bank, enforceable against the Company and the Bank in accordance
with its terms, except as the enforceability thereof may be limited
by (i) bankruptcy, insolvency, reorganization, moratorium,
conservatorship, receivership or other similar laws now or hereafter
in effect relating to or affecting the enforcement of creditors'
rights generally or the rights of creditors of federally chartered
savings institutions, (ii) general equitable principles, (iii) laws
relating to the safety and soundness of insured depository
institutions, and (iv) applicable law or public policy with respect to
the indemnification and/or contribution provisions contained herein,
including without limitation the provisions of Sections 23A and 23B of
the Federal Reserve Act and except that no opinion need be expressed
as to the effect or availability of equitable remedies or injunctive
relief (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(viii) The Conversion Application (including the establishment of
the Foundation and the contribution of cash and the Foundation Shares
thereto) has been approved by the OTS and the Prospectus has been
authorized for use by the OTS. The OTS has approved the Holding
Company Application and the purchase by the Company of all of the
issued and outstanding capital stock of the Bank and no action has
been taken, and to such counsel's Actual Knowledge, none is pending or
threatened, to revoke any such authorization or approval.
(ix) The Plan has been duly adopted by the required vote of the
directors of the Company and the Bank, and based upon the certificate
of the inspectors of election, by the members of the Bank.
(x) Subject to the satisfaction of the conditions to the OTS's
approval of the Conversion, no further approval, registration,
authorization, consent or other order of any federal regulatory agency
is required in connection with the execution and delivery of this
Agreement, the issuance of the Shares or the Foundation Shares and the
consummation of the Conversion, except as may be required under the
securities or blue sky laws of various jurisdictions (as to which no
opinion need be rendered) and except as may be required under the
rules and regulations of the NASD and/or The Nasdaq Stock Market (as
to which no opinion need by rendered).
(xi) The Registration Statement is effective under the 1933 Act
and no stop order suspending the effectiveness has been issued under
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the 1933 Act or proceedings therefor initiated or, to such counsel's
Actual Knowledge, threatened by the Commission.
(xii) At the time the Conversion Application, including the
Prospectus contained therein, was approved by the OTS, the Conversion
Application, including the Prospectus contained therein, complied as
to form in all material respects with the requirements of the
Conversion Regulations, federal and state law and all applicable rules
and regulations promulgated thereunder (other than the financial
statements, the notes thereto, and other tabular, financial,
statistical and appraisal data included therein, as to which no
opinion need be rendered).
(xiii) At the time that the Registration Statement became
effective, (i) the Registration Statement (as amended or supplemented,
if so amended or supplemented) (other than the financial statements,
the notes thereto, and other tabular, financial, statistical and
appraisal data included therein, as to which no opinion need be
rendered), complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations, and (ii)
the Prospectus (other than the financial statements, the notes
thereto, and other tabular, financial, statistical and appraisal data
included therein, as to which no opinion need be rendered) complied as
to form in all material respects with the requirements of the 1933
Act, the 1933 Act Regulations, the Conversion Regulations and federal
law.
(xiv) To such counsel's Actual Knowledge, there are no legal or
governmental proceedings pending or threatened which are required to
be disclosed in the Registration Statement and Prospectus, other than
those disclosed therein.
(xv) To such counsel's Actual Knowledge, there are no material
contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the
Conversion Application, the Registration Statement or the Prospectus
or required to be filed as exhibits thereto other than those described
or referred to therein or filed as exhibits thereto in the Conversion
Application, the Registration Statement or the Prospectus. The
description in the Conversion Application, the Registration Statement
and the Prospectus of such documents and exhibits is accurate in all
material respects and fairly presents the information required to be
shown.
(xvi) The Plan complies in all material respects with all
applicable federal laws, rules, regulations, decisions and orders
including, but not limited to, the Conversion Regulations; no order
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has been issued by the OTS, the Commission, the FDIC, or any state
authority to suspend the Offering or the use of the Prospectus, and no
action for such purposes has been instituted, or to such counsel's
Actual Knowledge, threatened by the OTS, the Commission, the FDIC, or
any other governmental authority and, to such counsel's Actual
Knowledge, no person has sought to obtain regulatory or judicial
review of the final action of the OTS approving the Plan, the
Conversion Application, the Holding Company Application or the
Prospectus.
(xvii) To such counsel's Actual Knowledge, the Company and the
Bank have obtained all material licenses, permits and other
governmental authorizations currently required for the conduct of
their businesses and all such licenses, permits and other governmental
authorizations are in full force and effect, and the Company and the
Bank are in all material respects complying therewith.
(xviii) To such counsel's Actual Knowledge, neither the Company
nor the Bank is in violation of its Articles of Incorporation and
Bylaws or its Charter and Bylaws, as appropriate or, to such counsel's
Actual Knowledge, in default or violation of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which it
is a party or by which it or its property may be bound, except for
such defaults or violations which would not have a material adverse
impact on the financial condition or results of operations of the
Company and the Bank on a consolidated basis; the execution and
delivery of this Agreement, the incurrence of the obligations herein
set forth and the consummation of the transactions contemplated herein
do not (a) conflict with or constitute a breach of, or default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or the Bank
pursuant to any material contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which the Company or the
Bank is a party or by which any of them may be bound, or to which any
of the property or assets of the Company or the Bank are subject
(other than the establishment of the liquidation account), (b) result
in any violation of the provisions of the Articles of Incorporation or
Bylaws of the Company or the Charter or the Bylaws of the Bank or, (c)
result in any violation of any applicable federal or state law, act,
regulation (except that no opinion with respect to the securities and
blue sky laws of various jurisdictions or the rules or regulations of
the NASD and/or The Nasdaq Stock Market need be rendered) or order or
court order, writ, injunction or decree.
-27-
(xix) The Company's Articles of Incorporation and Bylaws comply
in all material respects with the laws of the State of Maryland. The
Bank's Charter and Bylaws comply in all material respects with federal
law.
(xx) To such counsel's Actual Knowledge, neither the Company nor
the Bank is in violation of any directive from the OTS or the FDIC to
make any material change in the method of conducting its respective
business.
(xxi) The information in the Prospectus under the captions "How
We are Regulated," "Mutual Federal's Conversion," "Restrictions on
Acquisition of MFS Financial and Mutual Federal" and "Description of
Capital Stock of MFS Financial," to the extent that such information
constitutes matters of law, summaries of legal matters, documents or
proceedings, or legal conclusions, has been reviewed by such counsel
and is correct in all material respects. The description of the
Conversion process in the Prospectus under the caption "Mutual
Federal's Conversion" to the extent that such information constitutes
matters of law, summaries of legal matters, documents or proceedings,
or legal conclusions, has been reviewed by such counsel and fairly
describes such process in all material respects. The descriptions in
the Prospectus of statutes or regulations are accurate summaries and
fairly present the information required to be shown. The information
under the caption "Mutual Federal's Conversion-Effects of the
Conversion--Tax Effects of the Conversion" has been reviewed by such
counsel and fairly describes the opinions rendered by them to the
Company and the Bank with respect to such matters.
In addition, such counsel shall state that during the preparation of the
Conversion Application, the Registration Statement and the Prospectus, they
participated in conferences with certain officers of, the independent public and
internal accountants for, and other representatives of, the Company and the
Bank, at which conferences the contents of the Conversion Application, the
Registration Statement and the Prospectus and related matters were discussed
and, while such counsel have not confirmed the accuracy or completeness of or
otherwise verified the information contained in the Conversion Application, the
Registration Statement or the Prospectus and do not assume any responsibility
for such information, based upon such conferences and a review of documents
deemed relevant for the purpose of rendering their opinion (relying as to
materiality as to factual matters on certificates of officers and other factual
representations by the Company and the Bank), nothing has come to their
attention that would lead them to believe that the Conversion Application, the
Registration Statement, the Prospectus, or any amendment or supplement thereto
-28-
(other than the financial statements, the notes thereto, and other tabular,
financial, statistical and appraisal data included therein as to which no view
need be contained an untrue statement of a material fact or omitted 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.
In giving such opinion, such counsel may rely as to all matters of fact on
certificates of officers or directors of the Company and the Bank and
certificates of public officials. Such counsel's opinion shall be limited to
matters governed by federal laws and by the laws of the States of Maryland and
Indiana. The term "Actual Knowledge" as used herein shall have the meaning set
forth in the Legal Opinion Accord of the American Bar Association Section of
Business Law. For purposes of such opinion, no proceedings shall be deemed to be
pending, no order or stop order shall be deemed to be issued, and no action
shall be deemed to be instituted unless, in each case, a director or executive
officer of the Company or the Bank shall have received a copy of such
proceedings, order, stop order or action. In addition, such opinion may be
limited to present statutes, regulations and judicial interpretations and to
facts as they presently exist; in rendering such opinion, such counsel need
assume no obligation to revise or supplement it should the present laws be
changed by legislative or regulatory action, judicial decision or otherwise; and
such counsel need express no view, opinion or belief with respect to whether any
proposed or pending legislation, if enacted, or any proposed or pending
regulations or policy statements issued by any regulatory agency, whether or not
promulgated pursuant to any such legislation, would affect the validity of the
Conversion or any aspect thereof. Such counsel may assume that any agreement is
the valid and binding obligation of any parties to such agreement other than the
Company or the Bank.
(d) At the Closing Date, the Agent shall receive a certificate of the Chief
Executive Officer and the principal accounting officer of the Company and the
Bank in form and substance reasonably satisfactory to the Agent's Counsel, dated
as of such Closing Date, to the effect that: (i) they have carefully examined
the Prospectus and, in their opinion, at the time the Prospectus became
authorized for final use, the Prospectus did not contain any 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; (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
-29-
specifically, but without limitation, any material adverse change in the
condition, financial or otherwise, or in the earnings, capital, properties or
business of the Company or the Bank and the conditions set forth in this Section
7 have been satisfied; (iii) since the respective dates as of which information
is given in the Registration Statement and the Prospectus, there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, capital or properties of the Company or the Bank independently, or of
the Company and the Bank considered as one enterprise, whether or not arising in
the ordinary course of business; (iv) the representations and warranties in
Section 4 are true and correct with the same force and effect as though
expressly made at and as of the Closing Date; (v) the Company and the Bank have
complied in all material respects with all agreements and satisfied all
conditions on their part to be performed or satisfied at or prior to the Closing
Date and will comply in all material respects with all obligations to be
satisfied by them after the Conversion; (vi) no stop order suspending the
effectiveness of the Registration Statement has been initiated or, to the best
knowledge of the Company or the Bank, threatened by the Commission or any state
authority; (vii) no order suspending the Offering, the Conversion, the
acquisition of all of the capital stock of the Bank by the Company or the
effectiveness of the Prospectus has been issued and no proceedings for that
purpose are pending or, to the best knowledge of the Company or the Bank,
threatened by the OTS, the Commission, the FDIC, or any governmental authority;
and (viii) to the best knowledge of the Company or the Bank, no person has
sought to obtain review of the final action of the OTS approving the Plan.
(e) Prior to and at the Closing Date: (i) in the reasonable opinion of the
Agent, there shall have been no material adverse change in the condition,
financial or otherwise, or in the earnings or business of the Company or the
Bank independently, or of the Company and the Bank considered as one enterprise,
from that as of the latest dates as of which such condition is set forth in the
Prospectus, other than transactions referred to or contemplated therein; (ii)
the Company or the Bank shall not have received from the OTS or the FDIC any
direction (oral or written) to make any material change in the method of
conducting their business with which it has not complied (which direction, if
any, shall have been disclosed to the Agent) or which materially and adversely
would affect the business, operations or financial condition or income of the
Company and the Bank taken as a whole; (iii) neither the Company nor the Bank
shall have been in default (nor shall an event have occurred which, with notice
or lapse of time or both, would constitute a default) under any provision of any
agreement or instrument relating to any outstanding indebtedness; (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, to
-30-
the knowledge of the Company or the Bank, threatened against the Company or the
Bank or affecting any of their properties wherein an unfavorable decision,
ruling or finding would materially and adversely affect the business,
operations, financial condition or income of the Company or the Bank taken as a
whole; and (v) the Shares shall have been qualified or registered for offering
and sale or exempted therefrom under the securities or blue sky laws of the
jurisdictions as the Agent shall have reasonably requested and as agreed to by
the Company and the Bank.
(f) Concurrently with the execution of this Agreement, the Agent shall
receive a letter from Olive LLP dated as of the date of the Prospectus and
addressed to the Agent: (i) confirming that Olive LLP is a firm of independent
public accountants within the meaning of Rule 101 of the Code of Professional
Ethics of the American Institute of Certified Public Accountants and applicable
regulations of the Commission and the OTS and stating in effect that in their
opinion the financial statements, schedules and related notes of the Bank as of
December 31, 1998 and 1997, and for each of the three years in the period ended
December 31, 1998, included in the Prospectus and covered by their opinion
included therein, comply as to form in all material respects with the applicable
accounting requirements and related published rules and regulations of the OTS
and the 1933 Act; (ii) stating in effect that, on the basis of certain agreed
upon procedures (but not an audit in accordance with generally accepted auditing
standards) consisting of a reading of the latest available unaudited interim
financial statements of the Bank prepared by the Bank, a reading of the minutes
of the meetings of the Board of Directors and members of the Bank and
consultations with officers of the Bank responsible for financial and accounting
matters, nothing came to their attention which caused them to believe that: (A)
the unaudited financial statements included in the Prospectus are not in
conformity with the 1933 Act, applicable accounting requirements of the OTS and
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Prospectus; or (B) during the period from the date of the latest unaudited
financial statements included in the Prospectus to a specified date not more
than three business days prior to the date of the Prospectus, except as has been
described in the Prospectus, there was any increase in borrowings, other than
normal deposit fluctuations, by the Bank; or (C) there was any decrease in the
net assets or retained earnings of the Bank at the date of such letter as
compared with amounts shown in the latest unaudited balance sheets included in
the Prospectus or there was any decrease in net income or net interest income of
the Bank for the number of full months commencing immediately after the period
covered by the latest audited income statement included in the Prospectus and
ended on the latest month end prior to the date of the Prospectus as compared to
the corresponding period in the preceding year; and (iii) stating that, in
-31-
addition to the audit referred to in their opinion included in the Prospectus
and the performance of the procedures referred to in clause (ii) of this
subsection (f), they have compared with the general accounting records of the
Bank, which are subject to the internal controls of the Bank, the accounting
system and other data prepared by the Bank, directly from such accounting
records, to the extent specified in such letter, such amounts and/or percentages
set forth in the Prospectus as the Agent may reasonably request, and they have
found such amounts and percentages to be in agreement therewith.
(g) At the Closing Date, the Agent shall receive a letter dated the Closing
Date, addressed to the Agent, confirming the statements made by Olive LLP in the
letter delivered by it pursuant to subsection (f) of this Section 7, the
"specified date" referred to in clause (ii) of subsection (f) to be a date
specified in the letter required by this subsection (g) which for purposes of
such letter shall not be more than three business days prior to the Closing
Date.
(h) At the Closing Date, the Agent shall receive a letter from RP
Financial, dated the Closing Date and addressed to the Agent (i) confirming that
said firm is independent of the Company and the Bank and is experienced and
expert in the area of corporate appraisals within the meaning of Title 12 of the
Code of Federal Regulations, Section 563b.7(f)(1)(i), (ii) stating in effect
that the Appraisal prepared by such firm complies in all material respects with
the applicable requirements of Title 12 of the Code of Federal Regulations, and
(iii) further stating that its opinion of the aggregate pro forma market value
of the Company and the Bank expressed in its Appraisal, as most recently
updated, remains in effect.
(i) The Company and the Bank shall not have sustained since the date of the
latest financial statements included in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Registration Statement and Prospectus and since the
respective dates as of which information is given in the Registration Statement
and Prospectus, there shall not have been any change in the long-term debt of
the Company or the Bank other than debt incurred in relation to the purchase of
Shares by the Bank's eligible plans, or any change, or any development involving
a prospective change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Company or the
Bank, otherwise than as set forth or contemplated in the Registration Statement
and Prospectus, the effect of which, in any such case described above, is in
-32-
Xxxx'x reasonable judgment sufficiently material and adverse as to make it
impracticable or inadvisable to proceed with the Subscription Offering or the
delivery of the Shares on the terms and in the manner contemplated in the
Prospectus.
(j) At or prior to the Closing Date, the Agent shall receive: (i) a copy of
the letters from the OTS approving the Conversion Application and authorizing
the use of the Prospectus; (ii) a copy of the order from the Commission
declaring the Registration Statement effective; (iii) a certificate from the OTS
evidencing the existence of the Bank; (iv) a certificate of good standing from
the State of Maryland evidencing the good standing of the Company; (v) a
certificate from the FDIC evidencing the Bank's insurance of accounts; (vi) a
certificate from the FHLB-Indianapolis evidencing the Bank's membership therein;
(vii) a copy of the letter from the OTS approving the Company's Holding Company
Application; (viii) a certified copy of the Bank's Charter and Bylaws and (ix)
any other documents that the Agent shall reasonably request.
(k) Subsequent to the date hereof, there shall not have occurred any of the
following: (i) a suspension or limitation in trading in securities generally on
the New York Stock Exchange or in the over-the-counter market, or quotations
halted generally on The Nasdaq Stock Market, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for securities have been
required by either of such exchanges or the NASD or by order of the Commission
or any other governmental authority; (ii) a general moratorium on the operations
of commercial banks, or federal savings and loan associations or a general
moratorium on the withdrawal of deposits from commercial banks or federal
savings and loan associations declared by federal or state authorities; (iii)
the engagement by the United States in hostilities which have resulted in the
declaration, on or after the date hereof, of a national emergency or war; or
(iv) a material decline in the price of equity or debt securities if the effect
of such a declaration or decline, in the Agent's reasonable judgement, makes it
impracticable or inadvisable to proceed with the Offering or the delivery of the
Shares on the terms and in the manner contemplated in the Registration Statement
and the Prospectus.
(l) At or prior to the Closing Date, counsel to the Agent shall have been
furnished with such documents and opinions as they may reasonably require for
the purpose of enabling them to pass upon the sale of the Shares as herein
contemplated and related proceedings or in order to evidence the occurrence or
completeness of any of the representations or warranties, or the fulfillment of
any of the conditions, herein contained; and all proceedings taken by the
-33-
Company or the Bank in connection with the Conversion and the sale of the Shares
as herein contemplated shall be satisfactory in form and substance to Xxxx and
its counsel.
Section 8. Indemnification.
(a) The Company and the Bank jointly and severally agree to indemnify and
hold harmless the Agent, its officers and directors, employees and agents, and
each person, if any, who controls the Agent within the meaning of Section 15 of
the 1933 Act or Section 20(a) of the 1934 Act, against any and all loss,
liability, claim, damage or expense whatsoever (including, but not limited to,
settlement expenses), joint or several, that the Agent or any of them may suffer
or to which the Agent and any such persons may become subject under all
applicable federal or state laws or otherwise, and to promptly reimburse the
Agent and any such persons upon written demand for any expenses (including
reasonable fees and disbursements of counsel) incurred by the Agent or any of
them in connection with investigating, preparing to defend or defending any
actions, proceedings or claims (whether commenced or threatened) to the extent
such losses, claims, damages, liabilities or actions: (i) arise out of or are
related to the Conversion or any action taken by the Agent where acting as agent
of the Company and the Bank, including without limitation, the denial or
reduction of a subscription or order to purchase Shares based upon the deposit
records of the Bank or otherwise; (ii) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment or supplement thereto), preliminary or
final Prospectus (or any amendment or supplement thereto), the Conversion
Application (or any amendment or supplement thereto), the Holding Company
Application or any instrument or document executed by the Company or the Bank or
based upon written information supplied by the Company or the Bank filed in any
state or jurisdiction to register or qualify any or all of the Shares or to
claim an exemption therefrom or provided to any state or jurisdiction to exempt
the Company as a broker-dealer or its officers, directors and employees as
broker-dealers or agent, under the securities laws thereof (collectively, the
"Blue Sky Application"), or any document, advertisement, oral statement or
communication ("Sales Information") prepared, made or executed by or on behalf
of the Company or the Bank with their consent or based upon written or oral
information furnished by or on behalf of the Company or the Bank, whether or not
filed in any jurisdiction, in order to qualify or register the Shares or to
claim an exemption therefrom under the securities laws thereof; (iii) arise out
of or are based upon the omission or alleged omission to state in any of the
foregoing documents or information a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
-34-
which they were made, not misleading; or (iv) arise from any theory of liability
whatsoever relating to or arising from or based upon the Registration Statement
(or any amendment or supplement thereto), preliminary or final Prospectus (or
any amendment or supplement thereto), the Conversion Application (or any
amendment or supplement thereto), any Blue Sky Application or Sales Information
or other documentation distributed in connection with the Conversion; provided,
however, that no indemnification is required under this paragraph (a) to the
extent such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue material statement or alleged untrue material statement
in, or material omission or alleged material omission from, the Registration
Statement (or any amendment or supplement thereto), preliminary or final
Prospectus (or any amendment or supplement thereto), the Conversion Application,
any Blue Sky Application or Sales Information made in reliance upon and in
conformity with information furnished in writing to the Company or the Bank by
the Agent or its counsel regarding the Agent, provided, that it is agreed and
understood that the only information furnished in writing to the Company or the
Bank by the Agent regarding the Agent is set forth in the Prospectus under the
caption "The Conversion-Offering of Common Stock"; and, provided further, that
such indemnification shall be to the extent not prohibited by the Commission,
the OTS, the FDIC and the Board of Governors of the Federal Reserve and that the
Company and the Bank shall not be liable under clause (i) of the foregoing
indemnification provision to the extent that any loss, claim, damage, liability
or action is found in a final judgment by a court of competent jurisdiction to
have resulted from the Agent's bad faith or gross negligence.
(b) The Agent agrees to indemnify and hold harmless the Company and the
Bank, their directors and officers and each person, if any, who controls the
Company or the Bank within the meaning of Section 15 of the 1933 Act or Section
20(a) of the 1934 Act against any and all loss, liability, claim, damage or
expense whatsoever (including but not limited to settlement expenses), joint or
several, which they, or any of them, may suffer or to which they, or any of them
may become subject under all applicable federal and state laws or otherwise, and
to promptly reimburse the Company, the Bank, and any such persons upon written
demand for any expenses (including reasonable fees and disbursements of counsel)
incurred by them, or any of them, in connection with investigating, preparing to
defend or defending any actions, proceedings or claims (whether commenced or
threatened) to the extent such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment or supplement thereto), the Conversion Application (or any amendment
or supplement thereto), the preliminary or final Prospectus (or any amendment
-35-
or supplement thereto), any Blue Sky Application or Sales Information, (ii) are
based upon the omission or alleged omission to state in any of the foregoing
documents a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or (iii) arise from any theory of liability whatsoever
relating to or arising from or based upon the Registration Statement (or any
amendment or supplement thereto), preliminary or final Prospectus (or any
amendment or supplement thereto), the Conversion Application (or any amendment
or supplement thereto), or any Blue Sky Application or Sales Information or
other documentation distributed in connection with the Conversion; provided,
however, that the Agent's obligations under this Section 8(b) shall exist only
if and only to the extent that such untrue statement or alleged untrue statement
was made in, or such material fact or alleged material fact was omitted from,
the Registration Statement (or any amendment or supplement thereto), the
preliminary or final Prospectus (or any amendment or supplement thereto), the
Conversion Application (or any amendment or supplement thereto), any Blue Sky
Application or Sales Information in reliance upon and in conformity with
information furnished in writing to the Company or the Bank by the Agent or its
counsel regarding the Agent, provided, that it is agreed and understood that the
only information furnished in writing to the Company or the Bank by the Agent
regarding the Agent is set forth in the Prospectus under the caption "Mutual
Federal's Conversion."
(c) Each indemnified party shall give prompt written notice to each
indemnifying party of any action, proceeding, claim (whether commenced or
threatened), or suit instituted against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve it from any liability which it may have on account of this Section 8 or
otherwise. An indemnifying party may participate at its own expense in the
defense of such action. In addition, if it so elects within a reasonable time
after receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume defense of such action
with counsel chosen by it and approved by the indemnified parties that are
defendants in such action, unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to them
that are different from or in addition to those available to such indemnifying
party. If an indemnifying party assumes the defense of such action, the
indemnifying parties shall not be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action,
proceeding or claim, other than reasonable costs of investigation. In no event
shall the indemnifying parties be liable for the fees and expenses of more than
-36-
one separate firm of attorneys (and any special counsel that said firm may
retain) for each indemnified party in connection with any one action, proceeding
or claim or separate but similar or related actions, proceedings or claims in
the same jurisdiction arising out of the same general allegations or
circumstances.
(d) The agreements contained in this Section 8 and in Section 9 hereof and
the representations and warranties of the Company and the Bank set forth in this
Agreement shall remain operative and in full force and effect regardless of: (i)
any investigation made by or on behalf of the Agent or its officers, directors
or controlling persons, agent or employees or by or on behalf of the Company or
the Bank or any officers, directors or controlling persons, agent or employees
of the Company or the Bank; (ii) delivery of and payment hereunder for the
Shares; or (iii) any termination of this Agreement.
Section 9. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 8 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Company, the Bank or the Agent, the Company,
the Bank and the Agent shall contribute to the aggregate losses, claims, damages
and liabilities (including any investigation, legal and other expenses incurred
in connection with, and any amount paid in settlement of, any action, suit or
proceeding, but after deducting any contribution received by the Company, the
Bank or the Agent from persons other than the other parties thereto, who may
also be liable for contribution) in such proportion so that the Agent is
responsible for that portion represented by the percentage that the fees paid to
the Agent pursuant to Section 2 of this Agreement (not including expenses) bears
to the gross proceeds received by the Company from the sale of the Shares in the
Offering, and the Company and the Bank shall be responsible for the balance. If,
however, the allocation provided above is not permitted by applicable law, then
each indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative fault of the Company and the Bank on the one hand and the Agent on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions, proceedings or claims in
respect thereto), but also the relative benefits received by the Company and the
Bank on the one hand and the Agent on the other from the Offering (before
deducting expenses). The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and/or the Bank on the one hand or the Agent
on the other and the parties' relative intent, good faith, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Bank and the Agent 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 into account
the equitable considerations referred to above in this Section 9. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions, proceedings or claims in respect thereof)
referred to above in this Section 9 shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
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investigating or defending any such action, proceeding or claim. It is expressly
agreed that the Agent shall not be liable for any loss, liability, claim, damage
or expense or be required to contribute any amount pursuant to Section 8(b) or
this Section 9 which in the aggregate exceeds the amount paid (excluding
reimbursable expenses) to the Agent under this Agreement. It is understood that
the above stated limitation on the Agent's liability is essential to the Agent
and that the Agent would not have entered into this Agreement if such limitation
had not been agreed to by the parties to this Agreement. No person found guilty
of any fraudulent misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who was not found
guilty of such fraudulent misrepresentation. The obligations of the Company, the
Bank and the Agent under this Section 9 and under Section 8 shall be in addition
to any liability which the Company, the Bank and the Agent may otherwise have.
For purposes of this Section 9, each of the Agent's, the Company's or the Bank's
officers and directors and each person, if any, who controls the Agent or the
Company or the Bank within the meaning of the 1933 Act and the 1934 Act shall
have the same rights to contribution as the Agent, the Company or the Bank. Any
party entitled to contribution, promptly after receipt of notice of commencement
of any action, suit, claim or proceeding against such party in respect of which
a claim for contribution may be made against another party under this Section 9,
will notify such party from whom contribution may be sought, but the omission to
so notify such party shall not relieve the party from whom contribution may be
sought from any other obligation it may have hereunder or otherwise than under
this Section 9.
Section 10. Survival of Agreements, Representations and Indemnities. The
respective indemnities of the Company, the Bank and the Agent and the
representations and warranties and other statements of the Company, the Bank and
the Agent 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 the Agent, the Company,
the Bank or any controlling person referred to in Section 8 hereof, and shall
survive the issuance of the Shares, and any successor or assign of the Agent,
the Company, the Bank, and any such controlling person shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations.
Section 11. Termination. The Agent may terminate this Agreement by giving
the notice indicated below in this Section 11 at any time after this Agreement
becomes effective as follows:
(a) In the event the Company fails to sell the required minimum number of
the Shares by March 31, 2000, and in accordance with the provisions of the Plan
or as required by the Conversion Regulations, and applicable law, this Agreement
shall terminate upon refund by the Company to each person who has subscribed for
or ordered any of the Shares the full amount which it may have received from
such person, together with interest as provided in the Prospectus, and no party
to this Agreement shall have any obligation to the other hereunder, except as
set forth in Sections 2(a), 6, 8 and 9 hereof.
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(b) If any of the conditions specified in Section 7 shall not have been
fulfilled when and as required by this Agreement, unless waived in writing, or
by the Closing Date, this Agreement and all of the Agent's obligations hereunder
may be canceled by the Agent by notifying the Company and the Bank of such
cancellation in writing or by telegram at any time at or prior to the Closing
Date, and any such cancellation shall be without liability of any party to any
other party except as otherwise provided in Sections 2(a), 6, 8 and 9 hereof.
(c) In the event either the Company or the Bank is in material breach of
the representations and warranties or covenants contained in Sections 4 and 5
and such breach has not been cured after the Agent has provided the Company and
the Bank with notice of such breach.
If the Agent elects to terminate this Agreement as provided in this
Section, the Company and the Bank shall be notified promptly by telephone or
telegram, confirmed by letter.
The Company and the Bank may terminate this Agreement in the event the
Agent is in material breach of the representations and warranties or covenants
contained in Section 5 and such breach has not been cured after the Company and
the Bank have provided the Agent with notice of such breach.
This Agreement may also be terminated by mutual written consent of the
parties hereto.
Section 12. Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be mailed in writing and if sent to the
Agent shall be mailed, delivered or telegraphed and confirmed to Xxxxxxx Xxxx &
Company, 000 Xxxxxxxxx Xxxxx, Xxxxxx, Xxxx 00000-0000, Attention: Xxxxxx X.
Xxxxxx XXX (with a copy to Xxxxxxx, Xxxxxx & Xxxxxxxx LLP., Attention: Xxxx X.
Xxxxxxx, Esq., and, if sent to the Company and the Bank, shall be mailed,
delivered or telegraphed and confirmed to the Company and the Bank at 000 X.
Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxx 00000-0000, Attention: X. Xxxx Xxxxxxx,
President (with a copy to Silver, Xxxxxxxx & Xxxx, LLP, Attention: Xxxxx X.
Xxxxxxxxx, P.C.).
Section 13. Parties. 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 the Agent when the same shall have been given by the undersigned. The
Agent 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, the Agent, the Company, the Bank, and their respective
successors 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. It is understood and
agreed that this Agreement is the exclusive agreement among the parties hereto,
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and supersedes any prior agreement among the parties (except for specific
references to the letter agreement with the Agent) and may not be varied except
in writing signed by all the parties.
Section 14. Closing. The closing for the sale of the Shares shall take
place on the Closing Date at such location as mutually agreed upon by the Agent
and the Company and the Bank. At the closing, the Company and the Bank shall
deliver to the Agent in next day funds the commissions, fees and expenses due
and owing to the Agent as set forth in Sections 2 and 6 hereof and the opinions
and certificates required hereby and other documents deemed reasonably necessary
by the Agent shall be executed and delivered to effect the sale of the Shares as
contemplated hereby and pursuant to the terms of the Prospectus.
Section 15. Partial Invalidity. In the event that any term, provision or
covenant herein or the application thereof to any circumstance or situation
shall be invalid or unenforceable, in whole or in part, the remainder hereof and
the application of said term, provision or covenant to any other circumstances
or situation shall not be affected thereby, and each term, provision or covenant
herein shall be valid and enforceable to the full extent permitted by law.
Section 16. Construction. This Agreement shall be construed in accordance
with the laws of the State of New York.
Section 17. Counterparts. This Agreement may be executed in separate
counterparts, each of which so executed and delivered shall be an original, but
all of which together shall constitute but one and the same instrument.
If the foregoing correctly sets forth the arrangement among the Company,
the Bank and the Agent, please indicate acceptance thereof in the space provided
below for that purpose, whereupon this letter and the Agent's acceptance shall
constitute a binding agreement.
Very truly yours,
MFS Financial, Inc. Mutual Federal Savings Bank
By Its Authorized By Its Authorized
Representative: Representative:
--------------------------- ----------------------------
X. Xxxx Xxxxxxx X. Xxxx Xxxxxxx
President and Chief Executive Officer President and Chief Executive Officer
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Xxxxxxx Xxxx & Company, A Division of
Xxxxx, Xxxxxxxx & Xxxxx, Inc.
By Its Authorized
Representative:
Xxxxxx X. Xxxxxx XXX
Senior Vice President
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