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EXHIBIT 1.1 ENGAGEMENT LETTER BETWEEN BAY STATE FEDERAL SAVINGS BANK AND
SANDLER X'XXXXX & PARTNERS, L.P.
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September 9, 1997
Xx. Xxxx X. Xxxxxx
President and Chief Executive Officer
Bay State Federal Savings Bank
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Dear Xx. Xxxxxx:
Sandler X'Xxxxx & Partners, L.P. ("Sandler X'Xxxxx") is pleased to act
as conversion agent to Bay State Federal Savings Bank (the "Bank") in connection
with the Bank's proposed conversion from mutual to stock form (the
"Conversion"). This letter is to confirm the terms and conditions of our
engagement.
SERVICES AND FEES
In our role as Conversion Agent, we anticipate that our services will
include the services outlined below, each as may be necessary and as the Bank
may reasonably request:
I. Consolidation of Accounts and Development of a Central File
II. Preparation of Proxy, Order and/or Request Forms
III. Organization and Supervision of the Conversion Center
IV. Proxy Solicitation and Special Meeting Services
V. Subscription Services
Each of these services is further described in Appendix A to this agreement.
Sandler X'Xxxxx agrees to perform such services in a manner consistent with
professional and industry standards applicable to such engagements.
For its services hereunder, the Bank agrees to pay Sandler X'Xxxxx a
fee of $15,000. This
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September 9, 1997
Page 2
fee is based upon a total number of unconsolidated accounts of approximately
19,000.
The fee set forth above is based upon the requirements of current
regulations and the Plan of Conversion as currently contemplated. Any unusual or
additional items or duplication of service required as a result of a material
change in the regulations or the Plan of Conversion or a material delay or other
similar events may result in extra charges which will be covered in a separate
agreement if and when they occur.
All fees under this agreement shall be payable in cash, as follows: (a)
$5,000 payable upon execution of this agreement by the Bank, which shall be
non-refundable; and (b) the balance upon the completion of the Conversion.
COSTS AND EXPENSES
In addition to any fees that may be payable to Sandler X'Xxxxx
hereunder, the Bank agrees to reimburse Sandler X'Xxxxx, upon completion of the
Conversion or termination of Sandler X'Xxxxx'x engagement hereunder, for its
reasonable out-of-pocket expenses incurred in connection with its engagement
hereunder regardless of whether the Conversion is consummated, including,
without limitation, travel, lodging, food, telephone, postage, listings, forms
and other similar expenses, up to an aggregate maximum of $80,000 (including
expenses reimbursed pursuant to the terms of a separate engagement letter
between the Bank and Sandler X'Xxxxx dated the date hereof relating to the
provision of financial advisory services in connection with the Conversion);
provided, however, that Sandler X'Xxxxx shall document such expenses to the
reasonable satisfaction of the Bank, and provided further, that if Sandler
X'Xxxxx terminates its engagement hereunder without cause, Sandler X'Xxxxx shall
not be entitled to reimbursement of any of its out-of-pocket expenses. The
provisions of this paragraph are not intended to apply to or in any way impair
the indemnification provisions of this agreement.
In addition, all taxes however designated, arising from or based upon
this agreement or the payments made to Sandler X'Xxxxx pursuant hereto,
including, but not limited to, any applicable sales, use, excise and similar
taxes, shall be paid by the Bank as the same become due, and the Bank shall,
upon request by Sandler X'Xxxxx, pay the same either to Sandler X'Xxxxx or to
the appropriate taxing authority at any time during, or after the termination
of, this Agreement; provided, however, that the Bank shall not be responsible
for the payment of any state, federal, or local franchise or income taxes based
upon the net income of Sandler X'Xxxxx.
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September 9, 1997
Page 3
RELIANCE ON INFORMATION PROVIDED
The Bank will provide Sandler X'Xxxxx with such information as Sandler
X'Xxxxx may reasonably require to carry out its duties. The Bank recognizes and
confirms that Sandler X'Xxxxx (a) will use and rely on such information in
performing the services contemplated by this agreement without having
independently verified the same, and (b) does not assume responsibility for the
accuracy or completeness of the information. The Bank or its counsel will also
inform Sandler X'Xxxxx within a reasonable period of time of any changes in the
Plan which require changes in Sandler X'Xxxxx'x services. If a substantial
expense results from any such change, the parties shall negotiate an equitable
adjustment in the fee.
LIMITATIONS
Sandler X'Xxxxx, as Conversion Agent hereunder, (a) shall have no
duties or obligations other than those specifically set forth herein; (b) will
be regarded as making no representations and having no responsibilities as to
the validity, sufficiency, value or genuineness of any order form or any stock
certificates or the shares represented thereby, and will not be required to and
will make no representations as to the validity, value or genuineness of the
offer; (c) shall not be liable to any person, firm or corporation including the
Bank by reason of any error of judgment or for any act done by it in good faith,
or for any mistake of law or fact in connection with agreement and the
performance hereof unless caused by or arising out of its own bad faith, willful
misconduct or gross negligence; (d) will not be obliged to take any legal action
hereunder which might in its judgment involve any expense or liability, unless
it shall have been furnished with reasonable indemnity satisfactory to it (it
being understood that the Bank shall retain its own right to take directly any
legal action that it deems advisable); and (e) may rely on and shall be
protected in acting in reliance upon any certificate, instrument, opinion,
notice, letter, telex, telegram, or other document or security delivered to it
and in good faith believed by it to be genuine and to have been signed by the
proper party or parties.
INDEMNIFICATION
The Bank agrees to indemnify and hold Sandler X'Xxxxx and its
affiliates and their respective partners, directors, officers, employees, agents
and controlling persons (Sandler X'Xxxxx 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
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September 9, 1997
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engagement of Sandler X'Xxxxx pursuant to, and the performance by Sandler
X'Xxxxx of the services contemplated by this letter, and will reimburse any
Indemnified Party for all expenses (including reasonable counsel 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. The Bank will not be liable under the foregoing
indemnification provision to the extent that any loss, claim, damage, liability
or expense is found in a final judgment by a court of competent jurisdiction to
have resulted primarily from Sandler X'Xxxxx'x bad faith, willful misconduct or
gross negligence.
MISCELLANEOUS
The following addresses shall be sufficient for written notices to each
other:
If to you: Bay State Federal Savings Bank
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxxx
with a copy to: Xxxxxxxx X.X. Spaccasi, Esq.
Xxxxxxx, Xxxxxx & Xxxxxxxx
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
If to us: Sandler X'Xxxxx & Partners, L.P.
0 Xxxxx Xxxxx Xxxxxx, 000xx xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxxx, Esq.
The Agreement and appendix hereto constitute the entire Agreement
between the parties with respect to the subject matter hereof and can be altered
only by written consent signed by the parties. This Agreement is governed by the
laws of the State of New York.
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September 9, 1997
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Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to Sandler X'Xxxxx the duplicate copy of this letter
enclosed herewith.
Very truly yours,
Sandler X'Xxxxx & Partners, L.P.
By: Sandler X'Xxxxx & Partners Corp.,
the sole general partner
By: /s/ Xxxxxxxxx X. Xxxxxx
________________________________
Xxxxxxxxx X. Xxxxxx
Vice President
Accepted and agreed to as of
the date first above written:
Bay State Federal Savings Bank
By: /s/ Xxxx X. Xxxxxx
________________________________
Xxxx X. Xxxxxx
Chairman of the Board, President
and Chief Executive Officer
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APPENDIX A
OUTLINE OF CONVERSION AGENT SERVICES
I. Consolidation of Accounts
1. Consolidate files in accordance with regulatory guidelines.
2. Accounts from various files are all linked together. The
resulting central file can then be maintained on a regular basis.
3. Our EDP format will be provided to your data processing people.
II. Proxy/Order Form/Request Card Preparation
1. Perform eligible vote calculation.
2. Stenciling of proxy cards for initial mailing and any necessary
follow-up mailings.
3. Target group identification for proxy solicitation.
4. Identification of target group(s) for follow-up mailing(s).
III. Organization and Supervision of Conversion Center
1. Advising on and supervising the physical organization of the
Conversion Center, including materials requirements.
2. Assist in the training of all Bank personnel who will be staffing
the conversion center.
3. Establish reporting procedures.
4. On-site supervision of the Conversion Center during the
solicitation/offering period.
IV. Special Meeting Services
1. Direct proxy solicitation if independent solicitor not used.
2. Proxy and ballot tabulation.
3. Act as or support inspector of election.
4. Delete voting record date accounts closed prior to special
meeting.
5. Produce final report of vote.
A - 1
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V. Subscription Services
1. Produce list of depositors by state (Blue Sky report).
2. Production of subscription rights and research books.
3. Stock order form processing.
4. Acknowledgement letter to confirm receipt of stock order.
5. Daily reports and analysis.
6. Proration calculation and share allocation in the event of an
oversubscription.
7. Produce charter shareholder list.
8. Interface with Transfer Agent for Stock Certificate issuance.
9. Refund and interest calculations.
10. Confirmation letter to confirm purchase of stock.
11. Notification of full/partial rejection of orders.
12. Production of 1099/Debit tape.
A - 2
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September 9, 1997
Board of Directors
Bay State Federal Savings Bank
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxxx
Chairman of the Board, President
and Chief Executive Officer
Ladies and Gentlemen:
Sandler X'Xxxxx & Partners, L.P. ("Sandler X'Xxxxx") is pleased to act
as an independent financial advisor to Bay State Federal Savings Bank (the
"Bank") in connection with the Bank's proposed conversion from mutual to stock
form (the "Conversion"), including the offer and sale of certain shares of the
common stock of the proposed new holding company for the Bank (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"). For purposes of this letter, the term "Actual
Purchase Price" shall mean the price at which the shares of the Holding
Company's common stock are sold in the Conversion. This letter is to confirm the
terms and conditions of our engagement.
ADVISORY SERVICES
Sandler X'Xxxxx will act as a consultant and advisor to the Bank and
the Holding Company and will work with the Bank's management, counsel,
accountants and other advisors in connection with the Conversion 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 Conversion or related corporate
documents;
2. Reviewing with the Board of Directors the independent
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September 9, 1997
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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 Bank and the Holding Company and
their 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
Conversion.
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 Bank and subject to the continued satisfaction
of the conditions set forth in the second paragraph under the caption
"Definitive Agreement" below, Sandler X'Xxxxx 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 X'Xxxxx 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% of
the aggregate Actual Purchase Price of the shares sold under such agreements.
Sandler X'Xxxxx 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 Conversion, which may result in limiting the
allocation of stock to certain selected dealers. It is understood that in no
event shall Sandler X'Xxxxx be obligated to act as a selected dealer or to take
or purchase any shares of the Holding Company's common stock.
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September 9, 1997
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FEES
If the Conversion is consummated, the Bank agrees to pay Sandler
X'Xxxxx for its services hereunder the fees set forth below:
1. a fee of 1.55% 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 purchased by (i) any employee benefit plan of
the Holding Company or the Bank established for the
benefit of their respective directors, officers and
employees, and (ii) any director, officer or employee of
the Holding Company or the Bank or members of their
immediate families; and
2. with respect to any shares of the Holding Company's
common stock sold by an NASD member firm (other than
Sandler X'Xxxxx) under any selected dealers agreement in
the Syndicated Community Offering, (a) the sales
commission payable to the selected dealer under such
agreement, (b) any sponsoring dealer's fees, and (c) a
management fee to Sandler X'Xxxxx of one and one-half
percent (1.5%). Any fees payable to Sandler X'Xxxxx for
common stock sold by Sandler X'Xxxxx under any such
agreement shall be limited to an aggregate of 1.55% of
the Actual Purchase Price of such shares.
If (i) Sandler X'Xxxxx'x 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 Conversion is terminated by
the Bank, no fees shall be payable by the Bank to Sandler X'Xxxxx hereunder;
however, the Bank shall reimburse Sandler X'Xxxxx for its reasonable
out-of-pocket expenses incurred in connection with its engagement hereunder as
set forth under the caption "Costs and Expenses" below; provided, however, that
if Sandler X'Xxxxx terminates its engagement hereunder without cause, Sandler
X'Xxxxx shall not be entitled to reimbursement of any of its out-of-pocket
expenses.
All fees payable to Sandler X'Xxxxx hereunder shall be payable in cash
at the time of the closing of the Conversion. In recognition of the long lead
times involved in the conversion process, the Bank agrees to make an advance
payment to Sandler X'Xxxxx in the amount of $25,000, which shall be payable upon
execution of this letter and which shall be credited against any fees or
reimbursement of expenses payable hereunder, with any remaining balance to be
refunded to the Bank.
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September 9, 1997
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COSTS AND EXPENSES
In addition to any fees that may be payable to Sandler X'Xxxxx
hereunder and the expenses to be borne by the Bank pursuant to the following
paragraph, the Bank agrees to reimburse Sandler X'Xxxxx, 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 Conversion is
consummated, including, without limitation, legal fees, advertising,
promotional, syndication, and travel expenses, up to an aggregate maximum of
$80,000 (including expenses reimbursed pursuant to the terms of a separate
engagement letter between the Bank and Sandler X'Xxxxx dated the date hereof
relating to the provision of conversion agent services in connection with the
Conversion); provided, however, that Sandler X'Xxxxx 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 Conversion 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 and
the Holding Company's counsel, accountants, conversion agent and other advisors.
In the event Sandler X'Xxxxx incurs any such fees and expenses on behalf of the
Bank or the Holding Company, the Bank will reimburse Sandler X'Xxxxx for such
fees and expenses whether or not the Conversion is consummated; provided,
however, that Sandler X'Xxxxx shall not incur any substantial expenses on behalf
of the Bank or the Holding Company pursuant to this paragraph without the prior
written approval of the Bank.
DUE DILIGENCE REVIEW
Sandler X'Xxxxx'x 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 the Holding Company, and
their respective directors, officers, agents and employees, as Sandler X'Xxxxx
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 X'Xxxxx all information which Sandler X'Xxxxx
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Bay State Federal Savings Bank
September 9, 1997
Page 5
requests, and will allow Sandler X'Xxxxx the opportunity to discuss with the
Bank's and the Holding Company's management the financial condition, business
and operations of the Bank and the Holding Company. The Bank and the Holding
Company acknowledge that Sandler X'Xxxxx will rely upon the accuracy and
completeness of all information received from the Bank and the Holding Company
and their directors, trustees, officers, employees, agents, independent
accountants and counsel.
BLUE SKY MATTERS
The Bank agrees that if Sandler X'Xxxxx'x 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 X'Xxxxx'x participation
therein and shall furnish Sandler X'Xxxxx a copy thereof addressed to Sandler
X'Xxxxx or upon which such counsel shall state Sandler X'Xxxxx may rely.
CONFIDENTIALITY
Other than disclosure to other firms made part of any syndicate of
selected dealers or as required by law or regulation, Sandler X'Xxxxx 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 not include information which (i) is or becomes generally
available to the public other than as a result of a disclosure by Sandler
X'Xxxxx, (ii) was available to Sandler X'Xxxxx on a non-confidential basis prior
to its disclosure to Sandler X'Xxxxx by the Bank, or (iii) becomes available to
Sandler X'Xxxxx on a non-confidential basis from a person other than the Bank
who is not otherwise known to Sandler X'Xxxxx to be bound not to disclose such
information pursuant to a contractual, legal or fiduciary obligation.
INDEMNIFICATION
Since Sandler X'Xxxxx will be acting on behalf of the Bank and the
Holding Company in connection with the Conversion, the Holding Company and the
Bank agree to indemnify and hold Sandler X'Xxxxx 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
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September 9, 1997
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of the Securities Exchange Act of 1934 (Sandler X'Xxxxx 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 Conversion or the engagement of Sandler X'Xxxxx
pursuant to, or the performance by Sandler X'Xxxxx of the services contemplated
by, this letter, and will reimburse any Indemnified Party for all expenses
(including reasonable legal fees and expenses upon presentation of invoices of
such counsel to the Bank) 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 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 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 X'Xxxxx expressly for use therein, or (ii) is
primarily attributable to the gross negligence, willful misconduct or bad faith
of Sandler X'Xxxxx. If the foregoing indemnification is unavailable for any
reason, 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 Conversion bears to that of Sandler X'Xxxxx.
DEFINITIVE AGREEMENT
Sandler X'Xxxxx and the Bank agree that (a) except as set forth in
clause (b), the foregoing represents the general intention of the Bank and
Sandler X'Xxxxx with respect to the services to be provided by Sandler X'Xxxxx
in connection with the Offerings, which will serve as a basis for Sandler
X'Xxxxx commencing activities, and (b) the only legal and binding obligations of
the Bank, the Holding Company and Sandler X'Xxxxx 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 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 Subscription Offering relating to the
services of Sandler X'Xxxxx in connection with the Offerings. Such
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September 9, 1997
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Agency Agreement shall be in form and content satisfactory to Sandler X'Xxxxx,
the Bank and the Holding Company and their respective counsel and shall contain
standard indemnification provisions consistent herewith.
Sandler X'Xxxxx'x execution of such Agency Agreement shall also be
subject to (i) Sandler X'Xxxxx'x 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 X'Xxxxx and its counsel,
(iii) compliance with all relevant legal and regulatory requirements to the
reasonable satisfaction of Sandler X'Xxxxx'x 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 X'Xxxxx may terminate
this agreement if such Agency Agreement is not entered into prior to June 30,
1998.
ELIMINATION OF HOLDING COMPANY
If the Board of Directors of the Bank, for any reason, elects not to
proceed with the formation of the Holding Company but determines to proceed with
the Conversion and substitute the common stock of the Bank for the common stock
of the Holding Company, all of the provisions of this letter relating to the
common stock of the Holding Company will be deemed to pertain to the common
stock of the Bank on the same terms and conditions that such provisions pertain
to the common stock of the Holding Company and all of the references in this
letter to the Holding Company shall be deemed to refer to the Bank or shall have
no effect, as the context of the reference requires.
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September 9, 1997
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Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to Sandler X'Xxxxx the duplicate copy of this letter
enclosed herewith.
Very truly yours,
Sandler X'Xxxxx & Partners, L.P.
By: Sandler X'Xxxxx & Partners Corp.,
the sole general partner
By: /s/ Xxxxxxxxx X. Xxxxxx
------------------------------------
Xxxxxxxxx X. Xxxxxx
Vice President
Accepted and agreed to as of the date first above written:
Bay State Federal Savings Bank
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Xxxx X. Xxxxxx
Chairman of the Board,
President and Chief Executive Officer
