EXHIBIT 1.2
Engagement Letter between Alaska Federal Savings Bank
and Xxxxxxx Xxxx & Company, a division of Xxxxx, Xxxxxxxx & Xxxxx, Inc.
[XXXXXXX XXXX & CO. LETTERHEAD]
January 12, 1999
Xx. Xxxxx X. Xxxx
President and Chief Executive Officer
Alaska Federal Savings Bank
0000 Xxxxxx Xxx.
Juneau, AK 99801-8046
Dear Xx. Xxxx:
This proposal is in connection with Alaska Federal Savings Bank's' ("Alaska
Federal or Bank") 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 Bank's common stock to be outstanding pursuant to
the Conversion will be issued to a holding company (the "Company") to be formed
by the Bank, and that the Company will offer and sell shares of its common stock
first to eligible persons (pursuant to the Bank'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 Bank'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 Bank's and Company's financial advisor
and marketing agent, Xxxx will provide the Bank 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 Bank 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 Bank's market area, if necessary, in the
Community Offering.
Xxxx shall provide financial advisory services to the Bank 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 Bank's and the Company's financial
advisor and marketing agent are further described in Exhibit A attached hereto.)
2. Preparation of Offering Documents. The Bank, the Company and their 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, Application
for Conversion or any offering or other documents naming Xxxx as the Bank's and
the Company's financial advisor and marketing agent, Xxxx and their
representatives will undertake substantial investigations to learn about the
Bank's business and operations ("due diligence review") in order to confirm
information provided to us and to evaluate information to be contained in the
Bank's and/or the Company's offering documents. The Bank 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 Bank. Xxxx will treat all
material non-public information as confidential. The Bank acknowledges that Xxxx
will rely upon the accuracy and completeness of all information received from
the Bank, its officers, directors, employees, agents and representatives,
accountants and counsel including this letter to serve as the Bank's and the
Company's financial advisor and marketing agent.
4. Regulatory Filings. The Bank and/or the Company will cause 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 Bank.
5. Agency Agreement. The specific terms of the conversion services, conversion
offering enhancement and syndicated offering services contemplated in this
letter shall be set forth in an Agency Agreement between Xxxx and the Bank 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.
6. Representations, Warranties and Covenants. The Agency Agreement will provide
for customary representations, warranties and covenants by the Bank 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 Bank and the Company against certain liabilities,
including, without limitation, liabilities under the Securities Act of 1933.
7. Fees. For the services hereunder, the Bank and/or Company shall pay 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 1.50% 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 Bank'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
Bank 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 Bank, 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
Bank 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 offering,
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 effected 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 Bank 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).
8. Additional Services. Xxxx further agrees to provide financial advisory
assistance to the Company and the Bank 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 Bank of any fees
in addition to those set forth in Section 7 hereof. Nothing in this Agreement
shall require the Company and the Bank 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 Bank will bear those expenses of the proposed offering
customarily borne by issuers, including, without limitation, regulatory filing
fees, SEC, "Blue Sky," and NASD filing and registration fees; the fees of the
Bank's accountants, attorneys, appraiser, transfer agent and registrar,
printing, mailing and marketing 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.
Xxxx will request reimbursement for its reasonable out-of-pocket expenses
including travel, hotel, meals and shipping. Further, Xxxx shall request
reimbursement for fees and expenses of their counsel (such fees of counsel will
not be incurred without the prior approval of Client). The selection of such
counsel will be done by Xxxx, with the approval of the Bank. Such reimbursement
of legal fees will not exceed $35,000.
10. Conditions. Xxxx'x willingness and obligation to proceed hereunder shall 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 Bank 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 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
proceeding to work with the Bank on its proposed conversion. It does not create
a binding obligation on the part of the Bank, 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 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. You
further acknowledge that any report or analysis rendered by Xxxx pursuant to
this engagement is rendered for use solely by the management of the Bank and its
agents in connection with the Conversion. Accordingly, you agree that you will
not provide any such information to any other person without our 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/Xxxxxxxx X. XxXxxxx
--------------------------
Xxxxxxxx X. XxXxxxx
Executive Vice President
ALASKA FEDERAL SAVINGS BANK
By: /s/Xxxxx X. Xxxx Date: January 25, 1999
-------------------------- ----------------
Xxxxx X. Xxxx
President and Chief Executive Officer
EXHIBIT A
CONVERSION SERVICES PROPOSAL
TO ALASKA FEDERAL SAVINGS BANK
Xxxxxxx Xxxx & Company, a Division of Xxxxx, Xxxxxxxx & Xxxxx, Inc., 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 Bank.
General Services
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
Establish and manage Stock Information Center at the Bank. Stock Information
Center personnel will track prospective investors; record stock orders; mail
order confirmations; provide the Bank's senior management with daily reports;
answer customer inquiries; and handle special situations as they arise.
Assign Xxxx'x personnel to be at the Bank 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 Bank's depositor base.
Provide intensive financial and marketing input for drafting of the prospectus.
Conversion Offering Enhancement Services- Continued
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.
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 Bank's common stock.
Aftermarket Support Services.
Xxxx will use their best efforts to secure market making and on-going research
commitment from at least three NASD firms, one of which will be Xxxxx, Xxxxxxxx
& Xxxxx, Inc.
