EXHIBIT 1.2
ENGAGEMENT LETTER BETWEEN PEOPLES BUILDING AND LOAN ASSOCIATION
AND CAPITAL RESOURCES, INC.
[LOGO CAPITAL RESOURCES, INC.
OF 1211 Connecticut Ave., N.W. * Suite 200 * Washington, DC 20036 *
APPEARS Tel (202) 466-5685 * Fax (202) 466-5695
CAPITAL
RESOURCES
APPEARS
HERE]
November 18, 1997
Mr. Carl Smith
President and Chief Executive Officer
Peoples Building & Loan Association
819 Main Street
Tell City, Indiana 47586
Dear Mr. Smith:
We are pleased to submit this proposal to set forth the terms of the
proposed engagement between Capital Resources, Inc. and Peoples Building & Loan
Association ("Peoples Building" or the "Association") for your planned mutual-
to-stock conversion (the "Conversion") and the offering of your shares of common
stock (the "Offering").
BACKGROUND ON CAPITAL RESOURCES
Capital Resources is a National Association of Securities Dealers ("NASD")
member investment banking firm specializing in raising capital for financial
institutions. Members of our professional staff are licensed securities
representatives and have extensive experience in conducting local sales efforts
for thrift conversions. Our "hands-on" philosophy and direct sales involvement
have resulted in many successful conversions and a satisfied clientele. We
combine the critical and necessary operational and data processing support
within our package of marketing services to help ensure a smooth, professionally
conducted, successful Conversion.
As you are undoubtedly aware, there are substantial benefits to be derived
from a successful local offering of your stock. A successful local offering not
only results in stable, loyal stockholders, but also provides a rare opportunity
to capture many ancillary benefits to the Association, such as the opportunity
for enhancing local identity and increasing local exposure.
The conversion process involves an enormous amount of attention to detail
and requires extensive knowledge and expertise in conversion regulations and
securities regulations. Capital Resources' experience in managing thrift
conversions will help alleviate the burden on management and minimize disruption
to normal banking business while ensuring each detail is attended to in a timely
and accurate manner.
The following describes the scope of conversion marketing, operational and
staff training services Capital Resources proposes to provide Peoples Building.
CAPITAL RESOURCES, INC.
Mr. Carl Smith
November 18, 1997
Page 2
PROPOSED SERVICES
Capital Resources proposes to act as placement agent and marketing
representative on behalf of Peoples Building with respect to the offering of
common stock pursuant to the Conversion. We will also serve as "Conversion
Manager" to assist you in numerous operational areas with respect to the
Conversion. In this regard, we combine four critical roles in the Conversion
process:
I. Sales and Marketing Assistance
II. Comprehensive Staff Training
III. Stock Center Management
IV. Proxy Solicitation
V. Additional Value-Added Services
Each area is discussed in the following sections.
I. SALES AND MARKETING ASSISTANCE
Capital Resources proposes to represent Peoples Building as placement agent
in the sale of the common stock in a Subscription and Community Offering. Our
marketing assistance program is designed to inform your true customer base of
this investment opportunity and to educate your customers on the conversion
process. Our main objective is to target sales to your local customers who will
have subscription rights (the "Subscription Offering"). Typically, the entire
issue will be bought by your customers. In the event shares remain available
after customer subscriptions, we will market remaining shares to achieve a wide
distribution to "friendly" local shareholders (the "Community Offering").
Our specific responsibilities as such will be as follows:
o Assign licensed professionals from our staff to work at Peoples Building's
offices as sales representatives on behalf of the Association. Our
professionals will be responsible for all customer contact and inquiries
regarding the Offering.
o Work with your conversion counsel regarding the prospectus and the
language in it from a marketing perspective.
CAPITAL RESOURCES, INC.
Mr. Carl Smith
November 18, 1997
Page 3
o If desirable, conduct a series of community meetings to provide information
on the Offering. Capital Resources' representatives will take an active
role in these meetings. These meetings serve as a customer relations tool
as well as enhance local exposure of Peoples Building and set the stage for
favorable stockholder relations after Conversion.
o Design and prepare for the Association a marketing campaign, including
appropriate marketing literature and media advertisements.
o After the Subscription and Community Offerings if shares remain
unsubscribed, we will assemble a selected dealer's syndicate to distribute
remaining shares (the "Syndicated Community Offering"). We will meet with
local brokers to educate them on the particulars of thrift stocks, discuss
the salient terms of Peoples Building's Offering, create after-market
interest and stimulate local interest in Peoples Building's stock.
o We will make a market in the stock after Conversion and assist in arranging
other market-makers.
II. COMPREHENSIVE CONVERSION TRAINING
Capital Resources will conduct comprehensive training sessions before the
formal commencement date of the Offering. Our training sessions are designed to
ensure that members of the board, management and staff are knowledgeable of the
conversion process, aware of their roles and capable of dealing with problems,
inquiries and events. Each session is tailored to the audience involved and each
covers a different level of detail and area of the Conversion, as follows:
MANAGEMENT MEETING: A structured discussion pertaining to organization,
role assignments, facilities, marketing, accounting, reporting and timetables.
BOARD MEETING: A presentation regarding the conversion process and board
members' roles and responsibilities, with emphasis on insider behavior.
STAFF MEETING: A comprehensive presentation to the entire staff to discuss
the nature of the Conversion, roles and responsibilities, and the opportunity to
elaborate community involvement. A slide presentation and handouts are used.
STOCK CENTER TRAINING: We will train and supervise Bank personnel
specifically responsible for assisting us in the Stock Center with clerical
tasks (see section III below). Computer training, account balancing procedures
and stock recordkeeping are covered.
CAPITAL RESOURCES, INC.
Mr. Carl Smith
November 18, 1997
Page 4
In addition to our personalized training meetings, Capital Resources
documents the many details and functions of the conversion process in easy-to-
read manuals. Our conversion study manuals are intended to be used in
conjunction with our training sessions and as a reference during the Conversion.
The manuals provide instruction, sample forms and general information vital to
understanding the conversion process. This information has been collected and
updated by Capital Resources over many years.
III. STOCK CENTER MANAGEMENT
A conversion requires accurate and timely recordkeeping and reporting.
Furthermore, customer inquiries must be handled professionally and accurately.
The Stock Center centralizes all data and work effort relating to the
Conversion. Capital Resources will establish the Stock Center, preferably on-
site at the Association's offices, from which we will supervise all activities
relating to the Conversion. Our professionals will be on-site throughout the
Offering to handle customer inquiries and special situations as they arise. In
addition, we will require two of the Association's employees to assist us on a
full time basis in the Stock Center with clerical tasks. We will train and
supervise these employees. Stock Center activities for which Capital Resources
will be responsible for include the following:
o Collect, respond to and record all mail regarding conversion.
o Meet with customers who wish to discuss the Offering.
o Tabulate stock orders.
o Tabulate proxies.
o Mail "Stock-Grams", "Proxy-Grams", and other literature as applicable.
o Prepare and mail order confirmations.
o Sort and track prospects.
o Coordinate and record community meetings and attendance.
o Coordinate mailings to customers and prospects.
o Balance daily totals.
o Respond to mail and telephone inquiries.
CAPITAL RESOURCES, INC.
Mr. Carl Smith
November 18, 1997
Page 5
o Generate daily management reports.
o Coordinate with the printer for the initial sorting and mailing to
different categories of prospective subscribers.
CLOSING ASSISTANCE: The end of the Offering is a critical time that
requires coordination of many events. Capital Resources will be on-site to
coordinate tasks such as mailing interest checks, sending "welcome" letters to
shareholders, balancing accounts, tabulating final stock information, and
preparing stockholder records for the transfer agent, as well as answering post-
offering questions from subscribers.
In performing various Stock Center tasks outlined above, Capital Resources
will utilize its proprietary conversion programs, the "Back Office Stock System"
("BOSS"). BOSS is a menu-driven, user-friendly program which will help ensure
efficient, accurate recordkeeping and timely reporting during the Conversion. To
use BOSS, we would require a computer to be provided by Peoples Building for
Stock Center use during the conversion.
IV. PROXY SOLICITATION
Regulations require that over 50% of the outstanding members' votes must be
in favor of the Plan of Conversion. As part of our engagement, we will solicit
proxies to ensure this vote requirement is met.
V. ADDITIONAL VALUE-ADDED SERVICES
Capital Resources will provide, at no charge, general financial consulting
to the Association with respect to issues facing stock companies for a year
following Conversion. A representative from Capital Resources will attend Board
meetings semi-annually, as requested, to discuss such issues. The Bank will
reimburse Capital Resources for out-of-pocket expenses related to such meetings.
Capital Resources will also provide certain other post-conversion services
as part of this engagement at no charge, including stock research coverage and
stock benefit plan shares purchases at no commission.
CAPITAL RESOURCES, INC.
Mr. Carl Smith
November 18, 1997
Page 6
PROPOSED FEE STRUCTURE
For our services as described herein, we propose a compensation structure
as follows:
A. A fixed marketing fee of $50,000 payable as follows: $15,000 upon execution
of this proposal and the commencement of our engagement, $5,000 upon filing
of the Application for Conversion, and the balance upon closing. This fee
covers all professional services for advisory services, due diligence,
training, proxy solicitation, and marketing services. Progress payments are
for consulting work performed prior to the Offering.
B. Reimbursement for out-of-pocket expenses incurred by us on behalf of the
Conversion. Such expenses shall include, but are not limited to, travel,
legal, communications and postage. We will provide you with a detailed
accounting of all reimbursable expenses and will bill you monthly.
Reimbursable out-of-pocket expenses shall not exceed $10,000 and our legal
expenses shall not exceed $22,000, without management's prior approval.
ADDITIONAL PROVISIONS
Furthermore, it is understood that:
o Prior to the commencement of the Offering, Peoples Building and Capital
Resources will enter into a mutually agreed upon formal agency agreement
for securities offerings which provides for mutual indemnities and
warranties. Our sales and marketing services are subject to the usual
warranties, indemnities and conditions contained in the agency agreement.
o Our role as your NASD agent is subject to our normal underwriting criteria
and examination of relevant books and records.
o The Association will pay all other expenses of the conversion, including
but not limited to attorney's fees, National Association of Securities
Dealers, Inc. filing fees, all fees and expenses relating to "blue sky"
research and filings, state licensing and securities registration fees, all
fees relating to auditing and accounting, all printing and advertising fees
and all costs associated with retaining temporary staffing, if any, in
connection with the Conversion.
o Capital Resources will conduct an examination of the relevant documents and
records of Peoples Building as appropriate. Peoples Building agrees to make
all documents and records deemed appropriate or necessary by Capital
Resources available upon request.
o Our obligations stated herein will be subject to there being no material
changes, in the opinion of our firm, in the Association's conditions or in
market conditions so as to significantly delay the Offering or to render
the Offering inadvisable.
CAPITAL RESOURCES, INC.
Mr. Carl Smith
November 18, 1997
Page 7
o Our marketing obligations pursuant to this agreement will terminate upon
the completion or termination of the initial Offering, but in no event
later than 12 months from the date of this letter. All fees or expenses due
to Capital Resources but unpaid will be payable to Capital Resources at
that time. In the event the offering is extended beyond this term, the
Association and Capital Resources may mutually agree to renew this
engagement under mutually acceptable terms.
* * * * * * *
To engage our services, please sign in the space provided below and return
the signed letter to me. I have enclosed a signed copy for your files. This
proposal is open for your acceptance for thirty (30) days from the date of this
letter.
We look forward to working with Peoples Building on this most exciting and
challenging project.
Sincerely,
CAPITAL RESOURCES, INC.
/s/ David P. Rochester
David P. Rochester
Chairman and Chief
Executive Officer
DPR/ems
Agreed To and Accepted By:
PEOPLES BUILDING & LOAN ASSOCIATION
/s/ Carl Smith 12/9/97
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signed date
/s/ Carl Smith President
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