EXHIBIT 1.1
July 5, 2005
Boards of Directors
Mutual Federal Bancorp, MHC
Mutual Federal Savings and Loan Association of Chicago
2212 West Cermak Road
Chicago, Illinois 60608
Attention: Mr. Stephen M. Oksas
Chairman of the Board, President and Chief Executive Officer
------------------------------------------------------------
Ladies and Gentlemen:
Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") is pleased to
assist Mutual Federal Bancorp, MHC (the "MHC") and Mutual Federal Savings and
Loan Association of Chicago (the "Bank") with the offer and sale of certain
shares of the common stock (the "Common Stock") of a newly organized middle-tier
stock holding company (the "Holding Company") to the Bank's eligible account
holders in a Subscription Offering, to members of the Bank's community in a
Direct Community Offering and, under certain circumstances, to the general
public in a Syndicated Community Offering (collectively, the "Offerings")
pursuant to the terms of a Plan of Stock Issuance to be adopted by the Boards of
Directors of the MHC, the Holding Company and the Bank (the "Plan"). Sandler
O'Neill will act as exclusive marketing agent for the Holding Company in the
Offerings. 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
Offerings, and the MHC, the Holding Company and the Bank are sometimes
collectively referred to herein as the "Company". This letter is to confirm the
terms and conditions of our engagement.
SERVICES
- --------
Sandler O'Neill will act as a consultant and advisor to the Company and
will work with its management, counsel, accountants and other advisors in
connection with the Offerings. We 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 securities market implications of any aspect of
the Plan, including the percentage of stock of the Holding Company to be offered
in the Offerings;
2. Reviewing with the Board of Directors the financial impact of the
Offerings on the
Mutual Federal Bancorp, MHC
Mutual Federal Savings and Loan Association of Chicago
July 5, 2005
Page 2
Company, based upon the independent appraiser's appraisal of
the common stock;
3. Reviewing all offering documents, including the Prospectus, stock
order forms and 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 Offerings;
5. If necessary, assisting Company management in scheduling and
preparing for meetings with potential investors in the Direct Community
Offering; and
6. Providing such other general advice and assistance as may be
requested to promote the successful completion of the Offerings.
SUBSCRIPTION AND COMMUNITY OFFERING FEES
- ----------------------------------------
If the Offerings are consummated, the Company agrees to pay Sandler
O'Neill for its services a fee of one and thirty-five hundredths percent (1.35%)
of the aggregate Actual Purchase Price of the shares of common stock sold in the
Subscription Offering and in the Direct Community Offering, excluding in each
case shares purchased (i) by any employee benefit plan of the MHC and the
Holding Company established for the benefit of their respective directors,
officers and employees, (ii) by, or on behalf of, a charitable foundation, and
(iii) by any director, officer or employee of the Holding Company or the Bank or
members of their immediate families.
If (i) Sandler O'Neill's 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 Offerings are terminated by
the Holding Company, no fees shall be payable by the Company to Sandler O'Neill
hereunder; however, the Company shall reimburse Sandler O'Neill 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
O'Neill on behalf of the Company pursuant to the second paragraph under the
section captioned "Costs and Expenses" below.
All fees payable to Sandler O'Neill hereunder shall be payable in cash
at the time of the closing of the Offerings, or upon the termination of Sandler
O'Neill's engagement hereunder or termination of the Offerings, as the case may
be. In recognition of the long lead times involved in the conversion offering
process, the Company agrees to make an advance payment to Sandler O'Neill in the
amount of $25,000, payable upon execution of this letter, 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.
Mutual Federal Bancorp, MHC
Mutual Federal Savings and Loan Association of Chicago
July 5, 2005
Page 3
SYNDICATED COMMUNITY OFFERING
- -----------------------------
If any shares of the Holding Company's common stock remain available
after the expiration of the Subscription Offering and the 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 O'Neill 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 to be set forth in a selected dealers agreement. With respect to any
shares of the common stock sold by Sandler O'Neill or any other NASD member firm
under any selected dealers agreements in a Syndicated Community Offering, the
Company agrees to pay: (a) the sales commission payable to the selected dealer
under such agreement and (b) a management fee to Sandler O'Neill of one percent
(1.0%) of the aggregate Actual Purchase Price of the shares of common stock sold
in the Syndicated Community Offering. Sandler O'Neill 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% of
the aggregate Actual Purchase Price of the shares sold under such agreements.
Sandler O'Neill will endeavor to distribute the common stock among dealers in a
fashion that best meets the distribution objectives of the Bank 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
O'Neill be obligated to act as a selected dealer or to take or purchase any
shares of the Holding Company's common stock.
COSTS AND EXPENSES
- ------------------
In addition to any fees that may be payable to Sandler O'Neill
hereunder and the expenses to be borne by the Company pursuant to the following
paragraph, the Company agrees to reimburse Sandler O'Neill, 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 Offerings
are consummated, including, without limitation, legal fees and expenses,
advertising, syndication and travel expenses, up to a maximum of $45,000;
provided, however, that Sandler O'Neill shall document such expenses to the
reasonable satisfaction of the Company. 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 the Offerings, including, without limitation, (i) the cost of
obtaining all securities and bank regulatory approvals, including any required
NASD filing fees; (ii) the cost of printing and distributing the offering
materials; (iii) the costs of blue sky qualification (including fees and
expenses of blue sky
Mutual Federal Bancorp, MHC
Mutual Federal Savings and Loan Association of Chicago
July 5, 2005
Page 4
counsel) of the shares in the various states; (iv) listing fees; and (v) all
fees and disbursements of the Company's counsel, accountants, conversion agent
and other advisors. In the event Sandler O'Neill incurs any such fees and
expenses on behalf of the Company, the Company will reimburse Sandler O'Neill
for such fees and expenses whether or not the Offerings are consummated.
DUE DILIGENCE REVIEW
- --------------------
Sandler O'Neill's obligation to perform the services contemplated by
this letter shall be subject to the satisfactory completion of such
investigation and inquiries relating to the MHC, the Bank and the Holding
Company, and their respective directors, officers, agents and employees, as
Sandler O'Neill 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 O'Neill all information which Sandler
O'Neill requests, and will allow Sandler O'Neill the opportunity to discuss with
the management of the MHC, the Bank and the Holding Company the financial
condition, business and operations of the MHC, the Bank and the Holding Company.
The Company acknowledges that Sandler O'Neill will rely upon the accuracy and
completeness of all information received from the MHC, the Bank and the Holding
Company and their directors, trustees, officers, employees, agents, independent
accountants and counsel.
BLUE SKY MATTERS
- ----------------
The Company agrees that if Sandler O'Neill's counsel does not serve as
counsel with respect to blue sky matters in connection with the Offerings, the
Company will cause its counsel to prepare a Blue Sky Memorandum related to the
Offerings including Sandler O'Neill's participation therein and shall furnish
Sandler O'Neill a copy thereof addressed to Sandler O'Neill or upon which such
counsel shall state Sandler O'Neill may rely.
CONFIDENTIALITY
- ---------------
Other than disclosure to other firms made part of any syndicate of
selected dealers or as required by law or regulation or legal process, Sandler
O'Neill agrees that it will treat as confidential all material, non-public
information relating to the MHC, the Holding Company and the Bank obtained in
connection with its engagement hereunder (the "Confidential Information"),
whether or not the Offerings are consummated. 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 disclosure
by Sandler O'Neill, (ii) was available to Sandler O'Neill on a non-confidential
basis prior to its disclosure to Sandler O'Neill by the Company, or (iii)
becomes available to Sandler O'Neill on a non-confidential basis from a person
other than the Company who is not otherwise known to Sandler O'Neill to be bound
not to disclose such information pursuant to a contractual, legal or fiduciary
obligation.
Mutual Federal Bancorp, MHC
Mutual Federal Savings and Loan Association of Chicago
July 5, 2005
Page 5
INDEMNIFICATION
- ---------------
Since Sandler O'Neill will be acting on behalf of the MHC, the Bank and
the Holding Company in connection with the Offerings, the MHC, the Holding
Company and the Bank agree to indemnify and hold Sandler O'Neill 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 O'Neill
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 Offerings or the engagement of
Sandler O'Neill pursuant to, or the performance by Sandler O'Neill 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 MHC, 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 Holding Company by Sandler
O'Neill expressly for use therein, or (ii) is primarily attributable to the
gross negligence, willful misconduct or bad faith of Sandler O'Neill. If the
foregoing indemnification is unavailable for any reason, the MHC, 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
Offerings bears to that of Sandler O'Neill.
DEFINITIVE AGREEMENT
- --------------------
Sandler O'Neill and the Company agree that (a) except as set forth in
clause (b), the foregoing represents the general intention of the Company and
Sandler O'Neill with respect to the services to be provided by Sandler O'Neill
in connection with the Offerings, which will serve as a basis for Sandler
O'Neill commencing activities, and (b) the only legal and binding obligations of
the MHC, the Holding Company and the Bank and Sandler O'Neill with respect to
the subject matter hereof shall be (1) the Company's 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 Offerings relating to the
services of Sandler O'Neill in connection with the Offerings. Such Agency
Agreement shall be in form and content satisfactory to Sandler O'Neill and the
Company and their respective counsel and shall contain standard indemnification
provisions consistent herewith.
Mutual Federal Bancorp, MHC
Mutual Federal Savings and Loan Association of Chicago
July 5, 2005
Page 6
Sandler O'Neill's execution of such Agency Agreement shall also be
subject to (i) Sandler O'Neill's satisfaction with its investigation of the
Company's business, financial condition and results of operations, (ii)
preparation of offering materials that are satisfactory to Sandler O'Neill and
its counsel, (iii) compliance with all relevant legal and regulatory
requirements to the reasonable satisfaction of Sandler O'Neill's 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 O'Neill
may terminate this agreement if such Agency Agreement is not entered into prior
to June 30, 2006.
Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to Sandler O'Neill the duplicate copy of this letter
enclosed herewith.
Very truly yours,
Sandler O'Neill & Partners, L.P.
By: Sandler O'Neill & Partners Corp.,
the sole general partner
By: /s/ Robert A. Kotecki
--------------------------------------------
Robert A. Kotecki
Authorized Signatory
Accepted and agreed to as of
the date first above written:
Mutual Federal Bancorp MHC
Mutual Federal Savings and Loan Association of Chicago
By: /s/ Stephen M. Oksas
------------------------------
Stephen M. Oksas
Chairman of the Board, President and Chief Executive Officer