CUMBERLAND MOUNTAIN BANCSHARES, INC.
MIDDLESBORO FEDERAL BANK, FEDERAL SAVINGS BANK
CUMBERLAND MOUNTAIN BANCSHARES, M.H.C.
Up to 382,375 Shares of Common Stock
($.01 Par Value Per Share)
AGENCY AGREEMENT
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______________________, 1997
Trident Securities, Inc.
4601 Six Forks Road, 4th Floor
Raleigh, North Carolina 27609
Ladies and Gentlemen:
Cumberland Mountain Bancshares, Inc., a Tennessee corporation (the
"Company"), Middlesboro Federal Bank, Federal Savings Bank (the "Bank"), a
federally chartered stock savings bank, the deposit accounts of which are
insured by the Federal Deposit Insurance Corporation (the "FDIC") through the
Savings Association Insurance Fund ("SAIF"), and Cumberland Mountain Bancshares,
M.H.C. (the "MHC"), a federally chartered mutual holding company, hereby confirm
their agreement (the "Agreement") with Trident Securities, Inc. ("Trident"), as
follows:
Introduction
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On March ___,1994, the Bank reorganized into a mutual holding company
structure in a transaction in which the MHC was formed and acquired 64.71% of
the issued and outstanding shares of common stock of the Bank. The remaining
35.29% of the outstanding shares of common stock was sold to individuals (the
"Public Stockholders"). The foregoing transactions are hereinafter referred to
as the "1994 Conversion."
The Bank and the MHC now desire to eliminate the mutual holding
company structure. In furtherance of such elimination, the Boards of Directors
of the MHC and the Bank adopted on December 12, 1996, a Plan of Conversion and
Agreement and Plan of
Reorganization (the "Plan"). Pursuant to the Plan, the MHC intends to convert
from mutual to stock form in a series of transactions involving the following:
(i) the Company has been formed as a subsidiary of the Bank;
(ii) an interim savings bank (the "Interim") will be formed as a
subsidiary of the Company;
(iii) the MHC will convert from a federally chartered mutual holding
company to an interim federal stock savings bank and simultaneously merge with
and into the Bank;
(iv) the shares of common stock of the Bank owned by the MHC will be
canceled and extinguished;
(v) the Interim will merge with and into the Bank;
(vi) based on an independent appraisal of the Bank, the Company will
conduct an offering in which it will offer between 282,625 and 382,375 (subject
to increase to up to 439,731 shares) shares of common stock, $.01 par value per
share, of the Company (the "Shares") to depositors of the Bank with account
balances of $50 or more as of the close of business on September 30, 1995
("Eligible Account Holders"); to the Company's Employee Stock Ownership Plan
(the "ESOP"); to depositors of the Bank with account balances of $50 or more as
of the close of business on December 31, 1996 ("Supplemental Eligible Account
Holders"); to other members of the MHC, to directors, officers and employees of
the Bank; and to the Public Stockholders (the "Subscription Offering");
(vii) any Shares not sold in the Subscription Offering may be
offered for sale to the public in a direct community offering to certain members
of the general public with preference given to residents of Bell and Harlan
Counties in the Commonwealth of Kentucky (the "Community Offering") or a
syndicated community offering (the "Syndicated Community Offering") (the
Subscription Offering, the Community Offering and any Syndicated Community
Offering are hereinafter referred to collectively as the "Offerings"); and
(viii) each share of Bank common stock held by a Public Stockholder
will be converted into between .856 and 1.333 Shares
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based upon the final number of Shares issued in the Offerings in order to
maintain the Public Stockholders' approximately 35.29% ownership interest in the
Bank.
Upon consummation of the transactions set forth above and the receipt of
all necessary regulatory approvals, the Company will be a public company
required to file certain reports with, and otherwise comply with the rules and
regulations of, the Securities and Exchange Commission (the "Commission") and
the Bank will be a wholly-owned subsidiary of the Company.
The foregoing transactions are hereinafter referred to collectively as the
"Conversion".
The Company has filed with the Commission a Registration Statement on Form
SB-2 (File No. 333-18665) (the "Registration Statement") for the registration of
the Shares under the Securities Act of 1933, as amended (the "1933 Act"), and
has filed such amendments thereto, if any, as may have been required to the date
hereof. The offering prospectus, which forms a part of the Registration
Statement, as amended, on file with the Commission at the time the Registration
Statement initially became effective, is hereinafter referred to as the
"Prospectus"; provided, however, that if any offering 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") and is different from
the offering prospectus on file at the time the Registration Statement initially
becomes effective, the term "Prospectus" shall refer to the offering prospectus
filed pursuant to Rule 424(b) or (c) from and after the time such offering
prospectus is filed with the Commission or mailed to the Commission for filing.
In accordance with Title 12, Part 563b of the Code of Federal Regulations
(the "Conversion Regulations"), the MHC has filed with the Office of Thrift
Supervision (the "OTS") an Application for Approval of Conversion on Form AC
(the "Conversion Application") and has filed such amendments thereto, if any, as
may have been required by the OTS. In addition, the Company has filed with the
OTS an Application on Form H-(e)1-S (the "Holding Company Application") to
acquire and hold the shares of the Bank.
Each term not defined in this Agreement shall have the meaning given to it
in the Prospectus.
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1. Retention of Trident; Compensation; Sale and Delivery of the Shares.
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(a) Subject to the terms and conditions herein set forth, the Company,
the Bank and the MHC hereby appoint Trident to serve as their financial advisor
to exercise its best efforts to sell the Shares in the Offerings.
On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, Trident
accepts such appointment. It is acknowledged by the Company, the Bank and the
MHC that Trident shall not be required to purchase any Shares and shall not be
obligated to take any action which is inconsistent with applicable laws,
regulations, decisions or orders. Trident may assemble and manage a selling
group of broker-dealers, which are members of the National Association of
Securities Dealers, Inc. (the "NASD"), to participate in the solicitation of
purchase orders for Shares in the event of a Syndicated Community Offering.
Members of such selling group will enter into a selected dealers' agreement (the
"Dealers' Agreement"), the form of which is set forth as Exhibit A to this
Agreement.
The obligations of Trident pursuant to this Agreement shall terminate in
accordance with Section 8 hereof.
(b) Trident shall receive the following compensation for its services
hereunder:
(i) A management fee in the amount of $75,000;
(ii) For Shares sold by other NASD member firms in the
Syndicated Community Offering, if any, pursuant to the Dealers'
Agreement, a commission to be agreed upon jointly by Trident and the
Bank to reflect market requirements at the time of the stock
allocation in the Syndicated Community Offering; and
(iii) Trident shall be reimbursed for all allocable expenses
incurred by it, including, but not limited to, legal fees, whether or
not the Conversion is successfully completed. Reimbursement for such
legal fees and other out-of-pocket expenses shall not exceed $25,000,
and $10,000, respectively, excluding legal fees and out-of-pocket
expenses relating to compliance
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with state securities or "blue sky" laws and regulations in conducting
the Offerings. Trident acknowledges receipt of $7,000 to be applied
toward the payment of such expenses. Neither the Company, the Bank nor
the MHC shall pay or reimburse Trident for any of the foregoing
expenses which are incurred or accrued after Trident shall have
notified the Company, the Bank or the MHC of its election to terminate
this Agreement pursuant to Section 8 hereof or after such time as the
Company, the Bank or the MHC shall have given notice in accordance
with Section 8 hereof that Trident is in breach of this Agreement.
Full payment of Trident's actual and accountable expenses shall be made in
next day funds on the Closing Date (as hereinafter defined) or, if the
Conversion is not completed and is abandoned or terminated for any reason,
within five (5) days of receipt by the Company or the Bank of a reasonable
accounting from Trident of its expenses.
In the event of a resolicitation of subscribers, the parties agree to
renegotiate the expense cap on legal fees and out-of-pocket expenses applicable
to Trident.
(c) The release of Shares against payment therefor shall be made on a
date and at a place acceptable to Trident. The date upon which the Company
shall release or deliver the Shares sold in the Offerings in accordance with the
terms hereof is herein called the "Closing Date." If all conditions precedent
to the consummation of the Conversion are satisfied, including, without
limitation, the sale of all Shares required by the Plan to be sold, the Company
agrees to issue or have issued the Shares sold in the Offerings and to release
for delivery certificates for such Shares as soon as possible after the Closing
Date against payment to the Company by any means authorized by the Plan;
provided, however, that no funds shall be released to the Company until the
conditions specified in Section 4 hereof shall have been complied with to the
reasonable satisfaction of Trident.
In the event the Company is unable to sell a minimum of 282,625 Shares
within the period herein provided (including therein any extension of such
period as may be approved by the OTS), 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
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and none of the parties to this Agreement shall thereafter have any obligation
to the other parties hereunder, except as set forth in this Section 1 and in
Sections 5, 6, 7 and 8 hereof.
2. Representations and Warranties. The Company, the Bank and the MHC,
------------------------------
jointly and severally, represent and warrant to Trident that:
(a) The 1994 Conversion was conducted in accordance with all
applicable OTS and Commission rules and regulations and the MHC and the Bank
received all necessary approvals from the OTS and Commission required
thereunder.
(b) The Company has filed with the Commission the Registration
Statement, including exhibits, amendments or supplements thereto. The
Registration Statement, as amended, was declared effective by the Commission on
February ___, 1997. No stop order or equivalent order has been issued with
respect to the Registration Statement and no proceedings therefor have been
initiated or, to the knowledge of the Company, the Bank or the MHC, threatened
by the Commission.
(c) As of the date of the Prospectus, and at all times subsequent
thereto through and including the Closing Date, the Registration Statement and
all exhibits, amendments or supplements thereto complied and will comply in all
material respects with the 1933 Act and the 1933 Act Regulations. No order has
been issued by the Commission preventing or suspending the use of the
Prospectus. No action by or for the Commission revoking such action is pending,
or to the knowledge of the Company or the Bank, threatened.
(d) As of the date of the Prospectus, and at all times subsequent
thereto, through and including the Closing Date, the Registration Statement (as
amended) and the Prospectus (as amended or supplemented) did not and will not
contain 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.
Representations and warranties in this subsection (d) shall not apply to
statements or omissions which relate to Trident and which were made in reliance
upon and in conformity with written information furnished to the Company, the
Bank or the MHC by or on behalf of Trident, expressly for use in the
Registration
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Statement or the Prospectus (or any amendment or supplement thereto).
(e) The MHC has filed with the OTS the Conversion Application. The
Conversion Application was approved by the OTS on February __, 1997. No stop
order or equivalent order has been issued with respect to the Conversion
Application and, to the knowledge of the Company, the Bank and the MHC, no
proceedings therefor have been initiated or threatened by the OTS.
(f) The Conversion Application and all exhibits, amendments or
supplements thereto, comply in all material respects with the Conversion
Regulations. The Prospectus, which is included in the Conversion Application as
Item 3(b), has been approved for use by the OTS and such approval is in full
force and effect. All solicitation and marketing materials which are included
in the Conversion Application as Item 3(a) have been approved for use by the OTS
and such approval is in full force and effect. No order has been issued by the
OTS preventing or suspending the use of the Prospectus. No action by or before
the OTS revoking such approval is pending or, to the knowledge of the Company,
the Bank or the MHC, threatened.
(g) The Company has filed with the OTS the Holding Company Application
and such Application was deemed complete by the OTS, on ____________, 1997. The
Holding Company Application, and all exhibits, amendments or supplements
thereto, comply in all material respects with applicable OTS regulations.
(h) The Company has been duly incorporated and is validly existing and
in good standing under the laws of the State of Tennessee with full power and
authority to own its properties and conduct its business as described in the
Registration Statement and the Prospectus. The Charter and Bylaws of the
Company comply in all material respects with applicable laws and regulations.
The Company has obtained all licenses, permits and other governmental
authorizations currently required for the conduct of its business, except where
the failure to obtain such licenses, permits or authorizations would not have a
material adverse effect upon the business or operations of the Company. All of
such licenses, permits and other governmental authorizations are in full force
and effect, and the Company is in all material respects in compliance therewith.
The Company is duly qualified as a foreign corporation to transact business and
is in good standing in each jurisdiction in which its ownership of
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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 its condition,
financial or otherwise, or its business, operations or income on a consolidated
basis.
(i) The Bank is a stock savings bank duly organized and validly
existing under the laws of the United States with full power and authority to
own its properties and conduct its business as described in the Prospectus. The
Charter and Bylaws of the Bank comply in all material respects with applicable
laws and regulations. The Bank has obtained all licenses, permits and other
governmental authorizations currently required for the conduct of its business,
except where the failure to obtain such licenses, permits or authorizations
would not have a material adverse effect upon the business or operations of the
Bank. All of such licenses, permits and other governmental authorizations are
in full force and effect, and the Bank is in all material respects in compliance
therewith. The deposit accounts of the Bank are insured up to applicable limits
by the FDIC. The Bank is a member of the Federal Home Loan Bank (the "FHLB") of
Cincinnati. The Bank is duly qualified as a foreign corporation to transact
business and is in good standing or is exempt from such qualification 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 its condition, financial or otherwise, or its business, operations or
income on a consolidated basis.
(j) The MHC is a mutual holding company duly organized and validly
existing under the laws of the United States with full power and authority to
own its properties and conduct its business as described in the Prospectus. The
Charter and Bylaws of the MHC comply in all material respects with applicable
laws and regulations. The MHC has obtained all licenses, permits and other
governmental authorizations currently required for the conduct of its business,
except where the failure to obtain such licenses, permits or authorizations
would not have a material adverse effect upon the business or operations of the
MHC. All of such licenses, permits and other governmental authorizations are in
full force and effect, and the MHC is in all material respects in compliance
therewith. The MHC 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 properties or the
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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 its condition, financial or otherwise, or its business, operations or
income on a consolidated basis.
(k) The authorized capital stock of the Bank consists of 2,000,000
shares of preferred stock, par value $.__ per share, none of which are issued,
and 8,000,000 shares of common stock, par value $1.00 per share, 330,000 of
which are owned by the MHC, free, clear and unencumbered, and 180,000 of which
are owned of record by Public Stockholders. All issuances and sales by the Bank
of its securities prior to the date hereof were either (i) registered under the
1933 Act, or (ii) exempt from registration under the 1933 Act, and all such
issuances and sales complied in all respects with the provisions of all
applicable federal and state securities laws.
(l) The Plan has been duly and validly adopted by the Boards of
Directors of the Company, the Bank and the MHC. Prior to the Closing Date, the
Plan will be duly and validly approved by the members of the MHC and the
stockholders of the Bank.
(m) Prior to the Closing Date, 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 and regulations, including
all items, conditions, requirements and provisions precedent to the Conversion
imposed upon the Company, the Bank and the MHC by the OTS, the Commission or any
other regulatory authority and in the manner described in the Prospectus;
provided, however, that no representation or warranty is made with respect to
any action on the part of Trident or its agents. As of the date of this
Agreement, to the knowledge of the Company, the Bank and the MHC, no person has
sought to obtain review of the final action of the OTS in approving the Plan or
the Conversion Application pursuant to the Home Owners' Loan Act (the "HOLA") or
any other statute or regulation.
(n) Except as disclosed in the Prospectus, neither the Company, the
Bank nor the MHC owns of record or beneficially any equity securities of, or an
equity interest in, any entity or business enterprise.
(o) The Company, the Bank and the MHC each has good title to all
assets material to its respective businesses and to
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those assets described in the Prospectus as owned by it, free and clear of all
material liens, charges, encumbrances or restrictions, except as set forth in
the Prospectus or as are not materially significant or important in relation to
the business of the Company, the Bank and the MHC taken as a whole. All of the
leases and subleases material to the business of the Company, the Bank, and the
MHC under which any one of them holds property, including those set forth in the
Prospectus, are in full force and effect as described therein.
(p) This Agreement has been duly and validly authorized, executed and
delivered by the Company, the Bank and the MHC. This Agreement constitutes the
valid and legally binding obligation of the Company, the Bank and the MHC
enforceable against them 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 or by general equity principles regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(q) The Company, the Bank and the MHC have received the opinion of
Housley, Kantarian & Bronstein, P.C., special counsel to the Company, the Bank
and the MHC ("Special Counsel"), to the effect that the Conversion will
constitute a tax-free reorganization under the Internal Revenue Code of 1986, as
amended (the "Code"), and the opinion of Robert L. Brown, III, Esq., to the
effect that the Conversion will not be a taxable transaction under the laws of
the State of Kentucky. The facts relied upon by such firms as set forth in such
opinions are accurate and complete as of the date of such opinions.
(r) The Company, the Bank and the MHC have all such power, authority,
authorizations, approvals and orders as may be required to enter into this
Agreement, to perform all of their respective obligations hereunder and to
consummate the transactions contemplated hereby. Without limiting the generality
of the foregoing sentence, on or before the Closing Date, the Company will have
the power, authority, authorizations, approvals and orders to issue and sell the
Shares in accordance with this Agreement, the Plan and the Prospectus.
(s) Neither the Company, the Bank nor the MHC is in violation of any
rule or regulation of the OTS or the FDIC or any other agency which might
materially and adversely affect the
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condition (financial or otherwise), operations, businesses, assets or properties
of the Company, the Bank and the MHC taken as a whole. Neither the Company, the
Bank nor the MHC is subject to any directive from the OTS or the FDIC (or their
predecessors) or any other agency to make any change in the method of conducting
its business or affairs. Each of the Company, the Bank and the MHC has conducted
its business in material compliance with all applicable statutes and regulations
(including, without limitation, all regulations, decisions, directives and
orders of the FHLB of Cincinnati, the OTS and the FDIC, or their predecessors).
Except as set forth in the Registration Statement and the Prospectus, there is
not pending or, to the knowledge of the Company, the Bank or the MHC, threatened
any litigation, charge, investigation, action, suit or proceeding before or by
any court, regulatory authority or governmental agency or body which,
individually or in the aggregate, might materially affect the performance of the
terms and conditions of this Agreement or the consummation of the transactions
contemplated hereby or which, individually or in the aggregate, might result in
any material adverse change in the condition (financial or otherwise), business
or results of operations of the Company, the Bank and the MHC, taken as a whole.
(t) The statements of financial condition of the Bank as of June 30,
1996 and 1995, and the related statements of income, changes in stockholders'
equity and cash flows of the Bank for each of the years ended June 30, 1996 and
1995, which were examined and reported upon by Marr, Miller & Myers, PSC,
independent certified public accountants, and complete copies of which are
included in the Registration Statement and the Prospectus, have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be otherwise noted in the footnotes thereto) and fairly
present the financial position of the Bank at such dates and the results of its
operations, its stockholders' equity and its cash flows for such periods. The
statement of financial condition as of September 30, 1996, of the Bank and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the three months ended September 30, 1996 and 1995,
complete copies of which are included in the Registration Statement and the
Prospectus, have been prepared in conformity with generally accepted accounting
principles for interim financial statements applied on a consistent basis
(except as may be otherwise noted in the footnotes thereto) and fairly present
the financial position of the Bank at such date and the
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results of its operations, its stockholders' equity and its cash flows for such
periods. The tabular information in the Prospectus fairly presents the
information purported to be shown thereby at the respective dates and for the
respective periods covered thereby.
(u) The capitalization, assets, properties and business of the
Company, the Bank and the MHC conform in all material respects to the
descriptions thereof contained in the Prospectus as of the dates specified.
Since such dates, there have been no material adverse changes in either the
condition (financial or otherwise) of the Company, the Bank and the MHC taken as
a whole, or in the assets, properties, operations or earnings of the Company,
the Bank and the MHC, taken as a whole. The Company, the Bank and the MHC,
taken as a whole, have no material contingent liabilities of any kind, except as
set forth in the Prospectus.
(v) No material 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, the Bank or the MHC, in the due performance and observance of any term,
covenant or condition of any agreement which is material to the condition
(financial or otherwise) of the Company, the Bank, and the MHC, taken as a
whole. Such agreements are in full force and effect. No other party to any
such agreement has instituted or, to the knowledge of the Company, the Bank or
the MHC, threatened any action or proceeding wherein the Company, the Bank or
the MHC is alleged to be in default thereunder.
(w) Neither the Company, the Bank nor the MHC is in violation of its
respective Charter or Bylaws or in default in any respect in the performance of
any material obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness by which it is bound,
except where such default would not materially and adversely affect the
condition (financial or otherwise) or operations of the Company, the Bank and
the MHC, taken as a whole. The execution, delivery and performance of this
Agreement by the Company, the Bank and the MHC and the consummation of the
transactions contemplated hereby do not and will not (i) violate or conflict
with the Charter or Bylaws of the Company, the Bank or the MHC, as applicable,
or (ii) in any respect violate, conflict with or constitute a breach of, or a
default (or an event which, with notice or lapse of time, or both, would
constitute a default), except where such violation,
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conflict, breach or default would not materially and adversely affect the
condition (financial or otherwise) or operations of the Company, the Bank and
the MHC, taken as a whole under (I) any agreement, indenture or other instrument
by which the Company, the Bank or the MHC is bound, or (II) any governmental
license or permit or any law, administrative regulation or authorization,
approval, court decree, injunction or order.
(x) Subsequent to the respective dates as of which information is
given in the Prospectus and before the Closing Date, except as otherwise may be
specifically provided for in this Agreement, neither the Company, the Bank nor
the MHC will (i) issue any securities or incur any liability or obligation,
direct or contingent for borrowed money, except (I) the shares of common stock
to be issued by the Company in the Conversion and (II) borrowings from the FHLB
of Cincinnati and other borrowings and liabilities in the ordinary course of
business, including, but not limited to, borrowings in the form of deposits, or
(ii) enter into any other transaction not it the ordinary course of business
which is material in light of the businesses and properties of the Company, the
Bank and the MHC, taken as a whole.
(y) On the Closing Date, the authorized, issued and outstanding equity
capital of the Company will be within the range set forth in the Prospectus
under the caption "Capitalization."
(z) When issued in accordance with the terms of the Plan, the Shares
will be validly issued, fully paid and nonassessable, will conform in all
material respects to the description thereof set forth in the Registration
Statement and the Prospectus and will be issued in compliance in all material
respects with all applicable securities laws. The issuance of the Shares is not
subject to preemptive rights. Good title to the Shares will be transferred to
the purchasers thereof upon issuance thereof against payment therefor, free and
clear of all claims, encumbrances, security interests and liens caused or
created by any act or omission of the Company whatsoever. The certificates
evidencing the Shares will conform in all material respects to the requirements
of applicable laws and regulations.
(aa) Neither the Company, the Bank nor the MHC has: (i) placed any
securities within the last 18 months (except for notes to evidence bank loans
and mortgage-backed securities in the ordinary course of business); (ii) had any
material dealings within the 12 months prior to the date hereof with any member
of
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the NASD, or any person related to or associated with such member, other than
discussions and meetings relating to the proposed Conversion and routine
purchases and sales of securities for or from its portfolio; (iii) an officer or
director who has any affiliation with the NASD; or (iv) engaged any intermediary
between Trident and the Company in connection with any offering of the Shares,
and no person is being compensated in any manner for such service.
(bb) Appropriate arrangements for placing the funds received from
subscriptions for Shares in a segregated interest-bearing account with the Bank
until all Shares are paid for (the "Escrow Account") have been made, with
provision (i) for prompt refund to subscribers if the transactions contemplated
by the Plan and the Prospectus are otherwise not consummated or (ii) for
delivery to the Company if the transactions contemplated by the Plan and the
Prospectus are consummated.
(cc) No approval of any regulatory, supervisory or other public
authority is required in connection with the execution and delivery of this
Agreement or the issuance and sale of the Shares, except the approval of the OTS
and the Commission, the approval of the reasonableness of Trident's compensation
by the NASD, and as may be otherwise required under the securities laws of
various states.
(dd) All contracts and other documents required to be filed as
exhibits to the Conversion Application and the Registration Statement have been
filed with the OTS and the Commission, respectively.
(ee) Marr, Miller & Myers, PSC, the public accounting firm which has
certified the financial statements of the Bank included in the Prospectus, are
independent certified public accountants within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
(ff) Since January 1, 1986, each of the Company, the Bank and the MHC
has (i) timely filed all required federal and state tax returns and no
deficiency has been asserted with respect to such returns by any taxing
authorities, (ii) paid all taxes that have become due, and (iii) made adequate
reserves for similar current tax liabilities, except where the failure to make
such filings, payments and reserves, or the assertion of such a deficiency,
would not have a material adverse effect on the
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condition (financial or otherwise) or operations of the Company, the Bank and
the MHC taken as a whole.
(gg) The records of account holders, depositors, borrowers and other
members of the Bank delivered to Trident by the Bank or its agent for use in
connection with the Conversion are believed to be reliable and accurate in all
material respects.
(hh) RP Financial, LC. (the "Appraiser"), the corporation which
prepared an appraisal of the estimated pro forma fair market value of the Bank
and the MHC, is independent with respect to each of them within the meaning of
the Conversion Regulations.
(ii) The Company, the Bank and the MHC are in compliance in all
material respects with 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.
(jj) All supplemental sales literature, including but not limited to,
marketing materials, used by the Company in connection with the Offerings, which
is required by the Conversion Regulations to be filed with the OTS or by the
1933 Act Regulations to be filed with the Commission, has been filed with and
cleared by the OTS and the SEC.
(kk) To their knowledge, the Company, the Bank and the MHC are in
compliance with all laws, rules and regulations relating to environmental
protection, and neither the Company, the Bank nor the MHC has been notified or
is otherwise aware that any of them is potentially liable, or is considered
potentially liable, under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, or any similar state law, except for
violations which, if asserted, would not have a material adverse affect on the
Company, the Bank and the MHC, taken as a whole. There are no actions, suits,
regulatory investigations or other proceedings pending, or, to the best
knowledge of the Company, the Bank and the MHC threatened against the Company,
the Bank or the MHC relating to environmental protection, nor does the Company,
the Bank or the MHC have any reason to believe any such proceedings may be
brought against any of them. To the knowledge of the Company, the Bank and the
MHC, no disposal, release or discharge of hazardous or toxic substances,
pollutants or contaminants, including petroleum and
-15-
gas products, as any of such terms may be defined under federal, state or local
law, has occurred on, at or about any of the facilities or properties owned or
leased by the Company, the Bank or the MHC.
(ll) Neither the Company, the Bank, the MHC, nor the employees of the
Company, the Bank or the MHC has made any payment of funds of the Company, the
Bank or the MHC as a loan for the purchase of the Shares (except for the loan to
be made by the Company to the ESOP) 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.
(mm) The Company, the Bank and the MHC have not relied upon Trident,
its legal counsel or its other advisors for any legal, tax or accounting advice
in connection with the Conversion, other than advice with respect to state
securities matters.
(nn) The Company, the Bank and the MHC have not relied upon Trident,
its legal counsel or its other advisors for any legal, tax or accounting advice
in connection with the Conversion, other than advice with respect to state
securities matters.
Any certificate signed by an officer of the Company, the Bank or the MHC
and delivered to Trident or its counsel that refers to this Agreement and is
referred to therein as a "representation" or "warranty" shall be deemed to be a
representation and warranty by the Company, the Bank and the MHC, respectively,
to Trident and its counsel as to the matters covered thereby, with the same
effect as if such representation and warranty was set forth herein.
Trident represents and warrants to the Company, the Bank and the MHC that:
(i) Trident is registered as a broker-dealer with the Commission,
and is in good standing with the Commission and the NASD.
(ii) Trident is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full corporate power
and authority to provide the services to be furnished to the Company, the Bank
and the MHC hereunder.
-16-
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of Trident, and this Agreement is
a legal, valid and binding obligation of Trident, enforceable in accordance with
its terms (except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws relating to or affecting
the enforcement of creditors' rights generally or the rights of creditors of
registered broker-dealers accounts of whose may be protected by the Securities
Investor Protection Corporation or by general equity principles, regardless of
whether such enforceability is considered in a proceeding in equity or at law,
and except to the extent that the provisions of Sections 5 and 6 hereof may be
unenforceable as against public policy or pursuant to Section 23A).
(iv) Each of Trident and, to Trident's knowledge, its employees,
agents and representatives who shall perform any of the services required
hereunder to be performed by Trident shall be duly authorized and shall have all
licenses, approvals and permits necessary to perform such services, and Trident
is a registered selling agent in the jurisdictions listed in Exhibit A hereto
and will remain registered in such jurisdictions in which the Company is relying
on such registration for the sale of the Shares, until the Conversion is
consummated or terminated.
(v) The execution and delivery of this Agreement by Trident, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not violate or conflict with the
corporate charter or bylaws of Trident or violate, conflict with or constitute a
breach of, or default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, any material agreement, indenture or other
instrument to which Trident is a party or by which it or its property is bound.
(vi) Any funds received by Trident to purchase Shares will be
handled in accordance with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(vii) There is not now pending or, to Trident's knowledge, threatened
against Trident any action or proceeding before the Commission, the NASD, any
state securities commission or any state or federal court concerning Trident's
activities as a broker-dealer.
-17-
3. Covenants and Agreements. The Company, the Bank and the MHC covenant
------------------------
and agree that:
(a) The Company will deliver to Trident, from time to time, such
number of copies of the Prospectus as Trident may reasonably request. The
Company hereby authorizes and directs Trident to use the Prospectus in any
lawful manner in connection with the offer and sale of the Shares.
(b) The MHC will notify Trident immediately upon obtaining knowledge
of the following, and confirm the notice in writing: (i) when any amendment to
the Conversion Application is filed with the OTS or when any supplement to the
Prospectus is filed with the OTS; (ii) of the issuance by the OTS of any stop
order relating to the Conversion Application or the Prospectus or of the
initiation or the threat of any proceedings for such purpose; (iii) of the
receipt of any notice with respect to the suspension of the qualification of the
Shares for offering or sale in any jurisdiction; and (iv) of the receipt of any
comments from the OTS relating to the Conversion Application or the Prospectus.
In the event the OTS enters a stop order relating to the Conversion Application
or the Prospectus at any time, the MHC will make every reasonable effort to
obtain the lifting of such order at the earliest possible moment.
(c) The Company will notify Trident immediately upon obtaining
knowledge of the following, and confirm the notice in writing: (i) when any
amendment to the Registration Statement is filed with the Commission or when any
supplement to the Prospectus is filed with the Commission; (ii) of the issuance
by the Commission of any stop order relating to the Registration Statement or
the Prospectus or of the initiation or the threat of any proceedings for such
purpose; (iii) of the receipt of any notice with respect to the suspension of
the qualification of the Shares for offering or sale in any jurisdiction; and
(iv) of the receipt of any comments from the Commission relating to the
Registration Statement or the Prospectus. In the event the Commission enters a
stop order relating to the Registration Statement or the Prospectus at any time,
the Company will make every reasonable effort to obtain the lifting of such
order at the earliest possible moment.
(d) During the time when the Prospectus is used in connection with the
offer and sale of the Shares, the Company, the
-18-
Bank and the MHC will comply in all material respects with all applicable
requirements of the 1933 Act and the 1933 Act Regulations, as now in effect and
as hereafter amended, as from time to time in force, so far as is necessary to
permit the continuance of offers and sales of or dealings in the Shares, in
accordance with the provisions hereof and the Prospectus. If, during the period
when the Prospectus is used in connection with the offer and sale of the Shares,
any event relating to or affecting the Company, the Bank or the MHC shall occur
as a result of which it is necessary, in the reasonable opinion of counsel for
the Company, the Bank or the MHC and counsel for Trident, to amend or supplement
the Prospectus in order to make the Prospectus not false or misleading in light
of the circumstances existing at the time the Prospectus is delivered to a
purchaser of the Shares, the Company, the Bank and the MHC shall forthwith
prepare and furnish to Trident a reasonable number of copies of an amendment or
amendments or of a supplement or supplements to the Prospectus (in form and
substance reasonably satisfactory to counsel for Trident) which shall amend or
supplement the Prospectus so that, as amended or supplemented, the Prospectus
will 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 existing at the time the Prospectus is delivered to a purchaser of
the Shares, not misleading. The Company, the Bank and the MHC will not file or
use any amendment or supplement to the Conversion Application, the Registration
Statement or the Prospectus of which Trident has not first been furnished a copy
or as to which Trident shall reasonably object after having been furnished such
copy. For the purpose of this subsection (d), the Company, the Bank and the MHC
shall furnish such information with respect to themselves as Trident from time
to time reasonably may request.
(e) The Company will take all reasonably necessary action as may be
required to qualify or register the Shares for offer and sale by the Company
under the state securities or "blue sky" laws of such jurisdictions as Trident
and the Company may agree upon; provided, however, that the Company will not be
obligated to qualify as a foreign corporation under the laws of any such
jurisdiction. In each jurisdiction in which such qualification or registration
will be effected, the Company, unless Trident agrees that such action is not
necessary or advisable in connection with the distribution of the Shares, will
file and make such statements or reports as are, or reasonably may be, required
by the laws of such jurisdiction.
-19-
(f) The Company shall file with the Commission a registration
statement for the Shares under Section 12(g) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), prior to the completion of the Conversion
and will request that such registration statement become effective upon the
completion of the Conversion, and the Company will maintain the effectiveness of
such registration under Section 12(g) of the Exchange Act for not less than
three years.
(g) For a period of three years from the date of this Agreement or for
such shorter period of time during which the Company has a class of securities
registered under the Exchange Act, the Company will furnish the following to
Trident:
(i) As soon as publicly available after the end of each fiscal
year, a copy of the Annual Report of the Company to stockholders for such year;
(ii) As soon as publicly available, a copy of each report or
definitive proxy statement of the Company filed with the Commission under the
Exchange Act or mailed to stockholders; and
(iii) From time to time, such other public information concerning
the Bank and the Company as Trident may reasonably request.
(h) 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."
(i) The Company will not deliver the Shares until each and every
condition set forth in Section 4 hereof has been satisfied in full, unless such
condition is waived in writing by Trident.
(j) The Company, the Bank and the MHC will take such actions and
furnish such information as are reasonably requested by Trident in order for
Trident to ensure compliance with the NASD's "Interpretation Relating to Free-
Riding and Withholding."
(k) 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
-20-
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
Shares in the event of a complete liquidation of the Bank.
(l) The Company and the Bank will not sell, issue, contract to sell or
otherwise dispose of, for a period of 90 days after the Closing Date, without
Trident's prior written consent, any shares of common stock other than (i) the
Shares, (ii) the shares of common stock to be issued to the Bank's Public
Stockholders in exchange for their shares of Bank Common Stock or (iii) other
than in connection with any plan or arrangement described in the Prospectus,
including existing stock benefit plans.
(m) 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
the Shares on a national or regional securities exchange or on The Nasdaq Stock
Market or over-the-counter through the National Daily Quotation System "Pink
Sheets" published by the National Quotation Bureau, Inc. effective on or prior
to the Closing Date.
(n) The Bank will maintain appropriate arrangements for depositing all
funds received from persons mailing subscriptions for or orders to purchase
Shares in the Offerings 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 Offerings 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.
-21-
(o) The Company will promptly take all necessary action to register as
a savings and loan holding company under the HOLA within 90 days of the Closing
Date.
(p) Neither the Company, the Bank nor the MHC will amend the Plan
without notifying Trident prior thereto.
(q) The Company, the Bank and the MHC shall assist Trident, if
necessary, in connection with the allocation of the Shares in the event of an
oversubscription and shall provide Trident with any information necessary to
assist the Company in allocating the Shares in such event, and to the knowledge
of the Company, the Bank and the MHC, such information shall be accurate and
reliable in all respects.
4. Conditions of Trident's Obligations. The obligations of Trident set
-----------------------------------
forth in this Agreement shall be subject to the accuracy of the representations
and warranties contained in Section 2 hereof as of the date hereof and as of the
Closing Date, to the accuracy of the statements of officers and directors of the
Company, the Bank and the MHC made pursuant to the provisions hereof, to the
performance by the Company, the Bank and the MHC of their respective covenants
and obligations hereunder and to the following additional conditions:
(a) On the Closing Date, the Company, the Bank and the MHC will have
satisfied the conditions precedent to, and will have conducted the Conversion in
all material respects in accordance with, the Plan, the Conversion Regulations
and all applicable laws, regulations, decisions and orders, including all terms,
conditions, requirements and conditions precedent to the Conversion imposed 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 Trident's consent, at a later
time and date. At the Closing Date, no stop order suspending the effectiveness
of the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor 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 therefor initiated or, to the knowledge of the
-22-
Company, the Bank or the MHC, threatened by the Commission, the OTS, the FDIC,
or any state authority.
(c) On the Closing Date, Trident shall receive an opinion of Special
Counsel as to matters of the Federal law of the United States and the Tennessee
Business Corporation Act and an opinion of Robert Brown, Esq. as to matters of
Kentucky law, each dated as of the Closing Date, addressed to Trident, in form
and substance reasonably satisfactory to Trident and substantially to the effect
that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the Tennessee Business
Corporation Act and its Charter and Bylaws comply in all material respects with
the Tennessee Business Corporation Act.
(ii) The Company has the corporate power and authority to own,
lease and operate its properties and to conduct its business as such properties
and business are described in the Registration Statement and the Prospectus.
(iii) The Bank is a stock savings bank validly existing under the
Homeowners' Loan Act with full corporate power and authority to own its
properties and conduct its business as described in the Prospectus. To the
knowledge of Special Counsel, the Bank has obtained all federal licenses,
permits and other governmental authorizations currently required for the conduct
of its business, all of which are in full force and effect, and the Bank is in
all material respects in compliance therewith, except where the failure to
obtain such licenses, permits or governmental authorizations or the failure to
so comply would not have a material adverse effect on the Company, the Bank and
the MHC taken as a whole. The deposit accounts of the Bank are insured up to
applicable limits by the FDIC, and the Bank is a member of the FHLB of
Cincinnati.
(iv) The MHC is a mutual holding company validly existing under
the Home Owners' Loan Act with full corporate power and authority to own its
properties and conduct its business as such properties and business are
described in the Prospectus. To the knowledge of Special Counsel, the MHC has
obtained all federal licenses, permits and other governmental authorizations
currently required for the conduct of its business, all of which are in full
force and effect, and the MHC is in all
-23-
material respects in compliance therewith, except where the failure to obtain
such licenses, permits or governmental authorizations or the failure to so
comply would not have a material adverse effect on the Company, the Bank and the
MHC taken as a whole.
(v) Upon consummation of the Conversion, the Bank will have
authorized and outstanding common stock within the range set forth in the
Prospectus and the description of such common stock in the Prospectus is
accurate in all material respects.
(vi) The Plan complies in all material respects with the
Conversion Regulations (or appropriate waivers have been obtained) and has been
duly and validly approved and adopted by the Boards of Directors of the Company,
the Bank and the MHC, the members of the MHC and the stockholders of the Bank.
To the knowledge of Special Counsel, no person has sought to obtain review of
the final action of the OTS in approving the Plan or the Conversion Application
pursuant to the HOLA or any other applicable statute or regulation.
(vii) To the knowledge of Special Counsel, the Conversion will
not result in the termination of the insurance of the Bank's accounts by the
FDIC. To the knowledge of Special Counsel, no proceedings for the termination or
revocation of FDIC insurance of accounts are pending or threatened. The
description of the liquidation account as set forth in the Prospectus under the
caption "Liquidation Rights" has been reviewed by Special Counsel and, insofar
as it constitutes a description of applicable law, is accurate in all material
respects.
(viii) This Agreement has been duly and validly executed and
delivered by each of the Company, the Bank and the MHC. The execution and
delivery of this Agreement by the Company, the Bank and the MHC and the
consummation of the Conversion and Reorganization have been duly and validly
authorized by all necessary corporate action on the part of each of the Company,
the Bank and the MHC. This Agreement (assuming due execution and delivery by
Trident) is a legal, valid and binding obligation of each of the Company, the
Bank and the MHC, enforceable against each of them in accordance with its terms,
except as the enforceability thereof may be limited (A) by bankruptcy,
insolvency, moratorium, reorganization or other similar laws now or hereafter in
effect relating to or affecting the enforcement of
-24-
creditors' rights generally or the rights of creditors of savings institutions
whose accounts are insured by the FDIC or savings and loan holding companies,
the accounts of whose subsidiaries are insured by the FDIC, (B) by general
equity principles, regardless of whether such enforceability is considered in a
proceeding in equity or at law or (C) laws relating to the safety and soundness
of insured depository institutions and their affiliates, and except to the
extent that the provisions of Sections 5 and 6 hereof may be unenforceable as
against public policy or applicable law, as to which no opinion need be
rendered.
(ix) Each of the Company, the Bank and the MHC has all such
corporate power and authority to perform all of their respective obligations
under Section 3 of this Agreement and to consummate the Conversion. Subject to
the satisfaction of the conditions to the OTS' approval of the Conversion
Application and the Holding Company Application, (A) the Company has the
corporate power and authority, to enable the Company to offer, issue and sell
the Shares in accordance with the Plan and the Prospectus, (B) the OTS has
approved the Holding Company Application and issued its order of approval under
the savings and loan holding company provisions of the HOLA, and (C) no action
has been taken, and to the knowledge of Special Counsel, none is pending or
threatened, to revoke any such authorization or approval.
(x) Except as set forth in the Prospectus, to the knowledge of
Counsel (A) there is not pending or threatened in writing any litigation,
charge, investigation, action, suit or proceeding before or by any court,
regulatory authority or governmental agency or body which would have a material
adverse effect on the condition (financial or otherwise), business or results of
operations of the Company, the Bank and the MHC taken as a whole, (B) neither
the Company, the Bank nor the MHC is in violation of its respective Charter or
Bylaws and (C) no material default exists, and no event has occurred which, with
notice or lapse of time, or both, would constitute a default, on the part of
either the Company, the Bank or the MHC in any material respect in the
performance of any material obligation, agreement or condition contained in any
contract or agreement, or in any bond, debenture, note or other evidence of
indebtedness, except where such a violation would not have a material adverse
effect on the condition (financial or otherwise), business or results of
operations of the Company, the Bank and the MHC taken as a whole.
-25-
(xi) The execution, delivery and fulfillment of the terms of
this Agreement and the consummation of the Conversion (A) do not and will not
violate or conflict with the respective Charter or Bylaws of the Company, the
Bank and the MHC or (B) to the knowledge of Counsel, in any material respect,
violate, conflict with or constitute a breach of, or default (or an event which,
with notice or lapse of time, or both, would constitute a default) under (I) any
material agreement, indenture or other instrument filed as an exhibit to the
Registration Statement or (II) any governmental license or permit or any
federal, Kentucky or Tennessee law (except as may be otherwise required under
the securities or "blue sky" laws of various jurisdictions in which the Shares
are offered and as may be required under the rules and regulations of the NASD),
administrative regulation or authorization, approval, court decree, injunction
or order, except where such violation, conflict, breach or default would not
have a material adverse effect on the condition (financial or otherwise),
business or results of operations of the Company, the Bank and the MHC taken as
a whole.
(xii) At the time of the consummation of the Conversion, the
Shares subscribed for will have been duly and validly authorized for issuance by
all necessary corporate action on the part of the Company. Assuming compliance
with applicable state securities or "blue sky" laws, the Shares to be issued and
sold by the Company, when the purchase orders have been accepted and the
purchase price for the Shares has been paid in money as specified in the
Registration Statement, will be validly issued and outstanding, fully paid and
non-assessable with the claims, encumbrances, security interests and liens
caused or created by any act or omission of the Company whatsoever. Except for
the subscription rights under the Plan and options issued under the 1993 Stock
Option Plan or as otherwise disclosed in the Prospectus, there are no preemptive
or other rights to subscribe for or to purchase Shares, or any restriction upon
the voting of any common shares of the Company. The terms and provisions of the
Shares conform, in all material respects, to the description thereof contained
in the Registration Statement and the Prospectus, and certificates evidencing
the Shares are in due and proper form under Tennessee law.
(xiii) To the knowledge of Special Counsel, 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 and sale of
the Shares,
-26-
except (i) the approval of the OTS, (ii) the approval of the
Commission, (iii) as may be otherwise required under the securities laws of
various jurisdictions and (iv) as may be required under the rules and
regulations of the NASD.
(xiv) The statements in the Prospectus under the captions
"Dividend Policy," "The Conversion and Reorganization," "Regulation,"
"Taxation," "Restrictions on Acquisition of the Company" and "Description of
Capital Stock of the Company," insofar as they are, or refer to, statements of
law or legal conclusions, have been prepared or reviewed by Special Counsel and
are correct in all material respects.
(xv) Special Counsel has been advised by the Staff of the
Commission that the Registration Statement is effective under the 1933 Act and,
to the knowledge of Special Counsel, no stop order suspending the effectiveness
has been issued under the 1933 Act and no proceedings therefor been initiated or
threatened by the Commission.
(xvi) The Conversion Application has been approved by the OTS, and
the Prospectus has been authorized for use by the OTS. To the knowledge of
Special Counsel, no proceedings are pending by or before the OTS seeking to
revoke or rescind the orders declaring the Conversion Application or the
Prospectus effective and no such proceedings are, to Special Counsel's
knowledge, contemplated or threatened.
(xvii) The Conversion Application and the Prospectus (in each case
as amended or supplemented, if so amended or supplemented) comply as to form in
all material respects with the requirements of the Conversion Regulations and
the rules and regulations of the OTS, except as to financial statements, notes
to financial statements, financial tables and other financial and statistical
data and stock valuation information and information with respect to Trident
included therein, as to which an opinion need not be expressed. The Registration
Statement and the Prospectus (in each case as amended or supplemented, if so
amended or supplemented) comply as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations except as to financial
statements, notes to financial statements, financial tables and other financial
and statistical data and stock valuation information and information with
respect to Trident included therein, as to which an opinion need not be
expressed. To the knowledge of Special Counsel, all documents and
-27-
exhibits required to be filed with the Conversion Application and the
Registration Statement (in each case as amended or supplemented, if so amended
or supplemented) have been so filed or a waiver from such filing has been
obtained. The description in the Conversion Application and the Registration
Statement of such documents and exhibits is accurate in all material respects
and presents fairly the information required to be shown.
(xviii) To the knowledge of Special Counsel, the 1994 Conversion
was conducted in accordance with all applicable OTS and Commission rules and
regulations and the MHC and the Bank received all necessary approvals from the
OTS and Commission required thereunder.
(xix) All issuances and sales by the Bank of its securities
during the past three years were either (i) registered under the 1933 Act or
(ii) exempt from registration under the 1933 Act and, to the knowledge of
Special Counsel, otherwise complied with the provisions of all applicable
federal and states securities laws.
In giving the foregoing opinion, Special Counsel may rely, as to matters of
fact, on certificates of officers of the Company, the Bank and the MHC and on
certificates of public officials delivered pursuant hereto and as to matters
particularly within the knowledge and scope of representation of local counsel,
on the opinion of qualified local counsel satisfactory to Trident; provided,
however, that Special Counsel shall state that Special Counsel has no reason to
believe that it and Trident are not justified in relying on the opinion of such
local counsel. For purposes of the opinion, Special Counsel may assume that any
agreement is the valid and binding obligation of any parties to such agreement
other than the Company, the Bank and the MHC.
As to matters stated in such opinion to be "to the knowledge of Special
Counsel," such counsel may state in such opinion that such phrase refers to the
actual conscious knowledge of the individual lawyers involved in the actual
representation of the Company, the Bank and the MHC. Such opinion may be
limited to present statutes, regulations and judicial interpretations and to
facts as they presently exist. In rendering such opinion, Special 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
Special Counsel need express no view, opinion or belief with respect to whether
any
-28-
proposed or pending legislation, if enacted, or any proposed or pending
regulations or policy statements issued by any regulatory agency, whether or not
promulgated pursuant to any such legislation, would affect the validity of the
execution and delivery by the Company, the Bank and the MHC of this Agreement or
the issuance of the Shares.
(c) On the Closing Date, Trident shall receive a letter of Special
Counsel, dated as of the Closing Date, addressed to Trident, in form and
substance reasonably satisfactory to Trident, to the effect that, during the
preparation of the Registration Statement, and the Prospectus, such counsel
participated in conferences with management of, and the independent public
accountants for, the Bank and representatives of Trident and its counsel, and
while such counsel has not undertaken to determine independently, and does not
assume the responsibility for, the accuracy, completeness or fairness of the
statements in the Offering Circular, such counsel may state that based upon such
conferences, nothing has come to Special Counsel's attention that would lead it
to believe that the Registration Statement, as amended or supplemented (except
as to information solely with respect to Trident included therein, and except as
to the financial statements, notes to financial statements, financial tables and
other financial and statistical data and stock valuation information contained
therein, as to which Special Counsel need express no view), at the time it
became effective and at the time any post-effective amendment thereto became
effective, contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, not misleading, or that the Prospectus, as amended
(except as to information solely with respect to Trident included therein, and
except as to financial statements, notes to financial statements, financial
tables and other financial and statistical data and stock valuation information
contained therein, as to which Special Counsel need express no view), as of its
date and on the date hereof contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. (In
making this statement, Special Counsel may state that it has not undertaken to
verify independently the information in the Registration Statement or Prospectus
and, therefore, does not assume any responsibility for the accuracy or
completeness thereof.)
-29-
(d) Counsel for Trident shall have been furnished such documents as
such counsel reasonably may require for the purpose of enabling such counsel to
review or pass upon the matters required by Trident and for the purpose of
evidencing the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained, including, but not
limited to, resolutions of the Boards of Directors of the Company, the Bank and
the MHC regarding the authorization of this Agreement and the transactions
contemplated hereby.
(e) Prior to and at the Closing Date, in the reasonable opinion of
Trident: (i) there shall have been no material adverse change in the financial
or other condition of the Company, the Bank or the MHC from that as of the
latest date as of which such condition is set forth in the Prospectus except as
referred to therein; (ii) there shall have been no material transaction entered
into by the Company, the Bank or the MHC from the latest date as of which the
financial condition of the Company, the Bank and the MHC is set forth in the
Prospectus, other than transactions referred to or contemplated therein and
transactions in the ordinary course of business; (iii) the Company, the Bank or
the MHC shall not have received from the OTS any direction (oral or written) to
make any material change in the method of conducting their respective businesses
with which it has not complied (which direction if any, shall have been
disclosed to Trident) or which materially and adversely would affect the
business, operations, financial condition or income of the Company, the Bank and
the MHC taken as a whole; (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, or before any arbitrator or arbitrators, shall be pending
or, to the knowledge of the Company, the Bank or the MHC, threatened against the
Company, the Bank or the MHC or affecting any of their respective assets wherein
an unfavorable decision, ruling or finding materially and adversely would affect
the business, operations, financial condition or income of the Company, the Bank
and the MHC taken as a whole; and (v) the Shares shall have been qualified or
registered for offering and sale by the Company under the securities or "blue
sky" laws of each jurisdiction upon which Trident and the Company shall have
agreed.
(f) At the Closing Date, Trident shall receive a certificate of the
President and the Principal Financial Officer of each of the Company, the Bank
and the MHC (hereinafter referred
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to as the "Officers"), dated the Closing Date, to the effect that: (i) the
Officers have carefully examined the Prospectus and, at the time the Prospectus
became authorized for 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
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, without
limitation, any material adverse change in the business, financial condition,
income or operations of the Bank; (iii) since the date the Prospectus became
authorized for use, the conditions set forth in clauses (ii) through (iv)
inclusive of subsection (e) of this Section 4 have, to their knowledge, been
satisfied; (iv) no order has been issued by the Commission or the OTS to suspend
the effectiveness of the Prospectus or to terminate the Offerings and, to the
knowledge of the Officers, no action for such purposes has been instituted or
threatened by the Commission or the OTS; (v) to the knowledge of the Officers,
no person has sought to obtain review of the final action of the OTS approving
the Plan pursuant to Section 5(i)(2)(B) of the HOLA; and (vi) to their
knowledge, all of the representations and warranties contained in Section 2
hereof are true and correct with the same force and effect as though expressly
made on the Closing Date and all of the covenants and obligations of the
Company, the Bank and the MHC set forth in this Agreement have been fulfilled.
(g) At the Closing Date, Trident shall, if not already received,
receive, among other documents, (i) a copy of the order from the Commission
declaring the Registration Statement effective; (ii) a copy of the letters from
the OTS approving the Conversion Application and authorizing the use of the
Prospectus; and (iii) a copy of the letter from the OTS approving the Holding
Company Application.
(h) Concurrently with the execution of this Agreement, Trident shall
have received a letter from Marr, Miller & Myers, PSC, independent certified
public accountants, dated the date hereof and addressed to Trident, in substance
and form reasonably satisfactory to counsel for Trident, with respect to the
financial statements and certain financial information contained in the
Prospectus.
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(i) At the Closing Date, Trident shall receive a letter in form and
substance reasonably satisfactory to counsel for Trident from Marr, Miller &
Myers, PSC, independent certified public accountants, dated the Closing Date and
addressed to Trident, confirming the statements made by them in the letter
delivered by them pursuant to the preceding subsection as of a specified date
not more than five (5) business days prior to the Closing Date.
(j) All opinions, certificates, letters and documents prepared for
Trident's reliance shall be in compliance with the provisions hereof only if
they are, in the reasonable opinion of Trident, satisfactory to Trident. Any
certificates signed by an officer or director of the Company, the Bank or the
MHC prepared for Trident's reliance and delivered to Trident or to counsel for
Trident that specifically references this Agreement, shall be deemed a
representation and warranty by the Company, the Bank and the MHC to Trident as
to the statements made therein. If any condition to Trident's obligations
hereunder to be fulfilled prior to or at the Closing Date is not so fulfilled,
Trident may terminate this Agreement or, if Trident so elects, may waive any
such conditions which have not been fulfilled, or may extend the time of their
fulfillment. If Trident terminates this Agreement in accordance with the
foregoing, the Bank shall reimburse Trident for its accountable expenses as
provided in Section 1 hereof.
5. Indemnification.
---------------
(a) The Company, the Bank and the MHC, jointly and severally, hereby
agree to indemnify and hold harmless Trident, its officers, directors and
employees and each person, if any, who controls Trident within the meaning of
Section 15 of the 1933 Act or Section 20(a) of the Exchange Act:
(i) Against any and all loss, liability, claim, damage and expense
whatsoever, including but not limited to, legal fees and expenses, reasonably
incurred by any of them in investigating, preparing to defend or defending
against any action, proceeding or claim (whether commenced or threatened) (A)
arising out of or based upon any breach of any representation or warranty by the
Company, the Bank or the MHC contained in this Agreement, (B) arising out of or
based upon the failure of the Company, the Bank or the MHC to fulfill any
covenant or obligation set forth in this Agreement, or (C) arising out of or
based upon any untrue or alleged untrue statement of a material fact or the
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omission or alleged omission of a material fact required to be stated or
necessary to make not misleading any statements contained in (I) the
Registration Statement, the Conversion Application, the Holding Company
Application or the Prospectus or (II) any other document or communication
prepared or executed by or on behalf of the Company, the Bank or the MHC and
based upon written information furnished by or on behalf of the Company and the
Bank or the MHC with the consent of the Company, the Bank or the MHC to qualify
the Shares under the securities laws of the United States or any state or filed
with the Commission or the OTS (in this Section 5, collectively called the
"Application"), unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company, the Bank or the
MHC with respect to Trident by or on behalf of Trident expressly for use in the
Registration Statement, Conversion Application, the Holding Company Application,
the Proxy Statement, the Prospectus or any Application, or any amendment or
supplement thereof. This indemnity shall be in addition to any liability the
Company, the Bank or the MHC may have to Trident otherwise; and
(ii) Against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in settlement of
any litigation, investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any untrue
statement or omission referenced in subsection (i) of this Section 6(a), or any
alleged untrue statement or omission referenced in subsection (i) of this
Section 6(a), if such settlement is effected with the prior written consent of
the Company, the Bank or the MHC.
(b) Trident hereby agrees to indemnify and hold harmless the Company,
the Bank and the MHC, their respective officers, directors and the employees and
each person, if any, who controls the Company, the Bank or the MHC within the
meaning of Section 15 of the 1933 Act or Section 20(a) of the Exchange Act to
the same extent as the foregoing indemnity from the Company, the Bank and the
MHC to Trident, but only with respect to statements or omissions, if any, made
in the Prospectus, the Proxy Statement, the Registration Statement, the
Conversion Application, the Holding Company Application or the Application, as
amended or supplemented, in reliance upon, and in conformity with, written
information furnished to the Company, the Bank or the MHC with respect to
Trident by or on behalf of Trident expressly for use in the Prospectus, the
Proxy Statement, the Registration Statement,
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the Conversion Application, the Holding Company Application or the Application,
as amended or supplemented.
(c) Promptly after receipt by an indemnified party under this Section
5 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 5, notify the indemnifying party of the commencement thereof; provided,
however, that the omission to so notify the indemnifying party will not relieve
the indemnifying party from any liability which it may have to any indemnified
party unless the failure to provide such notice to the indemnifying party
results in the forfeiture by such party of substantial rights or defenses. In
case any such action is brought against any indemnified party, and the
indemnified party notifies the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein and, to the
extent that the indemnifying party may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of the indemnifying party's election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 5 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, other than the reasonable cost of investigation, except as otherwise
provided herein. In the event the indemnifying party elects to assume the
defense of any such action and retain counsel acceptable to the indemnified
party, the indemnified party may retain additional counsel, but shall bear the
fees and expenses of such counsel, unless: (i) the indemnifying party shall have
specifically authorized the indemnified party to retain such counsel, or (ii)
the parties to such suit include such indemnifying party and the indemnified
party, and such indemnified party shall have been advised by counsel that one or
more material legal defenses may be available to the indemnified party which may
not be available to the indemnifying party, in which case the indemnifying party
shall not be entitled to assume the defense of such suit notwithstanding the
indemnifying party's obligation to bear the fees and expenses of such counsel.
In no event shall the indemnifying parties be liable for the fees and expenses
of more than one separate firm of attorneys (and any special counsel that said
firm may retain) for all indemnified parties in connection with any one action,
proceeding or claim or separate but similar or related actions, proceedings or
claims in the same jurisdiction
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arising out of the same general allegations or circumstances. An indemnifying
party against whom indemnity may be sought shall not be liable to indemnify an
indemnified party under this Section 5 if any settlement of any such action is
effected without such indemnifying party's consent.
6. Contribution.
------------
(a) The parties agree that the provisions of this Section 6 shall
apply to the fullest extent permitted by Sections 23A and 23B of the Federal
Reserve Act. In order to provide for just and equitable contribution in
circumstances in which the indemnity provided for in Section 5 hereof is for any
reason held to be unavailable to Trident other than in accordance with its
terms, the Company, the MHC and the Bank on the one hand and Trident on the
other shall contribute to the aggregate losses, liabilities, claims, damages,
and expenses of the nature contemplated by such indemnity incurred by the
Company, the Bank and/or the MHC and Trident (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, the Bank
and/or the MHC, on the one hand, and Trident, on the other, from the offering of
the Shares or, (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, the Bank and/or the MHC, on the one hand, and Trident, on
the other, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
Bank and/or the MHC, on the one hand, and Trident, on the other, shall be deemed
to be in the same proportions as the total proceeds from the sale of the Shares
(before deducting expenses) received by the Company, the Bank and/or the MHC
bear to the total fees received by Trident under this Agreement. The relative
fault of the Company, the Bank and/or the MHC, on the one hand, and Trident, on
the other, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, the Bank and/or the MHC or by Trident, the relative intent of the
parties, the knowledge of the parties, access to information and opportunity to
correct or prevent such statement or omission.
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(b) The Company, the Bank, the MHC and Trident agree that it would not
be just and equitable if contribution pursuant to this Section 6 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 6, Trident shall
not be required to contribute any amount in excess of the amount by which fees
owed Trident pursuant to this Agreement exceed the amount of any damages which
Trident has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
7. Survival of Agreements, Representations and Indemnities. The
-------------------------------------------------------
respective indemnities of the Company, the Bank and the MHC and of Trident and
the representations and warranties of the Company, the Bank and the MHC set
forth in or made pursuant to this Agreement shall remain in full force and
effect regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of Trident or the Company, the Bank or the
MHC or any controlling person or indemnified party referred to in Section 5
hereof, and shall survive any termination of this Agreement and/or the issuance
of the Shares. Any successor or assign of Trident, the Company, the Bank or the
MHC, any controlling person and any legal representative of Trident, the
Company, the Bank or the MHC shall be entitled to the benefit of the respective
agreements, indemnities, warranties and representations contained in this
Agreement.
8. Termination.
-----------
(a) The obligations of Trident pursuant to this Agreement shall
terminate upon the earliest to occur of (i) completion, termination or
abandonment of the Plan by the Company, the Bank or the MHC, (ii) termination of
the Offerings, or (iii) 45 days after the completion of the Offerings unless
extended by agreement of all parties.
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(b) Notwithstanding the foregoing, Trident may terminate this
Agreement by giving notice at any time after this Agreement becomes effective,
as follows:
(i) If the obligations of Trident cannot, in the reasonable
opinion of Trident, be fulfilled because of the material breach of any of the
representations or warranties contained in Section 2 hereof, the failure by the
Company, the Bank or the MHC to perform their covenants and obligations under
this Agreement or the failure of the Company, the MHC or the Bank to fulfill any
of the other conditions set forth under Section 4 hereof.
(ii) If any domestic or international event or act or occurrence
has materially disrupted the United States securities markets, such as to make
impracticable, in the reasonable opinion of Trident, proceeding with the
Offerings; or if trading on the New York Stock Exchange shall have been
suspended or if limits in prices or volumes or the manner of trading shall have
been imposed by the New York Stock Exchange; 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; 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, the Bank or the MHC; or if
the Company, the Bank or the MHC shall have sustained a material or substantial
loss by, but not limited to, 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, the Bank or the MHC; or if Trident
elects to terminate this Agreement under any other Section of this Agreement.
(iii) If Trident elects to terminate this Agreement as provided
in this Section 8(b), the Company, the MHC and the Bank shall be notified
promptly by Trident by telephone or telegram, confirmed by letter.
(c) (i) The Company, the Bank or the MHC may terminate this Agreement by
giving notice of a material breach of this Agreement by Trident at any time
after this Agreement becomes effective.
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(ii) If the Company, the Bank or the MHC elects to terminate this
Agreement as provided in this Section 8(c), Trident shall be notified promptly
by the Company, the Bank or the MHC by telephone or telegram, confirmed by
letter.
(d) If this Agreement is terminated for any of the reasons set forth in
this Section 8, the Company, the MHC or the Bank shall reimburse Trident for any
expenses incurred by Trident which are reimbursable in accordance with Section 1
hereof.
9. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and:
If sent to Trident, shall be mailed, delivered or telegraphed and confirmed by
letter to:
Willis Smith
Trident Securities, Inc.
4601 Six Forks Road, 4th Floor
Raleigh, North Carolina 27609
with a copy to:
John C. Vorys, Esq.
Vorys, Sater, Seymour and Pease
Suite 2100, Atrium Two
221 East Fourth Street
Cincinnati, Ohio 45202
If sent to the Company, the MHC or the Bank, shall be mailed, delivered or
telegraphed and confirmed by letter to:
James J. Shoffner
Middlesboro Federal Bank, Federal Savings Bank
1431 Cumberland Avenue
Middlesboro, Kentucky 40965
with a copy to:
James C. Stewart, Esq.
Housley Kantarian & Bronstein, P.C.
Suite 700
1220 19th Street N.W.
Washington, D.C. 20036
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10. Parties. The Company, the Bank and the MHC shall be entitled to act
-------
and rely on any request, notice, consent, waiver or agreement purportedly given
on behalf of Trident when the same shall have been given by the undersigned.
Trident shall be entitled to act and rely on any request, notice, consent,
waiver, or agreement purportedly given on behalf of the Company, the Bank or the
MHC, when the same shall have been given by the undersigned or any other officer
of the Company, the Bank or the MHC. This Agreement shall inure solely to the
benefit of, and shall be binding upon, Trident, the Company, the Bank, the MHC
and the controlling persons and indemnified parties referred to in Section 5
hereof, and their respective successors, legal representatives and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim under, or in respect of, or by virtue of, this Agreement or any
provision herein contained.
11. Closing. At the Closing, Trident shall submit a list of the persons
-------
subscribing for the Shares and the number of Shares so subscribed. The Company,
the Bank or the MHC shall deliver to Trident in immediately available funds the
commissions and remaining expenses due and owing to Trident as set forth in
Section 1 hereof, and the opinions and certificates required hereby and other
documents deemed reasonably necessary by Trident shall be executed and delivered
to effect the sale of the Shares as contemplated hereby and pursuant to the
terms of the Prospectus.
12. Partial Invalidity. In the event that any term, provision or covenant
------------------
of this Agreement 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 such term, provision or covenant to any other circumstance or
situation shall not be affected thereby, and each term, provision or covenant of
this Agreement shall be valid and enforceable to the full extent permitted by
law.
13. Construction. This Agreement shall be construed in accordance with
------------
the internal laws of the Commonwealth of Kentucky (without regard to Kentucky
conflicts of laws principles).
14. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and
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delivered shall be an original, but all of which together shall constitute but
one and the same instrument.
If the foregoing correctly sets forth the understanding between Trident and
the Company, the Bank and the MHC please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between Trident and the Company, the Bank and the MHC.
Very truly yours,
CUMBERLAND MOUNTAIN BANCSHARES, INC.
By:
-------------------------------
James J. Shoffner
President
MIDDLESBORO FEDERAL BANK, FEDERAL
SAVINGS BANK
By:
-------------------------------
James J. Shoffner
President
CUMBERLAND MOUNTAIN BANCSHARES, M.H.C.
By:
-------------------------------
James J. Shoffner
President
Accepted as of the date first
above written:
TRIDENT SECURITIES, INC.
By:
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its
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