Exhibit 1.1 Engagement Letter between Elgin Financial Center, S.B. and
Xxxxxxx Xxxx & Company, a Division of Xxxxx, Xxxxxxxx & Xxxxx,
Inc.
[LETTERHEAD]
September 2, 1997
Xxxx X. Xxxxxxxx, Esq.
Chairman
Elgin Financial Center, SB
0000 Xxxxxx Xxx.
Elgin, Illinois 60123
Dear Xx. Xxxxxxxx:
This proposal is in connection with Elgin Financial Center, SB's (the "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 the Bank and provide 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,
Xx. Xxxx X. Xxxxxxxx
September 2, 1997
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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"), Federal Deposit Insurance Corporation ("FDIC"),
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, the FDIC, 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
Xx. Xxxx X. Xxxxxxxx
September 2, 1997
Page 3 of 6
the selling group and their controlling persons), provided however, that the
Bank and the Company will not be liable in any such case to the extent that any
request for indemnification (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 the statements therein not misleading
contained in any proxy statement or prospectus (preliminary or final), or any
amendment 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 Xxxx expressly for use therein, or (ii) is attributable
to the negligence, willful misconduct or bad faith of Xxxx, provided that the
Bank or Company is not providing indemnification or reimbursement to any other
person for liabilities arising from such person's negligence, willful misconduct
or bad faith, 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 $40,000 payable in four consecutive monthly
installments of $10,000 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 1.25% of the aggregate Purchase Price of Common Stock
sold in the conversion, 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, 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
Xx. Xxxx X. Xxxxxxxx
September 2, 1997
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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 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 the Bank for any of the
aforementioned matters, the Bank will reimburse Xxxx for such expenses.
Xxxx shall be reimbursed for reasonable out-of-pocket expenses, including
costs of travel, meals and lodging, photocopying, telephone, facsimile and
couriers and reasonable fees and expenses of their counsel. Reimbursement
for Xxxx'x total out-of-pocket expenses shall not exceed $60,000, of which
$40,000 shall be for legal fees, without the prior consent of the Bank and
Company. The selection of such counsel will be done by Xxxx, with the
approval of the Bank.
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)
legally sufficient disclosure of all relevant material, financial and other
information in the disclosure documents; (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.
Xx. Xxxx X. Xxxxxxxx
September 2, 1997
Page 5 of 6
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 the assumption of expenses as set forth in Section 9, and
the mutual indemnification provisions set forth in Section 6, 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.
Xx. Xxxx X. Xxxxxxxx
September 2, 1997
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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
--------------------------------
Xxxx Xxxxx
ELGIN FINANCIAL CENTER, SB
By: /s/ Xxxx X. Xxxxxxxx Date: Sept. 5, 1997
-------------------------------- ---------------------
Xxxx X. Xxxxxxxx
Chairman
cc: Xxxxxxx X. X'Xxxxxx
EXHIBIT A
CONVERSION SERVICES PROPOSAL
TO ELGIN FINANCIAL CENTER, SB
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 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. If so desired
by the Bank, Xxxx'x personnel will also 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.
Provide proxy solicitation, member vote tabulation and act as inspector of
election at the special meeting of members.
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, through Xxxxx, Xxxxxxxx & Xxxxx, Inc., will provide market making and
on-going research of the Company. In addition, Xxxx will use its best efforts
to secure a commitment from at least one additional NASD firm to provide market
making services.
Conversion Agent Services
Xxxx will utilize the services of Xxxxx, Xxxxxx & Company for aggregation of
accounts. The services provided will be a part of a separate agreement between
the Bank and Xxxxx Xxxxxx. Xxxxx Xxxxxx has advised Xxxx that the fees of Xxxxx
Xxxxxx are estimated to be $18,000.
