EXHIBIT 1.1
[LETTERHEAD]
December 23, 1996
Mr. Earl F. Elliott
President and Chief Executive Officer
Montgomery Savings Association, F.A.
119 E. Main Street
Crawfordsville, Indiana 47933
Dear Mr. Elliott:
This proposal is in connection with Montgomery Savings Bank, F.A. ("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 Offering
and then in a Community Offering.
Charles Webb & Company, a Division of Keefe Bruyette & Woods ("Webb") will act
as the Bank's and the Company's 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 an equity security and provide the appropriate
recommendations for the betterment of the equity valuation.
Mr. Earl F. Elliott
April 3, 1997
Page 2 of 5
Additionally, post conversion financial advisory services will be provided for a
one-year period, at no additional fee, including advice on shareholder
relations, NASDAQ listing, dividend policy, 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 their 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 request, and will permit Webb to discuss
personnel and the operations and prospects of the Bank with management. 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 of intent 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 Association of
Securities Dealers ("NASD"), 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 and such
state securities commissioners and other regulatory agencies as required by
applicable law.
Mr. Earl F. Elliott
April 3, 1997
Page 3 of 5
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 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 of 1.75% of 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 IRA's) or similar plan
created by the Bank for some or all of its directors or
employees.
(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
subparagraph7(a)and7(b).
Mr. Earl F. Elliott
April 3, 1997
Page 4 of 5
8. 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, conversion agent, 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.
Webb shall be reimbursed for the reasonable fees and expenses of their Counsel.
The selection of such counsel will be done by Webb, with the approval of the
Bank. Such fees and legal expenses shall be agreed upon by both Webb and Client;
however, they shall not exceed $30,000.
Webb shall be reimbursed for actual out of pocket expenses, including
communication, lodging, and travel expenses. This amount will not exceed $5,000,
without client approval.
9. 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 their
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
market conditions at the time of offering which in Webb's opinion make the sale
of the shares by the Company inadvisable.
10. Benefit. This Agreement shall inure to the benefit of the parties hereto and
their respective successors and to the parties indemnified hereunder 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.
11. 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
the assumption of expenses as set forth in Section 8, 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 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.
Mr. Earl F. Elliott
April 3, 1997
Page 5 of 5
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.
Sincerely,
/S/ Harold T. Hanley III
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Harold T. Hanley III
Senior Vice President
MONTGOMERY SAVINGS ASSOCIATION, F.A.
By: Earl F. Elliott December 26, 1996
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Earl F. Elliott Date
Chairman and Chief Executive Office
EXHIBIT A
CONVERSION SERVICES PROPOSAL
TO MONTGOMERY SAVINGS ASSOCIATION, F.A.
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
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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
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Establish and manage Conversion Center at the Bank. Conversion 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 Conversion Center, meet with prospective
shareholders at individual and community information meetings, solicit local
investor interest through a tele-marketing 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.
Create target investor list based upon review of the Bank's depositor base.
Provide intensive financial and marketing input for drafting of the prospectus.
Conversion Offering Enhancement Services- Continued
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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.
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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.
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Keefe, Bruyette & Woods will make a market and provide on-going research to the
Company. In addition, Webb will use its best efforts to secure another market
maker.