Exhibit 1.2
CULLMAN BANCORP, INC.
(a federal stock corporation in
formation)
up to 939,550 Shares
(subject to increase up to 1,080,483
shares)
COMMON SHARES
($.01 Par Value)
Subscription Price $10.00 Per
Share
AGENCY AGREEMENT
August ,
2009
Keefe, Bruyette & Woods,
Inc.
10 South Wacker Drive, Suite 3400
Chicago, Illinois 60606
Ladies and Gentlemen:
Cullman Savings Bank, MHC, a federal
mutual holding company in formation (the “MHC”),
Cullman Bancorp, Inc., a federal corporation in formation (the
“Company”), and Cullman Savings Bank, a federal savings
bank located in Cullman, Alabama, (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 of the date hereof, each
of the MHC and the Company are in formation. Accordingly, the Bank
hereby agrees to cause the MHC and the Company to duly ratify, sign
and deliver this Agreement upon completion of their formation at or
prior to the Closing Date as follows:
Section 1. The
Offering. The Bank, in
accordance with its 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 939,550 shares
(subject to increase up to 1,080,483 shares) (the
“Shares”) of its common stock, $.01 par value per share
(the “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
March 31, 2008 (“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
June 30, 2009 (“Supplemental Eligible Account
Holders”), and (4) the Bank’s Other Members as
defined in the Plan. 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 Cullman County, Alabama.
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 Company
will issue the Shares at a purchase price of $10.00 per share (the
“Purchase Price”).
As part of the Reorganization, and
subject to compliance with certain conditions as may be imposed by
regulatory authorities, the Company will contribute to a new
foundation, the Cullman Savings Bank Charitable Foundation (the
“Charitable Foundation”), shares equal to 2.0% of all
shares issued and outstanding following the Offering plus $100,000
in cash. The shares contributed to the Charitable Foundation
hereinafter being referred to as the “Charitable Foundation
Shares.” The Common Shares offered for sale in the Offering
and the Charitable Foundation Shares contributed to the Charitable
Foundation will in the aggregate represent a minority ownership
interest of 45% of the Company’s total outstanding shares of
Common Shares.
The Company has filed with the
Securities and Exchange Commission (the “Commission”) a
registration statement on Form S-1 (File
No. 333- )
(the “Registration Statement”), containing a prospectus
relating to the Offering, for the registration of the Shares under
the Securities Act of 1933, as amended (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 Bank has filed with the OTS a combined
Form MHC-1 Notice of Mutual Holding Company Reorganization and Form
MHC-2 Application for Approval of a Minority Stock Issuance by a
Subsidiary of a Mutual Holding Company (collectively,
the
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“MHC-1/MHC-2 Application”),
including the Prospectus and the Reorganization Valuation Appraisal
Report prepared by Keller & Company, Inc. (the
“Appraisal”) and has 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 has filed
with the OTS its application on Form H-(e)l-S (the “Holding
Company Application”) to become a registered 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; Sale and Delivery of the Shares.
Subject to the terms and conditions
herein set forth, the Company and the Bank hereby appoint the Agent
as their exclusive financial advisor and marketing agent
(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
February 20, 2009, 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 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 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 694,450 Shares within the period herein
provided, this Agreement shall terminate and the Company shall
refund to any persons who have subscribed for any of the Shares the
full amount which it may have received from them plus accrued
interest, as set forth in the Prospectus; and none of the parties
to this Agreement shall have any obligation to the other parties
hereunder, except as set forth in this Section 2 and in
Sections 6, 8 and 9 hereof. In the event the Offering is terminated
for any reason not attributable to the action or inaction of the
Agent, the Agent shall be paid the fees due to the date of such
termination pursuant to subparagraphs (a) and
(d) below.
If all conditions precedent to the
consummation of the Reorganization, including the sale of all
Shares required by the Plan to be sold, are satisfied, the Company
agrees to issue or have issued the Shares sold in the Offering and
to release for delivery certificates for such Shares on the Closing
Date (as hereinafter defined) against payment to the Company by any
means authorized by the Plan; provided, however, that no funds
shall be released to the Company until
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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 Company, the
Bank and the Agent. Certificates for shares shall be delivered
directly to the purchasers in accordance with their directions. The
date upon which the Company shall release or deliver the Shares
sold in the Offering, in accordance with the terms herein, is
called the “Closing Date.”
The Agent shall receive the
following compensation for its services hereunder:
(a) A management fee of $35,000
payable in five consecutive monthly installments of $7,000
commencing with the first month following execution of the
February 20, 2009 letter agreement referenced above. This fee
shall be due as it is earned and shall be non-refundable. In the
event that the Offering is terminated for any reason not
attributable to the action or inaction of the Agent, the Agent
shall have earned and be entitled to be paid fees accruing through
the stage at which point the termination occurred.
(b) A Success Fee of $145,000 for
shares sold in the Subscription Offering. In addition, a Success
Fee of 3.0% of the aggregate purchase price of the Common Shares
sold in the Direct Community Offering. The management fee will be
applied against the success fee.
(c) If any of the 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 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 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 6.5% 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 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 addition to, and not in
lieu of, 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 provided that such expenses do
not exceed $20,000 without the approval of the Company and will
reimburse the Agent for the fees and expenses, not to exceed
$50,000, of the Agent’s counsel (which do not include legal
fees to complete the qualification of the 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 the Financial Industry Regulatory
Authority (“FINRA”) filing and registration fees; the
fees of the Bank’s
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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 general strategic planning, the creation of a capital
management strategy designed to enhance the value of the Company,
including the formation of a dividend policy and share repurchase
program, assistance with shareholder relations matters, general
advice on mergers and acquisitions, and other related financial
matters, without the payment by the Company of any fees in addition
to those set forth in this Section 2 hereof. Nothing in this
letter agreement shall require the Company to obtain such services
from Agent. If Agent acts as a financial advisor to the Company in
connection with any specific transactions, the terms of such
engagement will be set forth in a separate agreement between the
Company and Agent.
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.”
Section 4. Representations
and Warranties of the Company. The MHC, the Company and the Bank represent and
warrant 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; the
Company has complied with all requests of the Commission for
additional or supplemental information; and 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, and at any
Applicable Time (as such term is defined in Section 4(c)
hereof), 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
5
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 under the
caption “The Reorganization and the Stock Offering—
Plan of Distribution and 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. Each Prospectus delivered to the
Agent for use in connection with the Offerings will be identical to
the electronically transmitted copy thereof filed with the
Commission pursuant to EDGAR.
(b) None of the Commission, the OTS
or any state securities (“Blue Sky”) authority has, by
order or otherwise, prevented or suspended the use of the
Prospectus or any supplemental sales literature authorized by the
Company, the MHC or the Bank for use in connection with the
Offering, and no proceedings for such purposes are pending or, to
the knowledge of the Company, the MHC or the Bank,
threatened.
(c) At the time of filing the
Registration Statement relating to the offering of the Shares and
at the date hereof, the Company was not, and is not, an ineligible
issuer, as defined in Rule 405 of the 1933 Act Regulations. At the
time of the filing of the Registration Statement and at the time of
the use of any issuer free writing prospectus, as defined in Rule
433(h) of the 1933 Act Regulations, the Company met the conditions
required by Rules 164 and 433 of the 1933 Act Regulations for the
use of a free writing prospectus. If required to be filed, the
Company has filed any issuer free writing prospectus related to the
offered Shares at the time it is required to be filed under Rule
433 of the 1933 Act Regulations and, if not required to be filed,
will retain such free writing prospectus in the Company’s
records pursuant to Rule 433(g) of the 1933 Act Regulations and if
any issuer free writing prospectus is used after the date hereof in
connection with the offering of the Shares, the Company will file
or retain such free writing prospectus as required by Rule 433 of
the 1933 Act Regulations.
(d) As of the Applicable Time,
neither (i) the Issuer-Represented General Free Writing
Prospectus(es) (as defined below) issued at or prior to the
Applicable Time (as defined below) and the Statutory Prospectus,
all considered together (collectively, the “General
Disclosure Package”), nor (ii) any individual
Issuer-Represented Limited-Use Free Writing Prospectus (as defined
below), when considered together with the General
6
Disclosure Package, included any
untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. The preceding sentence does not apply to statements in
or omissions from any Prospectus included in the Registration
Statement relating to the offered Shares or any Issuer-Represented
Free Writing Prospectus based upon and in conformity with written
information furnished to the Company by the Agent specifically for
use therein. As used in this paragraph and elsewhere in this
Agreement:
(i) “Applicable Time”
means each and every date when a potential purchaser submitted a
subscription or otherwise committed to purchase Shares.
(ii) “Issuer-Represented Free
Writing Prospectus” means any “issuer free writing
prospectus,” as defined in Rule 433(h) of the 1933 Act
Regulations, relating to the offered Shares that is required to be
filed with the Commission by the Company or required to be filed
with the Commission. The term does not include any writing exempted
from the definition of prospectus pursuant to clause (g) of
Section 2(a)(10) of the 1933 Act, without regard to Rule 172
or Rule 173.
(iii) “Issuer-Represented
General Free Writing Prospectus” means any Issuer-Represented
Free Writing Prospectus that is intended for general distribution
to prospective investors, as evidenced by its being specified in
Schedule A to this Agreement.
(iv) “Issuer-Represented
Limited-Use Free Writing Prospectus” means any
Issuer-Represented Free Writing Prospectus that is not an
Issuer-Represented General Free Writing Prospectus. The term
Issuer-Represented Limited-Use Free Writing Prospectus also
includes any “bona fide electronic road show,” as
defined in Rule 433 of the 1933 Act Regulations, that is made
available without restriction pursuant to Rule 433(d)(8)(i) of the
1933 Act Regulations or otherwise, even though not required to be
filed with the Commission.
(v) “Statutory
Prospectus”, as of any time, means the Prospectus relating to
the offered Shares that is included in the Registration Statement
relating to the offered Shares immediately prior to that time,
including any document incorporated by reference
therein.
(e) Each Issuer-Represented Free
Writing Prospectus, as of its date of first use and at all
subsequent times through the completion of the Offering and sale of
the offered Shares or until any earlier date that the Company
notified or notifies the Agent (as described in the next sentence),
did not, does not and will not include any information that
conflicted, conflicts or will conflict with the information
contained in the Registration Statement relating to the offered
Shares, including any document incorporated by reference therein
that has not been superseded or modified. If at any time following
the date of first use of an Issuer-Represented Free Writing
Prospectus there occurred or occurs an event or development as a
result of which such Issuer-Represented Free Writing Prospectus
conflicted or would conflict with the information contained
in
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the Registration Statement relating
to the offered Shares or included or would include an untrue
statement of a material fact or omitted or would omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances prevailing at that subsequent time,
not misleading, the Company has notified or will notify promptly
the Agent so that any use of such Issuer-Represented Free-Writing
Prospectus may cease until it is amended or supplemented and the
Company has promptly amended or will promptly amend or supplement
such Issuer-Represented Free Writing Prospectus to eliminate or
correct such conflict, untrue statement or omission. The foregoing
two sentences do not apply to statements in or omissions from any
Issuer-Represented Free Writing Prospectus based upon and in
conformity with written information furnished to the Company by the
Agent specifically for use therein.
(f) 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
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 under the caption
“The Reorganization and the Stock Offering—Plan of
Distribution and 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.
(g) The Company has 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
8
OTS. At the date of such approval,
the Holding Company Application complied in all material respects
with the applicable provisions of HOLA and the regulations
promulgated thereunder except to the extent waived or otherwise
approved by the OTS. The Company and the MHC will register with the
OTS as savings and loan holding companies under the
HOLA.
(h) 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.
(i) At the Closing Date, the Plan
will have been adopted by the Boards of Directors of the MHC, the
Company and the Bank and the Plan and contribution to the
Charitable Foundation approved by the members of the Bank, and the
offer and sale of the Shares and the funding of the Charitable
Foundation 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.
(j) 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
9
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 have 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 and those disclosed in the
Registration Statement and the Prospectus. 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.
(k) 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 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.
(l) 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
10
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.
(m) The Charitable Foundation has
been duly organized and is validly existing as a non-stock,
non-profit corporation under the laws of State of Delaware; the
Charitable Foundation will not be a savings and loan holding
company within the meaning of the HOLA as a result of the issuance
of shares of Common Shares to it in accordance with the terms of
the Plan and in the amounts as described in the Prospectus; no
approvals are required to contribute the shares of Common Shares
thereto as described in the Prospectus other than those imposed by
the OTS; except as disclosed in the Prospectus, there are no
agreements and/or understandings, written or oral, between the
Company, the Bank and/or the MHC and the Charitable Foundation with
respect to the control, directly or indirectly, over the voting and
the acquisition or disposition of the Charitable Foundation Shares;
at the time of the Reorganization, the Charitable Foundation Shares
will have been duly authorized for issuance and, when issued and
contributed by the Company pursuant to the Plan and for the
consideration, if any, contemplated by the corporate authorization
of the issuance thereof, will be validly issued, fully paid and
non-assessable by the Company; and the issuance of the Charitable
Foundation Shares is not subject to preemptive or similar
rights.
(n) The Bank is a member of the
Federal Home Loan Bank of Atlanta (“FHLB-Atlanta”). 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).
(o) The Bank has and, upon their
formation, each of the Company and the MHC, 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.
(p) The Company has received an
opinion of its special counsel, Luse Gorman Pomerenk &
Schick, P.C., with respect to the federal income tax consequences,
and an opinion of Faucett, Taylor & Associates, LLP, with
respect to the state income tax consequences of the Reorganization
and the contribution of the Charitable Foundation Shares to the
Charitable Foundation, all material aspects of such opinions are
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.
11
(q) 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 and to contribute the Charitable Foundation Shares 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
and to contribute the Charitable Foundation Shares 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).
(r) None 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, the General Disclosure Package 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
12
and adversely affect the Offering,
the performance of this Agreement or the consummation of the
transactions as described in the Registration Statement, the
General Disclosure Package and the Prospectus or which might result
in a Material Adverse Effect.
(s) The consolidated financial
statements, schedules and notes related thereto which are included
in the General Disclosure Package and the Prospectus fairly present
the balance sheet, income statement, statement of changes in equity
capital 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 General Disclosure Package and 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.
(t) 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 General
Disclosure Package and 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
13
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 General Disclosure Package
and 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.
(u) 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.
(v) 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.
(w) 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.
14
(x) No labor dispute with the
employees of the Company, the MHC, the Bank or the Subsidiaries
exists or, to the knowledge of the Company, the MHC, the Bank or
the Subsidiaries, is imminent or threatened; and the company, the
MHC and the Bank are not aware of any existing or threatened labor
disturbance by the employees of any of its principal suppliers or
contractors which might be expected to have a Material Adverse
Effect.
(y) There is no action, suit or
proceeding before or by any court or governmental agency or body,
domestic or foreign, no pending, or, to the knowledge of the
Company, the MHC or the Bank, threatened against or affecting the
Company, the MHC or the Bank which is required to be disclosed in
the Registration Statement (other than as disclosed therein), or
which might result in any material adverse change in the financial
condition, results of operation, business affairs or prospects of
the Company, the MHC, the Bank and the Subsidiaries, considered as
one enterprise, or which might materially and adversely affect the
properties or assets thereof, or which might adversely affect the
consummation of the Offering, or the performance of this Agreement;
all pending legal or governmental proceedings to which the Company,
the MHC, the Bank or any Subsidiary is a party or of which any of
their respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to their business, are in the aggregate not
material.
(z) Upon consummation of the
Reorganization and contribution of the Charitable Foundation Shares
to the Charitable Foundation, 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 and outstanding prior to the Closing Date; the Shares
(including the Charitable Foundation Shares and shares 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 or contributed by the Company pursuant to the Plan in the case
of the Charitable Foundation Shares 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.
(aa) 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 Financial Industry
Regulatory Authority (“FINRA”).
15
(bb) The Company, the MHC and the
Bank each carries, or is covered by, insurance in such amounts and
covering such risks as is adequate for the conduct of their
respective businesses and the value for their respective properties
as is customary for companies engaged in similar
industries.
(cc) The Company, the MHC and the
Bank are each in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder (“ERISA”); no
“reportable event” (as defined in ERISA) has occurred
with respect to any “pension plan” (as defined in
ERISA) for which the Company, the MHC or the Bank, respectively,
would have any liability; each of the Company, the MHC and the Bank
has not incurred and does not expect to incur liability under
(i) Title IV or ERISA with respect to termination of, or
withdrawal from, any “pension plan” or
(ii) Sections 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published
interpretations thereunder (the “Code”); and each
“pension plan” for which the Company, the MHC and the
Bank would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified and nothing
has occurred, whether by action or by failure to act, which would
cause the loss of such qualification.
(dd) The Company is in compliance
with the applicable provisions of the Sarbanes-Oxley Act of 2002,
the rules and regulations of the Commission thereunder, and will
use its best efforts to comply with those provisions of the
Sarbanes-Oxley Act of 2002 that will become effective in the future
upon their effectiveness.
(ee) Crowe Horwath LLP, which has
certified the audited financial statements and schedules of the
Bank included in the Prospectus, has advised the Company and the
Bank in writing that they are, with respect to the Company and the
Bank, independent registered public accountants within the
applicable rules of the Public Company Accounting Oversight Board
(United States).
(ff) Keller & Company,
Inc., 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.
(gg) 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.
(hh) 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.
16
(ii) 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 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.
(jj) 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 FINRA, 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.
(kk) 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.
(ll) 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.
(mm) The Company, the Charitable
Foundation and the MHC are not required to be registered under the
Investment Company Act of 1940, as amended.
(nn) 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 on the financial condition, results of
operations or business of the MHC, 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 o
