EXHIBIT 1.2
1ST STATE BANCORP, INC.
Up to 1,725,000 Shares
OF
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
$20 PER SHARE
SALES AGENCY AGREEMENT
----------------------
___________, 1999
Trident Securities, Inc.
0000 Xxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Dear Sirs:
1st State Bancorp, Inc., a Virginia corporation (the "Company") and 1st
State Bank, a North Carolina chartered mutual savings bank (the "Bank"), hereby
confirm as of the date above their respective agreements with Trident
Securities, Inc. ("Trident"), a broker-dealer registered with the Securities and
Exchange Commission (the "Commission") and a member of the National Association
of Securities Dealers, Inc. (the "NASD"), as follows:
1. Introduction. The Bank intends to convert from a North Carolina
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chartered mutual savings bank to a North Carolina chartered stock savings bank
as a wholly owned subsidiary of the Company (together with the Offerings, as
defined below, the issuance of shares of common stock of the Bank to the
Company, and the incorporation of the Company, collectively the "Stock
Conversion") pursuant to a plan of conversion adopted on August 11, 1998 (the
"Plan"). In accordance with the Plan, the Company is offering shares of its
common stock, par value $.01 per share (the "Shares" or the "Common Stock"),
pursuant to nontransferable subscription rights in a subscription offering
("Subscription Offering") to certain depositors and borrowers of the Bank and
the Bank's Employee Stock Ownership Plan (the "ESOP"). Shares of the Common
Stock not sold in the Subscription Offering are being offered to the general
public in a direct community offering, with preference being given to natural
persons residing in the Bank 's Local Community (as defined in the Plan) (the
"Community Offering") and, if necessary, through a syndicate of registered
broker-dealers managed by Trident in a syndicated community offering (the
"Syndicated Community Offering"). The Subscription Offering, the Community
Offering and the Syndicated Community Offering are collectively referred to as
the "Offerings." Purchases of Shares in the Offerings are subject to certain
limitations and restrictions as described in the Plan. The Company and Bank may
reject, in whole or in part, any order received in the Community Offering or
Syndicated Community
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Offering. Immediately following the completion of the Stock Conversion, the Bank
will convert to a North Carolina chartered commercial bank and will remain as a
wholly owned subsidiary of the Company (the "Bank Conversion").
In connection with the Stock Conversion and pursuant to the terms of the
Plan as described in the prospectus, immediately following the consummation of
the Stock Conversion, subject to the approval of the members of the Bank and
compliance with certain conditions as may be imposed by regulatory authorities,
the Company will contribute up to 150,000 shares of Common Stock sold in the
Stock Conversion to a charitable foundation (the "Foundation") such shares
hereinafter being referred to as the ("Foundation Shares").
The Company and the Bank have been advised by Trident that it will utilize
its best efforts to assist the Company and the Bank with the sale of the Shares
in the Offerings. Prior to the execution of this Agreement, the Company has
delivered to Trident a prospectus dated as of the date hereof and all
supplements thereto to be used in the Offerings. Such prospectus contains
information with respect to the Company, the Bank, the Shares, the Foundation
Shares, the Stock Conversion and the Bank Conversion.
2. Representations and Warranties.
------------------------------
(a) The Company and the Bank jointly and severally represent and warrant
to Trident that:
(i) The Company has filed with the Commission a registration
statement, including a prospectus relating to the Offerings and
exhibits, and an amendment or amendments thereto, on Form S-1 (No. 333-
_____) for the registration of the Shares and the Foundation Shares
under the Securities Act of 1933, as amended ("Securities Act"); and
such registration statement has been declared effective under the
Securities Act and no stop order has been issued with respect thereto
and no proceedings therefor have been initiated or, to the best
knowledge of the Company and the Bank, threatened by the Commission.
Except as the context may otherwise require, such registration
statement, as amended or supplemented, on file with the Commission at
the time the registration statement became effective, including the
prospectus, financial statements, schedules, exhibits and all other
documents filed as part thereof is herein called the "Registration
Statement," and the prospectus, as amended or supplemented, on file
with the Commission at the time the Registration Statement became
effective is herein called the "Prospectus," except that if any
prospectus filed by the Company with the Commission pursuant to Rule
424(b) of the general rules and regulations of the Commission under the
Securities Act (together with the enforceable published policies,
releases and actions of the
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Commission thereunder, hereinafter referred to as the "Securities Act
Regulations") differs from the form of prospectus on file at the time
the Registration Statement became effective, the term "Prospectus"
shall refer to the Rule 424(b) prospectus from and after the time it
is filed with or mailed for filing to the Commission and shall include
any amendments or supplements thereto from and after their dates of
effectiveness or use, respectively. The Registration Statement
complies in all material respects with the Securities Act and the
Securities Act Regulations.
(ii) The Bank has filed an application for approval to convert from
the mutual form of ownership to the stock form of ownership with the
Savings Institution Division of the North Carolina Department of
Commerce (the "Department") and the Federal Deposit Insurance
Corporation ("FDIC"). The Department and the FDIC have approved the
Bank's application, including the waiver of certain provisions of
regulations specified in such approval with respect to the
establishment of and contribution to the Foundation. The Prospectus
and the proxy statement for the solicitation of proxies from
depositors for the special meeting to approve the Plan (the "Proxy
Statement") included as part of the Bank's application to convert have
been approved for use by the Department and the FDIC. No order has
been issued by the Department or the FDIC preventing or suspending the
use of the Prospectus or the Proxy Statement; and no action by or
before the Department or the FDIC revoking such approvals is pending
or, to the Bank's best knowledge, threatened. Additionally, the
company has filed an application to register as a bank holding company
with the Federal Reserve Board ("FRB") and has received approval from
the FRB. (The Company and Bank applications are hereafter called the
"Applications.")
(iii) As of [effective date] (i) the Registration Statement and the
Prospectus complied with the Securities Act and the Securities Act
Regulations, (ii) the Registration Statement does not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (iii) the Prospectus does not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(iv) The Company has been duly incorporated as a Virginia
corporation and the Bank has been duly organized as a mutual savings
bank under the laws of North Carolina, and each of them is validly
existing and in good standing under the laws of its jurisdiction of
organization with full power and authority to own its property
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and conduct its business as described in the Registration Statement
and Prospectus; the Bank is a member in good standing of the Federal
Home Loan Bank of Atlanta; and the deposit accounts of the Bank are
insured by the Savings Association Insurance Fund ("SAIF")
administered by the FDIC up to the applicable legal limits. The
Company and the Bank are not required to be qualified to do business
as a foreign corporation in any jurisdiction except where non-
qualification would have a material adverse effect on the condition
(financial or otherwise), operations, business, earnings or properties
of the Company and the Bank taken as a whole ("Material Adverse
Effect"). Upon amendment of the Bank's mutual charter and bylaws to a
stock charter and bylaws, completion of the sale by the Company of the
Shares as contemplated by the Prospectus, and the other corporate and
regulatory actions discussed in the Plan, (i) the Bank will be
converted pursuant to the Plan to a North Carolina chartered capital
stock savings bank with full power and authority to own its property
and conduct its business as described in the Prospectus, (ii) all of
the authorized and outstanding capital stock of the Bank will be owned
of record and beneficially by the Company, (iii) the Company will
issue common stock to the Foundation and the public, and (iv) the
Company will have no direct subsidiaries other than the Bank.
(v) The Bank has good and marketable title to all assets material to
its business and to those assets described in the Prospectus as owned
by it, free and clear of all liens, charges, encumbrances or
restrictions, except for liens for ad valorem taxes not yet due,
except as described in the Prospectus and except as do not, and would
not, in the aggregate, have a Material Adverse Effect; and all of the
leases and subleases material to the operations of the Bank under
which it holds properties, including those described in the
Prospectus, are in full force and effect as described therein.
(vi) The Company and the Bank have obtained all licenses, permits and
other governmental authorizations currently required for the conduct
of their respective businesses except where the failure to obtain such
licenses, permits and governmental authorizations does not, and would
not, have a Material Adverse Effect; all such licenses, permits and
other governmental authorizations are in full force and effect, and
the Company and the Bank are complying therewith in all material
respects.
(vii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and all actions
in connection with the contribution to the Foundation contemplated by
the Plan have been duly and validly authorized by all necessary
actions on the part of each of the Company and the Bank, and this
Agreement is a valid and binding obligation of each of the Company and
the Bank, enforceable in accordance with its terms except as the
enforceability thereof may be
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limited by (a) bankruptcy, insolvency, moratorium, reorganization,
conservatorship, receivership or similar laws relating to or affecting
the enforcement of creditors' rights generally or the rights of
creditors of insured financial institutions and their holding
companies, the accounts of whose subsidiaries are insured by the FDIC;
(b) general equity principles, regardless of whether such principles
are applied in a proceeding in equity or at law; (c) laws relating to
the safety and soundness of insured depository institutions and their
affiliates, and except to the extent that the provisions of Sections 8
and 9 hereof may be unenforceable as against public policy or by
applicable law, including without limitation, Section 23A of the
Federal Reserve Act, 12 U.S.C. Section 371c ("Section 23A").
(viii) Except as described in the Prospectus, there is no litigation
or governmental proceeding pending or, to the best knowledge of the
Company or the Bank, threatened against or involving the Company or
the Bank, or any of their respective assets which individually or in
the aggregate would reasonably be expected to have a Material Adverse
Effect.
(ix) Each of the Company and the Bank has all power, authority,
authorizations, approvals and orders as may be required to enter into
this Agreement, to carry out the provisions and conditions hereof and,
in the case of the Company, to issue and sell the Shares in the
Offerings, and to issue and contribute the Foundation Shares, subject
to the limitations set forth herein and subject to the satisfaction of
certain conditions imposed by the Department, FDIC and the FRB in
connection with approvals of the Applications, and except as may be
required under the securities, or "blue sky," laws of various
jurisdictions, and in the case of the Company, as of the Closing Date
(as defined below), will have such approvals and orders to issue and
sell the Shares to be sold by the Company as provided herein, and in
the case of the Bank, as of the Closing Date, will have such approvals
and orders to issue and sell the Shares of its Common Stock to be sold
to the Company as provided in the Plan (subject to the issuance of an
amended charter in the form required for a North Carolina-chartered
stock savings bank ("Stock Charter"), the form of which has been
approved by the Department.
(x) The Company and the Bank have received the opinions of Housley
Kantarian & Xxxxxxxxx, P.C. with respect to the federal income tax
consequences of the Stock Conversion, and of KPMG Peat Marwick, L.L.P.
with respect to the state income tax consequences of the Stock
Conversion, to the effect that the Stock Conversion will constitute a
tax-free reorganization under the Internal Revenue Code of 1986, as
amended (the "Code"), or under the laws of North Carolina, and will
not be a taxable transaction for the Bank or the Company under the
Code or under the laws of North
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Carolina; and the facts and representations provided by the Company
and the Bank and relied upon in the rendering of such opinions are
accurate and complete, and neither the Company nor the Bank has taken
any action inconsistent therewith.
(xi) Neither the Company nor the Bank is in violation of any rule or
regulation of the Department or the FDIC that has resulted or could
result in any enforcement action against the Company or the Bank or
their officers or directors, that might have a Material Adverse
Effect.
(xii) Xxxxxxxx & Company, the firm that prepared the independent
appraisal included in the Applications, is independent with respect to
the Company and the Bank within the meaning of the Department and FDIC
Regulations. The Company and the Bank believe such firm to be
experienced and expert in providing appraisals of savings banks, and
nothing has come to the attention of the Company or the Bank which has
caused either of them to believe that the appraisal included in the
Applications was not prepared in accordance with the requirements of
the Department and FDIC Regulations.
(xiii) KPMG Peat Marwick, L.L.P., the firm that certified the
financial statements of the Bank filed as part of the Registration
Statement and the Applications, is independent with respect to the
Company and the Bank as required by the Securities Act, the Securities
Act Regulations, the Code of Professional Ethics of the American
Institute of Certified Public Accountants, and Title 12 of the Code of
Federal Regulations Parts 563c and 571, and nothing has come to the
attention of the Company or the Bank which has caused either of them
to believe that such firm is not independent within the meaning of
such provisions.
(xiv) The financial statements and related notes which are included
in the Registration Statement and the Prospectus fairly present the
consolidated financial condition, income, results of operations,
retained earnings and cash flows of the Bank at the respective dates
thereof and for the respective periods covered thereby and comply as
to form with the applicable accounting requirements of the Securities
Act Regulations and the applicable regulations of the Department and
FDIC. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied
throughout the periods involved, except as set forth therein, and such
financial statements are consistent with financial statements and
other reports filed by the Bank with supervisory and regulatory
authorities, except as GAAP may otherwise require. The financial
tables in the Prospectus accurately present the information purported
to be shown thereby at the respective dates thereof and for the
respective periods covered thereby.
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(xv) There has been no material change in the condition (financial
or otherwise), results of operations, business, assets or properties,
of the Company and the Bank, taken as a whole, since the latest date
as of which such condition is set forth in the Prospectus, except as
set forth therein; and the capitalization, assets, properties and
business of each of the Company and the Bank conform in all material
aspects to the descriptions thereof contained in the Prospectus.
Neither the Company nor the Bank has any material liabilities of any
kind, contingent or otherwise, except as set forth in the Prospectus.
(xvi) There has been no breach or default (or the occurrence of any
event which, with notice or lapse of time or both, would constitute a
default) under, or creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the Company or the
Bank pursuant to any of the terms, provisions or conditions of any
agreement, contract, indenture, lease, bond, debenture, note,
instrument or obligation to which the Company or the Bank is a party
or by which any of them or any of their respective assets or
properties may be bound or is subject or any violation of any
governmental license or permit or any enforceable published law,
administrative regulation or order or court order, writ, injunction or
decree, which breach, default, lien, charge, encumbrance or violation
would have a Material Adverse Effect; all agreements which are
material to the financial condition, results of operations, business,
assets or properties of the Company and the Bank, taken as a whole,
are in full force and effect, and no party to any such agreement has
instituted or, to the best knowledge of the Company and the Bank ,
threatened any action or proceeding wherein the Company and the Bank
would be alleged to be in default thereunder.
(xvii) Neither the Company nor the Bank is in violation of its
respective charter, certificate or articles of incorporation or
bylaws. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by the Company
and the Bank do not conflict with or result in a breach of the
charter, certificate or articles of incorporation or bylaws of the
Company or the Bank (in either mutual or stock form), or violate,
conflict with or constitute a material breach or default (or an event
which, with notice or lapse of time or both, would constitute a
default) under, give rise to any right of termination, cancellation or
acceleration contained in, or result in the creation or imposition of
any lien, charge or other encumbrance upon any of the properties or
assets of the Company or the Bank pursuant to any of the terms,
provisions or conditions of, any agreement, contract, indenture,
lease, bond, debenture, note, instrument or obligation to which the
Company or the Bank is a party (other than the establishment of a
liquidation account
Trident Securities, Inc.
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pursuant to the Plan) or violate any governmental license or permit or
any law, administrative regulation or order or court order, writ,
injunction or decree (subject to the satisfaction of certain
conditions imposed by the Department and FDIC in connection with their
approval of the Stock Conversion Application), which breach, default,
encumbrance or violation could have a Material Adverse Effect.
(xviii) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus and prior to the
Closing Date, except as otherwise may be indicated or contemplated
therein, neither the Company nor the Bank has issued any securities
which will remain issued at the Closing Date or incurred any liability
or obligation, direct or contingent, or borrowed money, except
borrowings or liabilities incurred in the ordinary course of business,
or entered into any other transaction not in the ordinary course of
business and not consistent with prior practices, which is material in
light of the business of the Company and the Bank, taken as a whole.
(xix) Upon consummation of the Stock Conversion, the authorized,
issued and outstanding equity capital of the Company shall be as set
forth in the Prospectus under the heading "Capitalization," and no
Common Stock of the Company shall be outstanding immediately prior to
the Closing Date. The issuance and the sale of the Shares of the
Company and the Foundation Shares have been duly authorized by all
necessary action of the Company and approved by the Department and,
when issued in accordance with the terms of the Plan and paid for as
set forth in the Prospectus, shall be validly issued, fully paid and
nonassessable and shall conform in all material respects to the
description thereof contained in the Prospectus; the issuance of the
Shares is not subject to preemptive rights, except as set forth in the
Prospectus; and good title to the Shares and Foundation Shares will be
transferred by the Company upon issuance thereof against payment
therefor, free and clear of all claims, encumbrances, security
interests and liens against the Company whatsoever. The certificates
representing the Shares and Foundation Shares will conform with the
requirements of applicable laws and regulations. The issuance and sale
of the capital stock of the Bank to the Company and the Foundation
Shares has been duly authorized by all necessary action of the Bank
and the Company and all applicable regulatory authorities (subject to
the satisfaction of various conditions imposed by the Department and
FDIC in connection with its approvals of the Applications), and such
capital stock and Foundation Shares, when issued in accordance with
the terms of the Plan, will be validly issued, fully paid and
nonassessable and will conform in all material respects to the
description thereof contained in the Prospectus.
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(xx) 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 and Foundation Shares,
except for the declaration of effectiveness by the Commission of any
required post-effective amendment of the Registration Statement not
yet filed, except as may be required by the "blue sky" or securities
laws of various jurisdictions, and except as may be required by the
conditions of the approval of the Applications by the Department, the
FDIC, and the FRB, and the issuance of the Stock Charter by the
Department.
(xxi) All contracts and other documents required to be filed as
exhibits to the Registration Statement or the Applications have been
filed with the Commission, the Department, the FDIC and the FRB, as
the case may be.
(xxii) The Company and the Bank have timely filed all required
federal, state and local franchise tax returns, and no deficiency has
been asserted with respect to such returns by any taxing authorities;
and the Company and the Bank have paid all taxes that have become due
and, to the best of their knowledge, the Company and the Bank, have
made adequate reserves for future tax liabilities, except where any
failure to make such filings, payments and reserves, or the assertion
of such a deficiency, could not have a Material Adverse Effect.
(xxiii) All of the loans represented as assets of the Bank as of the
most recent date for which financial condition data is included in the
Prospectus meet or are exempt from all requirements of federal, state
or local law pertaining to lending, including without limitation truth
in lending (including the requirements of Regulation Z and 12 C.F.R.
Part 226), real estate settlement procedures, consumer credit
protection, equal credit opportunity and all disclosure laws
applicable to such loans, except for violations which, if asserted,
could not have a Material Adverse Effect.
(xxiv) The records of depositors, account holders, borrowers and
other members of the Bank delivered to Trident by the Bank or its
agent for use during the Stock Conversion have been reviewed by the
Bank and are accurate, reliable and complete.
(xxv) Neither the Company nor the Bank or, to the best knowledge of
the Company and the Bank, the employees of the Company or the Bank,
has made any payment of funds of the Company or the Bank prohibited by
law, and no funds of the Company or the Bank have been set aside to be
used for any payment prohibited by law.
(xxvi) To the best knowledge of the Company and the Bank, the Company
and the Bank are in compliance with all laws, rules and regulations
relating to environmental
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protection, and neither the Company nor the Bank is subject to
liability under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, or any similar law, except for
violations which, if asserted, could not have a Material Adverse
Effect. There are no actions, suits, regulatory investigations or
other proceedings pending or, to the best knowledge of the Company or
the Bank, threatened against the Company or the Bank relating to
environmental protection. No disposal, release or discharge of
hazardous or toxic substances, pollutants or contaminants, including
petroleum and gas products, as any of such terms may be defined under
federal, state or local law, has been caused by the Company and the
Bank or, except as disclosed in the Prospectus, has occurred on, in or
at any of the facilities or properties owned or leased by the Company
or the Bank or on any properties pledged to the Bank as security for
any indebtedness, except such disposal, release or discharge as would
not have a Material Adverse Effect.
(xxvii) All documents delivered by the Company or the Bank or their
representatives in connection with the issuance and sale of the Common
Stock, except for those documents that were prepared by parties other
than the Company, the Bank, or their representatives, were, on the
dates on which they were delivered, true, complete and correct in all
material respects.
(xxviii) At the Closing Date, the Company and the Bank will have
completed the conditions precedent to, and will have conducted the
Stock Conversion in all material respects in accordance with, the
Plan, the Department Regulations, FDIC Regulations and all other
applicable laws, regulations, published decisions and orders,
including all terms, conditions, requirements and provisions precedent
to the Stock Conversion imposed by the Department and FDIC.
(xxix) The Foundation has been duly incorporated and is validly
existing as a private charitable foundation in good standing under the
laws of the State of North Carolina 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 bank
holding company within the meaning of the Bank Holding Company Act of
1956 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; to the best knowledge of the Company and the Bank,
all approvals required to establish the Foundation and to contribute
the Foundation Shares have been performed as described in the
Prospectus; except as specifically disclosed in the Prospectus and the
Proxy Statement, there are no agreements and/or understandings,
written or oral or otherwise, between the Company and/or the Bank and
the Foundation with respect
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to the control, directly or indirectly, over the voting and the
acquisition or disposition of the shares of Common Stock to be
contributed by the Company to the Foundation.
(xxx) The Company and the Bank maintain a system of internal
accounting controls sufficient to provide reasonable assurances that
(i) tranactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with GAAP and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xxxi) The Company and the Bank maintain insurance of the types and
in the amounts generally deemed adequate for its business, including,
but not limtied to, directors' and officers' insurance, insurance
covering real and personal property owned or leased by the Company and
the Bank against theft, damage, destruction, acts of vandalism and all
other risks customarily insured against, all of which insurance is in
full force and effect. The Company and the Bank have not been refused
any insurance coverage sought or applied for, and the Company and the
Bank have no reason to believe that they will not be able to renew
their exiting insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material
Adverse Effect.
(b) Trident represents and warrants to the Company and the Bank that:
(i) Trident is registered as a broker-dealer with the NASD.
(ii) Trident is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full
corporate power and authority to provide the services to be furnished
to the Company and the Bank hereunder.
(iii) 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 Trident,
and this Agreement is a legal, valid and binding obligation of
Trident, 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 registered broker-dealers whose accounts may be protected
by the Securities Investor Protection Corporation or by general
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Page 12
equity principles, regardless of whether such principles are applied
in a proceeding in equity or at law, and except to the extent that the
provisions of Sections 8 and 9 hereof may be unenforceable as against
public policy or by applicable law, including, without limitation,
Section 23A).
(iv) Trident and, to Trident's best knowledge, its employees, agents
and representatives who shall perform any of the services required
hereunder to be performed by Trident, shall be duly authorized and
shall have all licenses, approvals and permits necessary to perform
such services, and Trident is a registered selling agent in the
jurisdictions in which the Company is relying on such registration for
the sale of the Shares, and will remain so registered until the Stock
Conversion is consummated or terminated.
(v) The execution and delivery of this Agreement by Trident, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not violate or conflict with
the charter or bylaws of Trident or violate, conflict with or
constitute a breach of, or default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, any
material agreement, indenture or other instrument by which Trident is
bound or under any governmental license or permit or any law,
administrative regulation, authorization, approval or order or court
decree, injunction or order which breach, default or violation would
have a material adverse effect on its ability to perform its
obligations under this Agreement.
(vi) All funds received by Trident to purchase Common Stock will be
handled in accordance with Rule 15c2-4 under the Securities Exchange
Act of 1934, as amended ("Exchange Act").
(vii) No action or proceeding against Trident before the Commission,
the NASD, any state securities commission, or any state or federal
court is pending or, to Trident's best knowledge, threatened
concerning Trident's activities as a broker-dealer which could have a
material adverse effect on its ability to perform its obligations
under this Agreement.
3. Employment of Trident; Sale and Delivery of the Shares. On the basis
------------------------------------------------------
of the representations and warranties herein contained, but subject to the terms
and conditions herein set forth, the Company and the Bank hereby employ Trident
as their agent to utilize its best efforts to assist the Company with the
Company's sale of the Shares in the Offerings, and Trident hereby accepts such
employment.
Trident Securities, Inc.
Page 13
In the event the Company is unable to sell a minimum of 1,275,000 Shares
(or such lesser amount as the Department may permit) within the period described
in the Prospectus, this Agreement shall terminate, and the Company shall refund
promptly to any persons who have subscribed for any of the Shares, the full
amount which they may have received from them, together with interest as
provided in the Prospectus, and no party to this Agreement shall have any
obligation to the other party hereunder, except as set forth in Sections 3(c)
and 3(d) below and Sections 6, 8, 9 and 10 hereof. Appropriate arrangements
for placing the funds received from subscriptions for Shares in special
interest-bearing accounts with the Bank until all Shares are sold and paid for
will be made prior to the commencement of the Subscription and Community
Offerings, with provision for prompt refund to the purchasers as set forth
above, or for delivery to the Company if all Shares are sold.
If all conditions precedent to the consummation of the Stock Conversion are
satisfied, including the sale of all Shares required by the Plan to be sold, the
Company agrees to issue or have issued such Shares and to release for delivery
certificates to subscribers for such Shares on or as soon as possible following
the Closing Date against payment to the Company by any means authorized pursuant
to the Prospectus, at the principal executive office of the Bank or at such
other place as shall be agreed upon between the parties hereto. The date upon
which the Company shall release or deliver the Shares sold in the Offerings, in
accordance with the terms hereof, is herein called the "Closing Date."
Trident agrees either (a) upon receipt of an executed order form of a
subscriber to forward to the Bank for deposit in a segregated account the
offering price of the Common Stock ordered on or before twelve noon on the next
business day following receipt of an order form by Trident or (b) to solicit
indications of interest in which event (i) Trident will subsequently contact any
potential subscriber indicating interest to confirm the interest and give
instructions to execute and return an order form or to receive authorization to
execute the order form on the subscriber's behalf, (ii) Trident will mail
acknowledgments of receipt of orders to each subscriber confirming interest on
the business day following such confirmation, (iii) Trident will debit accounts
of such subscribers on the third business day ("Debit Date") following receipt
of the confirmation referred to in (i), and (iv) Trident will forward completed
order forms together with such funds to the Bank on or before twelve noon on the
next business day following the Debit Date for deposit in a segregated account.
Trident acknowledges that if the procedure in (b) is adopted, subscribers' funds
are not required to be in their accounts until the Debit Date.
The Company and the Bank agree to pay Trident the following compensation
and expense reimbursement for its services hereunder:
(a) A commission equal to one and one half percent (1.50%) of the
aggregate dollar amount of the Shares sold in the Subscription Offering and
Community Offering (excluding
Trident Securities, Inc.
Page 14
Shares sold to the Bank's directors and executive officers, and their
"Associates", as defined in the Plan, the Foundation Shares and Shares sold
to the ESOP). For stock sold by other NASD member firms under selected
dealers agreements, the commission shall not exceed a fee to be agreed upon
jointly by Trident and the Bank to reflect market requirements at the time
of the stock allocation in a Syndicated Community Offering.
(b) The foregoing fees shall be paid to Trident on the Closing Date.
(c) Reimbursement for all allocable out-of-pocket expenses, including but
not limited to travel, food, lodging and legal fees, incurred by Trident
whether or not the Stock Conversion is consummated; provided, however, that
Trident's out-of-pocket expenses shall not exceed $10,000 and its legal
fees shall not exceed $27,500 and neither the Company nor the Bank shall
reimburse Trident for any of the foregoing expenses accrued after Trident
shall have notified the Company or the Bank of its election to terminate
this Agreement pursuant to Section 11 hereof or after such time as the
Company or the Bank shall have given notice in accordance with Section 12
hereof that Trident is in breach of this Agreement. Full reimbursement of
Trident shall be made on the Closing Date or, if the Stock Conversion is
not completed and is terminated for any reason, within ten (10) business
days of receipt by the Company of a written request from Trident detailing
its allocable expenses. Trident acknowledges receipt of a $10,000 advance
payment from the Bank, which shall be credited against the total
reimbursement due Trident hereunder.
(d) Reimbursement for any expenses of the Company and the Bank set forth
in Section 6 hereof to the extent paid by Trident on behalf of the Company
or the Bank. Full reimbursement shall be made on the Closing Date or, if
the Conversion is not completed and is terminated for any reason, within
ten (10) business days of receipt by the Company and the Bank of a written
request from Trident detailing such expenses.
Notwithstanding the limitations on reimbursement of Trident for its
allocable expenses provided in subsection (c) above and notwithstanding any
reimbursement of Trident pursuant to subsection (d) above, in the event that a
resolicitation or other event causes the Offerings to be extended beyond the
original expiration date of the Subscription Offering, as set forth in the
Prospectus, Trident shall be reimbursed for its allocable expenses incurred
during such extended period, provided that the allowance for allocable expenses
provided for in subsection (c) above has been exhausted and subject to the
following: such reimbursement shall not exceed an amount equal to the product
obtained by dividing $37,500 (the reimbursable expenses and legal fees
limitation set forth in Section (c) above) by the total number of days of the
unextended Subscription Offering (calculated from the date of the Prospectus to
the intended close of the Subscription Offering as stated in the Prospectus) and
multiplying such product by the number of days of the extension (the
Trident Securities, Inc.
Page 15
number of days from the date of the intended close of the Subscription Offering
to the closing of the extension of the Subscription Offering).
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
--------
assisting the Company and the Bank on a best efforts basis in offering a minimum
of 1,275,000 and a maximum of 1,725,000 Shares, subject to adjustment up to
1,983,750 Shares, in the Offerings, subject to such other adjustments as may be
permitted by the Department and the FDIC. The Shares are to be offered to the
public at the price set forth on the cover page of the Prospectus and the first
page of this Agreement.
5. Further Agreements. The Company and the Bank jointly and severally
------------------
covenant and agree that:
(a) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus and through and including the
Closing Date, except as otherwise may be indicated or contemplated therein,
neither the Company nor the Bank will issue any securities which will
remain issued at the Closing Date or incur any liability or obligation,
direct or contingent, or borrow money, except borrowings or liabilities in
the ordinary course of business, or enter into any other transaction not in
the ordinary course of business and consistent with prior practices, which
is material in light of the financial condition or operations of the
Company and the Bank, taken as a whole.
(b) If any Shares remain unsubscribed following completion of the
Subscription Offering and the Community Offerings, the Company (i) will, if
required by the Securities Act Regulations, promptly file with the
Commission a post-effective amendment to such Registration Statement
relating to the results of the Subscription and the Community Offerings,
any additional information with respect to the proposed plan of
distribution and any revised pricing information or (ii) if no such post-
effective amendment is required, will, if required by the Securities Act
Regulations, file with the Commission a prospectus or prospectus supplement
containing information relating to the results of the Subscription and
Community Offerings and pricing information pursuant to Rule 424(c) of the
Securities Act Regulations, in either case in a form reasonably acceptable
to the Company and Trident.
(c) Upon consummation of the Stock Conversion, the authorized, issued and
outstanding equity capital of the Company shall be within the range as set
forth in the Prospectus under the caption "Capitalization," and no Common
Stock of the Company shall be outstanding immediately prior to the Closing
Date (other than shares of Common Stock issued in connection with the
initial capitalization of the Company, which shares will be canceled upon
consummation of the Stock Conversion), and the certificates representing
the Shares
Trident Securities, Inc.
Page 16
and Foundation Shares will conform in all material respects with the
requirements of applicable laws and regulations.
(d) Upon amendment of the Bank's charter and bylaws as provided in the
Department Regulations and completion of the sale by the Company of the
Shares as contemplated by the Prospectus, (i) the Bank will be converted
pursuant to the Plan to a North Carolina-chartered stock savings bank with
full power and authority to own its property and conduct its business as
described in the Prospectus, (ii) all of the authorized and outstanding
capital stock of the Bank will be owned of record and beneficially by the
Company, and (iii) the Company will have no direct subsidiaries other than
the Bank.
(e) The Company shall deliver to Trident, from time to time, such number
of copies of the Prospectus as Trident reasonably may request. The Company
authorizes Trident to use the Prospectus in any lawful manner in connection
with the offer and sale of the Shares.
(f) The Company will notify Trident immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration
Statement becomes effective or any supplement to the Prospectus has been
filed, (ii) of the issuance by the Commission of any stop order relating to
the Registration Statement or of the initiation or the threat of any
proceedings for that purpose, (iii) of the receipt of any notice with
respect to the suspension of the qualification of the Shares for offering
or sale in any jurisdiction, (iv) of the receipt of any comments from the
staff of the Commission relating to the Registration Statement and (v) of
the issuance by the Department or the FDIC of any stop order relating to
the Stock Conversion or the use of the Prospectus or Proxy Statement or the
initiation or threat of any proceedings for that purpose. If the
Commission enters a stop order relating to the Registration Statement at
any time, the Company will make every reasonable effort to obtain the
lifting of such order at the earliest possible moment.
(g) During the time when a prospectus is required to be delivered under
the Securities Act, the Company will comply with all requirements imposed
upon it by the Securities Act and by the Securities Act Regulations to
permit the continuance of offers and sales of or dealings in the Shares in
accordance with the provisions hereof and the Prospectus. If during the
period when the Prospectus is required to be delivered in connection with
the offer and sale of the Shares any event relating to or affecting the
Company or the Bank shall occur as a result of which it is necessary, in
the reasonable opinion of counsel for Trident after consultation with
counsel for the Company and the Bank, to amend or supplement the Prospectus
in order to make the Prospectus not false or misleading in light of the
circumstances existing at the time it is delivered to a purchaser of the
Shares, the Company shall prepare and furnish to Trident a reasonable
number of copies of an amendment or amendments or of a supplement or
supplements to the Prospectus (in form and substance
Trident Securities, Inc.
Page 17
reasonably satisfactory to counsel for Trident) which shall amend or
supplement the Prospectus so that, as amended or supplemented, the
Prospectus shall not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein,
in light of the circumstances existing at the time the Prospectus is
delivered to a purchaser of the Shares, not misleading. The Company will
not file or use any amendment or supplement to the Registration Statement
or the Prospectus unless Trident has been first furnished a copy or to
which Trident shall reasonably object after having been furnished such
copy. For the purposes of this subsection the Company and the Bank shall
furnish such information with respect to themselves as Trident from time to
time may reasonably request.
(h) The Company and the Bank has taken or will take all necessary action
and furnish to appropriate counsel such information as may be required to
qualify or register the Shares for offer and sale by the Company under the
securities or blue sky laws of such jurisdictions as Trident and the
Company or its counsel may agree upon; provided, however, that the Company
shall not be obligated to qualify as a foreign corporation to do business
under the laws of any such jurisdiction. In each jurisdiction where such
qualification or registration shall be effected, the Company, unless
Trident agrees that such action is not necessary or advisable in connection
with the distribution of the Shares, shall file and make such statements or
reports as are, or reasonably may be, required by the laws of such
jurisdiction.
(i) Appropriate entries will be made in the financial records of the Bank
to establish a liquidation account for the benefit of eligible account
holders as of December 31, 1994 and supplemental eligible account holders
as of December 31, 1998 in accordance with the Department Regulations.
(j) The Company will file a registration statement for the Common Stock
under Section 12(b) or Section 12(g) of the Exchange Act, as applicable,
prior to completion of the Offerings and shall request that such
registration statement be effective upon or before completion of the Stock
Conversion. The Company shall maintain the effectiveness of such
registration for a minimum period of three (3) years or for such shorter
period as may be required by applicable law.
(k) The Company will make generally available to its security holders, in
the manner contemplated by Rule 158(b) under the Securities Act, as soon as
practicable, but not later than 60 days after the end of its fiscal quarter
in which the first anniversary date of the effective date of the
Registration Statement occurs, an earnings statement which will comply with
Section 11(a) of the Securities Act covering a twelve-month period
beginning after the effective date of the Registration Statement.
Trident Securities, Inc.
Page 18
(l) For a period of three (3) years from the date of this Agreement, the
Company will furnish to Trident, as soon as publicly available after the
end of each fiscal year, a copy of its annual report to shareholders for
such year; and the Company will furnish to Trident (i) as soon as publicly
available, a copy of each report or definitive proxy statement of the
Company filed with the Commission under the Exchange Act or mailed to
shareholders, and (ii) from time to time, such other public information
concerning the Company as Trident may reasonably request.
(m) The Company shall apply the net proceeds from the sale of the Shares
in the manner set forth in the Prospectus under the heading "Use of
Proceeds" and shall file such reports with the Commission with respect to
the sale of the Shares and the application of the proceeds therefrom as may
be required in accordance with Rule 463 under the Securities Act.
(n) The Company will not deliver the Shares until each and every condition
set forth in Section 7 hereof has been satisfied, unless such condition is
waived in writing by Trident.
(o) The Company and the Bank will advise Trident as to the allocation of
the deposits of the Bank's depositors and as to the allocation of votes of
its voting members, and in the event of an oversubscription for Shares in
the Offerings, will determine and provide Trident with final instructions
as to the allocation of the Shares and such information shall be accurate,
reliable and complete. Trident shall be entitled to rely upon such
information and instructions and shall have no liability related to its
reliance thereon, including, without limitation, any liability for or
related to any denial or satisfaction of any subscription in whole or in
part.
(p) The Company and the Bank will take such actions and furnish such
information as are reasonably requested by Trident in order for Trident to
comply with the NASD's "Interpretation Relating to Free-Riding and
Withholding."
(q) The Company and the Bank shall use their best efforts to ensure that
the Foundation submits within the time frames required by applicable law a
request to the Internal Revenue Service to be recognized as a tax-exempt
organization under Section 501(c)(3) of the Code; 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.
(r) At the Closing Date, the Company and the Bank will have completed all
conditions precedent to, and shall have conducted the Stock Conversion in
all material respects in accordance with, the Plan, Department and FDIC
Regulations and all other applicable laws,
Trident Securities, Inc.
Page 19
regulations, published decisions and orders, including all terms,
conditions, requirements and provisions precedent to the Stock Conversion
imposed by the Department and FDIC.
(s) The Company will use its best efforts to obtain approval for and
maintain quotation of its shares of common stock on the Nasdaq National
Market System effective on or prior to the Closing Date.
(t) The Company will not sell or issue, contract to sell or otherwise
dispose of, for a period of 90 days after the Closing Date, without
Trident's prior written consent, any shares of common stock other than as
described in the Prospectus.
(u) The Company and the Bank will maintain appropriate arrangements for
depositing all funds received from persons mailing subscriptions for or
orders to purchase Common Stock in the Subscription and Community Offerings
on an interest bearing basis at the rate described in the Prospectus until
the Closing Date and satisfaction of all conditions precedent to the
delivery of certificates for the Shares to subscribers or until refunds of
such funds have been made to the persons entitled thereto in accordance
with the Plan and as described in the Prospectus.
(v) The Company and Bank will conduct the Stock Conversion in accordance
with the Plan, the Department and FDIC Regulations and all other applicable
laws, regulations, decisions, approvals and orders, including all terms,
conditions, requirements and provisions precedent to the Stock Conversion.
6. Payment of Expenses. Whether or not the Stock Conversion is
-------------------
consummated, the Company and the Bank shall pay all reasonable out-of-pocket
expenses of the Stock Conversion, including, but not limited to, the following
expenses: (a) all regulatory filing fees, including but not limited to those
payable to the Commission, the FDIC, FRB, the Department, state blue sky
authorities and the NASD (including fees payable to the NASD for Trident's
filing pursuant to the NASD Corporate Finance Rule), (b) all stock issue and
transfer taxes which may be payable with respect to the sale of the Shares, (c)
attorneys' fees of the Company and the Bank, (d) attorneys' fees relating to any
required state blue sky laws research and filings, (e) telephone charges, (f)
air freight, (g) rental equipment, (h) supplies, (i) transfer agent and
registrar fees and expenses, (j) auditing and accounting fees and expenses, (k)
fees for appraisals and business plans, (l) conversion agent charges, (m) costs
of printing and mailing all documents necessary in connection with the Stock
Conversion, and (n) slide production expenses in connection with any community
investor meetings to be held in connection with the Stock Conversion.
7. Conditions of Trident's Obligations. Except as may be waived in
-----------------------------------
writing by Trident, the obligations of Trident as provided herein shall be
subject to the accuracy of the representations
Trident Securities, Inc.
Page 20
and warranties contained in Section 2 hereof as of the date hereof and as of the
Closing Date, to the performance by the Company and the Bank of their
obligations hereunder, and to the following conditions:
(a) On the Closing Date, Trident shall receive the favorable opinion of
Housley Kantarian & Xxxxxxxxx, P.C., special counsel for the Company and
the Bank, dated the Closing Date, addressed to Trident, in form and
substance reasonably satisfactory to counsel for Trident substantially as
set forth in Exhibit A hereto.
In rendering such opinions, such counsel may rely as to certain
matters of fact on certificates of executive officers and directors of the
Company and the Bank and certificates of public officials delivered
pursuant hereto. Such counsel may assume that any agreement is the valid
and binding obligation of any parties to such agreement other than the
Company and the Bank. Such opinion may be limited to statutes, regulations
and judicial interpretations and to facts as they exist as of the date of
such opinion. In rendering such opinion, such counsel need assume no
obligation to revise or supplement it should such statutes, regulations and
judicial interpretations be changed thereafter by legislative or regulatory
action, judicial decision or otherwise.
(b) At the Closing Date, Trident shall receive the letter of Housley
Kantarian & Xxxxxxxxx, P.C., special counsel for the Company and the Bank,
dated the Closing Date, addressed to Trident, in form and substance
reasonably satisfactory to counsel for Trident substantially as set forth
in Exhibit B hereto.
(c) Counsel for Trident shall have been furnished such documents as they
reasonably may require for the purpose of enabling them to review or pass
upon the matters required by Trident, and for the purpose of evidencing the
accuracy, completeness or satisfaction of any of the representations,
warranties or conditions herein contained, including but not limited to,
resolutions of the Board of Directors of the Company and the Bank regarding
the authorization of this Agreement and the transactions contemplated
hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion of
Trident, (i) there shall have been no material adverse change in the
financial condition, results of operations, business or prospects of the
Company and the Bank, taken as a whole, since the latest date as of which
such condition is set forth in the Prospectus, except as referred to or
contemplated therein; (ii) there shall have been no transaction entered
into by the Company or the Bank after the latest date as of which the
financial condition of the Company or the Bank is set forth in the
Prospectus other than transactions referred to or contemplated therein,
transactions in the ordinary course of business, and transactions which are
not material to the Company and the Bank, taken as a whole; (iii) neither
the Company nor the Bank shall have
Trident Securities, Inc.
Page 21
received from the FDIC, Department, FRB or Commission any directive (oral
or written) to make any change in the method of conducting their respective
businesses which is material to the business of the Company and the Bank,
taken as a whole, with which they have not complied; (iv) no action, suit
or proceeding, at law or in equity or before or by any federal or state
commission, board or other administrative agency, shall be pending or
threatened against the Company or the Bank or affecting any of their
respective assets, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect; and (v) the Shares shall have been
qualified or registered for offering and sale by the Company under the
securities or blue sky laws of such jurisdictions as Trident and the
Company shall have agreed upon.
(e) On the Closing Date, Trident shall receive a certificate of the
principal executive officer and the principal financial officer of each of
the Company and the Bank, dated the Closing Date, to the effect that: (i)
they have examined the Prospectus, and the Prospectus does not contain an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading with respect to
the Company or the Bank; (ii) since the date the Prospectus became
authorized for final use, no event has occurred which should have been set
forth in an amendment or supplement to the Prospectus which has not been so
set forth, including specifically, but without limitation, any material
adverse change in the business, financial condition, or results of
operations of the Company or the Bank, and the conditions set forth in
clauses (i) through (v) inclusive of subsection (d) of this Section 7 have
been satisfied; (iii) to the best knowledge of such officers, no order has
been issued by the Commission, the FDIC or the Department to suspend the
Offerings or the effectiveness of the Prospectus, and no action for such
purposes has been instituted or threatened by the Commission, the FDIC or
the Department; (iv) to the best knowledge of such officers, no person has
sought to obtain review of the final action of the Department or FDIC
approving the Plan; and (v) all of the representations and warranties
contained in Section 2 of this Agreement are true and correct, with the
same force and effect as though expressly made on the Closing Date and the
Company and the Bank have complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at or prior to
the Closing Date.
(f) At the Closing Date, Trident shall receive, among other documents, (i)
copies of the letters from the Department and the FDIC authorizing the use
of the Prospectus and the Proxy Statement, (ii) a copy of the order of the
Commission declaring the Registration Statement effective; (iii) a copy of
the certificate from the Department evidencing the corporate existence of
the Bank; (iv) a copy of the certificate from the FDIC evidencing the
insured status of the Bank, (v) a copy of the letter from the appropriate
state authority evidencing the incorporation (and, if generally available
from such authority, good standing)
Trident Securities, Inc.
Page 22
of the Company, (vi) a copy of the charter, certificate of incorporation or
articles of incorporation of the Company certified by the appropriate state
governmental authority; and (vii) if available, a copy of the letter from
the Department approving the Bank's Stock Charter.
(g) As soon as available after the Closing Date, Trident shall receive a
certified copy of the Bank's Stock Charter as executed by the appropriate
governmental authority.
(h) Concurrently with the execution of this Agreement, Trident
acknowledges receipt of a letter from KPMG Peat Marwick, L.L.P.,
independent certified public accountants, addressed to Trident and the
Company, in substance and form reasonably satisfactory to counsel for
Trident, with respect to the financial statements of the Bank and certain
financial information contained in the Prospectus.
(i) At the Closing Date, Trident shall receive a letter from KPMG Peat
Marwick, L.L.P., independent certified public accountants, dated the
Closing Date and addressed to Trident and the Company, in form and
substance reasonably satisfactory to counsel for Trident, confirming the
statements made by such accountants in the letter delivered by them
pursuant to the preceding subsection and dated as of a specified date not
more than five (5) days prior to the Closing Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the reasonable
opinion of Trident and its counsel, satisfactory to Trident and its counsel.
Any certificates signed by an officer or director of the Company or the Bank
prepared for Trident's reliance and delivered to Trident or to counsel for
Trident shall be deemed a representation and warranty by the Company and the
Bank to Trident as to the statements made therein. If any condition to
Trident's obligations hereunder to be fulfilled prior to or at the Closing Date
is not so fulfilled, Trident may terminate this Agreement or, if Trident so
elects, may waive in writing any such conditions which have not been fulfilled,
or may extend the time of their fulfillment. If Trident terminates this
Agreement as aforesaid, the Company and the Bank shall reimburse Trident for its
expenses as provided in Section 3 hereof.
8. Indemnification.
---------------
(a) The Company and the Bank jointly and severally agree to indemnify and
hold harmless Trident, its officers, directors and employees and each
person, if any, who controls Trident within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act, against any and
all loss, liability, claim, damage and expense whatsoever and shall further
promptly reimburse such persons for any legal or other expenses reasonably
incurred by each or any of them in investigating, preparing to defend or
defending against
Trident Securities, Inc.
Page 23
any action, proceeding or claim (whether commenced or threatened) arising
out of or based upon (A) any untrue or alleged untrue statement of a
material fact or the omission or alleged omission of a material fact
required to be stated or necessary to make the statements, in light of the
circumstances under which they were made, not misleading contained in (i)
the Registration Statement or the Prospectus or (ii) any application
(including the Applications) or other document or communication (in this
Section 8 collectively called "Regulatory Application") prepared or
executed by or on behalf of the Company or the Bank or based upon written
information furnished by or on behalf of the Company or the Bank, filed in
any jurisdiction to register or qualify the Shares under the securities
laws thereof or filed with the Department, FDIC, FRB or Commission with
respect to the offering of the Shares, unless such statement or omission
was made in reliance upon and in conformity with information furnished in
writing to the Company or the Bank with respect to Trident by or on behalf
of Trident expressly for use in the Registration Statement or Prospectus or
any amendment or supplement thereto or in any Regulatory Application, as
the case may be, (B) any written or unwritten statement made to a purchaser
of the Shares by any director, officer or employee of the Company or the
Bank, or (C) the inaccuracy of any representation or warranty set forth in
Section 2(a) above or the breach of any covenant or agreement of the
Company or the Bank set forth herein.
(b) The Company shall indemnify and hold Trident harmless from any
liability whatsoever arising out of (i) any instructions given to Trident
as set forth in Section 5(o) above or (ii) any records of account holders,
depositors, borrowers, and other members of the Bank delivered to Trident
by the Bank or its agents for use during the Stock Conversion and Bank
Conversion.
(c) Trident agrees to indemnify and hold harmless the Company and the
Bank, their officers, directors and employees and each person, if any, who
controls the Company and the Bank within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, to the same extent as
the foregoing indemnity from the Company and the Bank to Trident, but only
with respect to (i) statements or omissions, if any, made in the Prospectus
or any amendment or supplement thereof, in any Regulatory Application or to
a purchaser of the Shares in reliance upon, and in conformity with,
information furnished in writing to the Company or the Bank with respect to
Trident by or on behalf of Trident expressly for use in the Prospectus or
any amendment or supplement thereof or in any Regulatory Application or
(ii) the inaccuracy of any representation or warranty set forth in Section
2(b) above or the breach of any covenant or agreement of Trident set forth
herein.
(d) Promptly after receipt by an indemnified party under this Section 8 of
notice of any action, proceeding or claim (whether commenced or threatened)
such indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this
Trident Securities, Inc.
Page 24
Section 8, notify the indemnifying party of such action, proceeding or
claim; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section 8 for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than the reasonable cost of
investigation except as otherwise provided herein. In the event the
indemnifying party elects to assume the defense of any such action and
retain counsel reasonably acceptable to the indemnified party, the
indemnified party may retain additional counsel, but shall bear the fees
and expenses of such counsel unless (i) the indemnifying party shall have
specifically authorized the indemnified party to retain such counsel or
(ii) the parties to such suit include such indemnifying party and the
indemnified party, and such indemnified party shall have been advised by
counsel that there are substantive or procedural issues which raise
conflicts of interest between the indemnified party and indemnifying party,
in which case the indemnifying party shall not be entitled to assume the
defense of such suit notwithstanding the indemnifying party's obligation to
bear the fees and expenses of such counsel. An indemnifying party against
whom indemnity may be sought shall not be liable to indemnify an
indemnified party under this Section 8 if any settlement of any such action
is effected without such indemnifying party's consent.
9. Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in Section 8
above is for any reason held to be unavailable to Trident, the Company and/or
the Bank other than in accordance with its terms, the Company and the Bank or
Trident shall contribute to the aggregate losses, liabilities, claims, damages,
and expenses of the nature contemplated by said indemnity agreement incurred by
the Company and the Bank or Trident (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Bank on the one
hand and Trident on the other hand from the offering of the Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above, but also the relative fault of the Company or
the Bank on the one hand and Trident on the other hand in connection with the
statements, acts or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Bank on
the one hand and Trident on the other shall be deemed to be in the same
proportion as the total net proceeds from the Conversion received by the Company
and the Bank bear to the total fees received by Trident under
Trident Securities, Inc.
Page 25
this Agreement. The relative fault of the Company or the Bank on the one hand
and Trident on the other shall be determined by reference to, among other
things, whether any untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Bank or by Trident and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Bank and Trident agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by the indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, Trident shall not be required
to contribute any amount in excess of the amount by which fees owed Trident
pursuant to this Agreement exceed the amount of any damages which Trident has
otherwise been required to pay by reason of such untrue or alleged untrue
statement, act, omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
10. Survival of Agreements, Representations and Indemnities. The
--------------------------------------------------------
respective indemnities and contribution agreements of the Company and the Bank
and Trident and the representations and warranties of the Company and the Bank
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 Trident or the Company or the Bank or any
controlling person or indemnified party referred to in Section 8 hereof, and
shall survive any termination or consummation of this Agreement and/or the
issuance of the Shares, and any legal representative of Trident, the Company,
the Bank and any such controlling persons shall be entitled to the benefit of
the respective agreements, indemnities, warranties and representations.
11. Termination. The parties may terminate this Agreement by giving the
-----------
notice indicated below in this Section at any time after this Agreement becomes
effective as follows:
(a) Trident may terminate this Agreement if any domestic or international
event or act or occurrence has materially disrupted the United States
securities markets such as to make it, in Trident's reasonable opinion,
impracticable to proceed with the offering of the Shares; or if trading on
the New York Stock Exchange shall have suspended; or if the United States
shall have become involved in a war or major hostilities; or if a general
banking moratorium has been declared by a state or federal authority which
has material effect on the Bank or the
Trident Securities, Inc.
Page 26
Stock Conversion; or if a moratorium in foreign exchange trading by major
international banks or persons has been declared; or if there shall have
been a material change in the capitalization, financial condition or
business of the Company and the Bank, taken as a whole, or if the Company
and the Bank, taken as a whole, shall have sustained a material or
substantial loss by fire, flood, accident, hurricane, earthquake, theft,
sabotage or other calamity or malicious act, whether or not said loss shall
have been insured.
(b) Trident may terminate this Agreement in the event of a material breach
of this Agreement by the Company or the Bank at any time after this
Agreement becomes effective if such breach is not cured within five (5)
days after Trident delivers written notice thereof to the Company and the
Bank, and the Company and the Bank may terminate this Agreement in the
event of a material breach of this Agreement by Trident at any time after
this Agreement becomes effective if such breach is not cured within five
(5) days after the Company or the Bank delivers written notice thereof to
Trident.
(c) The Bank may terminate the Stock Conversion in accordance with the
terms of the Plan. Such termination shall be without liability to any
party, except that the Company and the Bank shall be required to fulfill
their obligations pursuant to Sections 3, 6, 8, and 9 of this Agreement.
(d) If this Agreement is terminated by Trident for any of the reasons set
forth in subsections (a) or (b) above, and to fulfill their obligations, if
any, pursuant to Sections 3, 6, 8 and 9 of this Agreement and upon demand,
the Company and the Bank shall pay Trident the full amount so owing
thereunder.
(e) If this Agreement is terminated as provided in this Section 11, the
party terminating this Agreement shall notify any non-terminating party
promptly by telephone or telegram, confirmed by letter.
12. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, Inc., 0000
Xxx Xxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx Xxxxxxxx 00000, Attention: Mr. R. Xxx
Xxxxxxx, Xx. (with a copy to, Xxxxxx Xxxxx LLP, 0000 X Xxxxxx, X.X., Xxxxxxxxxx,
X.X. 00000, Attention: Xxxxxx X. Passaic, Jr., Esquire) and if sent to the
Company or the Bank, shall be mailed, delivered or telegraphed and confirmed to
000 X. Xxxx Xxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, Attention: Xxxxx X.
XxXxxx, President (with a copy to Housley Kantarian & Xxxxxxxxx, P.C., 0000 00xx
Xxxxxx, X.X., Xxxxx 000, Xxxxxxxxxx, X.X. 00000, Attention: Xxxx Xxxxxxxxx,
Esquire).
Trident Securities, Inc.
Page 27
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 Trident when the same shall have been given by the undersigned or any other
officer of Trident. Trident 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, Trident, the Company, the Bank and the
controlling and other persons referred to in Section 8 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained.
14. Construction. Unless preempted by federal law, this Agreement shall
------------
be governed by and construed in accordance with the substantive laws of North
Carolina.
15. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
Trident Securities, Inc.
Page 28
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
1st STATE BANCORP, INC.
By: ______________________________________
Xxxxx X. XxXxxx
President and Chief Executive Officer
1st STATE BANK
By: ______________________________________
Xxxxx X. XxXxxx
President and Chief Executive Officer
Agreed to and accepted as of
the date first written above:
TRIDENT SECURITIES, INC.
By: ___________________________
Name:
Title:
