EXHIBIT 1.2
Exhibit 1.2
CITIZENS SOUTH BANKING CORPORATION
(a Delaware-chartered Stock Corporation)
Up to 4,600,000 Shares
(Subject to Increase Up to 5,290,000 Shares)
COMMON STOCK ($.01 Par Value)
Subscription Price $10.00 Per Share
AGENCY AGREEMENT
___________, 2002
Xxxxx, Xxxxxxxx & Xxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000-0000
Ladies and Gentlemen:
Citizens South Banking Corporation, a federally chartered stock
corporation (together with its subsidiaries, the "Mid-Tier Holding Company"),
Citizens South Banking Corporation, a newly formed Delaware-chartered stock form
corporation organized to be the successor of the Mid-Tier Holding Company (the
"Holding Company"), Citizens South Holdings, MHC, a federally chartered mutual
holding company which owned 58.4% of the common stock of the Mid-Tier Holding
Company at December 31, 2001 (the "MHC"), and Citizens South Bank, a federally
chartered savings association (together with its subsidiaries, the "Bank") whose
common stock is owned in its entirety by the Mid-Tier Holding Company
(collectively, the "Citizens Parties") hereby confirm, jointly and severally,
their agreement with Xxxxx, Xxxxxxxx & Xxxxx, Inc. ("KBW" or the "Agent"), as
follows:
Section 1. The Offering. The MHC, in accordance with the Plan of
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Conversion and Reorganization adopted May 23, 2002 (the "Plan"), intends to
convert from mutual to stock form (the "Conversion"). The Conversion is being
conducted in accordance with the laws of the United States and the applicable
regulations of the Office of Thrift Supervision ("OTS") (such laws and the
regulations of the OTS are referred to herein as the "Conversion Regulations").
In connection with the Conversion, the Holding Company will offer stock on a
priority basis to (i) Eligible Account Holders; (ii) Employee Plans of the
Holding Company; (iii) Supplemental Eligible Account Holders; and (iv) Other
Members (all capitalized terms used in this Agreement and not defined in this
Agreement shall have the meanings set forth in the Plan). Pursuant to the Plan,
the Holding Company is offering a minimum of 3,400,000 and a maximum of
4,600,000 shares (subject to an increase up to 5,290,000 shares) of common
stock, par value $.01 per share (the "Common Stock"), in the Subscription
Offering, and, if necessary, (i) the Community Offering and/or (ii) a Syndicated
Community Offering.
Pursuant to the Plan, the Holding Company will offer and sell shares of
its Common Stock (the "Shares") in the Subscription Offering, Community
Offering, and/or Syndicated Community Offering (the "Offerings") and issue
shares of the Holding Company to existing public shareholders of the Mid-Tier
Holding Company in exchange for their existing shares of the Mid-Tier Holding
Company (the "Exchange") so that, upon completion of the Offerings, 100% of the
outstanding Common Stock of the Holding Company will be publicly held. The
Holding Company will sell the Shares in the Offerings at $10.00 per share (the
"Purchase Price"). If the number of Shares is increased or decreased in
accordance with the Plan, the term "Shares" shall mean such greater or lesser
number, where applicable.
Pursuant to the Plan, in the Subscription Offering, the Holding Company
will offer the Shares, subject to the allocation procedures and purchase
limitations set forth in the Plan, in descending order of priority to: (1)
Eligible Account Holders; (2) Employee Plans of the Holding Company or the Bank;
(3) Supplemental Eligible Account Holders; and (4) Other Members. The Holding
Company may offer Shares, if any, remaining after the Subscription Offering, in
the Community Offering on a priority basis to the Mid-Tier Holding Company's
public stockholders at the Voting Record Date, and then to the natural persons
residing within the North Carolina counties of Gaston, Rowan, Iredell,
Mecklenburg, Cabarrus, Cleveland, and Lincoln and the South Carolina County of
York, and then to the general public. In the event a Community Offering is held,
it may be held at any time during or immediately after the Subscription
Offering. Depending on market conditions, Shares available for sale but not
subscribed for in the Subscription Offering or purchased in the Community
Offering may be offered in the Syndicated Community Offering to the general
public on a best efforts basis, as described in subsection 4(c) below.
The Holding Company has filed with the U.S. Securities and Exchange
Commission (the "Commission") Registration Statement on Form S-1 (File No.
___________) in order to register the Shares under the Securities Act of 1933,
as amended (the "1933 Act"), and has filed such amendments thereto as have been
required to the date hereof (the "Registration Statement"). The prospectus, as
amended, included in the Registration Statement at the time it initially became
effective is hereinafter called the "Prospectus," except that if any prospectus
is filed by the Holding Company pursuant to Rule 424(b) or (c) of the
regulations of the Commission under the 1933 Act differing from the prospectus
included in the Registration Statement at the time it 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 and shall include any supplements and amendments thereto from and
after their dates of effectiveness or use, respectively.
In connection with the Conversion, the MHC filed with the OTS an
application for conversion to a stock company (the "Conversion Application") and
amendments thereto as required by the OTS. The Holding Company has also filed
with the OTS its application on Form H-(e)1-S (the "Holding Company
Application") to become a unitary savings and loan holding company under the
Home Owners' Loan Act of 1933, as amended, and the regulations promulgated
thereunder (the "HOLA"). Collectively, the Conversion Application and the
Holding Company Application may also be termed the "Applications."
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Section 2. Retention of Agent. Subject to the terms and conditions
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herein set forth, the Citizens Parties hereby appoint the Agent as their
financial advisor and marketing agent to utilize its best efforts to solicit
subscriptions for Shares and to advise and assist the Citizens Parties with
respect to the Holding 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 Citizens
Parties as to the matters set forth in the letter agreement, dated May 23, 2002,
between the Bank and KBW. It is acknowledged by the Citizens Parties that the
Agent shall not be required to purchase any Shares or be obligated to take any
action that 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 Holding
Company or upon termination of the Offering, but in no event later than 90 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 Citizens
Parties and the Agent may agree to renew this Agreement under mutually
acceptable terms and subject to the approval of any governmental agency or
regulatory authority having jurisdiction over such matters.
In the event the Holding Company is unable to sell a minimum of
3,400,000 Shares by the End Date, this Agreement shall terminate and the Holding
Company shall refund to any persons who have subscribed for any of the Shares
the full amount that 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 9, 11 and 12 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 Section 4, subparagraphs (a) and (d),
below.
Section 3. Sale and Delivery of Shares. If all conditions precedent
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to the consummation of the Conversion, including, without limitation, the sale
of all Shares required by the Plan to be sold, are satisfied, the Holding
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 Holding Company by any means
authorized by the Plan; provided, however, that no funds shall be released to
the Holding Company until the conditions specified in Section 10 hereof shall
have 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 Citizens Parties and the Agent. Certificates
for shares shall be delivered directly to the purchasers in accordance with
their directions. The date upon which the Holding Company shall release or
deliver the Shares sold in the Offering, in accordance with the terms herein, is
called the "Closing Date."
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Section 4. Compensation. The Agent shall receive the following
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compensation for its services hereunder:
(a) A management fee of $50,000, payable in four consecutive monthly
installments of $12,500, commencing with the adoption of the plan of Conversion,
of which $12,500 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.
(b) A Success Fee of 1.35% shall be charged based on the aggregate
purchase price of the Shares sold in the Subscription Offering and the Community
Offering excluding shares purchased by the officers, directors, corporators, or
employees (or members of their immediate families) of the Bank plus any ESOP,
tax-qualified or stock based compensation plans (except IRAs) or similar plan
created by the Bank for some or all of its directors or employees. The
management fee described in subparagraph 4(a) shall be applied against the
Success Fee described in this subparagraph 4(b).
(c) If any of the Shares remain available after the Subscription
Offering, at the request of the Bank, KBW will seek to form a syndicate of
registered broker-dealers ("Selected Dealers") to assist in the sale of such
Shares on a best efforts basis, subject to the terms and conditions set forth in
the selected dealers agreement. KBW will endeavor to distribute the Shares among
the Selected Dealers in a fashion which best meets the distribution objectives
of the Bank and the Plan. KBW will be paid a fee not to exceed 5.5% of the
aggregate purchase price of the shares sold by the Selected Dealers. From this
fee, KBW will pass on to the Selected Dealers who assist in such 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 KBW shall be transmitted by KBW to such Selected
Dealers. The decision to utilize Selected Dealers will be made by the Bank upon
consultation with KBW. In the event, with respect to any stock purchases, fees
are paid pursuant to this subparagraph 4(c), such fees shall be in lieu of, and
not in addition to, payment pursuant to subparagraph 4(b).
(d) The Agent shall be reimbursed for reasonable out-of-pocket
expenses, including costs of travel, meals and lodging, photocopying, telephone,
facsimile and couriers. The selection of KBW's counsel will be done by KBW, with
the approval of the Bank. Reimbursement of KBW's reasonable out-of-pocket
expenses, including fees of counsel, shall not exceed $50,000 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,
printing, mailing and marketing and syndicate expenses associated with the
Conversion; and the fees set forth under this Section 4. The Citizens Parties
will reimburse KBW for such expenses incurred by KBW on their behalf.
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Full payment of KBW'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 5. Closing. The closing for the sale of the Shares shall take
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place on the Closing Date at such location as mutually agreed upon by the Agent
and the Citizens Parties. At the closing, the Citizens Parties 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 4 and 9 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 6. Representations and Warranties of the Citizens Parties.
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The Citizens Parties jointly and severally represent and warrant to the Agent
that:
(a) Each of the Citizens Parties has all such power, authority,
authorizations, approvals and orders as may be required to enter into this
Agreement, and, as of the Closing Date, each of the Citizens Parties will have
all such power, authority, authorizations, approvals and orders as may be
required to carry out the provisions and conditions hereof and to issue and sell
the Shares as provided herein and as described in the Prospectus. The
consummation of the Conversion, the execution, delivery and performance of this
Agreement and the Letter Agreement and the consummation of the transactions
contemplated herein have been duly and validly authorized by all necessary
corporate action on the part of each of the Citizens Parties. This Agreement has
been validly executed and delivered by each of the Citizens Parties, and is a
valid, legal and binding obligation of each of the Citizens Parties, in each
case enforceable in accordance with its terms, except as the legality, validity,
binding nature and enforceability thereof may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization, conservatorship, receivership or other
similar laws relating to or affecting the enforcement of creditors' rights
generally, (ii) general equity principles regardless of whether such
enforceability is considered in a proceeding in equity or at law, and (iii) the
extent, if any, that the provisions of Sections 11 or 12 hereof may be
unenforceable as against public policy.
(b) The Registration Statement was declared effective by the
Commission on ________, 2002. No stop order has been issued with respect to the
Prospectus. No proceedings related to the Prospectus have been initiated or, to
the knowledge of the Citizens Parties, threatened by the Commission. At the time
the Registration Statement, including the Prospectus contained therein
(including any amendment or supplement thereto), became effective, the
Registration Statement complied as to form in all material respects with the
1933 Act and the regulations promulgated thereunder. The Registration Statement
and the Prospectus did not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. At the time any Rule 424(b) or (c) Prospectus was filed
with the Commission and at the Closing Date referred to in Section 5, the
Registration Statement, including the Prospectus (including any amendment or
supplement thereto) and, when taken together with the Prospectus, any Blue Sky
Application or Sales Information authorized for use by any of the Citizens
Parties in connection with
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the Offerings, will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the representations and warranties in
this Section 6(b) shall not apply to statements or omissions made in reliance
upon and in conformity with written information furnished to the Citizens
Parties by the Agent expressly regarding the Agent for use under the caption "
The Conversion - Plan of Distribution; Selling Agent Compensation."
(c) The Conversion Application has been approved by the OTS. The
Conversion Application did, and will, as of the Closing Date comply as to form
in all material respects with the Conversion Regulations and any other
applicable rules and regulations of the OTS.
(d) No order has been issued by the Commission preventing or
suspending the use of the Registration Statement or 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, to the knowledge of the
Citizens Parties, pending or threatened.
(e) The Plan has been duly adopted by the Board of the MHC. To the
knowledge of the Citizens Parties, no person has, or at the Closing Date will
have, sought to obtain review of the final action of the OTS in approving the
Conversion Application or the Holding Company Application, pursuant to the
Conversion Regulations, the HOLA or any other statute or regulation.
(f) The Holding Company has filed the Holding Company Application
with the OTS. As of the Closing Date, the OTS will have approved of the Holding
Company's becoming a unitary savings and loan holding company with respect to
the Bank.
(g) RP Financial, LC, which prepared the appraisal of the aggregate
pro forma market value of the Common Stock on which the Offerings were based
(the "Appraisal"), has advised the Citizens Parties in writing that it is
independent with respect to each of the Citizens Parties and the Citizens
Parties believe RP Financial, LC to be expert in preparing appraisals of savings
institutions.
(h) Cherry, Bekaert & Holland, L.L.P., which certified the financial
statements filed as part of the Registration Statement and the Conversion
Application, has advised the Citizens Parties that it is an independent
certified public accountant within the meaning of the Code of Ethics of the
AICPA, and Cherry, Bekaert & Holland, L.L.P. is, with respect to the Citizens
Parties and each subsidiary thereof, independent certified public accountants as
required by the 1933 Act and the regulations promulgated thereunder.
(i) The financial statements and the notes thereto which are
included in the Registration Statement and which are a part of the Prospectus
present fairly in all material respects the consolidated financial condition of
the Mid-Tier Holding Company and the Bank as of the dates indicated and the
results of operations, changes in stockholders' equity and cash flows for the
periods specified. The financial statements comply in all material respects with
the applicable accounting requirements of Title 12 of the Code of Federal
Regulations, Regulation S-X of the
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Commission and generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods presented, except as otherwise noted
therein, and present fairly in all material respects the information required to
be stated therein. The other financial, statistical and pro forma information
and related notes included in the Prospectus present fairly the information
shown therein on a basis consistent with the audited and any unaudited financial
statements included in the Prospectus, and as to the pro forma adjustments, the
adjustments made therein have been consistently applied on the basis described
therein.
(j) 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, results of operation,
capital, properties, business affairs or prospects of the Citizens Parties
considered as one enterprise, whether or not arising in the ordinary course of
business; (ii) there have not been any material transactions entered into by any
of the Citizens Parties, other than those in the ordinary course of business;
and (iii) the capitalization, liabilities, assets, properties and business of
the Citizens Parties conform in all material respects to the descriptions
thereof contained in the Prospectus and, none of the Citizens Parties has any
material liabilities of any kind, contingent or otherwise, except as disclosed
in the Registration Statement or the Prospectus.
(k) As of the Closing Date, the Holding Company will be a stock
corporation duly organized and in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and to
conduct the business currently conducted by the Mid-Tier Holding Company, as
described in the Prospectus, and will be qualified to transact business and will
be in good standing in Delaware and in each jurisdiction in which the conduct of
business requires such qualification, unless the failure to qualify in one or
more of such jurisdictions would not have a material adverse effect on the
financial condition, results of operation, capital, properties, business affairs
or prospects of the Citizens Parties taken as a whole (a "Material Adverse
Effect"). As of the Closing Date, the Holding Company will have obtained all
licenses, permits and other governmental authorizations required for the conduct
of its business, except those that individually or in the aggregate would not
have a Material Adverse Effect; and as of the Closing Date, all such licenses,
permits and governmental authorizations will be in full force and effect, and
the Holding Company will be in compliance therewith in all material respects.
(l) As of the date of this Agreement, the Holding Company does not
own any equity securities or any equity interest in any business enterprise.
(m) The Bank is a duly organized and validly existing federally
chartered savings association, duly authorized to conduct its business as
described in the Prospectus; the activities of the Bank are permitted by the
applicable rules, regulations and practices of the OTS (or valid waivers granted
by the OTS from such rules, regulations and practices); the Bank has obtained
all licenses, permits and other governmental authorizations currently required
for the conduct of its business, except those that individually or in the
aggregate would not have a Material Adverse Effect; all such licenses, permits
and other governmental authorizations are in full force and effect and the Bank
is in good standing under the laws of the United States and the Bank is duly
qualified as a foreign
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corporation to transact business in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect; all of the issued and outstanding
capital stock of the Bank after the Conversion will be duly and validly issued
and fully paid and nonassessable; and the Holding Company will directly own all
of the capital stock of the Bank free and clear of any mortgage, pledge, lien,
encumbrance, claim or restriction of any kind. As of the date of this Agreement,
the Bank does not own equity securities or any equity interest in any other
business enterprise except for (i) marketable equity securities and (ii) other
equity interests as described in the Prospectus or as are immaterial in amount
and are not required to be described in the Prospectus.
(n) The MHC is a federally chartered mutual savings and loan holding
company operating under the laws and regulations of the United States and under
the supervision of the OTS and is in good standing under such laws.
(o) The Mid-Tier Holding Company is a duly organized and validly
existing federally chartered mutual savings and loan holding company, duly
authorized to conduct its business as described in the Prospectus; the
activities of the Mid-Tier Holding Company are permitted by the rules,
regulations and practices of the OTS; the Mid-Tier Holding Company has obtained
all licenses, permits and other governmental authorizations currently required
for the conduct of its business, except those that, individually or in the
aggregate, would not have a Material Adverse Effect; all such licenses, permits
and other governmental authorizations are in full force and effect and the
Mid-Tier Holding Company is in good standing under the laws of United States and
the Mid-Tier Holding Company is duly qualified as a foreign corporation to
transact business in each jurisdiction in which the failure to so qualify would
have a Material Adverse Effect. As of the date of this Agreement, the Mid-Tier
Holding Company does not own equity securities or any equity interest in any
other business enterprise except for (i) marketable equity securities and (ii)
other equity interests as described in the Prospectus or as are immaterial in
amount and are not required to be described in the Prospectus.
(p) The only active subsidiary of the Bank is Citizens South
Financial Services, Inc., doing business as Citizens South Investment Services
("CSIS"). CSIS is organized, validly existing and in good standing under the
laws of the State of North Carolina, with full power and authority to own
property and conduct its business; CSIS 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 Holding Company, the Bank and
CSIS taken as a whole; CSIS holds all licenses, certificates and permits from
governmental authorities necessary for the conduct of its business, except where
failure to hold such licenses, permits or authorizations would not have a
material adverse effect on the financial condition, earnings, capital, assets or
properties of the Holding Company, the Bank, and CSIS, taken as a whole; the
activities of CSIS are permitted to be conducted by subsidiaries of a federally
chartered savings institution and of North Carolina corporations.
(q) The deposit accounts of the Bank are insured by the FDIC up to
applicable limits. Upon consummation of the Conversion, the Bank will establish
a liquidation account in accordance with the Plan and the requirements of
applicable Conversion Regulations.
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(r) As of the Closing Date, the Bank will be a wholly owned
subsidiary of the Holding Company.
(s) Upon consummation of the Conversion, the authorized, issued and
outstanding capital stock of the Holding Company will be within the range set
forth in the Prospectus under the caption "Capitalization" and no shares of
Common Stock have been or will be issued and outstanding prior to the Closing
Date (except for the shares issued upon incorporation of the Holding Company);
the shares of Common Stock to be subscribed for in the Offerings have been duly
and validly authorized for issuance and, when issued and delivered by the
Holding 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 nonassessable; the issuance of the Shares is not
subject to preemptive rights, except for the subscription rights granted
pursuant to the Plan; and the terms and provisions of the shares of Common Stock
will conform in all material respects to the description thereof contained in
the Prospectus. Upon issuance of the Shares sold, good title to the Shares will
be transferred from the Holding Company to the purchasers of Shares against
payment therefor in the Offering as set forth in the Plan and the Prospectus.
(t) The Citizens Parties are not in violation of their respective
certificates of incorporation or charters or their respective bylaws, or in
material default in the performance or observance of any obligation, agreement,
covenant, or condition contained in any contract, lease, loan agreement,
indenture or other instrument to which they are a party or by which they, or any
of their respective properties, may be bound which would result in a Material
Adverse Effect. The consummation of the transactions contemplated herein and in
the Plan will not (i) conflict with or constitute a breach of, or default under,
the certificate of incorporation, charter or bylaws of any of the Citizens
Parties, or conflict with or constitute a breach of, or default under, any
contract, lease or other instrument to which any of the Citizens Parties is a
party which breach, default or conflict would have a Material Adverse Effect, or
any applicable law, rule, regulation or order that is material to the financial
condition of any of the Citizens Parties; (ii) violate any authorization,
approval, judgment, decree, order, statute, rule or regulation applicable to the
Citizens Parties except for such violations which would not have a Material
Adverse Effect; or (iii) result in the creation of any lien, charge or
encumbrance upon any property of the Citizens Parties, except for such liens,
charges or encumbrances that would not individually or in the aggregate have a
Material Adverse Effect.
(u) All documents made available to or delivered or to be made
available to or delivered by the Citizens Parties or their representatives in
connection with the issuance and sale of the Shares, including records of
account holders, depositors and borrowers 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 Citizens Parties or their representatives, to
the best knowledge of the Citizens Parties, 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.
(v) No default exists, and no event has occurred which with notice
or lapse of time, or both, would constitute a default on the part of any of the
Citizens Parties, in the due performance and observance of any term, covenant or
condition of any indenture, mortgage, deed of trust, note, bank
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loan or credit agreement or any other instrument or agreement to which any of
the Citizens Parties is a party or by which any of their property is bound or
affected in any respect which, in any such case, would have a Material Adverse
Effect on the Citizens Parties taken as a whole, and such agreements are in full
force and effect; and no other party to any such agreements has instituted or,
to the knowledge of any of the Citizens Parties, threatened any action or
proceeding wherein any of the Citizens Parties is alleged to be in default
thereunder under circumstances where such action or proceeding, if determined
adversely to any of the Citizens Parties, would have a Material Adverse Effect.
(w) The Citizens Parties have good and marketable title to all
assets which are material to the businesses of the Citizens Parties, free and
clear of all liens, charges, encumbrances, restrictions or other claims, except
such as are described in the Prospectus or which do not have a Material Adverse
Effect; and all of the leases and subleases which are material to the businesses
of the Citizens Parties, including those described in the Registration Statement
or Prospectus, are in full force and effect.
(x) The Citizens Parties are not in violation of any material
directive from the OTS, the FDIC, or any other agency to make any material
change in the method of conducting their respective businesses; the Citizens
Parties have conducted and are conducting their respective businesses so as to
comply in all respects with all applicable statutes and regulations (including,
without limitation, regulations, decisions, directives and orders of the OTS,
the Commission and the FDIC), except where the failure to so comply would not
reasonably be expected to result in a Material Adverse Effect, and there is no
charge, investigation, action, suit or proceeding before or by any court,
regulatory authority or governmental agency or body pending or, to the knowledge
of any of the Citizens Parties, threatened, which would reasonably be expected
to materially and adversely affect the Conversion, the performance of this
Agreement, or the consummation of the transactions contemplated in the Plan as
described in the Registration Statement, or which would reasonably be expected
to result in a Material Adverse Effect.
(y) Prior to the Closing Date, the Citizens Parties will have
received an opinion of their special counsel, Xxxx Xxxxxx Xxxxxxxx & Xxxxxx,
P.C. with respect to the federal income tax consequences of the Conversion, as
described in the Registration Statement and the Prospectus and an opinion of
Cherry, Bekaert & Holland, L.L.P. with respect to the state tax consequences of
the Conversion, as described in the Registration Statement and the Prospectus;
and the facts and representations upon which such opinions will be based, will
be truthful, accurate and complete, and none of the Citizens Parties will take
any action inconsistent therewith.
(z) The Mid-Tier Holding Company and the Bank have filed all
required federal and state tax returns, paid all taxes that have become due and
payable, except where permitted to be extended or where the failure to pay such
taxes would not have a Material Adverse Effect, and no deficiency has been
asserted with respect thereto by any taxing authority.
(aa) No approval, authorization, consent or other order of any
regulatory or supervisory or other public authority is required for the
execution and delivery by the Citizens Parties of this
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Agreement, or the issuance of the Shares, except for the approval of the OTS,
the Commission and the Nasdaq Stock Market, Inc., and any necessary
qualification, notification, or registration or exemption under the securities
or blue sky laws of the various states in which the Shares are to be offered.
(bb) None of the Citizens Parties has: (i) issued any securities
within the last 18 months (except for (a) notes to evidence bank loans or other
liabilities in the ordinary course of business or as described in the
Prospectus, and (b) shares of Common Stock issued with respect to the initial
capitalization of the Holding Company, and (c) shares of the Mid-Tier Holding
Company issued upon the exercise of stock options); (ii) had any dealings with
respect to sales of securities 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 Offerings and
purchases and sales of U.S. government and agency and other securities in the
ordinary course of business; or (iii) engaged any intermediary between the Agent
and the Citizens Parties in connection with the Offerings or the offering of
shares of the common stock of the Mid-Tier Holding Company, and no person is
being compensated in any manner for such services.
(cc) The Citizens Parties have not made any payment of funds of the
Citizens Parties as a loan to any person for the purchase of Shares, except for
the Holding Company's loan to the employee stock ownership plan, the proceeds of
which may be used to purchase Shares, or has made any other payment or loan of
funds prohibited by law, and no funds have been set aside to be used for any
payment prohibited by law.
(dd) The Bank complies in all material respects with the applicable
financial record keeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, and the regulations and rules
thereunder.
(ee) The Citizens Parties have not relied upon Agent or its counsel
for any legal, tax or accounting advice in connection with the Conversion.
(ff) The records used by the Citizens Parties to determine the
identity of Eligible Account Holders and Supplemental Eligible Account Holders
and Other Members are accurate and complete in all material respects.
(gg) The Citizens Parties comply with all laws, rules and regulations
relating to environmental protection, and none of them has been notified or is
otherwise aware that any of them is potentially liable, or is considered
potentially liable, under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, or any other Federal, state or local
environmental laws and regulations except to the extent that any non-compliance
would not have a Material Adverse Effect; no action, suit, regulatory
investigation or other proceeding is pending, or to the knowledge of the
Citizens Parties, threatened against the Citizens Parties relating to
environmental protection, nor do the Citizens Parties have any reason to believe
any such proceedings may be brought against any of them; and, to the knowledge
of the Citizens Parties, no disposal, release or discharge of hazardous or toxic
substances, pollutants or contaminants, including
11
petroleum and gas products, as any of such terms may be defined under federal,
state or local law, has occurred on, in, at or about any facilities or
properties owned or leased by any of the Citizens Parties or in which the Bank
has a security interest, except to the extent such disposal, release or
discharge would not have a Material Adverse Effect.
(hh) All of the loans represented as assets in the Business of
Citizens South Banking Corporation and Citizens South Bank section or financial
information of the Citizens Parties included in the Prospectus meet or are
exempt from all requirements of federal, state and local law pertaining to
lending, including, without limitation, truth in lending (including the
requirements of Regulations Z and 12 C.F.R. Part 226), real estate settlement
procedures, consumer credit protection, equal credit opportunity and all
disclosure laws applicable to such loans, except for violations which, if
asserted, would not result in a Material Adverse Effect.
(ii) None of the Citizens Parties is required to be registered as an
investment company under the Investment Company Act of 1940.
(jj) Any certificates signed by an officer of any of the Citizens
Parties and delivered to the Agent or its counsel that refer to this Agreement
shall be deemed to be a representation and warranty by the Citizens Parties to
the Agent as to the matters covered thereby with the same effect as if such
representation and warranty were set forth herein.
(kk) The Citizens Parties have taken all actions necessary to obtain
at Closing a Blue Sky Memorandum from Xxxx Xxxxxx Xxxxxxxx & Xxxxxx.
Section 7. Representations and Warranties of the Agent. Agent
-------------------------------------------
represents and warrants to the Citizens Parties that:
(a) Agent is a duly organized New York corporation and is validly
existing and in good standing under the laws of the State of New York with full
power and authority to provide the services to be furnished to the Citizens
Parties hereunder.
(b) The execution, delivery and performance of this Agreement and
the Letter Agreement and the consummation of the transactions contemplated
herein and therein have been duly and validly authorized by all necessary
corporate action on the part of Agent, and each of this Agreement and the Letter
Agreement is the legal, valid and binding agreement of Agent, enforceable in
accordance with its terms, except as the legality, validity, binding nature and
enforceability thereof may be limited by (i) bankruptcy, insolvency, moratorium,
reorganization, conservatorship, receivership or other similar laws relating to
or affecting the enforcement of creditors' rights generally, and (ii) general
equity principles regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(c) Each of Agent and its employees, agents and representatives who
shall perform any of the services hereunder shall have, and until the Offerings
are consummated or terminated shall maintain, all licenses, approvals and
permits necessary to perform such services and shall comply
12
in all material respects with all applicable laws and regulations in connection
with the performance of such services.
(d) No action, suit, charge or proceeding before the Commission, the
NASD, any state securities commission or any court is pending, or to the
knowledge of Agent threatened, against Agent which, if determined adversely to
Agent, would have a material adverse effect upon the ability of Agent to perform
its obligations under this Agreement.
(e) Agent is registered as a broker/dealer pursuant to Section 15(b)
of the Securities Exchange Act of 1934, as amended (the "1934 Act") and is a
member in good standing of the NASD.
(f) Any funds received in the Offerings by the Agent will be handled
by the Agent in accordance with Rule 15c2-4 under the 1934 Act to the extent
applicable.
Section 8. Covenants of the Citizens Parties. The Citizens Parties
----------------------------------
hereby jointly and severally covenant with the Agent as follows:
(a) The Holding Company will not, at any time after the date the
Registration Statement is declared effective, file any amendment or supplement
to the Registration Statement without providing the Agent and its counsel a
reasonable opportunity to review and comment on such amendment or supplement.
The Holding Company will furnish promptly to the Agent and its counsel copies of
all correspondence from the Commission with respect to the Registration
Statement and the Holding Company's responses thereto.
(b) The Citizens Parties will not, at any time after the date any
Application is approved, file any amendment or supplement to such Application
without providing the Agent and its counsel a reasonable opportunity to review
and comment on such amendment or supplement. The Citizens Parties will furnish
promptly to the Agent and its counsel copies of all correspondence from the OTS
with respect to the Applications and the Citizens Parties' responses thereto.
(c) The Citizens Parties will use their best efforts to cause the
OTS to approve the Holding Company's acquisition of the Bank, and 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-effective amendment to
the Conversion Application to be approved by the OTS, as applicable, and will
promptly 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 received the
approval of the OTS; (iii) when the Holding Company Application, as amended, has
been approved by the OTS; (iv) of the receipt of any comments from the OTS or
any other governmental entity with respect to the Conversion or the transactions
contemplated by this Agreement; (v) of any request by the Commission, the OTS,
or any other governmental entity for any amendment or supplement to the
Registration Statement or the Applications or for additional information; (vi)
of the issuance by the Commission or the OTS, or any other governmental agency
of any order or other action suspending the Offerings or the use
13
of the Registration Statement or the Prospectus or any other filing of the
Citizens Parties under the Conversion Regulations or other applicable law, or
the threat of any such action; (vii) of the issuance by the Commission or the
OTS, or any other state 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 (viii) of the occurrence of any
event mentioned in subsection (f) below. The Citizens Parties will make every
reasonable effort to prevent the issuance by the Commission, the OTS, or any
other state authority of any order referred to in (vi) and (vii) above and, if
any such order shall at any time be issued, to obtain the lifting thereof at the
earliest possible time.
(d) The Citizens Parties will deliver to the Agent and to its
counsel conformed copies of each of the following documents, with all exhibits:
the Applications as originally filed and of each amendment or supplement
thereto, and the Registration Statement, as originally filed and each amendment
thereto. Further, the Citizens Parties will deliver such additional copies of
the foregoing documents to counsel to the Agent as may be required for any NASD
filings. In addition, the Citizens Parties will also deliver to the Agent such
number of copies of the Prospectus, as amended or supplemented, as the Agent may
reasonably request.
(e) The Citizens Parties will comply in all material respects with
any and all terms, conditions, requirements and provisions with respect to the
Conversion and the transactions contemplated thereby imposed by the Commission,
by applicable state law and regulations, and by the 1933 Act, the 1934 Act, and
the rules and regulations of the Commission promulgated under such Acts, to be
complied with prior to the Closing Date; and when the Prospectus is required to
be delivered, the Citizens Parties will comply in all material respects, at
their own expense, with all requirements imposed upon them by the OTS, the
Conversion Regulations (except as modified or waived in writing by the OTS), the
Commission, by applicable state law and regulations and by the 1933 Act, the
1934 Act and the rules and regulations of the Commission promulgated under such
statutes, in each case as from time to time in force, so far as is necessary to
permit the continuance of sales or dealing in shares of Common Stock during such
period in accordance with the provisions hereof and the Prospectus.
(f) During any period when the Prospectus is required to be
delivered, each of the Citizens Parties will inform the Agent of any event or
circumstance of which it is or becomes aware as a result of which the
Registration Statement and/or Prospectus, as then supplemented or amended, would
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading. If it is
necessary, in the reasonable opinion of counsel for the Citizens Parties, to
amend or supplement the Registration Statement or the Prospectus in order to
correct such untrue statement of a material fact or to make the statements
therein not misleading in light of the circumstances existing at the time of
their use, the Citizens Parties will, at their expense, prepare, 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 and the Prospectus (after a reasonable time for review by
counsel for the Agent) which will amend or supplement the Registration Statement
and/or the Prospectus so that as amended or supplemented it will not contain an
untrue statement of a material
14
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, not misleading. For
the purpose of this subsection, each of the Citizens Parties will furnish such
information with respect to itself as the Agent may from time to time reasonably
request.
(g) Pursuant to the terms of the Plan, the Holding Company will
endeavor in good faith, in cooperation with the Agent, to register or to qualify
the Shares for offering and sale or to exempt such Shares from registration and
to exempt the Holding Company and its officers, directors and employees from
registration as broker-dealers, under the applicable securities laws of the
jurisdictions in which the Offerings will be conducted; provided, however, that
the Holding Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation to do business in any
jurisdiction in which it is not so qualified. In each jurisdiction where any of
the Shares shall have been registered or qualified as above provided, the
Holding Company will make and file such statements and reports as are required
by the applicable regulatory authority in connection with such registration or
qualification for a period of not less than one year from the effective date of
the Registration Statement.
(h) The Holding Company will not sell or issue, contract to sell or
otherwise dispose of, for a period of 90 days after the date hereof, any shares
of Common Stock or securities convertible into or exercisable for shares of
Common Stock, without the Agent's prior written consent other than in connection
with any plan or arrangement described in the Prospectus, provided, however,
that the Mid-Tier Holding Company shall not be prohibited from issuing shares of
Common Stock pursuant to the exercise of previously granted stock options.
(i) For a period of three years from the date of this Agreement, the
Holding Company will furnish to the Agent, as soon as practical after such
information is available (i) a copy of each report of the Holding 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 Holding
Company is listed or quoted, (ii) a copy of each report of the Holding Company
mailed to holders of Common Stock, (iii) each press release and material news
item and article released by the Holding Company and/or Bank, and (iv) from
time-to-time, such other publicly available information concerning the Citizens
Parties as the Agent may reasonably request.
(j) The Citizens Parties will use the net proceeds from the sale of
the Common Stock in the manner set forth in the Prospectus under the caption
"Use of Proceeds."
(k) The Holding Company and the Bank will distribute the Prospectus
or other offering materials in connection with the offering and sale of the
Common Stock only in accordance with the Conversion Regulations of the OTS, the
1933 Act and the 1934 Act and the rules and regulations promulgated under such
statutes, and the laws of any state in which the shares are qualified for sale.
(l) Prior to the Closing Date, the Holding Company shall register
its Common Stock under Section 12(b) or 12(g) of the 1934 Act, and will request
that such registration statement shall be effective no later than the completion
of the Conversion.
15
(m) For so long as the Shares are registered under the 1934 Act, the
Holding Company will furnish to its stockholders as soon as practicable after
the end of each fiscal year such reports and other information as are required
to be furnished to its stockholders under the 1934 Act.
(n) The Holding Company will report the use of proceeds of the
Offering in accordance with Rule 463 under the 0000 Xxx.
(o) The Citizens Parties will maintain appropriate arrangements for
depositing all funds received from persons mailing subscriptions for or orders
to purchase Shares on an interest bearing basis as described in the Prospectus
until the Closing Date and satisfaction of all conditions precedent to the
release of the Holding Company's obligation to refund payments received from
persons subscribing for or ordering Shares in the Offerings, in accordance with
the Plan 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 Citizens
Parties 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 Citizens Parties 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.
(p) The Holding Company will register as a unitary savings and loan
holding company under the HOLA.
(q) The Citizens Parties 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 "Interpretation of the Board of Governors of the NASD
on Free Riding and Withholding."
(r) The Citizens Parties will conduct their businesses in compliance
in all material respects with all applicable federal and state laws, rules,
regulations, decisions, directives and orders, including all decisions,
directives and orders of the Commission, the FDIC and the OTS.
(s) The Citizens Parties shall comply with any and all terms,
conditions, requirements and provisions with respect to the Conversion and the
transactions contemplated thereby imposed by the OTS, the Conversion
Regulations, the Commission, the 1933 Act and the regulations promulgated
thereunder, the 1934 Act and the regulations promulgated by the Commission
pursuant to the 1934 Act to be complied with subsequent to the Closing Date. The
Holding Company will comply with all provisions of all undertakings contained
in the Registration Statement.
(t) The Citizens Parties will not amend the Plan without notifying
the Agent prior thereto.
(u) The Holding Company shall provide the Agent with any information
necessary to allow the Agent to manage the allocation process in order to permit
the Holding Company to carry out the allocation of the Shares in the event of an
oversubscription, and such information shall be accurate and reliable in all
material respects.
16
(v) The Holding Company will not deliver the Shares until the
Citizens Parties have satisfied or caused to be satisfied each condition set
forth in Section 10 hereof, unless such condition is waived in writing by the
Agent.
(w) Immediately upon the Closing, (i) all of the issued and
outstanding shares of capital stock of the Bank shall be owned by the Holding
Company, (ii) the Holding Company shall have no direct subsidiaries other than
the Bank, and (iii) the Conversion shall have been effected in accordance with
all applicable statutes, regulations, decisions and orders; and all terms,
conditions, requirements and provisions with respect to the Conversion (except
those that are conditions subsequent) imposed by the Commission, the OTS or any
other governmental agency, if any, shall have been complied with by the Citizens
Parties in all material respects or appropriate waivers shall have been obtained
and all notice and waiting periods shall have been satisfied, waived or elapsed.
(x) Prior to the Closing Date, the Plan shall have been approved by
the voting members of the MHC and the stockholders of the Mid-Tier Holding
Company in accordance with the Plan and the Conversion Regulations and the
applicable provisions, if any, of the MHC's charter and bylaws.
(y) On or before the Closing Date, the Citizens Parties will have
used their best efforts to obtain approval for quotation of shares of the Common
Stock on the Nasdaq National Market System by the Closing Date and will use its
best efforts to maintain such quotation and will have completed all conditions
precedent to the Conversion specified in the Plan and the offer and sale of the
Shares will have been conducted in all material respects in accordance with the
Plan, the Conversion Regulations (except as modified or waived in writing by the
OTS) and with all other applicable laws, regulations, decisions and orders,
including all terms, conditions, requirements and provisions precedent to the
Conversion imposed upon any of the Citizens Parties by the OTS, the Commission
or any other regulatory authority and in the manner described in the Prospectus.
(z) The Holding Company shall notify the Agent when funds shall have
been received for the minimum number of Shares set forth in the Prospectus.
(aa) The officers and directors of the Citizens Parties shall not
sell or transfer any shares of common stock of the Mid-Tier Holding Company or
Common Stock of the Holding Company commencing on the date hereof and continuing
for a period of 90 days following the Closing Date (the "Restricted Period").
The Citizens Parties shall not assist such officers or directors in connection
with the sale or transfer of shares of common stock of the Mid-Tier Holding
Company or Common Stock of the Holding Company during the Restricted Period.
(bb) 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, none of the Citizens Parties will distribute any
prospectus, offering circular or other offering material in connection with the
offer and sale of the Shares.
17
(cc) 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, none of the Citizens Parties 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
Citizens Parties, taken as a whole.
Section 9. Payment of Expenses. Whether or not the Conversion is
-------------------
completed or the sale and exchange of the Shares by the Holding Company is
consummated, the Citizens Parties will pay for all their expenses incident to
the performance of this Agreement, including without limitation: (a) the
preparation and filing of the Application and Registration Statement; (b) the
preparation, printing, filing, delivery and mailing of the Registration
Statement, including the Prospectus, and all documents related to the Offerings
and proxy solicitation; (c) all filing fees and expenses in connection with the
qualification or registration of the Shares for offer and sale by the Holding
Company or the Bank under the securities or "Blue Sky" laws, including without
limitation filing fees, reasonable legal fees and disbursements of counsel in
connection therewith, and in connection with the preparation of a blue sky law
survey; (d) the filing fees of the NASD related to the Agent's fairness filing
under NASD Rule 2710 and the application of the Holding Company to list its
shares; (e) fees and expenses related to the preparation of the independent
appraisal; (f) fees and expenses related to auditing and accounting services;
(g) expenses relating to advertising, temporary personnel, investor meetings and
stock information center; (h) transfer agent fees and costs of preparation and
distribution of stock certificates; and (i) Nasdaq listing fees. The Citizens
Parties also agree to reimburse Agent for reasonable out-of-pocket expenses,
including legal fees and expenses, incurred by Agent in connection with the
services hereunder. Agent will not incur legal fees in excess of $ 35,000
(including counsel's out-of-pocket expenses) without the approval of the
Mid-Tier Holding Company. The Agent will not incur other out-of-pocket expenses
in excess of $15,000 without prior approval of the Mid-Tier Holding Company. In
the event that the Agent incurs any expenses on behalf of the Citizens Parties,
the Citizens Parties will pay or reimburse the Agent for such expenses
regardless of whether the Conversion is successfully completed, and such
reimbursements will not be included in the expense limitations set forth in the
following paragraph. The Agent will not incur any single expense of more than
$5,000 pursuant to this paragraph without the prior approval of the Mid-Tier
Holding Company, MHC or the Bank. The Citizens Parties acknowledge, however,
that such limitations may be increased by the mutual consent of the Mid-Tier
Holding Company and Agent in the event of delay in the Offering requiring the
Agent to utilize a Syndicated Community Offering, a delay as a result of
circumstances requiring material additional work by Agent or its counsel or an
update of the financial information in tabular form contained in the Prospectus
for a period later than March 31, 2002. Not later than two days prior to the
Closing Date, the Agent will provide the Bank with a detailed accounting of all
reimbursable expenses to be paid at the Closing.
Section 10. Conditions to the Agent's Obligations. The obligations of
-------------------------------------
the Agent hereunder and the occurrence of the Closing and the Conversion are
subject to the condition that all representations and warranties of the Citizens
Parties herein contained are, at and as of the
18
commencement of the Offerings and (except to the extent such representations and
warranties speak as of an earlier date) at and as of the Closing Date, true and
correct, the condition that the Citizens Parties shall have performed, in all
material respects, all of their obligations hereunder to be performed on or
before such dates and to the following further conditions:
(a) The Registration Statement shall have been declared effective by
the Commission, the Conversion Application and Holding Company Application shall
have been approved by the OTS and no stop order or other action suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act or proceedings therefor initiated or, to the knowledge of the Citizens
Parties, threatened by the Commission or any state authority and no order or
other action suspending the authorization for use of the Prospectus or the
consummation of the Conversion shall have been issued, or proceedings therefor
initiated or, to the knowledge of the Citizens Parties, threatened by the OTS,
the Commission, or any other governmental body.
(b) At the Closing Date, the Agent shall have received:
(1) The opinion, dated as of the Closing Date, of Xxxx Xxxxxx
Xxxxxxxx & Xxxxxx, P.C. and/or local counsel acceptable to the Agent,
in form and substance satisfactory to the Agent and counsel for the
Agent to the effect that:
(i) The Holding Company is a corporation duly organized
and validly existing and in good standing under the laws of the
State of Delaware, with corporate power and authority to own its
properties and to conduct the business currently conducted by
Mid-Tier Holding Company, as described in the Prospectus, and is
duly qualified to transact business and is in good standing in
Delaware and in each other jurisdiction in which the conduct of
its business requires such qualification, except where the
failure to qualify would not have a Material Adverse Effect.
(ii) On the date hereof, the Bank is a validly
existing federally chartered stock savings association, and
upon consummation of the Conversion, the Bank will continue to
be a validly existing federally chartered stock savings
association, with full power and authority to own its
properties and to conduct its business as described in the
Prospectus and to enter into this Agreement and perform its
obligations hereunder; the activities of the Bank as described
in the Prospectus are permitted by federal law and the rules,
regulations and practices of the FDIC and the OTS (or valid
waivers granted by the OTS from such rules, regulations and
practices); the issuance and sale of the capital stock of the
Bank to the Holding Company in the Conversion has been duly and
validly authorized by all necessary corporate action on the part
of the Holding Company and the Bank and, upon payment therefor
in accordance with the terms of the Plan, will be validly
issued, fully paid and nonassessable and will be owned of record
and beneficially by the Holding Company, free and clear of any
mortgage, pledge, lien, encumbrance, claim or restriction.
Similarly, any subsidiaries of the Bank are validly existing
corporations in good standing in the jurisdiction of
19
incorporation and authorized under state and applicable federal
law to conduct the businesses in which they now engage.
(iii) The activities of the Mid-Tier Holding Company,
the MHC and the Bank, as described in the Prospectus, are
permitted under applicable federal law (or valid waivers
granted by the OTS from such law). To such counsel's knowledge,
each of the MHC, the Mid-Tier Holding Company and the Bank has
obtained all licenses, permits, and other governmental
authorizations that are material for the conduct of its
of its business, and all such licenses, permits and other
governmental authorizations are in full force and effect, and
to such counsel's knowledge the Mid-Tier Holding Company and
the Bank comply therewith in all material respects.
(iv) The Bank is a member in good standing of the
Federal Home Loan Board of Atlanta. The Bank is an insured
depository institution under the provisions of the Federal
Deposit Insurance Act, as amended, and to such counsel's
knowledge, no proceedings for the termination or revocation of
the federal deposit insurance of the Bank are pending or
threatened.
(v) Upon consummation of the Conversion, (a) the
authorized, issued and outstanding capital stock of the
Holding Company will be within the range set forth in the
Prospectus under the caption "Capitalization," and no shares
of Common Stock have been or will be issued and outstanding
prior to the Closing Date (except for the shares issued upon
incorporation of the Holding Company); (b) the shares to be
subscribed for in the Offerings will have been duly and validly
authorized for issuance, and when issued and delivered by the
Holding Company pursuant to the Plan against payment of the
consideration calculated as set forth in the Plan, will be duly
and validly issued and fully paid and nonassessable; and (c) the
issuance of the Shares is not subject to preemptive rights under
the certificate of incorporation or bylaws of the Holding
Company, or arising or outstanding by operation of law or under
any contract, indenture, agreement, instrument or other document
known to such counsel, except for the subscription subscription
rights under the Plan. To such counsel's knowledge, knowledge,
upon issuance of the shares of Common Stock, good title to the
shares will be transferred from the Holding 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 Citizens Parties 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 contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Citizens
Parties; and this Agreement constitutes a valid, legal and
binding obligation of each of the Citizens Parties, enforceable
in accordance with its terms, except as rights to indemnity and
contribution thereunder may be limited under applicable law,
subject to the qualification that (i) enforcement
20
thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws (including the laws of fraudulent
conveyance) or judicial decisions affecting the enforceability
of creditors' rights generally, the rights of creditors of
savings banks or financial institutions, the accounts of which
are insured by the FDIC, and (ii) enforcement thereof is subject
to general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at
law) and to the effect of certain laws and judicial decisions
upon the availability of injunctive relief and enforceability of
equitable remedies, including the remedies of specific
performance and self-help.
(vii) The Plan has been duly adopted by the Board of
Directors of the MHC in the manner required by the Conversion
Regulations and the MHC's charter and bylaws. The Plan complies
in all material respects with the Conversion Regulations.
(viii) The Conversion Application and the Holding
Company Application have been approved by the OTS, and no
action has been taken and, to such counsel's knowledge, none
is pending or threatened to revoke such approval or to suspend
the offering or the use of the Prospectus, and subject to the
satisfaction of any conditions set forth in such approvals, no
further approval, registration, authorization, consent or other
order of any federal or state regulatory agency, public board or
body is required in connection with the execution and delivery
of this Agreement, the offer, sale and issuance of the 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.
(ix) The Registration Statement has become effective
under the 1933 Act and to such counsel's knowledge, no stop
order suspending the effectiveness of the Registration
Statement has been issued, or proceedings for that purpose have
been instituted or threatened by the Commission.
(x) The terms and provisions of the shares of Common
Stock conform to the description thereof contained in the
Registration Statement and the Prospectus, and the forms of
certificates proposed to be used to evidence the shares of
Common Stock are in due and proper form.
(xi) At the time the Conversion Application was
approved, the Conversion Application (as amended or
supplemented), complied as to form in all material respects
with the requirements of the Conversion Regulations and all
applicable laws, rules and regulations and decisions and orders
of the OTS, except as modified or waived in writing by the OTS
(other than the financial statements, notes to financial
statements, financial tables and other financial and statistical
data included therein and the appraisal valuation and the
business plan as to which counsel need express
21
no opinion). To such counsel's knowledge, no person has sought
to obtain regulatory or judicial review of the final action of
the OTS in approving the Applications.
(xii) At the time that the Registration Statement became
effective and as of the Closing Date, the Registration
Statement, including the Prospectus (as amended or supplemented)
(other than the financial statements, notes to financial
statements, financial tables or other financial and statistical
data included therein and the appraisal valuation and the
business plan as to which counsel need express no opinion),
complied as to form in all material respects with the
requirements of the 1933 Act and the rules and regulations
promulgated thereunder.
(xiii) To such counsel's knowledge, there are no legal or
governmental proceedings pending, or threatened (i) asserting
the invalidity of this Agreement, (ii) seeking to prevent the
Conversion or the offer, sale or issuance of the Shares, or
(iii) which are required to be disclosed in the Registration
Statement and Prospectus, other than those disclosed therein.
(xiv) The information in the Prospectus under the
captions "Supervision and Regulation," "Taxation," "Restrictions
on Acquisition of Citizens South Banking Corporation,"
"Description of Capital Stock of Citizens South Banking
Corporation," and "The 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 is accurate in all material
respects.
(xv) None of the Citizens Parties are required to be
registered as an investment company under the Investment
Company Act of 1940.
(xvi) None of the Citizens Parties is in violation of its
Certificate of Incorporation or its charter, as the case may be,
or its bylaws or, to such counsel's knowledge, any obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other
instrument filed as an exhibit to, or incorporated by reference
in, the Registration Statement, which violation would have a
Material Adverse Effect. In addition, the execution and delivery
of and performance under this Agreement by the Citizens Parties,
the incurrence of the obligations set forth herein and the
consummation of the transactions contemplated herein will not
result in (i) any violation of the provisions of the articles of
incorporation or charter, as the case may be, or the bylaws of
any of the Citizens Parties, (ii) any violation of any
applicable law, act, regulation, or to such counsel's knowledge,
order or court order, writ, injunction or decree, and (iii) any
violation of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement,
note, lease or other instrument filed as an exhibit to, or
incorporated by reference in, the Registration Statement or
otherwise known by such counsel which should have otherwise
been filed as an
22
exhibit to the Registration Statement, which violation would
have a Material Adverse Effect.
(xvii) To such counsel's knowledge, the Citizens Parties
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 Citizens Parties are in all material respects complying
therewith.
(xviii) The Holding Company's Articles of Incorporation
and Bylaws comply in all material respects with the laws of the
State of Delaware. The Bank's respective Charter and Bylaws
comply in all material respects with federal law.
(xix) To such counsel's knowledge, none of the Citizens
Parties 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.
(xx) To such counsel's 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.
(xxi) CSIS has been duly incorporated and is validly
existing as a corporation under the laws of the jurisdiction of
its incorporation, has full corporate power and authority to
own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the
Prospectus and is duly qualified as a foreign corporation to
transact business in each jurisdiction in which the failure to
so qualify would have a material adverse effect upon the
financial condition, results of operations or business of the
Company, the Bank and CSIS, considered as one enterprise; the
activities of CSIS, as described in the Registration Statement
and the Prospectus, are permitted to subsidiaries of a Delaware
corporation and of a federally-chartered stock savings bank
under the rules, regulations, policies and practices of the OTS
and all other federal banking or non-federal governmental
agencies and regulatory authorities having jurisdiction
thereover; to the best of such counsel's knowledge, free and
clear of any material security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
23
The Agent's counsel may rely for purposes of its own opinion on the
opinion of Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C. whose opinion shall expressly
authorize such reliance. The opinion may be limited to matters governed by the
laws of the United States and the corporate laws of the State of Delaware. In
rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the United States, to the
extent such counsel deems proper and specified in such opinion, upon the opinion
of counsel reasonably acceptable to the Agent, as long as such other opinion
indicates that the Agent may rely on the opinion, and (B) as to matters of fact,
to the extent such counsel deems proper, on certificates of responsible officers
of the Citizens Parties and public officials; provided copies of any such
opinion(s) or certificates of public officials are delivered to Agent together
with the opinion to be rendered hereunder by special counsel to the Citizens
Parties. In rendering such opinion, all statements contained therein "to our
knowledge" or "to our attention" or "known to us" means the knowledge, following
reasonable investigation, of the attorneys who have worked on the transactions
contemplated herein. The opinion of such counsel for the Citizens Parties shall
state that it has no reason to believe that the Agent is not reasonably
justified in relying thereon.
(2) A letter of Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C. which
shall state that during the preparation of the Registration Statement
and the Prospectus, Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C. participated in
conferences with certain officers of and other representatives of the
Citizens Parties, counsel to the Agent, representatives of the
independent public accountants for the Citizens Parties and
representatives of the Agent at which the contents of the Registration
Statement and the Prospectus and related matters were discussed and has
considered the matters required to be stated therein and the statements
contained therein and, although (without limiting the opinions provided
pursuant to Section 10(b)(1)), Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C. has
not independently verified the accuracy, completeness or fairness of
the statements contained in the Registration Statement and Prospectus,
on the basis of the foregoing, nothing has come to the attention of
Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C. that caused Xxxx Xxxxxx Xxxxxxxx &
Xxxxxx, P.C. to believe that the Registration Statement at the time it
was declared effective by the Commission and as of the date of such
letter, contained or contains any untrue statement of a material fact
or omitted 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 (it being understood that
counsel need express no comment or opinion with respect to statements,
notes to financial statements, schedules and other financial and
statistical data included, or statistical or appraisal methodology
employed, in the Registration Statement or Prospectus, the appraisal
valuation or the business plan).
(3) A Blue Sky Memorandum from Xxxx Xxxxxx Xxxxxxxx & Xxxxxx,
P.C. relating to the offering, including Agent's participation therein,
and should be furnished to Agent with a copy thereof addressed to Agent
or upon which Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C. shall state Agent may
rely. The Blue Sky Memorandum will relate to the necessity of obtaining
or confirming exemptions, qualifications or the registration of the
common stock under applicable state securities law.
24
(c) Concurrently with the execution of this Agreement, the Agent
shall receive a letter from Cherry, Bekaert & Holland, L.L.P., dated the date
hereof and addressed to the Agent, such letter (i) confirming that Cherry,
Bekaert & Holland, L.L.P. is a firm of independent public accountants within the
meaning of the 1933 Act and the regulations promulgated thereunder, and stating
in effect that in Cherry, Bekaert & Holland, L.L.P.'s opinion the consolidated
financial statements of the Mid-Tier Holding Company included in the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1934 Act and the related rules and
regulations of the Commission thereunder; (ii) stating in effect that, on the
basis of certain agreed upon procedures (but not an audit examination in
accordance with generally accepted auditing standards) consisting of a review
(in accordance with Statement of Auditing Standards No. 71) of the latest
available unaudited consolidated interim financial statements of the Mid-Tier
Holding Company prepared by the Citizens Parties, a reading of the minutes of
the meetings of the Board of Directors, Executive Committee and stockholders and
Audit Committee of the Mid-Tier Holding Company and the Bank and consultations
with officers of the Mid-Tier Holding Company and the Bank responsible for
financial and accounting matters, nothing came to their attention which caused
them to believe that: (A) such unaudited consolidated financial statements
included in the Prospectus are not in conformity with 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 consolidated financial statements
included in the Prospectus to a specified date not more than five business days
prior to the date of the Prospectus, there was any material increase in
borrowings (defined as securities sold under agreements to repurchase and any
other form of debt other than deposits), or non-performing loans, special
mention loans or decrease in the deposits or loan allowance, total assets,
stockholders' equity or there was any change in common stock outstanding
(other than for stock option plans) at the date of such letter as compared with
amounts shown in the latest unaudited statement of condition or there was any
decrease in net income, non-interest income, provision for loan losses or net
income after provision or increase in non-interest expense of the Mid-Tier
Holding Company for the period commencing immediately after the period covered
by the latest unaudited income statement and ended not more than five business
days prior to the date of the Prospectus as compared to the corresponding period
in the preceding year; and (iii) stating that, in addition to the audit
examination referred to in its opinion included in the Prospectus and the
performance of the procedures referred to in clause (ii) of this subsection (c),
they have compared with the general accounting records of the Mid-Tier Holding
Company, which are subject to the internal controls of the accounting system of
the Mid-Tier Holding Company and other data prepared by the Citizens Parties
from 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 (subject to rounding).
(d) At the Closing Date, the Agent shall receive a letter from
Cherry, Bekaert & Holland, L.L.P. dated the Closing Date, addressed to the
Agent, confirming the statements made by its letter delivered by it pursuant to
subsection (c) of this Section 10, the "specified date" referred to in clause
(ii)(B) thereof to be a date specified in such letter, which shall not be more
than three business days prior to the Closing Date.
25
(e) At the Closing Date, counsel to the Agent shall have been
furnished with such documents and opinions as counsel for the Agent may require
for the purpose of enabling them to advise the Agent with respect to the
issuance and sale of the Common Stock as herein contemplated and related
proceedings, or in order to evidence the accuracy of any of the representations
and warranties, or the fulfillment of any of the conditions herein contained.
(f) At the Closing Date, the Agent shall receive a certificate of
the Chief Executive Officer and Chief Financial Officer of each of the Citizens
Parties, dated the Closing Date, to the effect that: (i) they have examined the
Registration Statement and at the time the Registration Statement became
authorized for final use, the Prospectus did not 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; (ii) there has not been, since the respective
dates as of which information is given in the Registration Statement, any
Material Adverse Effect otherwise than as set forth or contemplated in the
Registration Statement; (iii) the representations and warranties contained in
Section 6 of this Agreement are true and correct with the same force and effect
as though made at and as of the Closing Date; (iv) the Citizens Parties have
complied in all material respects with all material agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the Closing
Date including the conditions contained in this Section 10; (v) no stop order
has been issued or, to their knowledge, is threatened, by the Commission or any
other governmental body; (vi) no order suspending the Offering, the Conversion,
the acquisition of all of the shares of the Bank by the Holding Company, the
transactions required under the Plan to consummate the Conversion or the
effectiveness of the Prospectus has been issued and to their knowledge, no
proceedings for any such purpose have been initiated or threatened by the OTS,
the Commission, or any other federal or state authority; (vii) to their
knowledge, no person has sought to obtain regulatory or judicial review of the
action of the OTS in approving the Plan or to enjoin the Conversion, and (viii)
that the officers and directors of the Citizens Parties have agreed to abide by
the restrictions on the sale of Common Stock set forth in Section 8(aa).
(g) At the Closing Date, the Agent shall receive a letter from RP
Financial, LC, dated as of the Closing Date, (i) confirming that said firm is
independent of the Citizens Parties and is experienced and expert in the area of
corporate appraisals, (ii) stating in effect that the Appraisal complies in all
material respects with the applicable requirements of the Conversion
Regulations, and (iii) further stating that its opinion of the aggregate pro
forma market value of the Citizens Parties, as converted, expressed in the
appraisal as most recently updated, remains in effect.
(h) None of the Citizens Parties shall have sustained, since the
date of the latest financial statements included in the Registration Statement
and 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 in the Registration Statement and the Prospectus, and since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there shall not have been any Material Adverse
Effect, is in the Agent's reasonable judgment sufficiently material and adverse
as to make it impracticable or inadvisable to proceed with the Offerings or the
delivery of the Shares on the terms and in the manner contemplated in the
Prospectus.
26
(i) Prior to and at the Closing Date, in the reasonable opinion of
the Agent there shall have been no material adverse change in the financial
condition or in the earnings, business affairs or prospects of any of the
Citizens Parties independently, or the Citizens Parties taken as a whole, from
and as of the latest dates as of which such condition is set forth in the
Prospectus, except as referred to therein.
(j) At or prior to the Closing Date, the Agent shall receive (i) a
copy of the Conversion Application and a copy of the letter from the OTS
approving the Conversion Application, (ii) a copy of the order from the
Commission declaring the Registration Statement effective, (iii) an executed
copy of the certificate of incorporation of the Holding Company, (iv) a copy of
the letter from the OTS approving the Holding Company Application, (v) a
certificate from the FDIC evidencing the Bank's insurance of accounts, and (vi)
any other documents that 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 American 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
other than temporary trading halts or limitation (A) imposed as a result of
intraday changes in the Dow Xxxxx Industrial Average, (B) lasting no longer than
until the regularly scheduled commencement of trading on the next succeeding
business-day and (C) which when combined with all other such halts occurring
during the previous five (5) business days, total less than two (2); (ii) a
general moratorium on the operations of federally-insured financial institutions
or a general moratorium on the withdrawal of deposits from commercial banks or
other federally-insured financial institutions declared by either federal or
state authorities; or (iii) there shall not have occurred any material adverse
change in the financial markets in the United States or elsewhere or any
outbreak of hostilities or escalation thereof or other calamity or crisis,
including, without limitation, terrorist activities after the date hereof, the
effect of which, in the judgment of the Agent, is so material and adverse as to
make it impracticable to market the Shares or to enforce contracts, including
subscriptions or purchase orders, for the sale of the Shares.
(l) All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Agent and to counsel for the Agent.
Any certificate signed by an officer of the Mid-Tier Holding Company, the
Holding Company or the Bank and delivered to the Agent or to counsel for the
Agent shall be deemed a representation and warranty by the Mid-Tier Holding
Company, the Holding Company or the Bank, as the case may be, to the Agent as to
the statements made therein.
Section 11. Indemnification.
---------------
(a) The Citizens Parties jointly and severally agree to indemnify
and hold harmless the Agent, its officers, directors, agents, attorneys,
servants and employees 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
27
limited to settlement expenses, subject to the limitation set forth in the last
sentence of subsection (c) below), joint or several, that the Agent or any of
such officers, directors, agents, attorneys, servants, employees and controlling
Persons (collectively, the "Related Persons") may suffer or to which the Agent
or the Related Persons may become subject under all applicable federal and state
laws or otherwise, and to promptly reimburse the Agent and any Related Persons
upon written demand for any reasonable expenses (including reasonable fees and
disbursements of counsel and Agent's time spent according to normal hourly
rates) incurred by the Agent or any Related Persons in connection with
investigating, preparing 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 Prospectus (or any
amendment or supplement thereto), the Applications, or other instrument or
document of the Citizens Parties or based upon written information supplied by
any of the Citizens Parties filed in any state or jurisdiction to register or
qualify any or all of the Shares under the securities laws thereof
(collectively, the "Blue Sky Applications"), or any application or other
document, advertisement, or communication ("Sales Information") prepared, made
or executed by or on behalf of any of the Citizens Parties with its consent or
based upon information furnished by or on behalf of any of the Citizens Parties,
in order to qualify or register the Shares under the securities laws thereof,
(ii) 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 which they were made, not misleading; (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), the Prospectus
(or any amendment or supplement thereto), the Applications, any Blue Sky
Applications or Sales Information or other documentation distributed in
connection with the Offerings; or (iv) result from any claims made with respect
to the accuracy, reliability and completeness of the records identifying the
Eligible Account Holders and Supplemental Eligible Account Holders or Other
Members or for any denial or reduction of a subscription or order to purchase
Common Stock, whether as a result of a properly calculated allocation pursuant
to the Plan or otherwise, based upon such records; provided, however, that no
indemnification is required under this subsection (a) to the extent such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue material statements or alleged untrue material statements in, or material
omission or alleged material omission from, the Registration Statement (or any
amendment or supplement thereto) or the Prospectus (or any amendment or
supplement thereto), the Applications, the Blue Sky Applications or Sales
Information or other documentation distributed in connection with the Conversion
made in reliance upon and in conformity with information furnished to the
Citizens Parties by the Agent or its representatives (including counsel) with
respect to the Agent expressly for use in the Registration Statement (or any
amendment or supplement thereto) or Prospectus (or any amendment or supplement
thereto) under the caption "The Conversion -- Plan of Distribution; Selling
Agent Compensation" except for information derived from the Prospectus. Provided
further, that the Citizens Parties will not be responsible for any loss,
liability, claim, damage or expense to the extent a court of competent
jurisdiction finds they result primarily from material oral misstatements by the
Agent to a purchaser or prospective purchaser of Shares which are not based upon
information in the Registration Statement or Prospectus, or from actions taken
or omitted to be taken by the Agent in bad faith or
28
from the Agent's gross negligence or willful misconduct and the Agent agrees to
repay to the Citizens Parties any amounts advanced to it by the Citizens Parties
in connection with matters as to which it is found by a court of competent
jurisdiction not to be entitled to indemnification hereunder.
(b) The Agent agrees to indemnify and hold harmless the Citizens
Parties, their directors and officers, agents, attorneys, servants and employees
and each person, if any, who controls any of the Citizens Parties 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, subject to the limitation set forth in the
last sentence of subsection (c) below), 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
Citizens Parties and any such persons upon written demand for any reasonable
expenses (including out-of-pocket expenses, fees and disbursements of counsel)
incurred by them in connection with investigating, preparing or defending any
actions, proceedings or claims (whether commenced or threatened) to the extent
such losses, claims, damages, liabilities or actions 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 Applications or any Blue Sky Applications or Sales Information or
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; provided, however, that the Agent's obligations under this
Section 11(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 Applications, Registration Statement
(or any amendment or supplement thereto) or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with information
furnished to the Citizens Parties by the Agent or its representatives (including
counsel) expressly for use under the caption "The Conversion - Plan of
Distribution; Selling Agent Compensation."
(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 11,
Section 12 or otherwise, unless the failure to give such notice promptly results
in material prejudice to the indemnifying party. 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 the defense of such action with counsel chosen by it reasonably
acceptable to 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 one separate firm of attorneys
(unless an indemnified
29
party or parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or in addition to those of
other indemnified parties) for all indemnified parties 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. No indemnifying party shall be liable for any
settlement of any action, proceeding or suit, which settlement is effected
without its prior written consent. Neither the Citizens Parties nor the Agent
shall, without the written consent of the other, settle or compromise any claim
against them or it based upon circumstances giving rise to an indemnification
claim against the other party hereunder unless such settlement or compromise
provides that the indemnified party shall be unconditionally and irrevocably
released from all liability in respect to such claim.
(d) The agreements contained in this Section 11 and in Section 12
hereof and the representations and warranties of the Citizens Parties 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, controlling persons, agents, attorneys, servants or employees or by
or on behalf of any of the Citizens Parties or any officers, directors,
controlling persons, agents, attorneys , servants or employees of any of the
Citizens Parties; (ii) delivery of and payment hereunder for the Shares; or
(iii) any termination of this Agreement. Notwithstanding the prior sentence,
Sections 11 and 12 hereof are subject to and limited by Section 23A of the
Federal Reserve Act, as applicable.
Section 12. Contribution.
------------
(a) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 11 is due in
accordance with its terms but is found in a final judgment by a court to be
unavailable from the Citizens Parties or the Agent, the Citizens Parties and the
Agent shall contribute to the aggregate losses, claims, damages and liabilities
of the nature contemplated by such indemnification (including any investigation,
legal and other expenses incurred in connection therewith and any amount paid in
settlement of any action, suit, or proceeding of any claims asserted, but after
deducting any contribution received by the Citizens Parties or the Agent from
persons other than the other party thereto, who may also be liable for
contribution) in such proportion so that (i) the Agent is responsible for that
portion represented by the percentage that the fees paid to the Agent pursuant
to Section of this Agreement (not including expenses) ("Agent's Fees), less any
portion of Agent's Fees paid by Agent to Assisting Brokers, bear to the total
proceeds received by the Citizens Parties from the sale of the Shares in the
Offering, net of all expenses of the Offering, except Agent's fees and (ii) the
Citizens Parties shall be responsible for the balance. If, however, the
allocation provided above is not permitted by applicable law or if the
indemnified party failed to give the notice required under Section 11 above,
then each indemnifying party shall contribute to such amount paid or payable to
such indemnified party in such proportion as is appropriate to reflect not only
such relative fault of the Citizens Parties 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 thereof), but also the relative benefits received by the Citizens
Parties on the one hand and the Agent on the other from the Offering, as well as
any other relevant equitable considerations. The relative benefits received
30
by the Citizens Parties on the one hand and the Agent on the other hand shall be
deemed to be in the same proportion as the total proceeds from the Offering,
except Agent's fees, net of all expenses of the Offering, received by the
Citizens Parties bear, with respect to the Agent, to the total fees (not
including expenses) received by the Agent less the portion of such fees paid by
the Agent to Assisting Brokers. 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 Citizens Parties 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 Citizens Parties and the Agent agree that it would not be just and
equitable if contribution pursuant to this Section 12 were determined by
pro-rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 12.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or action, proceedings or claims in respect
thereof) referred to above in this Section 12 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with 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
which in the aggregate exceeds the amount paid (excluding reimbursable expenses)
to the Agent under this Agreement less the portion of such fees paid by the
Agent to Assisting Brokers. It is understood and agreed 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 0000
Xxx) shall be entitled to contribution with respect to any loss or liability
arising from such misrepresentation from any person who was not found guilty of
such fraudulent misrepresentation. The duties, obligations and liabilities of
the Citizens Parties and the Agent under this Section 12 and under Section 11
shall be in addition to any duties, obligations and liabilities which the
Citizens Parties and the Agent may otherwise have. For purposes of this Section
12, each of the Agent's and the Citizens Parties' officers, directors and,
controlling persons within the meaning of the 1933 Act and the 1934 Act shall
have the same rights to contribution as the Citizens Parties and the Agent. 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
12, 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 12.
Section 13. Survival.
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(a) All representations, warranties and indemnities and other
statements contained in this Agreement (and in Paragraph 11 of the Letter
Agreement), or contained in certificates of officers of the Citizens Parties or
the Agent submitted pursuant hereto, shall remain operative and 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 or its controlling persons,
or by or on behalf of the Citizens Parties and shall survive the issuance of the
Shares, and any legal representative, successor or assign of the
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Agent, any of the Citizens Parties, and any indemnified person shall be entitled
to the benefit of the respective agreements, indemnities, warranties and
representations.
(b) The provisions of Paragraph 10 of the Letter Agreement,
"Availability of `Stars' Program," shall survive the issuance of the Shares (but
not any termination or cancellation of this Agreement) for a period of one (1)
year, and any legal representative, successor or assign of the Agent, and any of
the Citizens Parties shall be entitled during such period to the benefit of the
agreements contained therein.
Section 14. Termination. Agent may terminate this Agreement by giving
-----------
the notice indicated below in this Section at any time after this Agreement
becomes effective as follows:
(a) In the event (i) the Plan is abandoned or terminated by the
Holding Company; (ii) the Holding Company fails to consummate the sale of the
minimum number of Shares prior to ___________, 2003 in accordance with the
provisions of the Plan or as required by the Conversion Regulations and
applicable law; or (iii) immediately prior to commencement of the Offering, the
Agent terminates this relationship because in its opinion, which shall have been
formed in good faith after reasonable determination and consideration of all
relevant factors, there has been a failure to satisfactorily disclose all
relevant information in the Prospectus or the existence of market conditions
which might render the sale of the Shares inadvisable, this Agreement shall
terminate and the Citizens Parties shall refund 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 in accordance with Section 2
hereof and any such termination shall be without liability of any party to any
other party except as otherwise provided in Sections 2, 4, 9, 11 and 12 hereof.
(b) If any of the conditions specified in Section 10 hereof shall
not have been fulfilled when and as required by this Agreement, or by
_____________, 2003, or waived in writing by the Agent, this Agreement and all
of the Agent's obligations hereunder may be canceled by the Agent by notifying
the Bank of such cancellation in writing 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, 4, 9, 11 and 12 hereof.
(c) If Agent elects to terminate this Agreement as provided in this
Section, the Mid-Tier Holding Company and the MHC shall be notified by the Agent
as provided in Section 15 hereof.
(d) If this Agreement is terminated in accordance with the
provisions of this Agreement, the Agent shall retain the advisory and management
fee paid to it pursuant to Section 4 and the Citizens Parties shall reimburse
the Agent for any of its other actual, accountable, reasonable out-of-pocket
expenses pursuant to Section 9, including without limitation, communication,
legal and travel expenses.
Section 15. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to Agent shall be
directed to Xxxxx, Xxxxxxxx & Xxxxx, Inc., 000
00
Xxxxxxxxx Xxxxx, Xxxxxx, Xxxx 00000, Attention: Xx. Xxxxxx Xxxxxx; notices to
the Citizens Parties shall be directed to Citizens South Banking Corporation,
X.X. Xxx 0000, Xxxxxxxx, Xxxxx Xxxxxxxx 00000, Attention: Xxx X. Xxxxx,
President and Chief Executive Officer (with a copy to Xxxx Xxxxxx Xxxxxxxx &
Xxxxxx, P.C., 0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, Attention:
Xxxxxx X. Xxxxxxxx, Esq.)
Section 16. Parties. This Agreement shall inure to the benefit of and
-------
be binding upon the Agent and the Citizens Parties, and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
parties hereto and their respective successors and the controlling persons and
officers and directors referred to in Sections 11 and 12 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provisions herein contained. It is understood
and agreed that this Agreement is the exclusive agreement among the parties,
supersedes any prior Agreement among the parties and may not be varied except by
a writing signed by all parties, except for Paragraphs 4, 10, 11 and 17 of the
Letter Agreement, which are not hereby superseded.
Section 17. Partial Invalidity. In the event that any term, provision
------------------
or covenant herein or the application thereof to any circumstances 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 circumstance 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 18. Construction and Waiver of Jury Trial. This Agreement
-------------------------------------
shall be construed in accordance with the laws of the State of New York. Each of
the Citizens Parties and the Agent waives all right to trial by jury in any
action, proceeding, claim or counterclaim (whether based on contract, tort or
otherwise) related to or arising out of this Agreement.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between you and us
in accordance with its terms.
Very truly yours,
CITIZENS SOUTH HOLDINGS, MHC
By: _____________________________________
Xxx X. Xxxxx
President and Chief Executive Officer
CITIZENS SOUTH BANKING CORPORATION
By: _____________________________________
Xxx X. Xxxxx
President and Chief Executive Officer
CITIZENS SOUTH BANKING CORPORATION (New)
By: _____________________________________
Xxx X. Xxxxx
President and Chief Executive Officer
CITIZENS SOUTH BANK
By: _____________________________________
Xxx X. Xxxxx
President and Chief Executive Officer
The foregoing Agency Agreement is
hereby confirmed and accepted as
of the date first set forth above.
XXXXX, XXXXXXXX & XXXXX, INC.
By: ________________________________
Xxxxxx X. Xxxxxx III
Managing Director
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