EXHIBIT 1.1
Exhibit 1.1
Form of Proposed Agency Agreement Among
Security Bancorp, Inc., Security Federal Savings
Bank of McMinnville, TN and Trident Securities, Inc.
EXHIBIT 1.1
Security Bancorp, Inc.
280,500 to 379,500 Shares
Common Stock
(Par Value $.01 Per Share)
Purchase Price: $10.00 Per Share
SALES AGENCY AGREEMENT
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Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
Security Bancorp, Inc., a Tennessee corporation (the "Company"), and
Security Federal Savings Bank of McMinnville, TN, a federally chartered and
insured mutual savings bank (the "Bank"), hereby confirm, as of _____________,
1997 their respective agreements with Trident Securities, Inc. ("Trident"),
a broker-dealer registered with the Securities and Exchange Commission
("Commission") and a member of the National Association of Securities Dealers,
Inc. ("NASD"), as follows:
1. Introductory. The Bank intends to convert from a federally chartered
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mutual savings bank to a federally chartered capital stock savings bank as a
wholly owned subsidiary of the Company (together with the Offerings, as defined
below, the issuance of shares of common stock of the Bank to the Company and the
incorporation of the Company, the "Stock Conversion") pursuant to a plan of
conversion adopted by the Bank's Board of Directors on January 15, 1997 and
amended on March 20, 1997 (the "Plan"). In accordance with the Plan, the
Company is offering shares of its common stock, par value $.01 per share (the
"Common Stock"), pursuant to nontransferable subscription rights in a
subscription offering (the "Subscription Offering") to certain depositors and
borrowers of the Bank and to the Bank's tax-qualified employee benefit plans
(i.e., the Bank's Employee Stock Ownership Plan (the "ESOP")). Any shares of
the Common Stock not sold in the Subscription Offering are being offered to the
general public in a direct community offering (the "Direct Community Offering"),
with preference given to natural persons and the trusts of natural persons who
are permanent residents of Warren County, Tennessee (the "Local Community") (the
Subscription and Direct Community Offerings are sometimes referred to
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Sales Agency Agreement
Page 2
collectively as the "Subscription and Direct Community Offering"), subject to
the right of the Company and the Bank, in their absolute discretion, to reject
orders in the Direct Community Offering in whole or in part. It is anticipated
that shares of Common Stock not subscribed for in the Subscription and Direct
Community Offering (if any) will be offered to certain members of the general
public on a best efforts basis by a selling group of broker dealers managed by
Trident in a syndicated offering ("Syndicated Community Offering") (the
Subscription and Direct Community Offering and the Syndicated Community Offering
are referred to collectively as the "Offerings"). In the Subscription Offering
(and the Direct Community Offering and the Syndicated Community
Offering if applicable), the Company is offering between 280,500 and 379,500
shares of Common Stock (the "Shares"), with the possibility of offering up to
436,425 shares without a resolicitation of subscribers, as contemplated by Title
12 of the Code of Federal Regulations, Part 563b. With the exception of the
ESOP, no person or other entity, including all persons or entities on a joint
account, may purchase shares with an aggregate purchase price of more than
$75,000 and no person or entity, together with associates of and persons acting
in concert with such person or other entity, may purchase shares of Common Stock
with an aggregate purchase price of more than $150,000 in the Stock Conversion.
Following completion of the Stock Conversion, the Bank intends to convert from a
federally chartered stock savings bank to a Tennessee chartered commercial bank
(the "Bank Conversion") to be known as _____________ (the "Commercial Bank").
The Stock Conversion and the Bank Conversion are referred to collectively herein
as the "Conversion."
The Company and the Bank have been advised by Trident that it will utilize
its best efforts to assist the Company with the sale of the Shares in the
Offerings. Prior to the execution of this Agreement, the Company has delivered
to Trident the Prospectus dated _______ __, 1997 (as hereinafter defined) and
all supplements thereto, if any, to be used in the Offerings have also been
delivered to Trident (or if after the date of this Agreement, will be promptly
delivered to Trident). Such Prospectus contains information with respect to the
Company, the Bank and the Shares.
2. Representations and Warranties.
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(a) The Company and the Bank jointly and severally represent and
warrant to Trident that:
(i) The Company has filed with the Commission a registration
statement, including exhibits and an amendment or amendments thereto,
on Form SB-2 (No. 333-6670), including a Prospectus relating to the
Offerings, for the registration of the Shares under the Securities Act
of 1933, as amended (the "Act"). Such registration statement has
become effective under the Act and no stop order has been issued with
respect thereto and no proceedings therefor have been initiated or, to
the Company's best knowledge, threatened by the Commission. Such
registration statement, as amended or supplemented, on file with the
Commission at the time the registration statement became effective,
including the Prospectus, financial statements, schedules, exhibits
and all other documents filed as part thereof, as amended and
supplemented, is herein called the "Registration Statement," and the
prospectus, as amended or supplemented, on file with the Commission at
the time the Registration Statement became effective is herein called
the "Prospectus," except that if the prospectus filed by the Company
with the
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Commission pursuant to Rule 424(b) of the general rules and
regulations of the Commission under the Act (the "SEC Regulations")
differs from the form of prospectus on file at the time the
Registration Statement became effective, the term "Prospectus" shall
refer to the Rule 424(b) prospectus from and after the time it is
filed with the Commission and shall include any amendments or
supplements thereto from and after their dates of effectiveness or
use, respectively. If any Shares remain unsubscribed following
completion of the Offerings thereby requiring a resolicitation of
subscribers, the Company (i) will promptly file with the Commission a
post-effective amendment to such Registration Statement relating to
the results of the Offerings, any additional information with respect
to the proposed plan of distribution and any revised pricing
information or (ii) if no such post-effective amendment is required,
will file with the Commission a prospectus or prospectus supplement
containing information relating to the results of the Subscription and
the Community Offerings and pricing information pursuant to Rule
424(c) of the SEC Regulations, in either case in a form reasonably
acceptable to the Company and Trident.
(ii) The Bank has filed an Application for Approval of Conversion
on Form AC, including exhibits (as amended or supplemented, the "Form
AC" and together with the Form H-(e)1-S referred to below, the
"Conversion Application") with the Office of Thrift Supervision (the
"Office") under the Home Owners' Loan Act, as amended (the "HOLA") and
the published rules and regulations, of the Office thereunder (the
"OTS Regulations"), which has been, or in the case of the Form H-(e)1-
S will be, by the Closing Date (as defined herein), approved by the
Office; the Prospectus and the proxy statement for the solicitation of
proxies from members of the Bank for the special meeting to approve
the Plan (the "Proxy Statement") included as part of the Form AC have
been approved for use by the Office. No order has been issued by the
Office preventing or suspending the use of the Prospectus or the Proxy
Statement; and no action by or before the Office revoking such
approvals is pending or, to the Bank's best knowledge, threatened. The
Company has filed with the Office the Company's application on Form H-
e(1)-S under the savings and loan holding company provisions of the
HOLA and the regulations promulgated thereunder and will have received
as of the Closing Date, approval of its acquisition of the Bank from
the Office.
(iii) At the date of the Prospectus and at all times subsequent
thereto through and including the Closing Date (i) the Registration
Statement and the Prospectus (as amended or supplemented, if amended
or supplemented) complied and will comply as to form in all material
respects with the Act and the SEC Regulations, (ii) the Registration
Statement (as amended or supplemented, if amended or supplemented) did
not contain an untrue statement of a material fact
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or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (iii) the
Prospectus (as amended or supplemented, if amended or supplemented)
did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading. Representations or warranties in this
subsection shall not apply to statements or omissions made in reliance
upon information furnished to the Company or the Bank relating to
Trident by or on behalf of Trident expressly for use in the
Registration Statement or Prospectus.
(iv) The Company has been duly incorporated as a Tennessee
corporation and the Bank has been duly organized as a mutual savings
bank under the laws of the United States, and each of them is validly
existing and in good standing under the laws of the jurisdiction of
its organization with full power and authority to own its property and
conduct its business as described in the Prospectus; the Bank is a
member of the Federal Home Loan Bank of Cincinnati; and the Bank is an
insured depository institution under the provisions of Section 4(a) of
the Federal Deposit Insurance Act, as amended ("FDIA"), with deposit
accounts insured by the Savings Association Insurance Fund ("SAIF")
administered by the Federal Deposit Insurance Corporation ("FDIC") up
to the applicable limits. Neither the Company or the Bank is required
to be qualified to do business as a foreign corporation in any
jurisdiction where non-qualification would have a material adverse
effect on the Company and the Bank, taken as a whole. The Bank does
not own equity securities of or an equity interest in any business
enterprise, except as described in the Prospectus. Upon amendment of
the Bank's charter and bylaws as provided in the rules and regulations
of the Office and completion of the sale by the Company of the Shares
as contemplated by the Prospectus, (i) the Bank will be converted
pursuant to the Plan to a federally chartered capital stock savings
bank with full power and authority to own its property and conduct its
business as described in the Prospectus, (ii) all of the authorized
and outstanding capital stock of the Bank will be owned of record and
beneficially by the Company, and (iii) the Company will have no direct
subsidiary other than the Bank.
(v) Each of the Company and the Bank has good and marketable title
to all assets material to its business and to those assets described
in the Prospectus as owned by it, free and clear of all material
liens, charges, encumbrances or restrictions, except for liens for
taxes not yet due, except as described in the Prospectus and except as
could not in the aggregate have a material adverse effect upon the
operations or financial condition of the Bank; and all of the leases
and subleases material to the operations or financial condition of the
Bank, under which
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they hold properties, including those described in the Prospectus, are
in full force and effect as described therein.
(vi) The Bank has obtained all licenses, permits and other
governmental authorizations currently required for the conduct of
their business, all such licenses, permits and other governmental
authorizations are in full force and effect and the Bank is in all
material respects complying therewith, except where the failure to
hold such licenses, permits or governmental authorizations or the
failure to hold would not have a material adverse effect on the
Company and the Bank, taken as a whole;
(vii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary actions on the part of each of
the Company and the Bank, and this Agreement is a valid and binding
obligation with valid execution and delivery of each of the Company
and the Bank, enforceable in accordance with its terms (except as the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws relating to or affecting
the enforcement of creditors' rights generally or the rights of
creditors of savings and loan holding companies the accounts of whose
subsidiary are insured by the FDIC or by general equity principles,
regardless of whether such enforceability is considered in a
proceeding in equity or at law, and except to the extent that the
provisions of Sections 8 and 9 hereof may be unenforceable as against
public policy or pursuant to Section 23A of the Federal Reserve Act,
12 U.S.C. Section 371c ("Section 23A")).
(viii) There is no litigation or governmental proceeding pending
or, to the best knowledge of the Company or the Bank, threatened
against or involving the Company, the Bank, or any of their respective
assets which individually or in the aggregate would reasonably be
expected to have a material adverse effect on the financial condition,
results of operations and business, including the assets and
properties, of the Company and the Bank, taken as a whole.
(ix) The Company and the Bank have received the opinions of Breyer
& Aguggia with respect to federal income tax consequences of the Stock
Conversion, and of Householder, Artman and Associates, P.C., with
respect to Tennessee tax consequences of the Stock Conversion, to the
effect that the Stock Conversion will constitute a tax-free
reorganization under the Internal Revenue Code of 1986, as amended,
and will not be a taxable transaction for the Bank or the Company
under the laws of Tennessee, and the facts relied upon in such
opinions are accurate and complete.
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(x) Each of the Company and the Bank has all such corporate power,
authority, authorizations, approvals and orders as may be required to
enter into this Agreement and to carry out the provisions and
conditions hereof, subject to the limitations set forth herein and
subject to the satisfaction of certain conditions imposed by the
Office in connection with its approvals of the Form AC and the
Application H-(e)1-S, and except as may be required under the
securities, or "blue sky," laws of various jurisdictions, and the
Company, as of the Closing Date, will have such approvals and orders
to issue and sell the Shares to be sold by the Company as provided
herein, and in the case of the Bank, as of the Closing Date, will have
such approvals and orders to issue and sell the Shares of its Common
Stock to be sold to the Company as provided in the Plan, subject to
the issuance of an amended charter in the form required for federally
chartered capital stock savings banks (the "Stock Charter"), the form
of which Stock Charter has been approved by the Office.
(xi) Neither the Company nor the Bank is in violation of any rule
or regulation of the Office or the FDIC that could reasonably be
expected to result in any enforcement action against the Company, the
Bank, or their officers or directors that would have a material
adverse effect on the financial condition, operations, businesses,
assets or properties of the Company and the Bank, taken as a whole.
(xii) The financial statements and any related notes or schedules
which are included in the Registration Statement and are part of the
Prospectus fairly present the financial condition, income, equity and
cash flows of the Bank at the respective dates thereof and for the
respective periods covered thereby and comply as to form in all
material respects with the applicable accounting requirements of the
SEC Regulations and the applicable accounting regulations of the
Office. Such financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved, except as set forth therein, and such
financial statements are in all material respects consistent with
financial statements and other reports filed by the Bank with
supervisory and regulatory authorities except as such generally
accepted accounting principles may otherwise require. The tables in
the Prospectus accurately present the information purported to be
shown thereby at the respective dates thereof and for the respective
periods therein.
(xiii) There has been no material change in the financial
condition, results of operations or business, including assets and
properties, of the Company and the Bank, taken as a whole, since the
latest date as of which such condition is set forth in the Prospectus,
except as set forth therein; and the capitalization, assets,
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properties and business of each of the Company and the Bank conform in
all material respects to the descriptions thereof contained in the
Prospectus. Neither the Company nor the Bank has any material
liabilities of any kind, contingent or otherwise, except as set forth
in the Prospectus.
(xiv) There has been no breach or default (or the occurrence of
any event which, with notice or lapse of time or both, would
constitute a default) under, or creation or imposition of any lien,
charge or other encumbrance upon any of the properties or assets of
the Company or the Bank pursuant to any of the terms, provisions or
conditions of, any agreement, contract, indenture, bond, debenture,
note, instrument or obligation to which the Company or the Bank is a
party or by which any of them or any of their respective assets or
properties may be bound or is subject, or violation of any
governmental license or permit or any enforceable published law,
administrative regulation or order or court order, writ, injunction or
decree, which breach, default, encumbrance or violation would have a
material adverse effect on the financial condition, operations,
business, assets or properties of the Company and the Bank taken as a
whole; all agreements which are material to the financial condition,
results of operations or business of the Company and the Bank, taken
as a whole are in full force and effect, and no party to any such
agreement has instituted or, to the best knowledge of the Company or
the Bank threatened any action or proceeding wherein the Company or
the Bank would be alleged to be in default thereunder.
(xv) Neither the Company nor the Bank is in violation of its
respective charter or bylaws. The execution and delivery of the
Agreement and the consummation of the transactions contemplated hereby
by the Company and the Bank do not conflict with or result in a breach
of the charter or bylaws of the Company or the Bank (in either mutual
or stock form) or constitute a material breach of or default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, give rise to any right of termination, cancellation or
acceleration contained in, or result in the creation or imposition of
any lien, charge or other encumbrance upon any of the properties or
assets of the Company or the Bank pursuant to any of the terms,
provisions or conditions of, any material agreement, contract,
indenture, bond, debenture, note, instrument or obligation to which
the Company or the Bank is a party or violate any governmental license
or permit or any enforceable published law, administrative regulation
or order or court order, writ, injunction or decree (subject to the
satisfaction of certain conditions imposed by the Office in connection
with its approval of the Stock Conversion Application), which breach,
default, encumbrance or violation would have a material adverse effect
on the financial condition, operations or business of the Company and
the Bank, taken as a whole.
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(xvi) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus and prior to the
Closing Date, except as otherwise may be indicated or contemplated
therein, neither the Company nor the Bank has issued any securities
which will remain issued at the Closing Date or incurred any liability
or obligation, direct or contingent, or borrowed money, except
borrowings in the ordinary course of business, or entered into any
other transaction not in the ordinary course of business and
consistent with prior practices, which is material in light of the
business of the Company and the Bank, taken as a whole.
(xvii) Upon consummation of the Stock Conversion, the authorized,
issued and outstanding equity capital of the Company shall be within
the range set forth in the Prospectus under the caption
"Capitalization," and no capital stock of the Company shall be
outstanding immediately prior to the Closing Date; the issuance and
the sale of the Shares have been duly authorized by all necessary
corporate action of the Company and approved by the Office and, when
issued in accordance with the terms of the Plan in exchange for the
consideration therefor, shall be validly issued, fully paid and
nonassessable and shall conform to the description thereof contained
in the Prospectus; the issuance of the Shares is not subject to
preemptive rights, except as set forth in the Prospectus; and good
title to the Shares will be transferred by the Company to the
purchasers thereof upon issuance thereof against payment therefor,
free and clear of all claims, encumbrances, security interests and
liens against the Company whatsoever. The certificates representing
the Shares will conform in all material respects with the requirements
of Tennessee law and regulations of the Officer. The issuance and sale
of the capital stock of the Bank to the Company has been duly
authorized by all necessary corporate action of the Bank and the
Company and appropriate regulatory authorities (subject to the
satisfaction of various conditions imposed by the Office in connection
with its approval of the Conversion Application), and such capital
stock, when issued in accordance with the terms of the Plan, will be
fully paid and nonassessable and will confirm in all material respects
to the description thereof contained in the Prospectus.
(xviii) No approval of any regulatory or supervisory or other
public authority is required in connection with the execution and
delivery of this Agreement or the issuance of the Shares, except for
the declaration of effectiveness of any required post-effective
amendment by the Commission and approval thereof by the Office and
approval of the Company's application on Form H-(e)1-S by the Office,
the issuance of the Stock Charter by the Office and as may be required
under the securities laws of various jurisdictions.
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(xix) All contracts and other documents required to be filed as
exhibits to the Registration Statement or the Conversion Application
have been filed with the Commission and/or the Office, as the case may
be.
(xx) Householder, Artman and Associates, P.C., which has audited
the financial statements of the Bank at December 31, 1996 and 1995 and
for the years ended December 31, 1996, 1995 and 1994 included in the
Prospectus, is an independent public accountant with respect to the
Company and the Bank within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants and
Title 12 of the Code of Federal Regulations, Section 571.2(c)(3).
(xxi) For the past five years, the Company and the Bank have
timely filed all required federal, state and local franchise tax
returns, and no deficiency has been asserted with respect to such
returns by any taxing authorities, and the Company and the Bank have
paid all taxes that have become due and, to the best of their
knowledge, have made adequate reserves for known future tax
liabilities, except where any failure to make such filings, payments
and reserves, or the assertion of such a deficiency, would not have a
material adverse effect on the financial condition of the Company and
the Bank, taken as a whole.
(xxii) To the best knowledge of the Company and the Bank, all of
the loans represented as assets of the Bank on the most recent
statement of financial condition of the Bank included in the
Prospectus meet or are exempt from all requirements of federal, state
or local law pertaining to lending, including without limitation truth
in lending (including the requirements of Regulation Z and 12 C.F.R.
Part 226 and Section 563.99), real estate settlement procedures,
consumer credit protection, equal credit opportunity and all
disclosure laws applicable to such loans, except for violations which,
if asserted, would not have a material adverse effect on the Company
and the Bank, taken as a whole.
(xxiii) The records of account holders, depositors and other
members of the Bank delivered to Trident by the Bank or its agent for
use during the Stock Conversion have been prepared or reviewed by the
Bank and, to the best knowledge of the Company and the Bank, are
reliable and accurate.
(xxiv) Neither the Company nor the Bank nor the employees of the
Company or the Bank, has made any payment of funds of the Company or
the Bank prohibited by law, and no funds of the Company, the Bank or
any Subsidiary have been set aside to be used for any payment
prohibited by law.
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(xxv) To the best knowledge of the Company and the Bank, the
Company and the Bank are in compliance with all laws, rules and
regulations relating to the discharge, storage, handling and disposal
of hazardous or toxic substances, pollutants or contaminants and
neither the Company nor the Bank believes that the Company and the
Bank are subject to liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or any
similar law, except for violations which, if asserted, would not have
a material adverse effect on the Company and the Bank, taken as a
whole. There are no actions, suits, regulatory investigations or other
proceedings pending or, to the best knowledge of the Company or the
Bank, threatened against the Company or the Bank relating to the
discharge, storage, handling and disposal of hazardous or toxic
substances, pollutants or contaminants. To the best knowledge of the
Company and the Bank, no disposal, release or discharge of hazardous
or toxic substances, pollutants or contaminants, including petroleum
and gas products, as any of such terms may be defined under federal,
state or local law, has been caused by the Company or the Bank or, to
the best knowledge of the Company or the Bank, has occurred on, in or
at any of the facilities or properties of the Company or the Bank,
except such disposal, release or discharge which would not have a
material adverse effect on the Company and the Bank, taken as a whole.
At the Closing Date, the Company and the Bank will have completed
the conditions precedent to, and shall have conducted the Stock
Conversion in all material respects in accordance with, the Plan, the
OTS Regulations and all other applicable laws, regulations, decisions
and orders; and, all terms, conditions, requirements and provisions
relating to the Stock Conversion imposed by the Office have been or,
with respect to any future Office conditions, will be complied with by
the Company and the Bank or appropriate waivers have been or will be
obtained.
(b) Trident represents and warrants to the Company and the Bank
that:
(i) Trident is registered as a broker-dealer with the Commission
and a member of the NASD, and is in good standing with the Commission
and the NASD.
(ii) Trident is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full
corporate power and authority to provide the services to be furnished
to the Company and the Bank hereunder.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by
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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 whom may be protected by the Securities Investor
Protection Corporation or by general equity principles, regardless of
whether such enforceability is considered in a proceeding in equity or
at law, and except to the extent that the provisions of Sections 8 and
9 hereof may be unenforceable as against public policy.
(iv) Each of Trident and its employees, and to Trident's
knowledge, its 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
Stock 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 by which Trident is
bound or under any governmental license or permit or any law,
administrative regulation, authorization, approval or order or court
decree, injunction or order.
(vi) All funds received by Trident to purchase the 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 best 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.
3. Employment of Trident; Sale and Delivery of the Shares. On the basis
------------------------------------------------------
of the representations and warranties herein contained, but subject to the terms
and conditions herein set forth, the Company and the Bank hereby employ Trident
as their agent to utilize its best efforts in assisting the Company with the
Company's sale of the Shares in the Offerings. The
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employment of Trident hereunder shall terminate (a) forty-five (45) days after
the Offerings close, unless the Company and the Bank, with the approval of the
Office, are permitted to extend such period of time, (b) upon consummation of
the Stock Conversion or (c) upon termination of the Stock Conversion, whichever
date shall first occur.
In the event the Company is unable to sell a minimum of 280,500 shares of
Common Stock (or such lesser amount as the Office may permit) within the period
herein provided, this Agreement shall terminate, and the Company and the Bank
shall refund promptly to any person who has subscribed for any of the Shares,
the full amount which it may have received from them, together with interest as
provided in the Prospectus, and no party to this Agreement shall have any
obligation to the other party hereunder, except as set forth in Sections 6, 8
and 9 hereof. Appropriate arrangements for placing the funds received from
subscriptions for Shares as described in the Prospectus were made prior to the
commencement of the Subscription and Direct Community Offering, with provision
for prompt refund to the purchasers as set forth above, or for delivery to the
Company if 280,500 Shares are sold.
If all conditions precedent to the consummation of the Stock Conversion are
satisfied, including the sale of all Shares required by the Plan to be sold, the
Company agrees to issue or have issued such Shares and to release for delivery
certificates to subscribers thereof for such Shares on the Closing Date against
payment to the Company by any means authorized pursuant to the
Prospectus, at the principal office of the Company or at such other place as
shall be agreed upon between the parties hereto. The date upon which Trident is
paid the compensation due hereunder is herein called the "Closing Date."
Trident agrees either (a) upon receipt of an executed order form of a
subscriber to forward the aggregate offering price of the Common Stock ordered
on or before twelve noon on the next business day following receipt or execution
of an order form by Trident to the Bank for deposit in a segregated account or
(b) to solicit indications of interest in which event (i) Trident will
subsequently contact any potential subscriber indicating interest to confirm the
interest and give instructions to execute and return an order form or to receive
authorization to execute the order form on the subscriber's behalf, (ii) Trident
will mail acknowledgments of receipt of orders to each subscriber confirming
interest on the business day following such confirmation, (iii) Trident will
debit accounts of such subscribers on the third business day ("debit date")
following receipt of the confirmation referred to in (i), and (iv) Trident will
forward completed order forms together with such funds to the Bank on or before
twelve noon on the next business day following the debit date for deposit in a
segregated account. Trident acknowledges that if the procedure in (b) is
adopted, subscribers' funds are not required to be in their accounts until the
debit date.
In addition to the expenses specified in Section 6 hereof, Trident shall
receive the following compensation for its services hereunder:
Trident Securities, Inc.
Sales Agency Agreement
Page 13
(a)(i) a management fee of fifty thousand dollars ($50,000) and (ii) for
stock sold by other NASD member firms under selected dealer's agreements, the
Commission shall not exceed a fee to be agreed upon jointly by Trident and the
Bank to reflect market requirements at the time of a stock allocation in a
Syndicated Community Offering. All such fees are to be payable via wire
transfer to Trident on the Closing Date.
(b) Trident shall be reimbursed for reasonable allocable expenses,
including but not limited to travel, communications, legal
fees and expenses and postage, incurred by it whether or not
the Offerings are successfully completed; provided, however,
that neither the Company nor the Bank shall pay or reimburse
Trident for any of the foregoing expenses accrued after
Trident shall have notified the Company or the Bank of its
election to terminate this Agreement pursuant to Section 11
hereof or after such time as the Company or the Bank shall
have given notice in accordance with Section 12 hereof that
Trident is in breach of this Agreement. Trident's reimbursable
out of pocket expenses will not exceed $7,500, and its
reimbursable legal fees will not exceed $20,000. Full payment
to defray Trident's reimbursable expenses shall be made in
next-day funds on the Closing Date or, if the Stock Conversion
is not completed and is terminated for any reason, within ten
(10) business days of receipt by the Company of a written
request from Trident for reimbursement of its expenses.
Trident acknowledges receipt of $7,500 advance payment from
the Bank which shall be credited against the total
reimbursement due Trident hereunder.
(c) Notwithstanding the limitations on reimbursement of Trident
for allocable expenses provided in the immediately preceding
paragraph (b), in the event that a resolicitation or other
event causes the Offerings to be extended beyond their
original expiration date, Trident shall be reimbursed for its
reasonable allocable expenses incurred during such extended
period, provided that the allowance for allocable expenses
provided for in the immediately preceding paragraph (b) above
have been exhausted and subject to the following. Such
reimbursement shall be in amount equal to the product obtained
by dividing $7,500 (original out-of-pocket expenses) by the
total number of days of the unextended Subscription Offering
(calculated from the date of the Prospectus to the intended
close of the Subscription Offering as stated in the
Prospectus) and multiplying such product by the number of days
of the extension (that number of days from the date of the
supplemental prospectus used in the extended Subscription
Offering to the closing of the extension of the Subscription
Offering described in such supplemental prospectus).
Trident Securities, Inc.
Sales Agency Agreement
Page 14
The Company shall pay any stock issue and transfer taxes which may be
payable with respect to the sale of the Shares. The Company and the Bank shall
also pay all expenses of the Stock Conversion incurred by them or on their prior
approval including but not limited to their attorneys' fees, NASD filing fees,
and attorneys' fees relating to any required state securities laws research and
filings, telephone charges, air freight, rental equipment, supplies, transfer
agent charges, fees relating to auditing and accounting and costs of printing
all documents necessary in connection with the Stock Conversion.
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
--------
assisting the Company on a best efforts basis in offering a minimum of 280,500
and a maximum of 379,500 Shares, with the possibility of offering up to 436,425
Shares (except as the Office may permit to be decreased or increased) in the
Subscription and Direct Community Offering, and if necessary, the Syndicated
Community Offering. The Shares are to be offered to the public at the price set
forth on the cover page of the Prospectus and the first page of this Agreement.
5. Further Agreements. The Company and the Bank jointly and severally
------------------
covenant and agree that:
(a) The Company shall deliver to Trident, from time to time, such
number of copies of the Prospectus as Trident reasonably may request. The
Company authorizes Trident to use the Prospectus in any lawful manner in
connection with the offer and sale of the Shares.
(b) The Company will notify Trident or its counsel immediately upon
discovery, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement becomes effective or any supplement
to the Prospectus has been filed, (ii) of the issuance by the Commission of
any stop order relating to the Registration Statement or of the initiation
or the threat of any proceedings for that purpose, (iii) of the receipt of
any notice with respect to the suspension of the qualification of the
Shares for offering or sale in any jurisdiction, and (iv) of the receipt of
any comments from the staff of the Commission relating to the Registration
Statement. If the Commission enters a stop order relating to the
Registration Statement at any time, the Company will make every reasonable
effort to obtain the lifting of such order at the earliest possible moment.
(c) During the time when the Prospectus is required to be delivered
under the Act, the Company will comply so far as it is able with all
requirements imposed upon it by the Act, as now in effect and hereafter
amended, and by the SEC Regulations and the Regulations of the Office, as
from time to time in force, so far as 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 required to be delivered in connection with the offer and
sale of the Shares any event relating to or
Trident Securities, Inc.
Sales Agency Agreement
Page 15
affecting the Company and the Bank, taken as a whole, shall occur as a
result of which it is necessary, in the opinion of counsel for the Company
and the Bank after consultation with counsel for Trident, to amend or
supplement the Prospectus in order to make the Prospectus not false or
misleading in light of the circumstances existing at the time it is
delivered to a purchaser of the Shares, the Company shall prepare and
furnish to Trident a reasonable number of copies of an amendment or
amendments or of a supplement or supplements to the Prospectus (in form and
substance satisfactory to counsel for Trident) which shall amend or
supplement the Prospectus so that, as amended or supplemented, the
Prospectus shall not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein,
in light of the circumstances existing at the time the Prospectus is
delivered to a purchaser of the Shares, not misleading. The Company will
not file or use any amendment or supplement to the Registration Statement
or the Prospectus of which Trident has not first been furnished a copy or
to which Trident shall reasonably object after having been furnished such
copy. For the purposes of this subsection the Company and the Bank shall
furnish such information with respect to themselves as Trident from time to
time may reasonably request.
(d) The Company has taken or will take all reasonably necessary action
as may be required to qualify or register the Shares for offer and sale by
the Company under the securities or blue sky laws of such jurisdictions as
Trident and either the Company or its counsel may agree upon; provided,
however, that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction. In each
jurisdiction where such qualification or registration shall be effected,
the Company, unless Trident agrees that such action is not necessary or
advisable in connection with the distribution of the Shares, shall file and
make such statements or reports as are, or reasonably may be, required by
the laws of such jurisdiction.
(e) Appropriate entries will be made in the financial records of the
Bank sufficient to establish a liquidation account upon consummation of the
Stock Conversion for the benefit of eligible account holders and
supplemental eligible account holders in accordance with the requirements
of the Office.
(f) The Company will file a registration statement for the Common
Stock under Section 12(g) of the Exchange Act prior to completion of the
stock offering pursuant to the Plan and shall request that such
registration statement be effective upon completion of the Stock
Conversion. The Company shall maintain the effectiveness of such
registration for a minimum period of three years or for such shorter period
as may be required by applicable law.
Trident Securities, Inc.
Sales Agency Agreement
Page 16
(g) The Company will make generally available to its security holders
as soon as practicable, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 of the regulations promulgated under the Act)
covering a twelve-month period beginning not later than the first day of
the Company's fiscal quarter next following the effective date (as defined
in said Rule 158) of the Registration Statement.
(h) For a period of three (3) years from the date of this Agreement
(unless the Common Stock shall have been deregistered under the Exchange
Act), the Company will furnish to Trident, as soon as publicly available
after the end of each fiscal year, a copy of its annual report to
shareholders for such year; and the Company will furnish to Trident (i) as
soon as publicly available, a copy of each report or definitive proxy
statement of the Company filed with the Commission under the Exchange Act
or mailed to shareholders, and (ii) from time to time, such other public
information concerning the Company as Trident may reasonably request.
(i) The Company shall use the net proceeds from the sale of the Shares
consistently with the manner set forth in the Prospectus.
(j) The Company shall not deliver the Shares until each and every
condition set forth in Section 7 hereof has been satisfied, unless such
condition is waived by Trident.
(k) The Company shall advise Trident, if necessary, as to the
allocation of deposits, in the case of eligible account holders and
supplemental eligible account holders, and votes, in the case of other
members, and of the Shares in the event of an oversubscription and shall
provide Trident final instructions as to the allocation of the Shares
("Allocation Instructions") in such event and such information shall be
accurate and reliable. Trident shall be entitled to rely on such
instructions and shall have no liability in respect of its reliance
thereon, including without limitation, no liability for or related to any
denial or grant of a subscription in whole or in part.
(l) The Company and the Bank 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."
(m) At the Closing Date, the Company and the Bank will have completed
the conditions precedent to, and shall have conducted the Stock Conversion
in all material respects in accordance with, the Plan, the OTS Regulations
and all other applicable laws, regulations, published decisions and orders,
including all terms, conditions, requirements and provisions precedent to
the Stock Conversion imposed by the Office.
Trident Securities, Inc.
Sales Agency Agreement
Page 17
6. Payment of Expenses. Whether or not the Stock Conversion is
-------------------
consummated, the Company and the Bank shall pay or reimburse Trident for
(a) all filing fees paid or incurred by Trident in connection with all
filings with the NASD with respect to the Subscription and Community
Offerings and, (b) in addition, if the Company is unable to sell a minimum
of 280,500 shares of Common Stock or such lesser amount as the Office may
permit or the Stock Conversion is otherwise terminated, the Company and the
Bank shall reimburse Trident for allocable expenses incurred by Trident
relating to the offering of the Shares as provided in Section 3 hereof;
provided, however, that neither the Company nor the Bank shall pay or
reimburse Trident for any of the foregoing expenses accrued after Trident
shall have notified the Company or the Bank of its election to terminate
this Agreement pursuant to Section 11 hereof or after such time as the
Company or the Bank shall have given notice in accordance with Section 12
hereof that Trident is in breach of this Agreement.
7. Conditions of Trident's Obligations. Except as may be waived by
-----------------------------------
Trident, the obligations of Trident as provided herein shall be subject to
the accuracy of the representations and warranties contained in Section 2
hereof as of the date hereof and as of the Closing Date, to the performance
by the Company and the Bank of their obligations hereunder and to the
following conditions:
(a) At the Closing Date, Trident shall receive the favorable
opinions of Breyer & Aguggia, special counsel for the Company and the
Bank, dated the Closing Date, addressed to Trident, in form and
substance reasonably satisfactory to counsel for Trident and to the
effect that:
(i) The Company has been duly incorporated and is validly
existing in good standing under the laws of the State of
Tennessee, and the Bank is validly existing as a mutual savings
bank under the laws of the United States, each with full power
and authority to own its properties and conduct its business as
described in the Prospectus;
(ii) each of the Company and the Bank has been qualified to
do business and, to such counsel's knowledge, is in good standing
as a foreign corporation in each jurisdiction where the ownership
or leasing of its properties or the conduct of its business
requires such qualification or, if not so qualified and in good
standing, failure to so qualify would not have any material
adverse effect on the Company and the Bank, taken as a whole;
(iii) the Bank is a member of the Federal Home Loan Bank of
Cincinnati, and the deposit accounts of the Bank are insured by
the SAIF up to the applicable legal limits;
Trident Securities, Inc.
Sales Agency Agreement
Page 18
(iv) to the knowledge of such counsel, the activities of the
Bank as such activities are described in the Prospectus are
permitted under federal and Tennessee law to subsidiaries of a
Tennessee business corporation and the Bank does not have any
subsidiaries;
(v) the Plan complies with and, to the knowledge of such
counsel, the Stock Conversion has been effected in all material
respects in accordance with the HOLA and the OTS Regulations or
appropriate waivers have been obtained; to such counsel's
knowledge, all of the terms, conditions, requirements and
provisions with respect to the Plan and the Stock Conversion
imposed by the Office, except with respect to the filing or
submission of certain required post-Stock Conversion reports or
other materials by the Company or the Bank in all material
respects, have been complied with by the Company and the Bank;
and, to the knowledge of such counsel, no person has sought to
obtain regulatory or judicial review of the final action of the
Office in approving the Plan;
(vi) the Company has authorized Common Stock as set forth in
the Registration Statement and the Prospectus, and the
description of the Common Stock in the Registration Statement and
the Prospectus is accurate in all material respects;
(vii) the issuance and sale of the Shares as set forth in
the Registration Statement and Prospectus have been duly
authorized by all necessary corporate action on the part of the
Company; the Shares, upon receipt of payment and issuance in
accordance with the terms of the Plan and this Agreement, will be
validly issued, fully paid, nonassessable and, except as
disclosed in the Prospectus, free of preemptive rights, and to
the knowledge of such counsel, good title thereto shall be
transferred by the Company free and clear of all claims,
encumbrances, security interests and liens whatsoever created or
suffered to be created by the Company;
(viii) the certificates for the Shares comply in all
material respects with the applicable requirements of Tennessee
law;
(ix) the issuance and sale of the capital stock of the Bank
to the Company have been duly authorized by all necessary
corporate action of the Bank and the Company and have received
the approval of the Office, and such capital stock, upon receipt
of payment and issuance in accordance with the terms of the Plan,
will be validly issued, fully paid and nonassessable and owned of
record by the Company;
Trident Securities, Inc.
Sales Agency Agreement
Page 19
(x) subject to the satisfaction of the conditions to the
Office's approval of the Conversion Application, no further
approval, authorization, consent or other order of any public
board or body is required in connection with the execution and
delivery of this Agreement, the issuance of the Shares and the
consummation of the Stock Conversion, except as may be required
under the "blue sky" or state securities laws of various
jurisdictions;
(xi) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of
each of the Company and the Bank; and this Agreement is a legal,
valid and binding obligation of each of the Company and the Bank,
enforceable in accordance with its terms (except as the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization, receivership, conservatorship or
similar laws relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of
depository institutions whose accounts are insured by the FDIC or
savings and loan holding companies the accounts of whose
subsidiaries are insured by the FDIC or by general equity
principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law, and except to the
extent that the provisions of Sections 8 and 9 hereof may be
unenforceable as against public policy or pursuant to Section
23A, as to which no opinion need be rendered);
(xii) to the knowledge of such counsel, there are no
material legal or governmental proceedings pending or threatened
against or involving the assets of the Company or the Bank
(provided that for this purpose such counsel need not regard any
litigation or governmental procedure to be "threatened" unless
the potential litigant or government authority has manifested to
the management of the Company or the Bank, or to such counsel, a
present intention to initiate such litigation or proceeding);
(xiii) to the knowledge of such counsel, there are no
statutes or regulations required to be described or disclosed in
the Prospectus which are not so described or disclosed;
(xiv) the statements in the Prospectus under the captions
"Dividend Policy," "Regulation," "Taxation," "Restrictions on
Acquisition of the Holding Company, "Registration Requirements"
and "Description of Capital Stock of the Holding Company,"
insofar as they are, or refer to, statements of law or legal
conclusions, have been prepared or reviewed by such counsel and
are correct in all material respects;
Trident Securities, Inc.
Sales Agency Agreement
Page 20
(xv) the Form AC has been approved by the Office, and the
Prospectus and the Proxy Statement have been authorized for use
by the Office; the Registration Statement and any post-effective
amendment thereto has been declared effective by the Commission;
and no proceedings are pending by or before the Commission or the
Office seeking to revoke or rescind the orders declaring the
Registration Statement effective or approving the Conversion
Application or, to the knowledge of such counsel, are
contemplated or threatened (provided that for this purpose such
counsel need not regard any litigation or governmental procedure
to be "threatened" unless the potential litigant or government
authority has manifested to the management of the Company or the
Bank, or to such counsel, a present intention to initiate such
litigation or proceeding); and the Office has issued its order of
approval in connection with the Application H-(e)1-S under the
savings and loan holding company provisions of the HOLA and the
regulations thereunder;
(xvi) the execution and delivery by the Company and the
Bank of, and performance by the Company and the Bank of their
obligations under, this Agreement, do not (i) violate the
respective charter or bylaws of the Company or the Bank (in
either mutual or stock form), (ii) to the knowledge of such
counsel, constitute a material breach of or default (or an event
which, with notice or lapse of time or both, would constitute a
default) under, give rise to any right of termination,
cancellation or acceleration contained in, or result in the
creation or imposition of any material lien, charge or other
encumbrance upon any of the properties or assets of the Company
or the Bank pursuant to any of the terms, provisions or
conditions of, any material agreement, contract, indenture, bond,
debenture, note, instrument or obligation to which the Company or
the Bank is a party or (iii) violate the HOLA or the OTS
Regulations or, to such counsel's knowledge, any existing
material obligation of the Company or the Bank under any court
order, writ, injunction or decree that specifically names the
Company or the Bank and that are specifically directed to any of
them or their property (subject to the satisfaction of certain
conditions imposed by the Office in connection with its approval
of the Conversion Application);
(xvii) The Conversion Application, the Registration
Statement, the Prospectus and the Proxy Statement comply as to
form in all material respects with the requirements of the Act
and the SEC Regulations, the HOLA and the OTS Regulations (except
as to financial statements, notes to financial statements,
financial tables and other financial and statistical data and the
appraisal included therein, as to which no opinion need be
expressed); to the knowledge of such counsel all documents and
exhibits required to be filed with the Conversion Application and
the Registration Statement have been so filed; the description in
the Conversion Application and the Registration Statement of such
documents and
Trident Securities, Inc.
Sales Agency Agreement
Page 21
exhibits is accurate in all material respects; and to the knowledge of
such counsel, there are no contracts or other documents of a character
required to be described in the Conversion Application, the
Registration Statement or the Prospectus which have not been described
therein;
(xviii) to the knowledge of such counsel, the Bank has obtained
all licenses, permits and other governmental authorizations currently
required for the conduct of its business as such business is described
in the Prospectus, all such licenses, permits and other governmental
authorizations are in full force and effect and the Bank is in all
material respects complying therewith, except where the failure to
hold such licenses, permits or governmental authorizations or the
failure to hold such licenses, permits or governmental authorizations
or the failure to so comply would not have a material adverse effect
on the Company and the Bank, taken as a whole; and
(xix) to the knowledge of such counsel, there has been no
material breach of any provision of the Company's or the Bank's
charter or bylaws or breach or default (or the occurrence of any event
which, with notice or lapse of time or both, would constitute a
default) under any agreement, contract, indenture, debenture, bond,
note, instrument or obligation to which the Company or the Bank is a
party or by which any of them or any of their respective assets or
properties may be bound, or any governmental license or permit, or a
violation of any enforceable published law, administrative regulation
or order, or court order, writ, injunction or decree which breach,
default, encumbrance or violation would have a material adverse effect
on the condition (financial or otherwise), operations, business,
assets or properties of the Company and the Bank, taken as a whole;
In rendering such opinions, such counsel may rely as to matters of
fact on certificates of officers and directors of the Company and the Bank
and certificates of public officials delivered pursuant hereto. Such
counsel may assume that any agreement is the valid and binding obligation
of any parties to such agreement other than the Company and the Bank. Such
opinions may be governed by, and interpreted in accordance with, the Legal
Opinion Accord (the "Accord") of the ABA Section of Business Law (1991),
and, as a consequence, references in such opinions to such counsel's
"knowledge" may be limited to "actual knowledge" as defined in the Accord
(or knowledge based on certificates). Such opinions may be limited to
present statutes, regulations and judicial interpretations and to facts as
they presently exist; in rendering such opinions, such counsel need assume
no obligation to revise or supplement them should the present laws be
changed by legislative or regulatory action, judicial decision or
otherwise; and such counsel need express no view, opinion or belief with
respect to whether any proposed or pending legislation, if enacted, or any
regulations or any policy statements issued by any
Trident Securities, Inc.
Sales Agency Agreement
Page 22
regulatory agency, whether or not promulgated pursuant to any such
legislation, would affect the validity of the execution and delivery by the
Company and the Bank of this Agreement or the issuance of the Shares.
(b) At the Closing Date, Trident shall receive the letter of Breyer &
Aguggia, special counsel for the Company and the Bank, dated the Closing
Date, addressed to Trident, in form and substance reasonably satisfactory
to counsel for Trident and to the effect that: nothing has come to such
counsel's attention that would lead it to believe that the Registration
Statement, as amended (except as to information in respect of Trident
contained therein and except as to the appraisal, financial statements,
notes to financial statements, financial tables and other financial and
statistical data contained therein, as to which such counsel need express
no comment), at the time it became effective contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein not
misleading, or that the Prospectus, as amended (except as to information in
respect of Trident contained therein and except as to the appraisal,
financial statements, notes to financial statements, financial tables and
other financial and statistical data contained therein as to which such
counsel need express no comment), as of its date and at the Closing Date,
contained any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein not misleading (in
making this statement such 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).
(c) Counsel for Trident shall have been furnished such documents as
they reasonably may require for the purpose of enabling them to review or
pass upon the 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 Board of Directors of the Company and
the Bank regarding the authorization of this Agreement and the transactions
contemplated hereby.
(d) At the Closing Date, Trident shall receive such opinion of Housley
Kantarian & Bronstein, P.C., counsel for Trident, with respect to such
matters as Trident may reasonably request, and such counsel shall have
received such documents, papers and records as they may request for the
purpose of enabling them to pass upon such matters.
(e) Prior to and at the Closing Date, in the reasonable opinion of
Trident, (i) there shall have been no material change in the financial
condition, business or results of operations of the Company and the Bank,
taken as a whole, since the latest date as of which such condition is set
forth in the Prospectus, except as referred to therein; (ii) there
Trident Securities, Inc.
Sales Agency Agreement
Page 23
shall have been no transaction entered into by the Company or the Bank
after the latest date as of which the financial condition of the Company or
the Bank is set forth in the Prospectus other than transactions referred to
or contemplated therein, transactions in the ordinary course of business,
and transactions which are not material to the Company and the Bank, taken
as a whole; (iii) neither the Company nor the Bank shall have received from
the Office or Commission any direction (oral or written) to make any change
in the method of conducting their respective businesses which is material
to the business of the Company and the Bank, taken as a whole, with which
they have not complied; (iv) no action, suit or proceeding, at law or in
equity or before or by any federal or state commission, board or other
administrative agency, shall be pending or threatened against the Company
or the Bank or affecting any of their respective assets, wherein an
unfavorable decision, ruling or finding would have a material adverse
effect on the business, operations, financial condition or income of the
Company and the Bank, taken as a whole; and (v) the Shares shall have been
qualified or registered for offering and sale by the Company under the
securities or blue sky laws of such jurisdictions as Trident and the
Company shall have agreed upon.
(f) At the Closing Date, Trident shall receive a certificate of the
principal executive officer and the principal financial officer of each of
the Company and the Bank, dated the Closing Date, to the effect that: (i)
they have examined the Prospectus and, at the time the Prospectus became
authorized by the Commission and the Office for use, the Prospectus did not
contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading with respect to
the Company or the Bank; (ii) since the date the Prospectus became
authorized by the Commission and the Office 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 specifically, but
without limitation, any material change in the business, financial
condition or results of operations of the Company or the Bank, and the
conditions set forth in clauses (ii) through (iv) inclusive of subsection
(e) of this Section 7 have been satisfied; (iii) to the best knowledge of
such officers, no order has been issued by the Commission or the Office to
suspend the Subscription Offering or the Community Offering or the
effectiveness of the Registration Statement, and no action for such
purposes has been instituted or threatened by the Commission or the Office;
(iv) to the best knowledge of such officers, no person has sought to obtain
review of the final actions of the Office approving the Plan; and (v) all
of the representations and warranties contained in Section 2 of this
Agreement are true and correct, with the same force and effect as though
expressly made on the Closing Date.
(g) At the Closing Date, Trident shall receive, among other documents,
(i) copies of the letters from the Office authorizing the use of the
Prospectus and the Proxy Statement, (ii) a copy of the order of the
Commission declaring the Registration Statement
Trident Securities, Inc.
Sales Agency Agreement
Page 24
effective; (iii) copies of the letters from the Office evidencing the
corporate existence of the Bank; (iv) a copy of the letter from the
appropriate Tennessee authority evidencing the incorporation (and, if
generally available from such authority, good standing) of the Company; (v)
a copy of the Company's charter certified by the appropriate Tennessee
governmental authority; and, (vi) a copy of the letter from the Office
approving the Bank's Stock Charter.
(h) As soon as available after the Closing Date, Trident shall receive
a certified copy of the Bank's Stock Charter executed by the Office.
(i) Concurrently with the execution of this Agreement, Trident
acknowledges receipt of a letter from Householder, Artman and Associates,
P.C., independent certified public accountants, addressed to Trident and
the Company, in substance and form satisfactory to counsel for Trident,
with respect to the financial statements and certain financial information
contained in the Prospectus.
(j) At the Closing Date, Trident shall receive a letter in form and
substance satisfactory to Trident from Householder, Artman and Associates,
P.C., independent certified public accountants, dated the Closing Date and
addressed to Trident and the Company, confirming the statements made by
them in the letter delivered by them pursuant to the preceding subsection
as of a specified date not more than five (5) days prior to the Closing
Date.
(k) At the Closing Date, the Company and the Bank shall have completed
the conditions precedent to, and shall have conducted the Stock Conversion
in all material respects in accordance with, the Plan and the OTS
regulations and all other applicable laws, regulations, decisions and
orders, including all terms, conditions, requirements and provisions
precedent to the Stock Conversion and the approval of the Conversion
Application imposed upon them by the Office.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the reasonable
opinion of Trident, satisfactory to Trident. Any certificates signed by an
officer or director of the Company or the Bank prepared for Trident's reliance
and delivered to Trident or to counsel for Trident shall be deemed a
representation and warranty by the Company and the Bank 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 as aforesaid, the Company and the Bank shall
reimburse Trident for its expenses as provided in Section 3 hereof.
Trident Securities, Inc.
Sales Agency Agreement
Page 25
8. Indemnification.
---------------
(a) The Company and the Bank jointly and severally agree to indemnify
and hold harmless Trident, its officers, directors and employees and each
person, if any, who controls Trident within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, against any and all loss,
liability, claim, damage and expense whatsoever and shall further promptly
reimburse such persons for any legal or other expenses reasonably incurred
by each or any of them in investigating, preparing to defend or defending
against any such action, proceeding or claim (whether commenced or
threatened) arising out of or based upon (A) any misrepresentation by the
Company or the Bank in this Agreement or any breach of warranty by the
Company or the Bank with respect to this Agreement or arising out of or
based upon any untrue or alleged untrue statement of a material fact or the
omission or alleged omission of a material fact required to be stated or
necessary to make not misleading any statements contained in (i) the
Registration Statement or the Prospectus or (ii) any application (including
the Form AC and the Form H-(e)1-S) or other document or communication (in
this Section 8 collectively called "Application") prepared or executed by
or on behalf of the Company or the Bank or based upon information furnished
by or on behalf of the Company or the Bank, whether or not filed in any
jurisdiction, to effect the Stock Conversion or qualify the Shares under
the securities laws thereof or filed with the Office or Commission, unless
such statement or omission was made in reliance upon and in conformity with
information furnished to the Company or the Bank with respect to Trident by
or on behalf of Trident expressly for use in the Registration Statement,
the Prospectus or any amendment or supplement thereof or in any
Application, as the case may be, or (B) the participation by Trident in the
Stock Conversion, provided, however, that this indemnification agreement
will not apply to any loss, liability, claim, damage or expense found in a
final judgment by a court of competent jurisdiction to have resulted
primarily from the bad faith, willful misconduct or gross negligence of any
party who may otherwise be entitled to indemnification pursuant to this
Section 8(a). This indemnity shall be in addition to any liability the
Company and the Bank may have to Trident otherwise.
(b) The Company shall indemnify and hold Trident harmless for any
liability whatsoever arising out of (i) the Allocation Instructions or (ii)
any records of account holders, depositors, borrowers and other members of
the Bank delivered to Trident by the Bank or its agents for use during the
Stock Conversion. This indemnity shall be in addition to any liability the
Company and the Bank may have to Trident otherwise.
(c) Trident agrees to indemnify and hold harmless the Company and the
Bank, their officers, directors and employees and each person, if any, who
controls the Company and the Bank within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company and the Bank to
Trident Securities, Inc.
Sales Agency Agreement
Page 26
Trident, but only with respect to (A) statements or omissions, if any, made
in the Prospectus or any amendment or supplement thereof, in any
Application or to a purchaser of the Shares in reliance upon, and in
conformity with, information furnished to the Company or the Bank with
respect to Trident by or on behalf of Trident expressly for use in the
Prospectus or in any Application; (B) any misrepresentation by Trident in
Section 2(b) of this Agreement; or (C) any liability of the Company or the
Bank which is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have principally and
directly resulted from gross negligence or willful misconduct of Trident,
provided, however, that this indemnification agreement will not apply to
any loss, liability, claim, damage or expense found in a final judgment by
a court of competent jurisdiction to have resulted primarily from the bad
faith, willful misconduct or gross negligence of any party who may
otherwise be entitled to indemnification pursuant to this Section 8(c).
(d) Promptly after receipt by an indemnified party under this Section
8 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 8, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with the
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than the reasonable cost of investigation except as
otherwise provided herein. In the event the indemnifying party elects to
assume the defense of any such action and retain counsel acceptable to the
indemnified party, the indemnified party may retain additional counsel, but
shall bear the reasonable 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 reasonable fees and expenses of
such counsel. An indemnifying party against whom indemnity may be sought
shall not be liable to indemnify an indemnified party under this Section 8
if any settlement of any such action is effected without such indemnifying
party's consent. To the extent required by law, this Section 8 is subject
to and limited by the provisions of Section 23A.
Trident Securities, Inc.
Sales Agency Agreement
Page 27
9. Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in Section 8
above is for any reason held to be unavailable to Trident, the Company and/or
the Bank other than in accordance with its terms, the Company or the Bank and
Trident shall contribute to the aggregate losses, liabilities, claims, damages,
and expenses of the nature contemplated by said indemnity agreement incurred by
the Company or the Bank and Trident (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Bank, on the one
hand, and Trident on the other from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above, but also the relative fault of the Company or
the Bank, on the one hand, and Trident on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Bank, on
the one hand, and Trident on the other shall be deemed to be in the same
proportions as the total net proceeds from the Stock Conversion received by the
Company and the Bank bear to the total fees and expenses received by Trident
under this Agreement. The relative fault of the Company or the Bank on the one
hand and Trident on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Bank or by Trident and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Bank and Trident agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by the indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, Trident shall not be required
to contribute any amount in excess of the amount by which fees owed Trident
pursuant to this Agreement exceeds the amount of any damages which Trident has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. To the extent required by law, this Section 8 is subject to
and limited by the provisions of Section 23A.
10. Survival of Agreements, Representations and Indemnities. The
--------------------------------------------------------
respective indemnities of the Company and the Bank and Trident and the
representations and warranties of the Company and the Bank and of Trident set
forth in or made pursuant to this Agreement shall remain in full
Trident Securities, Inc.
Sales Agency Agreement
Page 28
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of Trident or the Company or
the Bank or any controlling person or indemnified party referred to in Section 8
hereof, and shall survive any termination or consummation of this Agreement
and/or the issuance of the Shares, and any legal representative of Trident, the
Company, the Bank and any such controlling persons shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations.
11. Termination. Trident may terminate this Agreement by giving the
-----------
notice indicated below in this Section at any time after this Agreement becomes
effective as follows:
(a) If any domestic or international event or act or occurrence has
materially disrupted the United States securities markets such as to make
it, in Trident's reasonable opinion, impracticable to proceed with the
offering of the Shares; or if trading on the New York Stock Exchange shall
have suspended; 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 Tennessee or federal authority which has material effect on the Bank
or the Stock Conversion; or if a moratorium in foreign exchange trading by
major international banks or persons has been declared; or if there shall
have been a material adverse change in the capitalization, financial
condition or business of the Company, or if the Bank shall have sustained a
material or substantial loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act, whether or
not said loss shall have been insured.
(b) If Trident elects to terminate this Agreement as provided in
this Section, the Company and the Bank shall be notified promptly by
Trident by telephone or telegram, confirmed by letter.
(c) If this Agreement is terminated by Trident for any of the
reasons set forth in subsection (a) above, and to fulfill its obligations,
if any, pursuant to Sections 3, 6, 8(b) and 9 of this Agreement and upon
demand, the Company and the Bank shall pay Trident the full amount so owing
thereunder.
(d) The Bank may terminate the Stock Conversion in accordance with
the terms of the Plan. Such termination shall be without liability to any
party, except that the Company and the Bank shall be required to fulfill
their obligations pursuant to Sections 3(b), 3(c), 6, 8(a) and 9 of this
Agreement.
12. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or faxed and confirmed to Trident Securities, Inc., 4601 Six
Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Mr. R. Lee
Burrows, Jr. (with a copy to Housley Kantarian & Bronstein, P.C.,
Trident Securities, Inc.
Sales Agency Agreement
Page 29
1220 19th Street, N.W., Washington, DC 20036, Attention: Gary R. Bronstein,
Esquire) and if sent to the Company, the Bank or any Subsidiary, shall be
mailed, delivered or telegraphed and confirmed to Security Bancorp, Inc.,
Security Federal Savings Bank of McMinnville,TN, 306 West Main Street,
McMinnville, Tennessee 37110, Attention: Mr. Joe H. Pugh, President and Chief
Executive Officer (with a copy to Breyer & Aguggia, 1301 I Street, N.W., Suite
470 East, Washington, D.C. 20005, Attention: John F. Breyer, Jr., Esquire).
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, Trident, the Company, the Bank and the controlling and
other persons referred to in Section 8 hereof, and their respective successors,
legal representatives and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
14. Construction. Unless governed by preemptive federal law, this
------------
Agreement shall be governed by and construed in accordance with the substantive
laws of Tennessee.
15. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
Trident Securities, Inc.
Sales Agency Agreement
Page 30
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
SECURITY BANCORP, INC. SECURITY FEDERAL SAVINGS BANK
OF MCMINNVILLE, TN
By: By:
------------------------------- -------------------------------
Joe H. Pugh Joe H. Pugh
President and Chief President and Chief
Executive Officer Executive Officer
Date: Date:
---------------------------- ---------------------------
Agreed to and accepted:
TRIDENT SECURITIES, INC.
By:
---------------
Date:
---------------
Exhibit A
Trident Securities, Inc. is a registered selling agent in the jurisdictions
--
listed below:
Alabama Missouri
Arizona Nebraska
Arkansas Nevada
California New Hampshire
Colorado New Jersey
Connecticut New Mexico
Delaware New York
District of Columbia North Carolina
Florida North Dakota (Trident Securities, Inc. only, no
agents)
Georgia Ohio
Idaho Oklahoma
Illinois Oregon
Indiana Pennsylvania
Iowa Rhode Island
Kansas South Carolina
Kentucky Tennessee
Louisiana Texas
Maine Vermont
Maryland Virginia
Massachusetts Washington
Michigan West Virginia
Minnesota Wisconsin
Mississippi Wyoming
Trident Securities, Inc. is not a registered selling agent in the jurisdictions
---
listed below:
Alaska
Hawaii
Montana
South Dakota
Utah