Exhibit 1.2
VIRGINIA CAPITAL BANCSHARES, INC.
UP TO 13,965,600 SHARES OF COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
$10.00 PER SHARE
AGENCY AGREEMENT
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November __, 1998
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
Virginia Capital Bancshares, Inc., a Virginia corporation ("Company"), and
Fredericksburg Savings and Loan Association, F.A., a federally chartered and
insured mutual savings and loan association ("Association"), hereby confirm as
of the date above their respective agreements with Trident Securities, Inc.
("Trident"), a broker-dealer registered with the Securities and Exchange
Commission ("Commission") and a member of the National Association of Securities
Dealers, Inc. ("NASD"), as follows:
1. Introduction. The Association intends to convert from a federally
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chartered mutual savings and loan association to a federally chartered stock
savings and loan association as a wholly-owned subsidiary of the Company
(together with the Offerings (as defined below), the issuance of shares of
common stock of the Association to the Company, the incorporation of the
Company, and the establishment and operation of the Foundation (as defined
below), collectively the "Conversion") pursuant to a plan of conversion adopted
by the Association's Board of Directors on _______, 1998 ("Plan"). In
accordance with the Plan, the Company is offering up to 13,965,600 shares
("Shares") of its common stock, par value $0.01 per share ("Common Stock"),
pursuant to nontransferable subscription rights in a subscription offering
("Subscription Offering"), in order of priority, to (i) the Association's
Eligible Account Holders (as defined in the Plan), (ii) the Company's Employee
Stock Ownership Plan ("ESOP"), (iii) the Association's Supplemental Eligible
Account Holders (as defined in the Plan), and (iv) the Association's Other
Members (as defined in the Plan). Shares of the Common Stock not sold in the
Subscription Offering are being offered to the general public in a community
offering, with preference being given to natural persons residing in
___________________, Virginia ("Association's Local Community") ("Community
Offering"), and, if necessary, through a syndicate of NASD-registered broker-
dealers managed by Trident in a syndicated community offering ("Syndicated
Community Offering"). The Community Offering and the Syndicated Community
Offering may commence any time during the Subscription Offering or after the
expiration of the Subscription Offering. The Subscription Offering, the
Community
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Offering and the Syndicated Community Offering are collectively referred to as
the "Offerings." Purchases of Shares in the Offerings are subject to certain
limitations and restrictions as described in the Plan.
In addition, in connection with the Conversion and pursuant to the terms of
the Plan as described in the Prospectus, the Company has established a
charitable foundation ("Foundation"). Immediately following the consummation of
the Conversion, subject to the approval of the establishment of the Foundation
by the members of the Association and compliance with all conditions as may be
imposed by the OTS and any other regulatory authorities, the Company will
contribute Common Stock equal to 8% of the Common Stock sold in the Conversion
("Foundation Shares") to the Foundation.
The Company and the Association have been advised by Trident that it
intends to utilize its best efforts to assist the Company and the Association
with the sale of the Shares in the Subscription Offering and, if deemed
necessary, in the Community Offering and the Syndicated Community Offering.
2. Representations and Warranties.
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(a) The Company and the Association jointly and severally represent and
warrant to Trident that:
(i) The Company has filed with the Commission a registration statement,
including exhibits and an amendment or amendments thereto, on Form S-1
(No. 333-_______), including a Prospectus relating to the Offerings, for the
registration of the Shares and the Foundation Shares under the Securities Act of
1933, as amended ("Securities Act"); and such registration statement has been
declared effective under the Securities Act and no stop order has been issued
with respect thereto and no proceedings therefor have been initiated or, to the
Company's best knowledge, threatened by the Commission. Except as the context
may otherwise require, such registration statement, as amended or supplemented,
on file with the Commission at the time the registration statement became
effective, including the Prospectus, financial statements, schedules, exhibits
and all other documents filed as part thereof, as amended and supplemented, is
herein called the "Registration Statement," and the prospectus, as amended or
supplemented, on file with the Commission at the time the Registration Statement
became effective is herein called the "Prospectus," except that if any
prospectus filed by the Company with the Commission pursuant to Rule 424(b) of
the general rules and regulations of the Commission under the Securities Act
(together with the published policies and actions of the Commission thereunder,
the "Securities Act Regulations") differs from the form of prospectus on file at
the time the Registration Statement became effective, the term "Prospectus"
shall refer to the Rule 424(b) prospectus from and after the time it is filed
with the Commission and shall include any amendments or supplements thereto from
and after their dates of effectiveness or use, respectively.
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(ii) The Association has filed an Application for Approval of Conversion on
Form AC, including exhibits (as amended or supplemented, the "Form AC" or the
"Conversion Application") with the Office of Thrift Supervision ("OTS") under
the Home Owners' Loan Act, as amended ("HOLA"), and the rules and regulations,
including published policies and actions, of the OTS thereunder (collectively,
the "OTS Regulations"), which has been approved by the OTS; and the Prospectus
and the proxy statement for the solicitation of proxies from members for the
special meeting to approve the Plan ("Proxy Statement") included as part of the
Form AC have been approved for use by the OTS. No order has been issued by the
OTS preventing or suspending the use of the Prospectus or the Proxy Statement
and no action by or before the OTS revoking such approvals is pending or, to the
Association's best knowledge, threatened.
(iii) The Company has filed with the OTS an application on
Form H-e(1)-S ("Holding Company Application") promulgated under the savings and
loan holding company provisions of the HOLA and the regulations promulgated
thereunder and has received approval of its acquisition of the Association from
the OTS.
(iv) As of the date hereof (i) the Registration Statement and the
Prospectus comply with the Securities Act and the Securities Act Regulations,
(ii) the Registration Statement does not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (iii) the Prospectus does not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Representations or warranties in this subsection shall not apply to statements
or omissions made in reliance upon and in conformity with written information
furnished to the Company or the Association by or on behalf of Trident relating
to Trident expressly for use in the Registration Statement or Prospectus.
(v) The Company has been duly incorporated as a Virginia corporation and
the Association has been duly organized as a mutual savings and loan association
under the laws of the United States, and each of them is validly existing and in
good standing under the laws of their jurisdiction of organization with full
power and authority to own its property and conduct its business as described in
the Registration Statement and Prospectus; the Association is a member in good
standing of the Federal Home Loan Bank of Atlanta; and the deposit accounts of
the Association are insured by the Savings Association Insurance Fund ("SAIF")
administered by the Federal Deposit Insurance Corporation ("FDIC") up to the
applicable legal limits. Each of the Company and the Association is not
required to be qualified to do business as a foreign corporation in any
jurisdiction where non-qualification would have a material adverse effect on the
financial condition, operations, business, properties or assets of the Company
and the Association, taken as a whole.
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(vi) The Association has good, marketable and insurable title to all assets
material to its business and to those assets described in the Prospectus as
owned by it, free and clear of all liens, charges, encumbrances or restrictions,
except for liens for taxes not yet due, except as described in the Prospectus
and except as do not in the aggregate have a material adverse effect upon the
financial condition, results of operations or business of the Association; and
all of the leases and subleases material to the financial condition, results of
operations or business of the Association under which it holds properties,
including those described in the Prospectus, are in full force and effect as
described therein.
(vii) The only subsidiary of the Association is ________________ (the
"Subsidiary"). The Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation; the Subsidiary is currently inactive; all of the issued and
outstanding capital stock of the Subsidiary has been duly authorized and validly
issued, is fully paid and nonassessable and is owned by the Association, free
and clear of any security interest, mortgage, pledge, lien, encumbrance, claim
or equitable claim.
(viii) Upon consummation of the Conversion, the Foundation will be duly
incorporated and validly existing as a non-stock corporation in good standing
under the laws of the State of Delaware with corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Prospectus; the Foundation will not be a savings and loan holding company
within the meaning of 12 C.F.R. Section 574.2(q) as a result of the issuance of
the Foundation Shares in accordance with the terms of the Plan and in the
amounts as described in the Prospectus; no approvals are required to establish
the Foundation and to contribute the shares of Common Stock thereto as described
in the Prospectus other than those set forth in the OTS approval of the
Conversion Application; except as specifically disclosed in the Prospectus and
the Proxy Statement, there are no agreements and/or understandings, written or
oral, between the Company and/or the Association and the Foundation with respect
to the control, directly or indirectly, over the voting or the acquisition or
disposition of the Foundation Shares; at the time of the Conversion, the
Foundation Shares will have been duly authorized for issuance and, when issued
and contributed by the Company pursuant to the Plan, will be duly and validly
issued and fully paid and non-assessable; and the issuance of the Foundation
Shares is not subject to preemptive or similar rights.
(ix) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary actions on the part of each of the Company and the Association,
and this Agreement is a valid and binding obligation of each of the Company and
the Association, enforceable in accordance with its terms (except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization, conservatorship, receivership or similar laws relating to or
affecting the enforcement of creditors' rights generally or the rights of
creditors of insured financial institutions and their holding companies, the
accounts of whose subsidiaries are insured by the FDIC, by general equity
principles, regardless of whether such enforceability is considered in a
proceeding in equity or at
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law, or laws relating to the safety and soundness of insured depository
institutions and their affiliates, and except to the extent that the provisions
of Sections 8 and 9 hereof may be unenforceable as against public policy or
pursuant to Section 23A of the Federal Reserve Act, 12 U.S.C.
Section 371c (("Section 23A")).
(x) Except as referred to in the Prospectus, there is no litigation or
governmental proceeding pending or, to the best knowledge of the Company or the
Association, threatened against or involving the Company or the Association, or
any of their respective assets, which individually or in the aggregate would
reasonably be expected to have a material adverse effect on the financial
condition, results of operations or business of the Company and the Association,
taken as a whole. (For purposes of this representation, any litigation or
governmental proceeding is not considered "threatened" unless the potential
litigation or governmental authority had manifested to the management of the
Company or the Association a present intention to initiate such litigation or
proceeding.)
(xi) The Company and the Association have received the opinions of Muldoon,
Murphy & Faucette with respect to the federal income tax consequences of the
Conversion and the federal income tax consequences of the Foundation, and of
Cherry, Bekaert & Holland, L.L.P., with respect to the Virginia income tax
consequences of the Conversion, to the effect that the Conversion will
constitute a tax-free reorganization under the Internal Revenue Code of 1986, as
amended, and will not be a taxable transaction for the Association or the
Company under the laws of Virginia; the Association has received an opinion of
Cherry, Bekaert & Holland, L.L.P. with respect to the federal income tax
consequences of the Foundation; and the facts and representations made by the
Company and the Association and relied upon in rendering such opinions are
accurate and complete, and neither the Company nor the Association have taken
any action inconsistent therewith.
(xii) Neither the Company nor the Association is in violation of any
rule or regulation of the OTS or the FDIC that could reasonably be expected to
result in any enforcement action against the Company, the Association or their
officers or directors that might have a material adverse effect on the financial
condition, results of operations or business of the Company and the Association,
taken as a whole.
(xiii) FinPro, Inc. ("FinPro"), the firm that prepared the independent
appraisal dated as of ____________, 1998, is independent with respect to the
Company and the Association within the meaning of the OTS Regulations. The
Company and the Association believe FinPro to be experienced and expert in
rendering appraisals of thrift institutions, and nothing has come to the
attention of the Company and the Association which has caused them to believe
that the appraisal by FinPro was not prepared in accordance with the
requirements of the OTS Regulations.
(xiv) Cherry, Bekaert & Holland, L.L.P., the firm that certified the
financial statements of the Association filed as part of the Registration
Statement and the Conversion Application, is independent with respect to the
Company and the Association as required by the Securities Act, the
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Securities Act Regulations, the Code of Professional Ethics of the American
Institute of Certified Public Accountants, and Title 12 of the Code of Federal
Regulations Parts 563c and 571, and nothing has come to the attention of the
Company and the Association which has caused them to believe that such firm is
not independent within the meaning of such provisions.
(xv) The financial statements and related notes or schedules which are
included in the Registration Statement and the Prospectus fairly present the
financial condition, earnings, equity and cash flows of the Association at the
respective dates thereof and for the respective periods covered thereby and
comply as to form with the applicable accounting requirements of the Securities
Act Regulations and the OTS Regulations. Such financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved, except as set forth
therein, and such financial statements are consistent with financial statements
and other reports filed by the Association with the OTS, except as GAAP may
otherwise require. The financial tables in the Prospectus accurately present
the information purported to be shown thereby at the respective dates thereof
and for the respective periods covered thereby.
(xvi) There has been no material change in the financial condition,
results of operations or business of the Company and the Association, taken as a
whole, since the latest date as of which such condition is set forth in the
Prospectus, except as set forth therein; and the capitalization, assets,
properties and business of each of the Company and the Association conform in
all material aspects to the descriptions thereof contained in the Prospectus.
Neither the Company nor the Association has any material liabilities of any
kind, contingent or otherwise, except as set forth in the Prospectus.
(xvii) There has been no breach or default (or the occurrence of any
event which, with notice or lapse of time or both, would constitute a default)
under, or creation or imposition of any lien, charge or other encumbrance upon
any of the properties or assets of the Company or the Association pursuant to
any of the terms, provisions or conditions of, any agreement, contract,
indenture, bond, debenture, note, instrument or obligation to which the Company
or the Association is a party or by which any of them or any of their respective
assets or properties may be bound or is subject, or violation of any
governmental license or permit or any enforceable published law, administrative
regulation or order or court order, writ, injunction or decree, which breach,
default, encumbrance or violation would have a material adverse effect on the
financial condition, results of operations or business of the Company and the
Association, taken as a whole; all agreements which are material to the
financial condition, results of operations or business of the Company and the
Association, taken as a whole, are in full force and effect, and no party to any
such agreement has instituted or threatened any action or proceeding wherein the
Company or the Association would be alleged to be in default thereunder.
(xviii) Neither the Company nor the Association is in violation of its
respective charter, certificate of incorporation or bylaws. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby (including the establishment and operation
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of the Foundation) do not conflict with or result in a breach of the charter,
certificate of incorporation or bylaws of the Company or the Association (in
either mutual or stock form) or constitute a material breach of or default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, give rise to any right of termination, cancellation or
acceleration contained in, or result in the creation or imposition of any lien,
charge or other encumbrance upon any of the properties or assets of the Company
or the Association pursuant to any of the terms, provisions or conditions of,
any material agreement, contract, indenture, bond, debenture, note, instrument
or obligation to which the Company or the Association is a party (other than the
establishment of a liquidation account pursuant to the Plan) or violate any
governmental license or permit or any law, administrative regulation or order or
court order, writ, injunction or decree (subject to the satisfaction of certain
conditions imposed by the OTS in connection with its approval of the Conversion
Application), which breach, default, encumbrance or violation would have a
material adverse effect on the financial condition, results of operations or
business of the Company and the Association, taken as a whole.
(xix) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus, except as otherwise may be
indicated or contemplated therein, neither the Company nor the Association has
issued any securities which will remain issued at the Closing Date or incurred
any liability or obligation, direct or contingent, or borrowed money, except
borrowings or liabilities in the ordinary course of business consistent with
past practice, or entered into any other transaction not in the ordinary course
of business and not consistent with prior practices, which is material in light
of the business of the Company and the Association, taken as a whole.
(xx) The issuance and the sale of the Shares have been duly authorized by
all necessary action of the Company and approved by the OTS and, when issued in
accordance with the terms of the Plan and paid for, shall be validly issued,
fully paid and nonassessable and shall conform to the description thereof
contained in the Prospectus; the issuance of the Shares is not subject to
preemptive rights and good title to the Shares will be transferred by the
Company upon issuance thereof against payment therefor, free and clear of all
claims, encumbrances, security interests and liens against the Company
whatsoever. The issuance and sale of the capital stock of the Association to
the Company has been duly authorized by all necessary action of the Association
and the Company and the OTS (subject to the satisfaction of various conditions
imposed by the OTS in connection with its approvals of the Conversion
Application and the Holding Company Application), and such capital stock, when
issued in accordance with the terms of the Plan, will be fully paid and
nonassessable and will conform in all material respects to the description
thereof contained in the Prospectus.
(xxi) No approval of any regulatory or supervisory or other public
authority is required in connection with the execution and delivery of this
Agreement or the issuance of the Shares and the Foundation Shares, except such
approvals as have been obtained and except for the declaration of
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effectiveness of any required post-effective amendment by the Commission and
approval thereof by the OTS, the issuance of the Association's Federal Stock
Charter by the OTS and as may be required under the "blue sky" or securities
laws of various jurisdictions.
(xxii) All contracts and other documents required to be filed as
exhibits to the Registration Statement, the Conversion Application or the
Holding Company Application have been filed with the Commission or the OTS or
both, as the case may be.
(xxiii) The Company and the Association have timely filed all required
federal, state and local tax returns, and no deficiency has been asserted with
respect to such returns by any taxing authorities, and the Company and the
Association have paid all taxes that have become due and, to the best of their
knowledge, have made adequate reserves for accrued tax liabilities, except where
any failure to make such filings, payments and reserves, or the assertion of
such a deficiency, would not have a material adverse effect on the financial
condition or results of operations of the Company and the Association, taken as
a whole.
(xxiv) All of the loans represented as assets of the Association as of
the most recent date for which financial condition data is included in the
Prospectus meet or are exempt from all requirements of federal, state or local
law pertaining to lending, including without limitation truth in lending
(including the requirements of Regulation Z and 12 C.F.R. Part 226 and Section
563.99), 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
Association, taken as a whole.
(xxv) The records of Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members (as those terms are defined in the Plan)
delivered to Trident by the Association or its agent for use during the
Conversion have been reviewed by the Association and are believed to be
accurate, reliable and complete and Trident shall have no liability to any
person relating to the reliability, accuracy or completeness of such records or
for any denial or allocation of a subscription to purchase shares to any person
based upon such records.
(xxvi) Neither the Company nor the Association has made any payment of
funds of the Company or the Association as a loan for the purchase of shares or
has made any other payment of funds prohibited by law, and no funds of the
Company or the Association have been set aside to be used for any payment
prohibited by law.
(xxvii) To the best knowledge of the Company and the Association, the
Company and the Association are in compliance with all laws, rules and
regulations relating to environmental protection and neither the Company nor the
Association is subject to liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or
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any similar law, except for violations which, if asserted, would not have a
material adverse effect on the Company and the Association, taken as a whole.
There are no actions, suits, regulatory investigations or other proceedings
pending or threatened against the Company or the Association relating to
environmental protection. To the best knowledge of the Company and the
Association, no disposal, release or discharge of hazardous or toxic substances,
pollutants or contaminants, including petroleum and gas products, as any of such
terms may be defined under federal, state or local law, has been caused by the
Company or the Association or, to the best knowledge of the Company and the
Association, and except as already disclosed in the Prospectus, has occurred on,
in or at any of the facilities or properties owned or leased by the Company or
the Association or in which the Company or the Association has a security
interest, except such disposal, release or discharge which would not have a
material adverse effect on the financial condition, operations, business, assets
or properties of the Company, the Association or the subsidiary, taken as a
whole.
(xxviii) All documents delivered by the Association or the Company or their
representatives in connection with the issuance and sale of the Common Stock,
except for those documents that were prepared by parties other than the
Association, the Company or their representatives, were, on the dates on which
they were delivered, true, complete and correct.
(b) Trident represents and warrants to the Company and the Association
that:
(i) Trident is registered as a broker-dealer and is in good standing
with the Commission and the NASD.
(ii) Trident is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation, with full corporate power and
authority to provide the services to be furnished to the Company and the
Association hereunder.
(iii) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary action on the part of Trident, and this Agreement is a legal,
valid and binding obligation of Trident, enforceable in accordance with its
terms (except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws relating to or affecting
the enforcement of creditors' rights generally or the rights of creditors of
registered broker-dealers accounts of whose may be protected by the Securities
Investor Protection Corporation 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 that the provisions of Sections 8 and 9 hereof may be
unenforceable as against public policy or pursuant to Section 23A).
(iv) Trident and, to Trident's best knowledge, its employees, agents and
representatives who shall perform any of the services required hereunder to be
performed by Trident, shall be duly authorized and shall have all licenses,
approvals and permits necessary to perform such services, and Trident is a
registered selling agent in the jurisdictions in which the Company is relying on
such
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registration for the sale of the Shares, and will remain so registered
until the Conversion is consummated or terminated.
(v) The execution and delivery of this Agreement by Trident, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not violate or conflict with the charter
or bylaws of Trident or violate, conflict with or constitute a breach of, or
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, any material agreement, indenture or other
instrument by which Trident is bound or under any governmental license or permit
or any law, administrative regulation, authorization, approval or order or court
decree, injunction or order.
(vi) All funds received by Trident to purchase Common Stock will be handled
in accordance with Rule 15c2-4 under the Securities Exchange Act of 1934, as
amended ("Exchange Act").
(vii) No action or proceeding against Trident before the Commission,
the NASD, any state securities commission, or any state or federal court is
pending or, to Trident's best knowledge, threatened concerning Trident's
activities as a broker-dealer.
3. Engagement of Trident; Sale and Delivery of the Shares. On the basis
------------------------------------------------------
of the representations and warranties herein contained, but subject to the terms
and conditions herein set forth, the Company and the Association hereby engage
Trident as their agent to utilize its best efforts to assist the Company with
the Company's sale of the Shares in the Offerings, and Trident hereby accepts
such engagement. The engagement of Trident hereunder shall terminate (a) forty-
five (45) days after the Subscription and Community Offering closes, unless the
Company and the Association, with the approval of the OTS, are permitted to
extend such period of time, or (b) upon consummation of the Conversion,
whichever date shall first occur.
In the event the Company is unable to sell a minimum of 8,976,000 Shares
(or such lesser amount as the OTS may permit) within the period herein provided,
this Agreement shall terminate, and the Company and the Association shall refund
promptly to any persons who have subscribed for any of the Shares, the full
amount which it may have received from them, together with interest as provided
in the Prospectus, and no party to this Agreement shall have any obligation to
the other party hereunder, except as set forth in Sections 6, 8, 9 and 10
hereof. Appropriate arrangements for placing the funds received from
subscriptions for Shares in special interest-bearing accounts with the
Association until all Shares are sold and paid for will be made prior to the
commencement of the Subscription and Community Offering, with provision for
prompt refund to the purchasers as set forth above, or for delivery to the
Company if all Shares are sold.
If all conditions precedent to the consummation of the Conversion are
satisfied, including the sale of all Shares required by the Plan to be sold, the
Company agrees to issue or have issued
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such Shares and to release for delivery certificates to subscribers thereof for
such Shares on the Closing Date against payment to the Company by any means
authorized pursuant to the Prospectus, at the principal office of the Company,
400 George Street, Fredericksburg, Virginia, or at such other place as shall be
agreed upon between the parties hereto. The date upon which the Company shall
release or deliver the Shares sold in the Offerings, in accordance with the
terms hereof, is herein called the "Closing Date."
Trident agrees either (a) upon receipt of an executed order form of a
subscriber to forward to the Association for deposit in a segregated account the
offering price of the Common Stock ordered on or before twelve noon on the next
business day following receipt or execution of an order form by Trident or (b)
to solicit indications of interest in which event Trident will (i) subsequently
contact any potential subscriber indicating interest to confirm the interest and
give instructions to execute and return an order form or to receive
authorization to execute the order form on the subscriber's behalf, (ii) mail
acknowledgements of receipt of orders to each subscriber confirming interest on
the business day following such confirmation, (iii) debit accounts of such
subscribers on the third business day ("debit date") following receipt of the
confirmation referred to in (i), and (iv) forward completed order forms together
with such funds to the Association on or before twelve noon on the next business
day following the debit date for deposit in a segregated account. Trident
acknowledges that if the procedure in (b) is adopted, subscribers' funds are not
required to be in their accounts until the debit date.
Trident agrees to render to the Company and the Association the services
set forth in Exhibit A hereto. Trident shall receive the following compensation
and expense reimbursement for its services hereunder:
(a) (i) a management fee of $525,000, and (ii) a commission to be agreed
upon by Trident and the Company for Shares sold by other member firms of
the NASD through a selected dealers arrangement in the Syndicated Community
Offering, which aggregate commission shall be determined at the discretion
of the Company and the Association with the advice of Trident. All such
fees shall be paid to Trident in next-day funds on the Closing Date.
(b) Reimbursement for reasonable out-of-pocket allocable expenses,
including but not limited to travel, food, lodging and legal fees, incurred
by it whether or not the Offerings are successfully completed; provided,
however, that reimbursable legal fees will not exceed $30,000 (excluding
legal fees and expenses to comply with "blue sky" requirements) and that
other reimbursable expenses will not exceed $25,000, and, provided further,
that neither the Company nor the Association shall reimburse Trident for
any of the foregoing expenses accrued after Trident shall have notified the
Company or the Association of its election to terminate this Agreement
pursuant to Section 11 hereof or after such time as the Company or the
Association shall have given notice in accordance with Section 12
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hereof that Trident is in breach of this Agreement. Full reimbursement of
Trident shall be made in next-day funds on the Closing Date or, if the
Conversion is not completed and is terminated for any reason, within ten
(10) business days of receipt by the Company of a written request detailing
allocable expenses from Trident for reimbursement of such expenses. Trident
acknowledges receipt of a $10,000 advance payment from the Association,
which shall be credited against the total reimbursement due Trident
hereunder. In the event this Agreement is terminated pursuant to Section 11
hereof, Trident shall be reimbursed only for its actual allocable expenses.
(c) Reimbursement for any expenses of the Company and the Association
set forth in Section 6 hereof to the extent paid by Trident on behalf of
the Company and the Association. Full reimbursement shall be made in next-
day funds on the Closing Date or, if the Conversion is not completed and is
terminated for any reason, within ten (10) business days of receipt by the
Company and the Association of a written request for such reimbursement
detailing such reimbursements.
Notwithstanding the limitations on reimbursement of Trident for its
allocable expenses provided in subsection (b) above and notwithstanding any
reimbursement of Trident pursuant to subsection (c) above, in the event that a
resolicitation or other event causes the Offerings to be extended beyond their
original expiration date the parties agree to renegotiate the expense cap on
legal fees and out-of-pocket expenses applicable to Trident.
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
--------
assisting the Company on a best efforts basis in offering a minimum of 8,976,000
and a maximum of 12,144,000 Shares, subject to adjustment up to 13,965,600
Shares (except as the OTS may permit to be decreased or increased) in the
Offerings. The Shares are to be offered to the public at the price set forth on
the cover page of the Prospectus and the first page of this Agreement.
5. Further Agreements. The Company and the Association jointly and
------------------
severally covenant and agree that:
(a) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus and through and including the Closing
Date, except as otherwise may be indicated or contemplated therein, neither the
Company nor the Association will issue any securities which will remain issued
at the Closing Date or incur any liability or obligation, direct or contingent,
or borrow money, except borrowings or liabilities in the ordinary course of
business consistent with past practice, or enter into any other transaction not
in the ordinary course of business and consistent with past practice, which is
material in light of the financial condition, results of operations or business
of the Company and the Association, taken as a whole.
(b) If any Shares remain unsubscribed following completion of the
Subscription Offering
Trident Securities, Inc.
Page 13
and the Community Offering, the Company (i) will, if deemed necessary, promptly
file with the Commission a post-effective amendment to such Registration
Statement relating to the results of the Subscription and the Community
Offerings, any additional information with respect to the proposed plan of
distribution and any revised pricing information or (ii) if no such post-
effective amendment is required, will file with, or mail for filing to, the
Commission a prospectus or prospectus supplement containing information relating
to the results of the Subscription and Community Offerings and pricing
information pursuant to Rule 424(c) of the Securities Act Regulations, in either
case in a form reasonably acceptable to the Company and Trident.
(c) Upon consummation of the Conversion (including the establishment and
operation of the Foundation), the authorized, issued and outstanding equity
capital of the Company shall be within the range as set forth in the Prospectus
under the caption "Capitalization," and no Common Stock of the Company shall be
outstanding immediately prior to the Closing Date (other than shares of Common
Stock issued in connection with the initial capitalization of the Company, which
shares will be canceled upon consummation of the Conversion); and the
certificates representing the Common Stock will conform in all material respects
with the requirements of applicable laws and OTS Regulations.
(d) At all times subsequent to the date of the Prospectus through and
including the Closing Date (i) the Registration Statement and the Prospectus
will comply with the Securities Act and the Securities Act Regulations, (ii) the
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (iii) the Prospectus will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) Upon amendment of the Association's charter and bylaws as provided in
the OTS Regulations and completion of the sale and issuance of the Shares and
the issuance of the Foundation Shares by the Company as contemplated by the
Prospectus, (i) the Association will be converted pursuant to the Plan to a
federally chartered capital stock savings bank with full power and authority to
own its property and conduct its business as described in the Prospectus,
(ii) all of the authorized and outstanding capital stock of the Association will
be owned of record and beneficially by the Company, (iii) the Company will have
no direct subsidiaries other than the Association, and (iv) the Foundation will
be duly incorporated and validly existing as a non-stock corporation in good
standing under the laws of the State of Delaware.
(f) The Company shall deliver to Trident, from time to time, such number of
copies of the Prospectus as Trident reasonably may request. The Company
authorizes Trident to use the Prospectus in any lawful manner in connection with
the offer and sale of the Shares.
(g) The Company will notify Trident immediately upon discovery, and confirm
the notice
Trident Securities, Inc.
Page 14
in writing, (i) when any post-effective amendment to the Registration
Statement becomes effective or any supplement to the Prospectus has been filed,
(ii) of the issuance by the Commission of any stop order relating to the
Registration Statement or of the initiation or the threat of any proceedings for
that purpose, (iii) of the receipt of any notice with respect to the suspension
of the qualification of the Shares for offering or sale in any jurisdiction, and
(iv) of the receipt of any comments from the staff of the Commission relating to
the Registration Statement. If the Commission enters a stop order relating to
the Registration Statement at any time, the Company will make every reasonable
effort to obtain the lifting of such order at the earliest possible moment.
(h) During the time when a prospectus is required to be delivered under the
Securities Act, the Company will comply with all requirements imposed upon it by
the Securities Act and by the Securities Act Regulations to permit the
continuance of offers and sales of or dealings in the Shares in accordance with
the provisions hereof and the Prospectus. If during the period when the
Prospectus is required to be delivered in connection with the offer and sale of
the Shares any event relating to or affecting the Company and the Association,
taken as a whole, shall occur as a result of which it is necessary, in the
reasonable opinion of counsel for Trident, to amend or supplement the Prospectus
in order to make the Prospectus not false or misleading in light of the
circumstances existing at the time it is delivered to a purchaser of the Shares,
the Company forthwith shall prepare and furnish to Trident a reasonable number
of copies of an amendment or amendments or of a supplement or supplements to the
Prospectus (in form and substance reasonably satisfactory to counsel for
Trident) which shall amend or supplement the Prospectus so that, as amended or
supplemented, the Prospectus shall not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances existing at the time the Prospectus is
delivered to a purchaser of the Shares, not misleading. The Company will not
file or use any amendment or supplement to the Registration Statement or the
Prospectus unless Trident has been first furnished a copy or if Trident shall
reasonably object after having been furnished such copy. For the purposes of
this subsection the Company and the Association shall furnish such information
with respect to themselves as Trident from time to time may reasonably request.
(i) The Company and the Association will take all reasonably necessary
action as may be required to qualify or register the Shares for offer and sale
by the Company under the securities or blue sky laws of such jurisdictions as
Trident and the Company or its counsel may agree upon; provided, however, that
the Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any such jurisdiction. In each jurisdiction where
such qualification or registration shall be effected, the Company, unless
Trident agrees that such action is not necessary or advisable in connection with
the distribution of the Shares, shall file and make such statements or reports
as are, or reasonably may be, required by the laws of such jurisdiction.
(j) Appropriate entries will be made in the financial records of the
Association to establish a liquidation account for the benefit of Eligible
Trident Securities, Inc.
Page 15
Account Holders and Supplemental Eligible Account Holders (as those terms are
defined in the Plan) in accordance with the OTS Regulations.
(k) The Company will file a registration statement for the Common Stock
under Section 12(g) of the Exchange Act prior to completion of the Offerings
pursuant to the Plan and shall request that such registration statement be
effective upon completion of the Conversion. The Company shall maintain the
effectiveness of such registration for a minimum period of three years or for
such shorter period as may be required by applicable law.
(l) The Company will make generally available to its security holders as
soon as practicable, but not later than 90 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 of the Securities Act Regulations) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date (as defined in said Rule 158) of the Registration
Statement.
(m) For a period of three (3) years from the date of this Agreement, the
Company will furnish to Trident, as soon as publicly available after the end of
each fiscal year, a copy of its annual report to shareholders for such year; and
the Company will furnish to Trident (i) as soon as publicly available, a copy of
each report or definitive proxy statement of the Company filed with the
Commission under the Exchange Act or mailed to shareholders, and (ii) from time
to time, such other public information concerning the Company as Trident may
reasonably request.
(n) The Company shall use the net proceeds from the sale of the Shares in
the manner set forth in the Prospectus.
(o) The Company shall not deliver the Shares and issue the Foundation
Shares until each and every condition set forth in Section 7 hereof has been
satisfied, unless such condition is waived in writing by Trident.
(p) The Company, after consultation with Trident, shall make all
determinations, if necessary, as to the allocation of deposits, in the case of
Eligible Account Holders and Supplemental Eligible Account Holders, and votes,
in the case of Other Members, and of the Shares in the event of an
oversubscription, and shall provide final instructions as to the allocation of
the Shares ("Allocation Instructions") in such event, and the Allocation
Instructions shall be accurate, reliable and complete. Trident shall be
entitled to rely on the Allocation Instructions and shall have no liability in
respect of its reliance thereon, including without limitation, no liability for
or related to any denial or grant of a subscription in whole or in part.
(q) The Company and the Association will take such actions and furnish such
information as are reasonably requested by Trident in order for Trident to
comply with the NASD's "Interpretation Relating to Free-Riding and Withholding."
(r) At the Closing Date, the Company and the Association will have
completed the
Trident Securities, Inc.
Page 16
conditions precedent to, and shall have conducted the Conversion (including the
establishment and operation of the Foundation) in all material respects in
accordance with, the Plan, OTS Regulations and all other applicable laws,
regulations, published decisions and orders, including all terms, conditions,
requirements and provisions precedent imposed by the OTS.
(s) The Company will use its best efforts to obtain approval for and
maintain quotation of its shares of common stock on the Nasdaq stock market
effective on or prior to the Closing Date.
(T) THE COMPANY AND THE ASSOCIATION SHALL USE THEIR BEST EFFORTS TO ENSURE
THAT THE FOUNDATION SUBMITS WITHIN THE TIME FRAMES REQUIRED BY APPLICABLE LAW A
REQUEST TO THE INTERNAL REVENUE SERVICE TO BE RECOGNIZED AS A TAX-EXEMPT
ORGANIZATION UNDER SECTION 501(C)(3) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED; THE COMPANY AND THE ASSOCIATION WILL TAKE NO ACTION WHICH WILL RESULT
IN THE POSSIBLE LOSS OF THE FOUNDATION'S TAX-EXEMPT STATUS; AND THE COMPANY AND
THE ASSOCIATION CURRENTLY DO NOT INTEND TO CONTRIBUTE ANY ADDITIONAL ASSETS TO
THE FOUNDATION UNTIL SUCH TIME THAT SUCH ADDITIONAL CONTRIBUTIONS WILL BE
DEDUCTIBLE FOR FEDERAL AND STATE INCOME TAX PURPOSES.
6. Payment of Expenses. Subject to Section 3(c) hereof, whether or not
-------------------
the Conversion is consummated, the Company and the Association shall pay the
following expenses: (a) all regulatory filing fees, including but not limited to
those payable to the Commission, OTS, "blue sky" authorities and the NASD
(including fees payable to the NASD for Trident's filing pursuant to the NASD
Corporate Finance Rule), (b) all stock issue and transfer taxes which may be
payable with respect to the sale of the Shares, (c) attorneys' fees of the
Company and the Association, (d) attorneys' fees relating to any required "blue
sky" laws research and filings, (e) telephone charges, (f) air freight, (g)
rental equipment, (h) supplies, (i) transfer agent and registrar fees and
expenses, (j) auditing and accounting fees and expenses, (k) costs of printing
and mailing all documents necessary in connection with the Conversion, and (l)
slide production expenses in connection with any community investor meetings to
be held by Trident.
7. Conditions of Trident's Obligations. Except as may be waived in
-----------------------------------
writing by Trident, the obligations of Trident as provided herein shall be
subject to the accuracy of the representations and warranties contained in
Section 2 hereof as of the date hereof and as of the Closing Date, to the
performance by the Company and the Association of their obligations hereunder,
and to the following conditions:
(a) At the Closing Date, Trident shall receive the favorable opinion of
Muldoon, Murphy & Faucette, special counsel for the Company and the Association,
dated the Closing Date, addressed to Trident, in form and substance reasonably
satisfactory to counsel for Trident and stating that:
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the Commonwealth of Virginia, and
the
Trident Securities, Inc.
Page 17
Association is validly existing as a mutual savings and loan association
under the laws of the United States, each with full power and authority to own
its properties and conduct its business as described in the Prospectus;
(ii) the Association is a member of the Federal Home Loan Bank of Atlanta,
and the deposit accounts of the Association are insured by the SAIF up to the
applicable legal limits; and no action or proceeding to suspend or revoke such
membership or insurance coverage is pending or threatened;
(iii) the activities of the Association as described in the Prospectus
are permitted under the HOLA and OTS Regulations;
(iv) the Foundation has been duly incorporated and is validly existing as a
non-stock corporation in good standing under the laws of the State of Delaware
with corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus; the Foundation is not a
savings and loan holding company within the meaning of 12 C.F.R. Section
574.2(q) as a result of the issuance of the Foundation Shares to it in
accordance with the terms of the Plan and in the amounts as described in the
Prospectus; no approvals are required to establish the Foundation and to
contribute the Foundation Shares thereto as described in the Prospectus other
than those set forth in the OTS approval related thereto.
(v) the Company and the Association are duly qualified to do business and
are in good standing as a foreign corporation in each jurisdiction where the
ownership or leasing of its properties or the conduct of its business requires
such qualification, unless the failure to be so qualified would not have a
material adverse effect on the Company and the Association, taken as a whole.
(vi) to such counsel's knowledge, the Association has obtained all
licenses, permits and other governmental authorizations required for the conduct
of its business as described in the Prospectus, except where the failure to
obtain such licenses, permits or governmental authorizations would not have a
material adverse effect on the financial condition, results of operations or
business of the Company and the Association, taken as a whole; to such counsel's
knowledge, all of the leases and subleases material to the business of the
Association under which the Association holds properties are in full force and
effect; the Association is not in violation of its charter or bylaws;
(vii) the Plan has been duly adopted by the Boards of Directors of the
Association and the Company and the members of the Association; the Plan
complies with, and to such counsel's knowledge, the Conversion (including the
establishment and operation of the Foundation) has been effected in all material
respects in accordance with, the Plan the
Trident Securities, Inc.
Page 18
HOLA, the OTS Regulations and applicable OTS approvals issued thereunder; to
such counsel's knowledge, all of the terms, conditions, requirements and
provisions with respect to the Plan and the Conversion (including the
establishment and operation of the Foundation) imposed by the OTS, except with
respect to the Conversion Application and the filing or submission of certain
required post-Conversion reports by the Company or the Association, have been
complied with by the Company and the Association; and, to such counsel's
knowledge, no person has sought to obtain regulatory or judicial review of the
final action of the OTS in approving the Plan or the creation of the Foundation;
(viii) the Company has authorized Common Stock as set forth in the
Registration Statement and the Prospectus, and the description thereof in the
Registration Statement and the Prospectus is accurate and complete in all
material respects;
(ix) the issuance and sale of the Shares and the issuance of the Foundation
Shares have been duly and validly authorized by all necessary corporate action
on the part of the Company; the Shares and the Foundation Shares, upon receipt
of consideration and issuance in accordance with the terms of the Plan and this
Agreement, will be validly issued, fully paid, nonassessable and free of
preemptive rights, and good title thereto shall be transferred by the Company
free and clear of all claims, encumbrances, security interests and liens created
by the Company;
(x) the certificates for the Common Stock are in due and proper form and
comply in all material respects with applicable Virginia law and OTS
Regulations;
(xi) the issuance and sale of the capital stock of the Association to the
Company have been duly authorized by all necessary corporate action of the
Association and have received the approval of the OTS, and such capital stock,
upon receipt of payment and issuance in accordance with the terms of the Plan,
will be validly issued, fully paid and nonassessable and owned of record and, to
the knowledge of such counsel, beneficially by the Company;
(xii) subject to the satisfaction of the conditions to the OTS approval
of the Conversion Application and the Holding Company Application, no further
approval, authorization, consent or other order of any regulatory agency is
required in connection with the execution and delivery of this Agreement, the
issuance and sale of the Shares and the Foundation Shares and the consummation
of the Conversion (including the establishment and operation of the Foundation),
except with respect to the issuance to the Association's Federal Stock Charter
by the OTS, and except as may be required under the "blue sky" securities laws
of various jurisdictions and the regulations of the NASD (as to which no opinion
need be rendered);
Trident Securities, Inc.
Page 19
(xiii) the execution and delivery of this Agreement and the consummation
of the Conversion (including the establishment and operation of the Foundation)
have been duly and validly authorized by all necessary corporate action on the
part of each of the Company and the Association; and this Agreement is a legal,
valid and binding obligation of each of the Company and the Association,
enforceable in accordance with its terms (except as the enforceability thereof
may be limited by (i) bankruptcy, insolvency, moratorium, reorganization,
receivership, conservatorship or other similar laws relating to or affecting the
enforcement of creditors' rights generally or the rights of creditors of
depository institutions whose accounts are insured by the FDIC or savings and
loan holding companies the accounts of whose subsidiaries are insured by the
FDIC; (ii) general equity principles, regardless of whether such enforceability
is considered in a proceeding in equity or at law, or (iii) laws relating to the
safety and soundness of insured depository institutions and their affiliates,
and except to the extent that the provisions of Sections 8 and 9 hereof may be
unenforceable as against public policy or Section 23A of the Federal Reserve
Act, as amended);
(xiv) except as set forth in the Prospectus, there are no legal or
governmental proceedings pending or, to such counsel's knowledge, threatened
against or involving the assets of the Company or the Association which would
have a material adverse effect on the Company and the Association, taken as a
whole (provided that for this purpose such counsel need not regard any
litigation or governmental procedure to be "threatened" unless the potential
litigant or government authority has manifested to the management of the Company
or the Association, or to such counsel, a present intention to initiate such
litigation or proceeding);
(xv) the statements in the Prospectus under the captions "Regulation,"
"Federal and State Taxation," "Dividend Policy," "Restrictions on Acquisition of
the Company and the Bank," "Description of Capital Stock of the Company,"
"Description of Capital Stock of the Bank," and "The Conversion," insofar as
they are, or refer to, statements of law or legal conclusions (excluding
financial or statistical data or stock valuation information included therein,
as to which an opinion need not be expressed), have been prepared or reviewed by
such counsel and are accurate and complete in all material respects;
(xvi) the Form AC has been approved by the OTS, and the Prospectus and
the Proxy Statement have been authorized for use by the OTS; the Registration
Statement has been declared effective by the Commission; and no proceedings are
pending by or before the Commission or the OTS seeking to revoke or rescind the
orders declaring the Registration Statement effective or approving the
Conversion Application or, to such counsel's Actual Knowledge, are contemplated
or threatened;
(xvii) the execution and delivery of this Agreement and the consummation
of the Conversion (including the establishment and operation of the Foundation)
do not conflict
Trident Securities, Inc.
Page 20
with or result in a breach of the charter, certificate of incorporation or
bylaws of the Company or the Association (in either mutual or stock form), or,
to such counsel's knowledge, constitute a breach of or default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
give rise to any right of termination, cancellation or acceleration contained
in, or result in the creation or imposition of any lien, charge or other
encumbrance upon, any of the properties or assets of the Company or the
Association pursuant to any of the terms, provisions or conditions of, any
material agreement, contract, indenture, bond, debenture, note, instrument or
obligation to which the Company or the Association is a party (other than the
establishment of the liquidation account pursuant to the Plan) or violate any
governmental license or permit or any law, administrative regulation or order or
court order, writ, injunction or decree (subject to the satisfaction of certain
conditions imposed by the OTS in connection with its approval of the Conversion
Application and the Holding Company Application), which breach, default,
encumbrance or violation would have a material adverse effect on the financial
condition, results of operations or business of the Company and the Association,
taken as a whole;
(xviii) there has been no breach of any provision of the Company's or
the Association's charter, certificate of incorporation or bylaws, or to such
counsel's knowledge, any breach or default (or the occurrence of any event
which, with notice or lapse of time or both, would constitute a default) by the
Company or the Association under any agreement, contract, indenture, bond,
debenture, note, instrument or obligation to which the Company or the
Association is a party or by which any of them or any of their respective assets
or properties may be bound, which breach or default would have a material
adverse effect on the financial condition, results of operations, business of
the Company and the Association, taken as a whole;
(xix) at the time the Conversion Application was approved by the OTS
and the Registration Statement was declared effective by the Commission, the
Conversion Application and the Registration Statement (including the Prospectus
and the Proxy Statement contained therein), complied as to form in all material
respects with the requirements of the Securities Act, the HOLA, the Securities
Act Regulations and the OTS Regulations, as the case may be (except as to
information provided in writing by Trident with respect to Trident included
therein and financial statements, notes to financial statements, financial
tables and other financial and statistical data and stock valuation information
included therein, as to which no opinion need be rendered); to such counsel's
knowledge, all documents and exhibits required to be filed with the Conversion
Application and the Registration Statement have been so filed and the
descriptions in the Conversion Application and the Registration Statement of
such documents and exhibits are accurate and complete in all material respects;
and
(xx) upon the effectiveness of the Association's stock charter and bylaws
in
Trident Securities, Inc.
Page 21
accordance with applicable regulations and completion of the sale by the
Company of the Shares and the issuance of the Foundation Shares as contemplated
by the Prospectus and the Plan, (i) the Association will be converted to a
permanent capital stock savings association under the laws of the United States
with full power and authority to own its property and conduct its business as
described in the Prospectus, (ii) all of the outstanding capital stock of the
Association will be owned of record and, to such counsel's knowledge,
beneficially by the Company, free and clear of all liens, charges, encumbrances
and restrictions, and (iii) the Foundation will be duly incorporated and validly
existing as a non-stock corporation in good standing under the laws of the State
of Delaware.
In rendering such opinion, such counsel may rely as to certain matters of
fact on certificates of executive officers and directors of the Company and the
Association and certificates of public officials delivered pursuant hereto.
Such counsel may assume that any agreement is the valid and binding obligation
of any parties to such agreement other than the Company and the Association.
Such opinion may be governed by, and interpreted in accordance with, the Legal
Opinion Accord ("Accord") of the ABA Section of Business Law (1991). The
opinion of Muldoon, Murphy & Faucette shall cover matters of federal law,
Delaware General Business Corporation Law, and the laws of the Commonwealth of
Virginia. With respect to matters of Delaware law, such counsel may rely upon
the opinion of qualified local counsel, which opinion shall be in form and
substance satisfactory to Trident and its counsel. Such opinion may be limited
to statutes, regulations and judicial interpretations and to facts as they exist
as of the date of such opinions. In rendering such opinion, such counsel need
assume no obligation to revise or supplement it should such statutes,
regulations and judicial interpretations be changed by legislative or regulatory
action, judicial decision or otherwise. Such counsel need express no view,
opinion or belief with respect to whether any proposed or pending legislation,
if enacted, or any proposed or pending regulations or policy statements issued
by any regulatory agency, whether or not promulgated pursuant to any such
legislation, would affect the validity of the execution and delivery by the
Company and the Association of this Agreement or the issuance of the Shares and
the Foundation Shares.
(b) At the Closing Date, Trident shall receive the letter of Muldoon,
Murphy & Faucette, special counsel for the Company and the Association, dated
the Closing Date, addressed to Trident, in form and substance reasonably
satisfactory to counsel for Trident and to the effect that: (i) based on such
counsel's participation in conferences with representatives of the Company, the
Association, its counsel, the independent appraiser, the independent certified
public accountants, Trident and its counsel, review of documents and applicable
law (including the requirements of Form S-1 and Form AC) and the experience such
counsel has gained in its practice under the Securities Act (relying as to
factual matters on certificates of officers and other written factual
representations by the Company and the Association), nothing has come to such
counsel's attention that would lead it to believe that the
Trident Securities, Inc.
Page 22
Registration Statement, as amended or supplemented (except as to information in
respect of Trident contained therein and except as to the financial statements,
notes to financial statements, financial tables and other financial and
statistical data and stock valuation information contained therein, as to which
such counsel need express no view), at the time it became effective contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading, and
that the Prospectus, as amended or supplemented (except as to information in
respect of Trident contained therein and except as to financial statements,
notes to financial statements, financial tables and other financial and
statistical data and stock valuation information contained therein as to which
such counsel need express no view), as of its date and at the Closing Date,
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading (in issuing such letter, such counsel
may indicate that it has not confirmed the accuracy or completeness of or
otherwise verified the factual information contained in the Registration
Statement or the Prospectus and that it does not assume any responsibility for
the accuracy or completeness thereof.)
(c) Counsel for Trident shall have been furnished such documents as they
reasonably may require for the purpose of enabling them to review or pass upon
the sale of the Shares as herein contemplated and related proceedings, and for
the purpose of evidencing the accuracy, completeness or satisfaction of any of
the representations, warranties or conditions herein contained, including but
not limited to, resolutions of the Board of Directors of the Company and the
Association regarding the authorization of this Agreement and the transactions
contemplated hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion of Trident,
(i) there shall have been no material adverse change in the financial condition,
business, operations, assets or properties of the Company and the Association,
taken as a whole, since the latest date as of which such condition is set forth
in the Prospectus, except as referred to or contemplated therein; (ii) there
shall have been no transaction entered into by the Company or the Association
after the latest date as of which the financial condition of the Company or the
Association is set forth in the Prospectus other than transactions referred to
or contemplated therein, transactions in the ordinary course of business, and
transactions which are not material to the Company and the Association, taken as
a whole; (iii) none of the Company or the Association shall have received from
the OTS or Commission any directive (oral or written) to make any change in the
method of conducting their respective businesses which is material to the
business of the Company and the Association, taken as a whole, with which they
have not complied; (iv) no action, suit or proceeding, at law or in equity or
before or by any federal or state commission, board or other administrative
agency, shall be pending or threatened against the Company or the Association or
affecting any of their respective
Trident Securities, Inc.
Page 23
assets, wherein an unfavorable decision, ruling or finding would have a material
adverse effect on the business, operations, financial condition or income of the
Company and the Association, taken as a whole; and (v) the Shares shall have
been qualified or registered for offering and sale by the Company under the
securities or "blue sky" laws of such jurisdictions as Trident and the Company
shall have agreed upon.
(e) At the Closing Date, Trident shall receive a certificate of the
principal executive officer and the principal financial officer of each of the
Company and the Association, dated the Closing Date, to the effect that: (i)
they have examined the Prospectus and, at the time the Prospectus became
authorized by the Company for use, the Prospectus did not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading with respect to the Company or the Association; (ii)
no event has occurred since the date of the Prospectus which should have been
set forth in an amendment or supplement to the Prospectus which has not been so
set forth, including specifically, but without limitation, any material adverse
change in the business, financial condition, operations, assets or properties of
the Company or the Association and, the conditions set forth in clauses (ii)
through (iv) inclusive of subsection (d) of this Section 7 have been satisfied;
(iii) no order has been issued by the Commission or the OTS to suspend the
Offerings or the effectiveness of the Prospectus, and, to the best knowledge of
such officers, no action for such purposes has been instituted or threatened by
the Commission or the OTS; (iv) to the best knowledge of such officers, no
person has sought to obtain review of the final actions of the OTS approving the
Plan; and (v) all of the representations and warranties contained in Section 2
of this Agreement are true and correct, with the same force and effect as though
expressly made on the Closing Date.
(f) At the Closing Date, Trident shall receive, among other documents,
(i) copies of the letters from the OTS authorizing the use of the Prospectus and
the Proxy Statement and the establishment of the Foundation, (ii) a copy of the
order of the Commission declaring the Registration Statement effective; (iii) a
copy of the certificate from the OTS evidencing the corporate existence of the
Association; (iv) a copy of the certificate from the FDIC evidencing the insured
status of the Association, (v) a copy of the letter from the appropriate
Virginia authority evidencing the incorporation (and, if generally available
from such authority, good standing) of the Company; (vi) a copy of the Company's
certificate of incorporation certified by the appropriate Virginia governmental
authority; and (vii) a copy of the letter from the OTS approving the
Association's Federal Stock Charter.
(g) As soon as available after the Closing Date, Trident shall receive a
certified copy of the Association's Federal Stock Charter as executed by the
OTS.
(h) Concurrently with the execution of this Agreement, Trident acknowledges
Trident Securities, Inc.
Page 24
receipt of a letter from Cherry, Bekaert & Holland, L.L.P., independent
certified public accountants, addressed to Trident, in substance and form
reasonably satisfactory to counsel for Trident, with respect to the financial
statements of the Association and certain financial information contained in the
Prospectus.
(i) At the Closing Date, Trident shall receive a letter in form and
substance reasonably satisfactory to counsel for Trident from Cherry, Bekaert &
Holland, L.L.P., independent certified public accountants, dated the Closing
Date and addressed to Trident, confirming the statements made by them in the
letter delivered by them pursuant to the preceding subsection as of a specified
date not more than five (5) days prior to the Closing Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the reasonable
opinion of Trident and its counsel, satisfactory to Trident and its counsel.
Any certificates signed by an officer or director of the Company or the
Association prepared for Trident's reliance and delivered to Trident or to
counsel for Trident shall be deemed a representation and warranty by the Company
and the Association to Trident as to the statements made therein. If any
condition to Trident's obligations hereunder to be fulfilled prior to or at the
Closing Date is not so fulfilled, Trident may terminate this Agreement or, if
Trident so elects, may waive in writing any such conditions which have not been
fulfilled, or may extend the time of their fulfillment.
8. Indemnification.
---------------
(a) The Company and the Association jointly and severally agree to
indemnify and hold harmless Trident, its officers, directors and employees and
each person, if any, who controls Trident within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act, against any and all
loss, liability, claim, damage and expense whatsoever and shall further promptly
reimburse such persons for any legal or other expenses reasonably incurred by
each or any of them in investigating, preparing to defend or defending against
any action, proceeding or claim (whether commenced or threatened) arising out of
or based upon (A) any untrue or alleged untrue statement of a material fact or
the omission or alleged omission of a material fact required to be stated or
necessary to make the statements, in light of the circumstances under which they
were made, not misleading in (i) the Registration Statement or the Prospectus or
(ii) any application (including the Form AC) or other document or communication
(in this Section 8 collectively called "Application") prepared or executed by or
on behalf of the Company or the Association or based upon written information
furnished by or on behalf of the Company or the Association, filed in any
jurisdiction to register or qualify the Shares under the securities laws thereof
or filed with the OTS or Commission with respect to the offering of the Shares,
unless such statement or omission was made in reliance upon and in conformity
with information furnished in writing to the Company or the Association with
respect to Trident by or on behalf of Trident expressly for use in the
Prospectus or
Trident Securities, Inc.
Page 25
any amendment or supplement thereof or in any Application, as the case may be,
or (B) the Conversion (including the establishment and operation of the
Foundation) or other actions taken by Trident where acting as an agent of the
Company or the Association; provided, however, that such indemnification shall
be unavailable if such action, proceeding or claim arises as a result of
Trident's gross negligence, bad faith or willful misconduct.
(b) The Company shall indemnify and hold Trident harmless for any liability
whatsoever arising out of (i) the Allocation Instructions or (ii) any records of
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members (as those terms are defined in the Plan) delivered to Trident by the
Association or its agents for use during the Conversion.
(c) Trident agrees to indemnify and hold harmless the Company and the
Association, their officers, directors and employees and each person, if any,
who controls the Company and the Association within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act, to the same extent as
the foregoing indemnity from the Company and the Association to Trident, but
only with respect to statements or omissions, if any, made in the Prospectus or
any amendment or supplement thereof, in any Application or to a purchaser of the
Shares in reliance upon, and in conformity with, information furnished in
writing to the Company or the Association with respect to Trident by or on
behalf of Trident expressly for use in the Prospectus or any amendment or
supplement thereof or in any Application.
(d) Promptly after receipt by an indemnified party under this Section 8 of
notice of any action, proceeding or claim (whether commenced or threatened) such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party of such
action, proceeding or claim; but the omission so as to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 8. In case any such action
is brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with the other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so as to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than the
reasonable cost of investigation except as otherwise provided herein. In the
event the indemnifying party elects to assume the defense of any such action and
retain counsel acceptable to the indemnified party, the indemnified party may
retain additional counsel, but shall bear the fees and expenses of such counsel
unless (i) the indemnifying party shall have specifically authorized the
indemnified party to retain such counsel or (ii) the parties to such suit
include such indemnifying party and the indemnified party, and such indemnified
party shall have been advised by counsel that one or more material legal
defenses may be available to the indemnified party which may not be available to
the indemnifying
Trident Securities, Inc.
Page 26
party, in which case the indemnifying party shall not be entitled to assume the
defense of such suit notwithstanding the indemnifying party's obligation to bear
the fees and expenses of such counsel. In no event shall the indemnifying
parties be liable for the fees and expenses of more than one separate firm of
attorneys (and any special counsel that said firm may retain) for all
indemnified parties in connection with any one action, proceeding, claim or suit
or separate but similar or related actions, proceedings or claims in the same
jurisdiction arising out of the same general allegations or circumstances. An
indemnifying party against whom indemnity may be sought shall not be liable to
indemnify an indemnified party under this Section 8 if any settlement of any
such action is effected without such indemnifying party's consent. To the extent
applicable, this Section 8 is subject to and limited by Section 23A.
9. Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in Section 8
above is for any reason held to be unavailable to Trident, the Company and/or
the Association other than in accordance with its terms, the Company and the
Association or Trident shall contribute to the aggregate losses, liabilities,
claims, damages, and expenses of the nature contemplated by said indemnity
agreement incurred by the Company and the Association or Trident (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Association, on the one hand, and Trident, on the other, from
the offering of the Shares or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above, but
also the relative fault of the Company or the Association, on the one hand, and
Trident, on the other, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and the Association, on the one hand, and Trident, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
Conversion received by the Company and the Association bear to the total fees
received by Trident under this Agreement. The relative fault of the Company or
the Association, on the one hand, and Trident, on the other, shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Association
or by Trident and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Association and Trident agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
the indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9, Trident
shall not be
Trident Securities, Inc.
Page 27
required to contribute any amount in excess of the amount by which fees owed
Trident pursuant to this Agreement exceeds the amount of any damages which
Trident has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. To the extent applicable, this Section 9 is
subject to and limited by Section 23A.
10. Survival of Agreements, Representations and Indemnities. The
--------------------------------------------------------
respective indemnities of the Company and the Association and Trident and the
representation and warranties of the Company and the Association and of Trident
set forth in or made pursuant to this Agreement shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of Trident or the Company or the Association
or any controlling person or indemnified party referred to in Section 8 hereof,
and shall survive any termination or consummation of this Agreement and/or the
issuance of the Shares, and any legal representative of Trident, the Company,
the Association and any such controlling persons shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations.
11. Termination. Trident may terminate this Agreement by giving the
-----------
notice indicated below in this Section at any time after this Agreement becomes
effective as follows:
(a) If any domestic or international event or act or occurrence has
materially disrupted the United States securities markets such as to make it, in
Trident's reasonable opinion, impracticable to proceed with the offering of the
Shares; or if trading on the New York Stock Exchange shall have suspended
(except that this shall not apply to the imposition of trading collars on
program trading); or if the United States shall have become involved in a war or
major hostilities; or if a general banking moratorium has been declared by a
state or federal authority which has material effect on the Association or the
Conversion; or if a moratorium in foreign exchange trading by major
international banks or persons has been declared; or if there shall have been a
material change in the capitalization, condition or business of the Company, or
if the Association shall have sustained a material or substantial loss by fire,
flood, accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act, whether or not said loss shall have been insured; or if there
shall have been a material change in the condition or prospects of the Company
or the Association.
(b) Any party hereto may terminate this Agreement by giving notice pursuant
to Section 12 hereof of a material breach of this Agreement by the other party
at any time after this Agreement becomes effective.
(c) If this Agreement is terminated as provided in this Section 11, the
party terminating this Agreement shall notify the non-terminating party promptly
by telephone or telegram, confirmed by letter.
Trident Securities, Inc.
Page 28
(d) If this Agreement is terminated by Trident for any of the reasons set
forth in subsection (a) above, and to fulfill its obligations, if any, pursuant
to Sections 3, 6, 8(a) and 9 of this Agreement and upon demand, the Company and
the Association shall pay Trident the full amount so owing thereunder.
(e) The Association may terminate the Conversion in accordance with the
terms of the Plan. Such termination shall be without liability to any party,
except that the Company and the Association shall be required to fulfill their
obligations pursuant to Sections 3(b), 3(c), 6, 8(a), 9 and 10 of this
Agreement.
12. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, Inc., 4601
Six Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Mr. R. Lee
Burrows, Jr. (with a copy to Breyer & Aguggia LLP, 1300 I Street, N.W., Suite
470 East, Washington, D.C. 20005, Attention: Paul M. Aguggia, Esquire) and if
sent to the Company or the Association, shall be mailed, delivered or
telegraphed and confirmed to Fredericksburg Savings and Loan Association, F.A.,
400 George Street, Fredericksburg, Virginia 22404, Attention: Samuel J. Harding,
Jr., President (with a copy to Muldoon, Murphy & Faucette, 5101 Wisconsin
Avenue, NW, Washington, DC 20016, Attention: Joseph A. Muldoon, Jr., Esquire).
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, Trident, the Company, the Association and the controlling
and other persons referred to in Section 8 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
14. Construction. Unless preempted by federal law, this Agreement shall
------------
be governed by and construed in accordance with the substantive laws of North
Carolina.
15. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
* * *
Trident Securities, Inc.
Page 29
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
VIRGINIA CAPITAL BANCSHARES, INC.
By:
-----------------------------------------
Samuel J. Harding, Jr.
President and Chief Executive Officer
FREDERICKSBURG SAVINGS AND LOAN ASSOCIATION, F.A.
By:
-----------------------------------------
Samuel J. Harding, Jr.
President and Chief Executive Officer
Agreed to and accepted as of
the date first written above:
TRIDENT SECURITIES, INC.
By:
-------------------------------------
Name: R. Lee Burrows, Jr.
Title: Managing Director