TASK DEFINITION: In this task, you're given a passage that represents a legal contract or clause between multiple parties, followed by a question that needs to be answered. Based on the paragraph, you must write unambiguous answers to the questions and your answer must refer a specific phrase from the paragraph. If multiple answers seem to exist, write the answer that is the most plausible.
PROBLEM: EXHIBIT 10.11

                         NETWORK 1 FINANCIAL CORPORATION

                           AFFILIATE OFFICE AGREEMENT

THIS  AGREEMENT  is  entered  into  by  and  between  NETWORK  1 FINANCIAL, INC. (NETWORK  1),  a  Virginia Corporation with its principal place of business at 1501  Farm  Credit  Drive,  Suite 1500, McLean, Virginia 22102-5004, and Payment Data  Systems,  Inc.,  the  Affiliate Office (AFFILIATE), a Nevada Corporation with  its  principal place of business at 12500 San Pedro Suite 120 San Antonio, TX  78216.  NETWORK  1  and  Affiliate  hereby  agree  as  follows:

                                    RECITALS

WHEREAS, Network 1 Financial, Inc. (Network 1) provides through various Member Bank(s)  (Member),  VISA  and  MasterCard  processing  and  related  payment processing  services  (Services)  to merchant(s) (Merchant(s)) in accordance with  the  terms  of  certain  Agreement (s) between Network 1, Member and other settlement/transaction  processing  providers;  and

WHEREAS,  the  Network  1  desires  to  locate individuals to market Services as Contractor(s)  (the  Contractors)  of  Network  1;

WHEREAS,  Affiliate  desires  to  establish  an  Affiliate Office on behalf of Network 1 and Affiliate to market the Services of Network 1 and its subsidiaries and  to  locate Contractors on behalf of Network 1, Member, and Affiliate and to provide  a  Local  Office  for  such  Contractors  on  the  terms  and for the consideration  set  forth  herein;  And

WHEREAS,  Affiliate  requires  a  referral  arrangement  while  Affiliate  is negotiating an ISO sponsorship agreement with Network 1 and Harris Bank and this Agreement  shall  govern  the agreement between the parties until such time that the  ISO  sponsorship agreement has been approval and executed in which case the Processing  Agreement, ISO sponsorship Agreement, and Three Party Agreement will govern  the  relationship and this Agreement shall be terminated without penalty or  prejudice;

NOW,  THEREFORE,  in  consideration of the foregoing and for the mutual promises set  forth  herein,  the  parties  hereby  agree  as  follows:

                                    ARTICLE I  [OBLIGATIONS OF AFFILIATES]

OBLIGATIONS  OF  AFFILIATES

1.01     CONTRACTORS.  Affiliate  shall  use its best efforts to market and sell to  commercial businesses the Services of Network 1 and Network 1's subsidiaries and  to  locate individuals who are willing and capable of acting as Contractors of  Network  1  and Affiliate subject to the approval of all such individuals by Network  1  as  set  out  in  Section  2.01  [CONTRACTORS].  All  such Contractors must process Merchant applications and transactions exclusively through Network 1.  Network 1 consents  to  waive  said  exclusivity  requirement  with  respect  to  specific Merchants  in  the  event  Network  1 (i) is unable to process for such specific Merchant,  and  (ii)  the  declined Merchant is not accepted for processing by a provider  that Network 1 designates for specific Merchant's that are declined by Network  1  (B  Bank  Source).  Affiliate  shall  disclose  to  Network  1 all information  known  to  Affiliate  with  respect  to  the background, character, employment  history,  business  experience  and other information regarding each prospective  Contractor  relevant to Network 1's determination whether to accept or  not  accept  each  prospective  Contractor.

1.02     LOCAL OFFICE (AFFILIATE OFFICE).  Affiliate shall locate, establish and maintain such offices (the Local Office), as it deems necessary for use by all Contractors  identified  by  Affiliate  and  accepted  by  Network 1.  Network 1 expressly  agrees  that  Affiliate shall not be geographically restricted in its establishment of such offices.  Local Office has met the satisfaction of Network 1  in  terms  of  space, quality, appearance, equipment, supplies, office hours, support  staff,  working  conditions, and other factors materially affecting the working  conditions  of  its  Contractors.  All  Local Offices shall bear signs, emblems  and  other  insignia, including a telephone number, indicating that the office  is  in  fact  an  office of Network 1 subject to the conditions of 4.02. However, all leases, utility listing, telecommunication, furniture and equipment expense, employment contracts for support personnel and other contracts relating to  the  operation of the Local Office shall be in the name of the Affiliate and shall  be  the  sole  responsibility  of  the  Affiliate.

1.03     REQUIRED  REGISTRATION.  All  of  the  Contractors located by Affiliate must  also  be  registered  representative  through  Network  1  pursuant to the registration  documents  noted  on  Exhibit  D.

Source: USIO, INC., SB-2, 4/28/2004





1.04     PURCHASE  AND  LEASE  OF  EQUIPMENT.  All  equipment and software sold, leased or otherwise provided by Affiliate to Merchants and Commercial Businesses (whether  sold  directly, through Contractors, or leasing companies) relating to any  services  provided by Network 1 may be purchased from Network 1.  Network 1 agrees  to sell such Equipment and Software to Affiliate at prices pursuant to a price  list  established  by  Network  1  and  provided  to  the Affiliate.  The Affiliate  shall  be  responsible  for and hereby guarantees the payments of all amounts  owed  to  Network  1  with  respects  to  the purchase of Equipment and Software  from  Network  1  by  merchant  or  commercial  business.

1.05     NETWORK  1  TO  APPROVE  ALL MERCHANTS AGREEMENTS.  Affiliate agrees to submit  all  Merchant  Agreements  procured by Affiliate in accordance with this Agreement  to  Network 1.  Network 1 agrees to review and approve or decline all Merchant  Agreements  submitted  by  Affiliate  to  Network 1 in accordance with Network 1's approval policy.  Affiliate acknowledges that approval of a Merchant creates  a  customer relationship between Bank and the Merchant, which involves, among  other  things,  the  collection  and disbursement of funds to process and settle Merchant Transactions.  Bank and Network 1 shall, in its sole discretion, make  the  final  decision  as to whether or not approve or decline any Merchant Agreement submitted to Bank in accordance with this Agreement.  Network 1 agrees to  make  reasonable  efforts  to  review  and  approve  or decline all Merchant Agreements  submitted  to  Network  1.

1.06     RESTRICTED  MERCHANTS  AND MERCHANT ACTIVITIES.  Affiliate shall market only  to  bona  fide  and  lawful retail, MO/TO, and Internet businesses, all in accordance  with  Merchant Program Standards established by Network 1. Affiliate shall  not  engage in factoring or laundering or promote the same.  Factoring or laundering,  for  purpose  of  this Agreement, means the processing or attempted processing  of  Merchant Transactions through a Merchant Account other than that which  is  the  Merchant  Account  of  the  Merchant processing or attempting to process  the  Merchant Transaction. At the Affiliate request, a boarded Merchant may  be  terminated  from  services  so  long  as  good  reason  exists.

                                   ARTICLE II  [RIGHTS OF NETWORK 1]

RIGHTS  OF  NETWORK  1

2.01     CONTRACTORS.  Network  1  shall  have  the right, at its discretion, to accept,  not accept, terminate or otherwise deal with any individuals located by Affiliate  pursuant  to  Section  1.01  [CONTRACTORS].  All individuals identified by Affiliate shall be subject to the rules imposed by Network 1, VISA, MasterCard, NACHA, and the  Member bank (Member) utilized by Network 1, including rules pertaining to qualification  disqualification, conduct and otherwise, and shall agree to enter into,  and  shall  in fact enter into, a three party Contractor Agreement in the form  attached  hereto  as  Exhibit  1  as  amended  from  time  to  time.

2.02     LOCAL  OFFICE.  Network  1  shall  have  the right to inspect the Local Offices  during  normal business hours to insure compliance by Affiliate with is obligations  pursuant  to  Section  1.02  [LOCAL OFFICE (AFFILIATE OFFICE)].

2.03     RETENTION  OF  CONTRACTORS.  In  the  event  that this contract between Network 1 and Affiliate is terminated for any reason, the Contractors located by Affiliate  shall  remain  Contractors  of  Network  1.

(A)     RIGHT  OF  FIRST  REFUSAL.  If during the term of this Agreement for any renewal of this Agreement (the Right of First Refusal Period), Affiliate shall receive (i) any Bona Fide Offer to purchase the revenue due Affiliate under this Agreement  or  Affiliate's company through an asset purchase or merger (in which case  Network  1  shall be subordinate to the Checkfree first refusal right), or (ii) a Bona Fide Offer to acquire or merge with or into Affiliate (in which case Network  1 shall be subordinate to the Checkfree first refusal right), Affiliate shall  immediately  give written notice (the Offer Notice) to Network 1 of the terms  and  conditions  of the Bona Fide Offer, including without limitation the price.  Network  1  shall  have the exclusive right of first refusal to purchase all  or  any part of the revenue due Affiliate or acquire Affiliate (as the case may  be)  on the same terms and conditions as the Bona Fide Offer.  If Network 1 desires to exercise its rights under this Section it will give written notice to Affiliate  within  15  business  days  of  receipt of the Offer.  The failure by Network  1  to  exercise  its  rights within the 15-day period shall be deemed a waiver  of  such right.  Any changes in the terms of the Bona Fide Offer as well as  any  subsequent  Bona  Fide  Offer  received by Affiliate shall require full compliance  by  Affiliate  with  the  procedures  in  this  Section. (b)     CLIENT  shall have the right to withdraw (Transfer) Merchants from the Merchant  Program,  provided  (i)  that CLIENT shall have given 120 days written notice to NET1, (ii) that Affiliate is not in, and has not breached any terms of this  Agreement,  (iii)  NW1  has  waived its rights in Section 2.03 (a)  [RETENTION OF CONTRACTORS] (iv) 18 months  have  lapsed  under this Agreement and (v) Affiliate pays the applicable Exit Fee as defined in section 7.6 (c) below.  NET1 agrees that it shall use its reasonable  efforts to cause the prompt and orderly Transfer of all Merchants to the  processor  or  processors  selected by Affiliate.  Affiliate agrees that in

Source: USIO, INC., SB-2, 4/28/2004





addition  to  the  Exit  Fee,  all out of pocket and reasonable reimbursement of staff expenses shall be paid prior to the Transfer of the Merchants from NET1 or Harris  Bank. (c)     The  Exit  Fee  shall  be  paid  by  Affiliate  immediately prior to the assignment  or  Transfer of Merchants and/or its net revenue.  The amount of the Exit Fee during and following the termination of this Agreement shall be defined as  the  following:  (1)  the aggregate sum, per transferring merchant, equal to eighteen  (18) months net recurring revenue normally paid to Affiliate under the compensation  terms  of  this  Agreement  to  a  maximum  of  $250,000.

                                   ARTICLE III  [COMPENSATION]

COMPENSATION

3.01     AMOUNT.  As compensation for Affiliate's services hereunder, Network 1, or  an  affiliate, shall pay to Affiliate the following (the Affiliate's Fee): A.     The  surplus  funding  amount after costs noted in Exhibit A based on all Merchant  applications  obtained  for  Equipment  and Products sold or leased by Affiliate  or  Contractors  located  by  Affiliate  pursuant  to  Section  1.01  [CONTRACTORS]. Affiliate  shall  receive the buy rate with revenue share as noted in Exhibit A. B.     Affiliate  acknowledges  and  agrees  that  all merchants and subscribing businesses  referred  by  Affiliate are a party to a contract with Network 1 and it's Member bank and that Network 1 and the Member bank has a direct contractual relationship  with  the  merchants  and  subscribing  businesses.  Network  1 acknowledges and agrees that Affiliate has certain rights to residual revenue as specifically  defined in this agreement.  Affiliate acknowledges and agrees that it  has  no  claims  or  rights  of  ownership  over  Merchants  and subscribing businesses,  Unless  ISO  agreement is consummated or Network 1 does not approve Affiliate  or Network 1 cancels Affiliate and that it is a service provider to a customer  of  Network  1  (namely Merchants and subscribing businesses). In such case,  Affiliate  shall  have  the right to Transfer accounts in accordance with Section  2.03  (b)  [RETENTION OF CONTRACTORS]  and  2.03  (c).  The  Affiliate's Fees outlined in Exhibit A attached  hereto  and  incorporated  herein  shall be subject to modification by Network  1, at its discretion, upon the giving of thirty-days (30) prior written notification.

3.02     PAYMENT.  The  Affiliate's Fee payable pursuant to this agreement shall be  payable  as  outlined in Exhibit A. All payments to Affiliate are subject to Network  1  receipt  of all amounts payable to Network 1 by the Member Bank with respect  to the transaction giving rise to Affiliate's Fee. Network 1 shall have no  liability  with  respect  to  the  payment  of such Affiliate's Fee (for any specific  Merchant)  under  Section 3.01  [AMOUNT] unless and until Network 1 receives the above  referenced  payment for Merchant.  In the event Merchant rejects fees for any  reason,  the  fees  due to Affiliate shall not be due and only payable upon Network 1's receipt of such payment. Payments will be made on or before the 25th of  each  calendar  month.

3.03     LOSSES.  All  losses  or  charges arising from acts or omissions of the Affiliate,  Contractors  located by the Affiliate, or arising from transactions, chargebacks,  lost  revenues  due  to  account  cancellation  or  rejected  fee collections,  acts  or omissions of Merchants obtained by Contractors located by Affiliate  shall  be  borne  as  set  out  in  Exhibit  C.

                                   ARTICLE IV  [RESTRICTIONS ON AFFILIATE]

RESTRICTIONS  ON  AFFILIATE

4.01     RESTRICTIONS.  Affiliate shall not, without the express written consent of  Network  1: i.           Contact  or  otherwise  deal directly with, VISA, MasterCard or the Member  Bank;  or ii.     Make  any representations with respect to Network 1, VISA, MasterCard or the  Member  Bank;  or iii.     Make  contact  with  or  contract  with  any vendor of Network 1 or its subsidiaries  including other Affiliate's, direct sponsored ISO/MSP's of Network 1/Member  Bank,  or  any merchants currently processing with Network 1 or Member Bank. iv.     Network  1  expressly  understands  and gives permission to Affiliate to contact  any  organization  that  Affiliate deems necessary to implement its ISO program.

4.02     NETWORK  1  NAME  USAGE.  Affiliate  shall  use  the  Network 1 name in Relationship to all Bankcard marketing activity as required by the rules of VISA USA,  International  and  MasterCard International.  Affiliate acknowledges that the  use of the Network 1 name is on a non-exclusive basis and further agrees to cease using Network 1 name, including but not limited to logo(s) and insignia(s) at  the written request of Network 1.  In the event this contract terminates for any  reason,  Affiliate  shall  immediately cease using the Network 1 name.  The insignia,  logo's,  Service  Marks,  trademarks  and  name  of Network 1 are the

Source: USIO, INC., SB-2, 4/28/2004





absolute  and  sole  right  of  Network  1  Financial  Corporation,  a  Virginia Corporation.

                                    ARTICLE V  [TERM AND TERMINATION]

TERM  AND  TERMINATION

5.01     TERM.  The  term  (Term)  of  this Agreement shall be for one hundred eighty  days  (180)  from  the  date set forth below unless Network 1 or Visa or MasterCard  or Harris Bank doesn't approve Affiliate's ISO application, in which case,  the  Term  will  be  3 years. This Agreement will automatically renew for successive  one-year  terms  unless  terminated by either party by providing the other  with  30  days  written notice that this Agreement will not be renewed or Affiliate  enters  into  a  Processing  agreement  with  Network  1  and  an ISO Sponsorship  agreement  with  Harris  Bank  in  which  case  this Agreement will automatically  terminate  concurrent  with  the  execution  of  such agreements.

5.02     TERMINATION.  Agreement  may  be  terminated prior to the conclusion of the  Term  by  giving  written  notice  of  termination: A.     By  either  party  as  a  result of default by the other party under this Agreement  and failure to cure said default within thirty (30) days after notice of  said  default  is  given. B.     By  either  party  in the event of insolvency, receivership, voluntary or involuntary  bankruptcy  or  an assignment for the benefit of creditors of or by the Affiliate other than in the ordinary course of business.  However, Affiliate may  pledge  or  otherwise  collateralize  assets  for  the  purpose of securing commercial  loans or lines of credit in the ordinary course of business provided that  such  pledge  is  subordinate  to an security interest associated with the Merchant  accounts  and/or  losses  from  such  accounts. C.     By  Affiliate  in  the event of any changes in the Affiliate's Fee (other than  direct  pass through increases related to Visa and MasterCard interchange, fees,  assessments  and  dues,  processor  communication costs, and other direct increases  including  terminal  hardware). D.     By Network 1, for cause. For purpose hereof; cause shall consist of (i) fraud,  intentional  misrepresentation  or  negligence  by  Affiliate  or  any Contractor  located  by  Affiliate  in  compiling  or  providing any information submitted  to  or relied on by Network 1 to Network 1, whether or not such fraud or  misrepresentation  is based on a misstatement, omission, a substantive fact, or  data;  (ii)  intentional  violations  by  the Affiliate or any Contractor(s) located by Affiliate of any of the rules or regulations of VISA, MasterCard, the Member Bank or Network 1; and (iii) the providing of vendor services or merchant services  by  Affiliate  or  Contractor(s)  located  by  Affiliate  which  are competitive  with  Network  1 or without the prior written consent of Network 1, contrary  to Section 1.01  [CONTRACTORS] and IV, violation of any clause of Network 1 Affiliate Office  Agreement  and  failure  to  cure  such  violation  within  30  days  of notification E.     By  Network  1 in the event any provision of the Sales Certificate or the Code  of  Ethics  is  in  breach  by  the  Affiliate or Contractor(s) located by Affiliate. F.      Affiliate  enters  into a Processing agreement with Network 1 and an ISO Sponsorship  agreement  with  Harris  Bank  in  which  case  this Agreement will automatically  terminate  concurrent  with  the  execution  of  such agreements.      If  this  Agreement is terminated for cause, all rights of the Affiliate to future  payments  hereunder shall immediately terminate and Transferability will remain  in  place  in  accordance  with  Section  2.03  (b)  [RETENTION OF CONTRACTORS]  and  2.03  (c).

5.03     EFFECT  OF  TERMINATION.  Upon termination of this Agreement, except in the  event  of  termination  due  to an uncured default by Affiliate pursuant to Section  5.02  [TERMINATION]A, Network 1 shall continue to pay to the Affiliate the Affiliate's Fee  described  in  Section  3.01  [AMOUNT]B for so long as Network 1 continues to process transactions  of the Merchants in accordance with Schedule B attached hereto and Affiliate  continues  to maintain the merchant accounts, provided, however, that no such Affiliate's Fees shall be earned or paid for any calendar month in which the  Affiliate's  Fee  does not exceed $500.  Upon termination due to an uncured default  by  Affiliate,  or  termination for cause pursuant to Section 5.02  [TERMINATION]D all Affiliates  fees  shall  cease  to  be  accrued  and  paid  immediately upon the occurrence  of  said  event. Additionally, upon termination of this contract for any  reason, all merchants recruited by Affiliate on behalf of Network 1 for any product  offered  through  Network  1,  Affiliate  shall  not approach, rewrite, pursue,  or  contract  with any current client for the purpose of obtaining said client as a new customer for Affiliate or any competing entity the Affiliate may be  in  contract  with.  Such  restriction shall also apply to Affiliate's past, current  and future officers, directors, sales representatives, and Contractors. If  terminated  for  cause  Affiliate is responsible for any expense incurred by Network  1 for investigating incidents, attorney fees, fines, and administration expense.

                                   ARTICLE VI  [INDEPENDENT CONTRACTOR]

INDEPENDENT  CONTRACTOR

Source: USIO, INC., SB-2, 4/28/2004





6.01     NO  EMPLOYER-EMPLOYEE  RELATIONSHIP.  Nothing  in  this contract or its fulfillment  is  intended  to  create  an employer-employee relationship between Affiliate and contractors located by Affiliate and Network 1.  You must not take a  position  contrary to your status as an independent contractor.  YOU agree to accept  the  responsibilities placed on an independent contractor by federal and state  law,  regulation,  and  rule  or  otherwise.

6.02     MANNER  & MEANS OF WORK CONDUCT.  You decide when and where, as well as the manner and means by which you conduct your work activities.  You acknowledge that  you  set  your  business  hours.

6.03     BUSINESS  RESPONSIBILITY.  You  shall  be  responsible  for and pay all expenses  and  fees  incurred by you, including but not limited to your business overhead,  transportation,  state and federal income taxes, self-employment tax, unemployment  tax  and workers' compensation.  You are responsible for and shall pay  all  taxes,  duties,  assessments  and  governmental charges, now or in the future,  related  to  carrying  out  your obligations under this contract and or payments  made  to  you  by  Network  1.

                                   ARTICLE VII  [INDEMNIFICATION]

INDEMNIFICATION

7.01     AFFILIATE.  Affiliate  hereby  agrees  to  indemnify  and hold harmless Network  1, VISA, MasterCard and the Member Bank from and against any loss, cost or  damage (including reasonable legal fees and court costs) incurred by Network 1,  VISA,  MasterCard  and the Member Bank as a result of Affiliate's failure to comply  with  the  terms  of  this Agreement, Affiliate's misrepresentation with respect  to this Agreement or Affiliate's knowing or negligent misrepresentation with  respect  to  Contractors.

7.02     NETWORK  1.  Network  1  hereby  agrees  to indemnify and hold harmless Affiliate  from and against any loss, cost or damage (including reasonable legal fees  and  court costs) incurred by Affiliate as a result of Network 1's failure to  comply  with  the  terms  of  this  Agreement.

                                  ARTICLE VIII  [MISCELLANEOUS]

MISCELLANEOUS

8.01     NOTICES.  All  notices  required  hereunder  shall  be  in  writing and delivered in person, by e-mail, facsimile, Federal Express, UPS, or by certified or  registered  mail,  return  receipt requested, postage prepaid.  Such notices shall  be  addressed  as  follows:      To  Network  1     To  Affiliate      Network  1  Financial     Payment  Data  Systems      1501  Farm  Credit  Drive     12500  San  Pedro,  Suite  120      Suite  1500     San  Antonio,  TX  78216      McLean,  Virginia  22102-5004     FAX:  210.249.4130 All  notices  shall  be deemed given when delivered in person or upon depositing said  notice  in  the  United  States  mail with proper postage affixed thereto.

8.02     NON-EXCLUSIVITY.  Affiliate's  rights  to  locate Contractors hereunder shall  not  be  exclusive.  It  is  expressly  contemplated  and understood that Network  1  will  utilize  other  persons  and  companies to locate Contractors.

8.03     AMENDMENT.  Except as otherwise provided herein, this Agreement and the Schedules  hereto  may  not  be  amended,  altered or modified except in writing executed  by  all  parties  hereto.

8.04     BENEFITS AND ASSIGNMENTS.  This agreement may be assigned or delegated, in whole or in part, by NETWORK 1 without the prior written consent of the other party  herein.  This  agreement  may  not  be assigned or delegated by Affiliate without  prior  written  consent  from  Network  1.  Such  consent  shall not be unreasonably  withheld.

8.05     GOVERNING  LAW.  All  disputes  or  claims  by  Payment  Data  Systems hereunder  shall be resolved by arbitration in McLean, Virginia, pursuant to the rules of the American Arbitration Association. All disputes or claims by NETWORK 1  hereunder shall be resolved by arbitration in San Antonio, Texas, pursuant to the  rules  of  the  American  Arbitration  Association.

8.06     ARBITRATION.  All  disputes  or  claims  hereunder shall be resolved by arbitration  in  McLean,  Virginia,  pursuant  to  the  rules  of  the  American Arbitration  Association.

8.07     SEVERABILITY.  The  illegality,  invalidity  or unenforceability of any provision  of  this  Agreement shall not affect the remainder of this Agreement. 8.08     ENTIRE  AGREEMENT.  This Agreement and the attached Schedules, Exhibits and  Addendums hereto contain the entire understanding of the parties hereto and

Source: USIO, INC., SB-2, 4/28/2004





supersede  all  prior  agreements with respect to the subject of this Agreement. EXECUTED  this ________ day of ______________________, in the year ____________.      Network  1     Affiliate By:  ______________________________________     By: ________________________________________ Authorized  Representative     Authorized  Representative

Source: USIO, INC., SB-2, 4/28/2004 
Question: Highlight the parts (if any) of this contract related to Liquidated Damages that should be reviewed by a lawyer. Details: Does the contract contain a clause that would award either party liquidated damages for breach or a fee upon the termination of a contract (termination fee)?

SOLUTION: The  Exit  Fee  shall  be  paid  by  Affiliate  immediately prior to the assignment  or  Transfer of Merchants and/or its net revenue.  The amount of the Exit Fee during and following the termination of this Agreement shall be defined as  the  following:  (1)  the aggregate sum, per transferring merchant, equal to eighteen  (18) months net recurring revenue normally paid to Affiliate under the compensation  terms  of  this  Agreement  to  a  maximum  of  $250,000.

PROBLEM: Exhibit 1.2

ATHENS BANCSHARES CORPORATION  up to    Shares  (subject to increase up to    shares)  COMMON SHARES  ($.01 Par Value)  Subscription Price $10.00 Per Share  AGENCY AGREEMENT   , 2009

Keefe, Bruyette & Woods, Inc.  Investment Banking  10 South Wacker Drive, Suite 3400  Chicago, Illinois 60606

Ladies and Gentlemen:

Athens Bancshares Corporation, a Tennessee corporation (the Company), and Athens Federal Community Bank, a federal savings bank located  in Athens, Tennessee (the Bank) (references to the Bank include the Bank in mutual or stock form as indicated by the context), the deposit  accounts of which are insured by the Federal Deposit Insurance Corporation (FDIC), hereby confirm their agreement with Keefe, Bruyette &  Woods, Inc. (the Agent) as follows:

Section 1. The Offering. The Bank, in accordance with its plan of conversion adopted by its Board of Directors (the Plan), intends to convert  from a federally-chartered mutual savings bank to a federal stock savings bank (the Conversion), and issue all of its issued and outstanding  capital stock to the Company. The Conversion will be accomplished pursuant to federal law and the rules and regulations of the Office of Thrift  Supervision (the OTS). Pursuant to the Plan, the Company will offer and sell up to shares (subject to increase up to shares) of its common stock,  $.01 par value per share (the Shares or Common Shares), in a subscription offering (the Subscription Offering) to (1) depositors of the Bank  with Qualifying Deposits (as defined in the Plan) as of March 31, 2008 (Eligible Account Holders), (2) the employee stock ownership plan  established by either the Bank or the Company (the ESOP), (3) depositors of the Bank with Qualifying Deposits as of September 30, 2009  (Supplemental Eligible Account Holders), and (4) other depositor and borrower members of the Bank as defined in the Plan. Subject to the prior  subscription rights of the above-listed parties, the Company may offer for sale in a community offering (the Community Offering and when  referred to together with or subsequent to the Subscription Offering, the Subscription and Community Offering) the Shares not subscribed for or  ordered in the Subscription Offering to members of the general public to whom a copy of the Prospectus (as hereinafter defined) is delivered with a  preference given first to natural persons who are residents of Blount, Bradley, Hamilton, Knox, Loudon, McMinn, Meras, Monroe and Polk  Counties in Tennessee. It is anticipated that shares not subscribed for in the Subscription and Community Offering may be offered to certain  members of the general public on a best efforts basis through a selected dealers agreement (the Syndicated Community Offering) (the  Subscription Offering, Community Offering and Syndicated Community Offering are collectively referred to as the Offering). It is acknowledged  that the purchase of Shares in the Offering is subject to the maximum and minimum purchase limitations as described in the Plan and that the  Company may reject, in whole or in part, any orders received in the Community Offering or Syndicated Community Offering.

In connection with the Conversion and pursuant to the terms of the Plan as described in the Prospectus, immediately following the consummation  of the Conversion, subject to the approval of the Bank's depositors and compliance with certain conditions as may be imposed by regulatory  authorities, the Company will contribute $100,000 and 100,000 shares of Common Stock to the Athens Federal Foundation (the Foundation) such  shares hereinafter being referred to as the (Foundation Shares).







The Company has filed with the Securities and Exchange Commission (the Commission) a registration statement on Form S-1 (File No. 333-   )  (the Registration Statement), containing a prospectus relating to the Offering, for the registration of the Shares under the Securities Act of 1933  (the 1933 Act), and has filed such amendments thereof and such amended prospectuses as may have been required to the date hereof. The term  Registration Statement shall include any documents incorporated by reference therein and all financial schedules and exhibits thereto, as  amended, including post-effective amendments. The prospectus, as amended, on file with the Commission at the time the Registration Statement  initially became effective is hereinafter called the Prospectus, except that if any Prospectus is filed by the Company pursuant to Rule 424(b) or (c)  of the rules and regulations of the Commission under the 1933 Act (the 1933 Act Regulations) differing from the prospectus on file at the time  the Registration Statement initially became effective, the term Prospectus shall refer to the prospectus filed pursuant to Rule 424(b) or (c) from  and after the time said prospectus is filed with the Commission.

In accordance with Title 12, Part 563b of the Code of Federal Regulations (the Conversion Regulations), the Bank has filed with the OTS an  Application For Conversion on Form AC (the Form AC), including the Prospectus and the Conversion Valuation Appraisal Report prepared by  Keller & Company, Inc. (the Appraisal) and has filed such amendments thereto as may have been required by the OTS. The Form AC has been  approved by the OTS and the related Prospectus has been authorized for use by the OTS. In addition, the Company has filed with the OTS its  Application H-(e)l-S (the Holding Company Application) to become a savings and loan holding company under the Home Owners' Loan Act, as  amended (HOLA) and the regulations promulgated thereunder (the Control Act Regulations).

Section 2. Retention and Compensation of Agent. Subject to the terms and conditions herein set forth, the Company and the Bank hereby appoint  the Agent as their exclusive financial advisor and marketing agent (i) to utilize its best efforts to solicit subscriptions for Common Shares and to  advise and assist the Company and the Bank with respect to the Company's sale of the Shares in the Offering and (ii) to participate in the Offering  in the areas of market making and in syndicate formation (if necessary).

On the basis of the representations, warranties, and agreements herein contained, but subject to the terms and conditions herein set forth, the  Agent accepts such appointment and agrees to consult with and advise the Company and the Bank as to the matters set forth in the letter  agreement, dated June 9, 2009, between the Bank and the Agent (a copy of which is attached hereto as Exhibit A) (the Engagement Letter). It is  acknowledged by the Company and the Bank that the Agent shall not be required to purchase any Shares or be obligated to take any action which  is inconsistent with all applicable laws, regulations, decisions or orders.

The obligations of the Agent pursuant to this Agreement shall terminate upon termination of the Offering, but in no event later than 45 days after  the completion of the Subscription Offering (the End Date). All fees or expenses due to the Agent but unpaid will be payable to the Agent in  next day funds at the earlier of the Closing Date (as hereinafter defined) or the End Date. In the event the Offering is extended beyond the End  Date, the Company and the Agent may agree to renew this Agreement under mutually acceptable terms.

In the event the Company is unable to sell a minimum of    Shares within the period herein provided, this Agreement shall terminate and the  Company shall refund to any persons who have subscribed for any of the Shares the full amount which it may have received from them plus  accrued interest, as set forth in the Prospectus; and none of the parties to this Agreement shall have any obligation to the other parties hereunder,  except as set forth in this Section 2 and in Sections 7, 9 and 10 hereof. In the event the Offering is terminated for any reason not attributable to the  action or inaction of the Agent, the Agent shall be paid the fees due to the date of such termination pursuant to subparagraphs (a) and (d) below.

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The Agent shall receive the following compensation for its services hereunder:

(a) A management fee of $30,000 payable in four consecutive monthly installments of $7,500 each commencing with the execution of the  Engagement Letter. This fee shall be deemed to have been earned when due and shall be non-refundable.

(b) A success fee upon completion of the Offering of 1.125% of the aggregate purchase price of the Common Shares sold in the Subscription  Offering and Community Offering excluding shares purchased by the Bank's officers, directors, or employees (or members of their immediate  family), any ESOP, tax-qualified or stock-based compensation plans (except IRAs) or similar plan created by the Bank or the Company for some or  all of its directors or employees, or contributed to any charitable foundation established by the Bank in connection with the Conversion. In no  event shall the success fee paid for the sale of Common Stock in the Subscription and Community Offering be less than $200,000. The management  fee will be applied against the first success fee.

(c) If any of the Common Shares remain available after the Subscription Offering, at the request of the Company, the Agent will seek to form a  syndicate of registered broker-dealers (Selected Dealers) to assist in the sale of such Common Shares on a best efforts basis, subject to the  terms and conditions set forth in the selected dealers agreement. The Agent will endeavor to distribute the Common Shares among the Selected  Dealers in a fashion which best meets the distribution objectives of the Bank and the Plan. The Agent will be paid a fee not to exceed 5.5% of the  aggregate Purchase Price of the Shares sold in the Syndicated Community Offering. The Agent will pass onto the Selected Dealers who assist in  the Syndicated Community Offering an amount competitive with gross underwriting discounts charged at such time for comparable amounts of  stock sold at a comparable price per share in a similar market environment. Fees with respect to purchases effected with the assistance of Selected  Dealers other than the Agent shall be transmitted by the Agent to such Selected Dealers. The decision to utilize Selected Dealers will be made by  the Company upon consultation with the Agent.

(d) The Company and the Bank shall reimburse the Agent for reasonable out-of-pocket expenses, including costs of travel, meals and lodging,  photocopying, telephone, facsimile and couriers. The Company and the Bank will reimburse the Agent for the fees and expenses of the Agent's  counsel which will not exceed $50,000. The Company will bear the expenses of the Offering customarily borne by issuers including, without  limitation, regulatory filing fees, SEC, Blue Sky, and FINRA filing and registration fees; the fees of the Company's accountants, attorneys,  appraiser, transfer agent and registrar, printing, mailing and marketing and syndicate expenses associated with the conversion; and the fees set  forth under this Section 2; and any fees for Blue Sky legal work.

Full payment of the Agent's actual and accountable expenses, advisory fees and compensation shall be made in next day funds on the earlier of  the Closing Date or a determination by the Bank to terminate or abandon the Offering. The payment of such expenses assume no unusual  circumstances or delays, or a re-solicitation in connection with the subscription and community offering. The Company and the Bank acknowledge  that such expense cap may be increased by mutual consent, including in the event of a material delay in the Offering which would require an  update of the financial information in tabular form to reflect a period later than that set forth in the original filing.

Section 3. Sale and Delivery of Shares. If all conditions precedent to the consummation of the Conversion, including without limitation, the sale of  all Shares required by the Plan to be sold, are satisfied, the Company agrees to issue, or have issued, the Shares sold in the Offering and to release  for delivery certificates for such Shares on the Closing Date 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 8 hereof shall have been complied with to the  reasonable satisfaction of the Agent and its counsel. The release of Shares against payment therefor shall be made on a date and at a place  acceptable to the Company, the Bank and the Agent. Certificates for shares shall be delivered

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directly to the purchasers in accordance with their directions. The date upon which the Company shall release or deliver the shares sold in the  Offering, in accordance with the terms herein, is called the Closing Date.

Section 4. Representations and Warranties of the Company and the Bank. The Company and the Bank jointly and severally represent and warrant  to and agree with the Agent as follows:

(a) The Registration Statement which was prepared by the Company and the Bank and filed with the Commission has been declared effective by  the Commission, no stop order has been issued with respect thereto and no proceedings therefor have been initiated or, to the knowledge of the  Company or the Bank, threatened by the Commission. At the time the Registration Statement, including the Prospectus contained therein  (including any amendment or supplement), became effective, at the Applicable Time (as defined in Section 4(c) hereof) and at the Closing Date, the  Registration Statement complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and  the Registration Statement, including the Prospectus contained therein (including any amendment or supplement thereto), and any information  regarding the Company contained in Sales Information (as such term is defined in Section 9(a) hereof) authorized by the Company for use in  connection with the Offering, did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or  necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and at the time any Rule 424 (b) or (c) Prospectus is filed with the Commission and at the Closing Date referred to in Section 2 hereof, the Prospectus (including any amendment  or supplement thereto) and any information regarding the Company contained in Sales Information (as such term is defined in Section 9(a) hereof)  authorized by the Company for use in connection with the Offering will contain all statements that are required to be stated therein in accordance  with the 1933 Act and the 1933 Act Regulations and will not contain an untrue statement of a material fact or omit to state a material fact necessary  in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the  representations and warranties in this Section 4(a) shall not apply to statements or omissions made in reliance upon and in conformity with written  information furnished to the Company by the Agent or its counsel expressly regarding the Agent for use in the Prospectus under the caption The  Conversion and Stock Offering — Marketing Arrangements or statements in or omissions from any Sales Information or information filed  pursuant to state securities or blue sky laws or regulations regarding the Agent.

(b) At the time of filing the Registration Statement relating to the offering of the Shares and at the date hereof, the Company was not, and is not, an  ineligible issuer, as defined in Rule 405 of the 1933 Act Regulations. At the time of the filing of the Registration Statement and at the time of the use  of any issuer free writing prospectus, as defined in Rule 433(h) of the 1933 Act Regulations, the Company met the conditions required by Rules 164  and 433 of the 1933 Act Regulations for the use of a free writing prospectus. If required to be filed, the Company has filed any issuer free writing  prospectus related to the offered Shares at the time it is required to be filed under Rule 433 of the 1933 Act Regulations and, if not required to be  filed, will retain such free writing prospectus in the Company's records pursuant to Rule 433(g) of the 1933 Act Regulations and if any issuer free  writing prospectus is used after the date hereof in connection with the offering of the Shares the Company will file or retain such free writing  prospectus as required by Rule 433 of the 1933 Act Regulations.

(c) As of the Applicable Time, neither (i) the Issuer-Represented General Free Writing Prospectus(es) issued at or prior to the Applicable Time and  the Statutory Prospectus, all considered together (collectively, the General Disclosure Package), nor (ii) any individual Issuer-Represented  Limited-Use Free Writing Prospectus, when considered together with the General Disclosure Package, included any untrue statement of a material  fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were  made, not misleading. The preceding sentence does not apply to statements in or omissions from any Prospectus included in the Registration  Statement relating to the offered Securities or any Issuer-Represented Free

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Writing Prospectus based upon and in conformity with written information furnished to the Company by the Agent specifically for use therein. As  used in this paragraph and elsewhere in this Agreement:

1. Applicable Time means each and every date when a potential purchaser submitted a subscription or otherwise committed to purchase  Securities.

2. Statutory Prospectus, as of any time, means the Prospectus relating to the offered Shares that is included in the Registration Statement  relating to the offered Shares immediately prior to the Applicable Time, including any document incorporated by reference therein.

3. Issuer-Represented Free Writing Prospectus means any issuer free writing prospectus, as defined in Rule 433(h) of the 1933 Act  Regulations, relating to the offered Shares in the form filed or required or, if not required to be filed, in the form retained in the Company's records  pursuant to Rule 433(g) under the 1933 Act Regulations. The term does not include any writing exempted from the definition of prospectus  pursuant to clause (a) of Section 2(a)(10) of the 1933 Act, without regard to Rule 172 or Rule 173 of the 1933 Act Regulations.

4. Issuer-Represented General Free Writing Prospectus means any Issuer-Represented Free Writing Prospectus that is intended for general  distribution to prospective investors.

5. Issuer-Represented Limited-Use Free Writing Prospectus means any Issuer-Represented Free Writing Prospectus that is not an Issuer- Represented General Free Writing Prospectus. The term Issuer-Represented Limited-Use Free Writing Prospectus also includes any bona fide  electronic road show, as defined in Rule 433 of the 1933 Act Regulations, that is made available without restriction pursuant to Rule 433(d)(8)(ii)  of the 1933 Act Regulations or otherwise, even though not required to be filed with the Commission.

6. Permitted Free Writing Prospectus means any free writing prospectus as defined in Rule 405 of the 1933 Act Regulations that is consented to  by the Company, the Bank and the Agent.

(d) Each Issuer-Represented Free Writing Prospectus, as of its date of first use and at all subsequent times through the completion of the Offering  and sale of the offered Shares or until any earlier date that the Company notified or notifies the Agent (as described in the next sentence), did not,  does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement,  including any document incorporated by reference therein that has not been superseded or modified. If at any time following the date of first use  of an Issuer-Represented Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer-Represented  Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement relating to the offered Shares or  included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the  statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company has notified or will notify  promptly the Agent so that any use of such Issuer-Represented Free-Writing Prospectus may cease until it is amended or supplemented and the  Company has promptly amended or will promptly amend or supplement such Issuer-Represented Free Writing Prospectus to eliminate or correct  such conflict, untrue statement or omission. The foregoing two sentences do not apply to statements in or omissions from any Issuer-Represented  Free Writing Prospectus based upon and in conformity with written information furnished to the Company by the Agent specifically for use  therein.

(e) The Form AC, which was prepared by the Company and the Bank and filed with the OTS, has been approved by the OTS and the related  Prospectus and proxy statement to be delivered to members of the Bank have been authorized for use by the OTS and the Form AC complied in all  material respects with the Conversion Regulations. No order has been issued by the OTS or the FDIC preventing or

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suspending the use of the Prospectus or the proxy statement, and no action by or before any such government entity to revoke any approval,  authorization or order of effectiveness related to the Offering is pending or threatened. At the time of the approval of the Form AC, including the  Prospectus (including any amendment or supplement thereto) by the OTS and at all times subsequent thereto until the Closing Date, the Form AC,  including the Prospectus (including any amendment or supplement thereto), will comply in all material respects with the Conversion Regulations,  except to the extent waived or otherwise approved by the OTS. The Form AC, including the Prospectus (including any amendment or supplement  thereto), does not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make  the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the representations and  warranties in this Section 4(e) shall not apply to statements or omissions made in reliance upon and in conformity with written information  furnished to the Company by the Agent or its counsel expressly regarding the Agent for use in the Prospectus contained in the Form AC under  the caption The Conversion and Stock Offering — Marketing Arrangements.

(f) The Company has filed the Holding Company Application with the OTS and the Holding Company Application is accurate and truthful. The  Company has received written notice from the OTS of its approval of the acquisition of the Bank, such approval remains in full force and effect and  no order has been issued by the OTS suspending or revoking such approval and no proceedings therefor have been initiated or threatened by the  OTS. At the date of such approval, the Holding Company Application complied in all material respects with the applicable provisions of HOLA  and the regulations promulgated thereunder.

(g) The Company and the Bank have filed the Prospectus and any supplemental sales literature with the Commission and the OTS. The Prospectus  and all supplemental sales literature, as of the date the Registration Statement became effective and on the Closing Date referred to in Section 2,  complied and will comply in all material respects with the applicable requirements of the 1933 Act Regulations and, at or prior to the time of their  first use, will have received all required authorizations of the OTS and Commission for use in final form. No approval of any other regulatory or  supervisory or other public authority is required in connection with the distribution of the Prospectus and any supplemental sales literature that  has not been obtained and a copy of which has been delivered to the Agent. The Company and the Bank have not distributed any offering  material in connection with the Offering except for the Prospectus and any supplemental sales material that has been filed with the Registration  Statement and the Form AC and authorized for use by the Commission and the OTS. The information contained in the supplemental sales material  filed as an exhibit to both the Registration Statement and the Form AC does not conflict with information contained in the Registration Statement  and the Prospectus.

(h) The Plan has been adopted by the Boards of Directors of the Company and the Bank and, at the Closing Date, will have been approved by the  members of the Bank, and the offer and sale of the Shares will have been conducted in all material respects in accordance with the Plan, the  Conversion Regulations except to the extent waived or otherwise approved by the OTS, and all other applicable laws, regulations, decisions and  orders, including all terms, conditions, requirements and provisions precedent to the Offering imposed upon the Company and the Bank by the  OTS, the Commission, or any other regulatory authority and in the manner described in the Prospectus. To the best knowledge of the Company  and the Bank, no person has sought to obtain review of the final action of the OTS in approving the Conversion pursuant to the HOLA or any  other statute or regulation.

(i) The Bank has been duly organized and is validly existing as a federally-chartered savings bank in mutual form of organization and upon  completion of the Conversion will become a duly organized and validly existing federally-chartered savings bank in permanent capital stock form of organization, in both instances duly authorized to conduct its business and own its property as described in the Registration Statement and the  Prospectus; the Bank has obtained all licenses, permits and other governmental authorizations currently required for the conduct of its business,  except those that individually or in the

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aggregate would not materially adversely affect the financial condition, results of operations or business of the Company and the Bank, taken as a  whole; all such licenses, permits and governmental authorizations are in full force and effect, and the Bank is in compliance with all material laws,  rules, regulations and orders applicable to the operation of its business, except where failure to be in compliance would not materially adversely  affect the financial condition, results of operations or business of the Company and the Bank, taken as a whole; the Bank is duly qualified as a  foreign corporation to transact business and is in good standing in each jurisdiction in which its ownership of property or leasing of property or  the conduct of its business requires such qualification, unless the failure to be so qualified in one or more of such jurisdictions would not have a  material adverse effect on the financial condition, results of operations or business of the Bank (Material Adverse Effect). The Bank does not  own equity securities or any equity interest in any other business enterprise except as described in the Prospectus or as would not be material to  the operations of the Bank. Upon completion of the sale by the Company of the Shares contemplated by the Prospectus, (i) all of the outstanding  capital stock of the Bank will be duly authorized, validly issued and fully paid and non-assessable and owned directly by the Company free and  clear of any security interest, mortgage, pledge, lien, encumbrances or legal or equitable claim and (ii) the Company will have no direct subsidiaries  other than the Bank and no indirect subsidiaries other than Southland Finance, Inc., Ti-Serv, Inc. and Valley Title Services, LLC (the  Subsidiaries). The Conversion will be effected in all material respects in accordance with all applicable statutes, regulations, decisions and  orders; and, except with respect to the filing of certain post-sale, post-Conversion reports, and documents in compliance with the 1933 Act  Regulations, the Conversion Regulations or letters of approval, at the Closing Date, all terms, conditions, requirements and provisions with respect  to the Conversion imposed by the Commission, the OTS and the FDIC, if any, will have been complied with by the Company and the Bank in all  material respects or appropriate waivers will have been obtained and all applicable notice and waiting periods will have been satisfied, waived or  elapsed.

(j) The Company is duly organized, validly existing and in good standing as a corporation under the laws of the State of Tennessee with full  corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and  the Prospectus, and, at the Closing Date, the Company will be qualified to do business as a foreign corporation in each jurisdiction in which the  conduct of its business requires such qualification, except where the failure to so qualify would not have a Material Adverse Effect on the financial condition, results of operations or business of the Company. At the Closing Date, the Company will have obtained all licenses, permits and other  governmental authorizations currently required for the conduct of its business except those that individually or in the aggregate would not  materially adversely affect the financial condition, results of operations or business of the Company and the Bank, taken as a whole; all such  licenses, permits and governmental authorizations will be in full force and effect, and the Company will be in all material respects complying with all  laws, rules, regulations and orders applicable to the operation of its business. There are no outstanding warrants or options to purchase any  securities of the Company.

(k) The Subsidiaries are each duly organized, validly existing and in good standing as a corporation under the laws of the State of Tennessee with  full corporate power and authority to own, lease and operate its properties and to conduct their businesses as described in the Registration  Statement and the Prospectus, and are duly qualified to do business as foreign corporations and are in good standing in each jurisdiction in which  the conduct of its business requires such qualification, except where the failure to so qualify would not have a Material Adverse Effect on the  financial condition, results of operations or business of the Company and the Bank, taken as a whole. The activities of the Subsidiaries are  permissible to subsidiaries of federal savings banks. The Subsidiaries have each obtained all licenses, permits and other governmental  authorizations currently required for the conduct of its business except those that individually or in the aggregate would not materially adversely  affect the financial condition, results of operations or business of the Company and the Bank, taken as a whole; all such licenses, permits and  governmental authorizations will be in full force and effect, and the Subsidiaries are in all material respects complying with all laws, rules,  regulations and orders applicable to the operation of their respective business. All of the issued and outstanding capital stock of the Subsidiaries  have been duly

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authorized and validly issued, is fully paid and non-assessable and owned by the Bank directly, free and clear of any security interest, mortgage,  pledge, lien, encumbrance or legal or equitable claim.

(l) The Bank is a member of the Federal Home Loan Bank of Cincinnati (FHLB-Cincinnati). The deposit accounts of the Bank are insured by the  FDIC up to the applicable limits, and no proceedings for the termination or revocation of such insurance are pending or, to the best knowledge of  the Company or the Bank, threatened. The Bank is a qualified thrift lender within the meaning of 12 U.S.C. §l467a(m).

(m) The Bank and the Company have good and marketable title to all real property and good title to all other assets material to the business of the  Company and the Bank, taken as a whole, and to those properties and assets described in the Registration Statement and Prospectus as owned by  them, free and clear of all liens, charges, encumbrances or restrictions, except such as are described in the Registration Statement and Prospectus,  or are not material to the business of the Company and the Bank, taken as a whole; and all of the leases and subleases material to the business of  the Company and the Bank, taken as a whole, under which, the Company or the Bank hold properties, including those described in the Registration  Statement and Prospectus, are in full force and effect.

(n) The Company has received an opinion of its special counsel, Kilpatrick Stockton LLP, with respect to the federal income tax consequences of  the Conversion and an opinion of its tax advisor, Hazlett, Lewis & Bieter, PLLC, with respect to the Tennessee income tax consequences of the  Conversion; all material aspects of such opinions are accurately summarized in the Registration Statement and the Prospectus. The Company and  the Bank represent and warrant that the facts upon which such opinions are based are truthful, accurate and complete. Neither the Company nor  the Bank will take any action inconsistent therewith.

(o) Each of the Company and the Bank has all such power, authority, authorizations, approvals and orders as may be required to enter into this  Agreement, to carry out the provisions and conditions hereof and to issue and sell the Shares to be sold by the Company as provided herein and  as described in the Prospectus, subject to approval or confirmation by the OTS of the final appraisal of the Bank. The execution, delivery and  performance of this Agreement and the consummation of the transactions herein contemplated have been duly and validly authorized by all  necessary corporate action on the part of the Bank and the Company. This Agreement has been validly executed and delivered by the Company  and the Bank and is the valid, legal and binding agreement of the Company and the Bank enforceable in accordance with its terms (except as the  enforceability thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws relating to or affecting the enforcement  of creditors' rights generally or the rights of creditors of savings and loan holding companies, the accounts of whose subsidiaries are insured by  the FDIC, or by general equity principles, regardless of whether such enforceability is considered in a proceeding in equity or at law, and except to  the extent, if any, that the provisions of Sections 9 and 10 hereof may be unenforceable as against public policy).

(p) Neither the Company nor the Bank is in violation of any directive received from the OTS, the FDIC, or any other agency to make any material  change in the method of conducting its business so as to comply in all material respects with all applicable statutes and regulations (including,  without limitation, regulations, decisions, directives and orders of the OTS and the FDIC) and, except as may be set forth in the Registration  Statement, the General Disclosure Package and the Prospectus, there is no suit or proceeding or charge or action before or by any court, regulatory authority or governmental agency or body, pending or threatened, which might materially and adversely affect the Offering, as described in the  Registration Statement and the Prospectus or which might result in any material adverse change in the financial condition, results of operations or  business of the Company and the Bank, taken as a whole, or which would materially affect their properties and assets.

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(q) The consolidated financial statements, schedules and notes related thereto which are included in the General Disclosure Package and the  Prospectus fairly present the balance sheet, income statement, statement of changes in equity capital and statement of cash flows of the Bank and  the Subsidiaries on a consolidated basis at the respective dates indicated and for the respective periods covered thereby and comply as to form in  all material respects with the applicable accounting requirements of the 1933 Act Regulations and Title 12 of the Code of Federal Regulations. Such  consolidated financial statements, schedules and notes related thereto have been prepared in accordance with generally accepted accounting  principles (GAAP) consistently applied through the periods involved, present fairly in all material respects the information required to be stated  therein and are consistent with the most recent financial statements and other reports filed by the Bank with the OTS, except that accounting  principles employed in such regulatory filings conform to the requirements of the OTS and not necessarily to GAAP. The other financial, statistical  and pro forma information and related notes included in the Prospectus present fairly the information shown therein on a basis consistent with the  audited and unaudited consolidated financial statements of the Bank included in the Prospectus, and as to the pro forma adjustments, the  adjustments made therein have been properly applied on the basis described therein.

(r) Since the respective dates as of which information is given in the Registration Statement including the Prospectus: (i) there has not been any  material adverse change, financial or otherwise, in the condition of the Company and the Bank and their subsidiaries, considered as one enterprise,  or in the earnings, capital, properties or business of the Company and the Bank and their subsidiaries, whether or not arising in the ordinary course  of business; (ii) there has not been any material increase in the long-term debt of the Bank or in the principal amount of the Bank's assets which  are classified by the Bank as impaired, substandard, doubtful or loss or in loans past due 90 days or more or real estate acquired by foreclosure, by  deed-in-lieu of foreclosure or deemed in-substance foreclosure or any material decrease in equity capital or total assets of the Bank; nor has the  Company or the Bank issued any securities (other than in connection with the incorporation of the Company) or incurred any liability or obligation  for borrowing other than in the ordinary course of business; (iii) there have not been any material transactions entered into by the Company or the  Bank; (iv) there has not been any material adverse change in the aggregate dollar amount (on a consolidated basis with the Bank) of the  Company's deposits or its net worth; (v) there has been no material adverse change in the Company's or the Bank's relationship with its insurance  carriers, including, without limitation, cancellation or other termination of the Company's or the Bank's fidelity bond or any other type of insurance  coverage; (vi) except as disclosed in the General Disclosure Package and the Prospectus, there has been no material change in management of the  Company or the Bank; (vii) neither the Company nor the Bank has sustained any material loss or interference with its respective business or  properties from fire, flood, windstorm, earthquake, accident or other calamity, whether or not covered by insurance; (viii) neither the Company nor  the Bank has defaulted in the payment of principal or interest on any outstanding debt obligations; (ix) the capitalization, liabilities, assets,  properties and business of the Company and the Bank conform in all material respects to the descriptions thereof contained in the General  Disclosure Package and the Prospectus; and (x) neither the Company nor the Bank has any material contingent liabilities, except as set forth in the  Prospectus.

(s) Neither the Company nor the Bank is (i) in violation of their respective charters or bylaws (and the Bank will not be in violation of its charter or  bylaws in stock form upon completion of the Conversion), or (ii) in default in the performance or observance of any obligation, agreement,  covenant, or condition contained in any material contract, lease, loan agreement, indenture or other instrument to which it is a party or by which it  or any of its property may be bound. The execution and delivery of this Agreement and the consummation of the transactions herein contemplated  will not: (i) conflict with or constitute a breach of, or default under, or result in the creation of any lien, charge or encumbrance upon any of the  assets of the Company or the Bank pursuant to the respective charters or bylaws of the Company or the Bank or any contract, lease or other  instrument in which the Company or the Bank has a beneficial interest, or any applicable law, rule, regulation or order; (ii) violate any authorization,  approval, judgment, decree, order, statute, rule or regulation applicable to the Company or the Bank, except for

9







such violations which would not have a Material Adverse Effect on the financial condition and results of operations of the Company and the Bank  on a consolidated basis; or (iii) result in the creation of any material lien, charge or encumbrance upon any property of the Company or the Bank.

(t) All documents made available to or delivered or to be made available to or delivered by the Company and the Bank or their representatives in  connection with the issuance and sale of the Shares, including records of account holders and depositors of the Bank, or in connection with the  Agent's exercise of due diligence, except for those documents which were prepared by parties other than the Company or the Bank or their  representatives, to the best knowledge of the Company and the Bank, were on the dates on which they were delivered, or will be on the dates on  which they are to be delivered, true, complete and correct in all material respects.

(u) No default exists, and no event has occurred which with notice or lapse of time, or both, would constitute a default on the part of the Company  or the Bank in the due performance and observance of any term, covenant or condition of any indenture, mortgage, deed of trust, note, bank loan  or credit agreement or any other instrument or agreement to which the Company or the Bank is a party or by which any of them or any of their  property is bound or affected, except such defaults which would not have a material adverse affect on the financial condition or results of  operations of the Company and the Bank, taken as a whole; such agreements are in full force and effect and are the legal, valid and binding  agreements of the applicable party and the other parties thereto, enforceable in accordance with their terms, except as the enforcement thereof may  be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of  equity; and no other party to any such agreements 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 or might be alleged to be in default thereunder, where such action or proceeding, if  determined adversely to the Company or the Bank, would have a Material Adverse Effect on the financial condition, results of operations, or  business of the Company or the Bank, taken as a whole. There are no contracts or documents that are required to be filed as exhibits to the  Registration Statement or described in the Registration Statement, the Prospectus, or any Permitted Free Writing Prospectus which are not so filed  or described as required, and such contracts and documents as are summarized in the Registration Statement, the Prospectus, and any Permitted  Free Writing Prospectus are fairly summarized therein in all material respects. No party has sent or received any notice indicating the termination of  or intention to terminate any of the contracts or agreements referred to or described in the Registration Statement, the Prospectus, or any Permitted  Free Writing Prospectus, or filed as an exhibit to the Registration Statement, and, to the knowledge of the Company and the Bank, no such  termination has been threatened by any party to any such contract or agreement.

(v) Upon consummation of the Conversion, the authorized, issued and outstanding equity capital of the Company will be within the range set forth  in the General Disclosure Package and the Prospectus under the caption Capitalization, and no Shares have been or will be issued and  outstanding prior to the Closing Date; the Shares will have been duly and validly authorized for issuance and, when issued and delivered by the  Company pursuant to the Plan against payment of the consideration calculated as set forth in the Plan and in the Prospectus, will be duly and  validly issued, fully paid and non-assessable, except for shares purchased by the ESOP with funds borrowed from the Company to the extent  payment therefor in cash has not been received by the Company; except to the extent that subscription rights and priorities pursuant thereto exist  pursuant to the Plan, no preemptive rights exist with respect to the Shares; and the terms and provisions of the Shares will conform in all material  respects to the description thereof contained in the Registration Statement and the Prospectus. The Shares have been approved for listing on the  Nasdaq Capital Market, subject to issuance. Upon the issuance of the Shares, good title to the Shares will be transferred from the Company to the  purchasers thereof against payment therefor, subject to such claims as may be asserted against the purchasers thereof by third-party claimants.

(w) 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

10







approval of the Commission and the OTS, and any necessary qualification, notification, registration or exemption under the securities or blue sky  laws of the various states in which the Shares are to be offered, and except as may be required under the rules and regulations of the Financial  Industry Regulatory Authority (FINRA)

(x) Hazlett, Lewis & Bieter, PLLC, which has certified the audited financial statements and schedules of the Bank included in the Prospectus, has  advised the Company and the Bank in writing that they are, with respect to the Company and the Bank, independent registered public accountants  within the applicable rules of the Public Company Accounting Oversight Board (United States).

(y) Keller & Company, Inc., which has prepared the Valuation Appraisal Report (as amended or supplemented, if so amended or supplemented) of  the Bank, has advised the Bank in writing that it is independent of the Company and the Bank within the meaning of the Conversion Regulations.

(z) The Company and the Bank have timely filed or extended all required federal, state and local tax returns; the Company and the Bank have paid  all taxes that have become due and payable in respect of such returns, except where permitted to be extended, have made adequate reserves for  similar future tax liabilities and no deficiency has been asserted with respect thereto by any taxing authority. The Company and the Bank have no  knowledge of any tax deficiency which has been or might be assessed against either of them which, if the subject of an unfavorable decision,  ruling or finding, could have, individually or in the aggregate with other tax deficiencies, a Material Adverse Effect. All material tax liabilities have  been adequately provided for in the financial statements of the Company and the Bank in accordance with GAAP. There are no transfer taxes or  other similar fees or charges under Federal law or the laws of any state, or any political subdivision thereof, required to be paid in connection with  the execution and delivery of this Agreement by the Company or with the issuance or sale by the Company of the Shares.

(aa) The Company and the Bank are in compliance in all material respects with the applicable financial record-keeping and reporting requirements  of the Currency and Foreign Transactions Reporting Act of 1970, as amended, and the regulations and rules thereunder.

(bb) To the knowledge of the Company and the Bank, none of the Company, the Bank or the employees of the Company or the Bank has made any  payment of funds of the Company or the Bank as a loan for the purchase of the Shares or made any other payment of funds prohibited by law, and  no funds have been set aside to be used for any payment prohibited by law.

(cc) Neither the Company nor the Bank has: (i) issued any securities within the last 18 months (except for notes to evidence bank loans and reverse  repurchase agreements or other liabilities in the ordinary course of business or as described in the Prospectus); (ii) had any material dealings  within the 12 months prior to the date hereof with any member of the FINRA, or any person related to or associated with such member, other than  discussions and meetings relating to the proposed Offering and routine purchases and sales of United States government and agency and other  securities in the ordinary course of business; (iii) entered into a financial or management consulting agreement except as contemplated hereunder;  and (iv) engaged any intermediary between the Agent and the Company or the Bank in connection with the offering of the Shares, and no person  is being compensated in any manner for such service. Appropriate arrangements have been made for placing the funds received from  subscriptions for Shares in a special interest-bearing account with the Bank until all Shares are sold and paid for, with provision for refund to the  purchasers in the event that the Offering is not completed for whatever reason or for delivery to the Company if all Shares are sold.

(dd) The Company and the Bank have not relied upon the Agent or its legal counsel for any legal, tax or accounting advice in connection with the  Conversion.

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(ee) The records used by the Company and the Bank to determine the identities of Eligible Account Holders, Supplemental Eligible Account  Holders and Other Members are accurate and complete in all material respects.

(ff) The Company is not required to be registered under the Investment Company Act of 1940, as amended.

(gg) Neither the Company nor the Bank or any properties owned or operated by the Company or the Bank, is in violation of or liable under any  Environmental Law (as defined below), except for such violations or liabilities that, individually or in the aggregate, would not have a Material  Adverse Effect on the financial condition, results of operations or business of the Company and the Bank, taken as a whole. There are no actions,  suits or proceedings, or demands, claims, notices or investigations (including, without limitation, notices, demand letters or requests for  information from any environmental agency) instituted or pending or, to the knowledge of the Company or the Bank, threatened relating to the  liability of any property owned or operated by the Company or the Bank under any Environmental Law. For purposes of this subsection, the term  Environmental Law means any federal, state, local or foreign law, statute, ordinance, rule, regulation, code, license, permit, authorization,  approval, consent, order, judgment, decree, injunction or agreement with any regulatory authority relating to (i) the protection, preservation or  restoration of the environment (including, without limitation, air, water, vapor, surface water, groundwater, drinking water supply, surface soil,  subsurface soil, plant and animal life or any other natural resource), and/or (ii) the use, storage, recycling, treatment, generation, transportation,  processing, handling, labeling, production, release or disposal of any substance presently listed, defined, designated or classified as hazardous,  toxic, radioactive or dangerous, or otherwise regulated, whether by type or by quantity, including any material containing any such substance as a  component.

(hh) The Company has filed a registration statement to register for the Common Shares under Section 12(b) of the Securities Exchange Act of 1934,  as amended (the 1934 Act).

(ii) The Company and its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (A)  transactions are executed in accordance with management's general or specific authorizations, (B) transactions are recorded as necessary to permit  preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets, (C)  access to assets is permitted only in accordance with management's general or specific authorization, and (D) the recorded accounts or assets is  compared with the existing assets at reasonable intervals and appropriate action is taken with respect thereto. The books, records and accounts  and systems of internal accounting control of the Company and its subsidiaries comply in all material respects with the requirements of Section 13 (b)(2) of the 1934 Act. The Company has established and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the  1934 Act) that are effective in ensuring that the information it will be required to disclose in the reports it files or submits under the 1934 Act is  accumulated and communicated to the Company's management (including the Company's chief executive officer and chief financial officer) in a  timely manner and recorded, processed, summarized and reported within the periods specified in the Commission's rules and forms. To the  knowledge of the Company and the Bank,    and the Audit Committee of the Board of Directors have been advised of: (A) any significant  deficiencies and material weaknesses in the design or operation of internal control over financial reporting which could adversely affect  Company's and the Bank's ability to record, process, summarize, and report financial data; and (B) any fraud, whether or not material, that involves  management or other employees who have a significant role in the Company's or the Bank's internal accounting controls.

(jj) All of the loans represented as assets of the Company or the Bank in the Prospectus meet or are exempt from all requirements of federal, state  and local law pertaining to lending, including, without limitation, truth in lending (including the requirements of Regulation Z and 12 C.F.R. Part  226), real estate settlement procedures, consumer credit protection, equal credit opportunity and all disclosure laws

12







applicable to such loans, except for violations which, if asserted, would not have a Material Adverse Effect on the financial condition, results of  operations, or business of the Company and the Bank, taken as a whole.

(kk) To the Company's and the Bank's knowledge, there are no affiliations or associations between any member of the FINRA and any of the  Company's or the Bank's officers, directors or 5% or greater securityholders, except as set forth in the Registration Statement and the Prospectus.

(ll) The Company has taken all actions necessary to obtain at Closing a Blue Sky Memorandum from Kilpatrick Stockton LLP.

(mm) Any certificates signed by an officer of the Company or the Bank pursuant to the conditions of this Agreement and delivered to the Agent or  their counsel that refers to this Agreement shall be deemed to be a representation and warranty by the Company or the Bank, as the case may be,  to the Agent as to the matters covered thereby with the same effect as if such representation and warranty were set forth herein.

(nn) The Company and the Bank carry, or are covered by, insurance in such amounts and covering such risks at they deem reasonably adequate  for the conduct of their respective businesses and the value of their respective properties.

(oo) Subsequent to the date the Registration Statement is declared effective by the Commission and prior to the Closing Date, except as otherwise  may be indicated or contemplated in the Registration Statement, neither the Company nor the Bank has or will have issued any securities or  incurred any liability or obligation, direct or contingent, for borrowed money, except borrowings from the same or similar sources indicated in the  Prospectus in the ordinary course of its business.

(pp) All Sales Information (as defined in Section 9(a)) used by the Company in connection with the Conversion that is required by the OTS and the  Commission to be filed has been filed with and approved by the OTS and the Commission.

(qq) The statistical and market related data contained in any Permitted Free Writing Prospectus, the Prospectus and the Registration Statement are  based on or derived from sources which the Company and the Bank believe were reliable and accurate at the time they were filed with the  Commission. No forward-looking statement (within the meaning of Section 27A of the 1933 Act and Section 21E of the 1934 Act) contained in the  Registration Statement, the Prospectus, or any Permitted Free Writing Prospectus has been made or reaffirmed without a reasonable basis or has  been disclosed other than in good faith.

(rr) Except for the Bank's profit sharing/401(k) plan, neither the Company nor the Bank maintains any other pension plan, as defined in the  Employee Retirement Income Security Act of 1974, as amended (ERISA). In addition, (A) the employee benefit plans, including employee welfare  benefit plans, of the Company or the Bank (the Employee Plans) have been operated in compliance with the applicable provisions of ERISA, the  Internal Revenue Code of 1986, as amended (the Code), all regulations, rulings and announcements promulgated or issued thereunder and all  other applicable laws and governmental regulations, (B) no reportable event under Section 4043(c) of ERISA has occurred with respect to any  Employee Plan of the Company or the Bank for which the reporting requirements have not been waived by the Pension Benefit Guaranty  Corporation, (C) no prohibited transaction under Section 406 of ERISA, for which an exemption does not apply, has occurred with respect to any  Employee Plan of the Company or the Bank and (D) all Employee Plans that are group health plans have been operated in compliance with the  group health plan continuation coverage requirements of Section 4980B of the Code, except to the extent such noncompliance, reportable event or  prohibited transaction would not have, individually or in the aggregate, a Material Adverse Effect. There are no pending or, to the knowledge of

13







the Company and the Bank, threatened, claims by or on behalf of any Employee Plan, by any employee or beneficiary covered under any such  Employee Plan or by any governmental authority, or otherwise involving such Employee Plans or any of their respective fiduciaries (other than for  routine claims for benefits).

Section 5. Representations and Warranties of the Agent. The Agent represents and warrants to the Company and the Bank as follows:

(a) The Agent is a corporation and is validly existing in good standing under the laws of the State of New York with full power and authority to  provide the services to be furnished to the Company and the Bank hereunder.

(b) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly  authorized by all necessary action on the part of the Agent, and this Agreement has been duly and validly executed and delivered by the Agent  and is a legal, valid and binding agreement of the Agent, enforceable in accordance with its terms, except as the legality, validity, binding nature  and enforceability thereof may be limited by (i) bankruptcy, insolvency, moratorium, reorganization, conservatorship, receivership or other similar  laws relating to or affecting the enforcement of creditors' rights generally, and (ii) general equity principles regardless of whether such  enforceability is considered in a proceeding in equity or at law.

(c) Each of the Agent and its employees, agents and representatives who shall perform any of the services hereunder shall be duly authorized and  empowered, and shall have all licenses, approvals and permits necessary to perform such services; and the Agent is a registered selling agent in  each of the jurisdictions in which the Shares are to be offered by the Company in reliance upon the Agent as a registered selling agent as set forth  in the blue sky memorandum prepared with respect to the Offering.

(d) The execution and delivery of this Agreement by the Agent, the consummation of the transactions contemplated hereby and compliance with  the terms and provisions hereof will not conflict with, or result in a breach of, any of the terms, provisions or conditions of, or constitute a default  (or an event which with notice or lapse of time or both would constitute a default) under, the Articles of Incorporation or Bylaws of the Agent or  any agreement, indenture or other instrument to which the Agent is a party or by which it or its property is bound.

(e) No approval of any regulatory or supervisory or other public authority is required in connection with the Agent's execution and delivery of this  Agreement, except as may have been received.

(f) There is no suit or proceeding or charge or action before or by any court, regulatory authority or government agency or body or, to the  knowledge of the Agent, pending or threatened, which might materially adversely affect the Agent's performance under this Agreement.

Section 6. Covenants of the Company and the Bank. The Company and the Bank hereby jointly and severally covenant and agree with the Agent  as follows:

(a) The Company will not, at any time after the date the Registration Statement is declared effective, file any amendment or supplement to the  Registration Statement without providing the Agent and its counsel an opportunity to review such amendment or supplement or file any  amendment or supplement to which amendment or supplement the Agent or its counsel shall reasonably object.

(b) If at any time following issuance of an Issuer-Represented Free Writing Prospectus there occurred or occurs an event or development as a  result of which such Issuer Represented Free Writing Prospectus conflicted or would conflict with the information contained in the Registration  Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a

14







material fact necessary in order to make the statements therein, in light of the circumstances prevailing at the subsequent time, not misleading, the  Company has notified or will notify promptly the Agent so that any use of such Issuer-Represented Free Writing Prospectus may cease until it is  amended or supplemented and the Company has promptly amended or will promptly amend or supplement such Issuer-Represented Free Writing  Prospectus to eliminate or correct such conflict, untrue statement or omission; provided, however, that this covenant shall not apply to any  statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by the Agent expressly for  use therein.

(c) The Company and the Bank represent and agree that, unless it obtains the prior consent of the Agent, and the Agent represents and agrees  that, unless it obtains the prior consent of the Company or the Bank, it has not made and will not make any offer relating to the offered Shares that  would constitute an issuer free writing prospectus as defined in Rule 433 of the 1933 Act Regulations, or that would constitute a free writing  prospectus, as defined in Rule 405 of the 1933 Act Regulations, required to be filed with the Commission. Any such free writing prospectus  consented to by the Company, the Bank and the Agent is hereinafter referred to as a Permitted Free Writing Prospectus. The Company and the  Bank represent that it has treated or agrees that it will treat each Permitted Free Writing Prospectus as an issuer free writing prospectus, as  defined in Rule 433 of the 1933 Act Regulations, and has complied and will comply with the requirements of Rule 433 of the 1933 Act Regulations  applicable to any Permitted Free Writing Prospectus, including timely Commission filing where required, legending and record keeping. The  Company and the Bank need not treat any communication as a free writing prospectus if it is exempt from the definition of prospectus pursuant to  Clause (a) of Section 2(a)(10) of the 1933 Act without regard to Rule 172 or 173 of the 1933 Act Regulations.

(d) The Bank will not, at any time after the Form AC is approved by the OTS, file any amendment or supplement to such Form AC without  providing the Agent and its counsel an opportunity to review such amendment or supplement or file any amendment or supplement to which  amendment or supplement the Agent or its counsel shall reasonably object.

(e) The Company will not, at any time after the Holding Company Application is approved by the OTS, file any amendment or supplement to such  Holding Company Application without providing the Agent and its counsel an opportunity to review the non-confidential portions of such  amendment or supplement or file any amendment or supplement to which amendment or supplement the Agent or its counsel shall reasonably  object.

(f) The Company and the Bank will use their best efforts to cause any post-effective amendment to the Registration Statement to be declared  effective by the Commission and any post-effective amendment to the Form AC or the Holding Company Application to be approved by the OTS  and will immediately upon receipt of any information concerning the events listed below notify the Agent: (i) when the Registration Statement, as  amended, has become effective; (ii) when the Form AC or the Holding Company Application, as amended, has been approved by the OTS; (iii) of  any comments from the Commission, the OTS or any other governmental entity with respect to the Conversion contemplated by this Agreement;  (iv) of the request by the Commission, the OTS or any other governmental entity for any amendment or supplement to the Registration Statement,  the Form AC, Holding Company Application or for additional information; (v) of the issuance by the Commission, the OTS or any other  governmental entity of any order or other action suspending the Conversion or the use of the Registration Statement or the Prospectus or any  other filing of the Company or the Bank under the Conversion Regulations, or other applicable law, or the threat of any such action; (vi) of the  issuance by the Commission, the OTS or any authority of any stop order suspending the effectiveness of the Registration Statement or of the  initiation or threat of initiation or threat of any proceedings for that purpose; or (vii) of the occurrence of any event mentioned in paragraph (h)  below. The Company and the Bank will make every reasonable effort (i) to prevent the issuance by the Commission, the OTS or any other state

15







authority of any such order and, (ii) if any such order shall at any time be issued, to obtain the lifting thereof at the earliest possible time.

(g) The Company and the Bank will deliver to the Agent and to its counsel two conformed copies of the Registration Statement, the Form AC or  the Holding Company Application, as originally filed and of each amendment or supplement thereto, including all exhibits. Further, the Company  and the Bank will deliver such additional copies of the foregoing documents to counsel to the Agent as may be required for any FINRA filings.

(h) The Company and the Bank will furnish to the Agent, from time to time during the period when the Prospectus (or any later prospectus related  to this offering) is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of such Prospectus (as amended or  supplemented) as the Agent may reasonably request for the purposes contemplated by the 1933 Act, the 1933 Act Regulations, the 1934 Act or  the rules and regulations promulgated under the 1934 Act (the 1934 Act Regulations). The Company authorizes the Agent to use the Prospectus  (as amended or supplemented, if amended or supplemented) in any lawful manner contemplated by the Plan in connection with the sale of the  Shares by the Agent.

(i) The Company and the Bank will comply with any and all material terms, conditions, requirements and provisions with respect to the Offering  imposed by the Commission, the OTS or the Conversion Regulations, and by the 1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934  Act Regulations to be complied with prior to or subsequent to the Closing Date and when the Prospectus is required to be delivered, and during  such time period the Company and the Bank will comply, at their own expense, with all material requirements imposed upon them by the  Commission, the OTS or the Conversion Regulations, and by the 1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations,  including, without limitation, Rule 10b-5 under the 1934 Act, in each case as from time to time in force, so far as necessary to permit the  continuance of sales or dealing in the Common Shares during such period in accordance with the provisions hereof and the Prospectus. The  Company will comply with all undertakings contained in the Registration Statement.

(j) If, at any time during the period when the Prospectus is required to be delivered, any event relating to or affecting the Company or the Bank  shall occur, as a result of which it is necessary or appropriate, in the opinion of counsel for the Company or in the reasonable opinion of the  Agent's counsel, to amend or supplement the Registration Statement or Prospectus in order to make the Registration Statement or Prospectus not  misleading in light of the circumstances existing at the time the Prospectus is delivered to a purchaser, the Company will immediately so inform the  Agent and prepare and file, at its own expense, with the Commission and the OTS, and furnish to the Agent a reasonable number of copies, of an  amendment or amendments of, or a supplement or supplements to, the Registration Statement or Prospectus (in form and substance reasonably  satisfactory to the Agent and its counsel after a reasonable time for review) which will amend or supplement the Registration Statement or  Prospectus so that as amended or supplemented it will not contain an untrue statement of a material fact or omit to state a material fact necessary  in order to make the statements therein, in light of the circumstances existing at the time the Prospectus is delivered to a purchaser, not misleading.  For the purpose of this Agreement, the Company will timely furnish to the Agent such information with respect to itself and the Bank as the Agent  may from time to time reasonably request.

(k) The Company and the Bank will take all necessary actions in cooperating with the Agent and furnish to whomever the Agent may direct such  information as may be required to qualify or register the Shares for offering and sale by it or to exempt such Shares from registration, or to exempt  the Company as a broker-dealer and its officers, directors and employees as broker-dealers or agents under the applicable securities or blue sky  laws of such jurisdictions in which the Shares are required under the Conversion Regulations to be sold or as the Agent and the Company may  reasonably agree upon; provided, however, that the Company shall not be obligated to file any general consent to service of

16







process, to qualify to do business in any jurisdiction in which it is not so qualified, or to register its directors or officers as brokers, dealers,  salesmen or agents in any jurisdiction. In each jurisdiction where any of the Shares shall have been qualified or registered as above provided, the  Company will make and file such statements and reports in each fiscal period as are or may be required by the laws of such jurisdiction.

(l) The liquidation account for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders will be duly established and  maintained in accordance with the requirements of the Conversion Regulations, and such Eligible Account Holders and Supplemental Eligible  Account Holders who continue to maintain their savings accounts in the Bank will have an inchoate interest in their pro rata portion of the  liquidation account, which shall have a priority superior to that of the holders of the Common Stock in the event of a complete liquidation of the  Bank.

(m) The Company and the Bank will not sell or issue, contract to sell or otherwise dispose of, for a period of 90 days after the Closing Date, without  the Agent's prior written consent, any of their shares of their common stock, other than the Common Shares or other than in connection with any  plan or arrangement described in the Prospectus.

(n) The Company will register its common stock under Section 12(b) of the 1934 Act. The Company shall maintain the effectiveness of such  registration for not less than three years from the time of effectiveness or such shorter period as may be required by the OTS.

(o) During the period during which the Common Shares are registered under the 1934 Act or for three years from the date hereof, whichever period  is greater, the Company will furnish to its shareholders as soon as practicable after the end of each fiscal year an annual report of the Company  (including a consolidated balance sheet and statements of consolidated income, shareholders' equity and cash flows of the Company and its  subsidiaries as at the end of and for such year, certified by independent public accountants in accordance with Regulation S-X under the 1933 Act  and the 1934 Act) and make available as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the  first fiscal quarter ending after the effective time of the Registration Statement) financial information of the Company and its subsidiaries for such  quarter in reasonable detail.

(p) During the period of three years from the date hereof, the Company will furnish to the Agent: (i) as soon as practicable after such information is  publicly available, a copy of each report of the Company furnished to or filed with the Commission under the 1934 Act or any national securities  exchange or system on which any class of securities of the Company is listed or quoted (including, but not limited to, reports on Forms 10-K, 10-Q  and 8-K and all proxy statements and annual reports to stockholders), (ii) a copy of each other non-confidential report of the Company mailed to its  shareholders or filed with the Commission, the OTS or any other supervisory or regulatory authority or any national securities exchange or system  on which any class of securities of the Company is listed or quoted, each press release and material news items and additional documents and  information with respect to the Company or the Bank as the Agent may reasonably request; and (iii) from time to time, such other nonconfidential  information concerning the Company or the Bank as the Agent may reasonably request.

(q) 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.

(r) Other than as permitted by the Conversion Regulations, the HOLA, the 1933 Act, the 1933 Act Regulations and the rules and regulations and  the laws of any state in which the Shares are registered or qualified for sale or exempt from registration, the Company will not distribute any  prospectus, offering circular or other offering material in connection with the offer and sale of the Shares.

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(s) The Company will make generally available to its security holders as soon as practicable, but not later than 60 days after the close of the period  covered thereby, an earnings statement (in form complying with the provisions of Rule 158 of the 1933 Act Regulations) covering a twelve-month  period beginning not later than the first day of the Company's fiscal quarter next following the effective date (as defined in such Rule 158) of the  Registration Statement.

(t) The Company will use its best efforts to obtain and maintain a listing of the Common Shares on the Nasdaq Capital Market on or prior to the  Closing Date.

(u) The Bank will maintain appropriate arrangements for depositing all funds received from persons mailing or delivering subscriptions for or  orders to purchase Shares in the Offering with the Bank or another financial institution whose deposits are insured by the FDIC, 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  Company's or the Bank's obligation to refund payments received from persons subscribing for or ordering Shares in the Offering in accordance  with the Plan and as described in the Prospectus or until refunds of such funds have been made to the persons entitled thereto or withdrawal  authorizations canceled in accordance with the Plan and as described in the Prospectus. The Bank will maintain such records of all funds received  to permit the funds of each subscriber to be separately insured by the FDIC (to the maximum extent allowable) and to enable the Bank to make the  appropriate refunds of such funds in the event that such refunds are required to be made in accordance with the Plan and as described in the  Prospectus.

(v) The Company will report the use of proceeds of the Offering in accordance with Rule 463 under the 1933 Act.

(w) The Company will promptly take all necessary action to register as savings and loan holding company under the HOLA.

(x) The Company and the Bank will take such actions and furnish such information as are reasonably requested by the Agent in order for the  Agent to ensure compliance with the FINRA Rule 2790.

(y) Neither the Company nor the Bank, will amend the Plan without notifying the Agent and the Agent's counsel prior thereto.

(z) The Company shall assist the Agent, if necessary, in connection with the allocation of the Shares in the event of an oversubscription and shall  provide the Agent with any information necessary to assist the Company in allocating the Shares in such event and such information shall be  accurate and reliable in all material respects.

(aa) Prior to the Closing Date, the Company will inform the Agent of any event or circumstances of which it is aware as a result of which the  Registration Statement and/or Prospectus, as then amended or supplemented, would contain an untrue statement of a material fact or omit to state  a material fact necessary in order to make the statements therein not misleading.

(bb) The Company will not deliver the Shares until the Company and the Bank have satisfied or caused to be satisfied each condition set forth in  Section 8 hereof, unless such condition is waived in writing by the Agent.

(cc) Subsequent to the date the Registration Statement is declared effective by the Commission and prior to the Closing Date, except as otherwise  may be indicated or contemplated therein or set forth in an amendment or supplement thereto, neither the Company nor the Bank will have: (i)  issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money, except

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borrowings from the same or similar sources indicated in the Prospectus in the ordinary course of its business, or (ii) entered into any transaction  which is material in light of the business and properties of the Company and the Bank, taken as a whole.

(dd) The Company shall use its best efforts to ensure that the Foundation submits, within the time frames required by applicable law, a request to  the Internal Revenue Service to be recognized as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code, as amended. The  Company will not take any action which will result in the possible loss of the Foundation's tax exempt status.

(ee) Until the Closing Date, the Company and the Bank will conduct their businesses in compliance in all material respects with all applicable  federal and state laws, rules, regulations, decisions, directives and orders, including all decisions, directives and orders of the Commission, the  FDIC and the OTS.

(ff) The Company and the Bank shall comply in all material respects with any and all terms, conditions, requirements and provisions with respect to  the Offering imposed by the OTS, the Conversion Regulations, the Commission, the 1933 Act and the 1933 Act Regulations, the 1934 Act and the  1934 Act Regulations to be complied with subsequent to the Closing Date. The Company will comply with all provisions of all undertakings  contained in the Registration Statement.

(gg) The facts and representations provided to Kilpatrick Stockton LLP by the Bank and the Company and upon which Kilpatrick Stockton LLP  will base its opinion under Section 8(c)(1) are and will be truthful, accurate and complete.

(hh) The Company and the Bank will not distribute any offering material in connection with the Offering except for the Prospectus and any  supplemental sales material that has been filed with the Registration Statement and the Form AC and authorized for use by the Commission and the  OTS. The information contained in any supplemental sales material (in addition to the supplemental sales material filed as an exhibit to the  Registration Statement and the Form AC) shall not conflict with the information contained in the Registration Statement and the Prospectus.

(ii) The Company will comply with all applicable provisions of the Sarbanes-Oxley Act of 2002 and all applicable rules, regulations, guidelines and  interpretations promulgated thereunder by the Commission.

Section 7. Payment of Expenses. Whether or not the Conversion is completed or the sale of the Shares by the Company is consummated, the  Company and the Bank jointly and severally agree to pay or reimburse the Agent for: (a) all filing fees in connection with all filings related to the  Conversion with the FINRA; (b) any stock issue or transfer taxes which may be payable with respect to the sale of the Shares; (c) subject to  Section 2(d), all expenses of the Conversion, including but not limited to the Agent's attorneys' fees and expenses, blue sky fees, transfer agent,  registrar and other agent charges, fees relating to auditing and accounting or other advisors and costs of printing all documents necessary in  connection with the Offering. In the event the Company is unable to sell the minimum number of shares necessary to complete the Conversion or  the Conversion is terminated or otherwise abandoned, the Company and the Bank shall promptly reimburse the Agent in accordance with Section  2(d) hereof.

In the event that the Agent incurs any expenses on behalf of the Company or the Bank that are customarily borne by the issuer, the Company and  the Bank will pay or reimburse the Agent for such expenses regardless of whether the Offering is successfully completed, and such  reimbursements will not be included in the expense limitations set forth in Section 2(d) hereof. The Company and the Bank acknowledge, however,  that such limitations may be increased by the mutual consent of the Bank and Agent in the event of delay in the Offering requiring the Agent to  utilize a Syndicated Community Offering, a delay as a result of circumstances requiring material additional work by Agent or its counsel

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or an update of the financial information in tabular form contained in the Prospectus for a period later than [December 31, 2009] . Not later than  two days prior to the Closing Date, the Agent will provide the Company with an accounting of all reimbursable expenses to be paid at the Closing  in next day funds. In the event the Bank determines to abandon or terminate the Conversion prior to Closing, payment of such expenses shall be  made in next day funds on the date such determination is made.

Section 8. Conditions to the Agent's Obligations. The obligations of the Agent hereunder, as to the Shares to be delivered at the Closing Date, are  subject, to the extent not waived in writing by the Agent, to the condition that all representations and warranties of the Company and the Bank,  herein are, at and as of the commencement of the Offering and at and as of the Closing Date, true and correct in all material respects, the condition  that the Company and the Bank shall have performed all of its obligations hereunder to be performed on or before such dates, and to the following  further conditions:

(a) At the Closing Date, the Company and the Bank shall have conducted the Conversion in all material respects in accordance with the Plan, the  Conversion Regulations, the applicable laws of Tennessee, and all other applicable laws, regulations, decisions and orders, including all terms,  conditions, requirements and provisions precedent to the Conversion imposed upon them by the OTS.

(b) The Registration Statement shall have been declared effective by the Commission and the Form AC and Holding Company Application shall  have been approved by the OTS not later than 5:30 p.m. on the date of this Agreement, or with the Agent's consent at a later time and date; and at  the Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or  proceedings therefore initiated or threatened by the Commission or any state authority, and no order or other action suspending the authorization  of the Prospectus or the consummation of the Conversion shall have been issued or proceedings therefore initiated or, to the Company's or the  Bank's knowledge, threatened by the Commission, the OTS, the FDIC or any other state authority.

(c) At the Closing Date, the Agent shall have received:

(1) The favorable opinion, dated as of the Closing Date and addressed to the Agent and for its benefit, of Kilpatrick Stockton LLP special counsel  for the Company and the Bank in form and substance to the effect that:

(i) The Company has been duly incorporated and is validly existing as a corporation under the laws of the State of Tennessee.

(ii) The Company has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Form  AC, the Registration Statement, the Prospectus and the General Disclosure Package.

(iii) The Bank is a validly existing federally-chartered savings bank in mutual form and immediately following the completion of the Conversion will  be a validly-existing federally-chartered savings bank in stock form and, in both instances duly authorized to conduct its business and own its  property as described in the Registration Statement and the Prospectus. All of the outstanding capital stock of the Bank, upon completion of the  Conversion, will be duly authorized and, upon payment therefor, validly issued, fully-paid and non-assessable and will be owned by the Company,  free and clear of any liens, encumbrances, claims or other restrictions.

(iv) The Bank is a member of the FHLB-Cincinnati. The deposit accounts of the Bank are insured by the FDIC up to the maximum amount allowed  under law and no proceedings for the termination or revocation of such insurance are pending or threatened. The description of the liquidation  account as set forth in the Prospectus under the caption The Conversion and Stock Offering — Effects of

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Conversion to Stock Form — Liquidation Account, to the extent that such information constitutes matters of law and legal conclusions, has been  reviewed by such counsel and is accurately described in all material respects.

(v) The only subsidiaries of the Bank are Southland Finance, Inc., Ti-Serv, Inc. and Valley Title Services, LLC. The operations of the Subsidiaries  are not material to financial condition, results of operations, capital, properties or business prospects of the Company and the Bank, taken as a  whole. The Subsidiaries have been duly organized and are validly existing as corporations in good standing under the laws of Tennessee, have full  corporate power and authority to own, lease and operate their properties and to conduct their respective businesses as described in the  Registration Statement and Prospectus, and are duly qualified as foreign corporations to transact business and are in good standing in each  jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except  where the failure to so qualify would not have a Material Adverse Effect. Each Subsidiary has obtained all licenses, permits and other  governmental authorizations required for the conduct of their businesses and all such licenses, permits and other governmental authorizations are  in full force and effect and the Subsidiaries are in all material respects complying therewith; the activities of the Subsidiaries are permitted to  subsidiaries of a federally chartered savings bank by the rules, regulations and practices of the Federal Deposit Insurance Corporation (FDIC)  and the OTS in the case of the Bank; all of the issued and outstanding capital stock of each Subsidiary has been duly authorized and validly  issued, is fully paid and non-assessable and is owned by the Bank, free and clear of any security interest, mortgage, pledge, lien, encumbrance or  legal or equitable claim; and there are no warrants, options or rights of any kind to acquire shares of capital stock of any Subsidiary.

(vi) The Foundation has been duly organized and is validly existing as a non-stock corporation in good standing under the laws of the State of  Delaware with corporate power and authority to conduct its business as described in the Prospectus; to the knowledge of Company and the  Agent, all approvals required to establish the Foundation and to contribute the Foundation Shares thereto have been obtained as described in the  Prospectus; except as specifically disclosed in the Prospectus and the Proxy Statement, there are no agreements and/or understandings, written or  oral or otherwise, between any of the Company, the Agent and the Foundation with respect to the control, directly or indirectly, over the voting  and the acquisition or disposition of the shares of Common Stock to be contributed by the Company to the Foundation; the Foundation Shares to  be issued to the Foundation in accordance with the Plan and as described in the Prospectus will have been duly and validly authorized for  issuance and, when issued and contributed by the Company pursuant to the Plan, will be duly authorized and validly issued and fully paid and  non-assessable. Upon issuance of the Foundation Shares, good title to the Foundation Shares will be transferred from the Company to the  Foundation, subject to such claims as may be asserted against the Foundation by third-party claimants.

(vii) The authorized equity capital of the Company consists of shares of common stock and shares of preferred stock. Immediately following the  consummation of the Offering and the issuance of the Foundation Shares to the Foundation, the authorized, issued and outstanding Common  Shares of the Company will be within the range set forth in the Prospectus under the caption Capitalization, and no shares of capital stock of the  Company have been issued prior to the Closing Date; at the time of the Offering, the Common Shares subscribed for pursuant to the Conversion  will have been duly and validly authorized for issuance, and when issued and delivered by the Company pursuant to the Plan against payment of  the consideration calculated as set forth in the Plan and Prospectus, will be duly and validly issued and fully paid and non-assessable, except for  shares purchased by the ESOP with funds borrowed from the Company and shares issued and contributed to the Foundation by the Company to  the extent payment therefor in cash has not been received by the Company; except to the extent that subscription rights and priorities pursuant  thereto exist pursuant to the Plan, the issuance of the Shares is not subject to preemptive rights (other than subscription rights as provided in the  Plan) and the terms and provisions of the Shares conform in all material respects to the description thereof contained in the

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Prospectus. The Shares will not, when issued, be subject to any liens, charges, encumbrances or other claims created by the Company.

(viii) The Company and the Bank have full corporate power and authority to enter into this Agreement and to consummate the transactions  contemplated thereby and by the Plan. The execution and delivery of this Agreement and the consummation of the Offering, including the  establishment of the Foundation and the issuance of shares to the Foundation, have been duly and validly authorized by all necessary action on  the part of the Company and the Bank; and this Agreement is a valid and binding obligation of the Company and the Bank, enforceable against the  Company and the Bank, in accordance with its terms, except as the enforceability thereof may be limited by (i) bankruptcy, insolvency,  reorganization, moratorium, conservatorship, receivership or other similar laws now or hereafter in effect relating to or affecting the enforcement of  creditors' rights generally or the rights of creditors of federally chartered savings institutions or holding companies as applicable, (ii) general  equitable principles, (iii) laws relating to the safety and soundness of insured depository institutions, and (iv) applicable law or public policy with  respect to the indemnification and/or contribution provisions contained herein and except that no opinion need be expressed as to the effect or  availability of equitable remedies or injunctive relief (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(ix) The Form AC and the Holding Company Application have been approved by the OTS, the Prospectus has been authorized for use by the OTS,  and the acquisition by the Company of all of the issued and outstanding capital stock of the Bank has been approved by the OTS and no action  has been taken, and none is pending or threatened, to revoke any such authorization or approval.

(x) To such counsel's knowledge, the OTS's approval or non-objection of the Plan remains in full force and effect; each of the Form AC, the  Holding Company Application, and Plan comply in all material respects with the regulations of the OTS (other than the financial statements, notes  to financial statements, stock valuation information and other financial, tabular and statistical data included therein, as to which no opinion need  be rendered). Such counsel has been advised by the OTS staff and Commission staff that no order has been issued by any other state authority, to prevent the Conversion or the offer, sale or issuance of the Shares, or to suspend the Offering or the use of the Prospectus, and no action for such  purposes has been instituted or, to the knowledge of such counsel, threatened by the OTS, the Commission or any other state authority; and, to  the knowledge of such counsel, no person has sought to obtain regulatory or judicial review of the final action of the OTS approving the Plan, the  Form AC, the Holding Company Application or the Prospectus or to otherwise prevent the Conversion or the offer, sale or issuance of the Shares.

(xi) The Plan has been duly adopted by the required vote of the directors of the Company and the Bank and by the required vote of the Bank's  members.

(xii) Subject to the satisfaction of the conditions to the OTS's approval of the Conversion and the Holding Company Application, no further  approval, registration, authorization, consent or other order of any federal regulatory agency is required in connection with the execution and  delivery of this Agreement, the consummation of the Conversion and the issuance of the Shares, including the issuance of shares to the  Foundation, except as may be required under the securities or blue sky laws of various jurisdictions (as to which no opinion need be rendered) and  except as may be required under the rules and regulations of the FINRA (as to which no opinion need be rendered).

(xiii) The Registration Statement is effective under the 1933 Act; and any required filing of the Prospectus and any Permitted Free Writing  Prospectus pursuant to Rule 424(b) or Rule 433 has been made within the time period required by Rule 424(b) or Rule 433; and no stop order  suspending the effectiveness has been issued under the 1933 Act or proceedings therefor initiated or, to such counsel's Actual Knowledge,  threatened by the Commission.

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(xiv) At the time the Form AC, including the Prospectus contained therein, was approved by the OTS, the Form AC, including the Prospectus  contained therein, complied as to form in all material respects with the requirements of the Conversion Regulations except as waived or otherwise  approved by the OTS (other than the financial statements, the notes thereto, and other tabular, financial, statistical and appraisal data included  therein, as to which no opinion need be rendered).

(xv) At the time the Holding Company Application was approved by the OTS, the Holding Company Application complied as to from in all material  respects with the requirements and the rules and regulations of the OTS (except as waived or otherwise approved by the OTS, and other than the  financial statement, the notes thereto, and other tabular, financial, statistical and appraisal data included therein, as to which no opinion need be  rendered).

(xvi) At the time that the Registration Statement became effective, (i) the Registration Statement (as amended or supplemented, if so amended or  supplemented) (other than the financial statements, the notes thereto, and other tabular, financial, statistical and appraisal data included therein, as  to which no opinion need be rendered), complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act  Regulations, and (ii) the Prospectus (other than the financial statements, the notes thereto, and other tabular, financial, statistical and appraisal  data included therein, as to which no opinion need be rendered) complied as to form in all material respects with the requirements of the 1933 Act  and the 1933 Act Regulations.

(xvii) The terms and provisions of the shares of common stock of the Company conform, in all material respects, to the description thereof  contained in the Registration Statement, the General Disclosure Package and Prospectus, and the form of certificate used to evidence the Shares  complies with applicable laws.

(xviii) There are no legal or governmental proceedings pending or threatened (i) asserting the invalidity of this Agreement, (ii) seeking to prevent  the Conversion or the offer, sale or issuance of the Shares, including the establishment of the Foundation and the issuance of shares thereto, or  (iii) which are required to be disclosed in the Registration Statement and Prospectus, other than those disclosed therein.

(xix) Neither the Company nor the Bank are required to be registered as an investment company under the Investment Company Act of 1940.

(xx) Neither the Company nor the Bank is in violation of any directive from the OTS or the FDIC to make any material change in the method of  conducting its respective business.

(xxi) There are no material contracts, indentures, mortgages, loan agreements, notes, leases or other instruments required to be described or  referred to in the Form AC, the Registration Statement, the General Disclosure Package or the Prospectus or required to be filed as exhibits thereto  other than those described or referred to therein or filed as exhibits thereto in the Form AC, the Registration Statement, the General Disclosure  Package or the Prospectus. The description in the Form AC, the Registration Statement, the General Disclosure Package and the Prospectus of  such documents and exhibits is accurate in all material respects and fairly presents the information required to be shown.

(xxii) Except as waived or otherwise approved by the OTS, the Plan complies in all material respects with all applicable federal law, rules,  regulations, decisions and orders including, but not limited to, the Conversion Regulations; the Conversion, including the establishment of the  Foundation and the issuance of shares thereto, has been effected by the Company's and the Bank in all material respects in accordance with the  Conversion Regulations and the OTS approvals issued thereunder; no order has been issued by the OTS, the Commission, the FDIC, or any state  authority to suspend the Offering or the use of the Prospectus, and no action for such purposes has been instituted or threatened by the OTS, the  Commission, the FDIC, or any other state authority and, to such counsel's Actual

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Knowledge, no person has sought to obtain regulatory or judicial review of the final action of the OTS approving the Plan, the Form AC, the  Holding Company Application or the Prospectus.

(xxiii) The Company, and the Bank have obtained all licenses, permits and other governmental authorizations currently required for the conduct of  their businesses as described in the Registration Statement, and all such licenses, permits and other governmental authorizations are in full force  and effect, and the Company and the Bank are in all material respects complying therewith.

(xxiv) Neither the Company nor the Bank is in violation of its Charter and Bylaws or in default or violation of any obligation, agreement, covenant  or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which it is a party or by which it or  its property may be bound, except for such defaults or violations which would not have a material adverse impact on the financial condition or  results of operations of the Company and the Bank on a consolidated basis; the execution and delivery of this Agreement, the incurrence of the  obligations herein set forth and the consummation of the transactions contemplated herein will not, in any material respect, conflict with or  constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of  the Company or the Bank pursuant to any material contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the  Company or the Bank is a party or by which any of them may be bound, or to which any of the property or assets of the Company or the Bank are  subject; and such action will not result in any violation of the provisions of the Charter or Bylaws of the Company or the Bank, or result, in any  material respect, in any violation of any applicable federal or state law, act, regulation (except that no opinion with respect to the securities and  blue sky laws of various jurisdictions or the rules or regulations of the FINRA need be rendered) or order or court order, writ, injunction or decree.

(xxv) The Company's Charter and Bylaws comply in all material respects with the laws of the State of Tennessee. The Bank's Charter and Bylaws  each comply in all material respects with the laws of the United States of America.

(xxvi) The information in the Prospectus under the captions Regulation and Supervision, Federal and State Taxation, The Conversion and  Stock Offering, Restrictions on the Acquisition of Athens Bancshares Corporation and Athens Federal Community Bank, Description of  Athens Bancshares Corporation Capital Stock and Athens Federal Foundation, to the extent that such information constitutes matters of law,  summaries of legal matters, documents or proceedings, or legal conclusions, has been reviewed by such counsel and is accurate in all material  respects. The description of the Offering process in the Prospectus under the caption The Conversion and Stock Offering to the extent that such  information constitutes matters of law, summaries of legal matters, documents or proceedings, or legal conclusions, has been reviewed by such  counsel and fairly describes such process in all material respects. The descriptions in the Prospectus of statutes or regulations are accurate  summaries and fairly present, in all material respects, the information required to be shown. The information under the caption The Conversion  and Stock Offering — Material Income Tax Consequences has been reviewed by such counsel and fairly describes the federal and state tax  opinions rendered by them and Hazlett, Lewis & Bieter, PLLC, respectively, to the Company and the Bank with respect to such matters.

In addition, such counsel shall state that during the preparation of the Form AC, the Holding Company Application, the Registration Statement,  the Prospectus and the General Disclosure Package, they participated in conferences with certain officers of, the independent public and internal  accountants for, and other representatives of, the Company and the Bank, at which conferences the contents of the Form AC, the Holding  Company Application, the Registration Statement, the Prospectus and the General Disclosure Package and related matters were discussed and,  while such counsel have not confirmed the accuracy or completeness of or otherwise verified the information contained in the Form AC, the  Holding Company Application, the Registration Statement or the Prospectus or the General Disclosure Package and do not assume any  responsibility for such information, based upon such conferences and a review of

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documents deemed relevant for the purpose of rendering their opinion (relying as to materiality as to factual matters on certificates of officers and  other factual representations by the Company), nothing has come to their attention that would lead them to believe that the Form AC, the Holding  Company Application, the Registration Statement, the Prospectus, the General Disclosure Package or any amendment or supplement thereto as of  the Applicable Time (other than the financial statements, the notes thereto, and other tabular, financial, statistical and appraisal data included  therein as to which no view need be rendered) contained an untrue statement of a material fact or omitted to state a material fact required to be  stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

In giving such opinion, such counsel may rely as to all matters of fact on certificates of officers or directors of the Company and the Bank and  certificates of public officials. Such counsel's opinion shall be limited to matters governed by federal laws and by the laws of Tennessee and with  respect to enforceablity, New York law, and may add other qualifications and explanations on the basis of this opinion as may be reasonably  acceptable to the Agent.

(d) A Blue Sky Memorandum from Kilpatrick Stockton LLP relating to the Offering, including Agent's participation therein, and should be  furnished to the Agent with a copy thereof addressed to Agent or upon which Kilpatrick Stockton LLP shall state the Agent may rely. The Blue  Sky Memorandum will relate to the necessity of obtaining or confirming exemptions, qualifications or the registration of the Shares under  applicable state securities law.

(e) At the Closing Date, the Agent shall receive a certificate of the Chief Executive Officer and the Chief Financial Officer of the Company in form  and substance reasonably satisfactory to the Agent's Counsel, dated as of such Closing Date, to the effect that: (i) they have carefully examined  the Prospectus and, in their opinion, at the time the Prospectus became authorized for final use, the Prospectus did not contain any untrue  statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under  which they were made, not misleading; (ii) since the date the Prospectus became authorized for final use, no event has occurred which should have  been set forth in an amendment or supplement to the Prospectus which has not been so set forth, including specifically, but without limitation, any  material adverse change in the condition, financial or otherwise, or in the earnings, capital, properties or business of the Company or the Bank and  the conditions set forth in this Section 8 have been satisfied; (iii) since the respective dates as of which information is given in the Registration  Statement, the General Disclosure Package and the Prospectus, there has been no material adverse change in the condition, financial or otherwise,  or in the earnings, capital, properties or business of the Company or the Bank independently, or of the Company and the Bank considered as one  enterprise, whether or not arising in the ordinary course of business; (iv) the representations and warranties in Section 4 are true and correct with  the same force and effect as though expressly made at and as of the Closing Date; (v) the Company has complied in all material respects with all  agreements and satisfied all conditions on their part to be performed or satisfied at or prior to the Closing Date and will comply in all material  respects with all obligations to be satisfied by them after the Closing Date; (vi) no stop order suspending the effectiveness of the Registration  Statement has been initiated or, to the best knowledge of the Company or the Bank, threatened by the Commission or any state authority; (vii) no  order suspending the Conversion, the Offering or the effectiveness of the Prospectus has been issued and no proceedings for that purpose are  pending or, to the best knowledge of the Company or the Bank, threatened by the OTS, the Commission, the FDIC, or any state authority; and  (viii) to the best knowledge of the Company or the Bank, no person has sought to obtain review of the final action of the OTS approving the  Conversion.

(f) Neither the Company or the Bank shall have sustained, since the date of the latest financial statements included in the Registration Statement,  the General Disclosure Package and Prospectus, any material loss or interference with its business from fire, explosion, flood or other calamity,  whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree,

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otherwise than as set forth in the Registration Statement and the Prospectus, and since the respective dates as of which information is given in the  Registration Statement and the Prospectus, there shall not have been any Material Adverse Effect on the financial condition, results of operations,  or business of the Company or the Bank that is in the Agent's reasonable judgment sufficiently material and adverse as to make it impracticable or  inadvisable to proceed with the Offering or the delivery of the Shares on the terms and in the manner contemplated in the Prospectus.

(g) Prior to and at the Closing Date: (i) in the reasonable opinion of the Agent, there shall have been no material adverse change in the financial  condition, results of operations or business of the Company and the Bank considered as one enterprise, from that as of the latest dates as of which  such condition is set forth in the Prospectus, other than transactions referred to or contemplated therein; (ii) neither the Company nor the Bank  shall have received from the OTS or the FDIC any direction (oral or written) to make any material change in the method of conducting their  business with which it has not complied (which direction, if any, shall have been disclosed to the Agent) or which materially and adversely would  affect the financial condition, results of operations or business of the Company and the Bank taken as a whole; (iii) neither the Company or the  Bank shall have been in default (nor shall an event have occurred which, with notice or lapse of time or both, would constitute a default) under any  provision of any agreement or instrument relating to any outstanding indebtedness; (iv) no action, suit or proceeding, at law or in equity or before  or by any federal or state commission, board or other administrative agency, not disclosed in the Prospectus, shall be pending or, to the  knowledge of the Company or the Bank, threatened against the Company or the Bank or affecting any of their properties wherein an unfavorable  decision, ruling or finding would materially and adversely affect the financial condition, results of operations or business of the Company and the  Bank taken as a whole; and (v) the Shares shall have been qualified or registered for offering and sale or exempted therefrom under the securities or  blue sky laws of the jurisdictions as the Agent shall have reasonably requested and as agreed to by the Company and the Bank.

(h) Concurrently with the execution of this Agreement, the Agent shall receive a letter from Hazlett, Lewis & Bieter, PLLC, dated as of the date  hereof and addressed to the Agent: (i) confirming that Hazlett, Lewis & Bieter, PLLC is a firm of independent registered public accountants within  the applicable rules of the Public Company Accounting Oversight Board (United States) and stating in effect that in its opinion the consolidated  financial statements and related notes of the Company as of December 31, 2008, and for each of the years in the three-year period ended December  31, 2008, and covered by their opinion included therein, and any other more recent unaudited financial statements included in the Prospectus  comply as to form in all material respects with the applicable accounting requirements and related published rules and regulations of the OTS and  the 1933 Act; (ii) stating in effect that, on the basis of certain agreed upon procedures (but not an audit in accordance with standards of the Public  Company Accounting Oversight Board (United States)) consisting of a reading of the latest available consolidated financial statements of the  Company prepared by the Company, a reading of the minutes of the meetings of the Board of Directors, Executive Committee and Audit Committee  of the Company and the Bank and consultations with officers of the Company and the Bank responsible for financial and accounting matters,  nothing came to their attention which caused them to believe that:

(A) audited consolidated financial statements and any unaudited interim financial statements included in the Prospectus are not in conformity with  the 1933 Act, applicable accounting requirements of the OTS and accounting principles generally accepted in the United States of America applied  on a basis substantially consistent with that of the audited consolidated financial statements included in the Prospectus; or

(B) during the period from the date of the latest financial statements included in the Prospectus to a specified date not more than three business  days prior to the date of the Prospectus, except as has been described in the Prospectus, there was any increase in borrowings of the Company,  other than normal deposit fluctuations for the Bank; or (C) there was any decrease in the net assets of the Company

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at the date of such letter as compared with amounts shown in the latest balance sheet included in the Prospectus; and (iii) stating that, in addition  to the audit referred to in their opinion included in the Prospectus and the performance of the procedures referred to in clause (ii) of this  subsection (h), they have compared with the general accounting records of the Company, which are subject to the internal controls of the  Company, the accounting system and other data prepared by the Company, directly from such accounting records, to the extent specified in such  letter, such amounts and/or percentages set forth in the Prospectus as the Agent may reasonably request; and they have found such amounts and  percentages to be in agreement therewith (subject to rounding).

(i) At the Closing Date, the Agent shall receive a letter dated the Closing Date, addressed to the Agent, confirming the statements made by Hazlett,  Lewis & Bieter, PLLC in the letter delivered by it pursuant to subsection (g) of this Section 8, the specified date referred to in clause (i) of  subsection (h) to be a date specified in the letter required by this subsection (h) which for purposes of such letter shall not be more than three  business days prior to the Closing Date.

(j) At the Closing Date, the Company shall receive a letter from Keller & Company, Inc., dated the Closing Date (i) confirming that said firm is  independent of the Company and the Bank and is experienced and expert in the area of corporate appraisals within the meaning of Title 12 of the  Code of Federal Regulations, Section 563b.200(b), (ii) stating in effect that the Appraisal prepared by such firm complies in all material respects  with the applicable requirements of Title 12 of the Code of Federal Regulations, and (iii) further stating that its opinion of the aggregate pro forma  market value of the Company including the Bank, as most recently updated, remains in effect.

(k) At or prior to the Closing Date, the Agent shall receive: (i) a copy of the letters from the OTS approving the Form AC, the Holding Company  Application and authorizing the use of the Prospectus and the establishment of the Foundation, including the issuance of shares thereto; (ii) a  copy of the orders from the Commission declaring the Registration Statement and the Exchange Act Registration Statement effective; (iii) a  certificate from the OTS evidencing the valid existence of the Company and the Bank; (iv) a certificate from the FDIC evidencing the Bank's  insurance of accounts; (v) a certificate from the FHLB-Cincinnati evidencing the Bank's membership therein; and (vi) a certified copy of the Bank's  Charter and Bylaws.

(l) Subsequent to the date hereof, there shall not have occurred any of the following; (i) a suspension or limitation in trading in securities generally  on the New York Stock Exchange (the NYSE) or in the over-the-counter market, or quotations halted generally on The Nasdaq Stock Market, or  minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required by either of such  exchanges or the Nasdaq Stock Market or by order of the Commission or any other governmental authority; (ii) a general moratorium on the  operations of commercial banks, or federal savings and loan associations or a general moratorium on the withdrawal of deposits from commercial  banks or federal savings and loan associations declared by federal or state authorities; (iii) the engagement by the United States in hostilities  which have resulted in the declaration, on or after the date hereof, of a national emergency or war; or (iv) a material decline in the price of equity or  debt securities if the effect of such a declaration or decline, in the Agent's reasonable judgment, makes it impracticable or inadvisable to proceed  with the Offering or the delivery of the Shares on the terms and in the manner contemplated in the Registration Statement and the Prospectus.

(m) At or prior to the Closing Date, counsel to the Agent shall have been furnished with such documents and opinions as they may reasonably  require for the purpose of enabling them to pass upon the sale of the Shares as herein contemplated and related proceedings or in order to  evidence the occurrence or completeness of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained;  and all proceedings taken by the Company and the Bank in connection with the sale of the Shares as herein contemplated shall be satisfactory in  form and substance to the Agent and its counsel.

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(n) All such opinions, certificates, letters and documents will be in compliance with the provisions hereof only if they are reasonably satisfactory  in form and substance to the Agent and to counsel for the Agent. Any certificate signed by an officer of the Company or the Bank and delivered  to the Agent or to counsel for the Agent shall be deemed a representation and warranty by the Company or the Bank, as the case may be, to the  Agent as to the statements made therein.

Section 9. Indemnification.

(a) The Company and the Bank jointly and severally agree to indemnify and hold harmless the Agent, its officers and directors, employees and  agents, and each person, if any, who controls the Agent within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act, against  any and all loss, liability, claim, damage or expense whatsoever (including, but not limited to, settlement expenses), joint or several, that the Agent  or any of them may suffer or to which the Agent and any such persons may become subject under all applicable federal or state laws or otherwise,  and to promptly reimburse the Agent and any such persons upon written demand for any expense (including all fees and disbursements of  counsel) incurred by the Agent or any of them in connection with investigating, preparing or defending any actions, proceedings or claims  (whether commenced or threatened) to the extent such losses, claims, damages, liabilities or actions: (i) arise out of or are based upon any untrue  statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment or supplement thereto), the  General Disclosure Package, any Issuer-Represented Limited-Use Free Writing Prospectus, preliminary or final Prospectus (or any amendment or  supplement thereto), the Form AC (or any amendment or supplement thereto), the Holding Company Application (or any amendment or  supplement thereto) or any instrument or document executed by the Company or the Bank or based upon written information supplied by the  Company filed in any state or jurisdiction to register or qualify any or all of the Shares or to claim an exemption therefrom or provided to any state  or jurisdiction to exempt the Company or the Bank as a broker-dealer or its officers, directors and employees as broker-dealers or agents, under the  securities laws thereof (collectively, the Blue Sky Application), or any document, advertisement, oral statement or communication (Sales  Information) prepared, made or executed by or on behalf of the Company or the Bank with its consent and based upon written or oral information  furnished by or on behalf of the Company or the Bank, whether or not filed in any jurisdiction, in order to qualify or register the Shares or to claim  an exemption therefrom under the securities laws thereof; (ii) arise out of or are based upon the omission or alleged omission to state in any of the  foregoing documents or information a material fact required to be stated therein or necessary to make the statements therein, in light of the  circumstances under which they were made, not misleading; or (iii) arise from any theory of liability whatsoever relating to or arising from or based  upon the Registration Statement (or any amendment or supplement thereto), preliminary or final Prospectus (or any amendment or supplement  thereto), the General Disclosure Package, any Issuer-Represented Limited-Use Free Writing Prospectus, the Form AC (or any amendment or  supplement thereto) the Holding Company Application (or any amendment or supplement thereto), any Blue Sky Application or Sales Information  or other documentation distributed in connection with the Conversion; provided, however, that no indemnification is required under this  paragraph (a) to the extent such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue material statement or  alleged untrue material statement in, or material omission or alleged material omission from, the Registration Statement (or any amendment or  supplement thereto), preliminary or final Prospectus (or any amendment or supplement thereto), the General Disclosure Package, any Issuer- Represented Limited-Use Free Writing Prospectus, the Form AC, the Holding Company Application, any Blue Sky Application or Sales  Information made in reliance upon and in conformity with information furnished in writing to the Company, by the Agent or its counsel regarding  the Agent, and provided, that it is agreed and understood that the only information furnished in writing to the Company, by the Agent regarding  the Agent is set forth in the Prospectus under the caption The Conversion and Stock Offering — Marketing Arrangements; and, provided  further, that such indemnification shall be limited to the extent prohibited by the Commission, the OTS, the FDIC and the Board of Governors of the  Federal Reserve System.

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(b) The Agent agrees to indemnify and hold harmless the Company and the Bank, their directors and officers and each person, if any, who controls  the Company or the Bank within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act against any and all loss, liability, claim,  damage or expense whatsoever (including but not limited to settlement expenses), joint or several, which they, or any of them, may suffer or to  which they, or any of them may become subject under all applicable federal and state laws or otherwise, and to promptly reimburse the Company,  the Bank, and any such persons upon written demand for any expenses (including reasonable fees and disbursements of counsel) incurred by  them, or any of them, in connection with investigating, preparing or defending any actions, proceedings or claims (whether commenced or  threatened) to the extent such losses, claims, damages, liabilities or actions: (i) arise out of or are based upon any untrue statement or alleged  untrue statement of a material fact contained in the Registration Statement (or any amendment or supplement thereto), the Form AC (or any  amendment or supplement thereto), the Holding Company Application, the preliminary or final Prospectus (or any amendment or supplement  thereto), any Blue Sky Application or Sales Information, (ii) are based upon the omission or alleged omission to state in any of the foregoing  documents a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which  they were made, not misleading, or (iii) arise from any theory of liability whatsoever relating to or arising from or based upon the Registration  Statement (or any amendment or supplement thereto), preliminary or final Prospectus (or any amendment or supplement thereto), the Form AC (or  any amendment or supplement thereto), the Holding Company Application, or any Blue Sky Application or Sales Information or other  documentation distributed in connection with the Offering; provided, however, that the Agent's obligations under this Section 9(b) shall exist only if and only to the extent that such untrue statement or alleged untrue statement was made in, or such material fact or alleged material fact was  omitted from, the Registration Statement (or any amendment or supplement thereto), the preliminary or final Prospectus (or any amendment or  supplement thereto), the Form AC (or any amendment or supplement thereto), the Holding Company Application, any Blue Sky Application or  Sales Information in reliance upon and in conformity with information furnished in writing to the Company or the Bank, by the Agent or its counsel  regarding the Agent, and provided, that it is agreed and understood that the only information furnished in writing to the Company or the Bank, by  the Agent regarding the Agent is set forth in the Prospectus under the caption The Conversion and Stock Offering — Marketing Arrangements.

(c) Each indemnified party shall give prompt written notice to each indemnifying party of any action, proceeding, claim (whether commenced or  threatened), or suit instituted against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall  not relieve it from any liability which it may have on account of this Section 9 or otherwise. An indemnifying party may participate at its own  expense in the defense of such action. In addition, if it so elects within a reasonable time after receipt of such notice, an indemnifying party, jointly  with any other indemnifying parties receiving such notice, may assume defense of such action with counsel chosen by it and approved by the  indemnified parties that are defendants in such action, unless such indemnified parties reasonably object to such assumption on the ground that  there may be legal defenses available to them that are different from or in addition to those available to such indemnifying party. If an indemnifying  party assumes the defense of such action, the indemnifying parties shall not be liable for any fees and expenses of counsel for the indemnified  parties incurred thereafter in connection with such action, proceeding or claim, other than reasonable costs of investigation. In no event shall the  indemnifying parties be liable for the fees and expenses of more than one separate firm of attorneys (and any special counsel that said firm may  retain) for each indemnified party in connection with any one action, proceeding or claim or separate but similar or related actions, proceedings or  claims in the same jurisdiction arising out of the same general allegations or circumstances.

Section 10. Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in  Section 9 is due in accordance with its terms but is for any reason held by a court to be unavailable from the Company, the Bank or the Agent, the  Company, the Bank and the Agent shall contribute to the aggregate losses, claims, damages and liabilities

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(including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or  proceeding, but after deducting any contribution received by the Company, the Bank or the Agent from persons other than the other parties  thereto, who may also be liable for contribution) in such proportion so that the Agent is responsible for that portion represented by the percentage  that the fees paid to the Agent pursuant to Section 2 of this Agreement (not including expenses) bears to the gross proceeds received by the  Company from the sale of the Shares in the Offering, and the Company and the Bank shall be responsible for the balance. If, however, the  allocation provided above is not permitted by applicable law, then each indemnifying party shall contribute to such amount paid or payable by  such indemnified party in such proportion as is appropriate to reflect not only such relative fault of the Company and the Bank on the one hand  and the Agent on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions,  proceedings or claims in respect thereto), but also the relative benefits received by the Company and the Bank on the one hand and the Agent on  the other from the Offering (before deducting expenses). The relative fault shall be determined by reference to, among other things, whether the  untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by  the Company and the Bank on the one hand or the Agent on the other and the parties' relative intent, good faith, knowledge, access to information  and opportunity to correct or prevent such statement or omission. The Company, the Bank and the Agent agree that it would not be just and  equitable if contribution pursuant to this Section 10 were determined by pro-rata allocation or by any other method of allocation which does not  take into account the equitable considerations referred to above in this Section 10. The amount paid or payable by an indemnified party as a result  of the losses, claims, damages or liabilities (or actions, proceedings or claims in respect thereof) referred to above in this Section 10 shall be  deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any  such action, proceeding or claim. It is expressly agreed that the Agent shall not be liable for any loss, liability, claim, damage or expense or be  required to contribute any amount pursuant to Section 9(b) or this Section 10 which in the aggregate exceeds the amount paid (excluding  reimbursable expenses) to the Agent under this Agreement. It is understood that the above stated limitation on the Agent's liability is essential to  the Agent and that the Agent would not have entered into this Agreement if such limitation had not been agreed to by the parties to this  Agreement. No person found guilty of any fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to  contribution from any person who was not found guilty of such fraudulent misrepresentation. The obligations of the Company, the Bank and the  Agent under this Section 10 and under Section 9 shall be in addition to any liability which the Company and the Agent may otherwise have. For  purposes of this Section 10, each of the Agent's, the Company's or the Bank's officers and directors and each person, if any, who controls the  Agent or the Company or the Bank within the meaning of the 1933 Act and the 1934 Act shall have the same rights to contribution as the Agent on  the one hand, or, the Company or the Bank on the other hand. Any party entitled to contribution, promptly after receipt of notice of  commencement of any action, suit, claim or proceeding against such party in respect of which a claim for contribution may be made against  another party under this Section 10, will notify such party from whom contribution may be sought, but the omission to so notify such party shall  not relieve the party from whom contribution may be sought from any other obligation it may have hereunder or otherwise than under this Section  10.

Section 11. Survival of Agreements, Representations and Indemnities. The respective indemnities of the Company, the Bank and the Agent, the  representations and warranties and other statements of the Company, the Bank and the Agent set forth in or made pursuant to this Agreement and  the provisions relating to contribution 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 the Agent, the Company, the Bank or any controlling person referred to in Section 9 hereof, and shall  survive the termination of this Agreement and the issuance of the Shares, and any successor or assign of the Agent, the Company and the Bank,  and any such controlling person shall be entitled to the benefit of the respective agreements, indemnities, warranties and representations.

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Section 12. Termination. The Agent may terminate this Agreement by giving the notice indicated below in this Section 12 at any time after this  Agreement becomes effective as follows:

(a) If any domestic or international event or act or occurrence has materially disrupted the United States securities markets such as to make it, in  the Agent's reasonable opinion, impracticable to proceed with the offering of the Shares; or if trading on the NYSE shall have suspended (except  that this shall not apply to the imposition of NYSE trading collars imposed on program trading); or if the United States shall have become involved  in a war or major hostilities; or if a general banking moratorium has been declared by a state or federal authority which has a material effect on the  Company on a consolidated basis; 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 financial condition, results of operations or business of the Bank, or if the Bank shall have  sustained a material or substantial loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act, whether or  not said loss shall have been insured; or if there shall have been a material adverse change in the financial condition, results of operations or  business of the Bank.

(b) In the event the Company fails to sell the required minimum number of the Shares by the date when such sales must be completed, in  accordance with the provisions of the Plan or as required by the Conversion Regulations, and applicable law, this Agreement shall terminate upon  refund by the Company to each person who has subscribed for or ordered any of the Shares the full amount which it may have received from such  person, together with interest as provided in the Prospectus, and no party to this Agreement shall have any obligation to the other hereunder,  except as set forth in Sections 2(a) and (d), 7, 9 and 10 hereof.

(c) If any of the conditions specified in Section 8 shall not have been fulfilled when and as required by this Agreement, unless waived in writing, or  by the Closing Date, this Agreement and all of the Agent's obligations hereunder may be cancelled by the Agent by notifying the Company of  such cancellation in writing or by telegram at any time at or prior to the Closing Date, and any such cancellation shall be without liability of any  party to any other party except as otherwise provided in Sections 2(a), 2(d), 7, 9 and 10 hereof.

(d) If the Agent elects to terminate this Agreement as provided in this Section, the Company and the Bank shall be notified promptly by telephone  or telegram, confirmed by letter.

The Company or the Bank may terminate this Agreement in the event the Agent is in material breach of the representations and warranties or  covenants contained in Section 5 and such breach has not been cured after the Company or the Bank has provided the Agent with notice of such  breach.

This Agreement may also be terminated by mutual written consent of the parties hereto.

Section 13. Notices. All communications hereunder, except as herein otherwise specifically provided, shall be mailed in writing and if sent to the  Agent shall be mailed, delivered or telegraphed and confirmed to Keefe, Bruyette & Woods, Inc., Investment Banking, 10 South Wacker Drive,  Suite 3400, Chicago, Illinois 60606, Attention: Harold T. Hanley, III, Managing Director (with a copy to Silver, Freedman & Taff, L.L.P, 3299 K  Street, N.W., Suite 100, Washington, D.C. 20007, Attn: Martin L. Meyrowitz, P.C.) and, if sent to the Company or the Bank, shall be mailed,  delivered or telegraphed and confirmed to the Company at 106 Washington Avenue, P.O. Box 869, Athens, Tennessee, 37371-0869, Attn: Jeff  Cunningham, President and Chief Executive Officer (with a copy to Kilpatrick Stockton LLP, 607 14th Street, N.W., Suite 900, Washington, D.C.,  2005, Attn: Victor L. Cangelosi, Esq.).

Section 14. Parties. The Company and the Bank shall be entitled to act and rely on any request, notice, consent, waiver or agreement purportedly  given on behalf of the Agent when the same shall have been given by the undersigned. The Agent shall be entitled to act and rely on any request,  notice, consent,

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waiver or agreement purportedly given on behalf of the Company or the Bank, when the same shall have been given by the undersigned or any  other officer of the Company or the Bank. This Agreement shall inure solely to the benefit of, and shall be binding upon, the Agent, the Company,  the Bank and their respective successors and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy  or claim under or in respect of or by virtue of this Agreement or any provision herein contained. It is understood and agreed that this Agreement is  the exclusive agreement among the parties hereto, and supersedes any prior agreement among the parties and may not be varied except in writing  signed by all the parties.

Section 15. Closing. The closing for the sale of the Shares shall take place on the Closing Date at such location as mutually agreed upon by the  Agent and the Company and the Bank. At the closing, the Company and the Bank shall deliver to the Agent in next day funds the commissions,  fees and expenses due and owing to the Agent as set forth in Sections 2 and 7 hereof and the opinions and certificates required hereby and other  documents deemed reasonably necessary by the Agent shall be executed and delivered to effect the sale of the Shares as contemplated hereby  and pursuant to the terms of the Prospectus.

Section 16. Partial Invalidity. In the event that any term, provision or covenant herein or the application thereof to any circumstance or situation  shall be invalid or unenforceable, in whole or in part, the remainder hereof and the application of said term, provision or covenant to any other  circumstances or situation shall not be affected thereby, and each term, provision or covenant herein shall be valid and enforceable to the full  extent permitted by law.

Section 17. Construction. This Agreement shall be construed in accordance with the laws of the State of New York without regard to principles of  conflicts of law.

Section 18. Counterparts. This Agreement may be executed in separate counterparts, each of which so executed and delivered shall be an original,  but all of which together shall constitute but one and the same instrument.

Section 19. Entire Agreement. This Agreement, including schedules and exhibits hereto, which are integral parts hereof and incorporated as  though set forth in full, constitutes the entire agreement between the parties pertaining to the subject matter hereof superseding any and all prior  or contemporaneous oral or prior written agreements, proposals, letters of intent and understandings, and cannot be modified, changed, waived or  terminated except by a writing which expressly states that it is an amendment, modification or waiver, refers to this Agreement and is signed by the  party to be charged. No course of conduct or dealing shall be construed to modify, amend or otherwise affect any of the provisions hereof.

Section 20. Waiver of Trial by Jury. Each of the Agent and the Company and the Bank waive all rights to trial by jury in any action, proceeding,  claim or counterclaim (whether based on contract, tort or otherwise) related to or arising out of this Agreement.

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If the foregoing correctly sets forth the arrangement among the Company, the Bank and the Agent, please indicate acceptance thereof in the space  provided below for that purpose, whereupon this letter and the Agent's acceptance shall constitute a binding agreement.

Accepted as of the date first above written

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          Very truly yours,                   ATHENS FEDERAL COMMUNITY BANK        ATHENS BANCSHARES CORPORATION           By Its Authorized Representative        By Its Authorized Representative:

Jeff Cunningham        Jeff Cunningham President and Chief Executive Officer        President and Chief Executive Officer

          KEEFE, BRUYETTE & WOODS, INC.    By its Authorized Representative

    Harold T. Hanley, III, Managing Director     Managing Director 
Question: Highlight the parts (if any) of this contract related to Cap On Liability that should be reviewed by a lawyer. Details: Does the contract include a cap on liability upon the breach of a party’s obligation? This includes time limitation for the counterparty to bring claims or maximum amount for recovery.

SOLUTION: It is expressly agreed that the Agent shall not be liable for any loss, liability, claim, damage or expense or be  required to contribute any amount pursuant to Section 9(b) or this Section 10 which in the aggregate exceeds the amount paid (excluding  reimbursable expenses) to the Agent under this Agreement.

PROBLEM: Exhibit 10.13   TRANSPORTATION AGREEMENT   BETWEEN   ENERGY XXI GULF COAST, INC.   AND   ENERGY XXI USA, INC.   DATED EFFECTIVE AS OF   March 11, 2015









  TRANSPORTATION AGREEMENT   TABLE OF CONTENTS   ARTICLE 1 DEFINITIONS AND INTERPRETATION 1     ARTICLE 2 NOMINATIONS AND TRANSPORTATION 3     ARTICLE 3 RATES AND CHARGES 4     ARTICLE 4 QUALITY AND PRESSURE SPECIFICATIONS 5     ARTICLE 5 OFFSHORE PLATFORM FACILITIES AND OPERATING PROCEDURES 6     ARTICLE 6 GRAVITY BANK 8     ARTICLE 7 MEASUREMENT AND TESTING 9     ARTICLE 8 TERM 11     ARTICLE 9 TITLE AND CUSTODY 11     ARTICLE 10 BILLING AND PAYMENT 11     ARTICLE 11 REMEDIES 12     ARTICLE 12 FORCE MAJEURE 13     ARTICLE 13 INDEMNIFICATION 14     ARTICLE 14 NOTICES 14     ARTICLE 15 ASSIGNMENT 15     ARTICLE 16 MISCELLANEOUS 15

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  TRANSPORTATION AGREEMENT   This Transportation Agreement (the Agreement), dated as of March 11, 2015 (the Effective Date), is by and between ENERGY XXI GULF COAST, INC., a Delaware corporation (Shipper), and  ENERGY XXI USA, INC., a Delaware corporation  (Transporter). Shipper and Transporter may be referred to herein individually as a Party or collectively as the Parties.   WITNESSETH:   WHEREAS, Shipper desires to contract with Transporter for transportation service on Transporter's Gathering System;   WHEREAS, Transporter is willing to transport Shipper's Crude Petroleum on the Gathering System for the compensation and subject to the terms and conditions set forth below;   NOW, THEREFORE, in consideration of the mutual agreements, covenants and conditions herein contained, Transporter and Shipper hereby agree as follows:   ARTICLE 1 DEFINITIONS AND INTERPRETATION   1.1 Definitions. In addition to terms defined elsewhere in this Agreement and in Annex I hereto, the following definitions shall apply hereunder:   Agreement shall have the definition set forth in the preamble of this Agreement.   A.P.I. shall mean the American Petroleum Institute.   Barrel or Bbl shall mean forty-two (42) United States gallons at a temperature of sixty degrees (60°) Fahrenheit.   BS&W shall mean the basic sediment, water or other impurities found in a stream of Crude Petroleum.   Claiming Party shall have the meaning set forth in the definition of Force Majeure below.   Crude Petroleum shall mean the direct liquid products of oil wells, indirect petroleum products resulting either from distillate recovery equipment in gas and distillate fields, or a mixture of the direct product and indirect petroleum products.   Delivery Point shall mean the point(s) of interconnection between the Gathering System and one or more oil pipelines downstream of the Gathering System where Transporter delivers Crude Petroleum to Shipper. The initial Delivery Point shall be located at Grand Isle.

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  Downstream Pipelines shall mean any pipeline or other receiving facility downstream of the Delivery Point.   Effective Date shall have the definition set forth in the preamble of this Agreement.   Force Majeure shall mean an event which is not within the reasonable control of the Party claiming suspension (the Claiming Party), and which by the exercise of due diligence the Claiming Party is unable to overcome in a commercially reasonable manner. Force Majeure includes, to the extent such event satisfies the requirements of the preceding sentence: acts of God; wars (declared or undeclared); insurrections; hostilities; strikes; lockouts; riots; floods; fires; storms; storm warnings; named or numbered tropical disturbances and evacuations associated with the threat of the same; industrial disturbances; acts of the public enemy; sabotage; blockades; epidemics; landslides; lightning; earthquakes; washouts; arrests and restraints of rulers and peoples; civil disturbances; explosions; breakage or accidents to machinery or lines of pipe; hydrate obstruction or blockages of any kind of lines of pipe; adverse operating conditions on Shipper's facilities, Transporter's facilities, or the facilities of Downstream Pipelines; repairs, improvements, replacements or alterations to plants, lines of pipe or related facilities; inability of either Party to obtain necessary machinery, drilling or workover rigs, materials, permits, easements or rights-of-way on reasonable terms; freezing of delivery facility; and other events beyond the reasonable control of Shipper that affect production levels; action or restraint by court order or public or governmental authority (so long as the Claiming Party has not applied for or assisted in the application for, and has opposed where and to the extent reasonable, such government action); provided, however, that none of the loss of Shipper's or its Affiliates' markets, Shipper's or its Affiliates' inability to obtain adequate capacity (other than for reasons of force majeure affecting a Downstream Pipeline), nor Shipper's or its Affiliates' inability economically to use or resell Crude Petroleum transported hereunder shall constitute an event of Force Majeure. A force majeure event that occurs respecting one or more Downstream Pipelines for which there are no reasonable alternatives for a Claiming Party to utilize in order to meet its duties and obligations under this Agreement, regardless of whether such Downstream Pipeline declared such force majeure event, shall constitute Force Majeure for purposes of this Agreement, subject to the requirement of the first sentence of this definition. The failure of a Claiming Party to settle or prevent a strike or other labor dispute with employees shall not be considered to be a matter within such Claiming Party's control.   Gathering System shall mean Transporter's Grand Isle Gathering System.   Month shall mean a period of time beginning at 7:00 a.m. Central Clock Time on the first day of a calendar month and ending at 7:00 a.m. Central Clock Time on the first day of the next succeeding calendar month.   Psig shall mean pounds per square inch gauge.   Receipt Point shall mean the point(s) of interconnection between the Gathering System and one or more oil pipelines or other interconnecting facilities located upstream of the Gathering System where Shipper delivers Crude Petroleum to Transporter. The initial Receipt Points are identified on Exhibit A.

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  Shipper shall have the definition set forth in the preamble of this Agreement.   Transporter shall have the definition set forth in the preamble of this Agreement.   1.2 Other Terms. Other capitalized terms used in this Agreement and not defined in Section 1.1 above shall have the meanings ascribed to them throughout this Agreement.   ARTICLE 2 NOMINATIONS, SCHEDULING AND TRANSPORTATION   2.1 Nomination.   (a)  Applications for the transportation of Crude Petroleum shall be submitted in writing on Transporter's prescribed nomination of shipment form.   (b) Shipper desiring to nominate Crude Petroleum for transportation shall make such nomination to Carrier in writing on or before the twenty-fifth day of the month preceding the month during which the transportation under the nomination is to begin; except that, if space is available for current movement, a Shipper may nominate Crude Petroleum for transportation after the twenty-fifth day of the month preceding the month during which the transportation under the nomination is to begin.   2.2 Capacity Allocation.   (a) When pursuant to nominations hereunder, there shall be offered to Transporter more Crude Petroleum than can be immediately gathered and/or transported, the gathering and/or transportation shall be apportioned among all Shippers by Transporter on a just and reasonable basis.   2.3 Transportation.   (a) Subject to the provisions of this Agreement and all applicable Laws, Transporter shall accept and transport Shipper's Crude Petroleum and redeliver the quantity of Crude Petroleum received by Transporter, less applicable Losses as set forth in Section 7.3, at the Delivery Point. Transporter shall be under no obligation to deliver the identical Crude Petroleum received, and reserves the right to make delivery out of its common stock.   2.4 Transporter's Right to Shutdown Operations.   (a) Transporter shall have absolute discretion and authority to partially or totally shutdown any and all operations and activities (and temporarily or permanently discontinue the services) contemplated hereunder at any time, if in Transporter's sole discretion, such shutdown is warranted to (i) ensure the safety of persons, property, or the environment; (ii) ensure the operational integrity of the Gathering System; or (iii) modify, inspect, maintain or repair the Gathering System. Transporter shall notify Shipper in writing in the event of any of the occurrences listed above. In such cases, Transporter shall not have any liability to Shipper for such shutdowns.

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  (b) In the event interruption of service is required, Transporter's dispatcher will advise Shipper of an interruption as soon as practicable.   (c)  Nothing contained herein shall preclude Transporter from taking reasonable action(s) necessary to adjust receipts or deliveries hereunder in order to maintain the operational integrity of the Gathering System.   2.5 Line Fill and Tank Bottom Inventory.   (a) Either prior to or after the acceptance of Crude Petroleum for transportation, Transporter will, upon reasonable notice, require Shipper to provide a pro rata part of the volume of Crude Petroleum necessary for pipeline fill, unavailable stocks below tank connections, and reasonable additional minimum quantities required for efficient operation or to safeguard Transporter's tankage during passage of a tropical storm or hurricane. Crude Petroleum provided by Shipper for this purpose may be withdrawn after reasonable written notice of Shipper's intention to discontinue shipment in the Gathering System. Transporter may require advance payment of final transportation charges and settlement of any unpaid accounts receivable before final delivery will be made.   (b) In the event Shipper's inventory balance drops below its pro rata part of the volume of Crude Petroleum necessary for pipeline fill, unavailable stocks below tank connections, and reasonable additional minimum quantities required for the efficient operation of the system, then Transporter will require Shipper to provide the necessary volume to meet its pro rata part of such volume of Crude Petroleum.   (c) In the event that Shipper maintains an inventory balance after Shipper ceases movements on the Gathering System or Shipper gives written notice of its intent to cease movements over the system and Shipper is unable to schedule appropriate shipments to clear the inactive inventory balance, Shipper will be required to settle the inactive inventory balance through Transporter. In the event no such Shipper notice is given, then Transporter may require either an adjustment in Shipper's inventory balance or settlement of Shipper's inventory balance at any time after Shipper has ceased making movements under this Agreement for a period of six months. Such settlement will be based upon the fair market value of the Crude Petroleum, as published by Platts, at the time Shipper provides written notice of termination of this Agreement or if no such written notice is given, then at such time as Transporter calls for the settlement of the Shipper's inventory balance.   ARTICLE 3 RATES AND CHARGES   3.1 Transportation Charges. Crude Petroleum accepted for transportation by Transporter shall be subject to the transportation rates set forth on Exhibit A plus any other applicable charges specified in this Article 3.

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  ARTICLE 4 QUALITY AND PRESSURE SPECIFICATIONS   4.1 Quality Specifications. Transporter reserves the right to reject any and all shipments of: (i) Crude Petroleum delivered by Shipper to Transporter whose gravity, viscosity, and/or other characteristics are such that it is not readily susceptible to transportation through the Transporter's existing facilities and it will damage the quality of other shipments or cause disadvantage to other shippers and/or the Transporter; (ii) Crude Petroleum containing water, sediment and other impurities totaling in excess of one per cent as determined by centrifugal test, or by such other tests as may be agreed upon by the Shipper and Transporter; or (iii) Crude Petroleum where Shipper has failed to comply with all applicable laws, rules, and regulations made by any governmental authorities regarding shipment of Crude Petroleum.   4.2 Contaminants. Transporter has the right, at its discretion, to reject crude oil containing contaminants. If Transporter determines that a Shipper has delivered to Transporter's facilities Crude Petroleum that has been contaminated by the existence of and or excess amounts of impure substances, including but not limited to chlorinated and/or oxygenated hydrocarbons, arsenic, lead and/or other metals which results in harm to other shippers, Downstream Pipelines, users of the contaminated Crude Petroleum or Transporter, such Shipper will be excluded from further entry into applicable segments of the pipeline system until such time as the quality of the Crude Petroleum is to the satisfaction of the Transporter. Transporter is not responsible for monitoring receipts or deliveries for contaminants. Further, Transporter reserves the right to dispose of any contaminated Crude Petroleum blocking its pipeline system. Disposal thereof may be made in any reasonable manner including but not limited to commercial sales, and any liability associated with the contamination or disposal of any Crude Petroleum shall be borne by the Shipper introducing the contaminated Crude Petroleum into Transporter's system. Shipper liability includes, but is not limited to, claims from other shippers, carriers, or users of the contaminated Crude Petroleum and the costs of any regulatory or judicial proceeding.   4.3  Periodic Samples. Transporter reserves the right to periodically sample and test the quality of the Crude Petroleum delivered by Shipper at any Receipt Point. Transporter shall be responsible for all costs attributable to such periodic sampling and testing. If at any time Shipper's Crude Petroleum triggers any of the rejection rights set forth in Section 4.1, Shipper shall pay for any tests performed thereafter to establish that such Crude Petroleum no longer triggers such provisions.   4.4 Pressure. The present maximum operating pressure at all reception points is 1440 psig. Shipper's injection pressure shall be maintained within this stated maximum limit and shall conform, as near as possible, to the hydraulic gradient. Transporter reserves the right to reduce the maximum operating pressure by written notice to Shipper. Shipper shall furnish, or cause the producer from which Crude Petroleum is purchased to furnish, install, calibrate, and maintain continuous pressure recording devices at or near injection points to monitor pipeline operating pressures. Copies of the recording charts taken from these recording devices shall be furnished to Transporter on a weekly basis by Shipper. Shipper shall also furnish Transporter copies of annual calibration certificates for recording devices. Transporter reserves the right to witness calibration of these devices, and Shipper shall notify Transporter at least 48 hours prior to the initiation of such calibration procedures. Circumstances may arise which in Transporter's judgment require the Gathering System, or any part thereof, be shut down. Following such shutdown periods, Shippers shall obtain authorization from Transporter prior to the resumption of injections.

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  4.5 Excess Water, Sediment and Other Impurities. If during any monthly accounting period, the weighted average of the BS&W on all meter tickets covering Crude Petroleum delivered to Transporter by Shipper reflects a water, sediment and other impurities content which exceeds 1%, Shipper shall pay to Transporter a handling charge as specified in the table in Exhibit A on such excess water, sediment, and other impurities to cover the treating, separation and other aspects of handling such excess water, sediment and other impurities delivered to Transporter. This explicitly excludes disposal. Transporter shall accept excess water for handling only when Shipper has made the necessary arrangements for disposal of such excess water. Shipper may dispose of its excess water by method acceptable to Transporter such as barging or trucking subject to a mutually agreed upon schedule for excess water removal by Shipper from Transporter's Grand Isle tankage. As an alternative, Shipper may request Transporter to dispose of Shipper's excess water by use of Transporter's onshore disposal wells. The fees for disposal are set forth in Exhibit A. In any event, Shipper must contact Transporter in advance at 713-351-3000 to schedule means by which BS&W will be disposed. Where no meter tickets are available or meter tickets are in Transporter's opinion unreliable, water, sediment and other impurities in the system in excess of that reported on acceptable meter tickets will be allocated in a fair and equitable manner by Transporter. Notwithstanding the fact that Transporter levies a handling charge covering excess water, sediment and other impurities content in a Crude Petroleum stream, Transporter reserves the right to reject any nomination of products other than Crude Petroleum which satisfies all quality standards, requirements and conditions set forth herein.   ARTICLE 5 OFFSHORE PLATFORM FACILITIES AND OPERATING PROCEDURES   5.1 Transporter or its authorized representative shall have access to the platform from which shipments are received for the purpose of examining and checking meters and other installations utilized in connection with the handling of Crude Petroleum injected into the pipeline.   5.2  Shipper, upon request by Transporter, shall install, maintain and operate, or make arrangements with platform owners to install, maintain, and operate equipment to inject corrosion inhibitors, biocides, scale inhibitors, paraffin chemicals, or other chemicals as specified by Transporter.   5.3 Shipper shall provide or arrange with platform operator to furnish, operate, and maintain such pumping equipment as is necessary to inject the Crude Petroleum nominated by Shipper for shipment or will cause same to be done. Pumping equipment shall be controlled and operated so that the hourly rate at which Crude Petroleum is injected during each month shall not exceed 120% of the average hourly volume nominated and accepted for shipment during the current calendar month. If piston pumps are used, surge absorbers shall be installed, upon reasonable request of Transporter, to minimize pulsation. Transporter reserves the right, upon written notification to all Shippers to further limit the variation of Shipper's injection rates, if in Transporter's judgment proration is imminent. Reasonable exceptions to variations of injection rates for Shippers with newly discovered, expended production, and unusual production difficulties will be allowed by Transporter.

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  5.4  Physical and legal transfer of custody of Crude Petroleum to Transporter shall be at points where producer's or other delivering parties' lines are connected to Transporter's existing facilities, however, measurement of quantities received for the account of Shipper at such points shall be determined by measurement facilities installed on the production platforms where the Crude Petroleum is produced or to which it is moved for delivery into Transporter's existing facility.   5.5 The Transporter shall have the right to require uniform measurement and sampling equipment/procedures at all installations so that custody transfer measurements are made on a uniform basis. Transporter reserves the right to require Shipper to install or cause platform owners to install in accordance with applicable API and ASTM (American Society for Testing Materials) standards metering and meter proving equipment capable of continuous custody measurement, and devices for continuous proportional to-flow sampling of the Crude Petroleum.   5.6 If Crude Petroleum to be delivered to Transporter is produced at some distance from the Transporter's facilities and Transporter does not elect to provide a connection directly to the production platform where it is produced, Shipper may furnish, or cause to be furnished, free of cost to Transporter, the connecting pipeline required to deliver such Shipper's Crude Petroleum to the location designated by Transporter. If such location is on another producer's platform, all arrangement for installing the connecting pipeline or other required equipment or facilities on such platform shall be the sole responsibility of the Shipper.   5.7 At Transporter's request, Shipper will allow, or cause the platform owner(s) to allow, Transporter to place, operate, repair and maintain riser piping, scraper traps, valves, surveillance equipment, and any other equipment deemed by Transporter to be needed for the safe and efficient operation of the Gathering System. In the event Transporter should decide to transmit meter readings or other data from the platform from which Shipper's Crude Petroleum is run, Shipper will allow, or cause the platform owner(s) to allow, reasonable access to and use of communication facilities which may be available at the platform.   5.8 Where meter readings are available Transporter will prepare, as near as practicable to 7:00 a.m. on the first day of each month, a monthly pipeline run ticket for Shipper showing opening and closing meter readings and water, sediment, other impurities percentage on the basis of which Crude Petroleum and water, sediment, and other impurities volumes will be determined. If for any reason Transporter's representative fails to reach any receipt point on the first day of the month, Shipper's own representative, with prior authorization from Transporter, will obtain and make a record for Transporter's representative of the closing meter reading and will withdraw the sample material from the sampling equipment. The sample material thus withdrawn will be sealed in a special container and retained by Shipper's representative for Transporter's representative who will, during his next trip to that receipt point, determine the water, sediment, and other impurities percentage of the sample material in the special container and prepare the monthly pipeline run ticket. Where no meter readings are available, Crude Petroleum including water, sediment and other impurities will be determined by Transporter from the best available data.

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  5.9 It is recognized that from time to time producers inject acid into well formations containing Crude Petroleum in an attempt to stimulate production and fluids subsequently produced from such wells may contain unspent acid which must be neutralized to a pH of 4.5 or greater before the fluids (with which acid is produced) are delivered to Transporter. If such total fluids (Crude Petroleum plus unspent acid) is not so neutralized, the Gathering System may have to be shut down which in turn will require all connected producers to shut in their wells. To assist Transporter to anticipate the need and to prepare for possible corrective actions which may be required to void or minimize operating difficulties caused by any unneutralized acid, Shippers shall furnish, or cause the producer from which Crude Petroleum is purchased to furnish to Transporter, the following information at least 24 hours in advance of start of production from any well which has been acidized: (i) estimated time of first production from acidized well; (ii) estimated time that first production from acidized well, which has been neutralized to a pH equal to or greater than 4.5, will be injected into the Gathering System; and (iii) estimated time that produced fluids from previously acidized wells, which has been neutralized to a pH equal to or greater than 4.5, will be free of neutralized acids. Shipper shall assume full responsibility for and reimburse Transporter for all extra costs and expenses incurred by Transporter as the result of any unspent and/or unneutralized acids being present in the Crude Petroleum delivered to Transporter by Shipper. Shipper will be billed for all such extra costs and expenses for shutting down, purging of such unspent acids, and subsequent resuming operation of the Transporter's Gathering System. Transporter shall not be liable to any Shipper for any damage sustained by Shipper(s) as the result of unspent and/or unneutralized acids being received from other Shipper(s).   5.10 In the event that Shipper does not operate the wells from which the Crude Petroleum nominated for shipment is produced or does not operate the treating, measurement, or pumping equipment through which such Crude Petroleum is handled prior to its delivery to Transporter, then Shipper shall designate the party or parties responsible for the operation of such facilities and shall authorize and direct such party or parties to (1) comply with all provisions of this Agreement related to their operations and (2) furnish to Transporter such reasonably requested operational, technical, administrative, and analytical data as Transporter deems necessary to account for volumes being delivered to Transporter and assure safe, lawful, and efficient operations.   ARTICLE 6 GRAVITY BANK   6.1 To assure that no shipper will be materially damaged or allowed to benefit by changes in gravity due to the intermixing of petroleum in the Gathering System, Shipper will be required, as a condition of tendering, to participate in a Gravity Bank. The table of gravity differential values per barrel as attached hereto as Exhibit B is incorporated herein and made a part of this Agreement.

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  6.2 Transporter shall administer the Gravity Bank providing adjustments for the value of crudes with different qualities in the manner specified below for both receipt and delivery volumes. Applicable barrels and gravities shall be the net barrels at 60 degrees Fahrenheit (with no deduction for Loss allowance) and the gravities recorded by the Operator at points where it customarily records gravities and quantities. The weighted average gravity differential value per barrel (for two or more gravities of petroleum), as hereinafter referred to, shall be obtained in the following manner: multiply the gravity differential values per barrel (from the attached table as same is from time to time revised) by the number of barrels to which such gravity differential values are applicable and then divide the total of the resultant gravity differential values in dollars and cents by the total of the applicable barrels.   6.3 Adjustments between shippers shall be computed as follows: (i) compute the weighted average gravity differential value per barrel of the barrels received from by each shipper and (ii) compute the weighted average gravity differential value per barrel of the composite common stream for receipts.   6.4 Calculation:   (a) If the weighted average gravity differential value per barrel of a shipper as so determined under Section 6.3(i) above shall be greater than the weighted average gravity differential value per barrel of the aforementioned common stream petroleum as determined under Section 6.3(ii), the difference in cents per barrel shall be calculated and shipper shall be credited (receives) an amount calculated by multiplying said difference in gravity differential value per barrel by the applicable barrels.   (b) If the weighted average gravity differential value per barrel of a shipper is less than the weighted average gravity differential value per barrel of the aforementioned common stream petroleum, the difference shall be calculated as above outlined and a shipper debited for such difference.   (c) A sample calculation is attached as Exhibit C.   6.5 These calculations shall be made for each calendar month and the algebraic sum of the adjustments for the system shall be zero +/- One Dollar. If a shipper shall have a net debit balance in combining the two adjustments made above, the balance shall be remitted to the clearinghouse within fifteen (15) days from receipt of statement of such debit. If Shipper shall have a credit, the clearinghouse shall remit the amount thereof after receipt by the clearinghouse of the sums from those shippers having debits as calculated above.   ARTICLE 7 MEASUREMENT AND TESTING   7.1 Crude Petroleum tendered to Transporter for transportation shall be measured and tested by a representative of Transporter prior to its receipt from Shipper. Shipper shall have the privilege of being present or represented at the measurement and testing. Quantities shall be measured by meters and calculated in accordance with applicable A.P.I. Manual of Petroleum Measurement Standards. All shipments of required specifications will be received and delivered as net standard volume, as the total volume excluding water, sediment and other impurities, corrected by the appropriate volume correction factor for the observed temperature and A.P.I. gravity, relative density, or density to a standard temperature of 60 degrees Fahrenheit and also corrected by the applicable pressure correction factor and meter factor. Where measurement and testing of shipments to determine water, sediment, and other impurities content is not performed, the Transporter shall determine the water, sediment, and other impurities content of shipments based on the best available data. Due to the complexity of the allocations of the non-metered receipt locations, any prior period volume adjustment of 500 barrels or less will be corrected by including the corrected prior Months' (positive or negative) volume in the current month allocation process. Any shipper request for volume or quality adjustments prior to the most previous twenty-four (24) Month time frame will not be considered.

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  7.2  Evidence of Receipts and Deliveries. Transporter shall account to Shipper for Crude Petroleum received and delivered. Crude Petroleum received from Shipper and Crude Petroleum delivered to Shipper shall, in each instance, be evidenced by tickets, showing opening and closing tank gauges or meter readings, as applicable, temperature, basic sediment and water, and any other data essential to the determination of quantity. Such tickets shall be jointly signed by representatives of Transporter and Shipper, and shall constitute full receipt for (a) the Crude Petroleum received and (b) the Crude Petroleum delivered. Where meter tickets are not available or in Transporter's opinion are unreliable, Transporter shall use the best available data to determine the quantity of Crude Petroleum received and delivered. For receipt locations where custody transfer measurement is by Lease Automatic Custody Transfer (LACT) unit or by allocation process, a deduction of twenty-five hundredths of one percent (0.25%) will be made to cover evaporation, interface losses and normal losses during transportation.   7.3 Losses.   (a) All shipments of Crude Petroleum of 50 degrees A.P.I. gravity or above shall be subject to a deduction to cover the shrinkage resulting from the mixture thereof, in the facilities of Transporter, with Crude Petroleum of A.P.I. gravity of 49.9 degrees or less according to the following table:   A.P.I. Gravity  (Degrees)    Deduction  50 through 59.9    1% 60 through 74.9    2% 75 through 84.9    3% 85 through 94.9    4% 95 through 104.9    5% 105 through 120.9    6%   (b) The quantity of Crude Petroleum deliverable shall be the net standard volume less shrinkage, evaporation, or any other losses in transit or due to leaks or pipeline breaks. All such shrinkage, evaporation, and gains or losses shall be assigned by Transporter to Shipper on a just and reasonable basis.

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  ARTICLE 8 TERM   8.1 Term. Subject to the other provisions of this Agreement, the term of this Agreement shall commence on the Effective Date and shall remain in effect until terminated by either Party upon thirty (30) days' prior written notice.   8.2 Remedies Cumulative. Each Party shall have any and all remedies available to it under this Agreement, at law, or in equity for any breach by the other Party of the other Party's obligations under this Agreement. All such remedies are cumulative, not exclusive, and such Party may exercise any or all of such remedies in addition to or as an alternative to termination of the Term. No election of remedies shall be required or implied as the result of a Party's decision to avail itself of a remedy hereunder.   ARTICLE 9 TITLE AND CUSTODY   9.1 Title. A nomination of Crude Petroleum shall be deemed a warranty of title to such Crude Petroleum by Shipper, or a warranty of the good right to deliver such Crude Petroleum for transportation hereunder. Transporter may, in the absence of adequate security, decline to receive any Crude Petroleum which is in litigation, or as to which a dispute over title may exist, or which is encumbered by any lien. By nominating Crude Petroleum, Shipper also agrees to be responsible for any and all losses resulting from disputes, encumbrances, or failure of title thereto. Neither acceptance for transportation, nor redelivery by Transporter at the Delivery Point shall be deemed a representation by Transporter as to title.   9.2  Custody. As among the Parties, Shipper shall be in custody, control and possession of the Crude Petroleum affected by this Agreement at all times prior to delivery to Transporter at the Receipt Point and after redelivery by Transporter at the Delivery Point and Transporter shall have custody and control of the Crude Petroleum affected by this Agreement at all times after delivery by Shipper at the Receipt Point and prior to redelivery by Transporter at the Delivery Point.   ARTICLE 10 BILLING AND PAYMENT   10.1 Payment. All payments are due within 10 days of receipt of the invoice by ACH or wire transfer, unless the Transporter determines in a manner not unreasonably discriminatory that the financial condition of Shipper or Shipper's guarantor (if any) is or has become impaired or unsatisfactory or Transporter determines in a manner not unreasonably discriminatory it necessary to do so, in which case the payment due date shall be that specified in a written notice to the Shipper. Notwithstanding the foregoing, Shipper may withhold payment of amounts it disputes in good faith, provided that if any such amount is later determined to have been due Transporter Section 10.2 below shall apply to such amount.

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  10.2 Past-Due Interest. If any charge remains unpaid after the due date specified in Transporter's invoice, then such amount due may bear interest from the day after the due date until paid, calculated at an annual rate equivalent to the lesser of (1) 125% of the prime rate of interest, as of the date of Transporter's invoice, charged by the Citibank N.A. of New York, New York, for ninety (90) day loans made to substantial and responsible commercial borrowers or (2) the maximum rate allowed by law. In addition Shipper shall pay all documented costs incurred by Transporter to collect any unpaid amounts.   10.3 Setoff. In the event Shipper fails to pay any such undisputed charges when due, Transporter shall have the right to setoff such amounts owed and future amounts owed against those amounts Transporter owes Shipper.   10.4 In the event Transporter determines in a manner not unreasonably discriminatory that the financial condition of Shipper or Shipper's guarantor (if any) is or has become impaired or unsatisfactory or Transporter determines in a manner not unreasonably discriminatory it is necessary to obtain security from Shipper, Transporter, upon notice to Shipper, may require any of the following prior to Transporter's delivery of Shipper's Crude Petroleum in Transporter's possession or prior to Transporter's acceptance of Shipper's Crude Petroleum: (1) prepayment of all charges, (2) a letter of credit at Shipper's expense in favor of Transporter in an amount sufficient to ensure payment of all such charges and, in a form, and from an institution acceptable to Transporter, or (3) a guaranty in an amount sufficient to ensure payment of all such charges and in a form and from a third party acceptable to Transporter. In the event, Shipper fails to comply with any such requirement on or before the date supplied in Transporter's notice to Shipper, Transporter shall not be obligated to provide Shipper access to Transporter's facilities or provide services pursuant to this Agreement until such requirement is fully met.   ARTICLE 11 REMEDIES   11.1 Lien/Auction.   (a) Transporter shall have a lien on all Crude Petroleum delivered to Transporter to secure the payment of any and all transportation, or any other charges that are owed Transporter. Such lien shall survive delivery of Crude Petroleum to Shipper. Such lien shall extend to all Crude Petroleum in Transporter's possession beginning with Shipper's first receipt of transportation or other services from Transporter. The lien provided herein shall be in addition to any lien or security interest provided by statute or applicable law. Transporter may withhold delivery to Shipper of any of Shipper's Crude Petroleum in its possession and exercise any other rights and remedies granted under this Agreement or existing under applicable law until all such charges have been paid as provided above.   (b) If Shipper fails to pay the undisputed portion of an invoice by the due date, in addition to any other remedies under this Agreement or under applicable law, Transporter shall have the right, either directly or through an agent, to sell at a private sale any and all Crude Petroleum of such Shipper in its custody at fair market value at the time of sale. The proceeds of any sale shall be applied to the following order: (i) to the reasonable expenses of holding, preparing for sale, selling, and to the extent allowed by law, reasonable attorney's fees and legal expenses incurred by Transporter; and (ii) to the satisfaction of the Shipper's indebtedness including interest herein provided from the date of payment is due. The balance of the proceeds of the sale remaining, if any, shall be paid to Shipper or, if there is a dispute or claim as to entitlement, held for whoever may be lawfully entitled thereto.

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  11.2 Suspension of Performance. In the event Shipper fails to pay charges when due, Transporter shall not be obligated to provide Shipper access to Transporter's facilities or provide services pursuant to this Agreement until such time as payment is received by Transporter.   11.3 Legality of Shipments. Transporter reserves the right to reject any and all Crude Petroleum nominated for shipment when Shipper fails or is unwilling or unable to comply with all applicable Laws, or fails to reasonably demonstrate to Transporter that the shipment would be in conformance with the provisions of this Agreement.   11.4 Claims. As a condition precedent to recovery for losses or delay to shipments, claims must be filed in writing with Transporter within one year and one day after delivery of the Crude Petroleum, or, in case of failure to make delivery, then within one year and one day after a reasonable time for delivery has elapsed; and suits arising out of such claims shall be instituted against the Transporter only within two years and one day from the date of delivery, or within two years and one day after a reasonable time for delivery has elapsed. Where claims are not filed or suits are not instituted thereon in accordance with the foregoing provisions, Transporter shall not be liable and such claims will not be paid.   ARTICLE 12 FORCE MAJEURE   12.1 Force Majeure. If either Transporter or Shipper is rendered unable by an event of Force Majeure to carry out, in whole or part, its obligations hereunder and such Party gives notice and full details of the event to the other Party as soon as practicable after the occurrence of the event, then, pending such Force Majeure, but only during that period, the obligations of the Party affected by the event (other than the obligation to make payments then due or becoming due with respect to performance prior to the event) shall be canceled or suspended, as applicable, to the extent required; provided, however, that notwithstanding anything in the foregoing to the contrary, Shipper's obligation to pay the transportation charge set forth in Section 3.1 shall not be reduced, suspended or otherwise excused in any manner as the result of Force Majeure, regardless of which Party is affected. The Party affected by the Force Majeure shall use commercially reasonable efforts to remedy the Force Majeure condition with all reasonable dispatch, shall give written notice to the other Party of the termination of the Force Majeure, and shall resume performance of any suspended obligation promptly after termination of such Force Majeure; provided, that notwithstanding anything in the foregoing to the contrary, a Party may elect, in its sole discretion, whether or not to repair or replace its facilities following catastrophic destruction of all or substantially all of such facilities.

13







  ARTICLE 13 INDEMNIFICATION   13.1  Shipper shall release, indemnify, defend, and hold harmless Transporter and its affiliates, directors, officers, employees, agents, consultants, representatives, and invitees from and against all claims and losses arising out of or relating to (i) the operations of Shipper, (ii) any breach of this agreement by Shipper, except to the extent attributable to the negligence, willful misconduct or fault of Transporter, and (iii) operations or activities upstream or downstream of the Gathering System, except to the extent attributable to the negligence, willful misconduct or fault of Transporter.   13.2  Transporter shall release, indemnify, defend, and hold harmless Shipper and its Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees from and against all claims and losses arising out of or relating to (i) the operations of Transporter and (ii) any breach of this agreement by Transporter, except to the extent attributable to the negligence, willful misconduct or fault of Shipper.   ARTICLE 14 NOTICES   14.1 Notices. Unless otherwise provided herein, any notice, request, invoice, statement, or demand which either Party desires to serve upon the other regarding this Agreement shall be made in writing and shall be considered as delivered (i) when hand delivered, (ii) when delivery is confirmed by pre-paid delivery service (such as FedEx, UPS, DHL or a similar delivery service), (iii) if mailed by United States certified mail, postage prepaid, three (3) Business Days after mailing, (iv) if sent by facsimile transmission, when receipt is confirmed by the equipment of the transmitting Party, or (v) when sent, if sent by Email. Any notice shall be given to the other Party at the following address, or to such other address as either Party shall designate by written notice to the other:   ENERGY XXI USA, INC.           Attn:       Phone:      Fax:       Email address:           ENERGY XXI GULF COAST, INC.           Attn:       Phone:      Fax:       Email address:

14







  ARTICLE 15 ASSIGNMENT   15.1 Assignment.   (a) Shipper shall have the right to assign, or transfer all, but not less than all, of its rights and obligations under this Agreement with the prior written consent of Transporter, which consent may be withheld in Transporter's sole discretion.   (b) No assignment or transfer of this Agreement shall be effective as to Transporter unless and until Transporter has been provided written notice thereof.   15.2 Encumbrance.   (a)  Shipper shall not pledge, encumber or grant any security interest with respect to any portion of its interests or rights under this Agreement.   (b)  Transporter shall have the right to pledge, encumber or otherwise grant security interests in its interests or rights under this Agreement.   15.3  Nothing herein shall prevent or prohibit Shipper, without consent of Transporter, from engaging and using contractors and subcontractors to perform services, for the benefit of Shipper, in connection with the performance by Shipper of its obligations under this Agreement.   ARTICLE 16 MISCELLANEOUS   16.1 Applicable Laws. This Agreement is subject to, and the Parties shall comply with, all valid present and future laws, regulations, rules and orders of Governmental Authorities now or hereafter having jurisdiction over the Parties, this Agreement, or the Services performed or the facilities utilized under this Agreement.   16.2 Authorizations. The Parties hereto represent that they have all requisite corporate and/or company authorizations necessary or proper to consummate this Agreement.   16.3 Entirety. This Agreement constitutes the entirety of the understanding between the Parties with respect to the subject matter dealt with herein, and replaces and supersedes all prior agreements, conditions, understandings, representations and warranties made between the Parties with respect to the subject matter hereof, whether written or oral. It is further agreed that no amendment, modification or change herein shall be enforceable, except as specifically provided for in this Agreement, unless reduced to writing and executed by both Parties.   16.4 Governing Law; Jurisdiction; Jury Waiver.   (a) The validity, construction and performance of this Agreement shall be governed by the laws of the State of Texas, not including any of its conflicts of law rules that would direct or refer to the laws of another jurisdiction. The Parties have allocated liability risk pursuant to this Agreement and therefore intend that no anti-indemnity law, rule or regulation apply hereto.

15







  (b)  The Parties agree that the appropriate, exclusive and convenient forum for any disputes between the Parties arising out of this Agreement or the transactions contemplated hereby shall be in any state or federal court in Harris County, Texas, and each of the Parties irrevocably submits to the jurisdiction of such courts solely in respect of any proceeding arising out of or related to this Agreement. The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Agreement or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts.   (c) EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY DISPUTE ARISING FROM OR UNDER THIS AGREEMENT.   16.5 Non-Waiver. No waiver by either Party hereto of any one or more defaults by the other in the performance of any of the provisions of this Agreement shall be construed as a waiver of any other default or defaults whether of a like kind or different nature. Any delay, less than any applicable statutory period of limitations, in asserting or enforcing any rights under this Agreement, shall not be deemed a waiver of such rights. Failure of either Party to enforce any provision of this Agreement or to require performance by the other Party of any of the provisions hereof shall not be construed to affect the validity of this Agreement or any part thereof, or the right of either Party thereafter to enforce each and every provision hereof.   16.6 Severability. If any term or other provision or portion of a provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other terms and conditions of this Agreement shall nevertheless remain in full force and effect.   16.7 Amendments. This Agreement shall not be altered or amended, except by an agreement in writing executed by all parties to this Agreement in accordance with the limited partnership agreement of Transporter.   16.8 Confidentiality.   (a) Confidentiality. Except as otherwise provided in this Section 16.8, each Party agrees that it shall maintain all terms and conditions of this Agreement, and all information disclosed to it by the other Party or obtained by it in the performance of this Agreement and relating to the other Party's business (including all data relating to the production of Shipper, including well data, production volumes, volumes gathered, transported, or compressed, and quality) (collectively, Confidential Information) as confidential, and that it shall not cause or permit disclosure of this Agreement or its existence or any provisions contained herein without the express written consent of the other Party.

16







  (b) Permitted Disclosures. Notwithstanding Section 16.8(a), disclosures of any Confidential Information may be made by either Party (i) to the extent necessary for such Party to enforce its rights hereunder against the other Party; (ii) to the extent to which a Party is required to disclose all or part of this Agreement by a statute or by the order or rule of a Governmental Authority exercising jurisdiction over the subject matter hereof, by order, by regulations, or by other compulsory process (including deposition, subpoena, interrogatory, or request for production of documents in any administrative, judicial, or legislative proceedings); (iii) to the extent required by the applicable regulations of a securities or commodities exchange; (iv) to a third person in connection with a proposed sale or other transfer of all or any portion of a Party's assets and properties related to the subject matter of this Agreement, provided that such third person agrees in writing to be bound by the terms of this Section 16.8; (v) to its own directors, officers, employees, agents and representatives; (vi) to an Affiliate; (vii) to financial advisors, attorneys, and banks, provided that such Persons are subject to a confidentiality undertaking consistent with this Section 16.8(b); or (ix) any information which, through no fault of a Party, becomes a part of the public domain.   (c) Notification. If either Party is or becomes aware of a fact, obligation, or circumstance that has resulted or may result in a disclosure of any of the terms and conditions of this Agreement authorized by Section 16.8(b)(ii) or (iii), it shall so notify in writing the other Party promptly and shall provide documentation or an explanation of such disclosure as soon as it is available.   (d) Party Responsibility. Each Party shall be deemed solely responsible and liable for the actions of its directors, officers, employees, agents, representatives and Affiliates for maintaining the confidentiality commitments of this Section 16.8   (e) The provisions of this Section 16.8 shall survive any termination of this Agreement for a period of one (1) year.

17







  16.9 Representations. Each Party declares, warrants, and represents on behalf of itself (i) that it has contributed to the drafting of this Agreement or has had it reviewed by legal counsel before executing it, (ii) that this Agreement has been purposefully drawn and correctly reflects such Party's understanding of the transaction that it contemplates as of the Effective Date hereof, (iii) that this Agreement has been validly executed and delivered; (iv) that this Agreement has been duly authorized by all action necessary for the authorization thereof, and (v) this Agreement constitutes a binding and enforceable obligation of the Party, enforceable in accordance with its terms.   16.10 Counterparts. This Agreement may be executed in any number of counterparts and if so signed in counterparts, all counterparts taken together shall have the same effect as if all parties had signed the same instrument.   16.11 No Partnership. This Agreement shall not constitute a partnership or joint venture between Transporter and Shipper. Transporter shall carry out its operations with respect to the Gathering System as an independent contractor and shall not (except as expressly set forth in this Agreement) be subject to the control of Shipper in doing so.   16.12 No Third Party Beneficiaries. This Agreement is for the sole and exclusive benefit of the Parties hereto. Except as expressly provided herein to the contrary, nothing herein is intended to benefit any other Person not a Party hereto, and no such Person shall have any legal or equitable right, remedy or claim under this Agreement.   16.13 Exhibits. All exhibits and the like contained in or attached to the Agreement are integrally related to this Agreement and are hereby made a part of the Agreement for all purposes. To the extent of any ambiguity, inconsistency or conflict between the body of this Agreement and any of the exhibits and the like attached to the Agreement, the terms of the body of the Agreement shall prevail.   16.14 Further Assurances. Each Party shall take such acts and execute and deliver such documents as may be reasonably required to effectuate the purposes of this Agreement.   16.15 Limitation of Liability. EXCEPT WITH REGARD TO OBLIGATIONS TO INDEMNIFY A PARTY FOR CLAIMS MADE BY THIRD PARTIES, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY (OR ITS AFFILIATES) PURSUANT TO THIS AGREEMENT FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, OR SPECIAL DAMAGES OR LOSSES OR ANY PUNITIVE, EXEMPLARY, TREBLE, OR SIMILAR DAMAGES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE PERFORMANCE OF, OR FAILURE TO PERFORM, ITS OBLIGATIONS HEREUNDER, EVEN IF SUCH DAMAGES OR LOSSES ARE CAUSED BY THE SOLE, JOINT, OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF THE PARTY WHOSE LIABILITY IS BEING WAIVED HEREBY.   [Next page is signature page]

18







  IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be effective as of the Execution Date.   ENERGY XXI USA, INC.   ENERGY XXI GULF COAST, INC.           By: /S/ ANTONIO DE PINHO   By: /S/ RICK FOX           Name: ANTONIO DE PINHO   Name: RICK FOX           Title: PRESIDENT   Title: CFO

19







  EXHIBIT A TABLE OF RATES   FROM ESTABLISHED RECEPTION POINTS TO GRAND ISLE (JEFFERSON PARISH), LOUISIANA

From   Rate in Cents Per Barrel of 42 United States Gallons

Reception Points Offshore Louisiana   Crude Petroleum Transportation

Excess Water, Sediment, and  Other Impurities Handling  Block 22, Grand Isle 16     38.58      29.76  Block 30, Grand Isle 33     57.91      29.76  Block 73, West Delta 73     122.78      29.76  Block 90, West Delta 90     122.78      29.76  Block 62, West Delta 62     152.28      60.88  Block 54, South Timbalier 54     166.65      60.88  Block 30, West Delta 30     172.71      60.88  Block 32, West Delta 30     172.71      60.88  Block 45, West Delta 45     172.68      60.88  Block 93, South Pass 89     177.11      60.88  Block 152, Mississippi Canyon 268     242.01  &bbsp;  60.88  Block 311, Mississippi Canyon 311     242.01      60.88  Block 397, Mississippi Canyon 397     282.87      60.88  Block 280, Mississippi Canyon 281     291.11      60.88    Disposal Fee: _______________________

A-1







  EXHIBIT B ADJUSTMENT AUTHORIZATION   TABLES OF DIFFERENTIALS FOR USE IN DETERMINING ADJUSTMENTS FOR DIFFERENCE IN GRAVITY OF CRUDE PETROLEUM   API GRAV  DIFF/BBL  API GRAV  DIFF/BBL  API GRAV  DIFF/BBL   API GRAV   DIFF/BBL   API GRAV   DIFF/BBL   API GRAV   DIFF/BBL 20   2.75   24.9   3.485   29.8   4.22   34.7   4.955   39.6   5.08   44.5   5.1 20.1   2.765   25   3.5   29.9   4.235   34.8   4.97   39.7   5.08   44.6   5.1 20.2   2.78   25.1   3.515   30   4.25   34.9   4.985   39.8   5.08   44.7   5.1 20.3   2.795   25.2   3.53   30.1   4.265   35   5   39.9   5.08   44.8   5.1 20.4   2.81   25.3   3.545   30.2   4.28   35.1   5   40   5.1   44.9   5.1 20.5   2.825   25.4   3.56   30.3   4.295   35.2   5   40.1   5.1   45   5.1 20.6   2.84   25.5   3.575   30.4   4.31   35.3   5   40.2   5.1   45.1   5.085 20.7   2.855   25.6   3.59   30.5   4.325   35.4   5   40.3   5.1   45.2   5.07 20.8   2.87   25.7   3.605   30.6   4.34   35.5   5   40.4   5.1   45.3   5.055 20.9   2.885   25.8   3.62   30.7   4.355   35.6   5   40.5   5.1   45.4   5.04 21   2.9   25.9   3.635   30.8   4.37   35.7   5   40.6   5.1   45.5   5.025 21.1   2.915   26   3.65   30.9   4.385   35.8   5   40.7   5.1   45.6   5.01 21.2   2.93   26.1   3.665   31   4.4   35.9   5   40.8   5.1   45.7   4.995 21.3   2.945   26.2   3.68   31.1   4.415   36   5.02   40.9   5.1   45.8   4.98 21.4   2.96   26.3   3.695   31.2   4.43   36.1   5.02   41   5.1   45.9   4.965 21.5   2.975   26.4   3.71   31.3   4.445   36.2   5.02   41.1   5.1   46   4.95 21.6   2.99   26.5   3.725   31.4   4.46   36.3   5.02   41.2   5.1   46.1   4.935 21.7   3.005   26.6   3.74   31.5   4.475   36.4   5.02   41.3   5.1   46.2   4.92 21.8   3.02   26.7   3.755   31.6   4.49   36.5   5.02   41.4   5.1   46.3   4.905 21.9   3.035   26.8   3.77   31.7   4.505   36.6   5.02   41.5   5.1   46.4   4.89 22   3.05   26.9   3.785   31.8   4.52   36.7   5.02   41.6   5.1   46.5   4.875 22.1   3.065   27   3.8   31.9   4.535   36.8   5.02   41.7   5.1   46.6   4.86 22.2   3.08   27.1   3.815   32   4.55   36.9   5.02   41.8   5.1   46.7   4.845 22.3   3.095   27.2   3.83   32.1   4.565   37   5.04   41.9   5.1   46.8   4.83 22.4   3.11   27.3   3.845   32.2   4.58   37.1   5.04   42   5.1   46.9   4.815 22.5   3.125   27.4   3.86   32.3   4.595   37.2   5.04   42.1   5.1   47   4.8 22.6   3.14   27.5   3.875   32.4   4.61   37.3   5.04   42.2   5.1   47.1   4.785 22.7   3.155   27.6   3.89   32.5   4.625   37.4   5.04   42.3   5.1   47.2   4.77 22.8   3.17   27.7   3.905   32.6   4.64   37.5   5.04   42.4   5.1   47.3   4.755 22.9   3.185   27.8   3.92   32.7   4.655   37.6   5.04   42.5   5.1   47.4   4.74 23   3.2   27.9   3.935   32.8   4.67   37.7   5.04   42.6   5.1   47.5   4.725 23.1   3.215   28   3.95   32.9   4.685   37.8   5.04   42.7   5.1   47.6   4.71 23.2   3.23   28.1   3.965   33   4.7   37.9   5.04   42.8   5.1   47.7   4.695 23.3   3.245   28.2   3.98   33.1   4.715   38   5.06   42.9   5.1   47.8   4.68 23.4   3.26   28.3   3.995   332   4.73   38.1   5.06   43   5.1   47.9   4.665 23.5   3.275   28.4   4.01   33.3   4.745   38.2   5.06   43.1   5.1   48   4.65 23.6   3.29   28.5   4.025   33.4   4.76   38.3   5.06   43.2   5.1   48.1   4.635 23.7   3.305   28.6   4.04   33.5   4.775   38.4   5.06   43.3   5.1   48.2   4.62 23.8   3.32   28.7   4.055   33.6   4.79   38.5   5.06   43.4   5.1   48.3   4.605 23.9   3.335   28.8   4.07   33.7   4.805   38.6   5.06   43.5   5.1   48.4   4.59 24   3.35   28.9   4.085   33.8   4.82   38.7   5.06   43.6   5.1   48.5   4.575

B-1







  API GRAV  DIFF/BBL   API GRAV  DIFF/BBL   API GRAV  DIFF/BBL   API GRAV   DIFF/BBL   API GRAV   DIFF/BBL   API GRAV   DIFF/BBL

24.1   3.365   29   4.1   33.9   4.835   38.8   5.06   43.7   5.1   48.6   4.56 24.2   3.38   29.1   4.115   34   4.85   38.9   5.06   43.8   5.1   48.7   4.545 24.3   3.395   29.2   4.13   34.1   4.865   39   5.08   43.9   5.1   48.8   4.53 24.4   3.41   29.3   4.145   34.2   4.88   39.1   5.08   44   5.1   48.9   4.515 24.5   3.425   29.4   4.16   34.3   4.895   39.2   5.08   44.1   5.1   49   4.5 24.6   3.44   29.5   4.175   34.4   4.91   39.3   5.08   44.2   5.1   49.1   4.485 24.7   3.455   29.6   4.19   34.5   4.925   39.4   5.08   44.3   5.1   49.2   4.47 24.8   3.47   29.7   4.205   34.6   4.94   39.5   5.08   44.4   5.1   49.3   4.455

B-2







  EXHIBIT C SAMPLE QUALITY BANK CALCULATION   GRAND ISLE GATHERING SYSTEM COMMON STREAM HLS CRUDE   Receipt Bank

SHIPPER   BBLS REC'D   API GRAV   FROM EXH. A  GRAV DIFF   BBLS REC'D X  GRAV DIFF A   100.00   29.8   4.220   422.00 B   150.00   38.6   5.060   759.00 C   100.00   36.4   5.020   502.00 C   200.00   46.2   4.920   984.00 TOTAL   550.00        2667.00   Common stream weighted average GRAVITY value: 2667.00/550.0 = 4.84909091   Shipper A:               Weighted average GRAVITY value: 422.00/100 = 4.220              Calculation: (4.84909091 - 4.220) x 100 =   $ 62.909                         Total Shipper A pays the bank:          $ 62.91                  Shipper B:               Weighted average GRAVITY value: 759.00/150 = 5.060               Calculation: (4.84909091 - 5.060) x 150 =   ($ 31.636)                        Total Shipper B pays the bank:          ($ 31.64)                 Shipper C:              Weighted average GRAVITY value: 1486.00/300 = 4.953               Calculation: (4.84909091 - 4.953) x 300 =   ($ 31.273)                        Total Shipper B pays the bank:          $ (31.27)                 NET          $ 0.00

C-1 
Question: Highlight the parts (if any) of this contract related to Cap On Liability that should be reviewed by a lawyer. Details: Does the contract include a cap on liability upon the breach of a party’s obligation? This includes time limitation for the counterparty to bring claims or maximum amount for recovery.

SOLUTION:
EXCEPT WITH REGARD TO OBLIGATIONS TO INDEMNIFY A PARTY FOR CLAIMS MADE BY THIRD PARTIES, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY (OR ITS AFFILIATES) PURSUANT TO THIS AGREEMENT FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, OR SPECIAL DAMAGES OR LOSSES OR ANY PUNITIVE, EXEMPLARY, TREBLE, OR SIMILAR DAMAGES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE PERFORMANCE OF, OR FAILURE TO PERFORM, ITS OBLIGATIONS HEREUNDER, EVEN IF SUCH DAMAGES OR LOSSES ARE CAUSED BY THE SOLE, JOINT, OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF THE PARTY WHOSE LIABILITY IS BEING WAIVED HEREBY.