Exhibit 1.1
[KENDRICK PIERCE & COMPANY LETTERHEAD]
Confidential
October 17, 2001
Mr. Bernard Janis
Chairman & Chief Executive Officer
Florida Savings Bancorp
8181 SW 117th Street
Pinecrest, FL 33156
Dear Mr. Janis:
We are pleased to submit this Engagement Letter which sets forth the selected
terms of the proposed services to be provided by Kendrick, Pierce Securities,
Inc. ("Kendrick, Pierce", in connection with an offering of Convertible
Debentures ("Debentures") by Florida Savings Bancorp ("Florida Savings"). The
Debentures will be offered by Kendrick, Pierce on a "best efforts," and not a
firm underwriting basis.
Florida Savings will identify in writing a broad-based group of customers and
other associates of Florida Savings and members of the community, other than
current stockholders of Florida Savings common stock, who will be contacted by
the officers or directors of Florida Savings in connection with the Offering
(the "Preferred Investors"). Remaining Debentures will be sold to other persons,
other than current stockholders of Florida Savings common stock and Preferred
Investors, in the community at large (the "General Public") and by a selling
group managed by Kendrick, Pierce. Kendrick, Pierce may designate a co-manager
of the Offering with the consent of Florida Savings.
Nothing contained herein constitutes a commitment on the part of Kendrick,
Pierce to purchase any of the Debentures, a commitment on the part of Florida
Savings to sell any Debentures, or an assurance the Offering will be completed.
1. Proposed Offering and Services
It is presently contemplated that Florida Savings will offer approximately $5.0
million of Debentures. The amount, interest rate and other terms on the
Debentures offered will be determined in consultation with Kendrick, Pierce
immediately prior to commencement of the sale of Debentures, but is expected to
be consistent with the attached term sheet. The final terms will be based upon
prevailing market conditions and a number of other factors, including, but not
limited to the following: (i) the earnings of Florida Savings, (ii) the current
financial position and future prospects of Florida Savings, and (iii) the
condition of the credit and equity markets and particularly as they relate to
securities of financial institutions.
Mr. Bernard Janis
Florida Savings Bank
October 17, 2001
Page 2
Advisory Services - Kendrick, Pierce will serve as lead coordinator of the
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marketing and logistical efforts necessary to prepare for the Offering.
Kendrick, Pierce's responsibilities will include:
. Financial advisory services with respect to the type of
security, structure and size of Offering;
. Participate in drafting the offering circular;
. Develop a marketing plan including direct mail, advertising,
community meetings and telephone solicitation;
. Draft marketing materials including letters, brochures, slide
show presentations and advertisements;
. Design and implement procedures for handling IRA orders; and
. Prepare weekly sales reports for management and ensure funds
received balance to such reports.
Securities Sales Services - Kendrick, Pierce will use various sales techniques
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including investor meetings, telephone solicitation, direct mail, and
advertising. The sales approach is tailored to fit Madison' specific situation.
Kendrick, Pierce's specific actions will include:
. Assign licensed registered representatives from or staff to
work to solicit orders in the Offering;
. Respond to inquiries concerning the Offering and investment
opportunity;
. Organize, coordinate and participate in investor informational
meetings. These meetings are intended to promote favorable
stockholder investor relations and encourage investor
interest. The meetings generate widespread publicity for the
Offering.
. Meet with management and top prospects;
. Continually advise management on market conditions and
investor responsiveness to the Offering; and
. Assemble a selling group of selected broker-dealers to assist
in selling stock during the Offering. In doing so, prepare
broker "fact sheets" and conduct "road shows" for the purpose
of stimulating local interest in the Common Stock and
informing the brokerage community of the particulars of the
Offering.
2. Documents
Offering Document - The Debentures to be offered to the public will be the
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subject of a registration statement, offering statement or other similar
document ("Registration Statement") meeting the requirements of applicable
federal and state securities laws, and the Office of Thrift Supervision ("OTS"),
and their respective rules and regulations to the extent applicable. Kendrick,
Pierce will
Mr. Bernard Janis
Florida Savings Bank
October 17, 2001
Page 3
expect that such Registration Statement and any related documentation,
including, but not limited to, the Subscription Agreements and the Escrow
Agreement (further discussed below), each of which shall be prepared by counsel
to Florida Savings, will be satisfactory to Kendrick, Pierce and its counsel.
The final registration statement shall contain consolidated financial statements
of Florida Saving audited by its independent public accounts ("Accountants") as
of and for the years ended December 31, 2000 and 1999 and shall be covered by an
opinion of the Accountants containing no material qualifications. Additionally,
the final Registration Statement shall contain unaudited financial statements
for the nine month period ending September 30, 2001 (or any later period as
required by the securities laws). Florida Savings shall cause its Accountants to
provide Kendrick, Pierce, upon commencement of the sale of Debentures, with a
comfort letter, or comparable assurance letter, providing the usual assurances
with respect to all financial data contained in the registration statement and
update such letter upon the closing.
As referenced in the preceding paragraph, simultaneous with the execution of the
Agency Agreement the parties will enter into an Escrow Agreement, in form and
substance satisfactory to both parties and their respective counsel, identifying
an Escrow Agent and the terms relating to the deposit of the proceeds of the
Offering into an escrow account on behalf of Florida Savings.
Agency Agreement - Immediately prior to the sale of Debentures, Kendrick, Pierce
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and Florida Savings will enter into the Agency Agreement, which upon execution
will supersede this Agreement. Upon the occurrence of such event, this Agreement
shall be null and void and of no further legal consequence. The Agency Agreement
shall contain customary representations and covenants on behalf of Florida
Savings and other such terms and conditions as shall be agreed to by Florida
Savings and Kendrick, Pierce.
Opinion of Counsel - As a condition to closing, Kendrick, Pierce shall receive
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an opinion of counsel to Florida Savings, in the form and substance set forth in
an Agency Agreement to be agreed upon by the parties. Such opinion shall, among
other things, provide that the Offering and sale of the Debentures are either
properly registered or qualified under, or are exempt from registration or
qualification under, the Securities Act of 1933, as amended (the "Act"), and any
applicable blue sky laws. Counsel to Florida Savings shall be responsible for
performing and ensuring all necessary blue sky compliance and qualification, as
set more fully described in paragraph 7 herein.
3. Due Diligence Review
Kendrick, Peirce and its counsel will conduct an examination of relevant
documents and records of Florida Savings and will make such other reasonable
investigation as deemed necessary and appropriate under the circumstances.
Florida Saving agrees to make all such documents, records and other information
deemed reasonably necessary by the parties hereto, or their counsel, available
to
Mr. Bernard Janis
Florida Savings Bank
October 17, 2001
Page 4
Kendrick, Pierce upon request. Kendrick, Pierce acknowledges that any form of
confidential information regarding Florida Saving provided by Florida Savings or
its representatives to allow Kendrick, Pierce to provide the services
contemplated by this Engagement Agreement, will be kept confidential by
Kendrick, Pierce and its representatives, except such of the information as has
been made, or will be made pubic by Florida Savings, or which Florida Savings
agrees may be disclosed or which Kendrick, Pierce is required by legal process
(by oral questions, interrogatories, requests for information or documents,
subpoena, or similar process) to disclose.
4. Term
The term of this Engagement Agreement shall be for a period of one (1) year from
the date of the execution of this Engagement Agreement (the first six months of
which is referred to herein as the "Initial Term"). Following the Initial Term,
either party may terminate this Engagement Agreement upon thirty (30) days
written notice provided to the other party. Notwithstanding any termination or
expiration of this Engagement Agreement, Sections 6, 9 and 10 of this Engagement
Letter shall survive any termination or expiration of this Engagement Agreement
(except if terminated as a result of the execution of the Agency Agreement)
along with any other provisions which expressly or by implication survive the
termination or expiration (collectively, the "Surviving Provisions").
5. Fees
In consideration of Kendrick, Pierce's agreement to provide the services as
described herein, Florida Savings agrees to compensate Kendrick, Peirce as
follows:
(i) A non-refundable retainer of $15,000 upon the signing of this
Engagement Agreement. This fee will be offset against compensation
due at the closing.
(ii) A fee of one and one-half (1.50%) percent of the dollar amount of
Debentures sold to holders of Florida Savings common stock. No fee
would apply to Debentures purchased in the Offering by directors,
officers and employees of Florida Savings; and
(iii) A fee of one and one-half (1.50%) percent of the dollar amount of
Debentures sold to Preferred Investors in the Offering; and
(iv) A fee equal to six (6.00%) percent of the dollar amount of Debentures
sold to the General Public.
Mr. Bernard Janis
Florida Savings Bank
October 17, 2001
Page 5
6. Expenses
Florida Savings will pay all of the expenses of the Offering customarily borne
by issuers, including, but not limited to, printing expenses, legal and
accounting fees, "Blue Sky" legal fees, state and federal filing fees, and
advertising expenses. Florida Savings will reimburse Kendrick, Pierce for its
itemized and reasonable out-of-pocket expenses in connection with this
transaction, which shall include legal fees and associated expenses. Kendrick,
Pierce agrees to cap its out-of-pocket expenses including legal fees and
associated expenses, marketing and travel expenses at $40,000 (it being
understood by the parties that all legal fees or filing fees associated with all
Blue Sky compliance and/or qualification shall be borne by Florida Savings as
further referenced in paragraph 7 below).
7. Blue Sky
To the extent required by applicable state law, Kendrick, Pierce and Florida
Savings will need to obtain or confirm exemptions, qualifications or
registration of the Debentures under applicable state securities laws and NASD
policies. Florida Savings' counsel shall be responsible for Blue Sky filings and
preparation of the Blue Sky memorandum. Florida Savings shall be responsible for
any NASD filing fees. Florida Savings will cause the counsel performing such
services to prepare a Blue Sky memorandum related to the Offering including
Kendrick, Pierce's involvement therein and shall furnish Kendrick, Pierce a copy
thereof addressed to Kendrick, Pierce or upon which such counsel shall state
Kendrick, Pierce may rely, subject to the customary qualifications in offerings
of this type.
8. Indemnification and Contribution
The parties acknowledge and agree that the Agency Agreement shall contain
appropriate indemnification and contribution provisions as agreed upon by the
parties.
9. Arbitration
Any claims, controversies, demands, disputes or differences between or among the
parties hereto or any persons bound hereby arising out of, or by virtue of, or
in connection with, or otherwise relating to this Agreement shall be submitted
to and settled by arbitration conduced in Tampa, Florida before one or three
arbitrators, each of whom shall be knowledgeable in the field of securities law
and investment banking. Such arbitration shall otherwise be conducted in
accordance with the rules then obtaining of the American Arbitration
Association. The parties hereto agree to share equally the responsibility for
all fees of the arbitrators, abide by any decision rendered as final and
binding, and waive the right to appeal the decision or otherwise submit the
dispute to a court of law for a jury or non-jury trial. The parties hereto
specifically agree that neither party may appeal or subject the award or
decision of the majority of such arbitrators to appeal or review in any court of
law or in
Mr. Bernard Janis
Florida Savings Bank
October 17, 2001
Page 6
equity or by any other tribunal arbitration system or otherwise. Judgment upon
any award granted by the majority of such arbitrators may be enforced in any
court having jurisdiction thereof.
10. Obligations
a. Except as set forth below, this Engagement Agreement is merely a
statement of intent. This letter is not intended to constitute a
binding agreement to enter into an Agency Agreement. While the parties
agree in principle to the contents hereof and propose to proceed
promptly and in good faith to work out the arrangements with respect
to the Offering, any legal obligations between Kendrick, Pierce and
Florida Savings arising hereunder shall be only those set forth herein
in paragraph 5(i) regarding fees, paragraph 3 regarding
confidentiality, paragraph 5 regarding reimbursement for certain
expenses, and paragraph 9 regarding arbitration. The terms of the
Agency Agreement shall govern and supersede the terms of this letter
upon the parties' mutual execution of the Agency Agreement.
b. The obligations of Kendrick, Pierce under the Agency Agreement and
Kendrick, Pierce hereunder shall be subject to, among other things,
there being, in Kendrick, Pierce's opinion: (i) no material adverse
change in the condition or operation of Florida Savings; (ii)
satisfactory disclosure of all relevant financial information in the
disclosure documents and determination that the sale of the Debentures
is reasonable given such disclosures; and (iii) no market conditions
which might render the sale of the Debentures by Florida Savings hereby
contemplated inadvisable.
This Engagement Agreement shall be governed by the laws of the State of Florida
shall be binding upon Florida Savings and Kendrick, Pierce, their successors and
assigns.
This Engagement Agreement embodies the entire understanding between the parties
and may not be modified, altered, amended or supplemented, except by a written
agreement executed by both parties hereto. If any provision of this Engagement
Agreement is found to be invalid, it shall be considered deleted and shall not
invalidate the remaining provisions.
Mr. Bernard Janis
Florida Savings Bank
October 17, 2001
Page 7
Please acknowledge your agreement to the foregoing by signing in the place
provided below and returning one copy of this letter along with the $15,000
retainer check, to our office. We look forward to working with you.
ACCEPTED AND AGREED TO THIS 19/th/ DAY OF OCTOBER, 2001.
KENDRICK, PIERCE SECURITIES, INC. FLORIDA SAVINGS BANCORP
By: /s/ Russell L. Hunt By: /s/ Bernard Janis
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Russell L. Hunt Mr. Bernard Janis
Managing Director Chairman & Chief Executive Officer