EXHIBIT 1.1
(Sandler O'Neill letterhead)
March 1, 2001
Board of Directors
Charter Federal Savings & Loan Association
600 3rd Avenue
West Point, GA 31833-0472
Attention: Robert L. Johnson
President and Chief Executive Officer
Ladies and Gentlemen:
Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") is pleased to act as
an independent financial advisor to Charter Federal Savings & Loan Association
(the "Bank") in connection with the Bank's proposed Reorganization into mutual
holding company form (the "Reorganization"), including the offer and sale of
certain shares of the common stock (the "Common Stock") of the Bank (or a
middle-tier stock 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"). 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. This letter is to confirm the terms and
conditions of our engagement.
ADVISORY SERVICES
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Sandler O'Neill will act as a consultant and advisor to the Bank and will
work with the Bank's management, counsel, accountants and other advisors in
connection with the Reorganization and the Offerings. We anticipate that our
services will include the following, each as may be necessary and as the Bank
may reasonably request:
1. Consulting as to the securities marketing implications of any aspect of
the Plan of Reorganization or related corporate documents;
2. Reviewing with the Board of Directors the independent appraiser's
appraisal of the Common Stock;
3. Reviewing all offering documents, including the Prospectus, stock order
forms and an related offering materials (it being understood that
preparation and filing of such documents, will be the responsibility of
the Bank and its counsel);
4. Assisting in the design and implementation of a marketing strategy for
the Offerings;
5. Assisting in obtaining all requisite regulatory approvals;
6. Assisting Bank management in scheduling and preparing for meetings with
potential investors and broker-dealers; and
7. Providing such other general advice and assistance as may be requested
to promote the successful completion of the Offering.
SYNDICATED COMMUNITY OFFERING
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If any shares of the Common Stock remain available after the expiration of
the Subscription Offering and the Direct Community Offering, at the request of
the Bank 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 set forth in a selected dealers
agreement. Sandler O'Neill will endeavor to limit the aggregate fees to be paid
by the Bank under any such selected dealers agreement 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 7.0% of the aggregate Actual Purchase
Price the shares sold under such agreements. Sandler O'Neill will endeavor to
distribute the Common Stock among dealers in a fashion which best meets the
distribution objectives of the Bank and the requirements of the Plan of
Reorganization, 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
Common Stock.
FEES
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If the Reorganization is consummated, the Bank agrees to pay Sandler
O'Neill for its services hereunder the fees set forth below:
1. a fee of one and one-quarter percent (1.25%) 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
purchases by (i) any employee benefit plan of the Bank established for
the benefit of the Bank's directors, officers and employees, and (ii)
any director, officer or employee of the Bank or members of their
immediate families; and
2. with respect to any shares of the Common Stock sold by an NASD member
firm (including Sandler O'Neill) under any selected dealers agreement in
the Syndicated Community Offering, the sales commission payable to the
selected dealer under such agreement, (b) any sponsoring dealer's fees,
and (c) a management fee to Sandler O'Neill of one and one-quarter
percent 1.25%). Any fees payable to Sandler O'Neill for common stock
sold by Sandler O'Neill under any such agreement shall be limited to an
aggregate of two and one-half percent (2.5%) of the Actual Purchase
Price of such shares.
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 Reorganization is terminated by
the Bank, no fees shall be payable by the Bank to Sandler
O'Neill hereunder, however, the Bank shall reimburse Sandler O'Neill for its
reasonable out-of-pocket expenses (including legal fees) incurred in connection
with its engagement hereunder.
All fees payable to Sandler O'Neill hereunder shall be payable in cash at
the time of the closing of the Reorganization. In recognition of the long lead
times involved in the reorganization process, the Bank agrees to make an advance
payment to Sandler O'Neill in the amount of $25,000, which shall be payable upon
execution of this letter and which shall be credited against any fees or or
reimbursement of expenses payable hereunder.
COSTS AND EXPENSES
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In addition to any fees that may be payable to Sandler O'Neill hereunder
and the expenses to be borne by the Bank pursuant to the following paragraph,
the Bank 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 Reorganization is consummated,
including, without limitation, legal fees and expenses (up to a maximum of
$75,000), promotional, syndication, and travel expenses; provided, however, that
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Sandler O'Neill shall document such expenses to the reasonable satisfaction of
the Bank. 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 Bank will bear all other expenses incurred in
connection with the Reorganization and 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 counsel) of the shares in
the various states; (iv) listing fees; and (v) all fees and disbursements of
the Bank's counsel, accountants, conversion agent and other advisors. In the
event Sandler O'Neill incurs any such fees, and expenses on behalf of the Bank,
the Bank will reimburse Sandler O'Neill for such fees and expenses whether or
not the Reorganization is consummated.
DUE DILIGENCE REVIEW
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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 Bank, and its 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 Bank 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 Bank's management the financial condition, business and
operations of the Bank. The Bank acknowledge that Sandler O'Neill will rely upon
the accuracy and completeness of all information received from the Bank and its
directors, trustees, officers, employees, agents, independent accountants and
counsel.
BLUE SKY MATTERS
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The Bank 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
Bank will cause the counsel performing such services 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
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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 not disclose any Confidential Information relating to the
Bank obtained in connection with its engagement hereunder (whether or not the
Reorganization is 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 Bank, or (iii) becomes
available to Sandler O'Neill on a non-confidential basis from a person other
than the Bank who is not otherwise known to Sandler O'Neill upon due inquiry to
be bound not to disclose such information pursuant to a contractual, legal or
fiduciary obligation.
INDEMNIFICATION
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Since Sandler O'Neill will be acting on behalf of the Bank in connection
with the Reorganization, and the Offerings, the holding companies 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 Reorganization or 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 Bank and
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the holding companies 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 ally 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 proxy statement or prospectus, or any amendment or
supplement thereto, or any of the applications, notices, filings or documents
related thereto made in reliance on and in conformity with written information
furnished to the Bank by Sandler O'Neill expressly for use therein, or (ii) is
primarily attributable to the gross negligence or bad faith of Sandler O'Neill.
If the foregoing indemnification is unavailable for any reason, the Bank and the
holding companies agree to contribute to such losses, claims, damages,
liabilities and expenses in the proportion that its financial interest in the
Reorganization and the Offerings bears to that of Sandler O'Neill.
DEFINITIVE AGREEMENT
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Sandler O'Neill and the Bank agree that (a) except as set forth in clause
(b), the foregoing represents the general intention of the Bank 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 Bank, the holding companies and Sandler O'Neill with
respect to the subject matter hereof shall be (1) the Bank's obligation to
reimburse costs and expenses pursuant to the section captioned "Costs and
Expenses," (2) those set forth under the caption "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
Subscription Offering 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, the Bank and the holding companies and their
respective counsel and shall contain standard indemnification provisions
consistent herewith.
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 Bank'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 Offerings. Sandler O'Neill may terminate
this agreement if such Agency Agreement is not entered into prior to December
31, 2001.
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/ Thomas P. Duke
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Thomas P. Duke
Vice President
Accepted and agreed to as of
the date first above written:
Charter Federal Savings & Loan Association
By: /s/ Robert L. Johnson
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Robert L. Johnson
President and Chief Executive Officer