Attached files
Exhibit 1.1
[LETTERHEAD
OF SANDLER ONEILL & PARTNERS, L.P.]
October 15, 2010
Board of Directors
Fraternity Federal Savings & Loan Association
764 Washington Boulevard
Baltimore, MD 21230
Fraternity Federal Savings & Loan Association
764 Washington Boulevard
Baltimore, MD 21230
Attention: | Mr. Thomas K. Sterner Chairman & Chief Executive Officer |
Ladies and Gentlemen:
Sandler ONeill & Partners, L.P. (Sandler ONeill) is pleased to assist Fraternity Federal
Savings & Loan Association (the Bank) with the Banks proposed conversion from mutual to stock
form (the Conversion), including the offer and sale of certain shares of the common stock (the
Common Stock) of the proposed new holding company for the Bank (the Holding Company and
collectively with the Bank, the Company) to the Banks eligible account holders in a Subscription
Offering and, under certain circumstances, to members of the Banks community in a Direct Community
Offering and to the general public in a Syndicated Community Offering (collectively, the
Offering). This letter agreement (the Agreement) is to confirm the terms and conditions of our
engagement.
OFFERING SERVICES
Sandler ONeill will act as exclusive marketing agent for the Company in the Offering. We
will work with the Companys management, counsel, accountants and other advisors on the Offering
and anticipate that our services will include the following, each as may be necessary and as the
Company may reasonably request:
1. | Consulting as to the financial and securities marketing implications of any aspect of the Plan of Conversion (the Plan) or related corporate documents; | ||
2. | Reviewing with the Board of Directors the financial impact of the Offering on the Company, based upon the independent appraisers appraisal of the Common Stock; | ||
3. | Reviewing all offering documents, including the Prospectus, stock order forms and |
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related offering materials (it being understood that preparation and filing of such documents will be the responsibility of the Company and its counsel); | |||
4. | Assisting in the design and implementation of a marketing strategy for the Offering; | ||
5. | Assisting the Companys management in scheduling and preparing for meetings with potential investors and broker-dealers in connection with the Offering; and | ||
6. | Providing such other general advice and assistance as may be requested to promote the successful completion of the Offering. |
SUBSCRIPTION AND DIRECT COMMUNITY OFFERING FEES
If the Conversion is consummated, the Company agrees to pay Sandler ONeill for its services
hereunder a fee of one percent (1.00%) of the aggregate Actual Purchase Price of the shares of
Common Stock sold in the Subscription Offering and Direct Community Offering, excluding in each
case shares purchased by (i) any employee benefit plan of the Company established for the benefit
of their respective directors, officers and employees, (ii) any charitable foundation established
by the Company (or any shares contributed to such a charitable foundation), and (iii) any director,
officer or employee of the Company or members of their immediate families; provided, however, that
the aggregate fee payable pursuant to this paragraph shall not be less than $160,000. For purposes
of this letter, the term Actual Purchase Price shall mean the price at which the shares of the
Common Stock are sold in the Offering.
If (i) Sandler ONeills engagement hereunder is terminated for any of the reasons provided
for under the second paragraph of the section of this letter captioned Definitive Agreement, or
(ii) the Offering is terminated by the Company, no fees shall be payable by the Company to Sandler
ONeill hereunder; however, the Company shall reimburse Sandler ONeill for its reasonable
out-of-pocket expenses (including legal fees) incurred in connection with its engagement hereunder
and for any fees and expenses incurred by Sandler ONeill on behalf of the Company pursuant to the
second paragraph under the section captioned Costs and Expenses below.
All fees payable to Sandler ONeill hereunder shall be payable in cash at the time of the
closing of the Conversion. In recognition of the long lead times involved in the conversion
process, the Company agrees to make advance payments to Sandler ONeill of $25,000 upon execution
of this letter and $25,000 upon commencement of the mailing of offering materials to the Companys
depositors, which shall be credited against any fees or reimbursement of expenses payable
hereunder. In the event that the advance payment exceeds the amount due in payment of fees and
reimbursement of expenses hereunder, the excess shall be refunded to the Company.
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SYNDICATED COMMUNITY OFFERING
If any shares of Common Stock remain available after the expiration of the Subscription
Offering and Direct Community Offering, at the request of the Company and subject to the continued
satisfaction of the conditions set forth in the second paragraph under the caption Definitive
Agreement below, Sandler ONeill will seek to form a syndicate of registered dealers to assist in
the sale of such Common Stock in a Syndicated Community Offering on a best efforts basis, subject
to the terms and conditions set forth in a selected dealers agreement. With respect to any shares
of the Common Stock sold by Sandler ONeill or any other FINRA member firm in the Syndicated
Community Offering, the Company agrees to pay: (a) the sales commission payable to such firms under
the selected dealer agreement, and (b) a management fee to Sandler ONeill of one percent (1.00%)
of the aggregate Actual Purchase Price of the shares of Common Stock sold in the Syndicated
Community Offering. Sandler ONeill will endeavor to limit the aggregate fees to be paid by the
Company under any such selected dealers agreements to an amount competitive with gross underwriting
discounts charged at such time for underwritings of comparable amounts of stock sold at a
comparable price per share in a similar market environment, which shall not exceed 6.0% of the
aggregate Actual Purchase Price of the shares sold in the Syndicated Community Offering. Sandler
ONeill will endeavor to distribute the Common Stock among dealers in a fashion that best meets the
distribution objectives of the Company and the requirements of the Plan, which may result in
limiting the allocation of stock to certain selected dealers. It is understood that in no event
shall Sandler ONeill or any other broker-dealer be obligated to act as a selected dealer or to
take or purchase any shares of the Common Stock in the Offering.
COSTS AND EXPENSES
In addition to any fees that may be payable to Sandler ONeill hereunder and the expenses to
be borne by the Company pursuant to the following paragraph, the Company agrees to reimburse
Sandler ONeill, upon request made from time to time, for its reasonable out-of-pocket expenses
incurred in connection with its engagement hereunder, regardless of whether the Offering is
consummated, including, without limitation, legal fees and expenses, advertising, promotional, and
travel expenses, up to a maximum of $75,000; provided, however, that Sandler ONeill shall document
such expenses to the reasonable satisfaction of the Company. In the event that a resolicitation of
subscribers is required, this expense cap shall be increased to $100,000. The provisions of this
paragraph are not intended to apply to or in any way impair the indemnification provisions of this
letter.
As is customary, the Company will bear all other expenses incurred in connection with
Offering, including, without limitation, (i) the cost of obtaining all securities and bank
regulatory approvals, including any required FINRA filing fees; (ii) the cost of printing and
distributing the
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offering materials; (iii) the costs of blue sky qualification (including fees and
expenses of blue sky counsel) of the shares in the various states; (iv) listing fees; and (v) all
fees and disbursements of the Companys counsel, accountants, conversion agent and other advisors.
In the event Sandler ONeill incurs any such fees and expenses on behalf of the Company, the
Company will reimburse Sandler ONeill for such fees and expenses whether or not the Offering is
consummated.
DUE DILIGENCE REVIEW
Sandler ONeills obligation to perform the services contemplated by this Agreement shall be
subject to the satisfactory completion of such investigation and inquiries relating to the Company
and its directors, officers, agents and employees, as Sandler ONeill and its counsel in their sole
discretion may deem appropriate under the circumstances. In this regard, the Company agrees that,
at its expense, it will make available to Sandler ONeill all information which Sandler ONeill
requests, and will allow Sandler ONeill the opportunity to discuss with the Companys management
the financial condition, business and operations of the Company. The Company acknowledge that
Sandler ONeill will rely upon the accuracy and completeness of all information received from the
Company and its directors, trustees, officers, employees, agents, independent accountants and
counsel.
BLUE SKY MATTERS
Sandler ONeill and the Company agree that the Companys counsel shall serve as counsel with
respect to blue sky matters in connection with the Offering. The Company will cause such counsel
to prepare a Blue Sky Memorandum related to the Offering, including Sandler ONeills participation
therein, and shall furnish Sandler ONeill a copy thereof addressed to Sandler ONeill or upon
which such counsel shall state Sandler ONeill may rely.
CONFIDENTIALITY
Except as contemplated in connection with the performance of its services under this
agreement, as authorized by the Company or as required by law or regulation or legal process,
Sandler ONeill agrees that it will treat as confidential all material, non-public information
relating to the Company obtained in connection with its engagement hereunder (whether or not the
Offering is consummated) (the Confidential Information); provided, however, that Sandler ONeill
may disclose such information to its agents and advisors who are assisting or advising Sandler
ONeill in performing its services hereunder who have agreed to be bound by the terms and
conditions of this paragraph. As used in this paragraph, the term Confidential Information shall
not include information which (i) is or becomes generally available to the public other than as a
result of a
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disclosure by Sandler ONeill, (ii) was available to Sandler ONeill on a
non-confidential basis prior to its disclosure to Sandler ONeill by the Company, or (iii) becomes
available to Sandler ONeill on a non-confidential basis from a person other than the Company who
is not otherwise known to Sandler ONeill to be bound not to disclose such information pursuant to
a contractual, legal or fiduciary obligation.
The Company hereby acknowledges and agrees that the financial models and presentations used by
Sandler ONeill in performing its services hereunder have been developed by and are proprietary to
Sandler ONeill and are protected under applicable copyright laws. The Company agrees that it will
not reproduce or distribute all or any portion of such models or presentations without the prior
written consent of Sandler ONeill.
INDEMNIFICATION
Since Sandler ONeill will be acting on behalf of the Bank and the Holding Company in
connection with the Conversion, the Holding Company and the Bank agree to indemnify and hold
Sandler ONeill and its affiliates and their respective partners, directors, officers, employees,
agents and controlling persons within the meaning of Section 15 of the Securities Act of 1933 or
Section 20 of the Securities Exchange Act of 1934 (Sandler ONeill and each such person being an
Indemnified Party) harmless from and against any and all losses, claims, damages and liabilities,
joint or several, to which such Indemnified Party may become subject under applicable federal or
state law, or otherwise, related to or arising out of the Offering or the engagement of Sandler
ONeill pursuant to, or the performance by Sandler ONeill of the services contemplated by, this
letter, and will reimburse any Indemnified Party for all expenses (including reasonable legal fees
and expenses) as they are incurred, including expenses incurred in connection with the
investigation of, preparation for or defense of any pending or threatened claim or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party; provided, however,
that the Bank and the Holding Company will not be liable in any such case to the extent that any
such loss, claim, damage, liability or expense (i) arises out of or is based upon any untrue
statement of a material fact or the omission of a material fact required to be stated therein or
necessary to make not misleading any statements contained in any final prospectus, or any amendment
or supplement thereto made in reliance on and in conformity with written information furnished to
the Company by Sandler ONeill expressly for use therein, or (ii) is primarily attributable to the
gross negligence, willful misconduct or bad faith of Sandler ONeill. If the foregoing
indemnification is unavailable for any reason, the Bank and the Holding Company agree to contribute
to such losses, claims, damages, liabilities and expenses in the
proportion that its financial interest in the Conversion bears to that of Sandler ONeill.
The Company agrees to notify Sandler ONeill promptly of the assertion against it or any other
person of any claim or the commencement of any action or proceeding relating to any transaction
contemplated by this Agreement.
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DEFINITIVE AGREEMENT
Sandler ONeill and the Company agree that (a) except as set forth in clause (b), the
foregoing represents the general intention of the Company and Sandler ONeill with respect to the
services to be provided by Sandler ONeill in connection with the Offering, which will serve as a
basis for Sandler ONeill commencing activities, and (b) the only legal and binding obligations of
the Company and Sandler ONeill with respect to the subject matter hereof shall be (1) the
Companys obligation to reimburse costs and expenses pursuant to the section captioned Costs and
Expenses, (2) those set forth under the captions Confidentiality and Indemnification, and (3)
as set forth in a duly negotiated and executed definitive Agency Agreement to be entered into prior
to the commencement of the Offering relating to the services of Sandler ONeill in connection with
the Offering. Such Agency Agreement shall be in form and content satisfactory to Sandler ONeill,
the Company and their respective counsel and shall contain standard indemnification provisions
consistent herewith.
Sandler ONeills execution of such Agency Agreement shall also be subject to (i) Sandler
ONeills satisfaction with its investigation of the Companys business, financial condition and
results of operations, (ii) preparation of offering materials that are satisfactory to Sandler
ONeill and its counsel, (iii) compliance with all relevant legal and regulatory requirements to
the reasonable satisfaction of Sandler ONeills counsel, (iv) agreement that the price established
by the independent appraiser is reasonable and (v) market conditions at the time of the proposed
offering. Sandler ONeill may terminate this Agreement if such Agency Agreement is not entered
into prior to June 30, 2011.
This Agreement constitutes the entire agreement between the parties with respect to the
subject matter hereof and can be altered only by written consent signed by the parties. This
Agreement shall be construed and enforced in accordance with the laws of the State of New York,
without regard to the conflicts of laws principles.
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Please confirm that the foregoing correctly sets forth our agreement by signing and returning
to Sandler ONeill the duplicate copy of this letter enclosed herewith.
Very truly yours, Sandler ONeill & Partners, L.P. |
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By: | Sandler ONeill & Partners Corp., | |||
the sole general partner | ||||
By: | /s/ Catherine A. Lawton | |||
Catherine A. Lawton | ||||
An Officer of the Corporation | ||||
Accepted and agreed to as of the date first above written: Fraternity Federal Savings & Loan Association |
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By: | /s/ Thomas K. Sterner | |||
Thomas K. Sterner | ||||
Chairman & Chief Executive Officer | ||||