EXHIBIT 1.2
SECURITY FINANCIAL BANCORP, INC.
_________________ Shares
COMMON SHARES
($.01 Par Value)
Subscription Price $10.00 Per Share
AGENCY AGREEMENT
____________________________, 1999
Charles Webb & Company, a Division of
Keefe, Bruyette & Woods, Inc.
211 Bradenton Drive
Dublin, Ohio 43017-5034
Ladies and Gentlemen:
Security Financial Bancorp, Inc., a Delaware corporation (the "Company"),
and Security Federal Bank, a federal savings bank located in St. John, Indiana
(the "Bank") (references to the "Bank" include the Bank in the mutual or stock
form, as indicated by the context), with its deposit accounts insured by the
Savings Association Insurance Fund ("SAIF") administered by the Federal Deposit
Insurance Corporation ("FDIC"), hereby confirm their agreement with Charles Webb
& Company, a Division of Keefe, Bruyette & Woods, Inc. ("Webb", "KBW" or "the
Agent"), as follows:
Section 1. The Offering. The Bank, in accordance with its plan of
------------
conversion adopted by its Board of Directors (the "Plan"), intends to convert
from a federally chartered mutual savings bank to a federally chartered stock
savings bank, and will issue all of its issued and outstanding capital stock to
the Company. In addition, pursuant to the Plan, the Company will offer and sell
up to _____________________ of its common shares, $.01 par value per share (the
"Shares" or "Common Shares"), in a subscription offering (the "Subscription
Offering") to (1) depositors of the Bank with Qualifying Deposits (as defined in
the Plan) as of [June 30, 1998] ("Eligible Account Holders"), (2) the Security
Financial Bancorp Employee Stock Ownership Plan (the "ESOP"), (3) depositors of
the Bank with Qualifying Deposits as of September 30, 1999 ("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 is offering for
sale in a community offering (the "Community Offering" and when referred to
together with the Subscription Offering, the "Subscription and Community
Offering") conducted concurrently with the Subscription 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 to residents of Lake and Porter Counties, Indiana. It is
anticipated that shares not subscribed for in the Subscription and Community
Offering will 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 and the Bank may reject, in whole or in part, any orders received in the
Community Offering or Syndicated Community Offering. Collectively, these
transactions are referred to herein as the "Conversion."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (File No. _________________)
(the "Registration Statement") containing a prospectus relating to the Offering
for the registration of the Shares under the Securities Act of 1933 (the "1933
Act"), and has filed such amendments thereof and such amended prospectuses as
may have been required to the date hereof. The term "Registration Statement"
shall include any documents incorporated by reference therein and all financial
schedules and exhibits thereto, as amended, including post-effective amendments.
The prospectus, as amended, on file with the Commission at the time the
Registration Statement initially became effective is hereinafter called the
"Prospectus," except that if any Prospectus is filed by the Company pursuant to
Rule 424(b) or (c) of the rules and regulations of the Commission under the 1933
Act (the "1933 Act Regulations") differing from the prospectus on file at the
time the Registration Statement initially becomes effective, the term
"Prospectus" shall refer to the prospectus filed pursuant to Rule 424(b) or (c)
from and after the time said prospectus is filed with the Commission.
In accordance with Title 12, Part 563b of the Code of Federal Regulations
(the "Conversion Regulations") and the laws and regulations of the State of
Indiana, the Bank has filed with the Office of Thrift Supervision (the "OTS") an
Application for Conversion (the "Conversion Application"), including the
Prospectus and the Conversion 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 Conversion 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)1 (the
"Holding Company Application") to become a registered savings and loan holding
company under the Home Owners' Loan Act, as amended ("HOLA"); and it has been
approved.
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
-2-
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
____________, 1999, between the Bank and Webb (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 (d) hereof) shall terminate upon the completion or
termination or abandonment of the Plan by the Company or 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 ____________ 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 Conversion,
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 (as hereinafter defined) against payment to the Company by any
means authorized by the Plan; provided, however, that no funds shall be released
to the Company until the conditions specified in Section 7 hereof shall have
been complied with to the reasonable satisfaction of the Agent and their
counsel. 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."
-3-
The Agent shall receive the following compensation for its services
hereunder:
(a) A management fee of $25,000, payable in four consecutive monthly
installments of $6,250. Such fees shall be deemed to have been earned
when due. Should the Conversion be terminated for any reason not
attributable to the action or inaction of the Agent, the Agent shall
have earned and be entitled to be paid fees accruing through the stage
at which the termination occurred, including any accrued legal fees
expended by the Agent.
[(b) A Success Fee of 1.35% of the aggregate Purchase Price of Common
Shares sold in the Subscription Offering and Community Offering,
excluding shares purchased by the Bank's officers, directors, or
employees (or members of their immediate families), plus any ESOP,
tax-qualified or stock-based compensation plan (except IRA's) or
similar plans created by the Bank for some or all of its directors or
employees.]
[(b) A fixed Success Fee of $250,000. The management fee described in
subparagraph 2(a) shall be applied against the Success Fee described
in this subparagraph 2(b).]
(c) If any of the Common Shares remain available after the Subscription
Offering, at the request of the Bank, Webb will seek to form a
syndicate of registered broker-dealers ("Selected Dealers") to assist
in the sale of such Common Shares on a best efforts basis, subject to
the terms and conditions set forth in the selected dealers agreement.
Webb will endeavor to distribute the Common Shares among the Selected
Dealers in a fashion which best meets the distribution objectives of
the Bank and the Plan. Webb will be paid a fee not to exceed 5.5% of
the aggregate Purchase Price of the Shares sold by the Selected
Dealers. Webb 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 affected with the
assistance of Selected Dealers other than Webb shall be transmitted by
Webb to such Selected Dealers. The decision to utilize Selected
Dealers will be made by the Bank upon consultation with Webb. In any
event, with respect to any purchases of Shares, fees paid pursuant to
this subparagraph 2(c) such fees shall be in lieu of, and not in
addition to, payment pursuant to subparagraph 2(a) and 2(b).
(d) The Agent will be reimbursed for any reasonable out-of-pocket expenses
relating to travel, meals and lodging, photocopying, telephone,
facsimile and couriers, provided that reimbursement of such out-of-
pocket expenses shall not exceed $5,000. The Bank and Company shall
reimburse the Agent for fees and expenses of counsel, and such legal
fees will not exceed $35,000. The Bank will bear the expenses of the
Offering customarily borne by issuers including, without limitation,
regulatory filing fees, SEC, "Blue Sky," and NASD filing and
registration fees; the fees of the Bank's
-4-
accountants, attorneys, appraiser, transfer agent and registrar,
printing, mailing and marketing expenses associated with the
conversion; and the fees set forth under this Section 2; and fees for
"Blue sky" legal work. The Company or the Bank will reimburse Webb for
expenses incurred by Webb on their behalf.
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 Plan.
Section 3. Prospectus; Offering. The Shares are to be initially offered
--------------------
in the Offering at the Purchase Price as defined and set forth on the cover page
of the Prospectus.
Section 4. Representations and Warranties. The Company and the Bank
------------------------------
jointly and severally represent and warrant to and agree with the Agent as
follows:
(a) The Registration Statement which was prepared by the Company and the
Bank and filed with the Commission was declared effective by the
Commission on _________, 1999. At the time the Registration
Statement, including the Prospectus contained therein (including any
amendment or supplement), became effective, the Registration Statement
contained all statements that were required to be stated therein in
accordance with the 1933 Act and the 1933 Act Regulations, complied 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 or the Bank
contained in Sales Information (as such term is defined in Section 8
hereof) authorized by the Company or the Bank for use in connection
with the Offering, did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and at the
time any Rule 424(b) or (c) Prospectus was filed with the Commission
and at the Closing Date referred to in Section 2, the Registration
Statement, including the Prospectus contained therein (including any
amendment or supplement thereto), and any information regarding the
Company or the Bank contained in Sales Information (as such term is
defined in Section 8 hereof) authorized by the Company or the Bank 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
-5-
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 Conversion-Plan of Distribution for the Subscription;
Direct Comunity and Syndicated Community Offerings" or statements in
or omissions from any Sales Information or information filed pursuant
to state securities or blue sky laws or regulations regarding the
Agent.
(b) The Conversion Application which was prepared by the Company and the
Bank and filed with the OTS was approved on ___________, 1999 and the
related Prospectus has been authorized for use by the OTS. At the
time of the approval of the Conversion Application, including the
Prospectus (including any amendment or supplement thereto), by the OTS
and at all times subsequent thereto until the Closing Date, the
Conversion Application, including the Prospectus (including any
amendment or supplement thereto), will comply in all material respects
with the Conversion Regulations, except to the extent waived in
writing by the OTS. The Conversion 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 Conversion Application under the caption "The
Conversion-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. The
Holding Company Application for approval pursuant to the HOLA and the
regulations promulgated thereunder (the "Control Act Regulations") has
been prepared by the Bank and the Company in material conformity with
the requirements of the Control Act Regulations and has been filed
with and approved by the OTS. A conformed copy of the Holding Company
Application has been delivered to the Agent.
(c) The Company has filed with the OTS the Holding Company Application,
and such Application was deemed complete by the OTS. As of the
Closing Date, approval of the Company's acquisition of the Bank will
have been obtained from the OTS.
-6-
(d) No order has been issued by the OTS or the FDIC (hereinafter any
reference to the FDIC shall include the SAIF) preventing or suspending
the use of the Prospectus, and no action by or before any such
government entity to revoke any approval, authorization or order of
effectiveness related to the Conversion is, to the best knowledge of
the Company or the Bank, pending or threatened.
(e) At the Closing Date, the Plan will have been adopted by the Boards of
Directors of both the Company and the Bank and approved by the members
of the Bank, and the offer and sale of the Shares will have been
conducted in all material respects in accordance with the Plan, the
Conversion Regulations, and all other applicable laws, regulations,
decisions and orders, including all terms, conditions, requirements
and provisions precedent to the Conversion imposed upon the Company or
the Bank by the OTS, the Commission, or any other regulatory authority
and in the manner described in the Prospectus. No person has sought
to obtain review of the final action of the OTS in approving the Plan
or in approving the Conversion or the Holding Company Application
pursuant to the HOLA or any other statute or regulation.
(f) The Bank has been organized and is a validly existing federally
chartered savings bank in mutual form of organization and upon the
Conversion 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, earnings, capital, assets, properties or business of the
Company and the Bank, taken as a whole; all such licenses, permits and
governmental authorizations are in full force and effect, and the Bank
is in compliance with all material laws, rules, regulations and orders
applicable to the operation of its business; the Bank is existing
under federal law and is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in
which its ownership of property or leasing of property or the conduct
of its business requires such qualification, unless the failure to be
so qualified in one or more of such jurisdictions would not have a
material adverse effect on the condition, financial or otherwise, or
the business, operations or income of the Bank. 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
-7-
Company and (ii) the Company will have no direct subsidiaries other
than the Bank. The Conversion will have been 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-Conversion reports, and documents in
compliance with the 1933 Act Regulations, the OTS's resolutions or
letters of approval, all terms, conditions, requirements and
provisions with respect to the Conversion imposed by the Commission,
the OTS and the FDIC, if any, will have been complied with by the
Company and the Bank in all material respects or appropriate waivers
will have been obtained and all material notice and waiting periods
will have been satisfied, waived or elapsed.
(g) The Company has been duly incorporated and is validly existing as a
corporation 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 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 on
the condition, financial or otherwise, or the business, operations or
income of the Company. The Company has obtained all licenses, permits
and other governmental authorizations currently required for the
conduct of its business except those that individually or in the
aggregate would not materially adversely affect the financial
condition, earnings, capital, assets, properties or business of the
Company and the Bank, taken as a whole; all such licenses, permits and
governmental authorizations are in full force and effect, and the
Company is in all material respects complying with all laws, rules,
regulations and orders applicable to the operation of its business.
(h) The Bank is a member of the Federal Home Loan Bank of Indianapolis
("FHLB-Indianapolis"). The deposit accounts of the Bank are insured
by the FDIC up to the applicable limits, and no proceedings for the
termination or revocation of such insurance are pending or, to the
best knowledge of the Company or the Bank, threatened. Upon
consummation of the Conversion, the liquidation account for the
benefit of Eligible Account Holders and Supplemental Eligible Account
Holders will be duly established in accordance with the requirements
of the Conversion Regulations.
(i) The Company and the Bank have good and marketable title to all real
property and good title to all other assets material to the business
of the Company and the Bank, taken as a whole, and to those properties
and assets described in the Registration Statement and Prospectus as
owned by them,
-8-
free and clear of all liens, charges, encumbrances or restrictions,
except such as are described in the Registration Statement and
Prospectus, or are not material to the business of the Company and the
Bank, taken as a whole; and all of the leases and subleases material
to the business of the Company and the Bank, taken as a whole, under
which the Company or the Bank hold properties, including those
described in the Registration Statement and Prospectus, are in full
force and effect.
(j) The Company and the Bank have received an opinion of their special
counsel, Muldoon, Murphy & Faucette LLP, with respect to the federal
and state income tax consequences of the Conversion; all material
aspects of the opinion of Muldoon, Murphy & Faucette LLP are
accurately summarized in the Registration Statement and will be
accurately summarized in the Prospectus; and further represent and
warrant that the facts upon which such opinion is based are truthful,
accurate and complete.
(k) The Company and the Bank have all such power, authority,
authorizations, approvals and orders as may be required to enter into
this Agreement, to carry out the provisions and conditions hereof and
to issue and sell the Shares to be sold by the Company as provided
herein and as described in the Prospectus, except approval or
confirmation by the OTS of the final appraisal of the Bank. The
consummation of the Conversion, 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 Company and the Bank and
this Agreement has been validly executed and delivered by the Company
and the Bank and is the valid, legal and binding agreement of the
Company and 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).
(l) Neither the Company nor the Bank are 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 their businesses so as to
comply in all material respects with all applicable statutes and
regulations (including, without limitation, regulations, decisions,
directives and orders of the OTS and the FDIC) and, except as may be
set forth in the Registration Statement and the
-9-
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 Company or the Bank, threatened,
which might materially and adversely affect the Conversion, the
performance of this Agreement or the consummation of the transactions
contemplated in the Plan and as described in the Registration
Statement and the Prospectus or which might result in any material
adverse change in the condition (financial or otherwise), earnings,
capital or properties of the Company or the Bank, or which would
materially affect their properties and assets.
(m) The financial statements, schedules and notes related thereto which
are included in the Prospectus fairly present the balance sheet,
income statement, statement of changes in equity capital and statement
of cash flows of the 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 and generally accepted
accounting principles (including those requiring the recording of
certain assets at their current market value). Such financial
statements, schedules and notes related thereto have been prepared in
accordance with generally accepted accounting principles consistently
applied through the periods involved, present fairly in all material
respects the information required to be stated therein and are
consistent with the most recent financial statements and other reports
filed by the Bank with the OTS, except that accounting principles
employed in such regulatory filings conform to the requirements of the
OTS and not necessarily to GAAP. The other financial, statistical and
pro forma information and related notes included in the Prospectus
present fairly the information shown therein on a basis consistent
with the audited and unaudited financial statements of the Bank
included in the Prospectus, and as to the pro forma adjustments, the
adjustments made therein have been properly applied on the basis
described therein.
(n) Since the respective dates as of which information is given in the
Registration Statement including the Prospectus: (i) there has not
been any material adverse change, financial or otherwise, in the
condition of the Company or the Bank and its subsidiaries, considered
as one enterprise, or in the earnings, capital or properties of the
Company or 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
-10-
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 Company or the Bank; (iv) there has not been any material
adverse change in the aggregate dollar amount of the Bank's deposits
or its consolidated net worth or spread; (v) there has been no
material adverse change in the Company's or the Bank's relationship
with its insurance carriers, including, without limitation,
cancellation or other termination of the Company's or the Bank's
fidelity bond or any other type of insurance coverage; (vi) except as
disclosed in the Prospectus, there has been no material change in
management of the Company or the Bank, neither of which has any
material undisclosed liability of any kind, contingent or otherwise;
(vii) neither the Company nor the Bank has sustained any material loss
or interference with its respective business or properties from fire,
flood, windstorm, earthquake, accident or other calamity, whether or
not covered by insurance; (viii) neither the Company nor the Bank is
in default in the payment of principal or interest on any outstanding
debt obligations; (ix) the capitalization, liabilities, assets,
properties and business of the Company and the Bank conform in all
material respects to the descriptions thereof contained in the
Prospectus; and (x) neither the Company nor the Bank has any material
contingent liabilities, except as set forth in the Prospectus. All
documents made available to or delivered or to be made available to or
delivered by the Bank or the Company or their representatives in
connection with the issuance and sale of the Shares, including records
of account holders, depositors, borrowers and other members 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 Bank, the Company or their representatives, to the best knowledge
of the Bank and the Company, were on the dates on which they were
delivered, or will be on the dates on which they are to be delivered,
true, complete and correct in all material respects.
(o) As of the date hereof and as of the Closing Date, neither the Company
nor the Bank is (i) in violation of its articles of incorporation or
code of regulations or charter or bylaws, respectively (and the Bank
will not be in violation of its charter or bylaws in capital stock
form upon consummation of the Conversion), 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 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 (with the exception of the
liquidation
-11-
account established in the Conversion) upon any of the assets of the
Company or the Bank pursuant to the Articles of Incorporation and
Bylaws of the Company or the Charter and Bylaws of the Bank (in either
mutual or capital stock form) or any material contract, lease or other
instrument in which the Company or the Bank has a beneficial interest,
or any applicable law, rule, regulation or order; (ii) violate any
authorization, approval, judgement, decree, order, statute, rule or
regulation applicable to the Company or the Bank, except for such
violations which would not have a material adverse effect on the
financial condition and results of operations of the Company and the
Bank on a consolidated basis; or (iii) with the exception of the
liquidation account established in the Conversion, result in the
creation of any material lien, charge or encumbrance upon any property
of the Company or the Bank.
(p) 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
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 Company or the Bank is a party or by which any of them or
any of their property is bound or affected, except such defaults which
would not have a material adverse affect on the financial condition or
results of operations of the Company and the Bank on a consolidated
basis; 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 Company and the Bank, threatened any action or proceeding
wherein 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 Company or the Bank, would have a material adverse
effect on the Company or the Bank considered as one enterprise.
(q) Upon consummation of the Conversion, 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 will have been duly and validly authorized
for issuance and, when issued and delivered by the Company pursuant to
the Plan against payment of the consideration calculated as set forth
in the Plan and in the Prospectus, will be duly and validly issued,
fully paid and non-assessable, except for shares purchased by the ESOP
with funds borrowed from the Company to the extent payment therefor in
cash has not been received by the Company; except to the extent that
subscription rights and priorities pursuant thereto exist pursuant to
the Plan, no preemptive rights exist with respect to the Shares; and
the terms and provisions of the Shares will conform in all material
respects to the
-12-
description thereof contained in the Registration Statement and the
Prospectus. To the best knowledge of the Company and the Bank, 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.
(r) No approval of any regulatory or supervisory or other public authority
is required in connection with the execution and delivery of this
Agreement or the issuance of the Shares, except for the approval of
the Commission and the OTS, and any necessary qualification,
notification, registration or exemption under the securities or blue
sky laws of the various states in which the Shares are to be offered,
and except as may be required under the rules and regulations of the
National Association of Securities Dealers, Inc. ("NASD") and/or The
Nasdaq Stock Market.
(s) Crowe Chizek and Company 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 public
accountants within the meaning of the Code of Professional Ethics of
the American Institute of Certified Public Accountants and applicable
regulations of the OTS.
(t) Keller & Company, Inc., which has prepared the Bank's Conversion
Valuation Appraisal Report as of ____________, 1999 (as amended or
supplemented, if so amended or supplemented) (the "Appraisal"), has
advised the Company in writing that it is independent of the Company
and the Bank within the meaning of the Conversion Regulations.
(u) The Company and the Bank have timely filed all required federal, state
and local tax returns; 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.
(v) The Bank is 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.
(w) To the knowledge of the Company and the Bank, neither the Company, the
Bank nor employees of the Company or the Bank has made any payment of
-13-
funds of 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.
(x) Prior to the Conversion, neither the Company nor 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); (ii) had any material dealings within the 12 months prior
to the date hereof with any member of the NASD, or any person related
to or associated with such member, other than discussions and meetings
relating to the proposed Offering and routine purchases and sales of
United States government and agency and other securities in the
ordinary course of business; (iii) entered into a financial or
management consulting agreement except as contemplated hereunder; and
(iv) engaged any intermediary between the Agent and the Company and
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 Conversion is not
completed for whatever reason or for delivery to the Company if all
Shares are sold.
(y) The Company and the Bank have not relied upon the Agent or its legal
counsel or other advisors for any legal, tax or accounting advice in
connection with the Conversion.
(z) The Company is not required to be registered under the Investment
Company Act of 1940, as amended.
(aa) Any certificates signed by an officer of the Company or the Bank
pursuant to the conditions of this Agreement and delivered to the
Agent or their counsel that refers to this Agreement shall be deemed
to be a representation and warranty by the Company or the Bank to the
Agent as to the matters covered thereby with the same effect as if
such representation and warranty were set forth herein.
Section 5. Representations and Warranties.
------------------------------
KBW represents and warrants to the Company and the Bank that:
(i) it is a corporation and is validly existing in good standing under
the laws of the State of New York and licensed to conduct business in the
State of
-14-
Indiana and that Webb is an unincorporated division thereof with full power
and authority to provide the services to be furnished to the Bank and the
Company hereunder.
(ii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action on the part of the Agent, and
this Agreement has been duly and validly executed and delivered by the
Agent and is a legal, valid and binding agreement of the Agent, enforceable
in accordance with its terms.
(iii) Each of the Agent and its employees, agents and representatives
who shall perform any of the services hereunder shall be duly authorized
and empowered, and shall have all licenses, approvals and permits necessary
to perform such services; and the Agent is a registered selling agent in
each of the jurisdictions in which the Shares are to be offered by the
Company in reliance upon the Agent as a registered selling agent as set
forth in the blue sky memorandum prepared with respect to the Offering.
(iv) The execution and delivery of this Agreement by the Agent, the
consummation of the transactions contemplated hereby and compliance with
the terms and provisions hereof will not conflict with, or result in a
breach of, any of the terms, provisions or conditions of, or constitute a
default (or an event which with notice or lapse of time or both would
constitute a default) under, the Articles of Incorporation or Bylaws of the
Agent or any agreement, indenture or other instrument to which the Agent is
a party or by which it or its property is bound.
(v) No approval of any regulatory or supervisory or other public
authority is required in connection with the Agent's execution and delivery
of this Agreement, except as may have been received.
(vi) There is no suit or proceeding or charge or action before or by
any court, regulatory authority or government agency or body or, to the
knowledge of the Agent, pending or threatened, which might materially
adversely affect the Agent's performance of this Agreement.
Section 5.l Covenants of the Company and the Bank. The Company and the
-------------------------------------
Bank hereby jointly and severally covenant with KBW as follows:
(a) The Company will not, at any time after the date the Registration
Statement is declared effective, file any amendment or supplement to
the Registration Statement without providing the Agent and its counsel
an opportunity to review such amendment or supplement or file any
amendment or supplement
-15-
to which amendment or supplement the Agent or its counsel shall
reasonably object.
(b) The Bank will not, at any time after the Conversion Application is
approved by the OTS, file any amendment or supplement to such
Conversion Application without providing the Agent and its counsel an
opportunity to review such amendment or supplement or file any
amendment or supplement to which amendment or supplement the Agent or
its counsel shall reasonably object.
(c) The Company will not, at any time before the Holding Company
Application is approved by the OTS, file any amendment or supplement
to such Holding Company Application without providing the Agent and
its counsel an opportunity to review the nonconfidential portions of
such amendment or supplement or file any amendment or supplement to
which amendment or supplement the Agent or its counsel shall
reasonably object.
(d) The Company and the Bank will use their best efforts to cause any
post-effective amendment to the Registration Statement to be declared
effective by the Commission and any post-effective amendment to the
Conversion Application to be approved by the OTS and will immediately
upon receipt of any information concerning the events listed below
notify the Agent: (i) when the Registration Statement, as amended, has
become effective; (ii) when the Conversion Application, as amended,
has been approved by the OTS; (iii) any comments from the Commission,
the OTS, or any other governmental entity with respect to the
Conversion or the transactions contemplated by this Agreement; (iv) of
the request by the Commission, the OTS, or any other governmental
entity for any amendment or supplement to the Registration Statement,
the Conversion Application or for additional information; (v) of the
issuance by the Commission, the OTS, or any other governmental entity
of any order or other action suspending the Offering or the use of the
Registration Statement or the Prospectus or any other filing of the
Company or the Bank under the Conversion Regulations, or other
applicable law, or the threat of any such action; (vi) the issuance by
the Commission, the OTS, or any authority of any stop order suspending
the effectiveness of the Registration Statement or of the initiation
or threat of initiation or threat of any proceedings for that purpose;
or (vii) of the occurrence of any event mentioned in paragraph (h)
below. The Company and the Bank will make every reasonable effort (i)
to prevent the issuance by the Commission, the OTS, or any other state
authority of any such order and, if any such order shall at any time
be issued, (ii) to obtain the lifting thereof at the earliest possible
time.
-16-
(e) The Company and the Bank will deliver to the Agent and to its counsel
two conformed copies of the Registration Statement, the Conversion
Application and the Holding Company Application, as originally filed
and of each amendment or supplement thereto, including all exhibits.
Further, the Company and the Bank will deliver such additional copies
of the foregoing documents to counsel to the Agent as may be required
for any NASD filings.
(f) The Company and the Bank will furnish to the Agent, from time to time
during the period when the Prospectus (or any later prospectus related
to this offering) is required to be delivered under the 1933 Act or
the Securities Exchange Act of 1934 (the "1934 Act"), such number of
copies of such Prospectus (as amended or supplemented) as the Agent
may reasonably request for the purposes contemplated by the 1933 Act,
the 1933 Act Regulations, the 1934 Act or the rules and regulations
promulgated under the 1934 Act (the "1934 Act Regulations"). The
Company authorizes the Agent to use the Prospectus (as amended or
supplemented, if amended or supplemented) in any lawful manner
contemplated by the Plan in connection with the sale of the Shares by
the Agent.
(g) The Company and the Bank will comply with any and all material terms,
conditions, requirements and provisions with respect to the Conversion
and the transactions contemplated thereby imposed by the Commission,
the OTS or the Conversion Regulations, and by the 1933 Act, the 1933
Act Regulations, the 1934 Act and the 1934 Act Regulations to be
complied with prior to or subsequent to the Closing Date and when the
Prospectus is required to be delivered, and during such time period
the Company and the Bank will comply, at their own expense, with all
material requirements imposed upon them by the Commission, the OTS or
the Conversion Regulations, and by the 1933 Act, the 1933 Act
Regulations, the 1934 Act and the 1934 Act Regulations, including,
without limitation, Rule 10b-5 under the 1934 Act, in each case as
from time to time in force, so far as necessary to permit the
continuance of sales or dealing in the Common Shares during such
period in accordance with the provisions hereof and the Prospectus.
(h) If, at any time during the period when the Prospectus relating to the
Shares is required to be delivered, any event relating to or affecting
the Company or the Bank shall occur, as a result of which it is
necessary or appropriate, in the opinion of counsel for the Company
and the Bank or in the reasonable opinion of the Agent's counsel, to
amend or supplement the Registration Statement or Prospectus in order
to make the Registration Statement or Prospectus not misleading in
light of the circumstances existing at the time the Prospectus is
delivered to a purchaser, the Company and the Bank will
-17-
immediately so inform the Agent and prepare and file, at their own
expense, with the Commission, and the OTS and furnish to the Agent a
reasonable number of copies of an amendment or amendments of, or a
supplement or supplements to, the Registration Statement or Prospectus
(in form and substance reasonably satisfactory to the Agent and its
counsel after a reasonable time for review) which will amend or
supplement the Registration Statement or Prospectus so that as amended
or supplemented it 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 existing at the time
the Prospectus is delivered to a purchaser, not misleading. For the
purpose of this Agreement, the Company and the Bank each will timely
furnish to the Agent such information with respect to itself as the
Agent may from time to time reasonably request.
(i) The Company and the Bank will take all necessary actions in
cooperating with the Agent and furnish to whomever the Agent may
direct such information as may be required to qualify or register the
Shares for offering and sale by the Company or to exempt such Shares
from registration, or to exempt the Company as a broker-dealer and its
officers, directors and employees as broker-dealers or agents under
the applicable securities or blue sky laws of such jurisdictions in
which the Shares are required under the Conversion Regulations to be
sold or as the Agent and the Company and the Bank may reasonably agree
upon; provided, however, that the Company shall not be obligated to
file any general consent to service of process, to qualify to do
business in any jurisdiction in which it is not so qualified, or to
register its directors or officers as brokers, dealers, salesmen or
agents in any jurisdiction. In each jurisdiction where any of the
Shares shall have been qualified or registered as above provided, the
Company will make and file such statements and reports in each fiscal
period as are or may be required by the laws of such jurisdiction.
(j) The liquidation account for the benefit of Eligible Account Holders
and Supplemental Eligible Account Holders will be duly established and
maintained in accordance with the requirements of the OTS, and such
Eligible Account Holders and Supplemental Eligible Account Holders who
continue to maintain their savings accounts in the Bank will have an
inchoate interest in their pro rata portion of the liquidation
account, which shall have a priority superior to that of the holders
of the Common Shares in the event of a complete liquidation of the
Bank.
-18-
(k) The Company and the Bank will not sell or issue, contract to sell or
otherwise dispose of, for a period of 90 days after the Closing Date,
without the Agent's prior written consent, any of their common shares,
other than the Shares or other than in connection with any plan or
arrangement described in the Prospectus, including existing stock
benefit plans.
(l) The Company shall register its Common Shares under Section 12(g) of
the 1934 Act concurrently with the Offering and shall request that
such registration be effective prior to or upon completion of the
Conversion. The Company shall maintain the effectiveness of such
registration for not less than three years or such shorter period as
may be required by the OTS.
(m) During the period during which the Common Shares are registered under
the 1934 Act or for three (3) years from the date hereof, whichever
period is greater, the Company will furnish to its shareholders as
soon as practicable after the end of each fiscal year an annual report
of the Company (including a consolidated balance sheet and statements
of consolidated income, shareholders' equity and cash flows of the
Company and its subsidiaries as at the end of and for such year,
certified by independent public accountants in accordance with
Regulation S-X under the 1933 Act and the 1934 Act).
(n) During the period of three years from the date hereof, the Company
will furnish to the Agent: (i) as soon as practicable after such
information is publicly available, a copy of each report of the
Company furnished to or filed with the Commission under the 1934 Act
or any national securities exchange or system on which any class of
securities of the Company is listed or quoted (including, but not
limited to, reports on Forms 10-K, 10-Q and 8-K and all proxy
statements and annual reports to stockholders), (ii) a copy of each
other non-confidential report of the Company mailed to its
shareholders or filed with the Commission, the OTS or any other
supervisory or regulatory authority or any national securities
exchange or system on which any class of securities of the Company is
listed or quoted, each press release and material news items and
additional documents and information with respect to the Company or
the Bank as the Agent may reasonably request; and (iii) from time to
time, such other nonconfidential information concerning the Company or
the Bank as the Agent may reasonably request.
(o) The Company and the Bank will use the net proceeds from the sale of
the Shares in the manner set forth in the Prospectus under the caption
"Use of Proceeds."
(p) Other than as permitted by the Conversion Regulations, the HOLA, the
1933 Act, the 1933 Act Regulations and its rules and regulations and
the laws of
-19-
any state in which the Shares are registered or qualified for sale or
exempt from registration, neither the Company nor the Bank will
distribute any prospectus, offering circular or other offering
material in connection with the offer and sale of the Shares.
(q) The Company will use its best efforts to (i) encourage and assist a
market maker to establish and maintain a market for the Shares and
(ii) list and maintain quotation of the Shares on a national or
regional securities exchange or on The Nasdaq Stock Market effective
on or prior to the Closing Date.
(r) The Bank will maintain appropriate arrangements for depositing all
funds received from persons mailing subscriptions for or orders to
purchase Shares in the Offering on an interest-bearing basis at the
rate described in the Prospectus until the Closing Date and
satisfaction of all conditions precedent to the release of the Bank's
obligation to refund payments received from persons subscribing for or
ordering Shares in the Offering in accordance with the Plan and as
described in the Prospectus or until refunds of such funds have been
made to the persons entitled thereto or withdrawal authorizations
canceled in accordance with the Plan and as described in the
Prospectus. The Bank will maintain such records of all funds received
to permit the funds of each subscriber to be separately insured by the
FDIC (to the maximum extent allowable) and to enable the Bank to make
the appropriate refunds of such funds in the event that such refunds
are required to be made in accordance with the Plan and as described
in the Prospectus.
(s) The Company will promptly take all necessary action to register as a
savings and loan holding company under the HOLA.
(t) The Company and the Bank will take such actions and furnish such
information as are reasonably requested by the Agent in order for the
Agent to ensure compliance with the NASD's "Interpretation Relating to
Free Riding and Withholding."
(u) Neither the Company nor the Bank will amend the Plan of Conversion
without notifying the Agent prior thereto.
(v) The Company shall assist the Agent, if necessary, in connection with
the allocation of the Shares in the event of an oversubscription and
shall provide the Agent with any information necessary to assist the
Company in allocating the Shares in such event and such information
shall be accurate and reliable in all material respects.
-20-
(w) Prior to the Closing Date, the Company and the Bank will inform the
Agent of any event or circumstances of which it is aware as a result
of which the Registration Statement and/or Prospectus, as then amended
or supplemented, would contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein not misleading.
(x) Subsequent to the date the Registration Statement is declared
effective by the Commission and prior to the Closing Date, except as
otherwise may be indicated or contemplated therein or set forth in an
amendment or supplement thereto, neither the Company nor the Bank will
have: (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, except
borrowings from the same or similar sources indicated in the
Prospectus in the ordinary course of its business, or (ii) entered
into any transaction which is material in light of the business and
properties of the Company and the Bank, taken as a whole.
(y) The facts and representations provided to Muldoon, Murphy & Faucette
LLP by the Bank and the Company and upon which Muldoon, Murphy &
Faucette LLP will base its opinion under Section 7(c)(1) are and will
be truthful, accurate and complete.
Section 6. Payment of Expenses. Whether or not the Conversion is
-------------------
completed or the sale of the Shares by the Company is consummated, the Company
and the Bank jointly and severally agree to pay or reimburse the Agent for: (a)
all filing fees in connection with all filings related to the Offering with the
NASD; (b) any stock issue or transfer taxes which may be payable with respect to
the sale of the Shares; (c) all reasonable expenses of the Conversion, including
but not limited to the Company's and the Bank's, and the Agent's attorneys' fees
(not to exceed [$______] without the Bank's consent) and expenses, blue sky
fees, transfer agent, registrar and other agent charges, fees relating to
auditing and accounting or other advisors and costs of printing all documents
necessary in connection with the Conversion; provided, however, there will be no
out-of-pocket expenses charged by the Agent for expenses such as travel,
photocopying lodging and meals. In the event the Company is unable to sell a
minimum of ___________ Shares or the Conversion is terminated or otherwise
abandoned, the Company and the Bank shall promptly reimburse the Agent in
accordance with Section 2(d) hereof.
Section 7. Conditions to the Agent's Obligations. The obligations of the
-------------------------------------
Agent hereunder, as to the Shares to be delivered at the Closing Date, are
subject, to the extent not waived in writing by the Agent, to the condition that
all representations and warranties of the Company and the Bank herein are, at
and as of the commencement of the Offering and at and as of the Closing Date,
true and correct in all material respects, the condition that the Company and
the Bank shall have performed all of their obligations hereunder to be performed
on or before such dates, and to the following further conditions:
-21-
(a) At the Closing Date, the Company and the Bank shall have conducted the
Conversion in all material respects in accordance with the Plan, the
Conversion Regulations, the laws of Delaware, and all other applicable
laws, regulations, decisions and orders, including all terms,
conditions, requirements and provisions precedent to the Conversion
imposed upon them by the OTS.
(b) The Registration Statement shall have been declared effective by the
Commission and the Conversion Application approved by the OTS not
later than 5:30 p.m. on the date of this Agreement, or with the
Agent's consent at a later time and date; and at the Closing Date, no
stop order suspending the effectiveness of the Registration Statement
shall have been issued under the 1933 Act or proceedings therefore
initiated or threatened by the Commission or any state authority, and
no order or other action suspending the authorization of the
Prospectus or the consummation of the Conversion shall have been
issued or proceedings therefore initiated or, to the Company's or the
Bank's knowledge, threatened by the Commission, the OTS, the FDIC, or
any other state authority.
(c) At the Closing Date, the Agent shall have received:
(1) The favorable opinion, dated as of the Closing Date and addressed
to the Agent and for its benefit, of Muldoon, Murphy & Faucette LLP,
special counsel for the Company and the Bank, in form and substance to
the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of
Delaware.
(ii) The Company has 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.
(iii) The Bank is a validly existing federally chartered
savings bank in mutual form and immediately following the
completion of the Conversion will be a 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. All of the outstanding capital
stock of the Bank upon completion of the Conversion will be duly
authorized and, upon payment therefor, will be validly issued,
fully paid and non-assessable and will be owned by the Company,
to such counsel's Actual Knowledge, free and clear of any liens,
encumbrances, claims or other restrictions.
-22-
(iv) The Bank is a member of the FHLB-Indianapolis. The
deposit accounts of the Bank are insured by the FDIC up to the
maximum amount allowed under law and no proceedings for the
termination or revocation of such insurance are pending or, to
such counsel's Actual Knowledge, threatened; the description of
the liquidation account as set forth in the Prospectus under the
captions "The Conversion-Effects of Conversion to Stock Form-
Liquidation Account," to the extent that such information
constitutes matters of law and legal conclusions, has been
reviewed by such counsel and is accurately described in all
material respects.
(v) Immediately following the consummation of the
Conversion, the authorized, issued and outstanding Common Shares
of the Company will be within the range set forth in the
Prospectus under the caption "Capitalization," and no Common
Shares have been issued prior to the Closing Date; at the time of
the Conversion, the Shares subscribed for pursuant to the
Offering will have been duly and validly authorized for issuance,
and when issued and delivered by the Company pursuant to the Plan
against payment of the consideration calculated as set forth in
the Plan and Prospectus, will be duly and validly issued and
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, the issuance of the Shares is
not subject to preemptive rights and the terms and provisions of
the Shares conform in all material respects to the description
thereof contained in 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.
(vi) The Bank and the Company have full corporate power and
authority to enter into the Agreement and to consummate the
transactions contemplated thereby and by the Plan. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of the Company and
the Bank; and this Agreement is a valid and binding obligation of
the Company and the Bank, enforceable against the Company and the
Bank in accordance with its terms, except as the enforceability
thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, conservatorship, receivership or
other similar laws now or hereafter in effect relating to or
affecting the enforcement of creditors' rights generally or the
rights of creditors of federally chartered savings institutions,
(ii) general equitable principles, (iii) laws relating to the
safety and soundness
-23-
of insured depository institutions, and (iv) applicable law or
public policy with respect to the indemnification and/or
contribution provisions contained herein, including without
limitation the provisions of Sections 23A and 23B of the Federal
Reserve Act and except that no opinion need be expressed as to
the effect or availability of equitable remedies or injunctive
relief (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(vii) The Conversion Application has been approved by the
OTS and the Prospectus has been authorized for use by the OTS.
The OTS has approved the Holding Company Application and the
purchase by the Company of all of the issued and outstanding
capital stock of the Bank and no action has been taken, and to
such counsel's Actual Knowledge, none is pending or threatened,
to revoke any such authorization or approval.
(viii) The Plan has been duly adopted by the required vote
of the directors of the Company and the Bank, and based upon the
certificate of the inspectors of election, by the members of the
Bank.
(ix) Subject to the satisfaction of the conditions to the
OTS's approval of the Conversion, no further approval,
registration, authorization, consent or other order of any
federal regulatory agency is required in connection with the
execution and delivery of this Agreement, the issuance of the
Shares and the consummation of the Conversion, except as may be
required under the securities or blue sky laws of various
jurisdictions (as to which no opinion need be rendered) and
except as may be required under the rules and regulations of the
NASD and/or The Nasdaq Stock Market (as to which no opinion need
by rendered).
(x) The Registration Statement is effective under the
1933 Act and no stop order suspending the effectiveness has been
issued under the 1933 Act or proceedings therefor initiated or,
to such counsel's Actual Knowledge, threatened by the Commission.
(xi) At the time the Conversion Application, including the
Prospectus contained therein, was approved by the OTS, the
Conversion Application, including the Prospectus contained
therein, complied as to form in all material respects with the
requirements of the Conversion Regulations, federal and state law
and all applicable rules and regulations promulgated thereunder
(other than the financial statements, the notes thereto, and
other tabular, financial, statistical and appraisal data included
therein, as to which no opinion need be rendered).
-24-
(xii) At the time that the Registration Statement became
effective, (i) the Registration Statement (as amended or
supplemented, if so amended or supplemented) (other than the
financial statements, the notes thereto, and other tabular,
financial, statistical and appraisal data included therein, as to
which no opinion need be rendered), complied as to form in all
material respects with the requirements of the 1933 Act and the
1933 Act Regulations, and (ii) the Prospectus (other than the
financial statements, the notes thereto, and other tabular,
financial, statistical and appraisal data included therein, as to
which no opinion need be rendered) complied as to form in all
material respects with the requirements of the 1933 Act, the 1933
Act Regulations, the Conversion Regulations and federal law.
(xiii) The terms and provisions of the Shares of the Company
conform, in all material respects, to the description thereof
contained in the Registration Statement and Prospectus, and the
form of certificate used to evidence the Shares is in due and
proper form.
(xiv) There are no legal or governmental proceedings
pending or threatened which are required to be disclosed in the
Registration Statement and Prospectus, other than those disclosed
therein.
(xv) To such counsel's Actual Knowledge, there are no
material contracts, indentures, mortgages, loan agreements,
notes, leases or other instruments required to be described or
referred to in the Conversion Application, the Registration
Statement or the Prospectus or required to be filed as exhibits
thereto other than those described or referred to therein or
filed as exhibits thereto in the Conversion Application, the
Registration Statement or the Prospectus. The description in the
Conversion Application, the Registration Statement and the
Prospectus of such documents and exhibits is accurate in all
material respects and fairly presents the information required to
be shown.
(xvi) The Plan complies in all material respects with all
applicable federal and Delaware laws, rules, regulations,
decisions and orders including, but not limited to, the
Conversion Regulations; to such counsel's Actual Knowledge, no
order has been issued by the OTS, the Commission, the FDIC, or
any state authority to suspend the Offering or the use of the
Prospectus, and no action for such purposes has been instituted
or threatened by the OTS, the Commission, the FDIC, or any other
state authority and, to such counsel's Actual Knowledge, no
person has sought to obtain regulatory or judicial review of the
final action of the OTS approving the Plan, the Conversion
Application, the Holding Company Application or the Prospectus.
-25-
(xvii) The Company and the Bank have obtained all material
licenses, permits and other governmental authorizations currently
required for the conduct of their businesses and all such
licenses, permits and other governmental authorizations are in
full force and effect, and the Company and the Bank are in all
material respects complying therewith.
(xviii) Neither the Company nor the Bank is in violation of
its Articles of Incorporation and Bylaws or its Charter and
Bylaws, as appropriate or, to such counsel's Actual Knowledge, in
default or violation of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party
or by which it or its property may be bound, except for such
defaults or violations which would not have a material adverse
impact on the financial condition or results of operations of the
Company and the Bank on a consolidated basis; to such counsel's
Actual Knowledge, the execution and delivery of this Agreement,
the incurrence of the obligations herein set forth and the
consummation of the transactions contemplated herein will not
conflict with or constitute a breach of, or default under, or
result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or the
Bank pursuant to any material contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which the Company
or the Bank is a party or by which any of them may be bound, or
to which any of the property or assets of the Company or the Bank
are subject (other than the establishment of the liquidation
account); and such action will not result in any violation of the
provisions of the Articles of Incorporation or Bylaws of the
Company or the Charter or the Bylaws of the Bank or result in any
violation of any applicable federal or state law, act, regulation
(except that no opinion with respect to the securities and blue
sky laws of various jurisdictions or the rules or regulations of
the NASD and/or The Nasdaq Stock Market need be rendered) or
order or court order, writ, injunction or decree.
(xix) The Company's Articles of Incorporation and Bylaws
comply in all material respects with the laws of the State of
Delaware. The Bank's Charter and Bylaws comply in all material
respects with federal law.
(xx) Neither the Company nor the Bank is in violation of
any directive from the OTS or the FDIC to make any material
change in the method of conducting its respective business.
-26-
(xxi) The information in the Prospectus under the captions
"Regulation and Supervision," "The Conversion," "Restrictions on
Acquisition of Security Federal" and "Description of Capital
Stock of Security Federal," to the extent that such information
constitutes matters of law, summaries of legal matters, documents
or proceedings, or legal conclusions, has been reviewed by such
counsel and is correct in all material respects. The description
of the Conversion process in the Prospectus under the caption
"The Conversion" to the extent that such information constitutes
matters of law, summaries of legal matters, documents or
proceedings, or legal conclusions, has been reviewed by such
counsel and fairly describes such process in all material
respects. The descriptions in the Prospectus of statutes or
regulations are accurate summaries and fairly present the
information required to be shown. The information under the
caption "The Conversion-Effects of the Conversion to Stock Form--
Tax Effects" has been reviewed by such counsel and fairly
describes the opinions rendered by them to the Company and the
Bank with respect to such matters.
In addition, such counsel shall state that during the
preparation of the Conversion Application, the Registration
Statement and the Prospectus, they participated in conferences
with certain officers of, the independent public and internal
accountants for, and other representatives of, the Company and
the Bank, at which conferences the contents of the Conversion
Application, the Registration Statement and the Prospectus and
related matters were discussed and, while such counsel have not
confirmed the accuracy or completeness of or otherwise verified
the information contained in the Conversion Application, the
Registration Statement or the Prospectus and do not assume any
responsibility for such information, based upon such conferences
and a review of documents deemed relevant for the purpose of
rendering their opinion (relying as to materiality as to factual
matters on certificates of officers and other factual
representations by the Company and the Bank), nothing has come to
their attention that would lead them to believe that the
Conversion Application, the Registration Statement, the
Prospectus, or any amendment or supplement thereto (other than
the financial statements, the notes thereto, and other tabular,
financial, statistical and appraisal data included therein as to
which no view need be rendered) contained an untrue statement of
a material fact or omitted 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.
In giving such opinion, such counsel may rely as to all
matters of fact on certificates of officers or directors of the
Company and the Bank and certificates of public officials. Such
counsel's opinion shall be limited to matters governed by federal
laws and by the laws of the State of Delaware.
-27-
The term "Actual Knowledge" as used herein shall have the meaning
set forth in the Legal Opinion Accord of the American Bar
Association Section of Business Law. For purposes of such
opinion, no proceedings shall be deemed to be pending, no order
or stop order shall be deemed to be issued, and no action shall
be deemed to be instituted unless, in each case, a director or
executive officer of the Company or the Bank shall have received
a copy of such proceedings, order, stop order or action. In
addition, such opinion may be limited to present statutes,
regulations and judicial interpretations and to facts as they
presently exist; in rendering such opinion, such counsel need
assume no obligation to revise or supplement it should the
present laws be changed by legislative or regulatory action,
judicial decision or otherwise; and 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 Conversion or any aspect
thereof. Such counsel may assume that any agreement is the valid
and binding obligation of any parties to such agreement other
than the Company or the Bank.
(d) At the Closing Date, the Agent shall receive a certificate of the
Chief Executive Officer and the Principal Accounting Officer of
the Company and the Bank in form and substance reasonably
satisfactory to the Agent's Counsel, dated as of such Closing
Date, to the effect that: (i) they have carefully examined the
Prospectus and, in their opinion, at the time the Prospectus
became authorized for final use, the Prospectus did not contain
any 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; (ii) since the date the Prospectus became authorized
for final use, no event has occurred 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 condition,
financial or otherwise, or in the earnings, capital, properties
or business of the Company or the Bank and the conditions set
forth in this Section 7 have been satisfied; (iii) since the
respective dates as of which information is given in the
Registration Statement and the Prospectus, there has been no
material adverse change in the condition, financial or otherwise,
or in the earnings, capital or properties of the Company or the
Bank independently, or of the Company and the Bank considered as
one enterprise, whether or not arising in the ordinary course of
business; (iv) the representations and warranties in Section 4
are true and correct with the same force and effect as though
expressly made at and as of the Closing Date; (v) the Company and
the Bank have complied in all material respects with all
agreements and satisfied all conditions on their
-28-
part to be performed or satisfied at or prior to the Closing Date
and will comply in all material respects with all obligations to
be satisfied by them after the Conversion; (vi) no stop order
suspending the effectiveness of the Registration Statement has
been initiated or, to the best knowledge of the Company or the
Bank, threatened by the Commission or any state authority; (vii)
no order suspending the Offering, the Conversion, the acquisition
of all of the shares of the Bank by the Company or the
effectiveness of the Prospectus has been issued and no
proceedings for that purpose are pending or, to the best
knowledge of the Company or the Bank, threatened by the OTS, the
Commission, the FDIC, or any state authority; and (viii) to the
best knowledge of the Company or the Bank, no person has sought
to obtain review of the final action of the OTS approving the
Plan.
(e) Prior to and at the Closing Date: (i) in the reasonable opinion
of the Agent, there shall have been no material adverse change in
the condition, financial or otherwise, or in the earnings or
business of the Company or the Bank independently, or of the
Company and the Bank considered as one enterprise, from that as
of the latest dates as of which such condition is set forth in
the Prospectus, other than transactions referred to or
contemplated therein; (ii) the Company or the Bank shall not have
received from the OTS or the FDIC any direction (oral or written)
to make any material change in the method of conducting their
business with which it has not complied (which direction, if any,
shall have been disclosed to the Agent) or which materially and
adversely would affect the business, operations or financial
condition or income of the Company and the Bank taken as a whole;
(iii) neither the Company nor the Bank shall have been in default
(nor shall an event have occurred which, with notice or lapse of
time or both, would constitute a default) under any provision of
any agreement or instrument relating to any outstanding
indebtedness; (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, to the
knowledge of the Company or the Bank, threatened against the
Company or the Bank or affecting any of their properties wherein
an unfavorable decision, ruling or finding would materially and
adversely affect the business, operations, financial condition or
income of the Company or the Bank taken as a whole; and (v) the
Shares shall have been qualified or registered for offering and
sale or exempted therefrom under the securities or blue sky laws
of the jurisdictions as the Agent shall have reasonably requested
and as agreed to by the Company and the Bank.
(f) Concurrently with the execution of this Agreement, the Agent
shall receive a letter from Crowe Chizek and Company LLP dated as
of the date of the Prospectus and addressed to the Agent: (i)
confirming that Crowe Chizek and
-29-
Company LLP is a firm of independent public accountants within
the meaning of Rule 101 of the Code of Professional Ethics of the
American Institute of Certified Public Accountants and applicable
regulations of the OTS and stating in effect that in its opinion
the financial statements, schedules and related notes of the Bank
as of June 30, 1999 and 1998, and for each of the three years in
the period ended June 30, 1999, included in the Prospectus and
covered by their opinion included therein, comply as to form in
all material respects with the applicable accounting requirements
and related published rules and regulations of the OTS and the
1933 Act; (ii) stating in effect that, on the basis of certain
agreed upon procedures (but not an audit in accordance with
generally accepted auditing standards) consisting of a reading of
the latest available unaudited interim financial statements of
the Bank prepared by the Bank, a reading of the minutes of the
meetings of the Board of Directors and members of the Bank and
consultations with officers of the Bank responsible for financial
and accounting matters, nothing came to their attention which
caused them to believe that: (A) the unaudited financial
statements included in the Prospectus are not in conformity with
the 1933 Act, applicable accounting requirements of the OTS and
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included in the Prospectus; or (B) during the period
from the date of the latest unaudited financial statements
included in the Prospectus to a specified date not more than
three business days prior to the date of the Prospectus, except
as has been described in the Prospectus, there was any increase
in borrowings, other than normal deposit fluctuations, by the
Bank; or (C) there was any decrease in the net assets of the Bank
at the date of such letter as compared with amounts shown in the
latest unaudited balance sheets included in the Prospectus; and
(iii) stating that, in addition to the audit referred to in their
opinion included in the Prospectus and the performance of the
procedures referred to in clause (ii) of this subsection (g),
they have compared with the general accounting records of the
Bank, which are subject to the internal controls of the Bank, the
accounting system and other data prepared by the Bank, directly
from such accounting records, to the extent specified in such
letter, such amounts and/or percentages set forth in the
Prospectus as the Agent may reasonably request; and they have
reported on the results of such comparisons.
(g) At the Closing Date, the Agent shall receive a letter dated the
Closing Date, addressed to the Agent, confirming the statements
made by Crowe Chizek and Company LLP in the letter delivered by
it pursuant to subsection (g) of this Section 7, the "specified
date" referred to in clause (ii) of subsection (g) to be a date
specified in the letter required by this subsection (h) which for
purposes of such letter shall not be more than three business
days prior to the Closing Date.
-30-
(h) At the Closing Date, the Agent shall receive a letter from Keller &
Company, Inc., dated the Closing Date thereof and addressed to counsel
for the Agent (i) confirming that said firm is independent of the
Company and the Bank and is experienced and expert in the area of
corporate appraisals within the meaning of Title 12 of the Code of
Federal Regulations, Section 563b.7(f)(1)(i), (ii) stating in effect
that the Appraisal prepared by such firm complies in all material
respects with the applicable requirements of Title 12 of the Code of
Federal Regulations, and (iii) further stating that its opinion of the
aggregate pro forma market value of the Company and the Bank expressed
in its Appraisal dated as of __________, 1999, as most recently
updated, remains in effect.
(i) The Company and the Bank shall not have sustained since the date of
the latest financial statements included in the Prospectus any
material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Registration
Statement and Prospectus and since the respective dates as of which
information is given in the Registration Statement and Prospectus,
there shall not have been any change in the long-term debt of the
Company or the Bank other than debt incurred in relation to the
purchase of Shares by the Bank's eligible plans, or any change, or any
development involving a prospective change, in or affecting the
general affairs, management, financial position, shareholders' equity
or results of operations of the Company or the Bank, otherwise than as
set forth or contemplated in the Registration Statement and
Prospectus, the effect of which, in any such case described above, is
in Webb's reasonable judgment sufficiently material and adverse as to
make it impracticable or inadvisable to proceed with the Subscription
Offering or the delivery of the Shares on the terms and in the manner
contemplated in the Prospectus.
(j) At or prior to the Closing Date, the Agent shall receive: (i) a copy
of the letters from the OTS approving the Conversion Application and
authorizing the use of the Prospectus; (ii) a copy of the order from
the Commission declaring the Registration Statement effective; (iii) a
certificate from the OTS evidencing the good standing of the Bank;
(iv) a certificate of good standing from the State of Delaware
evidencing the good standing of the Company; (v) a certificate from
the FDIC evidencing the Bank's insurance of accounts; (vi) a
certificate from the FHLB-Indianapolis evidencing the Bank's
membership thereof; (vii) a copy of the letter from the OTS approving
the Company's Holding Company Application; and (viii) a certified copy
of the Bank's Charter and Bylaws.
-31-
(k) Subsequent to the date hereof, there shall not have occurred any of
the following: (i) a suspension or limitation in trading in securities
generally on the New York Stock Exchange or in the over-the-counter
market, or quotations halted generally on The Nasdaq Stock Market, or
minimum or maximum prices for trading have been fixed, or maximum
ranges for prices for securities have been required by either of such
exchanges or the NASD or by order of the Commission or any other
governmental authority; (ii) a general moratorium on the operations of
commercial banks, or federal savings and loan associations or a
general moratorium on the withdrawal of deposits from commercial banks
or federal savings and loan associations declared by federal or state
authorities; (iii) the engagement by the United States in hostilities
which have resulted in the declaration, on or after the date hereof,
of a national emergency or war; or (iv) a material decline in the
price of equity or debt securities if the effect of such a declaration
or decline, in the Agent's reasonable judgement, makes it
impracticable or inadvisable to proceed with the Offering or the
delivery of the Shares on the terms and in the manner contemplated in
the Registration Statement and the Prospectus.
(l) At or prior to the Closing Date, counsel to the Agent shall have been
furnished with such documents and opinions as they may reasonably
require for the purpose of enabling them to pass upon the sale of the
Shares as herein contemplated and related proceedings or in order to
evidence the occurrence or completeness of any of the representations
or warranties, or the fulfillment of any of the conditions, herein
contained; and all proceedings taken by the Company or the Bank in
connection with the Conversion and the sale of the Shares as herein
contemplated shall be satisfactory in form and substance to Webb and
its counsel.
Section 8. Indemnification.
---------------
(a) The Company and the Bank jointly and severally agree to indemnify and
hold harmless the Agent, its respective officers and directors,
employees and agents, and each person, if any, who controls the Agent
within the meaning of Section 15 of the 1933 Act or Section 20(a) of
the 1934 Act, against any and all loss, liability, claim, damage or
expense whatsoever (including, but not limited to, settlement
expenses), joint or several, that the Agent or any of them may suffer
or to which the Agent and any such persons may become subject under
all applicable federal or state laws or otherwise, and to promptly
reimburse the Agent and any such persons upon written demand for any
expense (including reasonable fees and disbursements of counsel)
incurred by the Agent or any of them in connection with investigating,
preparing or defending any actions, proceedings or claims (whether
commenced or threatened) to the extent such losses, claims, damages,
-32-
liabilities or actions: (i) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment or supplement thereto),
preliminary or final Prospectus (or any amendment or supplement
thereto), the Conversion Application (or any amendment or supplement
thereto), the Holding Company Application or any instrument or
document executed by the Company or the Bank or based upon written
information supplied by the Company or the Bank filed in any state or
jurisdiction to register or qualify any or all of the Shares or to
claim an exemption therefrom or provided to any state or jurisdiction
to exempt the Company as a broker-dealer or its officers, directors
and employees as broker-dealers or agent, under the securities laws
thereof (collectively, the "Blue Sky Application"), or any document,
advertisement, oral statement or communication ("Sales Information")
prepared, made or executed by or on behalf of the Company or the Bank
with their consent or based upon written or oral information furnished
by or on behalf of the Company or the Bank, whether or not filed in
any jurisdiction, in order to qualify or register the Shares or to
claim an exemption therefrom under the securities laws thereof; (ii)
arise out of or are based upon the omission or alleged omission to
state in any of the foregoing documents or information a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; or (iii) arise from any theory of liability whatsoever
relating to or arising from or based upon the Registration Statement
(or any amendment or supplement thereto), preliminary or final
Prospectus (or any amendment or supplement thereto), the Conversion
Application (or any amendment or supplement thereto), any Blue Sky
Application or Sales Information or other documentation distributed in
connection with the Conversion; provided, however, that no
indemnification is required under this paragraph (a) to the extent
such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue material statement or alleged untrue
material statement in, or material omission or alleged material
omission from, the Registration Statement (or any amendment or
supplement thereto), preliminary or final Prospectus (or any amendment
or supplement thereto), the Conversion Application, any Blue Sky
Application or Sales Information made in reliance upon and in
conformity with information furnished in writing to the Company or the
Bank by the Agent or its counsel regarding the Agent, provided, that
it is agreed and understood that the only information furnished in
writing to the Company or the Bank by the Agent regarding the Agent is
set forth in the Prospectus under the caption "The Conversion-Offering
of Common Stock"; and, provided further, that such indemnification
-------- -------
shall be to the extent not prohibited by the Commission, the OTS, the
FDIC and the Board of Governors of the Federal Reserve.
-33-
(b) The Agent agrees to indemnify and hold harmless the Company and
the Bank, their directors and officers and each person, if any, who
controls the Company or the Bank within the meaning of Section 15 of
the 1933 Act or Section 20(a) of the 1934 Act against any and all
loss, liability, claim, damage or expense whatsoever (including but
not limited to settlement expenses), joint or several, which they, or
any of them, may suffer or to which they, or any of them may become
subject under all applicable federal and state laws or otherwise, and
to promptly reimburse the Company, the Bank, and any such persons upon
written demand for any expenses (including reasonable fees and
disbursements of counsel) incurred by them, or any of them, in
connection with investigating, preparing or defending any actions,
proceedings or claims (whether commenced or threatened) to the extent
such losses, claims, damages, liabilities or actions: (i) arise out of
or are based upon any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement (or any
amendment or supplement thereto), the Conversion Application (or any
amendment or supplement thereto), the preliminary or final Prospectus
(or any amendment or supplement thereto), any Blue Sky Application or
Sales Information, (ii) are based upon the omission or alleged
omission to state in any of the foregoing documents a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or (iii) arise from any theory of liability whatsoever
relating to or arising from or based upon the Registration Statement
(or any amendment or supplement thereto), preliminary or final
Prospectus (or any amendment or supplement thereto), the Conversion
Application (or any amendment or supplement thereto), or any Blue Sky
Application or Sales Information or other documentation distributed in
connection with the Conversion; provided, however, that the Agent's
obligations under this Section 8(b) shall exist only if and only to
the extent that such untrue statement or alleged untrue statement was
made in, or such material fact or alleged material fact was omitted
from, the Registration Statement (or any amendment or supplement
thereto), the preliminary or final Prospectus (or any amendment or
supplement thereto), the Conversion Application (or any amendment or
supplement thereto), any Blue Sky Application or Sales Information in
reliance upon and in conformity with information furnished in writing
to the Company or the Bank by the Agent or its counsel regarding the
Agent, provided, that it is agreed and understood that the only
information furnished in writing to the Company or the Bank by the
Agent regarding the Agent is set forth in the Prospectus under the
caption "The Conversion-Plan of Distribution for the Subscription,
Direct Community and Syndicated Offerings."
-34-
(c) Each indemnified party shall give prompt written notice to each
indemnifying party of any action, proceeding, claim (whether
commenced or threatened), or suit instituted against it in
respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve it from any
liability which it may have on account of this Section 8 or
otherwise. An indemnifying party may participate at its own
expense in the defense of such action. In addition, if it so
elects within a reasonable time after receipt of such notice, an
indemnifying party, jointly with any other indemnifying parties
receiving such notice, may assume defense of such action with
counsel chosen by it and approved by the indemnified parties that
are defendants in such action, unless such indemnified parties
reasonably object to such assumption on the ground that there may
be legal defenses available to them that are different from or in
addition to those available to such indemnifying party. If an
indemnifying party assumes the defense of such action, the
indemnifying parties shall not be liable for any fees and
expenses of counsel for the indemnified parties incurred
thereafter in connection with such action, proceeding or claim,
other than reasonable costs of investigation. In no event shall
the indemnifying parties be liable for the fees and expenses of
more than one separate firm of attorneys (and any special counsel
that said firm may retain) for each indemnified party in
connection with any one action, proceeding or claim or separate
but similar or related actions, proceedings or claims in the same
jurisdiction arising out of the same general allegations or
circumstances.
(d) The agreements contained in this Section 8 and in Section 9
hereof and the representations and warranties of the Company and
the Bank set forth in this Agreement shall remain operative and
in full force and effect regardless of: (i) any investigation
made by or on behalf of the Agent or its officers, directors or
controlling persons, agent or employees or by or on behalf of the
Company or the Bank or any officers, directors or controlling
persons, agent or employees of the Company or the Bank; (ii)
delivery of and payment hereunder for the Shares; or (iii) any
termination of this Agreement.
Section 9. Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which the indemnification provided for in
Section 8 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Company, the Bank or the Agent, the Company,
the Bank and the Agent shall contribute to the aggregate losses, claims, damages
and liabilities (including any investigation, legal and other expenses incurred
in connection with, and any amount paid in settlement of, any action, suit or
proceeding, but after deducting any contribution received by the Company, the
Bank or the Agent from persons other than the other parties thereto, who may
also be liable for contribution) in such proportion so that the Agent is
responsible for that portion represented by the percentage that the fees paid to
the Agent pursuant to Section 2 of this Agreement (not including expenses) bears
to the gross proceeds received by the
-35-
Company from the sale of the Shares in the Offering, and the Company and the
Bank shall be responsible for the balance. If, however, the allocation provided
above is not permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative fault of the
Company and the Bank on the one hand and the Agent on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions, proceedings or claims in respect thereto), but also
the relative benefits received by the Company and the Bank on the one hand and
the Agent on the other from the Offering (before deducting expenses). The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company and/or the Bank on the one hand or the Agent on the other and the
parties' relative intent, good faith, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Bank and the Agent 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 into account the equitable
considerations referred to above in this Section 9. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions, proceedings or claims in respect thereof) referred to
above in this Section 9 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action, proceeding or claim. It is expressly agreed that
the Agent shall not be liable for any loss, liability, claim, damage or expense
or be required to contribute any amount pursuant to Section 8(b) or this Section
9 which in the aggregate exceeds the amount paid (excluding reimbursable
expenses) to the Agent under this Agreement. It is understood that the above
stated limitation on the Agent's liability is essential to the Agent and that
the Agent would not have entered into this Agreement if such limitation had not
been agreed to by the parties to this Agreement. No person found guilty of any
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not found guilty
of such fraudulent misrepresentation. The obligations of the Company, the Bank
and the Agent under this Section 9 and under Section 8 shall be in addition to
any liability which the Company, the Bank and the Agent may otherwise have. For
purposes of this Section 9, each of the Agent's, the Company's or the Bank's
officers and directors and each person, if any, who controls the Agent or the
Company or the Bank within the meaning of the 1933 Act and the 1934 Act shall
have the same rights to contribution as the Agent, the Company or the Bank. Any
party entitled to contribution, promptly after receipt of notice of commencement
of any action, suit, claim or proceeding against such party in respect of which
a claim for contribution may be made against another party under this Section 9,
will notify such party from whom contribution may be sought, but the omission to
so notify such party shall not relieve the party from whom contribution may be
sought from any other obligation it may have hereunder or otherwise than under
this Section 9.
Section 10. Survival of Agreements, Representations and Indemnities. The
-------------------------------------------------------
respective indemnities of the Company, the Bank and the Agent and the
representations and warranties and other statements of the Company, the Bank and
the Agent set forth in or made pursuant to this Agreement shall remain in full
force and effect, regardless of any termination or cancellation of this
-36-
Agreement or any investigation made by or on behalf of the Agent, the Company,
the Bank or any controlling person referred to in Section 8 hereof, and shall
survive the issuance of the Shares, and any successor or assign of the Agent,
the Company, the Bank, and any such controlling person shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations.
Section 11. Termination. The Agent may terminate this Agreement by giving
-----------
the notice indicated below in this Section 11 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 the Agent's reasonable opinion, impracticable to proceed
with the offering of the Shares; or if trading on the New York Stock
Exchange ("NYSE") shall have suspended (except that this shall not
apply to the imposition of NYSE trading collars imposed 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 a material effect
on the Bank 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 adverse change in the
capitalization, condition or business of the Company, or if the Bank
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 adverse change in the condition or
prospects of the Company or the Bank.
(b) In the event the Company fails to sell the required minimum number
of the Shares by ________________, and in accordance with the
provisions of the Plan or as required by the Conversion Regulations,
and applicable law, this Agreement shall terminate upon refund by the
Company to each person who has subscribed for or ordered any of the
Shares the full amount which it may have received from such person,
together with interest as provided in the Prospectus, and no party to
this Agreement shall have any obligation to the other hereunder,
except as set forth in Sections 2(a), 6, 8 and 9 hereof.
(c) If any of the conditions specified in Section 7 shall not have
been fulfilled when and as required by this Agreement, unless waived
in writing, or by the Closing Date, this Agreement and all of the
Agent's obligations hereunder may be cancelled by the Agent by
notifying the Company and the Bank of such cancellation in writing or
by telegram at any time at or prior to the Closing Date, and any such
cancellation
-37-
shall be without liability of any party to any other party except as
otherwise provided in Sections 2(a), 6, 8 and 9 hereof.
(d) If the Agent elects to terminate this Agreement as provided in this
Section, the Company and the Bank shall be notified promptly by
telephone or telegram, confirmed by letter.
The Company and the Bank may terminate this Agreement in the event the
Agent is in material breach of the representations and warranties or covenants
contained in Section 5 and such breach has not been cured after the Company and
the Bank have provided the Agent with notice of such breach.
This Agreement may also be terminated by mutual written consent of the
parties hereto.
Section 12. Notices. All communications hereunder, except as herein
-------
otherwise specifically provided, shall be mailed in writing and if sent to the
Agent shall be mailed, delivered or telegraphed and confirmed to Charles Webb &
Company, 211 Bradenton Drive, Dublin, Ohio 43017-5034, Attention: Harold T.
Hanley III (with a copy to Barnes & Thornburg, 11 South Meridian Street,
Indianapolis, IN 46204, Attention: Claudia V. Swhier and, if sent to the Company
and the Bank, shall be mailed, delivered or telegraphed and confirmed to the
Company and the Bank at 9321 Wicker Avenue, St. John, Indiana 46373, Attention:
John P. Hyland, President (with a copy to Muldoon, Murphy & Faucette LLP, 5101
Wisconsin Avenue, N.W., Washington, DC 20016 Attention: Paul M. Aguggia).
Section 13. Parties. The Company and the Bank shall be entitled to act
-------
and rely on any request, notice, consent, waiver or agreement purportedly given
on behalf of the Agent when the same shall have been given by the undersigned.
The Agent shall be entitled to act and rely on any request, notice, consent,
waiver or agreement purportedly given on behalf of the Company or the Bank, when
the same shall have been given by the undersigned or any other officer of the
Company or the Bank. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Agent, the Company, the Bank, and their respective
successors 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. It is understood
and agreed that this Agreement is the exclusive agreement among the parties
hereto, and supersedes any prior agreement among the parties and may not be
varied except in writing signed by all the parties.
Section 14. Closing. The closing for the sale of the Shares shall take
-------
place on the Closing Date at such location as mutually agreed upon by the Agent
and the Company and the Bank. At the closing, the Company and the Bank shall
deliver to the Agent in next day funds the commissions, fees and expenses due
and owing to the Agent as set forth in Sections 2 and 6 hereof and the opinions
and certificates required hereby and other documents deemed reasonably necessary
by the Agent shall be executed and delivered to effect the sale of the Shares as
contemplated hereby and pursuant to the terms of the Prospectus.
-38-
Section 15. Partial Invalidity. In the event that any term, provision or
------------------
covenant herein or the application thereof to any circumstance or situation
shall be invalid or unenforceable, in whole or in part, the remainder hereof and
the application of said term, provision or covenant to any other circumstances
or situation shall not be affected thereby, and each term, provision or covenant
herein shall be valid and enforceable to the full extent permitted by law.
Section 16. Construction. This Agreement shall be construed in accordance
------------
with the laws of the State of Indiana.
Section 17. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which so executed and delivered shall be an original, but
all of which together shall constitute but one and the same instrument.
Section 18. Entire Agreement. This Agreement, including schedules and
----------------
exhibits hereto, which are integral parts hereof and incorporated as though set
forth in full, constitutes the entire agreement between the parties pertaining
to the subject matter hereof superseding any and all prior or contemporaneous
oral or prior written agreements, proposals, letters of intent and
understandings, and cannot be modified, changed, waived or terminated except by
a writing which expressly states that it is an amendment, modification or
waiver, refers to this Agreement and is signed by the party to be charged. No
course of conduct or dealing shall be construed to modify, amend or otherwise
affect any of the provisions hereof.
If the foregoing correctly sets forth the arrangement among the Company,
the Bank and the Agent, please indicate acceptance thereof in the space provided
below for that purpose, whereupon this letter and the Agent's acceptance shall
constitute a binding agreement.
Very truly yours,
SECURITY FINANCIAL BANCORP, INC. SECURITY FEDERAL SAVINGS BANK,
A FEDERAL SAVINGS BANK
By Its Authorized By Its Authorized
Representative: Representative:
_________________________ __________________________
John P. Hyland John P. Hyland
President President
-39-
Accepted as of the date first above written
Charles Webb & Company, A Division of
Keefe, Bruyette & Woods, Inc.
By Its Authorized
Representative:
____________________
Harold T. Hanley III
Senior Vice President
-40-