EXHIBIT 1.1
XXXXX, XXXXXXXX & XXXXX, INC.
000 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
000-000-0000
December 27, 2005
Xx. Xxxxxx Xxxxx
Chairman
First Federal Financial Services, Inc.
First Federal Savings and Loan Association of Edwardsville
First Federal Financial Services, MHC
000 Xx. Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Dear Xx. Xxxxx:
This proposal is in connection with First Federal Financial Services, Inc.'s
(the "Company"), the federal mid-tier stock holding company of First Federal
Savings & Loan Association of Edwardsville (the "Bank"), intention to acquire
(the "Acquisition") a stock financial institution and its affiliates
(collectively the "Subject Company") and in connection therewith have the mutual
holding company component of its organization reorganize from the mutual holding
company form to a full stock company (the "Conversion"). In order to effect the
Conversion, it is contemplated that shares of common stock of a new holding
company will be offered to eligible persons in a Subscription and Community
Offering (the "Offering") and shares not sold in the offering will be issued to
stockholders of the Subject Company in the Acquisition.
Xxxxx, Xxxxxxxx & Xxxxx, Inc. ("KBW") will act as the Company's and the Bank's
exclusive financial advisor and marketing agent in connection with the
Acquisition/Conversion. This letter sets forth selected terms and conditions of
our engagement.
1. MERGER & ACQUISITION SERVICES. As the Bank's and Company's financial
advisor, KBW will perform the following services:
a) advise and assist the Company in considering the desirability of
the Acquisition and in arriving at definitive financial terms
therefor;
b) familiarize itself to the extent appropriate and feasible with
the business, operations, financial condition and prospects of
the Company and the Subject Company and advise and assist the
Company in developing a general strategy for accomplishing the
Acquisition, including the structure of the Acquisition and the
possible price or price range that might reasonably be offered
by the Company in the Acquisition;
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December 27, 2005
Page 2
c) advise and assist the Company in the course of its negotiation
of the Acquisition and, if requested, participate directly in
such negotiations;
d) assuming an agreement in principle is reached for the
Acquisition, assist you in preparing a letter of intent and a
definitive acquisition agreement;
e) if requested by the Company, KBW will render an opinion (the
"Opinion") as to the fairness from a financial point of view to
the Company of the consideration offered in the Acquisition. The
Opinion may be in such form as KBW shall determine and KBW may
qualify the Opinion in such manner as KBW believes reasonably
appropriate, including by stating therein that KBW has relied
upon the information furnished to it by the Company, has assumed
the accuracy and completeness of such information and has not
attempted independently to verify any of such information;
f) render such other financial advisory and investment banking
services as are customary in such engagements and as may be
agreed upon by KBW and the Bank.
2. ADVISORY/OFFERING SERVICES. As the Company's and the Bank's financial
advisor and marketing agent, KBW will provide the Company and the Bank with a
comprehensive range of services designed to promote an orderly, efficient,
cost-effective and long-term stock distribution. KBW will provide financial and
logistical advice to the Bank and the Company in connection with the Offering,
including strategies for maximizing stock sales to depositors in the
Subscription Offering and, if necessary, to residents of the Bank's market area
in a Community Offering. KBW shall also provide financial advisory services to
the Company and the Bank which are typical in connection with a minority stock
offering, including, but not limited to, a financial analysis of the Bank with
an emphasis on factors which impact the valuation of the common stock.
Additionally, post Offering financial advisory services consistent with
paragraph 9 will include advice on shareholder relations, after-market trading,
dividend policy (for both regular and special dividends), stock repurchase
strategies and communication with market-makers. Prior to the closing of the
Offering, KBW will furnish to the Company a Post-Offering reference manual,
which will include specifics relative to these items. (The nature of the
services to be provided by KBW as the Bank's and the Company's financial advisor
and marketing agent is set forth in paragraph 9 and is further described in
Exhibit A attached hereto.)
3. PREPARATION OF OFFERING DOCUMENTS. The Bank, the Company and their
counsel will draft the Registration Statement, Prospectus, Form AC and such
other documents to be used in connection with the Offering. KBW will attend
meetings to review these documents and advise you on their form and content. KBW
and its counsel will draft an appropriate agency agreement
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December 27, 2005
Page 3
and related documents, as well as marketing materials other than the Prospectus,
and will be responsible for obtaining NASD clearance as to the fairness of the
underwriting arrangement.
4. DUE DILIGENCE REVIEW. Prior to filing the Registration Statement,
Acquisition Application and Application for Conversion or any offering or any
other documents naming KBW as the Bank's and the Company's financial advisor and
marketing agent, KBW and its representatives will undertake a substantial
investigation to learn about the Bank's and Subject Company's business and
operations (a "due diligence review") in order to confirm information provided
to us and to evaluate information to be contained in the Company's offering
documents. The Company and the Bank agree to make available to KBW all relevant
information, whether or not publicly available, which KBW reasonably requests,
and will permit KBW to discuss with management the operations and prospects of
the Company and the Bank. KBW will treat confidentially all material non-public
information. The Bank acknowledges that KBW 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.
5. REGULATORY FILINGS. The Company will file all appropriate offering
documents with all regulatory agencies including, the SEC, the Office of Thrift
Supervision ("OTS"), and such state securities commissioners as may be
determined by the Company.
6. AGENCY AGREEMENT. The specific terms of KBW's services, including stock
offering enhancement and syndicated offering services contemplated by this
letter shall be set forth in a mutually agreed upon Agency Agreement between KBW
and the Company and the Bank 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.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Agency Agreement will
provide for to-be-agreed-upon representations, warranties and covenants of the
Company, the Bank and KBW, and for the Company to indemnify KBW and their
controlling persons (and, if applicable, the members of the selling group and
their controlling persons), and for KBW to indemnify the Bank and the Company
against certain liabilities, including, without limitation, liabilities under
the Securities Act of 1933, to the extent applicable.
8. FEES. For the services described above, the Company agrees to pay KBW:
a) With respect to the Acquisition, a success fee equal to
$100,000.
b) For delivery of a written Opinion pursuant to the Acquisition,
KBW shall receive a fee of $35,000. Such Opinion fee shall be
due and payable upon the delivery by KBW of the Opinion and
shall be deemed earned at that time whether or not the
Acquisition is eventually consummated. In addition, an updated
Opinion shall be delivered, if requested, at no additional fee
dated within five calendar days of any proxy
statement/prospectus to be
Xx. Xxxxxx Xxxxx
December 27, 2005
Page 4
mailed to Company stockholders as may be applicable. Such
fairness opinion fee shall be deducted from the amount due under
a) above.
c) With respect to the Conversion, a Management Fee of $25,000
payable in four consecutive monthly installments of $6,250
commencing with the adoption of the Plan of Conversion and
Reorganization. Such fees shall be deemed to have been earned
when due. Should the Offering be terminated for any reason not
attributable to the action or inaction of KBW, KBW shall be
entitled to be paid all fees accrued through the date of
termination.
d) With respect to the Conversion, a Success Fee of 1.35% 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 family) 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 and any shares issued to stockholders of
the Subject Company in the Acquisition. The Management Fee
described in 8(c) will be applied against the Success Fee.
e) With respect to the Conversion, if necessary, a Broker-Dealer
Pass-Through fee. If any shares of the Company's stock remain
available after the subscription and community offering, at the
request of the Bank, KBW 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. KBW will
endeavor to distribute the common stock among dealers in a
fashion which best meets the distribution objectives of the Bank
and the Offering. KBW will be paid a fee not to exceed 5.5% of
the aggregate Purchase Price of the shares of common stock sold
by them. From this fee, KBW 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 KBW shall be transmitted by KBW to such
broker/dealer and will be applied against (and come from) the
5.5% fee. THE DECISION TO UTILIZE SELECTED BROKER-DEALERS WILL
BE MADE BY THE BANK upon consultation with KBW. In the event any
fees are paid pursuant to this subparagraph 8(e), such fees
shall be in lieu of, and not in addition to any fees for the
sale of Common Stock payable pursuant to subparagraph 8(d).
9. ADDITIONAL SERVICES. KBW FURTHER AGREES TO PROVIDE FINANCIAL ADVISORY
ASSISTANCE TO THE COMPANY AND THE BANK FOR A PERIOD OF ONE YEAR FOLLOWING
COMPLETION OF THE OFFERING, INCLUDING ESTABLISHING A DIVIDEND POLICY AND SHARE
REPURCHASE PROGRAM, ASSISTING 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
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December 27, 2005
Page 5
THE BANK OF ANY FEES IN ADDITION TO THOSE SET FORTH IN SECTION 8 HEREOF. Nothing
in this Agreement shall require the Company and the Bank to obtain such services
from KBW. Following this initial one year term, if both parties wish to continue
the relationship, a fee may be negotiated and an agreement entered into at that
time.
10. EXPENSES. The Bank will bear those expenses of the proposed Offering and
Acquisition 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 and syndicate expenses associated
with the Offering; the fees set forth in Section 8; and fees for "Blue Sky"
legal work. If KBW incurs expenses on behalf of the Company or the Bank, the
Company or the Bank will reimburse KBW for such expenses.
KBW shall be reimbursed for reasonable out-of-pocket expenses, including costs
of travel, meals and lodging, photocopying, telephone, facsimile and couriers.
The selection of KBW's counsel will be made by KBW, with the approval of the
Bank. The Bank will reimburse KBW for the fees of its counsel, which will not
exceed $40,000, and reasonable out-of-pocket expenses. The expenses of this
paragraph assume that no resolicitation will occur. In the event of a
resolicitation, additional out-of-pocket expenses shall be reasonable and fully
discussed with the Company and the Bank upon notification of a need to
resolicit.
11. CONDITIONS. KBW's willingness and obligation to proceed hereunder shall
be subject to, among other things, satisfaction of the following conditions in
KBW's opinion, which opinion shall have been formed in good faith by KBW 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 KBW, 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 financial 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 KBW's 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 KBW.
13. DEFINITIVE AGREEMENT. This letter reflects KBW's present intention of
proceeding to work with the Company and the Bank on its proposed Acquisition and
Conversion. It does not create a binding obligation on the part of the Bank, the
Company or KBW except as to the agreement to maintain the confidentiality of
non-public information set forth in Section 4, the payment of certain fees as
set forth in Section 8, and the assumption of expenses as set forth in Section
10, 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
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December 27, 2005
Page 6
any report or analysis rendered by KBW pursuant to this engagement is rendered
for use solely by the management of the Bank, the Company and their agents in
connection with the Offering. Accordingly, you agree that you will not provide
any such information to any other person without our prior written consent.
KBW 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, KBW 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 one original copy of this letter to the
undersigned.
Xx. Xxxxxx Xxxxx
December 27, 2005
Page 7
Very truly yours,
XXXXX, XXXXXXXX & XXXXX, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Managing Director
FIRST FEDERAL FINANCIAL SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxx Date: January 4, 2006
--------------------------------------- ----------------
Xx. Xxxxxx Xxxxx
Chairman
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF EDWARDSVILLE
By: /s/ Xxxxxx X. Xxxxx Date: January 4, 2006
--------------------------------------- ----------------
Xx. Xxxxxx Xxxxx
Chairman
FIRST FEDERAL FINANCIAL SERVICES MHC
By: /s/ Xxxxxx X. Xxxxx Date: January 4, 2006
--------------------------------------- ----------------
Xx. Xxxxxx Xxxxx
Chairman
EXHIBIT A
OFFERING SERVICES PROPOSAL
TO
FIRST FEDERAL FINANCIAL SERVICES, INC.
FIRST FEDERAL FINANCIAL SERVICES MHC
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF EDWARDSVILLE
KBW provides thrift institutions converting from the mutual to stock form of
ownership with a comprehensive program of stock issuance services designed to
promote an orderly, efficient, cost-effective and long-term stock distribution.
The following list is representative of the stock issuance services, if
appropriate, we propose to perform on behalf of the Company and the Bank.
GENERAL SERVICES
Assist management and legal counsel in structuring the transaction.
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.
STOCK OFFERING ENHANCEMENT SERVICES
Establish and manage a Stock Information Center at the Company/Bank. Stock
Information Center personnel will track prospective investors; record stock
orders; mail order confirmations; provide the Company's/Bank's senior management
with daily reports; process and tabulate proxies for the MHC; answer customer
inquiries; and handle special situations as they arise.
Assign KBW's personnel to be at the Bank through completion of the Subscription
and Community Offerings to mange the Stock Information Center, meet with
prospective shareholders at individual and community information meetings (if
applicable), 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 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.
STOCK 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.
AFTER-MARKET SUPPORT SERVICES
KBW will use their best efforts to secure a trading commitment from at least
three NASD firms, one of which will be Xxxxx, Xxxxxxxx & Xxxxx, Inc.
