EXHIBIT 1.1
Ryan, Beck & Co.
Excellence in Investment Banking
220 South Orange Avenue
Livingston. New Jersey 07039-5817
Telephone (973) 597-6000
Facsimile: (973) 597-1258
Corporate Finance Department
CONFIDENTIAL
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May 19, 1999
VIA FEDERAL EXPRESS
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Mr. James B. Keegan
President & Chief Executive Officer
Cambridgeport Bank
689 Massachusetts Avenue
Cambridge, MA 02139
Re: Stock Conversion Subscription Enhancement and Administrative Services
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Dear Mr. Keegan:
Ryan, Beck & Co. ("Ryan, Beck") is pleased to submit this engagement letter
setting forth the terms of the proposed engagement between Ryan, Beck,
Cambridgeport MHC (the "MHC") and Cambridgeport Bank, (the "Institution") in
connection with the proposed full or partial conversion of the Institution from
the mutual to the capital stock form of organization.
1. BACKGROUND ON RYAN, BECK
Ryan, Beck, Inc. was organized in 1946 and is one of the nation's leading,
investment bankers for financial institutions. The firm is a registered broker-
dealer with the Securities and Exchange Commission, a member of the National
Association of Securities Dealers, Inc., Securities Industry Association and a
member of the Securities Investor Protection Corporation. Ryan, Beck's financial
institutions group is one of the largest such, groups devoted to financial
institution matters in the country. Moreover, Ryan, Beck, is one of the largest
market makers in bank and thrift stocks.
2. PLAN OF CONVERSION
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Cambridgeport Bank
May 19, 1999
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The MHC presently owns 100 percent of the outstanding stock of the Institution.
The MHC and the institution are presently considering several alternative
courses of action. The first alternative involves a full conversion whereby the
MHC will convert from the mutual to the stock form of organization (the
"Conversion") pursuant to applicable regulations and form a holding company (the
"Company"). The other alternatives involve a partial conversion whereby the MHC
will form a down stream middle tier holding company (the "Company") for the
purpose of selling up to 49% of its shares to the depositors and others (the
"Reorganization"). The MHC may or may not contribute its net assets to the
Company prior to the Reorganization. If the MHC does not contribute its net
assets to the Company prior to the Reorganization, that form of organization
will be referred to as the "Bank Only MHC Scenario", the other alternative will
be known as the "Consolidated MHC Scenario." Accordingly, the Institution's
Board of Directors will adopt a plan of conversion (the "Plan") and, if
necessary, convene a meeting of the Institution's corporators and/or depositors
as soon as practicable to obtain approval of the Plan in accordance with
applicable federal and state regulations. The Institution's Plan contemplates a
Subscription and Community Offering (the "Offerings").
In connection with the Institution's Conversion or Reorganization, Ryan, Beck
proposes to act as selling agent, financial advisor, and conversion manager to
the Institution with respect to the proposed transaction and the offering of the
shares of common stock of the Company (the "Common Stock") in the Offerings.
Specific terms of the services contemplated hereunder shall be set forth in a
definitive agency agreement (the "Definitive Agreement") between Ryan, Beck and
the Institution to be executed on the date the offering document is declared
effective by the appropriate regulatory authorities. The purchase price of the
Common Stock offered in the Offerings will be that price which is established by
an independent appraisal in accordance with applicable regulations and mutual y
acceptable to the parties hereto.
The Institution may also retain Ryan, Beck to assist it with respect to specific
acquisition matters. In connection therewith, the parties will execute a
separate Financial Advisory Agreement with respect to the services To be
rendered by Ryan, Beck.
3. SERVICES TO BE PROVIDED BY RYAN, BECK
a. Advisory Services - Thorough planning and financial advice is essential to
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a successful conversion. Ryan, Beck serves as your financial advisor and
lead coordinator of the marketing and logistic efforts necessary to prepare
for an offering. Our actions are intended to clearly define
responsibilities and timetables, while avoiding costly surprises. We assume
responsibility for the initial preparation of marketing materials saving
you time and legal expense. Moreover, as your investment banker, Ryan, Beck
will evaluate the financial, marketing and regulatory issues involved in
the Offerings. Our specific responsibilities include:
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Cambridgeport Bank
May 19, 1999
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- Review and advise with respect to the Plan;
- Advise with respect To acquisition strategy,
- Review and provide input with respect to the Business Plan to be
prepared in connection with the Reorganization;
- Review and advise with respect to the proposed stock benefit plans;
- Review and advise on the possibility of forming a charitable foundation;
- Assist in any discussions with regulators regarding the proposed
transaction;
- Participate in drafting the Prospectus and assist in obtaining all
requisite regulatory approvals;
- Review and opine to the Board of Directors on the adequacy of the
appraisal process;
- Develop a marketing plan for the Offerings including direct mall,
advertising, community meetings and telephone solicitation;
- Provide specifications and assistance in selecting data processing
assistance, printer and other professionals;
- Develop an operating plan for the Stock Sale Center (the "Center");
- Provide a list of equipment and supplies needed for the Center;
- Draft marketing materials including letters, brochures, slide show
script and advertisements; and
- Assist in arranging market-makers for post-reorganization trading.
b. Administrative Services and Conversion Center Management Ryan, Beck
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manages your "best efforts" community offering. A successful conversion
requires an enormous amount of attention to detail. Working knowledge and
familiarity with the law and "lore" of bank regulators Securities and.
Exchange Commission and NASD is essential. Ryan, Beck's experience in
managing, many thrift conversions will minimize the burden on your
management and disruption to normal banking, business. At the same time,
our legal, accounting and regulatory background ensures that details are
attended to in a professional fashion. A conversion requires accurate and
timely record keeping and reporting. Furthermore, customer inquiries must
be handled professionally and accurately. The Conversion Center centralizes
all data and work relating to the Offerings.
Ryan, Beck will supervise and administer the Conversion Center. Guy Malaby
will be the on-site manager at the Conversion Center. We will train
Conversion Center staff to help record stock orders, answer customer
inquiries and handle special situations as they arise. Conversion Center
activities include the following:
- Provide experienced onsite registered representatives to minimize
disruption of day-to-day business;
- Identify and organize space for the Center, the focal point of sales and
proxy solicitation activity;
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May 19, 1999
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- Administer the Center. All substantive stock and proxy related matters
will be handled by employees of Ryan, Beck
- Organize and implement all proxy solicitation efforts;
- Prepare procedures for processing proxies, stock orders and cash, and
for handling requests for information;
- Ryan, Beck will outsource all reorganization agent/data
processing/transfer agent functions. Ryan, Beck recommends outsourcing
such services to Chase/Mellon Shareholder Services or a mutually
agreeable third parry vendor. The cost of such services will be borne by
the Institution and are subject to separate agreement
- Provide scripts, training and guidance for the telephone team in
soliciting proxies and in the stock sales telemarketing effort;
- Educate the Institution's directors, officers and employees about
the Reorganization and Offerings, their roles and relevant securities
laws;
- Train branch managers and customer-contact employees on the
proper response to stock purchase inquiries,
- Train and supervise Center staff assisting with proxy and order
processing;
- Prepare daily sales reports for management and ensure funds received
balance to such reports;
- Coordinate functions with the data processing agent, printer, transfer
agent, stock certificate printer and other professionals;
- Design and implement procedures for handling IRA and Keogh orders; and
- Provide post-offering subscriber assistance and management of the pro-
ration process.
C. Securities Marketing Services Ryan, Beck uses various sales techniques
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including direct mail, advertising, community investor meetings, telephone
solicitation, and if necessary, selling group formation. The sales approach
is tailored to fit your specific situation. Our techniques are designed to
attract a stockholder base comprised largely of community oriented
individuals loyal to the Institution. Our specific actions include:
- Assign licensed registered representatives from our staff to work at the
Center To solicit orders on behalf of the Institution from eligible
prospects who have been targeted as likely and desirable stockholders;
- Assist management in developing a list of potential investors who are
viewed as priority prospects,
- Respond to inquiries concerning the Offerings and investment
opportunities;
- Organize, coordinate and participate in community informational meetings
(if needed). These meetings are intended to both relieve customer
anxiety and attract potential investors. The meetings generate
widespread publicity for the Offerings while providing local exposure of
the Institution and promoting favorable stockholder relations;
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May 19, 1999
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- Supervise and conduct a telemarketing campaign to identify prospects
from among the Institution's customer base:
- Continually advise management on market conditions and the community's
responsiveness to the Offerings; and
- If appropriate and at the request of the Institution and the Holding
Company, arrange a syndicated community Offerings involving a selling
group of selected broker-dealers acting on a "best efforts" basis to
assist in selling stock during the Offerings. In so doing, prepare
broker "fact sheets" and arrange "road shows" for the purpose of
stimulating interest in the stock and informing the brokerage community
of the particulars of the Offerings; and
- Coordinate efforts to maximize after-market support and institutional
sponsorship.
4. COMPENSATION
a. For its services hereunder, the Holding Company and/or the Institution will
pay to Ryan, Beck the following compensation in connection with the
Reorganization:
(1) An advisory and management fee of $100,000 in connection with the
advisory, administrative and proxy solicitation services set forth in
section 3.a. and 3.b. hereof (the "Management Fee");
(2) An additional fee will be paid to Ryan, Beck for the Securities
Marketing Services set forth in section 3(c). The amount of such fee
will be determined as follows:
(i) in the case of the Bank Only MHC Scenario, $350,000;
(ii) in the case of the Consolidated MHC Scenario, $450,000;
(iii) in the case of the Conversion transaction, $900,000; and
(3) For stock sold by a group of NASD member firms (which will include
Ryan, Beck) under a selected dealers' agreement (the "Selling Group")
a fee equal to one percent (1.0%), which fee along with the fee
payable directly by the Institution to selected dealers (including
Ryan, Beck) shall not exceed six percent (6.00%) in the aggregate.
Ryan, Beck will not commence sales of the stock through members of the
Selling Group without the specific prior approval of the Institution.
Such fees (less the amount of any advance payments) are to be paid to Ryan, Beck
at the closing of the Offerings. As advance payments, the institution will pay
Ryan, Beck $50,000 upon execution of this letter and $50,000 upon commencement
of the Offerings, each of which will be offset against total compensation due
hereunder at Closing. If, pursuant to a resolicitation undertaken by the
Institution, Ryan, Beck is required to provide significant additional services,
or expend significant additional time, the parties shall mutually agree to the
dollar amount of the additional compensation due.
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May 19, 1999
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b. If (i) the Plan is abandoned or terminated by the Institution; (ii) the
Offerings are not consummated by June 30, 2000; (iii) Ryan, Beck terminates
this relationship because there has been a material adverse change in the
financial condition or operations of the Institution since March 31, 1999;
or (iv) immediately prior to commencement of the Offerings, Ryan, Beck
terminates this relationship because in its opinion, which shall have been
formed in good faith after reasonable determination and consideration of
all relevant factors, there has been a failure to satisfactorily disclose
all relevant information in the disclosure documents or the existence of
market conditions which might render the sale of the shares by the
Institution hereby contemplated inadvisable; Ryan, Beck shall not be
entitled to the fees set forth above under subparagraph (a), but in
addition to reimbursement of its reasonable out-of-pocket expenses as set
forth in paragraph 7 below, shall be entitled to receive for its advisory
and administrative services a fec of $100,000.
5. MARKET MAKING AND RESEARCH
Ryan, Beck agrees to enlist its best efforts to maintain a market and to solicit
other broker-dealers to make a market in the Common Stock after the Conversion.
Ryan, Beck will provide research coverage at an appropriate time after closing.
6. DOCUMENTS
The Institution and its counsel will complete, file with the appropriate
regulatory authorities, and, as appropriate, amend from time to time, the
information to be contained in the Institution's Application for Conversion and
any related exhibits thereto. In this regard, the Institution and its counsel
will prepare a prospectus and any other necessary disclosure documents relating
to the offering of the Common Stock in conformance with applicable rules and
regulations. As the Institution's financial advisor, Ryan, Beck, will, in
conjunction with counsel, conduct an examination of the relevant documents and
records of the Institution and will make such other reasonable investigation as
deemed necessary and appropriate under the circumstances. The Institution agrees
to make all such documents, records and other information deemed necessary by
Ryan, Beck, or its counsel, available to them upon reasonable request. Ryan,
Beck's counsel will prepare, subject to the approval of the Institution's
counsel, the Definitive Agreement. Ryan, Beck's counsel shall be selected by
Ryan, Beck, subject to the approval of the Institution which will not
unreasonably be withheld.
7. EXPENSES AND REIMBURSEMENT
The Institution will bear all of its expenses in connection with the Conversion
and the offering of its Common Stock including, but not limited to, the
Institution's attorney fees, NASD filing fees, "blue legal fees, expenses for
appraisal, auditing and accounting services, advertising expenses, printing
expenses, temporary personnel expenses and the preparation of stock
certificates. In the
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May 19, 1999
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event Ryan, Beck incurs such expenses on behalf of the Institution, the
Institution shall pay or reimburse Ryan, Beck for such reasonable fees and
expenses regardless of whether the Conversion is successfully completed. Ryan,
Beck will not incur any single expense of more than $1,000, pursuant to this
paragraph without the prior approval of the Institution.
The Institution also agrees to reimburse Ryan, Beck for reasonable out-of-pocket
expenses, including legal fees and expenses, incurred by Ryan, Beck in
connection with the services contemplated hereunder. In no event shall the
Institution be required to reimburse Ryan, Beck, for more than $55,000 in legal
fees. The parties acknowledge, however, that such cap may be exceeded in the
event of a simultaneous acquisition by CambridgePort or any material delay in
the Offerings which would require an update of the financial information in
tabular form contained in the Prospectus for a period later than that set forth
in the original Prospectus filing. We will provide you with a detailed
accounting of all reimbursable expenses to be paid at closing.
8. BLUE SKY
To the extent required by applicable state law, Ryan, Beck and the Institution
will need to obtain or confirm exemptions, qualifications or registration of the
Common Stock under applicable state securities laws and NASD policies. The cost
of such legal work and related filing fees will be paid by the Institution to
the law firm furnishing such legal work. The Institution will cause the counsel
performing such services to prepare a Blue Sky memorandum related to the
Offerings including Ryan, Beck's participation therein and shall furnish Ryan,
Beck a copy thereof addressed to Ryan, Beck or upon which such counsel shall
state Ryan, Beck may rely.
9. AVAILABILITY OF "STARS" PROGRAM
As an additional service to the Institution, Ryan, Beck will make available for
a period of one year following the completion of the Conversion, advisory
services through the Ryan, Beck Strategic Advisory Services ("STARS") program.
If the Institution elects to avail itself of the STARS program, Ryan, Beck will
meet with the Institution at its request. Ryan, Beck also will provide opinions
and recommendations, upon request, for the areas covered below:
Valuation Analysis
Merger and Acquisition Analysis
Merger and Acquisition Trends
Planning, Forecasting & Competitive Strategy
Capital, Asset & Liability Structure & Management
Stock Repurchase Programs
Dividend Policy
Dividend Reinvestment Programs
Market Development and Sponsorship of Bank Securities
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May 19, 1999
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Financial Disclosure
Financial Relations
Financial Reports
Branch Sales and Purchases
Stock Benefit Plan Analysis and Advisory
Stockholder & Investor Relations Presentations & Programs
Fairness Opinions
Scanning of Potential Acquisition Candidates Based on Published Statement
Information
(This screening does nor extend to any in-depth merger and acquisition
analyses or studies which are available under Ryan, Beck's normal fee
schedule, and does not include retention of Ryan, Beck by the
Institution for any specific merger/acquisition situation.)
If the Institution elects to utilize the STARS program Ryan, Beck will waive the
regular retainer fee and hourly charges for the STARS program for the first
year. The Institution also will reimburse Ryan, Beck's reasonable out-of-pocket
expenses incurred in conjunction with the performance of these services, Such
out-of-pocket expenses shall include travel (coach class only), legal and other
miscellaneous expenses. Ryan, Beck will not incur any single expense in excess
of $1,000 pursuant to this paragraph without the prior approval of the
Institution.
If negotiations for a transaction conducted during the term of the STARS
Advisory Agreement described above result in the execution of a definitive
agreement and/or consummation of a transaction for which Ryan, Beck customarily
would be entitled to a fee for its advisory or other investment banking
services, Ryan, Beck shall receive a contingent advisory fee ("Advisory Fee") in
accordance with the terms of a separate engagement letter with respect to such
transaction.
10. INDEMNIFICATION
The Definitive Agreement will provide for indemnification of the type usually
found in underwriting agreements as to certain liabilities, including
liabilities under the Securities Act of 1933. The Institution also agrees to
defend, indemnify and hold harmless Ryan, Beck and its officers, directors,
employees and agents against all claims, losses, actions, judgments, damages or
expenses, including but not limited to attorneys' fees, arising solely out of
the engagement described herein, except that such indemnification shall not
apply to Ryan, Beck.'s own bad faith, willful misconduct or gross negligence.
11. 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 conducted in Boston, MA before
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May 19, 1999
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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 to any such arbitrator to appeal or review in any court of law or in
equity or by any other tribunal, arbitration system or otherwise. Judgment upon
any award granted by such an arbitrator may be enforced in any court having
jurisdiction thereof.
12. NASD MATTERS
Ryan, Beck has an obligation to file certain documents and to make certain
representations to the National Association of Security Dealers ("NASD") in
connection with the Conversion. The Institution agrees to cooperate with Ryan,
Beck and provide such information as may be necessary for Ryan, Beck to comply
wich all NASD requirements applicable to it in connection with its Participation
as contemplated herein in the Conversion. Ryan, Beck is and will remain through
completion of the Conversion a member in a good standing of the NASD and will
comply with all applicable NASD requirements.
13. OBLIGATIONS
(a) Except as set forth below, this engagement letter is merely a statement of
intent. While Ryan, Beck and the Institution 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 Conversion, any legal obligations
between Ryan, Beck and the Institution shall be only: (i) those set forth
herein in paragraphs 2, 3 and 4 regarding services and payments; (ii) those
set forth in paragraph 7 regarding reimbursement for certain expenses;
(iii) those set forth in paragraph 10 regarding Indemnification; and (iv)
as set forth in a duly negotiated and executed Definitive Agreement.
(b) The obligation of Ryan, Beck to enter into the Definitive Agreement shall
be subject to there being, in Ryan, Beck's opinion, which shall have been
formed in good faith after reasonable determination and consideration of
all relevant factors (i) no material adverse change in the financial
condition or operation of the Institution: (ii) satisfactory disclosure of
all relevant information in the disclosure documents and a determination
that the sale of stock is reasonable given such disclosures; (iii) no
market conditions which might render the sale of the shares by the
Institution hereby contemplated inadvisable; and (iv) agreement that the
price established by the independent appraiser is reasonable in the then
prevailing market conditions;
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May 19, 1999
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(c) Until such time as the Institution files its registration statement, it may
terminate this agreement upon thirty (30) days written notice. Upon the
expiration of such 30 day notice period and the payment of any outstanding
Invoices for out-of-pocket expenses, this agreement shall be terminated.
Please acknowledge your agreement to the foregoing by signing in the place
provided below and returning one copy of this letter to our office together with
the retainer payment in the amount of $50,000. We look forward to working with
you.
RYAN, BECK & CO., INC.
By: /s/ Ben A. Plotkin
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Ben A. Plotkin
President and Chief Executive Officer
Accepted and Agreed to This 24/th/ Day of May, 1999
CAMBRIDGEPORT BANK
By: /s/ James B. Keegan
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James B. Keegan
President and Chief Executive Officer