EXHIBIT 1.1
August 31, 1999
Mr. Richard P. Meduski
President
The Savings Bank of Manchester
923 Main Street
Manchester, Connecticut 06040-6092
Dear Mr. Meduski:
Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") is pleased to act as
conversion agent to The Savings Bank of Manchester (the "Bank") in connection
with the proposed reorganization of the Bank and its parent company, Connecticut
Bankshares, M.H.C., from the mutual holding company form to stock holding
company form (the "Conversion"). This letter is to confirm the terms and
conditions of our engagement.
SERVICES AND FEES
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In our role as Conversion Agent, we anticipate that our services will
include the services outlined below, each as may be necessary and as the Bank
may reasonably request:
I. Consolidation of Accounts and Development of a Central File
II. Preparation of Proxy, Order and/or Request Forms
III. Organization and Supervision of the Conversion Center
IV. Proxy Solicitation and Special Meeting Services
V. Subscription Services
Each of these services is further described in Appendix A to this agreement.
Mr. Richard P. Meduski
August 31, 1999
Page 2
For its services hereunder, the Bank agrees to pay Sandler O'Neill a fee of
$60,000. This fee is based upon a total number of unconsolidated accounts of
approximately 120,000. No change in fees will occur as long as the variance in
the number of accounts does not exceed 5%. In the event the actual number of
accounts exceeds the number specified above by more than 5%, the fee will be
proportionately increased.
The fee set forth above is based upon the requirements of current
regulations and the Plan of Conversion as currently contemplated. Any unusual or
additional items or duplication of service required as a result of a material
change in the regulations or the Plan of Conversion or a material delay or other
similar events may result in extra charges which will be covered in a separate
agreement if and when they occur.
All fees under this agreement shall be payable in cash, as follows: (a)
$10,000 payable upon execution of this agreement by the Bank, which shall be
non-refundable; and (b) the balance upon the completion of the Conversion.
COSTS AND EXPENSES
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In addition to any fees that may be payable to Sandler O'Neill hereunder,
the Bank agrees to reimburse Sandler O'Neill, upon request made from time to
time, for its reasonable out-of-pocket expenses incurred in connection with its
engagement hereunder regardless of whether the Conversion is consummated,
including, without limitation, travel, lodging, food, telephone, postage,
listings, forms and other similar expenses, up to an aggregate maximum amount of
$200,000 (inclusive of those expenses reimbursed to Sandler O'Neill pursuant to
the terms of the separate engagement letter of even date between Sandler O'Neill
and the Bank regarding Sandler O'Neill's financial advisory services in
connection with the Conversion); provided, however, that Sandler O'Neill shall
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document such expenses to the reasonable satisfaction of the Bank. The
provisions of this paragraph are not intended to apply to or in any way impair
the indemnification provisions of this agreement.
In addition, all taxes however designated, arising from or based upon this
agreement or the payments made to Sandler O'Neill pursuant hereto, including,
but not limited to, any applicable sales, use, excise and similar taxes, shall
be paid by the Bank as the same become due, and the Bank shall, upon request by
Sandler O'Neill, pay the same either to Sandler O'Neill or to the appropriate
taxing authority at any time during, or after the termination of, this
Agreement; provided, however, that the Bank shall not be responsible for the
payment of any state, federal, or local franchise or income taxes based upon the
net income of Sandler O'Neill.
Mr. Richard P. Meduski
August 31, 1999
Page 3
RELIANCE ON INFORMATION PROVIDED
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The Bank will provide Sandler O'Neill with such information as Sandler
O'Neill may reasonably require to carry out its duties. The Bank recognizes and
confirms that Sandler O'Neill (a) will use and rely on such information in
performing the services contemplated by this agreement without having
independently verified the same, and (b) does not assume responsibility for the
accuracy or completeness of the information. The Bank will also inform Sandler
O'Neill within a reasonable period of time of any changes in the Plan which
require changes in Sandler O'Neill's services. If a substantial expense results
from any such change, the parties shall negotiate an equitable adjustment in the
fee.
LIMITATIONS
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Sandler O'Neill, as Conversion Agent hereunder, (a) shall have no duties or
obligations other than those specifically set forth herein; (b) will be regarded
as making no representations and having no responsibilities as to the validity,
sufficiency, value or genuineness of any order form or any stock certificates or
the shares represented thereby, and will not be required to and will make no
representations as to the validity, value or genuineness of the offer; (c) shall
not be liable to any person, firm or corporation including the Bank by reason of
any error of judgment or for any act done by it in good faith, or for any
mistake of law or fact in connection with this agreement and the performance
hereof unless caused by or arising out of its own bad faith or gross negligence;
(d) will not be obliged to take any legal action hereunder which might in its
judgment involve any expense or liability, unless it shall have been furnished
with reasonable indemnity satisfactory to it; and (e) may rely on and shall be
protected in acting in reliance upon any certificate, instrument, opinion,
notice, letter, telex, telegram, or other document or security delivered to it
and in good faith believed by it to be genuine and to have been signed by the
proper party or parties.
INDEMNIFICATION
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The Bank agrees to indemnify and hold Sandler O'Neill and its affiliates
and their respective partners, directors, officers, employees, agents and
controlling persons (Sandler O'Neill 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 engagement of Sandler O'Neill pursuant to, and the
performance by Sandler O'Neill of the services contemplated by this letter, and
will reimburse any Indemnified Party for all expenses (including reasonable
counsel 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
Mr. Richard P. Meduski
August 31, 1999
Page 4
therefrom, whether or not such Indemnified Party is a party. The Bank will not
be liable under the foregoing indemnification provision to the extent that any
loss, claim, damage, liability or expense is found in a final judgment by a
court of competent jurisdiction to have resulted primarily from Sandler
O'Neill's bad faith or gross negligence.
MISCELLANEOUS
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The following addresses shall be sufficient for written notices to each
other:
If to you: The Savings Bank of Manchester
923 Main Street
Manchester, CT 06046092
Attention: Mr. Richard P. Meduski
If to us: Sandler O'Neill & Partners, L.P.
747 Middle Neck Road
Great Neck, New York 11024
Attention: Mr. Mark B. Cohen
The Agreement and appendix hereto constitute 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 Agreement is governed by the laws of
the State of New York.
Mr. Richard P. Meduski
August 31, 1999
Page 5
Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to Sandler O'Neill the duplicate copy of this letter
enclosed herewith.
Very truly yours,
Sandler O'Neill & Partners, L.P.
By: Sandler O'Neill & Partners Corp.,
the sole general partner
/s/ Thomas P. Duke
By: ________________________________
Thomas P. Duke
Vice President
Accepted and agreed to as of
the date first above written:
The Savings Bank of Manchester
/s/ Richard P. Meduski
By: ____________________________________
Mr. Richard P. Meduski
President
cc: Douglas P. Faucette, Esq.
Muldoon, Murphy & Faucette, L.L.P.
APPENDIX A
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OUTLINE OF CONVERSION AGENT SERVICES
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I. Consolidation of Accounts
1. Consolidate files in accordance with regulatory guidelines.
2. Accounts from various files are all linked together. The resulting
central file can then be maintained on a regular basis.
3. Our EDP format will be provided to your data processing people.
II. Proxy/Order Form/Request Card Preparation
1. Vote calculation.
2. Any combination of proxies, request cards and stock order forms for
voting and ordering stock.
3. Target group identification for subscription offering.
III. Organization and Supervision of Conversion Center
1. Advising on and supervising the physical organization of the Conversion
Center, including materials requirements.
2. Assist in the training of all Bank personnel who will be staffing the
conversion center.
3. Establish reporting procedures.
4. On-site supervision of the Conversion Center during the
solicitation/offering period.
IV. Special Meeting Services*
1. Direct proxy solicitation if independent solicitor not used.
2. Proxy and ballot tabulation.
3. Act as or support inspector of election.
4. Delete voting record date accounts closed prior to special meeting.
5. Produce final report of vote.
* To the extent independent third parties are required by any
regulatory agency to perform such services, it is understood and
agreed that Sandler O'Neill will subcontract for such services and
that the Bank will reimburse Sandler O'Neill for such reasonable fees
and expenses incurred as a result of such regulatory requirement.
A-1
V. Subscription Services
1. Produce list of depositors by state (Blue Sky report).
2. Production of subscription rights and research books.
3. Stock order form processing.
4. Acknowledgment letter to confirm receipt of stock order.
5. Daily reports and analysis.
6. Proration calculation and share allocation in the event of an
oversubscription.
7. Produce charter shareholder list.
8. Interface with Transfer Agent for Stock Certificate issuance.
9. Refund and interest calculations.
10. Confirmation letter to confirm purchase of stock.
11. Notification of full/partial rejection of orders.
12. Production of 1099/Debit tape.
A-2
August 31, 1999
Connecticut Bankshares, M.H.C.
923 Main Street
Manchester, CT 06040-6092
The Savings Bank of Manchester
923 Main Street
Manchester, CT 06040-6092
Attention: Mr. Richard P. Meduski
President
----------------------
Dear Mr. Meduski:
Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") is pleased to act as
an independent financial advisor to Connecticut Bankshares, M.H.C. (the
"Company") and its subsidiary, The Savings Bank of Manchester (the "Bank"), in
connection with the Company's proposed reorganization from mutual holding
company form to stock form (the "Conversion"), including the offer and sale of
certain shares of the common stock of the proposed new stock 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.
ADVISORY SERVICES
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Sandler O'Neill will act as a consultant and advisor to the Company, 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;
Mr. Richard P.Meduski
August 31, 1999
Page 2
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;
3. Reviewing all offering documents, including the Prospectus, stock
order forms and related offering materials (it being understood that
preparation and filing of such documents will be the responsibility of
the Company, 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 O'Neill 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 O'Neill 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, which shall not exceed 6% of the
aggregate Actual Purchase Price of the shares sold under such agreements.
Sandler O'Neill will endeavor to distribute the common stock among dealers in a
fashion which best meets the distribution objectives of the Bank and 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 O'Neill be obligated to act as a selected dealer or to take
or purchase any shares of the Holding Company's common stock.
Mr. Richard P. Meduski
August 31, 1999
Page 3
FEES
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If the Conversion is consummated, the Bank agrees to pay Sandler O'Neill
for its services hereunder the fees set forth below:
1. a fee of one and one-half percent (1.50%) of the aggregate Actual
Purchase Price of the shares of common stock sold in the Subscription
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 Charitable Foundation formed by the Bank or the Holding
Company, and (iii) any director, officer or employee of the Holding
Company or the Bank or members of their immediate families; and
2. with respect to any shares of the Holding Company's common stock sold
by an NASD member firm under any selected dealers 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 O'Neill of one and one-half
percent (1.50%).
If (i) Sandler O'Neill's 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 O'Neill hereunder;
however, the Bank shall reimburse Sandler O'Neill for its reasonable out-of-
pocket expenses incurred in connection with its engagement hereunder.
All fees payable to Sandler O'Neill 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 O'Neill 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 O'Neill hereunder
and the expenses to be borne by the Bank pursuant to the following paragraph,
the Bank agrees to reimburse Sandler O'Neill, upon request made from time to
time, for its reasonable out-of-pocket expenses incurred in connection with its
engagement hereunder, regardless of whether the Conversion is consummated,
Mr. Richard P. Meduski
August 31, 1999
Page 4
including, without limitation, legal fees, advertising, promotional,
syndication, and travel expenses, up to an aggregate maximum amount of $200,000
(inclusive of those expenses reimbursed to Sandler O'Neill pursuant to the terms
of the separate engagement letter of even date between Sandler O'Neill and the
Bank regarding Sandler O'Neill's services as Conversion Agent for the Bank);
provided, however, that Sandler O'Neill shall document such expenses to the
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reasonable satisfaction of the Bank. 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; (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, conversion agent and other advisors.
In the event Sandler O'Neill incurs any such fees and expenses on behalf of the
Company, the Bank or the Holding Company, the Bank will reimburse Sandler
O'Neill for such fees and expenses whether or not the Conversion is consummated;
provided, however, that Sandler O'Neill shall not incur any substantial expenses
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on behalf of the Company, the Bank or the Holding Company pursuant to this
paragraph without the prior approval of the Bank.
DUE DILIGENCE REVIEW
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Sandler O'Neill's obligation to perform the services contemplated by this
letter shall be subject to the satisfactory completion of such investigation and
inquiries relating to the Company, the Bank and the Holding Company, and their
respective directors, officers, agents and employees, as Sandler O'Neill 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 O'Neill all information which Sandler O'Neill requests, and will allow
Sandler O'Neill 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 O'Neill will rely upon the accuracy and completeness of all information
received from the Bank and the Holding Company and their directors, trustees,
officers, employees, agents, independent accountants and counsel.
BLUE SKY MATTERS
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The Bank agrees that if Sandler O'Neill's 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
Mr. Richard P. Meduski
August 31, 1999
Page 5
services to prepare a Blue Sky Memorandum related to the Offerings including
Sandler O'Neill's participation therein and shall furnish Sandler O'Neill a copy
thereof addressed to Sandler O'Neill or upon which such counsel shall state
Sandler O'Neill 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 O'Neill 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 O'Neill, (ii) was
available to Sandler O'Neill on a non-confidential basis prior to its disclosure
to Sandler O'Neill by the Bank, or (iii) becomes available to Sandler O'Neill on
a non-confidential basis from a person other than the Bank who is not otherwise
known to Sandler O'Neill to be bound not to disclose such information pursuant
to a contractual, legal or fiduciary obligation.
INDEMNIFICATION
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Since Sandler O'Neill will be acting on behalf of the Company, the Bank and
the Holding Company in connection with the Conversion, the Company, the Holding
Company and the Bank agree to indemnify and hold Sandler O'Neill 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 Exchange Act (Sandler O'Neill 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 O'Neill pursuant to, or the performance by Sandler O'Neill 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 proxy statement
or prospectus (preliminary or final), or any amendment or supplement 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
Sandler O'Neill expressly for use therein, or (ii) is primarily attributable
Mr. Richard P. Meduski
August 31, 1999
Page 6
to the gross negligence, willful misconduct or bad faith of Sandler O'Neill. 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 O'Neill.
DEFINITIVE AGREEMENT
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Sandler O'Neill and the Company and the Bank agree that (a) except as set
forth in clause (b), the foregoing represents the general intention of the
Company, the Bank and Sandler O'Neill with respect to the services to be
provided by Sandler O'Neill in connection with the Offerings, which will serve
as a basis for Sandler O'Neill commencing activities, and (b) the only legal and
binding obligations of the Company, the Bank, the Holding Company and Sandler
O'Neill with respect to the subject matter hereof shall be (1) the Company's and
the Bank's obligation to reimburse costs and expenses pursuant to the section
captioned "Costs and Expenses," (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 O'Neill in connection with the Offerings. Such Agency Agreement shall
be in form and content satisfactory to Sandler O'Neill, the Bank and the Holding
Company and their respective counsel and shall contain standard indemnification
provisions consistent herewith.
Sandler O'Neill's execution of such Agency Agreement shall also be subject
to (i) Sandler O'Neill's satisfaction with its investigation of the Company's
and the Bank's business, financial condition and results of operations, (ii)
preparation of offering materials that are satisfactory to Sandler O'Neill and
its counsel, (iii) compliance with all relevant legal and regulatory
requirements to the reasonable satisfaction of Sandler O'Neill's counsel, (iv)
agreement that the price established by the independent appraiser is reasonable
and (v) market conditions at the time of the proposed offering. Sandler O'Neill
may terminate this agreement if such Agency Agreement is not entered into prior
to September 30, 2000.
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
Mr. Richard P. Meduski
August 31, 1999
Page 7
deemed to refer to the Bank or shall have no effect, as the context of the
reference requires.
Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to Sandler O'Neill the duplicate copy of this letter
enclosed herewith.
Very truly yours,
Sandler O'Neill & Partners, L.P.
By: Sandler O'Neill & Partners Corp.,
the sole general partner
/s/ Thomas P. Duke
By: ________________________________
Thomas P. Duke
Vice President
Accepted and agreed to as of
the date first above written:
Connecticut Bankshares, M.H.C.
/s/ Richard P. Meduski
By: _____________________________________
Mr. Richard P. Meduski
President
The Savings Bank of Manchester
/s/ Richard P. Meduski
By: _____________________________________
Mr. Richard P. Meduski
President
cc: Douglas P. Faucette, Esq.
Muldoon, Murphy & Faucette L.L.P.