1
EXHIBIT 1.1
Charles Webb & Company
A Division of
KEEFE, BRUYETTE & WOODS, INC.
August 18, 1997
Mr. Robert V. Lynch
President and Chief Executive Officer
Columbia Federal Savings Bank
2497 Dixie Highway
Fort Mitchell, KY 41017-3085
Dear Mr. Lynch:
This proposal is in connection with Columbia Federal Savings Bank'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.
Charles Webb & Company ("Webb"), a Division of Keefe, Bruyette and Woods,
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, Webb 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. Webb will provide
financial and logistical advice to the Bank and the Company concerning the
offering and related issues. Webb will assist in providing 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.
Webb 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.
Investment Bankers and Financial Advisors
211 Bradenton o Dublin, Ohio o 43017-3541 o (614) 766-8400 o
Fax: (614) 766-8406
2
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, Webb 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 Webb 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. Webb will
attend meetings to review these documents and advise you on their form and
content. Webb 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 Webb as the
Bank's and the Company's financial advisor and marketing agent, Webb 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 Webb all relevant information, whether or not publicly
available, which Webb reasonably requests, and will permit Webb to discuss with
management the operations and prospects of the Bank. Webb will treat all
material non-public information as confidential. The Bank acknowledges that Webb
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 Bank of Securities
Dealers ("NASD"), 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 Webb 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 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
Webb, and for the Company to indemnify Webb and their controlling persons (and,
if applicable, the members of the selling group and their controlling persons),
and for Webb to indemnify the Bank and the
3
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 Webb at closing unless stated otherwise:
(a) A Management Fee of $25,000 payable in four consecutive
monthly installments of $6,250 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 Webb, Webb shall have earned and be
entitled to be paid fees accruing through the stage at which point
the termination occurred.
(b) A Success Fee shall be charged based on the aggregate
Purchase Price of Common Stock sold in the Subscription Offering and
Community Offering 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 IRAs) or similar plan created by the Bank for some or
all of its directors or employees. The Success Fee is calculated as
follows: (i) 1.50% of stock sold to residents of the Bank's primary
market area, (ii) 1.25% of stock sold to residents of counties
contiguous to the Bank's primary market area, (iii) .75% of all
stock sold to individuals not included in (i) or (ii). 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, Webb 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. Webb 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. Webb will be paid a fee not to
exceed 5.5% of the aggregate Purchase Price of the shares of common
stock sold by them. Webb 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
market environment. Fees with respect to purchases affected with
the assistance of a broker/dealer other than Webb shall be
transmitted by Webb to such broker/dealer. THE DECISION TO UTILIZE
SELECTED BROKER-DEALERS WILL BE MADE BY THE BANK upon consultation
with Webb. 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. Webb 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
4
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 Webb. 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 Webb incurs expenses on behalf of Client, Client will reimburse Webb for
such expenses.
WEBB WILL NOT REQUEST REIMBURSEMENT FOR ANY OUT-OF-POCKET EXPENSES RELATED
TO TRAVEL, MEALS, LODGING, PHOTOCOPYING, ETC. Webb will request reimbursement
for reasonable fees and expenses of their counsel (such fees of counsel will
not be incurred without the prior approval of Client). The selection of such
counsel will be done by Webb, with the approval of the Bank. Such
reimbursement of legal fees will not exceed $35,000.
10. Conditions. Webb's willingness and obligation to proceed hereunder shall
be subject to, among other things, satisfaction of the following conditions in
Webb's opinion, which opinion shall have been formed in good faith by Webb
after reasonable determination and consideration of all relevant factors: (a)
full and satisfactory disclosure of all relevant material, financial and other
information in the disclosure documents and a determination by Webb, in its
sole discretion, that the sale of stock on the terms proposed is reasonable
given such disclosures; (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 Webb's opinion make
the sale of the shares by the Company inadvisable.
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 Webb.
13. Definitive Agreement. This letter reflects Webb's 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 Webb 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 7(b) and the assumption of expenses as set forth in Section 9, 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 Webb
pursuant to this engagement is rendered for use solely by the management of the
Bank and
5
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.
Webb 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, Webb 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.
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,
CHARLES WEBB & COMPANY,
A DIVISION OF KEEFE, BRUYETTE & WOODS, INC.
By: /s/ Harold T. Hanley III
------------------------
Harold T. Hanley III
Senior Vice President
COLUMBIA FEDERAL SAVINGS BANK
By: s/s Robert V. Lynch Date: October 3, 1997
-------------------------------------
Robert V. Lynch,
President and Chief Executive Officer
6
EXHIBIT A
CONVERSION SERVICES PROPOSAL
TO THE HOME LOAN & SAVINGS BANK
Charles Webb & 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 Webb's personnel to be at the Bank through completion of the
Subscription and Community Offerings to manage the Stock Information Center,
meet with prospective shareholders at individual and community information
meetings, solicit local investor interest through a telemarketing 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 Webb/KBW.
Create target investor list based upon review of the Bank's depositor base.
Provide intensive financial and marketing input for drafting of the prospectus.
Investment Bankers and Financial Advisors
211 Bradenton . Dublin, Ohio . 43017-3541 . (614) 766-8400 .
Fax: (614) 766-8406
7
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.
Webb will use their best efforts to secure market making and on-going research
commitment from at least two NASD firms, one of which will be Keefe, Bruyette &
Woods, Inc.