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.
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Question: Exhibit 1

Execution Copy

JOINT VENTURE AGREEMENT

BETWEEN

TATE & LYLE FERMENTATION PRODUCTS LTD.

AND

IGENE BIOTECHNOLOGY, INC.

Table of Contents

1.

2.

DEFINITIONS

CREATION OF THE JOINT VENTURE AND ITS STRUCTURE

Page

1

4

3.

4.

PARTIES' CONTRIBUTIONS TO THE JOINT VENTURE AND FINANCING

PARTIES' INTERESTS IN THE JOINT VENTURE

4

6

5.

6.

[INTENTIONALLY OMITTED]

TAX CONSIDERATIONS

6

6

7.

8.

PARTIES' WITHDRAWAL FROM THE FIELD OF AGREEMENT

FUTURE PRODUCTS AND DEVELOPMENTS

8

8

9.

10.

MANAGEMENT AND CONTROL OF THE JOINT VENTURE

DAY-TO-DAY MANAGEMENT OF THE JOINT VENTURE

10

12

11. SERVICES TO BE PROVIDED TO THE JOINT VENTURE BY THE PARTIES 12

12. RIGHT OF FIRST REFUSAL; TERMINATION OF THE JOINT VENTURE AFTER THE EFFECTIVE DATE 14

13. LIABILITIES 15

14. WARRANTIES BY THE PARTIES 16

15. CONDITIONS PRECEDENT; TERMINATION OF AGREEMENT 17





16. OPERATIONS UNTIL TRANSFER 18

17. ASSIGNMENT; PLEDGE OF JOINT VENTURE INTEREST 19

18. COSTS, FEES AND TAXES 19

19. NOTICES 19

20. LAW 20

21. MISCELLANEOUS PROVISIONS 20

22. DISPUTE RESOLUTION PROCEDURES; LIQUIDATION 23

23. JOINT VENTURE TO BE BOUND 24

JOINT VENTURE AGREEMENT

This Joint Venture Agreement (as amended, restated, supplemented or otherwise modified in accordance herewith, this Agreement) is entered into as of March 18, 2003 and is by and between Tate & Lyle Fermentation Products Ltd., a corporation organized under the laws of England (T&L) and a subsidiary of Tate & Lyle PLC, and Igene Biotechnology, Inc., a Maryland corporation (Igene; collectively with T&L, the Parties).

RECITALS

A. Igene owns certain technology and expertise related to the manufacture and sale of Astaxanthin and derivative products, and T&L and its subsidiaries and affiliates possess expertise with respect to all aspects of the manufacture and production of numerous products through fermentation.

B. In an effort to capitalize on their respective strengths and expertise, Igene and T&L wish to form a joint venture to manufacture and sell Astaxanthin and derivative products worldwide, all in accordance with the principles set out in this Agreement (including each of its relevant constituent entities, the Joint Venture). The Parties anticipate that the primary market for the product of the Joint Venture will initially be limited to Chile, parts of Europe, Japan and other parts of Asia.

C. Such Joint Venture shall consist initially of two legal entities to be formed as soon after the execution as practicable which together will have sufficient financial, mechanical, technological and land rights, resources and assets, to allow them to operate with limited assistance from the Parties.

D. Without derogating from the principles of Recital C, it is also understood and recognized by the Parties that, in order to minimize support and administrative costs associated with the operation of the Joint Venture, certain ongoing services will be provided to the Joint Venture by the Parties over various periods of time in consideration for payments from the Joint Venture as described in the appropriate agreements between the Joint Venture and the Parties.

E. The Parties envision the Joint Venture continuing in effect for an indefinite period, subject to termination in accordance with this Agreement.

AGREEMENT

Now therefore, the Parties agree:

1. DEFINITIONS.

In this Agreement, the following words shall have the meanings set forth below:





1.1. AFFILIATE means, with respect to any Party, any other entity controlling, controlled by or under common control with, such Party. The term control shall mean direct or indirect ownership of at least fifty percent (50%) of the outstanding voting stock of a corporate entity or voting interest in a non-corporate entity and shall also mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity.

1.2. AVERAGE MARKET PRICE means the spot price for Astaxanthin as determined by the weighted average market price over the 30 day period prior to purchase as set forth in the books and records of the Joint Venture.

1.3. BOARD is defined in Article 9.1.

1.4. BOARD DISPUTE is defined in Article 22.1.

1.5. COMMENCEMENT DATE is the first business day after the first 30 consecutive days of production following the start-up phase in which 3 fermenters located at the Manufacturing Facility (constructed in accordance with the Construction Agreement) have been continuously operating.

1.6. CONSTRUCTION AGREEMENT is defined in Article 3.6.

1.7. EVENT OF BANKRUPTCY for any Person means (i) such Person files a petition in bankruptcy or insolvency, (ii) such Person files for reorganization or for the appointment of a receiver or trustee of all or a material portion of such Party's assets, (iii) such Person makes an assignment for the benefit of creditors, (iv) such Person admits in writing its inability to pay its debts as they fall due, (v) such Person seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of a material portion of its assets, (vi) such Person fails to have any petition in bankruptcy or insolvency, or for reorganization, or for the appointment of a receiver or trustee of all or a material portion of such Person's assets dismissed within sixty (60) days after the commencement of any proceeding as a result thereof or (vii) such Person fails to have any levy or attachment on all or a material portion of its assets released or discharged within sixty (60) days of imposition thereof.

1.8. DISCLOSING PARTY is defined in Article 21.4.

1.9. EFFECTIVE DATE means 12:01 a.m. Eastern Standard Time on March 3, 2003.

1.10. FACILITIES means collectively, the Site and the Manufacturing Facility to be located thereon, as well as any other manufacturing facilities constructed, acquired or operated by the Joint Venture from time to time.

1.11. FIELD OF AGREEMENT is defined in Article 2.1.

1.12. FORMATION is defined in Article 3.3.

1.13. FORMATION DATE means the business day immediately following the Formation.

1.14. GENERAL MANAGER is defined in Article 18.5.

1.15. HSR ACT means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

1.16. INDEMNIFYING PARTY is defined in Article 13.1.

1.17. INFORMATION is defined in Article 21.4.

1.18. LAWSUIT is defined in Article 13.1.

1.19. LIQUIDATION NOTICE is defined in Article 22.3.

1.20. MANAGEMENT is defined in Article 10.1.

1.21. MANUFACTURING FACILITY means the manufacturing facility to be constructed by Parent on behalf of the Manufacturing Company at the Site in accordance with the provisions of Article 3.6 which will be capable of producing 14,000 kg per annum of pure Astaxanthin.

1.22. NEUTRACEUTICAL means a nutritional supplement for human consumption.

1.23. OFFER is defined in Article 12.1.

1.24. OFFER PRICE is defined in Article 22.2.





1.25. OFFEREE is defined in Article 12.1.

1.26. OPTION PERIOD is defined in Article 12.1.

1.27. PARENT means Tate & Lyle Industries Ltd.

1.28. PARTY shall mean each of T&L and Igene, and PARTIES shall mean both T&L and Igene.

1.29. PARTY HEADS means the Chairman of the Board of Igene and the Chief Financial Officer of Tate & Lyle North America, Inc. respectively.

1.30. QUALIFIED EXPERT is defined in Article 12.2(c).

1.31. RECIPIENT PARTY is defined in Article 21.4.

1.32. SELLING PARTY is defined in Article 12.1.

1.33. SITE is defined in Article 3.5.

1.34. TECHNOLOGY is defined in Appendix 3.2.

1.35. TRANSFERRED ASSETS means the assets of Igene that are to be transferred to the Operating Company as more particularly described in Appendix 3.2.

2. CREATION OF THE JOINT VENTURE AND ITS STRUCTURE.

2.1. Subject to the terms and conditions stated in this Agreement, the Parties shall take all such steps and do all such things as are reasonably necessary to create between T&L and Igene a joint venture commencing from the date hereof until the date this Agreement is terminated with respect to (a) the manufacture of Astaxanthin and derivative products and (b) the marketing and sale of Astaxanthin and derivative products worldwide for all uses other than uses as a Neutraceutical or otherwise for direct human consumption (collectively, the Field of Agreement). Notwithstanding the foregoing, nothing herein shall, or shall be deemed to, form a partnership or any other entity other than the Operating Company and the Manufacturing Company (as defined below).

2.2. The legal structure of the Joint Venture shall be (a) a limited liability company organized under the laws of Bermuda and owned by the Parties as set forth herein (the Operating Company) which in turn will own all of the shares of (b) a corporation formed under the laws of the United Kingdom (the Manufacturing Company). T&L and Igene shall cause such entities to be formed promptly after the execution of this Agreement in a manner consistent with the terms of this Agreement.

2.3. (a) Upon the terms and subject to the conditions of this Agreement, each of the Parties hereby agrees to use commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary or proper under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, obtaining consent under the HSR Act (if necessary) and any other relevant governmental consents. The Parties shall share the cost of any filings required under this Article 2.3 equally.

(b) Notwithstanding clause (a) above, nothing contained in this Agreement will require or obligate either Party to initiate any litigation to which any governmental authority is a party, although the Parties agree to use commercially reasonable good faith efforts to negotiate with the applicable governmental authority, as the case may be, in order to avoid any such litigation.

(c) Notwithstanding clause (a) above, nothing contained in this Agreement will require or obligate either Party to agree or otherwise become subject to any limitations on the right of the Joint Venture to acquire, own, control or operate the Transferred Assets (including either Party or the Joint Venture being required to sell or otherwise dispose of, or hold separate, the Transferred Assets), if such Party reasonably believes in its good faith judgment as a result of any such limitation that it cannot substantially realize the material benefits that such Party reasonably expects to derive from the Joint Venture. The Parties agree to use commercially reasonable good faith efforts to negotiate with any applicable governmental authority in order to avoid any such limitations.

3. PARTIES' CONTRIBUTIONS TO THE JOINT VENTURE AND FINANCING.

3.1. Subject to the terms and conditions of this Agreement, T&L shall contribute, or cause to be contributed, to the Operating Company cash in the amount of $21,614,000. Subject to the terms and conditions of this Agreement, T&L further agrees to pay to Operating Company as a contribution to capital upon Formation (as defined below) $3,000,000.

3.2. Subject to the terms and conditions of this Agreement, Igene shall transfer and assign, or cause to be transferred and assigned,





to the Operating Company the Transferred Assets described in Appendix 3.2.

3.3. The Parties intend that the transfer of the Transferred Assets to the Operating Company pursuant to Articles 3.1 and 3.2 and the other various transactions, transfers, contributions and agreements to be made or entered by and between Igene or T&L and the Operating Company in connection with the formation of the Joint Venture, shall be made promptly upon the formation of both the Operating Company and the Manufacturing Company (Formation). In the event that the Transferred Assets are not transferred to the Operating Company at such time or on such other date as is specified herein or in the Asset Transfer Agreement, the entity who is to make such transfer(s) shall, without any further cost to the Joint Venture or to the other Party, (a) ensure that the Joint Venture shall have all of the benefits and bear all of the burdens of such assets on and from Formation and (b) fully and legally assign to the Operating Company such assets as soon after Formation as practicable.

3.4. Title to the Transferred Assets shall be passed to the Operating Company in accordance with Asset Transfer Agreement to be entered into by the Operating Company and Igene upon Formation. Such Asset Transfer Agreement shall be in the form set forth in Appendix 3.4. Such Transferred Assets shall be contributed free and clear of any and all indebtedness, liens and encumbrances.

3.5. As promptly as possible after Formation, the Manufacturing Company shall enter into a lease with Parent with respect to the lease of certain real property located in Selby, England adjacent to the existing facility of an Affiliate of Parent (the Site), which lease will have a term of at least 50 years at an annual rent of $1 and shall grant to the Manufacturing Company all rights necessary to construct and operate the Manufacturing Facility.

3.6. Upon Formation, the Manufacturing Company shall enter into an Engineering, Procurement and Construction Management Agreement in the form set forth in Appendix 3.6 (the Construction Agreement), pursuant to which Parent shall supervise and manage the construction of the Manufacturing Facility on a turnkey basis in consideration for a payment of $21,614,000. Upon the entering into of the agreements referred to in Articles 3.5 and 3.6, the Operating Company shall capitalize the Manufacturing Company through the contribution of equity received by it from T&L pursuant to Article 3.1 in an amount equal to at least $21,614,000.

3.7. It is the intention of the Parties that any debt incurred by the Joint Venture shall be non-recourse against each Party. Each of the Parties agrees to use its reasonable best efforts to cause the Joint Venture to incur long-term indebtedness in an amount that is consistent with the business and cash desires of the Parties and the cash needs of the Joint Venture; provided, however, that neither Party shall be required to contribute any additional capital or guarantee, directly or indirectly, any debt of the Joint Venture including without limitation any leases or other direct or indirect obligations.

4. PARTIES' INTERESTS IN THE JOINT VENTURE.

4.1. The Parties shall each have a fifty percent (50%) interest in the Operating Company, and control of the Joint Venture shall be shared equally between the Parties. The Parties agree that their respective contributions to the Operating Company have equal value, and that no payment shall be made from one Party to the other Party in the event appraisals performed for tax accounting reasons of the Transferred Assets give rise or would give rise to different valuations.

4.2. All profits and losses earned or incurred by the Operating Company shall be shared by the Parties in equal shares as long as each Party has a 50% interest in the Operating Company. Upon a reduction or increase in such interest, all profits and losses shall be shared in accordance with each Party's ownership interest in the Joint Venture. To the greatest extent permitted by applicable law and accounting provisions, (a) the Operating Company shall make distributions, dividends and returns of capital equally to each of the Parties and (b) Operating Company items of income, gain, loss and deduction shall be allocated equally to each of the Parties; provided, if for any reason, such distributions, dividends, returns of capital or allocations may not be made on an equal basis, the Operating Company shall make a special distribution, dividend, return of capital or allocation to one Party to balance the required distribution, dividend, return of capital or allocation to the other Party.

4.3. Notwithstanding the foregoing, if for any reason the contribution of* T&L proves to have a value materially less than that attributed to it at the Effective Date as a result of the Facilities not being constructed as provided herein then either (a) T&L shall contribute a cash amount to the Operating Company to make up the shortfall or (b)(i) T&L's capital account shall be adjusted to reflect the revaluation of its contribution, (ii) T&L's interest in the Operating Company shall be adjusted to reflect its actual proportion of the contributions made upon the formation of the Joint Venture and (iii) the Joint Venture shall be liquidated as provided in Article 22.3.

* Portions intentionally deleted pursuant to a request for confidential treatment.

5. [INTENTIONALLY OMITTED]





6. TAX CONSIDERATIONS.

6.1. Each Party shall produce and submit to the Board, as promptly as possible, a reasonable estimate of their respective income tax liability with respect to the income of the Operating Company computed pursuant to the provisions of this paragraph as by a reasonably prudent taxpayer attempting to reduce the income tax payable by such taxpayer to the greatest extent permitted by law (a Party Tax Estimate). A Party Tax Estimate shall be calculated pursuant to United States and/or United Kingdom law and regulations (and the laws and regulations of any other jurisdiction under which the earnings of the Operating Company may be taxable to either Party) as may be applicable to either Party. The tax liability shall be calculated based on each Party's share of the income, gain, costs, expenses and deductions of the Operating Company in the prior year without consideration of items of income, gain, loss or deduction applicable to either Party derived from outside the Operating Company (including, without limitation, with respect to Igene, any Net Operating Loss that Igene may have accumulated prior to the formation of the Joint Venture), but shall include any items of income, gain, loss or deduction derived from the Operating Company in any previous year to the extent applicable to such year. Such Party Tax Estimate shall not be deemed to be final until it is approved by the Board; provided, that if the Board does not approve the higher Tax Estimate, and cannot resolve such a dispute within thirty days of the submission of such Tax Estimate to the Board, then the lesser Tax Estimate (the Preliminary Minimum Distribution) shall be paid to both Parties pursuant to Article 6.2 as if it were the Minimum Distribution. After the expiration of such thirty day period, the Board shall promptly submit the higher Tax Estimate (the Disputed Estimate) to PricewaterhouseCoopers (the Neutral Auditor) who shall evaluate the reasonableness and accuracy of the Disputed Estimate in light of the provisions of this Article 6.1. The Party that submitted the Disputed Estimate shall promptly provide to the Neutral Auditor all information requested by the Neutral Auditor in order to perform the analysis required by this Article 6.1. Within thirty days of receiving all information it deems necessary to perform the analysis required herein, the Neutral Auditor shall inform the Board in writing that it either agrees or disagrees that the Disputed Estimate is reasonable and accurate in light of the provisions of this Article 6.1 and the tax information submitted to it. If the Neutral Auditor concludes that the Disputed Estimate is reasonable and accurate, the difference between the Disputed Estimate and the Preliminary Minimum Distribution shall be promptly paid to each Party. If the Neutral Auditor concludes that the Disputed Estimate is not reasonable and/or accurate then the Preliminary Minimum Distribution shall be deemed the Minimum Distribution for the applicable year; provided, however, that if the Neutral Auditor concludes that an amount greater than the Preliminary Minimum Distribution is appropriate, then such greater amount shall be deemed the Minimum Distribution for the applicable year. The costs of the Neutral Auditor shall be paid equally by the Parties.

6.2. Subject to the provisions of Article 6.1, the Operating Company shall annually declare and pay by March 15 a distribution to each Party equal to the larger of the two estimated annual tax liabilities as reflected on the approved Party Tax Estimates (the Minimum Distribution). A portion of the Minimum Distribution shall be paid in advance on a quarterly basis should either Party be required to pay periodic mandatory payments of estimated taxes during any given year. In the event that such estimated taxes are required to be paid by either Party, such Party shall notify the Operating Company of the date of such required payments and the Operating Company shall pay to each Party, no later than 5 business days prior to the due date of each quarterly estimated tax payment specified in the notice above, an amount equal to 25% of the estimated Minimum Distribution. In the event that such distributions of estimate taxes are made within a given year, then the distribution on March 15 of the subsequent year shall be adjusted to reflect the advance distributions of related estimated taxes made prior to that date.

6.3. The Operating Company shall annually within 90 days after the end of each fiscal year declare an additional distribution equal to 20% of the net income of the Operating Company, half of which is to be paid to each Party (the Target Distribution). The Target Distribution shall be paid except when the Board shall determine otherwise.

6.4. The Board may pay other distributions at its discretion.

6.5. Notwithstanding the foregoing, the Operating Company shall only pay distributions or dividends to the extent permitted by applicable law.

7. PARTIES' WITHDRAWAL FROM THE FIELD OF AGREEMENT.

7.1. Each Party shall, and shall cause each of its Affiliates to, do all such things and shall take all such steps as are reasonably necessary to effect its total withdrawal from the Field of Agreement. Such withdrawal shall be effective from the Effective Date.

7.2. After the Effective Date and as long as Igene and T&L continue to own an interest in the Operating Company, neither of the Parties shall, or shall cause or permit any of their Affiliates to, directly or indirectly, as stockholders, consultants, members, partners or in any other capacity, engage in any enterprise or business anywhere in the world, which (a) manufactures Astaxanthin or (b) develops, markets, or sells products falling within the Field of Agreement. In the event that either (x) one Party shall transfer its entire interest in the Operating Company as permitted pursuant to this Agreement and the Operating Company shall remain a going concern after the closing of such transfer or (y) both Parties sell their interest in the Operating Company as permitted pursuant to this Agreement and the Operating Company shall remain a going concern after the closing of such transfer, then any Party which





ceases to own an interest in the Operating Company as a result of such transfer shall remain subject to the terms of this Article 7.2 for a period of ten (10) years after the date of such transfer. Notwithstanding the foregoing, if a court of competent jurisdiction determines that the obligations set forth in this Article 7.2 are unreasonable in scope, time or geography, such court is hereby authorized by the Parties to enforce such provisions with narrower scope, shorter time or lesser geography as such court determines to be the maximum that is reasonable and proper in the circumstances.

7.3. Except as set forth in Articles 7.1, 7.2, 8.1 and 8.2, it is explicitly agreed that nothing contained in this Agreement shall prevent either Party or any of their respective Affiliates from engaging, directly or indirectly, in any enterprise, which develops, manufactures, markets, or sells products that are not within the Field of Agreement, and except as set forth in Articles 7.1, 7.2, 8.1 and 8.2, either Party shall be free to engage in any business, enterprise, or undertaking, or to make any investment it chooses.

8. FUTURE PRODUCTS AND DEVELOPMENTS.

8.1. If, after the date of this Agreement and continuing as long as either Party is a partner, member, or shareholder of the Operating Company, such Party or any of its Affiliates receives or discovers any opportunity within the Field of Agreement, including without limitation developing or completing the development of, or discovering, or acquiring proprietary rights over, a product or process that falls within the Field of Agreement, the Operating Company then shall have exclusive rights to exploit such opportunity, but only within the Field of Agreement. The Party (or its Affiliate) that has developed, discovered or acquired such opportunity, product or process will, however, be entitled to exploit such opportunity, product or process for application outside the Field of Agreement.

8.2. If, after the date of this Agreement and continuing as long as either Party is a partner, member, or shareholder of the Operating Company, such Party or any of its Affiliates receives or discovers any opportunity to use Astaxanthin as a Neutraceutical (a Neutraceutical Opportunity), including without limitation developing or completing the development of, or discovering, or acquiring proprietary rights over, a product or process that involves the use of Astaxanthin as a Neutraceutical, such Party shall (or shall cause its Affiliate to) present such opportunity to the Operating Company, providing the Operating Company with such narrative description and budgetary and other information as such Party (or its Affiliates) may have generated or gathered to the extent necessary to evaluate such Neutraceutical Opportunity. The Board shall consider the material presented by such Party and its Affiliates and shall elect whether the Joint Venture should pursue such Neutraceutical Opportunity. If the Board elects to pursue such Neutraceutical Opportunity, the Operating Company then shall have exclusive rights to exploit such Neutraceutical Opportunity, but solely with respect to use of Astaxanthin as a Neutraceutical, and, subject to Article 8.1, the Party (or its Affiliate) that has developed, discovered or acquired such opportunity, product or process will, however, be entitled to exploit such opportunity, product or process for application outside of use of Astaxanthin as a Neutraceutical. If however the Board does not elect to pursue such Neutraceutical Opportunity, the Party (or its Affiliate) that has developed, discovered or acquired such opportunity, product or process shall, subject to Article 8.1, be entitled to exploit such opportunity, product or process; provided, that subsequent developments or discoveries with respect to such Neutraceutical Opportunity would reasonably be expected to affect the Board's acceptance or rejection of such Neutraceutical Opportunity, such Party shall (or shall cause its Affiliate to) present such Neutraceutical Opportunity to the Board with reference to the pertinent subsequent developments or discoveries.

8.3. If, after the date of this Agreement and continuing as long as a Party is a partner, member, or shareholder of the Operating Company, the Joint Venture develops or completes the development of, or discovers, or acquires proprietary rights over, a process or product which at, or after, the time of its development, discovery or acquisition has, or might have, some application outside of the Field of Agreement, then the appropriate entity of the Joint Venture shall offer to license the use of the process or product (or the production thereof) for such application to each of the Parties on reasonable commercial terms (including, without limitation, the possible payment of royalties at market rates) taking into account the time and money spent by the Joint Venture and taking into account other relevant commercial factors. The grant of licenses to any third parties shall be the prerogative of the Board provided that no such license shall be granted at terms more favorable to the third party than were offered to the member(s) of such Party.

8.4. In the event either T&L or Igene wishes to market Astaxanthin for uses other than in the Field of Agreement, including but not limited to the use of Astaxanthin as a neutraceutical or otherwise for direct human consumption, either T&L or Igene, as the case may be, shall be permitted to purchase reasonable quantities of Astaxanthin from the Operating Company for use in the manufacture of such products at the Average Market Price. The Joint Venture will manufacture such Astaxanthin to the standard required for its business, and each Party desiring to market Astaxanthin for other uses shall process the product acquired from the Operating Company at its own cost and expense.

9. MANAGEMENT AND CONTROL OF THE JOINT VENTURE.

9.1. The Joint Venture will be managed and controlled by a board of directors comprised of six (6) members (the Board). Each Party shall appoint three (3) of such members (none of whom shall be residents of the United Kingdom) and shall be entitled to





appoint any successor appointees as necessary such that the Board shall always be comprised of three members appointed by each Party. Each Party shall be entitled to appoint alternate directors on a periodic and temporary basis as needed. Each party agrees at all times to vote in favor of the directors appointed by the other Party or any successor appointees.

9.2. The Board shall have a Chairman selected in odd-numbered years by Igene and in even-numbered years by T&L for the duration of the calendar year. The Party with the right to select the Chairman shall select the Chairman from among the members of the Board appointed by it. If for any reason the individual serving as the Chairman ceases to be a member of the Board, such individual shall also cease to serve as Chairman and the Party who appointed such individual to the Board may select another individual appointed by that Party to the Board to serve as Chairman through the remainder of such calendar year. The Chairman shall serve as the chairman of all meetings of the Board and shall serve in such other administrative capacities as may be appropriate or as the Board may determine from time to time, but the Chairman shall not have any additional vote or authority by virtue of being the Chairman.

9.3. The Board shall have regular meetings at least once each calendar quarter which shall be called by the Chairman by written notice delivered to each Board member no later than five business days prior to the meeting specifying the date, time and place for such meeting. Either Party may at any time provide the Chairman with a written request that the Chairman convene a special meeting, whereupon the Chairman shall call a special meeting to be held within two weeks after receipt of such request by written notice delivered to each Board member no later than five business days prior to the meeting specifying the date, time and place for such meeting. Any member of the Board may attend a meeting by telephonic equipment if such member may hear and be heard by all present at that meeting (including others participating telephonically).

9.4. The decisions of the Board shall be by majority vote of the members present at a meeting, provided that such majority vote includes the affirmative vote of at least one member appointed by each Party. Notwithstanding the foregoing, after either Party either has an Event of Bankruptcy or is and continues to be in material breach of this Agreement (unless such breach is being contested by the breaching party in good faith) and no director appointed by such Party attends a duly convened meeting of the Board (after notice delivered pursuant to Article 9.3), the affirmative vote of three members of the Board at a duly convened meeting of the Board shall constitute approval of the Board for all purposes hereunder, regardless of whether a member of the Board appointed by each Party approves such matter.

9.5. The Board shall establish various authorizations and delegations for Management (as described below) to conduct the business of the Joint Venture as contemplated by Article 1.1 hereof. In addition, the Board shall:

(a) select the officer who will manage the Joint Venture on a day-to-day basis (the General Manager) subject to the direction of the Board who need not be an employee of the Joint Venture;

(b) approve any and all individual capital investments to be made by the Joint Venture in excess of $50,000 or, at its discretion, delegate such approval to the General Manager with respect to capital investments that do not exceed amounts to be determined by the Board in such delegation;

(c) approve any dividend or profit distribution to be made to the shareholders, members or partners, as the case may be, in excess of the Minimum Distribution in accordance with Article 6.2;

(d) approve any merger of the Operating Company or any acquisition of another entity or all or substantially all of another entity's assets by the Operating Company;

(e) the sale, disposition or purchase of individual assets for in excess of $50,000;

(f) approve the closing of any plant or facility of the Joint Venture;

(g) approve any related-party contracts, except as contemplated in this Agreement;

(h) approve any incurrence of indebtedness for borrowed money;

(i) change the business purpose of the Joint Venture;

(j) approve the discontinuance of any operations of the Joint Venture;

(k) determine the annual business plan and budget (including capital expenditures) and any material variance from such plan and budget;





(l) approve any contract or commitment for a period greater than twelve months;

(m) approve any capacity increase at any manufacturing site;

(n) determine budgets for continuing research concerning the development of strains and process methods for Astaxanthin;

(o) approve the material tax and accounting policies of the Joint Venture (which shall include for the Operating Company the application of U.S. generally accepted accounting principles); and

(p) approve the issuance of new or additional interests in the Operating Company (but not including, in any case, any transfer of existing interests as otherwise provided herein).

If the Board should be deadlocked on any matter, the dispute resolution procedures set forth in Article 22.1 shall apply.

9.6. The Joint Venture shall be jointly controlled by the Parties who, as shareholders, members, or partners, shall have the exclusive power, by instructing the Board, to: (i) dissolve the Joint Venture, (ii) sell, or dispose of all or substantially all assets of the Joint Venture or permit the Joint Venture to place or grant any consensual lien or security interest on its assets (except liens for taxes and materialsmen's liens being contested in good faith which are not material in amount), or (iii) permit the Joint Venture to engage in material commerce outside the Field of Agreement or change the scope of the Field of Agreement. Upon receipt of such instructions, the Board shall act in accordance with this Article 9.

10. DAY-TO-DAY MANAGEMENT OF THE JOINT VENTURE.

10.1. Except as provided in Article 9.5, the Board shall delegate the conduct of the day-to-day business of the Joint Venture to the General Manager, together with the officers and employees of the companies providing the services set forth in Article 11 (collectively the Management). The General Manager shall also have whatever title is appropriate for each entity in the Joint Venture reflecting his or her role as the primary manager and officer of each entity. The initial General Manager will be Peter Boynton who will be secunded to the Joint Venture on a part-time basis.

10.2. Subject to Article 9.5 and the direction of the Board, the Management shall direct, supervise and conduct the business of the Joint Venture in the following areas:

(a) creation, development, and implementation of routine commercial policies and procedures;

(b) creation, development, and implementation of sales and marketing strategies;

(c) treasury and financial management;

(d) manufacturing, maintenance and other operations;

(e) legal services; and

(f) research and development.

11. SERVICES TO BE PROVIDED TO THE JOINT VENTURE BY THE PARTIES.

11.1. Contemporaneously with the execution of this Agreement, each Party will enter into an agreement or agreements substantially in the form attached hereto as Appendix 11.1.1 and Appendix 11.1.2 pursuant to which each Party or its Affiliates shall provide the services identified for it below (the Support Services Agreements, and each a Support Services Agreement). The Support Services Agreements shall provide that the parties will provide the following services to the Joint Venture:

11.1.1.Igene or its Affiliates will provide to the Joint Venture:

(i) Sales and marketing services related to the world-wide sale and marketing of Astaxanthin in the Field of Agreement;

(ii) Research services related to further development of the Technology and improvement of manufacturing process efficiencies, as requested by the Board from time-to-time; and





(iii) Administration of the contract for manufacturing of Axtaxanthin with Fermic S.A. de Mexico pursuant to the terms of the Support Services Agreement.

11.1.2.T&L or its Affiliates will provide to the Joint Venture:

(i) Engineering and operations services;

(ii) Technical and research services related to the further development of the Technology and improvement of manufacturing process efficiencies, as requested by the Board from time-to-time;

(iii) Transportation and logistics services; and

(iv) Finance and accounting services.

11.1.3.The charge for the services set forth in Article 11.1.1 and 11.1.2 is set forth in the appropriate Support Services Agreement and shall be paid by the Operating Company.

11.1.4.T&L or its Affiliates shall also provide certain utilities and waste treatment services to the Joint Venture from its existing facility located at the Site. Such services shall be reimbursed by the Operating Company in an amount as more fully set forth in the appropriate Support Services Agreement.

11.2. In the event that either Party conveys its interest in the Operating Company to the other or a third party during the five year period commencing on the Effective Date and the Joint Venture continues to operate as a going concern thereafter, each Party shall provide the services described in Article 11.1 to the Joint Venture at a price (that shall reasonably be consistent with the methodology used for determining prices prior to such conveyance) to be agreed upon by the Parties for a transition period to allow the owner or owners of the Operating Company to obtain such services for the Joint Venture independently. Such transition period shall not exceed 24 months for the services set forth in Article 11.1.1 and Article 11.1.2 and shall not exceed 36 months for the services set forth in Article 11.1.4; provided, however, if T&L shall give notice to Igene that it intends to close the Selby, England facility adjacent to the Site, T&L shall be required to provide the services set forth in Article 11.1.4 for a period not to exceed 24 months from the date Igene receives such notice.

11.3. In the event of a contradiction between the terms of this Article 11 and any Support Services Agreement, the terms of the Support Services Agreement shall govern.

12. RIGHT OF FIRST REFUSAL; TERMINATION OF THE JOINT VENTURE AFTER THE EFFECTIVE DATE.

12.1. RIGHT OF FIRST REFUSAL; TAG-ALONG RIGHTS.

Prior to one year from the Effective Date, a Party may not sell or otherwise transfer its interest in the Operating Company. Thereafter, any sale or other transfer may not be effectuated except pursuant to a good faith, arms' length offer to sell its entire ownership interest in the Operating Company for cash consideration to a party who is not affiliated with such Party (a Third Party Offer). If either Party has received a Third Party Offer that it intends to accept (the Offer), such Party (the Selling Party) shall notify the other Party (the Offeree) of the Offer, which notice shall include a copy of the Offer and any other information necessary to enable the Offeree to evaluate reasonably the Offer and the potential purchaser. The Offeree shall have thirty (30) days after receipt of the notice from the Selling Party (the Option Period) to elect either (i) to purchase the Selling Party's interest in the Operating Company or (ii) to sell the Offeree's interest in the Operating Company to the Selling Party, in either case on the same terms and conditions as those contained in the Offer. If the Offeree makes one of such elections, the applicable purchase and sale shall take place within sixty (60) days after the date of the Offeree's election in accordance with the terms and conditions of the Offer or such other terms and conditions as the Selling Party and the Offeree shall mutually agree. If the Offeree does not make one of such elections within the Option Period, the Selling Party shall have the right to sell its interest to the person or entity who made the Third Party Offer for cash consideration only on terms and conditions no more favorable to such person or entity within sixty (60) days after the expiration of the Option Period. If such sale is not completed within such sixty (60) day period, the offer from the Selling Party shall be deemed to have been revoked and any subsequent offer from such Selling Party shall be subject to the right of first refusal described herein.

12.2. TERMINATION OF THE JOINT VENTURE.

(a) If there is an Event of Bankruptcy with respect to either Party, then the other Party may elect either to terminate the Joint





Venture (and follow the liquidation procedures set forth in Article 22.3) or to purchase the interest of the Party who had an Event of Bankruptcy for a purchase price equal to the market value of such interest as determined pursuant to subsection (c). Such election shall occur within 60 days after the Event of Bankruptcy unless prohibited by a bankruptcy court or other court of competent jurisdiction; provided that once any such prohibition is no longer applicable, such election shall occur promptly thereafter. The other Party shall provide written notice to the Party who had an Event of Bankruptcy upon the election of the other Party, which notice shall specify the effective date of the action elected by the other Party.

(b) If the Parties shall agree to terminate the Joint Venture pursuant to the terms of the Agreement, the Parties agree to terminate the Joint Venture and follow the liquidation procedures set forth in Article 22.3 unless the Parties otherwise agree.

(c) Upon delivery by either Party of such Party's election to purchase the interest of the other Party upon the other Party having an Event of Bankruptcy, the Board shall meet for the purpose of retaining a mutually acceptable, qualified investment banking, accounting or appraisal firm of national reputation with no conflict of interest with respect to either Party or any Affiliate thereof (a Qualified Expert) to determine the market value of the Operating Company. If the Board is unable to select by unanimous agreement a single Qualified Expert, then the appraisal shall be arrived at by mutual agreement of two Qualified Experts, one selected by each Party. If in such an instance either Party shall fail to appoint a Qualified Expert within fifteen (15) days after a written request to do so, such failure shall be deemed acceptance of the conclusions and appraisal of such Qualified Expert as has been appointed. If the Board unanimously selects a single Qualified Expert, the value of the Operating Company as determined by such Qualified Expert shall be final and binding upon both of the Parties. If two Qualified Experts are chosen, one by each Party, and such Qualified Experts either agree or the greater of the two valuations is no more than 110% of the lesser valuation, the average of the valuations of the Operating Company as determined by each such Qualified Expert shall be the value of the Operating Company for the purposes of this Article 12.2 and shall be final and binding upon both Parties. If two Qualified Experts are chosen, one by each Party, and such Qualified Experts cannot agree within thirty (30) days of the appointment of the second of such Qualified Expert (or their valuations differ by more than 10%), then (i) the two appointed Qualified Experts shall select a third Qualified Expert, (ii) if the determination of any of the three Qualified Experts is greater than the two smallest determinations or smaller than the two greatest determinations, in either case by more than 125% of the difference between such other determinations, such determination will be disregarded and the average of the two remaining determinations shall be final and binding upon both of the Parties and (iii) otherwise, the average of the three determinations of the three Qualified Experts shall be final and binding upon both of the Parties. The market value for the interest of the Party who has had an Event of Bankruptcy shall equal the market value of the Operating Company as determined above times the interest of such Party in the Operating Company as stated in Article 4.1.

13. LIABILITIES.

13.1. Igene (the Indemnifying Party) shall indemnify and hold harmless T&L, its Affiliates, the Operating Company and the Manufacturing Company, and their respective officers, directors, shareholders and agents (collectively, the Indemnified Parties) from and against any and all claims, demands, actions, lawsuits, proceedings, liabilities, losses, costs and expenses (including reasonable attorney's fees and disbursements incurred by any of the Indemnified Parties in respect of any such claims, demands, actions, lawsuits or proceedings) arising from any actual or alleged infringement of any patent, trademark, trade name, trade dress, copyright, trade secret or other proprietary right (whether under the laws of any country or of the European Union) resulting from the ownership or use of the Technology by Igene or as contemplated herein, including without limitation a failure of the Operating Company to have unencumbered rights in the Technology as a result of the pending lawsuit (the Lawsuit) styled Archer Daniels Midland Corporation v. Igene Biotechnology, Inc., United States District Court for the District of Maryland, Case No. S97-2358, or any similar claim.

*

* Intentionally deleted pursuant to a request for confidential treatment.

14. WARRANTIES BY THE PARTIES

14.1. Each Party represents and warrants to the other Party that:

14.1.1. General Corporate Matters. (i) it is duly formed and validly existing, and it is in good standing in the state of its incorporation and in each other state except where the failure to be in good standing would not have a material adverse effect on the formation or operation of the Joint Venture, (ii) it is duly authorized and has the requisite power to execute this Agreement and to form the Joint Venture and to do all other things necessary to implement the various agreements contemplated in and by this Agreement, (iii) this Agreement has been duly executed, and constitutes the legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except





to the extent that the enforceability thereof against such Party may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally or by equitable principles of general application, (iv) none of such Party's Transferred Assets are subject to any liens or security interests (except liens for taxes and materialsmen's liens being contested in good faith which are not material in amount), and (v) it has disclosed to the other Party all material facts and circumstances existing on the date hereof which could reasonably be likely to, in such Party's commercially reasonable judgment, have a material adverse effect on the Joint Venture.

14.1.2. Litigation. There are no suits, actions, arbitrations, or legal, administrative or other proceedings or governmental investigations pending or, to its knowledge, threatened against or affecting it or any of its shareholders or members that if decided adversely to it or its shareholders or members could reasonably be expected to have a material adverse effect on its business, operations or financial condition or that could reasonably be expected to prevent the consummation of the Joint Venture, except for the Lawsuit.

14.1.3. Bankruptcy. There are no attachments, executions or assignments for the benefit of creditors, or voluntary or involuntary proceedings in bankruptcy, or under any other debtor relief laws, contemplated by or pending or threatened against it. Without limiting the generality of the foregoing, none of the following have been done by, against or with respect to it: (i) the commencement of a case under Title 11 of the U.S. Code, as now constituted or hereafter amended, or under any other applicable federal or state bankruptcy law or other similar law; (ii) the appointment of a trustee or receive of any property interest; (iii) an assignment for the benefit of creditors; (iv) an attachment, execution or other judicial seizure of a substantial property interest; (v) the taking of, failure to take, or submission to, any action indicating an inability to meet its financial obligations as they accrue; or (vi) a dissolution or liquidation.

14.2. Igene represents and warrants to T&L (i) that the Technology, the Brands and all other Transferred Assets set forth in Appendix 3.2 constitute all know-how and intellectual property owned, used or possessed by Igene with respect to the Field of Agreement, (ii) that it has good and workable title to the Transferred Assets, free and clear of any and all liens, claims and encumbrances, except for the Lawsuit, and (iii) this Agreement and each document contemplated hereby is sufficient to transfer Igene's right, title and interest in the Transferred Assets to the Operating Company.

14.3. Igene warrants to T&L that the Technology, the Brands and other Transferred Assets do not infringe on any third-party patent, trademark or other rights.

14.4. T&L represents and warrants to Igene that (i) the Manufacturing Facility will be constructed in accordance with the terms of the Construction Agreement, free and clear of all liens, claims and encumbrances and (ii) the Manufacturing Facility will be a turnkey project capable of producing 14,000 kg per year of pure Astaxanthin.

15. CONDITIONS PRECEDENT; TERMINATION OF AGREEMENT.

15.1. The obligation of each Party to consummate the agreements and covenants set forth herein is subject to the satisfaction (or waiver) on the Effective Date of the following conditions:

A. Subject to Article 2.3, if necessary, approval shall have been received under the HSR Act and any other applicable competition law, or the waiting period thereunder shall have expired;

B. Any other necessary governmental approvals for the formation and operation of the Joint Venture as contemplated herein shall have been given (either expressly or by operation of law); and

C. Approval of the Board of Directors of each of T&L and Igene shall have been given.

15.2. Without prejudice to the foregoing, without liability to the other Party except in the case of a breach of this Agreement, either Party shall be entitled to terminate this Agreement at any time from the date hereof up to Formation, if:

A. Subject to Article 2.3, an order of any court, arbitrator, or governmental, regulatory or administrative body, shall be in effect which restrains or prohibits the transactions contemplated hereby;

B. Any final and nonappealable determination of the Lawsuit or any other claim subject to indemnification under Article 13 shall arise either of which, in the business judgment of T&L, restricts the ability of Igene to perform its obligations hereunder or with respect to the Operating Company or the Joint Venture;





C. There has arisen, after the date of this Agreement, any bona fide claim or litigation involving, directly or indirectly, one or both of the Parties, of any member of either Party, or any shareholder, director, officer, employee, agent, consultant or representative of any Party, which may reasonably be expected to materially and adversely affect the Transferred Assets and/or the business falling with the Field of the Agreement; or

D. There has been a material adverse change reasonably outside of the control of the Party seeking to terminate with respect to the Transferred Assets of the other Party.

E. The Effective Date has not occurred on or prior to March 3, 2003.

16. OPERATIONS UNTIL TRANSFER.

From and after the date hereof, each Party will use its reasonable best efforts to ensure that (i) no liens or security interest shall be created or levied on the Transferred Assets (except liens for taxes and materialsmen's liens being contested in good faith which are not material in amount), and (ii) the assets to be transferred to the Operating Company, shall be operated in the ordinary course of business consistent with past business practices, and no portion thereof (except inventory sold in the ordinary course of business) shall be sold, conveyed, or otherwise transferred prior to transfer to the Operating Company.

17. ASSIGNMENT; PLEDGE OF JOINT VENTURE INTEREST.

Except as permitted pursuant to Article 13.1 hereof, neither Party shall assign or transfer this Agreement, or any and all related rights and obligations in the Joint Venture or all rights and all obligations in any related agreements, without the prior written consent of the other Party, which consent may not be unreasonably withheld or delayed; provided, however, any Party may assign any or all of its interests in this Agreement or the Operating Company to a wholly-owned subsidiary (which shall at all times remain a wholly-owned subsidiary, and such subsidiary may be a partnership, limited liability company, or corporation) or commonly-owned affiliate of Igene or T&L, as the case may be, provided that the ultimate parent company (e.g. Igene or T&L, as the case may be) shall guarantee such subsidiary's or affiliate's performance hereunder. Without the prior written consent of the other Party, neither Igene nor T&L, as the case may be, shall pledge, encumber, or grant a security interest in, any interest (stock, membership or partnership) in the Operating Company. Any permitted assignee shall, prior to the effectiveness of any assignment to such assignee, agree in writing to be bound by, and assume each obligation of the assigning Party under, this Agreement, and each other document and agreement relating to the Joint Venture to which the assignor (or its Party) is a Party, which such written agreement shall be in a form satisfactory to the Party not assigning its interest hereunder.

18. COSTS, FEES AND TAXES.

18.1. Unless the Parties agree otherwise in writing and except as otherwise provided herein, each Party shall bear and pay its own costs, expenses and fees incurred in connection with the making of this Agreement.

18.2. Any and all stamp duties, transfer taxes, recording and filing fees, and other similar statutory costs, incurred or payable in connection, directly or indirectly, with the transfer to the Operating Company of any of the Transferred Assets, or the implementation of this Agreement and the formation of the Joint Venture, shall be borne and paid by the Joint Venture. Notwithstanding the previous sentence, any and all taxes relating to income, capital gains, or other similar taxes or charges shall be borne by the Party transferring the Transferred Assets to the Operating Company.

19. NOTICES.

19.1. Any notice to be served by one Party on the other in connection with this Agreement shall be validly served if delivered by overnight delivery service (costs pre-paid), confirmed fax, or delivered in person, to the following addresses (or such other address as a Party may specify from time to time in accordance with this Article):

A. Tate & Lyle Fermentation Products Ltd. c/o Tate & Lyle North America Inc. 2200 E. Eldorado Street Decatur, Illinois 62521 Attn: General Counsel FAX: 217-421-4704

B. with a copy to:

Tate & Lyle North America Inc.





2200 E. Eldorado Street Decatur, Illinois 62521 Attn: Chief Financial Officer FAX: 217-421-4507

C. Igene Biotechnology, Inc. 9110 Red Branch Road Columbia, Maryland 21045-2024 Attention: Stephen F. Hiu FAX: 410-730-0540 TEL: 410-997-2599

with a copy to:

Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, New York 10038 Attention: Martin H. Neidell FAX: 212-806-7836 TEL 212-806-5836

After the Effective Date, the Operating Company shall give each of the Parties appropriate addresses for notices.

19.2. Any notice validly served on a business day of the recipient and in accordance with Article 19.1 shall be deemed served on the day of receipt in the case of faxed, hand-delivered, and overnight delivery service notices.

20. LAW.

This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without reference to the conflicts of laws principles thereunder.

21. MISCELLANEOUS PROVISIONS.

21.1. THIRD PARTIES. Except as expressly stated herein with respect to members of each Party, no person or entity not a Party to this Agreement (including, without limitation, any employee of either Party or the Joint Venture) shall be a third-party beneficiary of any provision of this Agreement, and nothing contained herein shall be construed or deemed to confer any benefit or right upon any third party.

21.2. BROKERS. Each Party agrees to indemnify and hold the other harmless against any and all liability to any broker retained by such Party in connection with this Agreement and the transactions contemplated by this Agreement.

21.3. PRESS RELEASES. Except as required by law or securities exchange rules, public announcements and press releases concerning this Agreement and the transactions contemplated hereby shall be made only as mutually agreed by the Parties.

21.4. ENTIRE AGREEMENT; CONFIDENTIALITY.

A. This Agreement, including the Appendices attached to this Agreement and the Recitals set forth herein, constitutes the entire agreement between the Parties pertaining to the subject matter hereof, and all prior representations, discussions and negotiations between the Parties and/or their representatives pertaining to the subject matter of this Agreement are superseded. Notwithstanding the preceding sentence, the terms and provisions of the certain Nondisclosure Agreement dated as of March 19, 2001 as amended August 5, 2002 between the Parties shall remain in effect.

B. Each Party (the Recipient Party) agrees to hold in confidence and not to disclose either directly or indirectly to any third party any technical, financial, commercial or other information (the Information) as may be revealed or disclosed orally, in writing or otherwise to it by the other Party or by the Joint Venture (the Disclosing Party) and shall refrain from using any such Information for any purpose whatsoever other than for the purpose(s) for which the Information was disclosed or unless previously approved in writing by the Disclosing Party; provided, however, that these obligations shall not apply to Information:





(i) which at the time of disclosure to the Recipient Party was in the public domain,

(ii) which after disclosure to the Recipient Party becomes part of the public domain through no fault of said Party,

(iii) which at the time of disclosure to the Recipient Party was in its possession or was independently developed by the Recipient Party (and the Recipient Party can demonstrate such by written documents dated before the time of disclosure),

(iv) which disclosure is obtained by the Recipient Party from a third party which has not, either directly or indirectly, received the Information from the Disclosing Party; or

(v) which disclosure is required otherwise by law, unless compelled to disclose such documents or information by judicial or administrative process.

Specific Information shall not be deemed to be within the foregoing exceptions merely because such specific Information may be construed as being within broader, non- confidential information which is either in the public domain or in the possession of the Receiving Party at the time of the disclosure of such Information, nor shall a combination of features which form Information be deemed to be non-confidential merely because the individual features, without being combined, are non-confidential. In any such instance where disclosure appears to be compelled by law, the first Party will notify the other Party so that such Party may avail itself of such measures as may be available for protecting the confidentiality of such information; provided, however, that neither Party will be prohibited from using such documents and information in litigation against the other Party.

C. The Parties shall cause the Operating Company and the Manufacturing Company to adhere to similar obligations of confidentiality as set forth above with respect to Information received by it from either Party.

D. Unless otherwise agreed between the Parties, the provisions of this clause shall survive the termination of this Agreement and continue to be in force thereafter for a period of five (5) years.

21.5. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. Signatures to this Agreement may be given by facsimile or other electronic transmission, and such signatures shall be fully binding on the Party sending the same.

21.6. AMENDMENT; WAIVER; HEADINGS. No waiver, modification or amendment of any provision, term, or condition of this Agreement shall be of any force or effect unless in writing and executed by each of the Parties. No usage of trade, course of dealing or performance shall modify the terms or conditions of this Agreement. The headings in this Agreement are for convenience only and shall not be deemed a part of this Agreement.

21.7. AUDITORS. The Parties will agree on the independent auditors of the Joint Venture. From time to time, each Party shall have the right to have its own internal or external auditors review the books and records of the Joint Venture.

21.8. SUPREMACY. Other than as set forth in this Agreement to the contrary, in the event of any conflict or inconsistency between the provisions of this Agreement and any other document related to the subject matter of this Agreement, which may be entered into by the Parties or between a member of any Party and the Joint Venture, from time to time, the provisions of this Agreement shall prevail in each case, unless the Parties otherwise expressly agree in writing.

21.9. TAX MATTERS. Each Party shall prepare its tax reports and returns in a manner not inconsistent with the tax reports and returns of the Operating Company, except in the case of manifest error.

21.10. GUARANTEE. Parent hereby guarantees the performance by T&L of all of its obligations hereunder.

22. DISPUTE RESOLUTION PROCEDURES; LIQUIDATION.

22.1. At any time for so long as both T&L and Igene own an interest in the Operating Company, at the request of either Party in a written notice to the other Party's appointees to the Board, the Parties agree to negotiate in good faith to resolve expeditiously any controversies, claims or disputes between the Parties that may arise from time to time under this Agreement or otherwise relating to the Joint Venture (each a Board Dispute). If, after a Board Dispute is addressed and recorded in the minutes in two regular





quarterly Board meetings without resolution of such Board Dispute, then any such matter not so resolved shall be referred (by written notice by either Party to the other Party's general counsel and the other Party's appointees to the Board) to the Party Heads, who shall have an initial meeting with respect to such matters within ten days of the date of such referral notice, and who shall thereafter negotiate in good faith with each other for an additional twenty day period following the date of such initial meeting in an attempt to resolve any open issues.

22.2. If any Board Dispute is not resolved through the procedure set forth in Article 22.1 after expiration of all of the time specified therefor, either Party, in the thirty day period beginning upon the end of the twenty day period described in Article 22.1, may provide the other Party with a written notice (the Offer Notice) stating that such Board Dispute is not resolved and setting forth a price (the Offer Price) and a list of three acceptable closing dates not less than ninety days after the expiration of the twenty-one day period referred to in the next sentence; provided, that an Offer Notice may not be served earlier than (i) with respect to a Board Dispute arising pursuant to Article 9.5(a) (General Manager Appointment), 9.5(k) (Operating Plans) (except as provided in subclause (ii) below), eighteen months from the Commencement Date, (ii) a Board Dispute arising pursuant to Article 9.5(b) (Capital Expenditures) or 9.5(k) (Operating Plans) that involves a contemplated expenditure which can be financed solely by the Joint Venture from its internal resources and/or using funds provided on normal commercial terms by any other party without any contribution or guaranty from either Party, eighteen months from the Commencement Date and (iii) with respect to any other Board Dispute, fifty-four months from the Effective Date. Upon receipt of an Offer Notice, the other Party must elect prior to the expiration of twenty-one days either to (a) sell its interest in the Operating Company for the Offer Price or (b) purchase the interest of the Party providing the Offer Notice for the Offer Price, which election in either case may be in a written notice which also specifies which of the closing dates identified in the notice delivered to such Party is preferred by such Party. On the closing date specified in the response notice, the Parties shall consummate the transaction selected in the response notice unless both Parties expressly agree otherwise. The Party initiating the notice provided herein, shall be required to provide such Support Services as agreed in the appropriate Support Services Agreement described in Article 11.1 to the surviving entity at a price (that shall be reasonably consistent with the methodology used for determining prices prior to such conveyance) to be agreed upon by the Parties for a transition period to allow the Operating Company to continue to obtain such services. Such transition period shall not exceed 12 months for the services set forth in Article 11.1.1 and Article 11.1.2 and shall not exceed 24 months for the services set forth in Article 11.1.4. The Party whose interest in the Operating Company is purchased shall take all reasonable steps to cooperate in the transition with the other Party so that the Joint Venture will be able to continue as an independent and functioning business after termination of the Support Services. For all purposes under this Article 22.2, if each Party delivers an Offer Notice to the other Party, the Offer Notice that is received on the earliest date shall be effective. If each Party receives an Offer Notice from the other Party on the same date, then the Offer Notice containing the highest cash Offer Price shall be effective.

22.3. In the event the Parties (a) agree to liquidate the Joint Venture, (b) are required to liquidate the Joint Venture pursuant to Article 12.2 or (c) do not send any notice under Article 22.2 in the period allowed therefor, either Party may, by notice to the Board of such circumstance (the Liquidation Notice), commence the following liquidation process. Upon the Board's receipt of a Liquidation Notice, the Board shall meet to determine how to proceed. The Board may retain or appoint a Qualified Expert or any other person to value the Joint Venture and to advise it in liquidating the Joint Venture. Each Party may also retain or appoint such advisors and experts as it may deem appropriate to advise such Party with respect to the liquidation of the Joint Venture. From and after the Board's receipt of a Liquidation Notice, the Board shall proceed with the liquidation of the Joint Venture, and shall have no authority and shall not continue the regular operations of the Joint Venture except to the extent necessary or appropriate to preserve or increase the value of the assets of the Joint Venture; provided that, the Board may elect to, and upon express election by the Board thereby shall, for a specified period not to exceed six months, continue regular operations of the Joint Venture solely for the purpose of preserving its value while seeking to sell the Joint Venture as a whole, but if such period expires prior to the sale of the Joint Venture as a whole, the Board shall thereafter be required to sell the assets of the Operating Company reasonably expeditiously. The proceeds of any such liquidation shall be first used to pay the fees and expenses of the Qualified Experts and all remaining proceeds after payment of such fees shall be distributed between the Parties in proportion to their respective capital accounts.

23. JOINT VENTURE TO BE BOUND.

On the Formation Date, each of the Parties shall cause the Joint Venture (and each of its constituent entities) to agree to and be irrevocably bound by the terms and provisions of this Agreement, including, without limitation, Article 13.

[remainder of page intentionally left blank]

IN WITNESS of the foregoing, the Parties have signed this Agreement as to the date first written above.

TATE & LYLE FERMENTATION PRODUCTS LTD. IGENE BIOTECHNOLOGY, INC.

/s/





/s/

By:

Its:

Agreed and accepted for purposes of Section 21.10 hereof only:

TATE & LYLE INDUSTRIES LTD.

/s/

By:

Its:

By:

Its: 
Question: Highlight the parts (if any) of this contract related to Third Party Beneficiary that should be reviewed by a lawyer. Details: Is there a non-contracting party who is a beneficiary to some or all of the clauses in the contract and therefore can enforce its rights against a contracting party?

Answer: Except as expressly stated herein with respect to members of each Party, no person or entity not a Party to this Agreement (including, without limitation, any employee of either Party or the Joint Venture) shall be a third-party beneficiary of any provision of this Agreement, and nothing contained herein shall be construed or deemed to confer any benefit or right upon any third party.


Question: ALAMOGORDO FINANCIAL CORPORATION                                 1,101,643 Shares

                                  COMMON STOCK                            (Par Value $.0l Per Share)

                       Subscription Price $10.00 Per Share

                                AGENCY AGREEMENT

                              ___________ __, 2000

Charles Webb & Company, a Division of Keefe, Bruyette & Woods, Inc. 211 Bradenton Avenue Dublin, Ohio 43017

Ladies and Gentlemen:

         Alamogordo   Financial   Corporation,   a  federal   corporation   (the Company), AF Mutual Holding Company (the MHC) and Alamogordo Federal Savings and Loan Association,  a federally  chartered stock savings and loan association (the  Bank)  with its  deposit  accounts  insured by the  Savings  Association Insurance  Fund  (SAIF)   administered  by  the  Federal   Deposit   Insurance Corporation  (FDIC),  hereby confirm,  jointly and severally,  their agreement with Charles Webb & Company,  a Division of Keefe,  Bruyette & Woods,  Inc. (the Agent), as follows:

         Section 1. The  Offering.  In accordance  with the Stock  Issuance Plan adopted by its Board of Directors (the Plan),  the Company will offer and sell up to  1,101,643  shares of its common  stock,  par  value,  $.01 per share (the Shares or Common  Stock),  in a  subscription  offering  (the  Subscription Offering) to (1) depositors of the Bank with account balances of $50.00 or more as of September 30, 1998 (Eligible  Account  Holders),  (2) the Employee Stock Ownership Plan of the Bank (the ESOP), (3) depositors of the Bank with account balances  of $50.00 or more as of  December  31,  1999  (Supplemental  Eligible Account Holders), and (4) employees, officers and directors of the Bank. To the extent  Shares  remain  unsold in the  Subscription  Offering,  the  Company  is offering for sale in a community  offering  (the  Community  Offering and when referred to together  with the  Subscription  Offering,  the  Subscription  and Community  Offering)  the  Shares  not  so  subscribed  for or  ordered  in the Subscription Offering to members of the general public, with preference given to natural persons residing in the New Mexico counties of Otero and Lincoln

(Other Subscribers),  (all such offerees being referred to in the aggregate as Eligible  Offerees).  It is anticipated  that shares not subscribed for in the Subscription  and Community  Offering will be offered to certain  members of the general  public on a best efforts basis through a selected  dealers  arrangement (the Syndicated  Community  Offering) (the  Subscription  Offering,  Community Offering and Syndicated  Community Offering are collectively  referred to as the Offering).  It is acknowledged  that the purchase of Shares in the Offering is subject to the maximum and minimum purchase limitations as described in the Plan and that the Company and the Bank may  reject,  in whole or in part,  any orders received in the Community Offering or Syndicated Community Offering. The Company will  issue the Shares at a  purchase  price of $10.00 per share (the  Purchase Price).

         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  all  exhibits  thereto,  as  amended,  including  post-effective amendments.  The prospectus, as amended, on file with the Commission at the time the Registration  Statement initially became effective is hereinafter called the Prospectus,  except that if any Prospectus is filed by the Company pursuant to Rule 424(b) or (c) of the rules and regulations of the Commission under the 1933 Act (the 1933 Act  Regulations)  differing  from the prospectus on file at the time  the  Registration   Statement   initially  becomes  effective,   the  term Prospectus  shall refer to the prospectus filed pursuant to Rule 424(b) or (c) from and after the time said prospectus is filed with the Commission.

         In accordance  with Title 12, Parts 575 and 563b of the Code of Federal Regulations  (the MHC  Regulations),  the Company has filed with the Office of Thrift  Supervision (the OTS) an Application on Form MHC-2 with respect to the stock  issuance  (the  MHC  Application),  including  the  Prospectus  and the Valuation  Appraisal Report prepared by RP Financial,  LC (the  Appraisal) and has filed such amendments  thereto as may have been required by the OTS. The MHC Application  has been  approved by the OTS and the related  Prospectus  has been authorized for use by the OTS.





         Section 2. Retention of Agent;  Compensation;  Sale and Delivery of the Shares.  Subject to the terms and conditions  herein set forth,  the Company and the Bank have retained the Agent to consult with and to advise the Bank, the MHC and the Company,  and to assist the Company,  on a best  efforts  basis,  in the distribution  of the shares of Common Stock in the  Offering.  The services that the  Agent  will  provide  include,  but are not  limited  to (i)  training  the employees  of the Bank who will  perform  certain  ministerial  functions in the Subscription  and Community  Offering  regarding  the  mechanics and  regulatory requirements of the stock offering process,  (ii) managing the Stock Information Center by assisting  interested stock  subscribers and by keeping records of all stock orders and (iii) preparing marketing materials.

                                        2

         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,  the MHC and the Bank as to the  matters set forth in the letter  agreement  (Letter Agreement),  dated  November 29, 1999 between the Company and the Agent (a copy of which is attached  hereto as Exhibit A). It is  acknowledged  by the Company, the MHC and the Bank that the Agent  shall not be  required  to take or purchase any Shares or be  obligated to take any action  which is  inconsistent  with all applicable laws, regulations, decisions or orders.

         The  obligations of the Agent  pursuant to this  Agreement  (other than those set forth in  Sections  2(d),  8 and 9 hereof)  shall  terminate  upon the completion  or  termination  or  abandonment  of the Plan by the Company or upon termination  of the  Offering,  but in no event  later  than the date  (the End Date) which is 45 days after the Closing  Date (as  hereinafter  defined).  All fees or  expenses  due to the Agent but  unpaid  will be payable to the Agent in next day funds at the earlier of the Closing  Date (as  hereinafter  defined) or the End Date.  In the event the  Offering is extended  beyond the End Date,  the Company, the MHC, the Bank and the Agent may agree to renew this Agreement under mutually acceptable terms.

         In the event the Company is unable to sell a minimum of 708,050  Shares within the period  herein  provided,  this  Agreement  shall  terminate  and the Company shall refund to any persons who have  subscribed  for any of the Shares, the full amount which it may have  received  from them plus accrued  interest as set forth in the  Prospectus;  and none of the parties to this  Agreement  shall have any obligation to the other parties hereunder,  except as set forth in this Section 2 and in Sections 6, 8 and 9 hereof.

         In the event the Offering is terminated,  the Agent shall be reimbursed for its actual accountable out-of-pocket expenses.

         If all  conditions  precedent  to  the  consummation  of the  Offering, including, without limitation, the sale of all Shares required by the Plan to be sold, are satisfied,  the Company  agrees to issue,  or have issued,  the Shares sold in the Offering and to release for delivery certificates for such Shares on the Closing Date (as hereinafter  defined) against payment to the Company by any means authorized by the Plan; provided, however, that no funds shall be released to the Company  until the  conditions  specified  in Section 7 hereof shall have been  complied  with to the  reasonable  satisfaction  of the  Agent  and  their counsel.  The release of Shares against payment therefor shall be made on a date and at a place  acceptable  to the  Company,  the MHC,  the Bank and the  Agent. Certificates  for  shares  shall be  delivered  directly  to the  purchasers  in accordance with their directions.  The date upon which the Company shall release or deliver the Shares sold in the Offering, in accordance with the terms herein, is called the Closing Date.

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

                                        3

          (a)  A  management  fee of $25,000,  payable in four  installments  of                $6,250 on  November 29 and  December  29, 1999 and January 29 and                February 29,  2000.  Should the  Offering be  terminated  for any                reason not  attributable  to the action or inaction of the Agent,                the Agent  shall  have  earned  and be  entitled  to be paid fees                accruing through the stage at which the termination occurred.

          (b)  A Success Fee of $75,000.

          (c)  If any of the shares remain  available after the Subscription and                Community  Offerings,  at the request of the Bank, the Agent will                seek to form a syndicate of registered  broker-dealers  to assist                in the sale of such Common Stock 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 Stock                among  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 by them.  the Agent will pass onto selected  broker-dealers,





               who assist in the  syndicated  community,  an amount  competitive                with  gross  underwriting  discounts  changed  at such  time  for                comparable  amounts of stock sold at a comparable price per share                in a similar market  environment.  Fees with respect to purchases                affected with the  assistance of a  broker/dealer  other than the                Agent shall be  transmitted  by the Agent to such  broker/dealer.                The decision to utilize selected  broker-dealers  will be made by                the Bank upon  consultation  with the Agent.  In the event,  with                respect to any  purchases  of Shares,  fees are paid  pursuant to                this subparagraph 2(c), such fees shall be in lieu of, and not in                addition to, payment pursuant to subparagraph 2(a) and 2(b).

          (d)  The Company  will bear those  expenses of the  proposed  offering                customarily  borne by  issuers,  including,  without  limitation,                regulatory   filing  fees,   Blue  Sky,  and  NASD  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                Offering;  the fees set  forth in  Section  2; and fees for Blue                Sky legal work.  If the Agent  incurs  expenses on behalf of the                Company, the Company will reimburse the Agent for such expenses.

               The  Agent  shall  be  reimbursed  for  reasonable  out-of-pocket                expenses,   including   costs  of  travel,   meals  and  lodging,                photocopying,  telephone, facsimile and couriers. The Agent shall                also  be  reimbursed  for  its  fees  of  underwriter's   counsel                (including  counsel's   out-of-pocket  expenses)  not  to  exceed                $35,000. The selection of such counsel will be done by the Agent,                after consultation with the Bank.

         Section 3. Prospectus; Offering. The Shares are to be initially offered in the Offering at the Purchase Price as defined and set forth on the cover page of the Prospectus.

                                        4

         Section 4.  Representations and Warranties of the Company,  the MHC and the Bank. The Company,  the MHC 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, the                MHC and the  Bank and  filed  with the  Commission  was  declared                effective by the  Commission on __________  __, 2000. At the time                the Registration  Statement,  including the Prospectus  contained                therein   (including   any  amendment  or   supplement),   became                effective,  the Registration  Statement  contained all statements                that were required to be stated  therein in  accordance  with the                1933 Act and the 1933 Act  Regulations,  complied in all material                respects with the  requirements  of the 1933 Act and the 1933 Act                Regulations  and  the  Registration   Statement,   including  the                Prospectus   contained   therein   (including  any  amendment  or                supplement thereto), and any information regarding the Company or                the MHC or the Bank contained in Sales  Information (as such term                is defined in Section 8 hereof)  authorized  by the Company,  the                MHC or the Bank for use in connection with the Offering,  did not                contain an untrue statement of a material fact or omit to state a                material fact required to be stated  therein or necessary to make                the statements therein, in light of the circumstances under which                they were made, not  misleading,  and at the time any Rule 424(b)                or (c)  Prospectus  was  filed  with  the  Commission  and at the                Closing  Date   referred  to  in  Section  2,  the   Registration                Statement,  including the Prospectus contained therein (including                any  amendment  or  supplement  thereto),   and  any  information                regarding  the  Company,  the MHC or the Bank  contained in Sales                Information  (as  such  term is  defined  in  Section  8  hereof)                authorized  by  the  Company,  the  MHC or the  Bank  for  use in                connection with the Offering will contain all statements that are                required to be stated therein in accordance with the 1933 Act and                the 1933 Act Regulations and will not contain an untrue statement                of a material fact or omit to state a material fact  necessary in                order  to  make  the   statements   therein,   in  light  of  the                circumstances   under  which  they  were  made,  not  misleading;                provided,  however,  that the  representations  and warranties in                this Section 4(a) shall not apply to statements or omissions made                in  reliance  upon and in  conformity  with  written  information                furnished to the Company, the MHC or the Bank by the Agent or its                counsel  expressly  regarding the Agent for use in the Prospectus                or  statements  in or  omissions  from any Sales  Information  or                information  filed pursuant to state  securities or blue sky laws                or regulations regarding the Agent.

          (b)  The MHC  Application  which was prepared by the Company,  the MHC                and the Bank and filed  with the OTS was  approved  by the OTS on                ___________  ___,  2000,  and the  related  Prospectus  has  been                authorized for use by the OTS. At the time of the approval of the                MHC Application, including the

                                        5





               Prospectus  (including any amendment or supplement  thereto),  by                the OTS and at all times  subsequent  thereto  until the  Closing                Date, the MHC  Application,  including the Prospectus  (including                any amendment or supplement thereto), will comply in all material                respects with the MHC Regulations, except to the extent waived in                writing by the OTS. The MHC Application, including the Prospectus                (including any amendment or supplement thereto), does not include                any  untrue  statement  of a  material  fact or  omit to  state a                material fact required to be stated  therein or necessary to make                the statements therein, in light of the circumstances under which                they were  made,  not  misleading;  provided,  however,  that the                representations  and  warranties  in this  Section 4(b) shall not                apply to  statements  or omissions  made in reliance  upon and in                conformity with written information furnished to the Company, the                MHC or the Bank by the Agent or its counsel  expressly  regarding                the  Agent  for  use  in the  Prospectus  contained  in  the  MHC                Application   or  statements  in  or  omissions  from  any  sales                information.

          (c)  The Company and the MHC have  registered  with the OTS as savings                and loan  holding  companies  under the Home Owners' Loan Act, as                amended (HOLA).

          (d)  No order has been issued by the OTS or the FDIC  (hereinafter any                reference  to the FDIC  shall  include  the SAIF)  preventing  or                suspending the use of the Prospectus,  and no action by or before                any such government entity to revoke any approval,  authorization                or order of effectiveness related to the Offering is, to the best                knowledge  of  the  Company,  the  MHC or the  Bank,  pending  or                threatened.

          (e)  The MHC is and, as of the Closing Date,  will continue to be duly                organized and validly  existing as a federally  chartered  mutual                holding  company  under  the  laws  of the  United  States,  duly                authorized  to  conduct  its  business  and own its  property  as                described in the Registration Statement and the Prospectus; as of                the  Closing  Date,  the MHC will  have  obtained  all  licenses,                permits and other  governmental  authorizations  required for the                conduct of its business except those that  individually or in the                aggregate  would not  materially  adversely  affect the financial                condition,   earnings,  capital,  assets  or  properties  of  the                Company,  MHC and Bank taken as a whole;  as of the Closing Date,                all such licenses,  permits and governmental  authorizations will                be in full  force and  effect  and the MHC will be in  compliance                therewith in all material  respects;  as of the Closing Date, the                MHC will be duly  qualified as a foreign  corporation to transact                business  in each  jurisdiction  in which  the  failure  to be so                qualified  in one or  more  of such  jurisdictions  would  have a                material  adverse  effect on the financial  condition,  earnings,                capital,  assets,  properties or business of the Company, MHC and                Bank considered as one enterprise.

                                        6

          (f)  The MHC does not own any equity securities or any equity interest                in any business enterprise except as described in the Prospectus.

          (g)  The MHC is not authorized to issue any shares of capital stock.

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

          (i)  The Bank has been organized and is a validly  existing  federally                chartered  savings and loan  association in capital stock form of                organization, duly authorized to conduct its business and own its                property  as  described  in the  Registration  Statement  and the                Prospectus;  the Bank has obtained all material licenses, permits                and other governmental  authorizations currently required for the                conduct  of  its  business;   all  such  licenses,   permits  and                governmental authorizations are in full force and effect, and the                Bank is in all material respects  complying with all laws, rules,                regulations  and  orders  applicable  to  the  operation  of  its                business;  the Bank is  existing  under  the  laws of the  United                States and is duly qualified as a foreign corporation to transact                business and is in good  standing in each  jurisdiction  in which                its  ownership  of property or leasing of property or the conduct                of its business requires such  qualification,  unless the failure                to be so qualified in one or more of such jurisdictions would not                have a material  adverse  effect on the  condition,  financial or                otherwise, or the business, operations or income of the Bank. The





               Bank does not own equity securities or any equity interest in any                other business  enterprise  except as described in the Prospectus                or as would not be material to the  operations of the Bank.  Upon                completion of the sale by the Company of the Shares  contemplated                by the Prospectus,  (i) all of the issued and outstanding capital                stock of the Bank will be owned by the Company,  (ii) the Company                will have no direct  subsidiaries  other than the Bank, and (iii)                the Company will be a  majority-owned  subsidiary of the MHC. The                Offering  will have been  effected  in all  material  respects in                accordance with all applicable statutes,  regulations,  decisions                and orders;  and,  except  with  respect to the filing of certain                post-sale,  post-Offering  reports,  and  documents in compliance                with the 1933 Act Regulations, the OTS' resolutions or letters of

                                        7

               approval, all terms, conditions, requirements and provisions with                respect to the Offering  imposed by the Commission,  the OTS, and                the FDIC,  if any,  will have been  complied with by the Company,                the MHC and the  Bank in all  material  respects  or  appropriate                waivers  will have been  obtained  and all  material  notice  and                waiting periods will have been satisfied, waived or elapsed.

          (j)  The Company has been duly incorporated and is validly existing as                a  corporation  in good  standing  under  the laws of the  United                States  with  corporate  power and  authority  to own,  lease and                operate its  properties  and to conduct its business as described                in the  Registration  Statement  and the  Prospectus,  and at the                Closing  Date the Company  will be  qualified to do business as a                foreign  corporation in each jurisdiction in which the conduct of                its  business  requires  such  qualification,  except  where  the                failure to so qualify would not have a material adverse effect on                the   condition,   financial  or  otherwise,   or  the  business,                operations or income of the Company. The Company has obtained all                material licenses, permits and other governmental  authorizations                currently  required  for the  conduct of its  business;  all such                licenses,  permits and  governmental  authorizations  are in full                force and  effect,  and the Company is in all  material  respects                complying with all laws, rules, regulations and orders applicable                to the operation of its business.

          (k)  The Bank is a member  of the  Federal  Home  Loan  Bank of Dallas                (FHLB- Dallas). 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.

          (l)  The Company,  the MHC and the Bank have good and marketable title                to all real property and good title to all other assets  material                to the business of the Company,  the MHC 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,                the MHC and the Bank, taken as a whole; and all of the leases and                subleases  material to the business of the  Company,  the MHC and                the Bank, taken as a whole,  under which the Company,  the MHC or                the  Bank  hold  properties,  including  those  described  in the                Registration  Statement  and  Prospectus,  are in full  force and                effect.

          (m)  The  Company  and the Bank  have  received  an  opinion  of their                special  counsel,  Luse  Lehman  Gorman  Pomerenk  & Schick  with                respect to the federal  income tax  consequences  of the Offering                and the opinions of

                                        8

               ____________________  with  respect  to  New  Mexico  income  tax                consequences  of  the  Offering;  all  material  aspects  of  the                opinions   of  Luse   Lehman   Gorman   Pomerenk   &  Schick  and                _____________________    are   accurately   summarized   in   the                Registration  Statement and will be accurately  summarized in the                Prospectus; and further represent and warrant that the facts upon                which  such  opinions  are  based  are  truthful,   accurate  and                complete.

          (n)  The Company, the MHC and the Bank have all such power, authority,                authorizations,  approvals and orders as may be required to enter                into this  Agreement,  to carry out the provisions and conditions                hereof  and to  issue  and  sell  the  Shares  to be  sold by the                Company,  as provided  herein and as described in the  Prospectus                except approval or confirmation by the OTS of the final appraisal                of the Company. The consummation of the Offering,  the execution,                delivery and  performance of this Agreement and the  consummation                of the  transactions  herein  contemplated  have  been  duly  and                validly authorized by all necessary  corporate action on the part





               of the Company,  the MHC and the Bank and this Agreement has been                validly  executed and  delivered by the Company,  the MHC and the                Bank  and  is the  valid,  legal  and  binding  agreement  of the                Company,  the MHC and the Bank enforceable in accordance with its                terms  (except as the  enforceability  thereof  may be limited by                bankruptcy,  insolvency,  moratorium,  reorganization  or similar                laws  relating to or  affecting  the  enforcement  of  creditors'                rights  generally  or the rights of creditors of savings and loan                holding companies, the accounts of whose subsidiaries are insured                by the FDIC or by general equity principles regardless of whether                such enforceability is considered in a proceeding in equity or at                law,  and except to the  extent if any,  that the  provisions  of                Sections 8 and 9 hereof may be  unenforceable  as against  public                policy).

          (o)  The  Company,  the MHC and the Bank are not in  violation  of any                directive received from the OTS, the FDIC, or any other agency to                make any  material  change  in the  method  of  conducting  their                businesses  so as to comply  in all  material  respects  with all                applicable   statutes   and   regulations   (including,   without                limitation,  regulations, decisions, directives and orders of the                OTS,  and  the  FDIC)  and,  except  as may be set  forth  in the                Registration  Statement and the  Prospectus,  there is no suit or                proceeding or charge or action before or by any court, regulatory                authority  or  governmental  agency or body,  pending  or, to the                knowledge of the Company, the MHC or the Bank, threatened,  which                might   materially  and  adversely   affect  the  Offering,   the                performance  of  this  Agreement  or  the   consummation  of  the                transactions  contemplated  in the Plan and as  described  in the                Registration  Statement and the  Prospectus or which might result                in any material  adverse  change in the  condition  (financial or                otherwise), earnings, capital or properties of the

                                        9

               Company,  the MHC and the Bank, or which would materially  affect                their properties and assets.

          (p)  The financial  statements,  schedules  and notes related  thereto                which  are  included  in  the   Prospectus   fairly  present  the                consolidated  balance  sheet,  income  statement,   statement  of                changes in equity  and cash  flows of the Bank at the  respective                dates  indicated and for the respective  periods  covered thereby                and  comply  as  to  form  in  all  material  respects  with  the                applicable  accounting  requirements  of  Title 12 of the Code of                Federal Regulations and generally accepted accounting  principles                (including  those  requiring the  recording of certain  assets at                their current market value). Such financial statements, schedules                and notes related  thereto have been prepared in accordance  with                generally accepted  accounting  principles  consistently  applied                through  the periods  involved,  present  fairly in all  material                respects the  information  required to be stated  therein and are                consistent  with the most recent  financial  statements and other                reports  filed by the Bank  with the OTS.  The  other  financial,                statistical and pro forma  information and related notes included                in the Prospectus present fairly the information shown therein on                a basis  consistent  with the  audited  and  unaudited  financial                statements of the Bank included in the Prospectus,  and as to the                pro forma  adjustments,  the adjustments  described  therein have                been properly applied on the basis described therein.

          (q)  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,  the MHC or the Bank  considered                as one enterprise,  or in the earnings,  capital or properties of                the Company,  the MHC or the Bank,  whether or not arising in the                ordinary course of business; (ii) there has not been any material                increase in the  long-term  debt of the Bank or in the  principal                amount of the Bank's  assets which are  classified by the Bank as                substandard,  doubtful  or loss or in  loans  past due 90 days or                more or real estate acquired by  foreclosure,  by deed-in-lieu of                foreclosure  or deemed  in-substance  foreclosure or any material                decrease in retained earnings or total assets of the Bank nor has                the  Company,  the MHC 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, the MHC or the                Bank; (iv) there has not been any material  adverse change in the                aggregate   dollar   amount  of  the  Bank's   deposits   or  its                consolidated  net worth;  (v) there has been no material  adverse                change in the  Company's,  the MHC's or the  Bank's  relationship                with  its  insurance  carriers,  including,  without  limitation,                cancellation or other termination of the Company's, the

                                       10





               MHC's or the Bank's  fidelity bond or any other type of insurance                coverage;  (vi) except as disclosed in the  Prospectus  there has                been no material change in management of the Company,  the MHC or                the Bank, neither of which has any material undisclosed liability                of any kind, contingent or otherwise;  (vii) the Company, the MHC                or the Bank has not 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) the Company, the MHC or the Bank is                not in default in the  payment of  principal  or  interest on any                outstanding   debt   obligations;    (ix)   the   capitalization,                liabilities,  assets, properties and business of the Company, the                MHC  and  the  Bank  conform  in  all  material  respects  to the                descriptions thereof contained in the Prospectus; and (x) neither                the  Company,  the MHC nor the Bank has any  material  contingent                liabilities, except as set forth in the Prospectus. All documents                made  available  to or  delivered  or to be made  available to or                delivered  by  the  Bank,   the  MHC  or  the  Company  or  their                representatives  in connection  with the issuance and sale of the                Shares,  including  records of account  holders,  depositors  and                other  members of the Bank,  or in  connection  with the  Agent's                exercise of due diligence,  except for those documents which were                prepared by parties other than the Bank,  the MHC, the Company or                their representatives, to the best knowledge of the Bank, the MHC                and the Company,  were on the dates on which they were delivered,                or will be on the dates on which they are to be delivered,  true,                complete and correct in all material respects.

          (r)  As of the date  hereof and as of the  Closing  Date,  neither the                Company, the MHC nor the Bank is (i) in violation of its articles                of incorporation or charter or bylaws,  respectively,  or (ii) in                default  in  the   performance  or  observance  of  any  material                obligation,  agreement,  covenant,  or condition contained in any                material  contract,  lease,  loan  agreement,  indenture or other                instrument  to  which  it is a party or by which it or any of its                property may be bound;  the  consummation  of the  Offering,  the                execution,  delivery and  performance  of this  Agreement and the                consummation of the transactions  herein  contemplated  have been                duly and validly authorized by all necessary  corporate action on                the part of the Company,  the MHC and the Bank and this Agreement                has been validly  executed and delivered by the Company,  the MHC                and the Bank and is a valid,  legal and binding  Agreement of the                Company,  the MHC and the Bank enforceable 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 federal                savings institutions,  (ii) general equitable  principles,  (iii)                laws relating to the safety and  soundness of insured  depository                institutions, and (iv) applicable

                                       11

               law or public policy with respect to the  indemnification  and/or                contribution  provisions  contained  herein,  and except  that no                representation  or  warranty  need be made  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).  The  consummation  of  the                transactions  herein  contemplated will not: (i) conflict with or                constitute  a breach  of,  or  default  under,  or  result in the                creation of any material lien,  charge or encumbrance upon any of                the assets of the  Company,  the MHC or the Bank  pursuant to the                articles  of  incorporation  of the  Company or the  charter  and                bylaws of the Bank and the MHC, or any material  contract,  lease                or other instrument to which the Company, the MHC or the Bank has                a beneficial interest, or any applicable law, rule, regulation or                order;  (ii)  violate  any  authorization,  approval,  judgement,                decree,  order,  statute,  rule or  regulation  applicable to the                Company,  the MHC or the Bank,  except for such violations  which                would  not  have a  material  adverse  effect  on  the  financial                condition and results of  operations of the Company,  the MHC 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, the MHC or the Bank.

          (s)  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,  the MHC 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,  the MHC                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,  the MHC and the Bank on a                consolidated basis; such agreements are in full force and effect;                and no other party to any such  agreements  has instituted or, to                the  best  knowledge  of the  Company,  the  MHC  and  the  Bank,                threatened any action or proceeding wherein the Company,  the MHC                or  the  Bank  would  or  might  be  alleged  to  be  in  default





               thereunder.

          (t)  Upon  consummation of the Offering,  the  authorized,  issued and                outstanding  equity  capital  of the  Company  will be within the                range   set   forth  in  the   Prospectus   under   the   caption                Capitalization,  and no Shares  have been or will be issued and                outstanding  prior to the Closing Date (other than Shares held by                the MHC);  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

                                       12

               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.  To                the best knowledge of the Company, the MHC and the Bank, upon the                issuance  of the  Shares,  good  title  to  the  Shares  will  be                transferred  from the Company to the purchasers  thereof  against                payment  therefor,  subject  to such  claims  as may be  asserted                against the purchasers thereof by third-party claimants.

          (u)  No approval of any  regulatory  or  supervisory  or other  public                authority  is  required  in  connection  with the  execution  and                delivery of this Agreement or the issuance of the Shares,  except                for the  approval of the  Commission,  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 NASD.

          (v)  The Accounting & Consulting Group L.L.P.  which has certified the                consolidated  audited  financial  statements and schedules of the                Bank included in the Prospectus, has advised the Company, the MHC                and the Bank in  writing  that  they  are,  with  respect  to the                Company,  the MHC and the Bank,  independent  public  accountants                within  the  meaning  of the Code of  Professional  Ethics of the                American  Institute of Certified Public  Accountants and Title 12                of the Code of Federal Regulations and Section 571.2(c)(3).

          (w)  RP  Financial  LC, which has  prepared  the  Valuation  Appraisal                Report as of December ___, 1999 (as amended or  supplemented,  if                so amended or supplemented)  (the  Appraisal),  has advised the                Company in writing that it is independent of the Company, the MHC                and the Bank within the meaning of the MHC Regulations.

          (x)  The Company,  the MHC and the Bank have timely filed all required                federal,  state and local tax returns;  the Company,  the MHC 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.

          (y)  The  Bank is in  compliance  in all  material  respects  with the                applicable financial record-keeping and reporting requirements of                the Currency and

                                       13

               Foreign  Transactions  Reporting Act of 1970, as amended, and the                regulations and rules thereunder.

          (z)  To the  knowledge of the Company,  the MHC and the Bank,  neither                the Company,  the MHC, the Bank nor employees of the Company, the                MHC or the Bank have made any  payment  of funds of the MHC,  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.

          (aa) Prior to the Offering,  neither the Company, the MHC nor the Bank                has: (i) issued any securities  within the last 18 months (except                for notes to  evidence  other bank loans and  reverse  repurchase                agreements  or  other  liabilities  in  the  ordinary  course  of                business or as  described in the  Prospectus,  and except for any                shares  issued  in  connection  with  the  incorporation  of  the                Company);  (ii) had any  material  dealings  within the 12 months                prior to the date  hereof  with any  member of the  NASD,  or any                person  related to or  associated  with such  member,  other than                discussions  and meetings  relating to the proposed  Offering and                routine  purchases  and sales of  United  States  government  and





               agency  securities;  (iii) entered into a financial or management                consulting agreement except as contemplated  hereunder;  and (iv)                engaged any intermediary  between the Agent and the Company,  the                MHC and the Bank in  connection  with the offering of the Shares,                and no  person  is  being  compensated  in any  manner  for  such                service.  Appropriate arrangements have been made for placing the                funds  received  from  subscriptions  for  Shares  in  a  special                interest-bearing  account with the Bank until all Shares are sold                and paid for, with  provision for refund to the purchasers in the                event that the Offering is not completed  for whatever  reason or                for delivery to the Company if all Shares are sold.

          (bb) The Company,  the MHC and the Bank have not relied upon the Agent                or its legal  counsel or other  advisors  for any  legal,  tax or                accounting advice in connection with the Offering.

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

          (dd) Any certificates signed by an officer of the Company,  the MHC 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,  the MHC or the Bank to the Agent as to the matters                covered  thereby  with the same effect as if such  representation                and warranty were set forth herein.

                                       14

         Section 5. Representations and Warranties of the Agent.

         The Agent represents and warrants to the Company,  the MHC and the Bank that:

               (i) it is a corporation and is validly  existing in good standing           under the laws of the State of Ohio and  licensed to conduct  business           in the  State of Ohio  and it has the  full  power  and  authority  to           provide the  services  to be  furnished  to the Bank,  the MHC and the           Company hereunder.

               (ii)  The  execution  and  delivery  of  this  Agreement  and the           consummation of the  transactions  contemplated  hereby have been duly           and  validly  authorized  by all  necessary  action on the part of the           Agent,  and this  Agreement  has been duly and  validly  executed  and           delivered by the Agent and is a legal,  valid and binding agreement of           the Agent, enforceable in accordance with its terms.

               (iii)   Each  of  the  Agent  and  its   employees,   agents  and           representatives  who shall perform any of the services hereunder shall           be duly  authorized  and  empowered,  and  shall  have  all  licenses,           approvals and permits necessary to perform such services.

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

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

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

         Section  5.l  Covenants  of the  Company,  the MHC and  the  Bank.  The Company,  the MHC and the Bank hereby  jointly and  severally  covenant 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

                                       15

               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)  The MHC and Bank will not, at any time after the MHC  Application                is approved by the OTS,  file any amendment or supplement to such





               MHC  Application  without  providing the Agent and its counsel an                opportunity  to review such  amendment or  supplement or file any                amendment or  supplement  to which  amendment or  supplement  the                Agent or its counsel shall reasonably object.

          (c)  The Company,  the MHC 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 MHC  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 MHC                Application,  as amended has been approved by the OTS;  (iii) any                comments from the Commission,  the OTS or any other  governmental                entity  with  respect  to  the   Offering  or  the   transactions                contemplated  by  this  Agreement;  (iv)  of the  request  by the                Commission,  the OTS or any  other  governmental  entity  for any                amendment or supplement to the  Registration  Statement,  the MHC                Application or for additional information; (v) of the issuance by                the Commission,  the OTS or any other governmental  entity of any                order or other action  suspending  the Offering or the use of the                Registration  Statement or the  Prospectus or any other filing of                the Company,  the MHC or the Bank under the MHC  Regulations,  or                other applicable law, or the threat of any such action;  (vi) the                issuance by the Commission,  the OTS or any authority of any stop                order suspending the effectiveness of the Registration  Statement                or of the  initiation  or threat of  initiation  or threat of any                proceedings  for that purpose;  or (vii) of the occurrence of any                event mentioned in paragraph (g) below. The Company,  the MHC and                the Bank will make every  reasonable  effort  (i) to prevent  the                issuance by the Commission, the OTS or any state authority of any                such  order and,  if any such order  shall at any time be issued,                (ii) to obtain the lifting thereof at the earliest possible time.

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

                                       16

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

          (f)  The  Company,  the MHC and the Bank will  comply with any and all                material  terms,  conditions,  requirements  and provisions  with                respect  to  the  Offering,  and  the  transactions  contemplated                thereby,   imposed  by  the  Commission,   the  OTS  or  the  MHC                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,  the MHC and the Bank will comply, at their own expense,                with  all  material   requirements   imposed  upon  them  by  the                Commission, the OTS or the MHC 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 Stock during such period in accordance with the provisions                hereof and the Prospectus.

          (g)  If, at any time during the period when the Prospectus relating to                the Shares is required to be delivered,  any event relating to or                affecting  the  Company,  the MHC or the Bank shall  occur,  as a                result of which it is necessary or appropriate, in the opinion of                counsel  for  the  Company,  the  MHC  and  the  Bank  or in  the                reasonable opinion of the Agent's counsel, to amend or supplement                the  Registration  Statement or  Prospectus  in order to make the                Registration  Statement or Prospectus  not misleading in light of                the  circumstances   existing  at  the  time  the  Prospectus  is                delivered to a purchaser,  the Company, the MHC and the Bank will                immediately  so inform the Agent and prepare  and file,  at their                own expense,  with the  Commission and the OTS and furnish to the                Agent a reasonable number of copies of an amendment or amendments                of, or a supplement or supplements to, the Registration Statement                or Prospectus (in form and substance  reasonably  satisfactory to                the Agent and its  counsel  after a  reasonable  time for review)                which will amend or  supplement  the  Registration  Statement  or





               Prospectus so that as amended

                                       17

               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,                the MHC and the Bank each will  timely  furnish to the Agent such                information  with respect to itself as the Agent may from time to                time reasonably request.

          (h)  The  Company,  the MHC and  the  Bank  will  take  all  necessary                actions,  in cooperating  with the Agent, and furnish to whomever                the Agent may  direct,  such  information  as may be  required to                qualify  or  register  the Shares  for  offering  and sale by the                Company or to exempt such Shares from registration,  or to exempt                the Company as a  broker-dealer  and its officers,  directors and                employees  as  broker-dealers  or  agents  under  the  applicable                securities  or blue sky laws of such  jurisdictions  in which the                Shares are required  under the MHC  Regulations  to be sold or as                the Agent and the  Company,  the MHC and the Bank may  reasonably                agree upon;  provided,  however,  that the  Company  shall not be                obligated to file any general  consent to service of process,  to                qualify to do business in any  jurisdiction in which it is not so                qualified,  or to register its  directors or officers as brokers,                dealers,  salesmen  or  agents  in  any  jurisdiction.   In  each                jurisdiction where any of the Shares shall have been qualified or                registered as above provided, the Company will make and file such                statements  and  reports in each  fiscal  period as are or may be                required by the laws of such jurisdiction.

          (i)  The  Company,  the MHC 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 Common Stock other than the Shares or other than in                connection  with  any  plan  or  arrangement   described  in  the                Prospectus, including existing stock benefit plans.

          (j)  The Company  shall  register its Common Stock under Section 12(g)                of the 1934 Act on or prior to the Closing  Date  pursuant to the                Plan and shall request that such  registration be effective prior                to or upon completion of the Offering. The Company shall maintain                the  effectiveness  of such  registration for not less than three                years or such shorter period as may be required by the OTS.

          (k)  During the period  during  which the  Company's  Common  Stock is                registered  under the 1934 Act or for  three  (3) years  from the                date  hereof,  whichever  period is  greater,  the  Company  will                furnish to its shareholders as soon as practicable  after the end                of each fiscal year an annual report of the Company  (including a                consolidated balance sheet and statements of consolidated

                                       18

               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).

          (l)  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  stockholders  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,  MHC or the Bank as                the Agent may  reasonably  request;  and (iii) from time to time,                such other  nonconfidential  information  concerning the Company,                the MHC or the Bank as the Agent may reasonably request.

          (m)  The Company,  the MHC 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.

          (n)  Other than as permitted  by the MHC  Regulations,  the HOLA,  the                1933 Act, the 1933 Act Regulations,  and the laws of any state in                which the Shares are  registered  or qualified for sale or exempt                from registration, neither the Company, the MHC nor the Bank will





               distribute any  prospectus,  offering  circular or other offering                material in connection with the offer and sale of the Shares.

          (o)  The Company will use its best efforts to (i) encourage and assist                a market maker to establish  and maintain a market for the Shares                and (ii) list and maintain  quotation of the Shares on a national                or regional  securities  exchange or on the Nasdaq  Stock  Market                (Nasdaq) effective on or prior to the Closing Date.

          (p)  The Bank will maintain  appropriate  arrangements  for depositing                all funds  received  from persons  mailing  subscriptions  for or                orders to purchase Shares in the Offering on an  interest-bearing                basis at the rate described in the  Prospectus  until the Closing                Date and satisfaction of all conditions  precedent to the release                of the Bank's obligation to refund payments received from

                                       19

               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.

          (q)  The  Company,  the MHC and the Bank will take  such  actions  and                furnish such information as are reasonably requested by the Agent                in order  for the  Agent to  ensure  compliance  with the  NASD's                Interpretation Relating to Free Riding and Withholding.

          (r)  Neither  the  Company,  the MHC nor the Bank will  amend the Plan                without notifying the Agent prior thereto.

          (s)  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.

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

          (u)  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,                the MHC nor the Bank will  have:  (i) issued  any  securities  or                incurred any liability or obligation,  direct or contingent,  for                borrowed  money,  except  borrowings  from  the  same or  similar                sources indicated in the Prospectus in the ordinary course of its                business,  or (ii) entered into any transaction which is material                in light of the  business and  properties  of the Company and the                Bank, taken as a whole.

          (v)  The facts and  representations  provided  to Luse  Lehman  Gorman                Pomerenk & Schick by the Bank,  the MHC and the  Company and upon                which Luse

                                       20

               Lehman  Gorman  Pomerenk  & Schick  will base its  opinion  under                Section 7(c)(1) are and will be truthful, accurate and complete.

         Section  6.  Payment  of  Expenses.  Whether  or not  the  Offering  is completed or the sale of the Shares by the Company is consummated,  the Company, the MHC and the Bank jointly and  severally  agree to pay or reimburse the Agent for the Company, the MHC and the Bank have agreed to reimburse the Agent for its out-of-pocket  expenses,  and its legal fees (as  specified in Section 2) and to indemnify the Agent against  certain claims or  liabilities,  including  certain liabilities  under the Securities Act, and will contribute to payments the Agent may be required to make in connection with any such claims or  liabilities;  and the fees set forth under Section 2. In the event the Company is unable to sell a minimum of 708,050  Shares,  the  Company,  the MHC and the Bank shall  promptly reimburse the Agent in accordance with Section 2 hereof.

         Section 7.  Conditions to the Agent's  Obligations.  The obligations of the Agent  hereunder,  as to the Shares to be delivered at the Closing Date, are





subject, to the extent not waived in writing by the Agent, to the condition that all representations  and warranties of the Company,  the MHC 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, the MHC and the Bank shall have performed all of their obligations  hereunder to be performed on or before such dates, and to the following further conditions:

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

          (b)  The Registration  Statement shall have been declared effective by                the  Commission and the MHC  Application  and MHC Notice shall be                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,  the MHC's                or the Bank's knowledge,  threatened by the Commission,  the OTS,                the FDIC, or any state authority.

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

                                       21

               (1) The  favorable  opinion,  dated  as of the  Closing  Date and                addressed to the Agent and for its benefit, of Luse Lehman Gorman                Pomerenk & Schick,  special counsel for the Company,  the MHC 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 United States.

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

                    (iii) The Bank has been organized and is a validly  existing                federally chartered savings and loan association in capital stock                form of organization,  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 Offering  will be duly  authorized  and,  upon                payment  therefor,   will  be  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-Dallas.  The  deposit                accounts  of the Bank are  insured by the FDIC up to the  maximum                amount allowed under law and no proceedings  for the  termination                or revocation of such insurance are pending or, to such counsel's                Actual Knowledge, threatened; 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 MHC has been duly organized and is validly  existing                as a federally chartered mutual holding company,  duly authorized                to conduct its  business and own its  properties  as described in                the Registration Statement and Prospectus.

                    (vi) Upon  consummation  of the Offering,  immediately  upon                completion  thereof  subject to  compliance  with all  conditions                imposed by the OTS under the terms of the OTS' approval order, in                an amount as described in the Prospectus, the authorized,  issued                and  outstanding  capital stock of the Company will be within the                range   set   forth  in  the   Prospectus   under   the   caption                Capitalization,  and no shares of Common Stock have been issued                prior  to the  Closing  Date;  at the time of the  Offering,  the                Shares  subscribed  for pursuant to the  Offering  will have been                duly and validly  authorized  for  issuance,  and when issued and                delivered by the Company  pursuant to the Plan against payment of                the consideration calculated as set forth in the Plan and

                                       22

               Prospectus,  will be duly and  validly  issued and fully paid and                non-assessable;  the  issuance  of the  Shares is not  subject to                preemptive  rights  and the terms and  provisions  of the  Shares                conform  in all  material  respects  to the  description  thereof





               contained in the Prospectus.  To such counsel's Actual Knowledge,                upon the issuance of the Shares, good title to the Shares will be                transferred  by 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.

                    (vii) The execution  and delivery of this  Agreement and the                consummation of the transactions  contemplated  hereby, have been                duly and validly  authorized by all necessary  action on the part                of the  Company,  the MHC and the Bank;  and this  Agreement is a                valid and  binding  obligation  of the  Company,  the MHC and the                Bank,  enforceable  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 savings institutions, the                deposits  of which  are  insured  by the FDIC and  their  holding                companies, (ii) general equitable principles, (iii) laws relating                to the safety and  soundness of insured  depository  institutions                and their holding  companies,  and (iv)  applicable law or public                policy with respect to the  indemnification  and/or  contribution                provisions  contained herein,  including  without  limitation the                provisions of Sections 23A and 23B of the Federal Reserve Act and                except  that no  opinion  need be  expressed  as to the effect or                availability   of  equitable   remedies  or   injunctive   relief                (regardless  of whether such  enforceability  is  considered in a                proceeding in equity or at law).

                    (viii) The MHC  Application has been approved by the OTS and                the  Prospectus  has been  authorized  for use by the OTS, and no                action has been taken,  and to such  counsel's  Actual  Knowledge                none is pending or threatened,  to revoke any such  authorization                or approval.

                    (ix) The Plan has been duly adopted by the required  vote of                the  directors  of the Company,  the MHC and the Bank,  and based                upon the certificate of the inspector of election, by the members                of the Bank.

                    (x) Subject to the  satisfaction  of the  conditions  to the                OTS' approval of the Offering, no further approval, registration,                authorization,  consent or other order of any federal  regulatory                agency is required in connection  with the execution and delivery                of  this   Agreement,   the   issuance  of  the  Shares  and  the                consummation of the Offering, except as may be required under the                securities or blue sky laws of various jurisdictions (as to which                no opinion need be

                                       23

               rendered)  and  except  as may be  required  under  the rules and                regulations  of the NASD  and/or the NYSE (as to which no opinion                need  be  rendered).  To such  counsel's  Actual  Knowledge,  the                Offering  has  been  consummated  in  all  material  respects  in                accordance  with  MHC  Regulations,  except  that no  opinion  is                rendered  with  respect  to (a)  the  Registration  Statement  or                Prospectus,  which are covered by other  clauses of this opinion,                (b) the satisfaction of the  post-Offering  conditions in the OTS                Regulations or in the OTS approvals of the MHC  Application,  (c)                the securities or blue sky laws of various  jurisdictions,  and                (d) the rules and regulations of the NASD.

                    (xi) The Registration  Statement is effective under the 1933                Act,  and no stop order  suspending  the  effectiveness  has been                issued under the 1933 Act or proceedings  therefor  initiated or,                to such counsel's Actual Knowledge, threatened by the Commission.

                    (xii)  At  the  time  the  MHC  Application,  including  the                Prospectus  contained  therein,  was approved by the OTS, the MHC                Application, including the Prospectus contained therein, complied                as to form in all material  respects with the requirements of the                MHC  Regulations,  federal  law  and  all  applicable  rules  and                regulations  promulgated  thereunder  (other  than the  financial                statements,  the notes  thereto,  and other  tabular,  financial,                statistical and appraisal data included  therein,  as to which no                opinion need be rendered).

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





                    (xiv) The terms and  provisions of the Shares of the Company                conform,  in all material  respects,  to the description  thereof                contained in the Registration  Statement and Prospectus,  and the                form of  certificate  used to  evidence  the Shares is in due and                proper form.

                    (xv) There are no legal or governmental  proceedings pending                or  threatened   which  are  required  to  be  disclosed  in  the                Registration Statement and Prospectus, other than those disclosed                therein, and to such counsel's

                                       24

               Actual Knowledge,  all pending legal and governmental proceedings                to which the Company,  the MHC or the Bank is a party or of which                any of their property is the subject,  which are not described in                the Registration Statement and the Prospectus, including ordinary                routine litigation incidental to the Company's,  the MHC's or the                Bank's business, are, considered in the aggregate, not material.

                    (xvi)  To such  counsel's  Actual  Knowledge,  there  are no                material  contracts,  indentures,   mortgages,  loan  agreements,                notes,  leases or other  instruments  required to be described or                referred to in the MHC Application, the Registration Statement or                the Prospectus or required to be filed as exhibits  thereto other                than those  described or referred to therein or filed as exhibits                thereto in the MHC Application, the Registration Statement or the                Prospectus.   The  description  in  the  MHC   Application,   the                Registration  Statement and the  Prospectus of such documents and                exhibits is accurate in all material respects and fairly presents                the information required to be shown.

                    (xvii) To such counsel's Actual Knowledge,  the Company, the                MHC and the Bank have  conducted  the  Offering,  in all material                respects,  in accordance with all applicable  requirements of the                Plan and  applicable  federal  law,  except  that no  opinion  is                rendered   with   respect  to  (a)  the  MHC   Application,   the                Registration Statement or Prospectus,  which are covered by other                clauses   of  this   opinion,   (b)  the   satisfaction   of  the                post-Offering  conditions  in the OTS  Regulations  or in the OTS                approval of the MHC Application, (c) the securities or blue sky                laws of various jurisdictions,  and (d) the rules and regulations                of the NASD. The Plan complies in all material  respects with all                applicable federal laws, rules, regulations, decisions and orders                including, but not limited to, the MHC Regulations;  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, to such                counsel's   Actual   Knowledge,   threatened   by  the  OTS,  the                Commission,  the FDIC,  or any state  authority and no person has                sought  to  obtain  regulatory  or  judicial  review of the final                action of the OTS, approving the Plan, the MHC Application or the                Prospectus.

                    (xviii) To such counsel's Actual Knowledge, the Company, the                MHC and the Bank have obtained all material licenses, permits and                other  governmental  authorizations  currently  required  for the                conduct of their  businesses and all such  licenses,  permits and                other  governmental  authorizations are in full force and effect,                and  the  Company,  the  MHC and  the  Bank  are in all  material                respects  complying  therewith,  except where the failure to have                such licenses,  permits and other governmental  authorizations or                the  failure  to be in  compliance  therewith  would  not  have a                material adverse effect on the

                                       25

               business  or  operations  of the Bank,  the MHC and the  Company,                taken as a whole.

                    (xix)  To  such  counsel's  Actual  Knowledge,  neither  the                Company,  the MHC nor the Bank is in violation of its articles of                incorporation   and  bylaws  or  its  Charter   and  bylaws,   as                appropriate or, to such counsel's Actual Knowledge, in default or                violation  of any  obligation,  agreement,  covenant or condition                contained in any contract,  indenture,  mortgage, loan agreement,                note,  lease  or  other  instrument  to which it is a party or by                which it or its property may be bound,  except for such  defaults                or violations  which would not have a material  adverse impact on                the financial  condition or results of operations of the Company,                the MHC and the Bank on a consolidated  basis;  to such counsel's                Actual  Knowledge,  the execution and delivery of this Agreement,                the  occurrence  of the  obligations  herein  set  forth  and the                consummation  of the  transactions  contemplated  herein will not                conflict  with or  constitute a breach of, or default  under,  or                result in the  creation  or  imposition  of any  lien,  charge or                encumbrance  upon any property or assets of the Company,  the MHC                or  the  Bank  pursuant  to  any  material  contract,  indenture,





               mortgage,  loan  agreement,  note,  lease or other  instrument to                which the Company, the MHC 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, the MHC or the Bank are subject; and, such action                will  not  result  in  any  violation  of the  provisions  of the                certificate  of  incorporation  or bylaws of the  Company  or the                Charter  or bylaws  of the MHC or the Bank or, to such  counsel's                Actual  Knowledge,  result  in any  violation  of any  applicable                federal law, act, regulation (except that no opinion with respect                to the securities and blue sky laws of various  jurisdictions  or                the rules or  regulations  of the NASD need be rendered) or order                or court order, writ, injunction or decree.

                    (xx) The  Company's  articles  of  incorporation  and bylaws                comply in all material  respects with the regulations of the OTS.                The Bank's and MHC's  charter and bylaws  comply in all  material                respects with the rules and regulations of the OTS.

                    (xxi)  To  such  counsel's  Actual  Knowledge,  neither  the                Company,  the MHC 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.

                    (xxii) The information in the Prospectus  under the captions                Regulation, The Stock Offering,  Restrictions on Acquisition                of  the  Alamogordo   Financial  and   Alamogordo   Federal  and                Description  of Capital Stock of the  Alamogordo  Financial, to                the extent that such information constitutes

                                       26

               matters  of  law,  summaries  of  legal  matters,   documents  or                proceedings,  or legal  conclusions,  has been  reviewed  by such                counsel and is correct in all material  respects.  The discussion                of  statutes  or  regulations  described  or  referred  to in the                Prospectus   are  accurate   summaries  and  fairly  present  the                information   required  to  be  shown.  The  information  in  the                Prospectus relating to the tax consequences of the stock offering                has been  reviewed  by such  counsel  and  fairly  describes  the                opinions  rendered  by Luse Lehman  Gorman  Pomerenk & Schick and                _____________________  to the Company,  the MHC and the Bank with                respect to such matters.

                    (xxiii) The  Company  and the MHC have been duly  registered                and are in good  standing as savings and loan  holding  companies                under the HOLA.

                    (xxiv) In addition, such counsel shall state that during the                preparation of the MHC Application,  the  Registration  Statement                and the Prospectus, they participated in conferences with certain                officers of, the independent public and internal accountants for,                and other  representatives of the Company,  the MHC and the Bank,                at which  conferences  the contents of the MHC  Application,  the                Registration  Statement and the  Prospectus  and related  matters                were  discussed  and,  while such counsel have not  confirmed the                accuracy or completeness of or otherwise verified the information                contained in the MHC Application,  the Registration  Statement or                the  Prospectus,  and do not assume any  responsibility  for such                information,   based  upon  such  conferences  and  a  review  of                documents deemed relevant for the purpose of rendering their view                (relying as to materiality as to factual  matters on certificates                of officers and other factual representations by the Company, the                MHC and the Bank), nothing has come to their attention that would                lead them to believe that the MHC  Application,  the Registration                Statement, the Prospectus, or any amendment or supplement thereto                (other than the  financial  statements,  the notes  thereto,  and                other tabular, financial, statistical and appraisal data included                therein as to which no view need be rendered) contained an untrue                statement of a material  fact or omitted to state a material fact                required to be stated therein or necessary to make the statements                therein,  in light of the  circumstances  under  which  they were                made, not misleading.

         In giving such opinion, such counsel may rely as to all matters of fact on  certificates  of officers or directors of the Company,  the MHC and the Bank and certificates of public officials. The opinion of Luse Lehman Gorman Pomerenk & Schick  shall be  governed  by the  Legal  Opinion  Accord  (Accord)  of the American  Bar  Association  Section of  Business  Law (1991).  The term  Actual Knowledge  as used herein  shall have the meaning set forth in the Accord.  For purposes of such opinion, no proceedings shall be deemed to be pending, no order or stop order shall be deemed to be issued,  and no action shall be deemed to be instituted unless, in each case, a director or executive officer of the Company, the MHC or the Bank shall have received a copy of such

                                       27

proceedings,  order,  stop order or action.  In  addition,  such  opinion may be limited to present  statutes,  regulations and judicial  interpretations  and to





facts as they  presently  exist;  in rendering  such opinion,  such counsel need assume no  obligation  to revise or  supplement  it should the  present  laws be changed by legislative or regulatory action, judicial decision or otherwise; and such counsel need express no view, opinion or belief with respect to whether any proposed  or  pending  legislation,  if  enacted,  or any  proposed  or  pending regulations or policy statements issued by any regulatory agency, whether or not promulgated  pursuant to any such legislation,  would affect the validity of the Offering or any aspect  thereof.  Such counsel may assume that any  agreement is the valid and binding obligation of any parties to such agreement other than the Company, the MHC or the Bank.

         The  favorable  opinion,  dated as of the Closing Date and addressed to the  Agent and for their  benefit,  of the  Bank's  local  counsel,  in form and substance to the effect that, to the best of such counsel's  knowledge,  (i) the Company,  the MHC and the Bank have good and marketable  title to all properties and assets which are  material to the  business of the Company,  the MHC and the Bank 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 in relation to the business of the Company,  the MHC and the Bank  considered  as one  enterprise;  (ii) all of the leases and  subleases  material to the business of the Company,  the MHC and the Bank under which the Company, the MHC and the Bank hold properties, as described in the Registration Statement and Prospectus,  are in full force and effect; and (iii) 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  condition, financial or otherwise, or the business, operations or income of the Bank.

          (d)  At the Closing Date,  the Agent shall have received the favorable                opinion,  dated as of the  Closing  Date,  of Silver,  Freedman &                Taff, L.L.P.,  the Agent's counsel,  with respect to such matters                as the Agent may reasonably  require.  Such opinion may rely upon                the opinions of counsel to the Company, the MHC and the Bank, and                as  to  matters  of  fact,  upon  certificates  of  officers  and                directors of the Company, the MHC and the Bank delivered pursuant                hereto or as such counsel shall reasonably request.

          (e)  At the Closing Date, the Agent shall receive a certificate of the                Chief  Executive  Officer  and  the  Principal  Financial  and/or                Accounting  Officer of the Company,  the MHC and the Bank in form                and substance  reasonably  satisfactory  to the Agent's  Counsel,                dated as of such Closing Date, to the effect that:  (i) they have                carefully  reviewed 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

                                       28

               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, the                MHC or the Bank,  and the  conditions set forth in this Section 7                have been satisfied; (iii) since the respective dates as of which                information  is  given  in the  Registration  Statement  and  the                Prospectus,  there  has been no  material  adverse  change in the                condition, financial or otherwise, or in the earnings, capital or                properties of the Company, the MHC or the Bank, independently, or                of  the  Company,  the  MHC  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,                MHC and the Bank have 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  Offering;  (vi)  no  stop  order                suspending the  effectiveness of the  Registration  Statement has                been initiated or, to the best knowledge of the Company,  the MHC                or the Bank, threatened by the Commission or any state authority;                (vii) no order  suspending 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, the                MHC or the Bank, threatened by the OTS, the Commission, the FDIC,                or any state  authority;  and (viii) to the best knowledge of the                Company,  the MHC or the  Bank,  no person  has  sought to obtain                review of the final action of the OTS approving the Plan.

          (f)  Prior to and at the Closing Date: (i) in the  reasonable  opinion                of the Agent, there shall have been no material adverse change in                the  condition,  financial  or  otherwise,  or in the earnings or                business of the Company, the MHC or the Bank independently, or of                the Company, the MHC and the Bank,  considered as one enterprise,





               from that as of the latest  dates as of which such  condition  is                set forth in the Prospectus other than  transactions  referred to                or contemplated  therein;  (ii) the Company,  the MHC or the Bank                shall not have  received  from the OTS or the FDIC any  direction                (oral or  written) to make any  material  change in the method of                conducting  their business with which it has not complied  (which                direction,  if any,  shall have been  disclosed  to the Agent) or                which   materially  and  adversely  would  affect  the  business,                operations or financial  condition or income of the Company,  the                MHC and the Bank taken as a whole; (iii) the Company, the MHC and                the Bank shall not 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

                                       29

               any   agreement  or  instrument   relating  to  any   outstanding                indebtedness;  (iv) no action,  suit or proceeding,  at law or in                equity or before or by any federal or state commission,  board or                other  administrative   agency,  shall  be  pending  or,  to  the                knowledge of the Company, the MHC or the Bank, threatened against                the  Company,  the MHC or the  Bank  or  affecting  any of  their                properties  wherein an  unfavorable  decision,  ruling or finding                would materially and adversely  affect the business,  operations,                financial  condition  or income of the  Company,  the MHC and the                Bank taken as a whole;  and (v) the Shares 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,                the MHC and the Bank.

          (g)  Concurrently  with the  execution  of this  Agreement,  the Agent                shall  receive a letter from The  Accounting &  Consulting  Group                L.L.P.  dated as of the date of the  Prospectus  and addressed to                the Agent:  (i) confirming that The Accounting & Consulting Group                L.L.P.  is a firm  of  independent  public  accounts  within  the                meaning  of Rule 101 of the Code of  Professional  Ethics  of the                American Institute of Certified Public Accountants and applicable                regulations  of the OTS and stating in effect that in its opinion                the  consolidated  financial  statements,  schedules  and related                notes of the Bank as of September  30, 1999 and 1998 and for each                of the three years in the period ended September 30, 1998, as are                included in the Prospectus and covered by their opinion  included                therein,  comply  as to form in all  material  respects  with the                applicable  accounting  requirements and related  published rules                and  regulations  of the OTS and the 1933 Act;  (ii)  stating  in                effect that, on the basis of certain agreed upon  procedures (but                not an audit  in  accordance  with  generally  accepted  auditing                standards)  consisting  of a  reading  of  the  latest  available                unaudited interim  consolidated  financial statements of the Bank                prepared by the Bank, a reading of the minutes of the meetings of                the Board of Directors and members of the Bank and  consultations                with  officers  of  the  Bank   responsible   for  financial  and                accounting matters,  nothing came to their attention which caused                them to believe  that:  (A) the  unaudited  financial  statements                included in the  Prospectus  are not in conformity  with the 1933                Act, applicable accounting  requirements of the OTS and generally                accepted  accounting  principles applied on a basis substantially                consistent with that of the audited financial statements included                in the Prospectus;  or (b) during the period from the date of the                latest unaudited  consolidated  financial  statements included in                the  Prospectus to a specified  date not more than three business                days  prior to the  date of the  Prospectus,  except  as has been                described   in  the   Prospectus,   there  was  any  increase  in                borrowings, other than normal deposit fluctuations,  by the Bank;                or (c) there was any decrease in the  consolidated  net assets of                the Bank at the date of such letter as compared with amounts

                                       30

               shown in the latest unaudited consolidated statement of condition                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  (f), they have compared with the                general  accounting records of the Bank, which are subject to the                internal  controls of the Bank, the  accounting  system and other                data prepared by the Bank, directly from such accounting records,                to the extent  specified  in such  letter,  such  amounts  and/or                percentages  set  forth  in  the  Prospectus  as  the  Agent  may                reasonably request; and they have reported on the results of such                comparisons.

          (h)  At the Closing  Date,  the Agent shall receive a letter dated the                Closing Date,  addressed to the Agent,  confirming the statements                made by The  Accounting & Consulting  Group L.L.P.  in the letter                delivered by it pursuant to subsection (f) of this Section 7, the                specified  date  referred to in clause (ii) of  subsection  (f)





               thereof to be a date specified in such letter, which shall not be                more than three business days prior to the Closing Date.

          (i)  At the Closing  Date,  the Agent  shall  receive a letter from RP                Financial LC, dated the date thereof and addressed to counsel for                the Agent (i)  confirming  that said firm is  independent  of the                Company,  the MHC and the Bank and is  experienced  and expert in                the area of corporate  appraisals  within the meaning of Title 12                of the Code of Federal Regulations, Section 563b.7(f)(1)(i), (ii)                stating  in  effect  that the  Appraisal  prepared  by such  firm                complies   in  all   material   respects   with  the   applicable                requirements of Title 12 of the Code of Federal Regulations,  and                (iii)  further  stating that their  opinion of the  aggregate pro                forma market value of the Company, the MHC and the Bank expressed                in  their  Appraisal  dated as of  December  __,  1999,  and most                recently updated, remains in effect.

          (j)  The Company,  the MHC and the Bank shall not have sustained since                the  date of the  latest  financial  statements  included  in the                Prospectus  any material loss or  interference  with its business                from fire,  explosion,  flood or other  calamity,  whether or not                covered  by  insurance,  or from any  labor  dispute  or court or                governmental action, order or decree, otherwise than as set forth                or contemplated in the Registration  Statement and Prospectus and                since the  respective  dates as of which  information is given in                the Registration  Statement and Prospectus,  there shall not have                been any change in the long- term debt of the Company, the MHC or                the Bank other than debt  incurred in relation to the purchase of                Shares  by the  Bank's  Eligible  Plans,  or any  change,  or any                development  involving a prospective  change, in or affecting the                general affairs,  management,  financial position,  stockholders'                equity or  results  of  operations  of the  Company  or the Bank,                otherwise than as set forth or

                                       31

               contemplated in the  Registration  Statement and Prospectus,  the                effect of  which,  in any such case  described  above,  is in the                Agent's reasonable judgment  sufficiently material and adverse as                to make it  impracticable  or  inadvisable  to  proceed  with the                Subscription  Offering or the delivery of the Shares on the terms                and in the manner contemplated in the Prospectus.

          (k)  At or prior to the Closing Date, the Agent shall  receive:  (i) a                copy of the letters from the OTS  approving  the MHC  Application                and  authorizing  the use of the  Prospectus;  (ii) a copy of the                order from the Commission  declaring the  Registration  Statement                effective;  (iii)  certificate  of  good  standing  from  the OTS                evidencing  the good standing of the Company;  (iv) a certificate                from the FDIC evidencing the Bank's insurance of accounts;  (v) a                certificate of the FHLB-Dallas  evidencing the Bank's  membership                thereof; (vi) a certificate from the OTS evidencing the Company's                and the MHC's  standing as  registered  savings and loan  holding                companies;  (vii) a copy of the Bank's federal stock charter; and                (viii) a copy of the Company's federal charter; and (viii) a copy                of the MHC's federal charter.

          (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  or in the                over-the-counter  market,  or quotations  halted generally on the                Nasdaq, or minimum or maximum prices for trading have been fixed,                or maximum ranges for prices for securities have been required by                either  of  such  exchanges  or  the  NASD  or by  order  of  the                Commission or any other  governmental  authority;  (ii) a general                moratorium on the operations of commercial banks, federal savings                institutions  or  a  general  moratorium  on  the  withdrawal  of                deposits from commercial  banks or federal  savings  institutions                declared  by federal  authorities;  (iii) the  engagement  by the                United  States  in   hostilities   which  have  resulted  in  the                declaration, on or after the date hereof, of a national emergency                or war; or (iv) a material decline in the price of equity or debt                securities if the effect of such a declaration or decline, in the                Agent's   reasonable   judgement,   makes  it   impracticable  or                inadvisable  to proceed  with the Offering or the delivery of the                shares  on  the  terms  and  in the  manner  contemplated  in the                Registration Statement and the Prospectus.

          (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,  the  MHC or  the  Bank  in                connection with the Offering and the sale

                                       32





               of the Shares as herein  contemplated  shall be  satisfactory  in                form and substance to the Agent and its counsel.

         Section 8. Indemnification.

          (a)  The Company,  the MHC and the Bank jointly and severally agree to                indemnify and hold harmless the Agent,  its  respective  officers                and directors, employees and agents, and each person, if any, who                controls  the Agent  within the meaning of Section 15 of the 1933                Act or Section  20(a) of the 1934 Act,  against any and all loss,                liability, claim, damage or expense whatsoever (including but not                limited to settlement expenses), joint or several, that the Agent                or any of them may  suffer  or to which  the  Agent  and any such                persons may become subject under all applicable  federal or state                laws or  otherwise,  and to promptly  reimburse the Agent and any                such  persons  upon  written  demand for any  expense  (including                reasonable  fees and  disbursements  of counsel)  incurred by the                Agent or any of them in connection with investigating,  preparing                or  defending  any  actions,   proceedings  or  claims   (whether                commenced  or  threatened)  to the extent  such  losses,  claims,                damages,  liabilities  or actions:  (i) arise out of or are based                upon any  untrue  statement  or  alleged  untrue  statement  of a                material  fact  contained in the  Registration  Statement (or any                amendment or supplement thereto), preliminary or final Prospectus                (or any amendment or supplement thereto), the MHC Application (or                any  amendment  or  supplement  thereto),  or any  instrument  or                document  executed by the  Company,  the MHC or the Bank or based                upon written information  supplied by the Company, the MHC or the                Bank filed in any state or  jurisdiction  to  register or qualify                any or all of the Shares or to claim an exemption  therefrom,  or                provided to any state or  jurisdiction to exempt the Company as a                broker-dealer  or  its  officers,   directors  and  employees  as                broker-dealers  or  agent,  under  the  securities  laws  thereof                (collectively,  the Blue  Sky  Application),  or any  document,                advertisement,    oral   statement   or   communication   (Sales                Information)  prepared,  made or executed by or on behalf of the                Company,  the MHC or the Bank with  their  consent  or based upon                written  or oral  information  furnished  by or on  behalf of the                Company,  the  MHC 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 MHC Application

                                       33

               (or  any   amendment  or  supplement   thereto),   any  Blue  Sky                Application   or  Sales   Information   or  other   documentation                distributed in connection with the Offering;  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 MHC                Application  (or any amendment or supplement  thereto),  any Blue                Sky Application or Sales Information made in reliance upon and in                conformity with information  furnished in writing to the Company,                the MHC or the Bank by the  Agent or its  counsel  regarding  the                Agent  provided,  that it is agreed and understood  that the only                information  furnished in writing to the Company,  the MHC or the                Bank  by the  Agent  regarding  the  Agent  is set  forth  in the                Prospectus;  and,  provided  further,  that such  indemnification                shall be to the extent  permitted by the  Commissioner,  the OTS,                the FDIC and the Board of Governors of the Federal  Reserve.  The                indemnification  provided for in this  paragraph (a) shall not be                applicable with respect to any loss, liability, claim, damage, or                expense  whatsoever if it is  determined  by final  judgment of a                court  having  jurisdiction  over  the  matter  that  such  loss,                liability, claim, damage or expense was primarily a result of the                Agent's willful misconduct or gross negligence.

          (b)  The Agent agrees to indemnify and hold harmless the Company,  the                MHC and the Bank,  their  directors and officers and each person,                if any, who controls the Company,  the MHC 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 MHC, 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 MHC  Application  (or any amendment or                supplement thereto),  the preliminary or final Prospectus (or any                amendment or supplement  thereto),  any Blue Sky  Application  or                Sales  Information,  (ii) are based upon the  omission or alleged                omission  to state in any of the  foregoing  documents a material                fact required to be stated therein

                                       34

               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 MHC Application (or                any amendment or supplement  thereto),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 8(b) shall exist only if and only                to the extent (i) 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 MHC                Application (or any amendment or supplement thereto), or any Blue                Sky  Application  or Sales  Information  in reliance  upon and in                conformity with information  furnished in writing to the Company,                the MHC or the Bank by the  Agent or its  counsel  regarding  the                Agent,  provided,  that it is agreed and understood that the only                information  furnished in writing to the Company,  the MHC or the                Bank  by the  Agent  regarding  the  Agent  is set  forth  in the                Prospectus.  The  indemnification  provided for in this Section 8                (b) shall not be applicable with respect to any loss,  liability,                claim, damage, or expense whatsoever if it is determined by final                judgment of a court having jurisdiction over the matter that such                loss, liability,  claim, damage or expense was primarily a result                of the Company's,  the MHC's or the Bank's willful  misconduct or                gross negligence.

          (c)  Each  indemnified  party shall give prompt written notice to each                indemnifying  party of any  action,  proceeding,  claim  (whether                commenced  or  threatened),  or  suit  instituted  against  it in                respect of which indemnity may be sought  hereunder,  but failure                to so notify an indemnifying  party shall not relieve it from any                liability  which  it may have on  account  of this  Section  8 or                otherwise.  An  indemnifying  party  may  participate  at its own                expense in the  defense of such  action.  In  addition,  if it so                elects within a reasonable time after receipt of such notice,  an                indemnifying party,  jointly with any other indemnifying  parties                receiving  such  notice,  may assume  defense of such action with                counsel chosen by it and approved by the indemnified parties that                are defendants in such action,  unless such  indemnified  parties                reasonably object to such assumption on the ground that there may                be legal defenses available to them that are different from or in                addition to those  available to such  indemnifying  party.  If an                indemnifying  party  assumes  the  defense  of such  action,  the                indemnifying  parties  shall  not be  liable  for  any  fees  and                expenses  of  counsel  for  the  indemnified   parties   incurred                thereafter in connection  with such action,  proceeding or claim,                other than reasonable costs

                                       35

               of investigation.  In no event shall the indemnifying  parties be                liable for the fees and expenses of more than one  separate  firm                of attorneys (and any special  counsel that said firm may retain)                for each  indemnified  party in  connection  with any one action,                proceeding  or claim or separate but similar or related  actions,                proceedings or claims in the same jurisdiction arising out of the                same general allegations or circumstances.

          (d)  The  agreements  contained  in this  Section  8 and in  Section 9                hereof and the representations and warranties of the Company, the                MHC  and the  Bank  set  forth  in this  Agreement  shall  remain                operative  and in full  force and effect  regardless  of: (i) any                investigation  made by or on behalf  of agent or their  officers,                directors or controlling persons,  agent or employees or by or on                behalf  of the  Company,  the MHC or the  Bank  or any  officers,                directors  or  controlling  persons,  agent or  employees  of the                Company,  the  MHC or the  Bank;  (ii)  delivery  of and  payment                hereunder  for the  Shares;  or  (iii)  any  termination  of this





               Agreement.

         Section 9.  Contribution.  In order to provide  for just and  equitable contribution  in  circumstances  in which the  indemnification  provided  for in Section 8 is due in  accordance  with its terms but is for any reason  held by a court to be unavailable  from the Company,  the MHC, the Bank or the Agent,  the Company,  the MHC,  the Bank and the Agent  shall  contribute  to the  aggregate losses, claims, damages and liabilities (including any investigation,  legal and other  expenses  incurred in connection  with, and any amount paid in settlement of, any action,  suit or proceeding of any claims asserted,  but after deducting any  contribution  received by the Company,  the MHC, the Bank or the Agent from persons  other  than  the  other  party  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,  the MHC and the Bank shall be responsible for the balance. If, however,  the allocation provided above is not permitted by applicable law or if the indemnified  party failed to give the notice required under Section 8 above, 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, the MHC 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,  the MHC 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, the MHC and/or the Bank on the one hand or the Agent on the other and the parties' relative intent, good faith,  knowledge,  access to  information  and  opportunity  to correct or prevent such statement or omission. The Company, the MHC, the Bank and the Agent agree that it would not be just and equitable if  contribution  pursuant to this Section 9 were determined by pro-rata allocation or by any other

                                       36

method  of   allocation   which  does  not  take  into  account  the   equitable considerations  referred to above in this  Section 9. The amount paid or payable by  an  indemnified  party  as a  result  of  the  losses,  claims,  damages  or liabilities (or actions,  proceedings or claims in respect thereof)  referred to above in this  Section 9 shall be deemed to include any legal or other  expenses reasonably  incurred by such indemnified party in connection with  investigating or defending any such action,  proceeding or claim. It is expressly  agreed that the Agent shall not be liable for any loss, liability,  claim, damage or expense or be required  to  contribute  any amount  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 MHC and the Bank under this Section 9 and under Section 8 shall be in addition to any liability  which the Company and the Bank may  otherwise  have.  For purposes of this Section 9, each of the Agent's, the Company's,  the MHC or the Bank's officers and directors and each person, if any,  who  controls  the Agent or the  Company or the MHC or the Bank within the meaning  of the  1933  Act and the  1934 Act  shall  have  the  same  rights  to contribution as the Agent, the Company,  the MHC or the Bank. Any party entitled to contribution, promptly after receipt of notice of commencement of any action, suit,  claim or  proceeding  against  such party in respect of which a claim for contribution may be made against another party under this Section 9, will notify such party from whom  contribution may be sought,  but the omission to so notify such party shall not relieve the party from whom contribution may be sought from any other  obligation it may have hereunder or otherwise than under this Section 9.

         Section 10. Survival of Agreements,  Representations  and  Indemnities. The respective  indemnities of the Company,  the MHC, the Bank and the Agent and the representations and warranties and other statements of the Company, the MHC, the Bank and the Agent set forth in or made  pursuant  to this  Agreement  shall remain in full force and effect,  regardless of any  termination or cancellation of this Agreement or any  investigation  made by or on behalf of the Agent,  the Company,  the MHC, the Bank or any  controlling  person referred to in Section 8 hereof,  and shall  survive the  issuance of the Shares,  and any  successor  or assign of the Agent,  the Company,  the MHC, the Bank, and any such  controlling person  shall  be  entitled  to  the  benefit  of  the  respective   agreements, indemnities, warranties and representations.

         Section 11.  Termination.  The Agent may  terminate  this  Agreement by giving  the  notice  indicated  below in this  Section 11 at any time after this Agreement becomes effective as follows:

          (a)  In the  event  the  Company  fails to sell the  required  minimum                number of the Shares by _________,  2000, and in accordance  with                the provisions of the Plan or as required by the MHC 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





                                       37

               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 for payment by                the  Company,  the MHC and/or  the Bank as set forth in  Sections                2(a), 6, 8 and 9 hereof.

          (b)  If any of the  conditions  specified  in Section 7 shall not have                been  fulfilled  when and as  required by this  Agreement  unless                waived in writing, or by the Closing Date, this Agreement and all                of the Agent's  obligations  hereunder  may be  cancelled  by the                Agent  by  notifying  the  Company,  the MHC and the Bank of such                cancellation in writing or by telegram at any time at or prior to                the  Closing  Date,  and any such  cancellation  shall be without                liability  of any party to any other  party  except as  otherwise                provided in Sections 2(a), 6, 8 and 9 hereof.

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

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

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

         Section 12. Notices.  All  communications  hereunder,  except as herein otherwise specifically  provided,  shall be mailed in writing and if sent to the Agent shall be mailed,  delivered or telegraphed and confirmed to Charles Webb & Company,  a Division of Keefe,  Bruyette & Woods,  Inc., 211 Bradenton,  Dublin, Ohio 43017-3514,  Attention: Patricia A. McJoynt, Executive Vice President (with a copy to Silver, Freedman & Taff, L.L.P., Attention: Martin L. Meyrowitz, P.C.) and, if sent to the Company, the MHC and the Bank, shall be mailed, delivered or telegraphed  and  confirmed  to the  Company,  the MHC and the  Bank at 500 10th Street, Alamogordo, New Mexico 88310-0690, Attention: Miles Ledgewood, President (with a copy to Luse Lehman Gorman Pomerenk & Schick, Attention: Eric Luse).

         Section  13.  Parties.  The  Company,  the MHC and the  Bank  shall  be entitled to act and rely on any request,  notice,  consent,  waiver or agreement purportedly  given on behalf of the Agent when the same shall have been given by the  undersigned.  The Agent shall be  entitled to act and rely on any  request, notice, consent, waiver or agreement purportedly given on behalf of the Company, the MHC or the Bank,  when the same shall have been given by the  undersigned or any other  officer of the Company,  the MHC or the Bank.  This  Agreement  shall inure  solely to the  benefit  of, and shall be  binding  upon,  the Agent,  the Company, the MHC, 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

                                       38

or claim under or in respect of or by virtue of this  Agreement or any provision herein  contained.  It is  understood  and  agreed  that this  Agreement  is the exclusive agreement among the parties hereto, and supersedes any prior agreement among the  parties  and may not be varied  except in  writing  signed by all the parties.

         Section 14. Closing.  The closing for the sale of the Shares shall take place on the Closing Date at such location as mutually  agreed upon by the Agent and the Company,  the MHC and the Bank. At the closing, the Company, the MHC and the Bank shall deliver to the Agent in next day funds the commissions,  fees and expenses  due and owing to the Agent as set forth in Sections 2 and 6 hereof and the  opinions  and  certificates  required  hereby  and other  documents  deemed reasonably  necessary by the Agent shall be executed and delivered to effect the sale of the  Shares as  contemplated  hereby  and  pursuant  to the terms of the Prospectus.

         Section 15. Partial Invalidity.  In the event that any term,  provision or covenant herein or the application  thereof to any  circumstance or situation shall be invalid or unenforceable, in whole or in part, the remainder hereof and the application of said term,  provision or covenant to any other  circumstances or situation shall not be affected thereby, and each term, provision or covenant herein shall be valid and enforceable to the full extent permitted by law.

         Section  16.  Construction.   This  Agreement  shall  be  construed  in accordance with the laws of the State of Kansas.

         Section 17.  Counterparts.  This  Agreement may be executed in separate counterparts,  each of which so executed and delivered shall be an original, but all of which together shall constitute but one and the same instrument.

         If the  foregoing  correctly  sets  forth  the  arrangement  among  the Company,  the MHC, 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.

         Section 18. Entire Agreement.  This Agreement,  including schedules and exhibits hereto,  which are integral parts hereof and incorporated as though set forth in full,  constitutes the entire agreement between the parties  pertaining to the subject matter hereof  superseding  any and all prior or  contemporaneous oral  or  prior   written   agreements,   proposals,   letters   of  intent  and understandings,  and cannot be modified, changed, waived or terminated except by a writing  which  expressly  states  that it is an  amendment,  modification  or waiver, refers to this Agreement and is signed by the party

                                       39

to be charged.  No course of conduct or dealing  shall be  construed  to modify, amend or otherwise affect any of the provisions hereof.

                                               Very truly yours,

ALAMOGORDO FINANCIAL                           ALAMOGORDO FEDERAL SAVINGS AND CORPORATION                                    LOAN ASSOCIATION

By Its Authorized                              By Its Authorized Representative:                                Representative:

- ----------------------------                   --------------------------------- Miles Ledgerwood                               Miles Ledgerwood Chairman                                       Chairman

AF MUTUAL HOLDING COMPANY

By Its Authorized Representative:

- ---------------------------- Miles Ledgerwood Chairman

Accepted as of the date first above written

Charles Webb & Company, a Division Keefe, Bruyette & Woods, Inc.

By Its Authorized Representative:

- ----------------------------- Patricia A. McJoynt Executive Vice President

                                       40 
Question: Highlight the parts (if any) of this contract related to Insurance that should be reviewed by a lawyer. Details: Is there a requirement for insurance that must be maintained by one party for the benefit of the counterparty?

Answer: 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.


Question: Attachment B to Master Franchise Agreement   GUARANTEES OF MASTER FRANCHISE AGREEMENT   As   an   i nducemen t   t o  K iosk  Concep t s ,   I nc .   ( F ranch i so r  )   t o   en t e r   i n to   a  Mas t e r  F r anch i s e  Agreemen t  w i th __N/A____________________ (Master Franchisee) dated __________________, 20____ (the  Master Franchise Agreement), ___________________________________ (Guarantors), jointly and severally agree as follows:   A. Guarantors shall pay or cause to be paid to Franchisor all monies payable by Master Franchisee under the Master Franchise Agreement on the days and times and in the manner therein appointed for payment thereof.   B. Guarantors shall unconditionally guarantee full performance and discharge by Master Franchisee of all the obligations of Master Franchisee under the Master Franchise Agreement at the times and in the manner therein provided.   C. Guarantors shall indemnify and save harmless Franchisor and its affiliates against and from all losses, damages, costs, and expenses which Franchisor and its affiliates may sustain, incur, or become liable for by reason of: (1) the failure for any reason whatsoever of Master Franchisee to pay the monies payable pursuant to the Master Franchise Agreement or to do and perform any other act, matter or thing pursuant to the provisions of the Master Franchise Agreement; or (2) any act, action, or proceeding of or by Franchisor for or in connection with the recovery of monies or the obtaining of performance by Master Franchisee of any other act, matter or thing pursuant to the provisions of the Master Franchise Agreement.   D. Franchisor shall not be obligated to proceed against Master Franchisee or exhaust any security from Master Franchisee or pursue or exhaust any remedy, including any legal or equitable relief against Master Franchisee, before proceeding to enforce the obligations of the Guarantors under this Guarantee, and the enforcement of such obligations may take place before, after, or contemporaneously with, enforcement of any debt or obligation of Master Franchisee under the Master Franchise Agreement.   E. Without affecting the Guarantors' obligations under this Guarantee, Franchisor, without notice to the Guarantors, may extend, modify, or release any indebtedness or obligation of Master Franchisee, or settle, adjust, or compromise any claims against Master Franchisee. Guarantors waive notice of amendment of the Master Franchise Agreement and notice of demand for payment or performance by Master Franchisee.   F. Guarantors' obligations under this Guarantee shall remain in full force and effect, and shall be unaffected by: (1) the unenforceability of the Master Franchise Agreement against Master Franchisee; (2) the termination of any obligations of Master Franchisee under the Master Franchise Agreement by operation of law or otherwise; (3) the bankruptcy, insolvency, dissolution, or other liquidation of Master Franchisee, including, without limitation, any surrender or disclaimer of the Franchise Agreement by the trustee in bankruptcy of Master Franchisee; (4) Franchisor's consent or acquiescence to any bankruptcy, receivership, insolvency, or any other creditor's proceedings of or against Master Franchisee, or by the winding-up or dissolution of Master Franchisee, or any other event or occurrence which would have the effect at law of terminating the existence of Master Franchisee's obligations prior to the termination of the Master Franchise Agreement; or (5) by any other agreements or other dealings between Franchisor and Master Franchisee having the effect of amending or altering the Master Franchise Agreement or Master Franchisee's obligations under this Guarantee, or by any want of notice by Franchisor to Master Franchisee of any default of Master Franchisee or by any other matter, thing, act, or omission of Franchisor whatsoever.



Source: SOUPMAN, INC., 8-K, 8/14/2015







  G. Notice to Guarantors shall be given as follows:   Names and addresses:                                               H. This Guarantee shall be interpreted and construed under the laws of the state in which Franchisor has its principal place of business at the time the action is initiated. In the event of any conflict of law, the laws of such state shall prevail, without regard to the application of such state's conflict of law rules. If, however, any provision of this Guarantee would not be enforceable under the laws of the state in which Franchisor has its principal place of business at the time the action is initiated, and if the Master Franchisee's franchised business is located outside of such state and such provision would be enforceable under the laws of the state in which the Master Franchisee's franchised business is located, then such provision shall be interpreted and construed under the laws of that state. Any action brought to enforce or interpret this Guarantee in any court, whether federal or state, shall be brought within the county and state in which Franchisor has its principal place of business at the time the action is initiated, and Guarantors hereby waive all questions of personal jurisdiction or venue for the purpose of carrying out this provision.   IN WITNESS WHEREOF, each of the undersigned has signed this Guarantee as of the day and year set forth below.   GUARANTORS :                     Date:     Date:                                 Date:     Date:

2

Source: SOUPMAN, INC., 8-K, 8/14/2015 
Question: Highlight the parts (if any) of this contract related to Parties that should be reviewed by a lawyer. Details: The two or more parties who signed the contract

Answer:
K iosk  Concep t s ,   I nc