EXHIBIT 1.2
ENGAGEMENT LETTER BETWEEN FIRST FEDERAL BANK OF IDAHO, F.S.B.
AND SANDLER X'XXXXX & PARTNERS, L.P.
[LETTER HEAD OF SANDLER X'XXXXX]
January 14, 1997
Board of Directors
First Federal Bank of Idaho FSB
000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxx
Chairman of the Board
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Gentlemen:
Sandler X'Xxxxx & Partners, L.P. ("Sandler X'Xxxxx") is pleased to act as
an independent financial and marketing advisor to First Federal Bank of Idaho
FSB (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 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.
SERVICES
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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 appraiser's
appraisal of the common stock, particularly with regard to aspects of
the appraisal involving the methodology employed;
Sandler X'Xxxxx & Partners, L.P. is a limited partnership, the sole
general partner of which is Sandler X'Xxxxx & Partners Corp., a New
York Corporation
Board of Directors
First Federal Bank of Idaho FSB
January 14, 1997 Sandler X'Xxxxx
Page 2
3. Reviewing all offering documents, including the Subscription and
Community Offering 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
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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, but in no event shall such fees exceed 7%
of the 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 nd 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.
FEES
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If the Conversion is consummated, the Bank agrees to pay Sandler X'Xxxxx
for its services hereunder the fees set forth below:
Board of Directors
First Federal Bank of Idaho FSB
January 14, 1997 Sandler X'Xxxxx
Page 3
1. A fee of one and one-half percent (1.5%) of the aggregate Actual
Purchase Price of the shares of common stock sold in the Subscription
Offering and in the 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, subject to a maximum fee equal to one and one-half
percent (1.5%) of the aggregate gross proceeds at the midpoint of the
estimated price range as set forth on the cover page of the final
prospectus; 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
dealer's 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 two percent (2%). 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 two percent (2%) 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, subject to
the terms and maximum limitation set forth under the caption "Costs and
Expenses" below.
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 advance
payments to Sandler X'Xxxxx in the aggregate amount of $50,000, $25,000 of which
shall be payable upon execution of this letter and the remaining $25,000 of
which shall be payable upon commencement of the Subscription Offering, which
shall be credited against any fees or reimbursement of expenses payable
hereunder.
COSTS AND EXPENSES
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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
Board of Directors
First Federal Bank of Idaho FSB
January 14, 1997 Sandler X'Xxxxx
Page 4
connection with this engagement hereunder, regardless of whether the Conversion
is consummated, including, without limitation, legal fees, advertising,
promotional, syndication, and travel expenses; provided, however, that Sandler
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X'Xxxxx shall document such expenses to the reasonable satisfaction of the Bank,
and provided further that in no event shall the Bank be required to reimburse
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Sandler X'Xxxxx for more than an aggregate of $50,000 in out-of-pocket expenses
under this letter. 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 (which at the option of the Bank may be
printed from camera-ready text); (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 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
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Sandler X'Xxxxx shall not incur any expenses in excess of $1,000 on behalf of
the Bank or the Holding Company pursuant to this paragraph without the prior
approval of the Bank.
POST-CONVERSION GENERAL ADVISORY SERVICES
-----------------------------------------
If the Conversion is consummated, Sandler X'Xxxxx agrees to act as an
independent financial advisor to the Holding Company and its subsidiaries in
connection with the Holding Company's general strategic planning ("General
Advisory Services"). In connection with such General Advisory Services, we
would expect to work with the Holding Company's management, its counsel,
accountants and other advisors to assess the Holding Company's strategic
alternatives and help implement a tactical plan to enhance the value of the
Holding Company. We anticipate that our activities would include, as
appropriate, those activities outlined in Exhibit A hereto. Sandler X'Xxxxx
shall provide such services at the Holding Company's request for a period of one
year following the completion of the Conversion; provided, however, that the
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Holding Company shall reimburse Sandler X'Xxxxx for its reasonable out-of-pocket
expenses incurred in connection with providing such services. Thereafter, if
both parties wish to continue the relationship, the parties will enter into a
separate advisory services agreement on terms and conditions to be negotiated at
such time.
Board of Directors
First Federal Bank of Idaho FSB
January 14, 1997 Sandler X'Xxxxx
Page 5
DUE DILIGENCE REVIEW
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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 Holding Company and the Bank, 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 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 respective directors, trustees,
officers, employees, agents, independent accountants and counsel.
Sandler X'Xxxxx agrees that its obligation to perform the services
contemplated by this letter will not be conditioned upon inclusion in any
prospectus of audited financial statements as of December 31, 1996 and the nine
months then ended.
BLUE SKY MATTERS
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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 address to Sandler X'Xxxxx or upon
which such counsel shall state Sandler X'Xxxxx may rely.
CONFIDENTIALITY
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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
Board of Directors
First Federal Bank of Idaho FSB
January 14, 1997 Sandler X'Xxxxx
Page 6
to Sandler X'Xxxxx to be bound not to disclose such information pursuant to a
contractual, legal or fiduciary obligation.
In the event Sandler X'Xxxxx is requested or becomes legally compelled (by
oral questions, interrogatories, request for information or documents, subpoena,
civil investigative demand or similar process) to disclose any Confidential
Information, it will provide the Bank with prompt written notice so that the
Bank may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this letter. In the event that such
protective order or other remedy is obtained, or that the Bank waives compliance
with the provisions of this letter, Sandler X'Xxxxx will furnish only that
portion of the Confidential Information which is legally required.
INDEMNIFICATION
---------------
Since Sandler X'Xxxxx will be acting on behalf of the Bank and the Holding
Company in connection with the Conversion, the Bank and the Holding Company
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 of the Securities and Exchange Act (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) 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
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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 prospectus, or
any amendment or supplement thereto, made in reliance on and in conformity with
written information furnished to the Bank by Sandler X'Xxxxx expressly for use
therein (the "Agent Information"), 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.
Board of Directors
First Federal Bank of Idaho FSB
January 14, 1997 Sandler X'Xxxxx
Page 7
DEFINITIVE AGREEMENT
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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 Expense," (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 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, (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 December
31, 1997.
ELIMINATION OF HOLDING COMPANY
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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.
MISCELLANEOUS
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This Agreement constitutes 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
Board of Directors
First Federal Bank of Idaho FSB
January 14, 1997 Sandler X'Xxxxx
Page 8
Agreement shall be construed and enforced in accordance with the laws of the
State of New York, without regard to the conflicts of laws principles thereof.
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
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Xxxxxxxxx X. Xxxxxx
Vice President
Accepted and agreed to as of
the date first above written:
First Federal Bank of Idaho FSB
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Chairman of the Board
Sandler X'Xxxxx
EXHIBIT A
GENERAL ADVISORY SERVICES
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1. A review and analysis of the Holding Company's current business and
financial characteristics, including its operating strategies, balance
sheet composition, historical operating performance, branch structure and
market share, and the Holding Company's competitive position relative to
selected peer groups;
2. Creation of a base case financial model to serve as a benchmark for
analyzing alternative strategies and market environments;
3. An analysis of the impact on the franchise value of altering the Holding
Company's dividend policy, implementing a stock repurchase program, or
changing the asset mix or other operating activities;
4. An analysis of the Holding Company's acquisition resources, objectives and
capacity to compete for acquisition opportunities;
5. A summary of recent merger and acquisition trends in the financial services
industry, including tactics employed by others and typical terms and values
involved;
6. A review of other strategic alternatives which could provide long-term
benefits and enhanced value to the Holding Company;
7. A review of the Holding Company's advance defensive preparation plans,
including a comprehensive financial valuation and an analysis of stock
ownership and trading activity;
8. A review with the Board of Directors of the Holding Company of Sandler
X'Xxxxx'x findings, with periodic updates as may be requested;
9. Ongoing general advice and counsel to management and the Board of Directors
of the Holding Company with respect to strategic and tactical issues; and
10. Rendering such financial advisory and investment banking services as may
from time to time be agreed upon by Sandler X'Xxxxx and the Holding
Company.
