[FORM OF]
MSB FINANCIAL CORP.
(a federal stock corporation)
up to 2,199,375 Shares
(subject to increase up to 2,529,281 shares)
COMMON SHARES
($.10 Par Value)
Subscription Price $10.00 Per Share
AGENCY AGREEMENT
_______________, 2006
Keefe, Bruyette & Woods, Inc.
211 Bradenton Drive
Dublin, Ohio 43017-5034
Ladies and Gentlemen:
MSB Financial Corp.,
a federal corporation (the "Company") and the
wholly-owned subsidiary of MSB Financial, MHC, a federal mutual holding
company
(the "MHC"), and the mid-tier holding company for all of the
outstanding capital
stock of Millington
Savings Bank, a New Jersey-chartered stock savings bank
located in Millington,
New Jersey, (the "Bank"), deposit accounts in which are
insured by the Federal Deposit Insurance Corporation ("FDIC"), hereby confirms
its agreement with Keefe, Bruyette & Woods, Inc. (the "Agent")
as follows:
Section 1. The
Offering. The Company,
in accordance with a plan of
stock issuance
adopted by the Board
of Directors, (the
"Plan") will offer and
sell up to 2,199,375
shares (subject to increase up to 2,529,281) of its common
stock, $.10 par
value per share (the "Shares" or "Common Shares"), in a
subscription offering
(the "Subscription
Offering") to (1)
depositors of the
Bank with Qualifying
Deposits (as defined in the Plan) as of June 30,
2005
("Eligible Account Holders"), (2) the employee stock ownership
plan established
by either the Bank or the Company (the "ESOP"), and (3) depositors of the Bank
with Qualifying
Deposits as of September 30, 2006 ("Supplemental Eligible
Account Holders").
Subject to the prior subscription rights of the above-listed
parties, the Company
may offer for sale in a community offering (the "Community
Offering" and when
referred to together with or subsequent to the Subscription
Offering, the
"Subscription and Community Offering") the Shares not
subscribed
for or ordered in the Subscription Offering to members of the general
public to
whom a copy of the
Prospectus (as
hereinafter
defined) is
delivered with a
preference given
first to natural persons who are residents of Morris and
Somerset Counties, New
Jersey. It is anticipated that shares not subscribed for
in the Subscription and Community Offering may be offered to certain
members of
the general public on a best efforts basis through a selected
dealers agreement
(the "Syndicated
Community Offering")
(the Subscription
Offering, Community
Offering and
<PAGE>
Syndicated Community
Offering are collectively referred to as the
"Offering").
It is acknowledged that the purchase of Shares in the Offering is
subject to the
maximum and minimum
purchase limitations
as described in the Plan and that the
Company may reject, in
whole or in part, any
orders received in the
Community
Offering or Syndicated Community Offering. The Common Shares
offered for sale in
the Offering
will represent a minority ownership interest of 45% of the
Company's total outstanding Common Shares.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (File No.
__________)
(the
"Registration Statement"), containing a prospectus relating to the
Offering, for
the registration
of the Shares under the Securities Act of 1933 (the "1933
Act"), and has filed
such amendments
thereof and such amended prospectuses as
may have been required
to the date hereof.
The term "Registration
Statement"
shall include any documents incorporated by reference therein
and all financial
schedules and exhibits thereto, as amended, including
post-effective amendments.
The prospectus,
as amended, on file with the Commission at the time the
Registration Statement
initially became effective is hereinafter
called the
"Prospectus," except
that if any Prospectus is filed by the Company pursuant to
Rule 424(b) or (c) of the rules and regulations of the Commission
under the 1933
Act (the "1933 Act
Regulations")
differing from the
prospectus on file at the
time the Registration Statement initially became effective, the term
"Prospectus" shall
refer to the prospectus filed pursuant to Rule 424(b) or (c)
from and after the time said prospectus is filed with the
Commission.
In accordance
with
12 C.F.R. Part 575 (the "Reorganization
Regulations"), the
Company has filed with the OTS a Form MHC-2 Application for
Approval of a Minority
Stock Issuance by a Subsidiary of a Mutual Holding
Company ("MHC-2
Application"),
including the Prospectus and the Valuation
Appraisal Report
prepared by RP Financial, LC (the "Appraisal") and has filed
such amendments
thereto as may have been required by the OTS. The MHC-2
Application has been
approved by the OTS
and the related
Prospectus has
been
authorized for use by the OTS.
Section 2. Retention of Agent; Compensation; Sale and Delivery of the
Shares. Subject to the terms and conditions herein set forth, the
Company hereby
appoints the Agent as its exclusive financial advisor and marketing
agent (i) to
utilize its best
efforts to
solicit subscriptions for Common Shares and to
advise and assist the Company with respect to the Company's sale of the Shares
in the Offering, and
(ii) to participate in the Offering in the areas of market
making, research coverage and in syndicate formation (if
necessary).
On the basis of the representations, warranties, and agreements
herein
contained, but subject
to the terms and conditions herein set forth, the Agent
accepts such
appointment and agrees
to consult with and advise the Company and
the Bank as to the
matters set forth in
the letter agreement,
dated June 26,
2006, between the
Company and the Agent (a copy of which is attached hereto as
Exhibit A). It is
acknowledged
by the Company that the Agent shall not be
required to purchase
any Shares or be
obligated to take any action which is
inconsistent with all applicable laws, regulations, decisions or
orders.
The obligations of the
Agent pursuant to this
Agreement (other than
those set forth in Section 2(a) and (c) hereof) shall terminate
upon termination
of the Offering, but
in no event later than 45 days after the completion of the
Subscription Offering
(the "End Date").
All fees or
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<PAGE>
expenses due to the
Agent but unpaid
will be payable to the
Agent in next day
funds at the earlier of the Closing Date (as hereinafter defined) or the End
Date. In the event the Offering is extended beyond the End Date,
the Company and
the Agent may agree to renew this Agreement under mutually
acceptable terms.
In the event the
Company is
unable to sell a minimum of 1,625,625
Shares within the period herein provided, this Agreement shall
terminate and the
Company shall refund
to any persons who have subscribed for any of the Shares
the full amount which it may have received from them plus accrued
interest, as
set forth in the
Prospectus; and none
of the parties to this
Agreement shall
have any obligation to the other parties hereunder, except as set forth in this
Section 2 and in
Sections 6, 8 and 9
hereof. In the
event the Offering is
terminated for any
reason not
attributable to the
action or inaction
of the
Agent, the
Agent shall be paid the fees due to the date of such
termination
pursuant to subparagraphs (a) and (d) below.
If all conditions
precedent to the sale of all Shares required by the
Plan to be sold, are
satisfied, the Company
agrees to issue the Shares sold in
the Offering and to
release for delivery
certificates
for such Shares on
the
Closing Date (as
hereinafter
defined) against payment to the Company by any
means authorized by the Plan; provided, however, that no funds
shall be released
to the Company until
the conditions
specified in Section 7 hereof shall have
been complied with to the reasonable satisfaction of the Agent and its
counsel.
The release of Shares against payment therefor shall be made on a date
and at a
place acceptable to the Company and the Agent. Certificates for shares shall
be
delivered directly to
the purchasers in accordance with their directions. The
date upon which the
Company shall
release or deliver
the Shares
sold in the
Offering, in accordance with the terms herein, is called the
"Closing Date."
The Agent shall
receive the following
compensation
for its services
hereunder:
(a)
A management fee of
$25,000 payable in
four consecutive
monthly
installments of $6,250
commencing with the
adoption of the Plan. This
fee shall be due as it is earned and shall be non-refundable.
(b) A success
fee upon completion of the Offering of 1.00% of the
aggregate purchase
price of the Common Shares sold in the Subscription
Offering and
Community Offering excluding shares purchased by the
Bank's officers, directors, or employees (or members of their
immediate
family) or their
IRAs, or the ESOP, tax qualified or stock based
compensation plans or similar plans created by the Bank for some or
all
of its directors
or employees. The management fee will be applied
against the success fee.
(c) If any of the Common Shares remain available after the
Subscription
Offering, at the
request of the Company, the Agent will seek to form a
syndicate of registered broker-dealers ("Selected Dealers") to assist
in the sale of such Common Shares on a best efforts basis, subject to
the terms and conditions set forth in the selected dealers agreement.
The Agent will
endeavor to
distribute
the Common
Shares among the
Selected Dealers
in a fashion which best meets the distribution
objectives of the Bank
and the Plan. The
Agent will be paid a fee not
to exceed 5.5% of the
aggregate Purchase
Price of the Shares
sold by
the Selected Dealers. The Agent will pass onto the Selected Dealers
who
assist in the Syndicated Community Offering an amount
competitive with
gross underwriting
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<PAGE>
discounts charged at
such time for comparable amounts of stock sold at
a comparable price
per share in a similar
market environment. Fees
with respect to
purchases effected
with the assistance of Selected
Dealers other than the
Agent shall be transmitted by the Agent to such
Selected Dealers.
The decision to utilize Selected Dealers will be
made by the Company
upon consultation
with the Agent.
In the event,
with respect to any
stock purchases,
fees are paid
pursuant to this
subparagraph 2(c),
such fees shall be in
lieu of, and not in addition
to, payment pursuant to paragraph 2(b).
(d) The Company shall reimburse the Agent for reasonable
out-of-pocket
expenses, including costs of travel, meals and lodging, photocopying,
telephone, facsimile, couriers not to exceed $20,000. In addition,
the
Company will
reimburse the Agent for legal fees paid
to the Agent's
legal counsel
not to exceed
$40,000 and
expenses of
Agent's legal
counsel not to exceed
$5,000. The Company
will bear the expenses of
the Offering
customarily
borne by issuers including, without
limitation, regulatory
filing fees, SEC, "Blue Sky," and NASD
filing
and registration
fees; the fees of the Company's accountants,
attorneys, appraiser,
transfer agent and
registrar, printing, mailing
and marketing expenses
associated with
the reorganization; and the
fees set forth under this Section 2.
Additional Services.
Agent further agrees to provide general financial
advisory assistance
to the Company and the Bank for a period of three
years
following completion
of the Offering,
including formation of a dividend policy
and share repurchase program, assistance with shareholder reporting and
shareholder relations
matters, general advice on mergers and
acquisitions and
other related financial matters, without the payment by the Company
and the Bank
of any fees in
addition to those
set forth in this Section 2 hereof. If,
however, a specific
buy side assignment
were to develop,
Agent would look
to
develop a separate and specific engagement letter tailored to such a
transaction, while
simultaneously maintaining the elements of this Agreement in
good standing.
As part of the post-Offering financial advisory services, Agent will
specifically conduct the following:
o
assistance with financial modeling
o
assistance with the formation of dividend policy
o
assistance with the formation of a share repurchase program
o
assistance with shareholder reporting and shareholder
relations
matters
o general
advice on mergers
and acquisitions and other related
financial matters, including updating the Company on the merger
&
acquisition
market with
specific attention being paid to
comparable
transactions in
terms of charter, size, region,
capital levels and
profitability.
Such updates will
serve as a
benchmark for understanding how merger and acquisition pricing
is
influenced by various
profitability and
efficiency metrics
and
will serve to keep the Company focused on continuing to achieve
further franchise value.
4
<PAGE>
Full payment of Agent's actual and accountable expenses,
advisory fees
and compensation
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
Offering.
Section 3. Sale and Delivery of Shares. If all conditions
precedent to
the sale of all Shares
required by the Plan to be sold,
are satisfied, the
Company agrees to issue, or have issued, the Shares sold in the Offering
and to
release for delivery
certificates
for such Shares on the
Closing Date against
payment to the Company by any means authorized by the Plan;
provided, however,
that no funds shall be released to the Company until the conditions
specified in
Section 7 hereof shall have been complied with to the reasonable
satisfaction of
the Agent and its counsel. The release of Shares against
payment therefor shall
be made on a date and
at a place
acceptable
to the Company and the Agent.
Certificates for
shares shall be delivered directly to the purchasers in
accordance with their directions.
Section 4.
Representations and Warranties of the Company. The Company
represents and warrants to and agrees with the Agent as
follows:
(a)
The Registration
Statement which was
prepared by the Company and
the Bank and filed with the Commission has been declared
effective by
the Commission, no stop order has been issued with respect thereto
and
no proceedings
therefor have been
initiated or, to the
knowledge of
the Company,
threatened
by the Commission. At the time the
Registration
Statement, including
the Prospectus
contained therein
(including any amendment or supplement), became effective and at the
Closing Date, the Registration Statement complied and will comply in
all material respects
with the requirements
of the 1933 Act and
the
1933 Act Regulations
and the Registration
Statement,
including the
Prospectus contained
therein (including any amendment or
supplement
thereto), and any information regarding the Company contained in
Sales
Information (as such
term is defined in Section 8 hereof) authorized
by the Company
for use in
connection
with the Offering, did not
contain an untrue
statement of a material fact or omit to state a
material fact required
to be stated therein
or necessary to make the
statements therein,
in light of the
circumstances
under which they
were made,
not misleading, and at the time any Rule
424(b) or (c)
Prospectus is
filed with the Commission and at the Closing Date
referred to in
Section 2 hereof, the Prospectus (including any
amendment or
supplement thereto)
and any information
regarding the
Company contained
in Sales Information (as such term is defined in
Section 8 hereof) authorized by the Company for use in connection
with
the Offering
will contain all statements that are required to be
stated therein
in accordance with the 1933 Act and the 1933 Act
Regulations and will
not contain an untrue
statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein,
in light of the
circumstances
under which they
were made, not misleading; provided, however, that the
representations
and warranties
in this Section 4(a)
shall not apply to statements or
omissions made
in reliance upon and in conformity with written
information furnished
to the Company by the Agent or its counsel
expressly regarding
the Agent for use in the Prospectus under the
caption "The Offering-- Plan of Distribution/Marketing
Arrangements"
or statements
in or omissions from any Sales Information or
information filed
pursuant to state
securities
or blue sky laws
or
regulations regarding the Agent.
5
<PAGE>
(b) The MHC-2
Application, which was
prepared by the Company and the
Bank and filed
with the OTS,
has been approved by the OTS and the
related Prospectus
to be delivered to members of the Bank has
been
authorized for use by
the OTS and the MHC-2
Application complied
in
all material respects with the Reorganization Regulations except as
otherwise waived by
the OTS. No order has
been issued by the OTS
or
the FDIC preventing or
suspending the use of the Prospectus, and no
action by or before any such government entity to revoke any
approval,
authorization or order of effectiveness related to the Offering is,
to
the best knowledge of the Company, pending or threatened.
At the time
of the approval of the MHC-2 Application, including the Prospectus
(including any amendment or supplement thereto) by the OTS and at all
times subsequent
thereto
until the Closing Date, the MHC-2
Application, including
the Prospectus (including any amendment or
supplement thereto),
will comply in all
material respects
with the
Reorganization
Regulations, except to
the extent waived or otherwise
approved by the OTS. The MHC-2 Application, including the Prospectus
(including any amendment or supplement thereto), does not include any
untrue statement of a
material fact or omit
to state a material fact
required to be stated
therein or
necessary to make the statements
therein, in light of the circumstances under which they were made,
not
misleading; provided, however, that the representations and
warranties
in this Section 4(b) shall not apply to statements or omissions made
in reliance upon and in conformity with written information
furnished
to the Company by the Agent or its counsel expressly regarding the
Agent for use in the
Prospectus contained
in the MHC-2
Application
under
the caption "The Offering--Plan of Distribution/Marketing
Arrangements" or statements in or omissions from any sales
information
or information filed
pursuant to state securities or blue sky laws or
regulations regarding the Agent.
(c) The Company, the
MHC and the Bank have filed the Prospectus and
any supplemental sales literature with the Commission and the OTS.
The
Prospectus and all supplemental sales literature, as of the date the
Registration Statement
became effective and on the Closing Date
referred to in Section 2, complied and will comply in all material
respects with
the applicable requirements of the Securities Act
Regulations and, at or prior to the time of their first use, will
have
received all required authorizations of the OTS and Commission for
use
in final form. No approval of any other regulatory or supervisory or
other public authority is required in connection with the
distribution
of the Prospectus and any supplemental sales literature that has not
been obtained and a copy of which has been delivered to the Agent.
The
Company, the MHC and
the Bank have not distributed any offering
material in connection with the Offering except for the Prospectus
and
any supplemental
sales
material that has been filed with the
Registration
Statement and
the Stock Issuance Application and
authorized for use by
the Commission
and the OTS.
The information
contained in the
supplemental sales
material filed as an
exhibit to
both the Registration
Statement and the
Stock Issuance
Application
does not conflict
with information contained in the Registration
Statement and the Prospectus.
(d) The offer and sale of the Shares will have been conducted in all
material respects in
accordance
with the Plan,
the Reorganization
Regulations except to
the extent waived or otherwise approved by the
OTS, and all other applicable laws, regulations, decisions and
orders,
including all terms, conditions, requirements and provisions
precedent
to the Offering
imposed upon the MHC, the Company and the Bank by the
OTS, the
6
<PAGE>
Commission, or any
other regulatory authority and in the manner
described in the
Prospectus.
To the best
knowledge of the MHC,
the
Company and the Bank,
no person has
sought to obtain
review of the
final action of the OTS in approving the Offering pursuant to the
HOLA
or any other statute or regulation.
(e) The Company is a duly organized and validly existing
federally-chartered
corporation; and the Bank is a duly organized and
validly existing
New Jersey-chartered savings bank in permanent
capital stock form of
organization. Each of
the Company and the Bank
is duly authorized
to conduct its
business and own its property as
described in the
Registration Statement
and the Prospectus;
each of
the Company and the Bank has obtained all licenses, permits and other
governmental
authorizations currently required for the conduct of its
business, except those that individually or in the aggregate would
not
materially adversely
affect the financial condition, results of
operations or business of the Company and the Bank, taken as a whole;
all such licenses, permits and governmental authorizations are in
full
force and effect, and each of the Company and the Bank is in
compliance with all
material laws, rules, regulations and orders
applicable to the
operation of its business, except where failure to
be in compliance would
not materially
adversely affect the financial
condition, results of
operations
or business of the
Company and the
Bank, taken
as a whole; each of the Company and the Bank is duly
qualified as a foreign corporation to transact business and is in
good
standing in each
jurisdiction in which
its ownership of
property or
leasing of property
or the conduct of its business requires such
qualification, unless the failure to be so qualified in one or more
of
such jurisdictions
would not have a
material adverse
effect on the
financial condition,
results of operations or business of the Company
and the Bank, taken as a whole. Each of the Company and the Bank
does
not own equity securities or any equity interest in any other
business
enterprise except as
described in the
Prospectus or as would
not be
material to the operations of the Company or the Bank, as the case
may
be. Upon completion of the sale by the Company of the Shares
contemplated by
the Prospectus, (i) all of the authorized and
outstanding capital stock of the Bank will be owned by the Company
and
(ii) the Company will have no direct subsidiaries other than the
Bank.
The Offering will be
effected in all material respects in accordance
with all applicable statutes, regulations, decisions and orders; and,
except with respect to the filing of certain
post-sale reports and
documents in
compliance
with
the 1933 Act Regulations, the
Reorganization
Regulations or letters
of approval at the time of the
Closing, all terms,
conditions,
requirements
and provisions with
respect to the
Offering imposed by
the Commission,
the OTS and the
FDIC, if any,
will have been
complied with by the Company in all
material respects or
appropriate waivers
will have been obtained and
all material
notice and waiting
periods will have been satisfied,
waived or elapsed.
(f) The MHC is duly incorporated and validly existing as a
corporation
under the laws of the United States of America with
corporate power
and authority to own,
lease and operate its properties and to conduct
its business
as described in the Registration Statement and the
Prospectus, and is
qualified to do business as a foreign corporation
in each jurisdiction
in which the conduct
of its business
requires
such qualification,
except where the
failure to so qualify would not
have a material adverse effect on the financial condition,
results of
operations or business of the Company and the Bank, taken as a whole.
The MHC has all licenses, permits and other governmental
authorizations
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currently required for
the conduct of its business except those that
individually or in the aggregate would not materially adversely
affect
the financial
condition,
results of
operations
or business of the
Company and the Bank, taken as a whole; all such licenses, permits
and
governmental
authorizations are in full force and effect, and the MHC
in all material respects complies with all laws,
rules, regulations
and orders
applicable to the operation of its business.
(g) The MHC and the Company are registered and in good standing as
savings association
holding companies under the Home Owners' Loan Act
of 1933.
(h) The Bank is a member of the Federal Home Loan Bank of New York
("FHLB-New York"). The deposit accounts of the Bank are insured by
the
FDIC up to the applicable limits, and no proceedings for the
termination or
revocation
of such insurance are pending or, to
the
best knowledge of the Company or the Bank, threatened. The Bank is a
"qualified
thrift lender"
within
the meaning of 12 U.S.C.
ss.l467(a)(m).
(i) Each of the Company and the Bank, has good and marketable title
to
all real property and
good title to all other assets material to the
business of the Company and the Bank, taken as a whole, and to those
properties and assets
described in the
Registration
Statement and
Prospectus as owned
by it, free and clear of all liens, charges,
encumbrances or
restrictions,
except such as are
described in the
Registration Statement
and Prospectus, or are not material to the
business of the Company and the Bank, taken as a whole; and all of
the
leases and subleases
material to the
business of the Company and the
Bank, taken as a
whole, under
which, the Company or the Bank hold
properties, including
those described in the
Registration
Statement
and Prospectus, are in full force and effect.
(j) The Company
has received an opinion of its special counsel,
Malizia
Spidi & Fisch,
PC, with respect to the federal income tax
consequences of the Offering, all material aspects of such opinion
are
accurately
summarized in
the Registration Statement and the
Prospectus. The
Company represents
and warrants that the
facts upon
which such opinion is based are truthful, accurate and complete. None
of the Company, the
Bank or the MHC will take any action inconsistent
therewith.
(k) Each of the Company and the Bank has all such
power, authority,
authorizations,
approvals and orders as may be required to enter into
this Agreement, to carry out the provisions and conditions hereof
and,
with respect to the
Company, to issue and
sell the Shares to be sold
by it as provided herein and as described in the Prospectus, subject
to approval or
confirmation by the
OTS of the final appraisal of the
Company including the Bank. The execution, delivery and performance
of
this Agreement have been duly and validly authorized by all necessary
corporate action on the part of the Company; and the Offering has
been
duly and validly
authorized by all necessary corporate action on the
part of the Company.
This Agreement
has been validly executed and
delivered by the Company and is the valid, legal and binding
agreement
of the Company enforceable in accordance with its terms (except as
the
enforceability thereof
may be limited by bankruptcy, insolvency,
moratorium,
reorganization or
similar laws relating
to or affecting
the enforcement
of creditors rights generally or the rights of
creditors of
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savings and loan holding companies or savings banks,
as the case may
be, the accounts of whose subsidiaries or of which are
insured by the
FDIC, or by general
equity principles, regardless of whether such
enforceability is
considered in a proceeding in equity or at law, and
except to the extent,
if any, that the provisions of Sections 8 and 9
hereof may be unenforceable as against public policy). The Company
has
all such power, authority, authorizations, approvals and orders as
may
be required to enter into this Agreement, to carry out the provisions
and conditions
hereof and to issue
and sell the Shares to be sold by
it as provided herein and as described in the Prospectus, subject to
approval or
confirmation
by the OTS of the
final appraisal
of the
Company including the Bank.
(l) None the MHC,
the Company or the Bank is in violation of any
directive received from the OTS, the FDIC, or any other agency to
make
any material change in
the method of conducting its business so as to
comply in all material
respects with all applicable statutes and
regulations (including, without limitation, regulations, decisions,
directives and orders
of the OTS and the FDIC) and, except as may be
set forth in the Registration Statement and the Prospectus,
there is
no suit or proceeding
or charge or
action before or by any court,
regulatory authority
or governmental agency
or body, pending or,
to
the knowledge of the MHC, the Company or the Bank, threatened, which
might materially and
adversely affect the
Offering, as described
in
the Registration Statement and the Prospectus or which might result
in
any material adverse
change in the
financial condition,
results of
operations or business of the Company and the Bank, taken as a whole,
or which would materially affect their properties and assets.
(m) The financial
statements, schedules
and notes related thereto
which are
included in the Prospectus fairly present the balance sheet,
income statement, statement of changes in equity capital and
statement
of cash flows of the
Company on a
consolidated
basis with the
Bank
(except as otherwise stated therein) at the respective dates
indicated
and for the respective
periods covered
thereby and comply as to form
in all material respects with the applicable accounting requirements
of Title 12 of the Code of Federal Regulations. Such financial
statements, schedules
and notes related thereto have been prepared in
accordance with
generally accepted
accounting
principles
("GAAP")
consistently applied
through the periods involved, present fairly in
all material respects
the information
required to be stated
therein
and are consistent with the most recent financial statements and
other
reports filed by the
Company and the Bank
with the OTS, except
that
accounting principles
employed in such
regulatory filings conform to
the requirements
of the OTS and not
necessarily
to GAAP. The other
financial, statistical
and pro forma
information
and related notes
included in the
Prospectus
present fairly the information shown
therein on a basis consistent with the audited and unaudited
financial
statements of the
Company on a consolidated basis with the Bank
(except as otherwise stated therein) included in the Prospectus,
and
as to the pro forma
adjustments, the
adjustments
made therein have
been properly applied on the basis described therein.
(n) 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, financial or otherwise, in the
condition of
the Company and the Bank and their subsidiaries,
considered as one enterprise, or in the earnings, capital properties
or business of the Company and the Bank, whether or not arising in
the
ordinary course of
9
<PAGE>
business; (ii)
there has not been any material increase in the
long-term debt of the
Company or the Bank or in the principal amount
of the Company's
or the Bank's
assets which are
classified
by the
Company or the Bank as substandard, doubtful or loss or in loans
past
due 90 days
or more or real estate acquired by foreclosure, by
deed-in-lieu of foreclosure or deemed in-substance foreclosure or any
material decrease in
equity capital or total assets of the Company on
a consolidated
basis with the Bank;
nor has the MHC, the
Company or
the Bank issued any
securities
(other than in
connection
with the
incorporation of the Company and the reorganization of the Bank
into a
mutual holding
company structure) or incurred any liability or
obligation for
borrowing other than in the ordinary course of
business; (iii) there
have not been any material transactions entered
into by the MHC, the Company or the Bank; (iv) there has not been any
material adverse
change in the aggregate dollar amount (on a
consolidated basis with the Bank) of the Company's deposits or its
net
worth; (v) there has been no material adverse change in the MHC's,
the
Company's or the
Bank's relationship
with its insurance carriers,
including, without
limitation,
cancellation or other
termination of
the MHC s, the Company's or the Bank's fidelity bond or any other
type
of insurance coverage;
(vi) except as
disclosed in the
Prospectus,
there has been no
material change in management of the MHC, the
Company or the
Bank; (vii) neither the Company nor the Bank has
sustained any
material loss or interference with its respective
business or
properties
from fire, flood, windstorm, earthquake,
accident or other
calamity, whether or not covered by insurance;
(viii) none of the MHC, the Company or the Bank has
defaulted in the
payment of principal or interest on any outstanding debt
obligations;
(ix) the capitalization, liabilities, assets, properties
and business
of the MHC, the Company and the Bank conform in all material
respects
to the descriptions
thereof contained in the Prospectus; and (x)
neither the
Company nor the Bank has any material contingent
liabilities, except as set forth in the Prospectus.
(o) None of the MHC,
the Company or the Bank is (i) in violation of
its charter
or articles of incorporation, as the case may be, or
bylaws, or (ii) in
default in the
performance or
observance of any
material obligation,
agreement, covenant,
or condition contained
in
any material
contract, lease, loan agreement, indenture or other
instrument to
which it is a party or by which it or any of its
property may be bound.
The execution and
delivery of this
Agreement
and the consummation of the transactions herein contemplated will
not:
(i) conflict
with or constitute a breach of, or default
under, or
result in the creation of any material lien, charge or encumbrance
upon any of the assets of the MHC, the Company or the Bank pursuant
to
the Charter or
Articles of Incorporation, as the case may be, and
Bylaws of the Company,
the MHC or the Bank or any material contract,
lease or other
instrument in which
the MHC, the Company
or the Bank
has a beneficial interest, or any applicable law, rule,
regulation or
order; (ii) violate any authorization, approval, judgment, decree,
order, statute, rule
or regulation applicable to the MHC, the Company
or the Bank,
except for such violations which would not have a
material adverse
effect on the
financial condition and results of
operations of the
Company and the Bank on a consolidated basis; or
(iii) result
in the creation of any material lien, charge or
encumbrance upon any property of the Company or the Bank.
10
<PAGE>
(p) All documents made available to or delivered or to be made
available to or
delivered by the MHC, the Company and the Bank or
their representatives
in connection with the issuance and sale of the
Shares, including
records of account
holders and
depositors of the
Bank, or in connection
with the Agent's
exercise of due
diligence,
except for those
documents which were
prepared by parties other than
the MHC, the Company or the Bank or their representatives, to the
best
knowledge of the
Company, 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.
(q) No default exists,
and no event has occurred which with notice or
lapse of time, or both, would constitute a default on the
part of the
MHC, the Company or the Bank in the due performance and observance of
any term, covenant or
condition of any indenture, mortgage, deed of
trust, note, bank loan
or credit agreement or any other instrument or
agreement to which the
MHC, the Company or
the Bank is a party or by
which any of them or
any of their property
is bound or affected,
except such defaults which would not have a material adverse affect
on
the financial
condition or results
of operations of the
Company and
the Bank, taken as a
whole; such
agreements
are in full
force and
effect; and no other
party to any such
agreements has instituted or,
to the best knowledge of the MHC, the Company or the Bank,
threatened
any action or
proceeding wherein
the MHC, the Company or the Bank
would or might be
alleged to be in
default thereunder, where such
action or proceeding,
if determined adversely to the MHC, the Company
or the Bank, would
have a material
adverse effect on the
financial
condition, results of
operations,
or business of the
Company or the
Bank, taken as a whole.
(r) Upon consummation
of the Offering,
the authorized, issued and
outstanding equity capital of the Company will be within the range
set
forth in the
Prospectus under the
caption
"Capitalization," and
no
Shares (other
than Shares issued to the MHC) have been or will
be
issued and
outstanding
prior
to the Closing Date; the Shares
(including shares
issued or to be issued to the MHC) have
been duly
and validly authorized
for issuance and, when issued and delivered by
the Company pursuant to the Plan against payment of the
consideration
calculated as set
forth in the Plan and
in the Prospectus,
will be
duly and validly
issued, fully paid and
non-assessable,
except for
shares purchased by
the ESOP with funds
borrowed from the Company to
the extent
payment therefor in cash has not been received by the
Company; except to the
extent that subscription rights and priorities
pursuant thereto exist
pursuant to the Plan,
no preemptive rights
exist with respect to the Shares; and the terms and provisions of
the
Shares will
conform in all material respects to the description
thereof contained in
the Registration
Statement and the
Prospectus.
Upon the issuance
of the Shares, good title to the Shares
will be
transferred from the Company to the purchasers thereof against
payment
therefor, subject
to such claims as may be asserted against the
purchasers thereof by third-party claimants.
(s) No approval of any
regulatory
or supervisory or other public
authority is required in connection with the execution and delivery
of
this Agreement or the issuance of the Shares, except for the approval
of the Commission
and the OTS, and any necessary qualification,
notification,
registration or
exemption under the securities or blue
sky laws of the various states in which the Shares are to
be offered,
and except as may be required
11
<PAGE>
under the rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD").
(t) Beard Miller Company LLP, which has certified the audited
financial statements
and schedules of the Company and the Bank
included in the
Prospectus,
has advised the
Company and the Bank in
writing that they are,
with respect to the Company and the Bank,
independent registered
public accountants within the applicable rules
of the Public Company Accounting Oversight Board (United
States).
(u) RP Financial,
LC, which has prepared the Valuation Appraisal
Report (as amended or supplemented, if so amended or supplemented)
of
the Company
including the Bank, has advised the Company in
writing
that it is independent of the MHC, the Company and the Bank within
the
meaning of the Reorganization Regulations.
(v) The Company,
the MHC and the Bank
have timely filed or
extended
all required federal,
state and local tax returns; the Company, the
MHC and the Bank have paid all taxes that have become due and payable
in respect of such
returns, except
where permitted to be extended,
have made adequate
reserves for similar future tax liabilities and no
deficiency has been
asserted with respect thereto by any taxing
authority.
(w) The Company
and the Bank are in compliance in all material
respects with the applicable financial record-keeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act
of
1970, as amended, and the regulations and rules thereunder.
(x) To the knowledge
of the MHC, the
Company and the Bank,
none the
MHC, the Company, the Bank or employees of the MHC, the Company or
the
Bank has made any payment of funds of the MHC, the Company or the
Bank
as a loan for the purchase of the Shares or made any other
payment of
funds prohibited
by law, and no funds
have been set aside to be used
for any payment prohibited by law.
(y) Prior to the
Offering, none of the
MHC, the Company or
the Bank
has: (i) issued any
securities within the
last 18 months (except for
notes to evidence bank
loans and reverse
repurchase
agreements
or
other liabilities in
the ordinary course of
business or as described
in the Prospectus and except in connection with the Bank's
reorganization into
the mutual holding company structure); (ii) had
any material
dealings within the 12 months prior to the
date hereof
with any member of the NASD, or any person related to or associated
with such member,
other than discussions and meetings relating to the
proposed Offering and
routine purchases
and sales of United
States
government and agency and other securities in the ordinary
course of
business; (iii)
entered into a financial or management consulting
agreement except as
contemplated
hereunder;
and (iv) engaged any
intermediary between the Agent and the MHC, the Company or the Bank
in
connection with the
offering of the
Shares, and no person is being
compensated in any manner for such service. Appropriate arrangements
have been made for placing the funds received from subscriptions for
Shares in a special
interest-bearing
account with the Bank until all
Shares are
sold and paid
for, with provision for refund to the
12
<PAGE>
purchasers in the
event that the Offering is not completed for
whatever reason or for delivery to the Company if all Shares are
sold.
(z) The Company,
the MHC and the Bank
have not relied upon the Agent
or its legal
counsel for any legal, tax or accounting advice in
connection with the Offering.
(aa) The records used
by the Company and the
Bank to determine
the
identity of Eligible Account Holders and Supplemental Eligible
Account
Holders and Other Depositors are accurate and complete in all
material
respects.
(bb) The Company and the MHC are not required to be registered under
the Investment Company Act of 1940, as amended.
(cc) None of the Company, the Bank or the MHC or any
properties owned
or operated by the Company, the Bank or the MHC, is in violation of
or
liable under any Environmental Law (as defined below), except for
such
violations or
liabilities that,
individually
or in the aggregate,
would not have a material adverse effect on the financial
condition,
results of operations
or business of the Company and the Bank, taken
as a whole. There are
no actions, suits or
proceedings, or
demands,
claims, notices or
investigations
(including,
without limitation,
notices, demand
letters or requests for information from any
environmental agency)
instituted
or pending or, to the
knowledge of
the Company, the Bank or the MHC, threatened relating to the
liability
of any property owned or operated by the Company, the Bank or the MHC
under any Environmental Law. For purposes of this subsection, the
term
"Environmental Law"
means any federal,
state, local or
foreign law,
statute,
ordinance, rule,
regulation,
code,
license, permit,
authorization,
approval, consent, order, judgment, decree, injunction
or agreement
with any regulatory authority relating to (i) the
protection, preservation or restoration of the environment
(including,
without limitation,
air, water, vapor,
surface water,
groundwater,
drinking water supply, surface soil, subsurface soil, plant and
animal
life or any other
natural resource),
and/or (ii) the use,
storage,
recycling,
treatment,
generation,
transportation, processing,
handling, labeling,
production, release or
disposal of any substance
presently listed,
defined, designated or classified as hazardous,
toxic, radioactive or
dangerous, or
otherwise regulated,
whether by
type or by quantity,
including any material containing any such
substance as a component.
(dd) The Company will
file a registration
statement for the Common
Shares under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act Registration Statement").
(ee) The Company and
its subsidiaries
maintain a system of
internal
accounting controls
sufficient to provide
reasonable assurance
that
(A) transactions are executed in accordance with management's
general
or specific authorizations, (B) transactions are recorded as
necessary
to permit preparation
of financial
statements
in conformity with
generally
accepted
accounting
principles and
to maintain
accountability for
assets, (C) access to
assets is permitted only in
accordance with management's general or specific authorization, and
(D) the recorded
accounts or assets is compared with the existing
assets at reasonable
intervals and
appropriate action is
taken with
respect thereto. As
of
13
<PAGE>
the first report filed by the Company pursuant to Section 13 or 15
of
the 1934 Act, the books, records and accounts and systems
of internal
accounting control of
the Company and its subsidiaries will comply in
all material respects with the requirements of Section 13(b)(2) of
the
1934 Act and the
Company will maintain "disclosure controls and
procedures" (as defined in Rule 13a-15(e) under the Exchange Act)
that
are effective in ensuring that the information it will be required
to
disclose in the reports it files or submits under the Exchange Act is
accumulated and
communicated to the Company's management (including
the Company's chief executive officer and chief financial
officer) in
a timely
manner and
recorded, processed, summarized and reported
within the periods specified in the Commission's rules and
forms.
(ff) All of the loans represented as assets of the Company or the
Bank
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
Regulation
Z and 12 C.F.R. Part 226), real estate settlement procedures,
consumer
credit protection,
equal credit
opportunity and all
disclosure laws
applicable to such loans, except for violations which, if asserted,
would not have a material adverse effect on the financial
condition,
results of operations,
or business of the Company and the Bank, taken
as a whole.
(gg) The Company has taken all actions necessary to obtain at Closing
a Blue Sky Memorandum from Malizia Spidi & Fisch, PC.
(hh) Any certificates
signed by an officer of the MHC, the Company or
the Bank pursuant to the conditions of this Agreement and delivered
to
the Agent or their
counsel that
refers to this
Agreement shall be
deemed to be a representation and warranty by the MHC, the
Company or
the Bank, as the case
may be, to the Agent as to the matters covered
thereby with the same
effect as if such
representation and
warranty
were set forth herein.
Section 5. Representations and Warranties of the Agent. The Agent
represents and warrants to the Company and the Bank as follows:
(a) The Agent is a corporation and is validly existing 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 Company and
the Bank hereunde
