Exhibit 1.1
SUGAR CREEK FINANCIAL
CORP.
(a federal stock corporation in
formation)
up to 465,750 Shares
(subject to increase up to 535,613
shares)
COMMON SHARES
($.01 Par Value)
Subscription Price $10.00 Per
Share
AGENCY AGREEMENT
February 12, 2007
Keefe, Bruyette & Woods,
Inc.
211 Bradenton Drive
Dublin, Ohio 43017-5034
Ladies and Gentlemen:
Sugar Creek MHC, a federal mutual
holding company in formation (the “MHC”), Sugar Creek
Financial Corp., a federal corporation in formation (the
“Company”), and Tempo Bank, a federal savings bank
located in Trenton, Illinois, (the “Bank” and includes
references to the Bank in mutual or stock form, as indicated by
context), the deposit accounts of which are insured by the Federal
Deposit Insurance Corporation (“FDIC”), hereby confirm
their agreement with Keefe, Bruyette & Woods, Inc. (the
“Agent”) as follows:
Section 1. The
Offering. The Bank, in
accordance with the Plan of Reorganization and Stock Issuance
adopted by its Board of Directors (the “Plan”), intends
to reorganize from a federally-chartered mutual savings bank into
the mutual holding company structure, and issue all of its issued
and outstanding capital stock to the Company (collectively, these
transactions are referred to herein as the
“Reorganization”). The Reorganization will be
accomplished pursuant to federal law and the rules and regulations
of the Office of Thrift Supervision (the “OTS”), except
as such rules and regulations are waived by the OTS. Pursuant to
the Plan, the Company will offer and sell up to 465,750 shares
(subject to increase up to 535,613) of its common stock, $.01 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 September 30, 2005
(“Eligible Account Holders”), (2) the employee
stock ownership plan established by either the Bank or the Company
(the “ESOP”), (3) depositors of the Bank with
Qualifying Deposits as of December 31, 2006
(“Supplemental Eligible Account Holders”), and
(4) Depositors of the Bank as of January 31, 2007, who
are not eligible or supplemental eligible account holders, and
borrowers of the Bank who had loans outstanding on
September 19, 1989 that continue to be outstanding as of
January 31, 2007 (“Other Members”). 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 Clinton, Madison and St. Clair Counties, Illinois.
Subscribers’ checks will be transmitted to the Bank by no
later than noon of the next business day where they will be
invested in investments that are permissible under Rule 15c2-4. 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 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 SB-2 (File No. 333-139332) (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 Title 12, Part
575 of the Code of Federal Regulations (the “Reorganization
Regulations”), the Company and the Bank have filed with the
OTS a Form MHC-1 Notice of Mutual Holding Company Reorganization
and Form MHC-2 Application for Approval of a Minority Stock
Issuance by a Savings Association Subsidiary of a Mutual Holding
Company (collectively, the “MHC-1/MHC-2 Application”),
including the Prospectus and the Reorganization Valuation Appraisal
Report prepared by RP Financial, LC. (the “Appraisal”)
and have filed such amendments thereto as may have been required by
the OTS. The MHC-l/MHC-2 Application has been approved by the OTS
and the related Prospectus has been authorized for use by the OTS.
In addition, the Company and the MHC have filed with the OTS its
application on Form H-(e)l-S (the “Holding Company
Application”) to become a savings and loan holding company
under the Home Owners Loan Act, as amended (“HOLA”) and
the regulations promulgated thereunder (the “Control Act
Regulations”).
Section 2. Retention of
Agent; Compensation. Subject to the terms and conditions herein set
forth, the Company and the Bank hereby appoint the Agent as their
exclusive financial
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advisor and marketing agent (i) to utilize
its best efforts to solicit subscriptions for Common Shares and to
advise and assist the Company and the Bank 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
September 14, 2006, between the Bank and the Agent (a copy of
which is attached hereto as Exhibit A). It is acknowledged by the
Company and the Bank that the Agent shall not be required to
purchase any Shares or be obligated to take any action that is
inconsistent with all applicable laws, regulations, decisions or
orders.
Except as described in
Section 10 of this Agreement, 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 expenses due to the Agent but unpaid will
be payable to the Agent in next day funds at the earlier of the
Closing Date (as hereinafter defined) or the End Date. In the event
the Offering is extended beyond the End Date, the Company, the Bank
and the Agent may agree to renew this Agreement under mutually
acceptable terms.
In the event the Company is unable
to sell a minimum of 344,250 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, 9 and 10 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.
The Agent shall receive the
following compensation for its services hereunder:
(a) A management fee of $25,000
payable in two consecutive monthly installments of $12,500
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 of $75,000 shall
be paid to KBW upon consummation of the Offering.
(c) If any of the Common Shares
remain available after the Subscription Offering, at the request of
the Bank, 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
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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
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 Bank 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 and the Bank shall
reimburse the Agent for reasonable out-of-pocket expenses,
including costs of travel, meals and lodging, photocopying,
telephone, facsimile and couriers up to $20,000 and will reimburse
the Agent for the fees and expenses of the Agent’s legal
counsel, not to exceed $35,000, (which do not include legal fees to
complete the qualification of the Common Shares under the various
state securities “Blue Sky” laws). 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 one year following completion of the Offering,
including assistance with financial modeling, 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.
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 consummation of the Reorganization,
including without limitation, the sale of all Shares required by
the Plan to be sold, are satisfied, the Company agrees to issue, or
have issued, the Shares sold in the Offering and to release for
delivery certificates for such Shares on the Closing Date 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. The
release of Shares against payment therefor shall be made on a date
and at a place acceptable to the MHC, the Company, the Bank and the
Agent. Certificates for shares shall be delivered directly to the
purchasers in accordance with their directions. The date upon which
the Company shall release or deliver the Shares sold in the
Offering, in accordance with the terms herein, is called the
“Closing Date.”
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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 or the
Bank by the Agent or its counsel expressly regarding the Agent for
use in the Prospectus in the first paragraph under the caption
“The Reorganization and Stock Offering—Marketing
Arrangements” and in the first and second paragraphs under
the caption “The Reorganization and Stock
Offering–—Description of Sales Activities,” 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.
(b) The MHC-1/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 and
proxy statement to be delivered to members of the Bank have been
authorized for use by the OTS and the MHC-1/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 or the proxy statement, 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-1/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-1/MHC-2 Application, including the Prospectus (including
any
5
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-1/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 or the
Bank by the Agent or its counsel expressly regarding the Agent for
use in the Prospectus contained in the MHC-1/MHC-2 Application in
the first paragraph under the caption “The Reorganization and
Stock Offering—Marketing Arrangements” and in the first
and second paragraphs under the caption “The Reorganization
and Stock Offering—Description of Sales Activities,” 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 and the MHC have
filed with the OTS the Company’s application for approval of
its acquisition of the Bank on Form H-(e)1-S promulgated under the
savings and loan holding company provisions of the HOLA and the
Control Act Regulations, and the Holding Company Application is
accurate and truthful in all material respects. The Company has
received written notice from the OTS of its approval of the
acquisition of the Bank, such approval remains in full force and
effect and no order has been issued by the OTS suspending or
revoking such approval and no proceedings therefor have been
initiated or, to the knowledge of the Company, the Bank or the MHC,
threatened by the OTS. At the date of such approval, the Holding
Company Application complied in all material respects with the
applicable provisions of HOLA and the Control Act Regulations
except to the extent waived or otherwise approved by the
OTS.
(d) 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 MHC-1/MHC-2
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
MHC-1/MHC-2 Application does not conflict with information
contained in the Registration Statement and the
Prospectus.
6
(e) At the Closing Date, the Plan
will have been adopted by the Boards of Directors of the MHC, the
Company and the Bank and approved by the members of the Bank, and
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 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.
(f) The Bank has been organized and
is a validly existing federally-chartered savings bank in mutual
form of organization and upon the Reorganization will become a duly
organized and validly existing federally-chartered savings bank in
permanent capital stock form of organization, in both instances
duly authorized to conduct its business and own its property as
described in the Registration Statement and the Prospectus; the
Bank has obtained all licenses, permits and other governmental
authorizations currently required for the conduct of its business,
except those that individually or in the aggregate would not
materially adversely affect the financial condition, results of
operations or business of the MHC, the Company and the Bank, taken
as a whole (a “Material Adverse Effect”); all such
licenses, permits and governmental authorizations are in full force
and effect, and the Bank is in compliance with all material laws,
rules, regulations and orders applicable to the operation of its
business, except where failure to be in compliance would not result
in a Material Adverse Effect; 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. 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 Bank. 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 Reorganization 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, post-Reorganization 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
Reorganization imposed by the Commission, the OTS and the FDIC, if
any, will have been complied with by the Company and the Bank in
all material respects or appropriate waivers will have been
obtained and all material notice and waiting periods will have been
satisfied, waived or elapsed.
(g) Upon completion of its
formation, and in any event no later than the Closing Date, the
Company will be 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
7
and operate its properties and to
conduct its business as described in the Registration Statement and
the Prospectus, and at the Closing Date the Company will be
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. At the Closing Date, the Company
will have 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 result
in a Material Adverse Effect; all such licenses, permits and
governmental authorizations will be in full force and effect, and
the Company in all material respects will comply with all laws,
rules, regulations and orders applicable to the operation of its
business.
(h) Upon completion of its
formation, and in any event no later than the Closing Date, the MHC
will be 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 at the Closing Date, the MHC will be 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. At the Closing Date, the MHC will have 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 result in a Material
Adverse Effect; all such licenses, permits and governmental
authorizations will be in full force and effect, and the MHC in all
material respects will comply with all laws, rules, regulations and
orders applicable to the operation of its business.
(i) The Bank is a member of the
Federal Home Loan Bank of Chicago (“FHLB-Chicago”). 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 MHC, the Company or the Bank, threatened. The Bank is a
“qualified thrift lender” within the meaning of 12
U.S.C. § l467(a)(m).
(j) The Bank and, upon their
formation, each of the Company and the MHC, has or will have good
and marketable title to all real property and good title to all
other assets material to the business of the MHC, the Company and
the Bank, taken as a whole, and to those properties and assets
described in the Registration Statement and Prospectus as owned by
them, 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 MHC, the Company and the Bank, taken as a whole; and all of the
leases and subleases material to the business of the MHC, the
Company and the Bank, taken as a whole, under which, the MHC, the
Company or the Bank hold or will hold properties, including those
described in the Registration Statement and Prospectus, are in full
force and effect.
(k) The Company has received an
opinion of its special counsel, Muldoon Murphy & Aguggia
LLP, with respect to the federal income tax consequences of the
Reorganization, and an opinion of Michael Trokey &
Company, P.C., with respect to the state income tax consequences of
the Reorganization, and all material aspects of such opinions
are
8
accurately summarized in the
Registration Statement and the Prospectus. The MHC, the Company and
the Bank represent and warrant that the facts upon which such
opinions are based are truthful, accurate and complete. None of the
MHC, the Company or the Bank will take any action inconsistent
therewith.
(l) 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 to issue and sell the Shares to be sold by
the Company as provided herein and as described in the Prospectus,
subject to approval or confirmation by the OTS of the final
appraisal of the Bank. The execution, delivery and performance of
this Agreement and the consummation of the transactions herein
contemplated have been duly and validly authorized by all necessary
corporate action on the part of the Bank. This Agreement has been
validly executed and delivered by the Bank and is the valid, legal
and binding agreement of the Bank enforceable in accordance with
its terms (except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws
relating to or affecting the enforcement of creditors rights
generally or the rights of creditors of savings and loan holding
companies, the accounts of whose subsidiaries are insured by the
FDIC, or by general equity principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law,
and except to the extent, if any, that the provisions of Sections 8
and 9 hereof may be unenforceable as against public policy). Upon
completion of their formation, and in any event no later than the
Closing Date, the MHC and the Company will have all such power,
authority, authorizations, approvals and orders as may be required
to enter into this Agreement, to carry out the provisions and
conditions hereof and to issue and sell the Shares to be sold by
the Company as provided herein and as described in the Prospectus,
subject to approval or confirmation by the OTS of the final
appraisal of the Bank. The execution, delivery and performance of
this Agreement and the consummation of the transactions herein
contemplated will have been duly and validly authorized by all
necessary corporate action on the part of the MHC and the Company.
This Agreement will have been validly executed and delivered by the
MHC and the Company and will be the valid, legal and binding
agreement of the MHC and 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 savings and loan holding
companies, the accounts of whose subsidiaries are insured by the
FDIC, or by general equity principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law,
and except to the extent, if any, that the provisions of Sections 8
and 9 hereof may be unenforceable as against public
policy).
(m) None of the MHC, the Company or
the Bank is, or at the time of their formation, will be 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
9
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
a Material Adverse Effect.
(n) The financial statements,
schedules and notes related thereto which are included in the
Prospectus fairly present the balance sheet, statement of earnings,
statement of retained earnings and statement of cash flows of the
Bank at the respective dates indicated and for the respective
periods covered thereby and comply as to form in all material
respects with the applicable accounting requirements of Title 12 of
the Code of Federal Regulations. 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 Bank
with the OTS, except that accounting principles employed in such
regulatory filings conform to the requirements of the OTS and not
necessarily to GAAP. The other financial, statistical and pro forma
information and related notes included in the Prospectus present
fairly the information shown therein on a basis consistent with the
audited and unaudited financial statements of the Bank included in
the Prospectus, and as to the pro forma adjustments, the
adjustments made therein have been properly applied on the basis
described therein.
(o) 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 MHC, the
Company and the Bank and their subsidiaries, considered as one
enterprise, or in the earnings, capital properties or business of
the MHC, the Company and the Bank, whether or not arising in the
ordinary course of business; (ii) there has not been any
material increase in the long-term debt of the Bank or in the
principal amount of the Bank’s assets which are classified by
the Bank as substandard, doubtful or loss or in loans past due 90
days or more or real estate acquired by foreclosure, by
deed-in-lieu of foreclosure or deemed in-substance foreclosure or
any material decrease in equity capital or total assets of the
Bank; nor has the MHC, the Company or the Bank issued any
securities (other than in connection with the incorporation of the
Company) or incurred any liability or obligation for borrowing
other than in the ordinary course of business; (iii) there
have not been any material transactions entered into by the 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) none of the MHC, the
Company or 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
10
Company and the Bank conform in all
material respects to the descriptions thereof contained in the
Prospectus; and (x) none of the MHC, the Company or the Bank
has any material contingent liabilities, except as set forth in the
Prospectus.
(p) None of the MHC, the Company or
the Bank is or will be (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;
or (iii) result in the creation of any material lien, charge
or encumbrance upon any property of the Company or the
Bank.
(q) 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 MHC, the Company and the Bank, 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.
(r) 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 Effect; 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.
(s) Upon consummation of the
Reorganization, 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 have been or will be issued
11
and outstanding prior to the Closing
Date; the Shares (including shares issued or to be issued to the
MHC) will have been duly and validly authorized for issuance and,
when issued and delivered by the Company pursuant to the Plan
against payment of the consideration calculated as set forth in the
Plan and in the Prospectus, will be duly and validly issued, fully
paid and non-assessable, except for shares purchased by the ESOP
with funds borrowed from the Company to the extent payment therefor
in cash has not been received by the Company; except to the extent
that subscription rights and priorities pursuant thereto exist
pursuant to the Plan, no preemptive rights exist with respect to
the Shares; 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.
(t) 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 under the rules and regulations of the National
Association of Securities Dealers, Inc.
(“NASD”).
(u) Michael Trokey &
Company, P.C., which has certified the audited financial statements
and schedules of the Bank included in the Prospectus, has advised
the Company and the Bank in writing that they are, with respect to
the Company and the Bank, independent registered public accountants
within the applicable rules of the Public Company Accounting
Oversight Board (United States).
(v) RP Financial, LC., which has
prepared the Valuation Appraisal Report (as amended or
supplemented, if so amended or supplemented) of the Bank, has
advised the Bank in writing that it is independent of the MHC, the
Company and the Bank within the meaning of the Reorganization
Regulations.
(w) The MHC, Company and the Bank
have timely filed or extended all required federal, state and local
tax returns; the MHC, the Company and the Bank have paid all taxes
that have become due and payable in respect of such returns, except
where permitted to be extended, have made adequate reserves for
similar future tax liabilities and no deficiency has been asserted
with respect thereto by any taxing authority.
(x) The Bank is, and upon their
formation, the MHC and the Company will be 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.
(y) To the knowledge of the MHC, the
Company and the Bank, none of 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
12
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.
(z) Prior to the Reorganization,
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 purchasers in the event that the Offering is not
completed for whatever reason or for delivery to the Company if all
Shares are sold.
(aa) The MHC, the Company and the
Bank have not relied upon the Agent or its legal counsel for any
legal, tax or accounting advice in connection with the
Reorganization.
(bb) The records used by the Company
and the Bank to determine the identity of Eligible Account Holders
and Supplemental Eligible Account Holders and Other Members are
accurate and complete in all material respects.
(cc) The Company and the MHC are not
required to be registered under the Investment Company Act of 1940,
as amended.
(dd) None of the MHC, the Company or
the Bank or any properties owned or operated by the MHC, the
Company or the Bank, 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. 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 MHC, the Company or the Bank,
threatened relating to the liability of any property owned or
operated by the MHC, the Company or the Bank 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,
13
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.
(ee) 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”).
(ff) 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 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 applicable 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.
(gg) All of the loans represented as
assets of 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.
(hh) The Company has taken all
actions necessary to obtain at Closing a Blue Sky Memorandum from
Muldoon Murphy & Aguggia LLP.
(ii) 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.
14
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 MHC, the Company and the Bank
hereunder.
(b) The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
necessary action on the part of the Agent, and this Agreement has
been duly and validly executed and delivered by the Agent and is a
legal, valid and binding agreement of the Agent, enforceable in
accordance with its terms, except as the 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 the Agent and its
employees, agents and representatives who shall perform any of the
services hereunder shall be duly authorized and empowered, and
shall have all licenses, approvals and permits necessary to perform
such services; and the Agent is a registered selling agent in each
of the jurisdictions in which the Shares are to be offered by the
Company in reliance upon the Agent as a registered selling agent as
set forth in the blue sky memorandum prepared with respect to the
Offering.
(d) The execution and delivery of
this Agreement by the Agent, the consummation of the transactions
contemplated hereby and compliance with the terms and provisions
hereof will not conflict with, or result in a breach of, any of the
terms, provisions or conditions of, or constitute a default (or an
event which with notice or lapse of time or both would constitute a
default) under, the Articles of Incorporation or Bylaws of the
Agent or any agreement, indenture or other instrument to which the
Agent is a party or by which it or its property is
bound.
(e) No approval of any regulatory or
supervisory or other public authority is required in connection
with the Agent’s execution and delivery of this Agreement,
except as may have been received.
(f) There is no suit or proceeding
or charge or action before or by any court, regulatory authority or
government agency or body or, to the knowledge of the Agent,
pending or threatened, which might materially adversely affect the
Agents performance under this Agreement.
Section 5.1. Covenants of
the Company. The Company
hereby covenants with the Agent as follows:
(a) The 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 an
opportunity to review such amendment or
15
supplement or file any amendment or
supplement to which amendment or supplement the Agent or its
counsel shall reasonably object.
(b) The Bank will not, at any time
after the MHC-1/MHC-2 Application is approved by the OTS, file any
amendment or supplement to such MHC-1/MHC-2 Application without
providing the Agent and its counsel an opportunity to review such
amendment or supplement or file any amendment or supplement to
which amendment or supplement the Agent or its counsel shall
reasonably object.
(c) The Company will not, at any
time after the Holding Company Application is approved by the OTS,
file any amendment or supplement to such Holding Company
Application without providing the Agent and its counsel an
opportunity to review the non-confidential portions of such
amendment or supplement or file any amendment or supplement to
which amendment or supplement the Agent or its counsel shall
reasonably object.
(d) The MHC, the Company and the
Bank will use their best efforts to cause any post-effective
amendment to the Registration Statement to be declared effective by
the Commission and any post-effective amendment to the MHC-1/MHC-2
Application or the Holding Company Application to be approved by
the OTS 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 MHC-1/MHC-2 Application or the Holding Company
Application, as amended, has been approved by the OTS;
(iii) of any comments from the Commission, the OTS or any
other governmental entity with respect to the Reorganization
contemplated by this Agreement; (iv) of the request by the
Commission, the OTS or any other governmental entity for any
amendment or supplement to the Registration Statement, the
MHC-1/MHC-2 Application, Holding Company Application or for
additional information; (v) of the issuance by the Commission,
the OTS or any other governmental entity of any order or other
action suspending the Reorganization or the use of the Registration
Statement or the Prospectus or any other filing of the Company or
the Bank under the Reorganization Regulations, or other applicable
law, or the threat of any such action; (vi) of the issuance by
the Commission, the OTS or any authority of any stop order
suspending the effectiveness of the Registration Statement or of
the initiation or threat of initiation or threat of any proceedings
for that purpose; or (vii) of the occurrence of any event
mentioned in paragraph (h) below. The MHC, the Company and the
Bank will make every reasonable effort (i) to prevent the
issuance by the Commission, the OTS or any other state a
