EXHIBIT 1.1
April 21, 2003
Board of Directors
Attn: Robert J. Larison, Jr.
President & Chief Executive Officer
Atlantic Coast Federal Corporation
505 Haines Avenue
Waycross, GA 31501
RE: Plan of Stock Issuance
Gentlemen:
This letter sets forth the terms of the proposed engagement between Friedman,
Billings, Ramsey and Co., Inc. ("FBR") and Atlantic Coast Federal. Corporation
(the "Company"), whereby the Company's common stock will be issued to the
public.
FBR is prepared to assist the Company 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 the Company 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 the Company's Board of
Directors, based upon an independent appraisal as approved by the appropriate
regulatory authorities, provided such price is mutually acceptable to FBR and
the Company.
In connection with the Subscription Offering and Community Offering, FBR will
render the following services:
o Act as the Financial Advisor to the Company
o Create marketing materials and formulate a marketing plan
o Conduct training for all Directors and Employees concerning the stock
offering
o Manage Stock Center and staff with FBR personnel
o Assist the Company and Attorneys with listing on Nasdaq
At the appropriate time, FBR, in conjunction with its counsel, will conduct an
examination of the relevant documents and records of the Bank, as FBR deems
necessary and appropriate. The Bank will make all documents, records and other
information deemed necessary by FBR or its counsel available to them upon
request.
For its services hereunder, FBR will receive the following compensation and
reimbursement from the Bank:
1. A management fee of $25,000 payable as follows: $12,500 upon the signing of
this letter and $12,500 upon receiving regulatory 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.
Atlantic Coast Federal.
April 2, 2003
Page 2 of 5
2. A marketing fee of 0.90% based on the amount of Common Stock sold in the
Subscription Offering and Community Offering, excluding shares sold to the Board
of Directors, senior management, employees and the Employee Stock Ownership
Plan. The management fee of $25,000 will be subtracted from the marketing fee.
3. The marketing fee is to be payable to FBR at closing as defined in the
Agreement to be entered into between FBR and the Bank.
4. FBR shall be reimbursed for reasonable allocable expenses incurred by it,
including legal fees and expenses of up to $40,000, whether or not the Agreement
is consummated.
It is further understood that the Bank will pay all other reasonable expenses of
the Plan including but not limited to its attorneys' fees, NASD filing fees,
filing and registration fees and fees 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, the Bank warrants that:
(a) the 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 FBR,
the Bank has no financial or management consulting contracts outstanding with
any other person; (e) the Bank has not granted FBR a right of first refusal with
respect to the underwriting of any future offering of the Bank's common stock;
and (f) there has been no intermediary between FBR and the Bank in connection
with the public offering of the Bank shares, and no person is being compensated
in any manner for providing such service.
The Company 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, and agrees to the other
provisions of Appendix A, which is incorporated herein by this reference,
regardless of whether the proposed Offering is consummated.
This letter is merely a statement of intent and is not a binding legal agreement
except as to the compensation and reimbursement paragraphs numbered 1-4 above
and the indemnity described in Appendix A. While FBR and the Company 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 the Company shall be only as set forth in
a duly executed Agreement. The indemnification provision described in Appendix A
will be superseded by the indemnification provisions of the Agreement entered
into by the Company 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 operations of the Bank or no market
conditions which might render the sale of the shares by the Company hereby
contemplated inadvisable.
Nothing in this letter shall be construed to limit the ability of FBR or its
affiliates to pursue, investigate, analyze, invest in, or engage in investment
banking, financial advisory or any other business relationships with entities
other than the Bank, notwithstanding that such entities may be engaged in a
business which is similar to or competitive with the business of the Bank, and
notwithstanding that such entities may have actual or potential operations,
products, services, plans, ideas, customers or supplies similar or identical to
the Bank's, or may have been identified by the Bank as potential merger or
acquisition targets or potential candidates for some other business combination,
cooperation or relationship. The Bank expressly acknowledges and agrees that it
does not claim any proprietary interest in the identity of any entity in its
industry or otherwise, and that the identity of any such entity is not
confidential information.
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). EACH OF FBR AND THE
Atlantic Coast Federal.
April 2, 2003
Page 3 of 5
COMPANY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM, OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) RELATED TO OR
ARISING OUT OF THIS LETTER.
Please acknowledge your agreement to the foregoing by signing below and
returning to FBR one copy of this letter along with a payment of $12,500. 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
- -----------------------------------
By: J. Rock Tonkel
Title: EVP & Head of Investment Banking
Date:
/s/ Heather D. Rosenkoetter
- ----------------------------------
By: Heather D. Rosenkoetter
Title: Vice President
Date:
Agreed and Accepted to this 22nd day of April, 2003.
Atlantic Coast Federal Corporation
By: /s/ Robert J. Larison
-----------------------
Title: Presient/CEO
-----------------------
Atlantic Coast Federal.
April 2, 2003
Page 4 of 5
APPENDIX A
The Company agrees 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 the Bank. The
Company 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 judgment by a court of competent jurisdiction to
have resulted primarily from FBR's willful misconduct or gross negligence. The
Company also agrees that no Indemnified Party shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to the Company 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, this
letter agreement except to the extent that any loss, claim, damage or liability
is found in a final 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 the Company pursuant hereto, promptly
notify the Company in writing of the same. In case any such action is brought
against any Indemnified Party and such Indemnified Party notifies the Company of
the commencement thereof, the Company may elect to assume the defense thereof,
with counsel reasonably satisfactory to such Indemnified Party (which may not be
unreasonably withheld), and an Indemnified Party may retain counsel to
participate in the defense of any such action; provided, however, that in no
event shall the Company be required to pay fees and expenses for more than one
firm of attorneys representing 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 the Company, 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 (other than as a result of a judicial
determination as to FBR's willful misconduct or gross negligence), the Company
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 the Company, 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 the Company, on the one hand and FBR, on the
other hand, as well as any other relevant equitable considerations. The Company
agrees that for the purposes of this paragraph the relative benefits to the
Company and FBR of the Transactions as contemplated shall be deemed to be in the
same proportion that the total value received or contemplated to be received by
the Company or its shareholders, as the case may be, as a result of or in
connection with the Transactions bear to the fees paid or to be paid to FBR
under this letter agreement. Notwithstanding the foregoing, the Company
expressly agrees that FBR shall not be required to contribute any amount in
excess of the amount by
Atlantic Coast Federal.
April 2, 2003
Page 5 of 5
which fees previously paid to or owed FBR hereunder (excluding reimbursable
expenses), exceeds the amount of any damages which FBR has otherwise been
required to pay.
The Company 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), unless
such settlement, compromise or consent includes an unconditional release of each
Indemnified Party from all liability arising out of such claim, action or
proceeding.
In the event that an Indemnified Party is requested or required to appear as a
witness in any action brought by or on behalf of or against the Company in which
such Indemnified Party is not named as a defendant, the Company agrees to
promptly reimburse FBR on a monthly basis for all reasonable expenses incurred
by it in connection with such Indemnified Party's appearing and preparing to
appear as such a witness, including, without limitation, the reasonable fees and
disbursements of its legal counsel. In addition to any reimbursed fees, expenses
or costs outlined hereunder, FBR shall also receive from the Company cash
compensation of $2,000.00 per person, per day, plus reasonable out-of-pocket
expenses and costs should FBR be required to provide testimony in any formal or
informal proceeding regarding the Offering.
If multiple claims are brought with respect to at least one of which
indemnification is permitted under applicable law and provided for under this
agreement, we agree that any judgment or arbitrated award shall be conclusively
deemed to be based on claims as to which indemnification is permitted and
provided for, except to the extent the judgment or arbitrated award expressly
states that the award, or any portion thereof, is based solely on a claim as to
which indemnification is not available.
In the event that the Company does not promptly inform an Indemnified Party of
its intention to undertake the defense of a claim or action, the Indemnified
Party shall have the right to employ counsel reasonable satisfactory to the
Company, at the Company's expense, to defend such pending or threatened action
or claim.
Agreed and Accepted to this 22nd day of April, 2003.
Atlantic Coast Federal Corporation
By: /s/ Robert J. Larison
------------------------
Title: Presient/CEO
------------------------