EXHIBIT 1.1
TRIDENT SECURITIES
A DIVISION OF MCDONALD INVESTMENTS INC.
0000 XXX XXXXX XXXX, XXXXX 000
XXXXXXX, XXXXX XXXXXXXX 00000
TELEPHONE (000) 000-0000
FACSIMILE (000) 000-0000
June 17, 2002
Board of Directors
Chesapeake Bank of Maryland
0000 X. Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
RE: Conversion Stock Marketing Services
Gentlemen:
This letter sets forth the terms of the proposed engagement between Trident
Securities, a division of McDonald Investments, Inc. ("Trident") and Chesapeake
Bank of Maryland, together with its successors and assigns, (the "Bank")
concerning our investment banking services in connection with the conversion of
the Bank from a mutual to a capital stock organization.
Trident is prepared to assist the Bank in connection with the offering of its
shares of common stock during the subscription offering and community offering
as such terms are defined in the Bank's Plan of Conversion. The specific terms
of the services contemplated hereunder shall be set forth in a definitive sales
agency agreement (the "Agreement") between Trident and the Bank to be executed
on the date the prospectus is declared effective by the appropriate regulatory
authorities. The price of the shares during the subscription offering and
community offering will be the price established by the Bank's Board of
Directors, based upon an independent appraisal as approved by the appropriate
regulatory authorities, provided such price is mutually acceptable to Trident
and the Bank.
In connection with the subscription offering and community offering, Trident
will act as financial advisor and exercise its best efforts to assist the Bank
in the sale of its common stock during the subscription offering and community
offering. Additionally, Trident may, as the Bank determines to be appropriate,
enter into agreements with other National Association of Securities Dealers,
Inc., ("NASD") member firms to act as selected dealers, assisting in the sale of
the common stock. Trident and the Bank will determine the selected dealers to
assist the Bank during the community offering. At the appropriate
Board of Directors
June 17, 2002
Page 2
time, Trident in conjunction with its counsel, will conduct an examination of
the relevant documents and records of the Bank as Trident deems necessary and
appropriate. The Bank will make all documents, records and other information
deemed necessary by Trident or its counsel available to them upon request.
For its services hereunder, Trident will receive the following compensation and
reimbursement from the Bank:
1. A conversion center management and proxy solicitation management fee
in the amount of $25,000, payable at execution of this agreement.
2. A commission equal to two percent (2%) of the aggregate dollar amount
of stock sold in the subscription offering or community offering,
excluding any shares of stock sold to the Bank's directors, executive
officers and Employee Stock Option Plan (ESOP). For stock sold by
other NASD member firms under selected dealer's agreements, the
commission shall not exceed a fee of four and one half percent (4.5%),
unless such amount is approved in advance by the Board of the Bank.
3. The foregoing commissions are to be payable to Trident at the closing
as defined in the Agreement to be entered into between the Bank and
Trident.
4. Trident shall be reimbursed for its reasonable legal and for
out-of-pocket expenses incurred by them and their counsel, whether or
not the Agreement is consummated. Trident's legal and out-of-pocket
expenses will not exceed $50,000.
The Bank will forward to Trident a check in the amount of $25,000 as payment of
the management fee with an executed copy of this Letter of Intent.
It further is understood that the Bank will pay all other expenses of the
conversion including but not limited to its attorneys' fees, NASD fairness
filing and other NASD filing fees, and filing and registration fees and fees of
either Trident's attorneys or the attorneys relating to any required state
securities law filings, telephone charges, air freight, rental equipment,
supplies, transfer agent charges, fees relating to auditing and accounting and
costs of printing all documents necessary in connection with the foregoing.
In order to facilitate Xxxxxxx's filing with the NASD, the Bank agrees to
deliver or causes to be delivered to Trident, or Trident's counsel, seven copies
of the registration statement, and any amendments thereto filed with the
Securities and Exchange Commission ("SEC") within one day after they are filed
with the SEC.
Board of Directors
June 17, 2002
Page 3
For purposes of Trident's obligation to file certain documents and to make
certain representations to the NASD in connection with the conversion, the Bank
warrants that: (a) Bank has not privately placed any securities within the last
18 months; (b) there have been no material dealings within the last 12 months
between the Bank and any NASD member or any person related to or associated with
any such member; (c) none of the officers or directors of the Bank has any
affiliation with the NASD; (d) except as contemplated by this engagement letter
with Trident, the Bank has no financial or management consulting contracts
outstanding with any other person; (e) the Bank has not granted Trident a right
of first refusal with respect to the underwriting of any future offering of the
Bank stock; and (f) there has been no intermediary between Trident and the Bank
in connection with the public offering of the Bank's shares, and no person is
being compensated in any manner for providing such service.
Other than disclosure to other firms made part of any syndicate of selected
dealers or as required by law or regulation, Trident agrees that it will not
disclose any Confidential Information relating to the Bank obtained in
connection with its engagement hereunder (whether or not the Conversion is
consummated). As used in this paragraph, the term "Confidential Information"
shall be defined in the agreement, but shall not include information which: (1)
is or becomes generally available to the public other than as a result of
disclosure by Trident; (2) was available to Trident on a non-confidential basis
prior to its disclosure to Trident by the Bank; or (3) becomes available to
Trident on a non-confidential basis from a person other than the Bank who is not
otherwise known to Trident to be bound not to disclose such information pursuant
to a contractual, legal or fiduciary obligation.
The Bank agrees to indemnify and hold harmless Trident and each person, if any,
who controls the firm against all losses, claims, damages or liabilities, joint
or several and all legal or other expenses reasonably incurred by them in
connection with the investigation or defense thereof (collectively, "Losses"),
to which they may become subject under securities laws or under the common law,
that arise out of or are based upon the conversion or the engagement hereunder
of Trident except to the extent such losses are the result of the bad faith,
gross negligence, or willful misconduct of Trident. If the foregoing
indemnification is unavailable for any reason, the Bank agrees to contribute to
such Losses in the proportion that its financial interest in the conversion
bears to that of the indemnified parties. If the agreement is entered into with
respect the common stock to be issued in the conversion, the Agreement will
provide for indemnification, which will be in addition to any rights that
Trident or any other indemnified party may have at common law or otherwise. The
indemnification provision of this paragraph will be superseded by the
indemnification provisions of the Agreement entered into by the Bank and
Trident.
This letter is merely a statement of intent and is not a binding legal agreement
except as to paragraph (4) above with regard to the obligation to reimburse
Trident for allocable expenses to be incurred prior to the execution of the
Agreement and the indemnity
Board of Directors
June 17, 2002
Page 4
described in the preceding paragraph. While Trident and the Bank agree in
principle to the contents hereof and propose to proceed promptly, and in good
faith, to work out the arrangements with respect to the proposed offering, any
legal obligations between Trident and the Bank shall be only as set forth in a
duly executed Agreement. Such Agreement shall be in a form and content
satisfactory to Trident and the Bank, as well as their counsel, and Trident's
obligation's thereunder shall be subject to, among other things, there being in
Trident's opinion no material adverse change in the condition or obligations of
the Bank or no market conditions which might render the sale of the shares by
the Bank hereby contemplated inadvisable.
Please acknowledge your agreement to the foregoing by signing below and
returning to Trident one copy of this letter, along with the payment of $25,000.
This proposal is open for your acceptance for a period of thirty (30) days from
the date hereof.
Yours very truly,
TRIDENT SECURITIES
A Division of McDonald Investments, Inc.
By: /s/ Xxxx X. Xxxx
------------------------------------
Xxxx X. Xxxx
Senior Vice President
Xxxxxx and accepted to this 27th day
of June, 2002
CHESAPEAKE BANK OF MARYLAND
By: /s/ X. Xxxxxx Xxxxxxxxx By: /s/ Xxxxxxx X. Xxxx
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R. Xxxxxx Xxxxxxxxx Xxxxxxx X. Xxxx
President and CEO Attorney/Director
