EXHIBIT 1.1 ENGAGEMENT LETTER BETWEEN CENTRAL FEDERAL SAVINGS AND LOAN
ASSOCIATION OF WELLSVILLE AND XXXXXXX XXXX & COMPANY, A DIVISION
OF XXXXX, XXXXXXXX AND XXXXX, INC.
Exhibit 1.1
[LOGO] [LETTERHEAD OF XXXXXXX XXXX & COMPANY APPEARS HERE]
June 11, 1998
Xx. Xxxxxxx X.Xxxxxxxx
President and Chief Executive Officer
Central Federal Savings and Loan Association of Wellsville
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Dear Xx. Xxxxxxxx:
This proposal is in connection with Central Federal Savings and Loan
Association's (the "Association") intention to convert from a mutual to a
capital stock form of organization (the "Conversion"). In order to effect the
Conversion, it is contemplated that all of the Association's common stock to be
outstanding pursuant to the Conversion will be issued to a holding company (the
"Company") to be formed by the Association, and that the Company will offer and
sell shares of its common stock first to eligible persons (pursuant to the
Association's Plan of Conversion) in a Subscription and Community Offering.
Xxxxxxx Xxxx & Company ("Xxxx"), a Division of Xxxxx, Xxxxxxxx and Xxxxx, Inc.
("KBW"), will act as the Association's and the Company's exclusive financial
advisor and marketing agent in connection with the Conversion. This letter sets
forth selected terms and conditions of our engagement.
1. Advisory/Conversion Services. As the Association's and Company's financial
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advisor and marketing agent, Xxxx will provide the Association and the Company
with a comprehensive program of conversion services designed to promote an
orderly, efficient, cost-effective and long-term stock distribution. Xxxx will
provide financial and logistical advice to the Association and the Company
concerning the offering and related issues. Xxxx will assist in providing
conversion enhancement services intended to maximize stock sales in the
Subscription Offering and to residents of the Association's market area, if
necessary, in the Community Offering.
Xxxx shall provide financial advisory services to the Association which are
typical in connection with an equity offering and include, but are not limited
to, overall financial analysis of the client with a focus on identifying factors
which impact the valuation of the common stock and provide the appropriate
recommendations for the betterment of the equity valuation.
Additionally, post conversion financial advisory services will include advice on
shareholder relations, NASDAQ listing, dividend policy (for both regular and
special dividends), stock repurchase strategy and communication with market
makers. Prior to the closing of the offering, Xxxx shall furnish to client a
Post-Conversion reference manual which will include specifics relative to these
items. (The nature of the services to be provided by Xxxx as the Association's
and the Company's financial advisor and marketing agent are further described in
Exhibit A attached hereto.)
2. Preparation of Offering Documents. The Association, the Company and their
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counsel will draft the Registration Statement, Application for Conversion,
Prospectus and other documents to be used in connection with the Conversion.
Xxxx will attend meetings to review these documents and advise you on their form
and content. Xxxx and its counsel will draft appropriate agency agreement and
related documents as well as marketing materials other than the Prospectus.
3. Due Diligence Review. Prior to filing the Registration Statement,
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Application for Conversion or any offering or other documents naming Xxxx as the
Association's and the Company's financial advisor and marketing agent, Xxxx and
its representatives will undertake substantial investigations to learn about the
Association's business and operations ("due diligence review") in order to
confirm information provided to us and to evaluate information to be contained
in the Association's and/or the Company's offering documents. The Association
agrees that it will make available to Xxxx all relevant information, whether or
not publicly available, which Xxxx reasonably requests, and will permit Xxxx to
discuss with management the operations and prospects of the Association. Xxxx
will treat all material non-public information as confidential. The Association
acknowledges that Xxxx will rely upon the accuracy and completeness of all
information received from the Association, its officers, directors, employees,
agents and representatives, accountants and counsel including this letter to
serve as the Association's and the Company's financial advisor and marketing
agent.
4. Regulatory Filings. The Association and/or the Company will cause
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appropriate offering documents to be filed with all regulatory agencies
including, the Securities and Exchange Commission ("SEC"), the National
Association of Securities Dealers ("NASD"), Office of Thrift Supervision ("OTS")
and such state securities commissioners as may be determined by the Association.
5. Agency Agreement. The specific terms of the conversion services, conversion
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offering enhancement and syndicated offering services contemplated in this
letter shall be set forth in an Agency Agreement between Xxxx and the
Association and the Company to be executed prior to commencement of the
offering, and dated the date that the Company's Prospectus is declared effective
and/or authorized to be disseminated by the appropriate regulatory agencies, the
SEC, the NASD, the OTS and such state securities commissioners and other
regulatory agencies as required by applicable law.
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6. Representations, Warranties and Covenants. The Agency Agreement will
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provide for customary representations, warranties and covenants by the
Association and Xxxx, and for the Company to indemnify Xxxx and their
controlling persons (and, if applicable, the members of the selling group and
their controlling persons), and for Xxxx to indemnify the Association and the
Company against certain liabilities, including, without limitation, liabilities
under the Securities Act of 1933.
7. Fees. For the services hereunder, the Association and/or Company shall pay
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the following fees to Xxxx at closing unless stated otherwise:
(a) A Management Fee of $25,000 payable in four consecutive monthly
installments of $6,250 commencing with the signing of this letter.
Such fees shall be deemed to have been earned when due. Should the
Conversion be terminated for any reason not attributable to the action
or inaction of Xxxx, Xxxx shall have earned and be entitled to be paid
fees accruing through the stage at which point the termination
occurred.
(b) A Success Fee of 1.30% shall be charged based on the aggregate
Purchase Price of Common Stock sold in the Subscription Offering and
Community Offering excluding shares purchased by the Association's
officers, directors, or employees (or members of their immediate
families) plus any ESOP, tax-qualified or stock based compensation
plans (except IRA's) or similar plan created by the Association for
some or all of its directors or employees. The Management Fee
described in 7(a) will be applied against the Success Fee.
(c) If any shares of the Company's stock remain available after the
subscription offering, at the request of the Association, Xxxx will
seek to form a syndicate of registered broker-dealers to assist in the
sale of such common stock on a best efforts basis, subject to the
terms and conditions set forth in the selected dealers agreement.
Xxxx will endeavor to distribute the common stock among dealers in a
fashion which best meets the distribution objectives of the
Association and the Plan of Conversion. Xxxx will be paid a fee not
to exceed 5.5% of the aggregate Purchase Price of the shares of common
stock sold by them. Xxxx will pass onto selected broker-dealers, who
assist in the syndicated community, an amount competitive with gross
underwriting discounts charged at such time for comparable amounts of
stock sold at a comparable price per share in a similar market
environment. Fees with respect to purchases affected with the
assistance of a broker/dealer other than Xxxx shall be transmitted by
Xxxx to such broker/dealer. The decision to utilize selected broker-
dealers will be made by the Association upon consultation with Xxxx.
In the event, with respect to any stock purchases, fees are paid
pursuant to this subparagraph 7(c), such fees shall be in lieu of, and
not in addition to, payment pursuant to subparagraph 7(a) and 7(b).
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8. Additional Services. Xxxx further agrees to provide financial advisory
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assistance to the Company and the Association for a period of one year following
completion of the Conversion, including formation of a dividend policy and share
repurchase program, assistance with shareholder reporting and shareholder
relations matters, general advice on mergers and acquisitions and other related
financial matters, without the payment by the Company and the Association of any
fees in addition to those set forth in Section 7 hereof. Nothing in this
Agreement shall require the Company and the Association to obtain such services
from Xxxx. Following this initial one year term, if both parties wish to
continue the relationship, a fee will be negotiated and an agreement entered
into at that time.
9. Expenses. The Association will bear those expenses of the proposed offering
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customarily borne by issuers, including, without limitation, regulatory filing
fees, SEC, "Blue Sky," and NASD filing and registration fees; the fees of the
Association's accountants, attorneys, appraiser, transfer agent and registrar,
printing, mailing and marketing and syndicate expenses associated with the
Conversion; the fees set forth in Section 7; and fees for "Blue Sky" legal work.
If Xxxx incurs expenses on behalf of Client, Client will reimburse Xxxx for such
expenses.
The Association will reimburse Xxxx for any out-of-pocket expenses related to
travel, meals lodging, photocopying, etc. up to $10,000. Additionally, the
Association will reimburse Xxxx for the reasonable fees and expenses of Xxxx'x
counsel up to $30,000.
10. Conditions. Xxxx'x willingness and obligation to proceed hereunder shall
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be subject to, among other things, satisfaction of the following conditions in
Xxxx'x opinion, which opinion shall have been formed in good faith by Xxxx after
reasonable determination and consideration of all relevant factors: (a) full and
satisfactory disclosure of all relevant material, financial and other
information in the disclosure documents and a determination by Xxxx, in its sole
discretion, that the sale of stock on the terms proposed is reasonable given
such disclosures; (b) no material adverse change in the condition or operations
of the Association subsequent to the execution of the agreement; and (c) no
adverse market conditions at the time of offering which in Xxxx'x opinion make
the sale of the shares by the Company inadvisable.
12. Benefit. This Agreement shall inure to the benefit of the parties hereto
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and their respective successors and to the parties indemnified pursuant to the
terms and conditions of the Agency Agreement and their successors, and the
obligations and liabilities assumed hereunder by the parties hereto shall be
binding upon their respective successors provided, however, that this Agreement
shall not be assignable by Xxxx.
13. Definitive Agreement. This letter reflects Xxxx'x present intention of
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proceeding to work with the Association on its proposed conversion. It does not
create a binding obligation on the part of the Association, the Company or Xxxx
except as to the agreement to maintain the confidentiality of non-public
information set forth in Section 3, the payment of certain fees as set
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forth in Section 7(a) and 7(b) and the assumption of expenses as set forth in
Section 9, all of which shall constitute the binding obligations of the
parties hereto and which shall survive the termination of this Agreement or
the completion of the services furnished hereunder and shall remain operative
and in full force and effect. The Association further acknowledges that any
report or analysis rendered by Xxxx pursuant to this engagement is rendered
for use solely by the management of the Association and its agents in
connection with the Conversion. Accordingly, the Association agrees that it
will not provide any such information to any other person without Xxxx'x prior
written consent.
Xxxx acknowledges that in offering the Company's stock no person will be
authorized to give any information or to make any representation not contained
in the offering prospectus and related offering materials filed as part of a
registration statement to be declared effective in connection with the offering.
Accordingly, Xxxx agrees that in connection with the offering it will not give
any unauthorized information or make any unauthorized representation. We will
be pleased to elaborate on any of the matters discussed in this letter at your
convenience.
If the foregoing correctly sets forth our mutual understanding, please so
indicate by signing and returning the original copy of this letter to the
undersigned.
Very truly yours,
XXXXXXX XXXX & COMPANY,
A DIVISION OF XXXXX, XXXXXXXX & XXXXX, INC.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx
Senior Vice President
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF WELLSVILLE
By: /s/ Xxxxxxx X. Xxxxxxxx Date: June 16 1998
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Xxxxxxx X. Xxxxxxxx
President and Chief Executive Officer
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EXHIBIT A
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CONVERSION SERVICES PROPOSAL
TO CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF WELLSVILLE
Xxxxxxx Xxxx & Company provides thrift institutions converting from mutual to
stock form of ownership with a comprehensive program of conversion services
designed to promote an orderly, efficient, cost-effective and long-term stock
distribution. The following list is representative of the conversion services,
if appropriate, we propose to perform on behalf of the Association.
General Services
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Assist management and legal counsel with the design of the transaction
structure.
Analyze and make recommendations on bids from printing, transfer agent and
appraisal firms.
Assist officers and directors in obtaining bank loans to purchase stock, if
requested.
Assist in drafting and distribution of press releases as required or
appropriate.
Conversion Offering Enhancement Services
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Establish and manage Stock Information Center at the Association. Stock
Information Center personnel will track prospective investors; record stock
orders; mail order confirmations; provide the Association's senior management
with daily reports; answer customer inquiries; and handle special situations as
they arise.
Assign Xxxx'x personnel to be at the Association through completion of the
Subscription and Community Offerings to manage the Stock Information Center,
meet with prospective shareholders at individual and community information
meetings, solicit local investor interest through a tele-marketing campaign,
answer inquiries, and otherwise assist in the sale of stock in the Subscription
and Community Offerings. This effort will be lead by a Principal of Xxxx/KBW.
Create target investor list based upon review of the Association's depositor
base.
Provide intensive financial and marketing input for drafting of the prospectus.
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Conversion Offering Enhancement Services- Continued
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Prepare other marketing materials, including prospecting letters and brochures,
and media advertisements.
Arrange logistics of community information meeting(s) as required.
Prepare audio-visual presentation by senior management for community information
meeting(s).
Prepare management for question-and-answer period at community information
meeting(s).
Attend and address community information meeting(s) and be available to answer
questions.
Broker-Assisted Sales Services.
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Arrange for broker information meeting(s) as required.
Prepare audio-visual presentation for broker information meeting(s).
Prepare script for presentation by senior management at broker information
meeting(s).
Prepare management for question-and-answer period at broker information
meeting(s).
Attend and address broker information meeting(s) and be available to answer
questions.
Produce confidential broker memorandum to assist participating brokers in
selling the Association's common stock.
Aftermarket Support Services.
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Xxxx will use their best efforts to secure market making and on-going research
commitment from at least two NASD firms, one of which will be Xxxxx, Xxxxxxxx &
Xxxxx, Inc.
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