EX-1.1 3 dex11.txt ENGAGEMENT LETTER EXHIBIT 1.1 TRIDENT SECURITIES A DIVISION OF MCDONALD INVESTMENTS INC. 4601 SIX FORKS ROAD, SUITE 400 RALEIGH, NORTH CAROLINA 27609 TELEPHONE (919) 781-8900 FACSIMILE (919) 787-1670 June 17, 2002 Board of Directors Chesapeake Bank of Maryland 2001 E. Joppa Road Baltimore, Maryland 21234 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 Trident'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/ John A. Hitt ------------------------------------ John A. Hitt Senior Vice President Agreed and accepted to this 27th day of June, 2002 CHESAPEAKE BANK OF MARYLAND By: /s/ R. Thomas Jefferson By: /s/ Richard N. Kerr -------------------------------- ------------------------------------ R. Thomas Jefferson Richard N. Kerr President and CEO Attorney/Director