[LETTERHEAD OF FRIEDMAN, BILLINGS, RAMSEY & CO. INC.]
INSTITUTIONAL BROKERAGE
RESEARCH
INVESTMENT BANKING
Potomac Tower
1001 Nineteenth Street North
Arlington, Virginia 22209-1710
Telephone (703) 312-9500
Fax (703) 812-9501
August 19, 1998
Board of Directors
Attn: James B. Pittard, Jr.
President & Chief Executive Officer
Community Savings, F. A.
660 US Highway 1
North Palm Beach, FL 33408
RE: Reorganization and Plan of Conversion Marketing Services
Gentlemen:
This letter sets forth the terms of the proposed engagement between Friedman,
Billings, Ramsey and Co., Inc. ("FBR") and Community Savings, F. A. ("Community
Savings"), concerning our Investment Banking Services in connection with the
Plan of Conversion and Plan of Reorganization (the "Plan") in connection with
the reorganization of Community Savings, F. A. and Community Savings Bankshares,
Inc. from the mutual holding company format into the stock holding company
structure.
FBR is prepared to assist Community Savings 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 Plan. The specific terms of the
services contemplated hereunder shall be set forth in a definitive sales agency
agreement (the "Agreement") between FBR and Community Savings to be executed
prior to mailing of the Offering material. The price of the shares during the
Subscription Offering and Community Offering will be the price established by
Community Savings Board of Directors, based upon an independent appraisal as
approved by the appropriate regulatory authorities, provided such price is
mutually acceptable to FBR and Community Savings.
In connection with the Subscription Offering and Community Offering, FBR will
render the following services:
1. Act as the Financial Advisor to Community Savings;
2. Create marketing materials and formulate a marketing plan;
3. Conduct training for all Directors and Employees concerning the
reorganization and stock offering;
4. Manage Stock Center and staff with FBR personnel;
5. Assist Community Savings and Attorneys with listing on Nasdaq; and
6. Provide general advisory services including capital management strategies,
dividend policy and mergers and acquisitions strategies for a period of
one year following the completion of the Offering
After the Offering, FBR intends to become a Market Maker and continue coverage
of Community Savings through after market support and research.
At the appropriate time, FBR, in conjunction with its counsel, will conduct an
examination of the relevant documents and records of Community Savings as FBR
deems necessary and appropriate. Community Savings will make all documents,
records and other information deemed reasonably necessary by FBR or its counsel
available to them upon request, subject to any limitations imposed by applicable
law and regulations.
Mr. James B. Pittard, Jr.
August 19, 1998
Page 2 of 5
For its services hereunder, FBR will receive the following compensation and
reimbursement from Community Savings:
1. A management fee of $50,000 payable as follows, $25,000 upon the signing of
this letter and $25,000 upon receiving OTS approval of the Plan Application.
Should the Plan be terminated for any reason not attributable to the action or
inaction of FBR, FBR shall have earned and be entitled to be paid fees accruing
through the stage at which point the termination occurred.
2. A marketing fee of 0.75% of the aggregate Purchase Price of Common Stock sold
in the Subscription Offering and Community Offering, excluding those shares
purchased by Community Savings officers, directors, or employees (or members of
their immediate families) or by any ESOP, charitable foundation, tax-qualified
or stock compensation plans (except IRA's) or similar plan created by Community
Savings for some or all of its directors or employees. The management fee of
$50,000 will be subtracted from the marketing fee.
3. If any shares of Common Stock remain available after the Subscription and
Community Offering, at the request of Community Savings, FBR will seek to form a
syndicate of registered broker-dealers to assist in the sale of such remaining
Common Stock on a best efforts basis, subject to the terms and conditions set
forth in a selected dealers agreement. Total fees paid to FBR and selected
broker-dealers will not exceed 0.75% of the aggregate Purchase Price of the
shares of Common Stock sold in a syndicated offering. The decision to utilize
selected broker-dealers will be made by Community Savings upon consultation with
FBR. In the event, with the respect to any stock purchases, fees are paid
pursuant to this paragraph 3, such fees shall be in lieu of, and not in addition
to, any payment required pursuant to paragraph 2.
4. The foregoing commissions are to be payable to FBR at closing as defined in
the agreement to be entered into between FBR and Community Savings.
5. FBR shall be reimbursed for allocable expenses incurred by them, including
legal fees, whether or not the Agreement is consummated. These expenses shall
not exceed $70,000.
It is further understood that Community Savings will pay all other expenses of
the Plan including but not limited to its attorneys' fees, NASD filing fees,
filing and registration fees and fees of either FBR's attorneys or the attorneys
relating to any required state securities law filings, telephone charges, air
freight, supplies, conversion agent charges, transfer agent charges, fees
relating to auditing and accounting and costs of printing all documents
necessary in connection with the foregoing.
For purpose of FBR's obligation to file certain documents and to make certain
representations to the NASD in connection with the Plan, Community Savings
warrants that: (a) Community Savings has not privately placed any securities
within the last 18 months; (b) there have been no material dealings within the
last 12 months between Community Savings and any NASD member or any person
related to or associated with any such member; (c) none of the officers or
directors of Community Savings has any affiliation with the NASD; (d) except as
contemplated by this engagement letter with FBR , Community Savings has no
financial or management consulting contracts outstanding with any other person;
(e) Community Savings has not granted FBR a right of first refusal with respect
to the underwriting of any future offering of Community Savings stock; and (f)
there has been no intermediary between FBR and Community Savings in connection
with the public offering of Community Savings shares, and no person is being
compensated in any manner for providing such service.
Community Savings agrees to indemnify FBR and its controlling persons,
representatives and agents in accordance with the indemnification provisions
(the "Indemnification Provisions") set forth in Appendix A hereto, and agrees to
the other provisions of Appendix A, which is incorporated herein by this
reference, regardless of whether the proposed Offering is consummated.
Mr. James B. Pittard, Jr.
August 19, 1998
Page 3 of 5
This letter is merely a statement of intent and is not a binding legal agreement
except as to the compensation and reimbursement paragraphs numbered 1-5 above
and the indemnity described above. While FBR and Community Savings agree in
principle to the contents hereof and the purpose to proceed promptly, and in
good faith, to work out the arrangements with respect to the proposed Offering,
any legal obligations between FBR and Community Savings shall be only as set
forth in a duly executed Agreement. The indemnification provision described
above will be superseded by the indemnification provisions of the Agreement
entered into by Community Savings and FBR. Such Agreement shall be in the form
and content satisfactory to, among other things, there being in FBR's opinion no
material adverse change in the condition or obligations of Community Savings or
no material change in market conditions which would render the sale of the
shares by Community Savings hereby contemplated inadvisable.
The validity and interpretation of this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the Commonwealth of
Virginia (excluding the conflicts of laws rules).
Please acknowledge your agreement to the foregoing by signing below and
returning to FBR one copy of this letter along with a payment of $25,000. This
proposal is open for your acceptance for a period of thirty (30) days from the
date hereof.
Very truly yours,
/s/ J. ROCK TONKEL, JR. /s/ RICHARD A. BUCKNER
------------------------------ ------------------------------
By: J. Rock Tonkel, Jr. Richard A. Buckner
Title: Managing Director Senior Vice President
Date: August 19, 1998
Agreed and Accepted to this _________ day of ____________, 1998.
Community Savings, F. A.
By: ________________________
Title: _________________________
FRIEDMAN, BILLINGS, RAMSEY & CO. INC.
Mr. James B. Pittard, Jr.
August 19, 1998
Page 4 of 5
APPENDIX A
Community Savings F. A., Community Savings Bancshares, Inc. (a Delaware
corporation), ComFed M. H. C., and Community Savings Bancshares, Inc. (a federal
corporation) (here and after, known as "Community Savings") agree to indemnify
and hold harmless FBR and its affiliates (as defined in Rule 405 under the
Securities Act of 1933, as amended) and their respective directors, officers,
employees, agents and controlling persons (FBR and each person being an
"Indemnified Party") from and against all losses, claims, damages and
liabilities (or actions, including shareholder actions, in respect thereof),
joint or several, to which such Indemnified Party may become subject under any
applicable federal or state law, or otherwise, which are related to or result
from the performance by FBR of the services contemplated by or the engagement of
FBR pursuant to, this letter agreement and will promptly reimburse any
Indemnified Party for all reasonable expenses (including reasonable counsel fees
and expenses) as they are incurred in connection with the investigation of,
preparation for or defense arising from any threatened or pending claim, whether
or not such Indemnified Party is a party and whether or not such claim, action
or proceeding is initiated or brought by Community Savings. Community Savings
will not be liable to any Indemnified Party under the foregoing indemnification
and reimbursement provisions, (i) for any settlement by an Indemnified Party
effected without its prior written consent (not to be unreasonably withheld); or
(ii) to the extent that any loss, claim, damage or liability is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
primarily from FBR's willful misconduct or gross negligence. Community Savings
also agrees that no Indemnified Party shall have any liability (whether direct
or indirect, in contract or tort or otherwise) to Community Savings or its
security holders or creditors related to or arising out of the engagement of FBR
pursuant to, or the performance by FBR of the services contemplated by, the
letter agreement of even date herewith to which this is an appendix thereto (the
"Letter Agreement"), except to the extent that any loss, claim, damage or
liability is found in a final non-appealable judgment by a court of competent
jurisdiction to have resulted primarily from FBR's willful misconduct or gross
negligence.
Promptly after receipt by an Indemnified Party of notice of any intention or
threat to commence an action, suit or proceeding or notice of the commencement
of any action, suit or proceeding, such Indemnified Party will, if a claim in
respect thereof is to be made against Community Savings pursuant hereto,
promptly notify Community Savings in writing of the same. In case any such
action is brought against any Indemnified Party and such Indemnified Party
notifies Community Savings of the commencement thereof, Community Savings may
elect to assume the defense thereof, with counsel reasonably satisfactory to
such Indemnified Party, and an Indemnified Party may retain counsel to
participate in the defense of any such action; provided, however, that in no
event shall Community Savings be required to pay fees and expenses for more than
one firm of attorneys representing all Indemnified Parties unless the defense of
one Indemnified Party is unique or separate from that of another Indemnified
Party subject to the same claim or condition. Any failure or delay by an
Indemnified Party to give the notice referred to in this paragraph shall not
affect such Indemnified Party's right to be indemnified hereunder, except to the
extent that such failure or delay causes actual harm to Community Savings, or
prejudices its ability to defend such action, suit or proceeding on behalf of
such Indemnified Party.
If the indemnification provided for in this letter agreement is for any reason
held unenforceable by an Indemnified Party, Community Savings agrees to
contribute to the losses, claims, damages and liabilities for which such
indemnification is held unenforceable (i) in such proportion as is appropriate
to reflect the relative benefits to Community Savings, on the one hand, and FBR
on the other hand, of the Offering as contemplated (whether or not the Offering
is consummated) or, (ii) if (but only if) the allocation provided for in clause
(i) is for any reason unenforceable, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) but also the
relative fault of Community Savings, on the one hand and FBR, on the other hand,
as well as any other relevant equitable considerations. Community Savings agrees
that for the purposes of this paragraph the relative benefits to Community
Savings and FBR of the Offering as contemplated shall be deemed to be in the
same proportion that the total value received or contemplated to be received by
Community Savings or its shareholders, as the case may be, as a result of or in
connection with the Offering bears to the fees paid or to be paid to FBR under
FRIEDMAN, BILLINGS, RAMSEY & CO. INC.
Mr. James B. Pittard, Jr.
August 19, 1998
Page 5 of 5
the Letter Agreement. Notwithstanding the foregoing, Community Savings expressly
agrees that FBR shall not be required to contribute any amount in excess of the
amount by which fees owed FBR under said Letter Agreement (excluding
reimbursable expenses), exceeds the amount of any damages which FBR has
otherwise been required to pay.
Community Savings agrees that without FBR's prior written consent, which shall
not be unreasonably withheld, it will not settle, compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
in respect of which this indemnification could be sought under the
indemnification provisions of this letter agreement (in which FBR or any other
indemnified Party is an actual or potential party to such claim, action or
proceeding).
In the event that Community Savings does not promptly assume the defense of a
claim or action, the Indemnified Party shall have the right to employ counsel
reasonable satisfactory to Community Savings, at Community Savings's expense, to
defend such pending or threatened action or claim.
Agreed and Accepted to this _________ day of ___________, 1998.
Community Savings, F.A.
By: __________________________
Title: _______________________