Exhibit 1.1
[LETTERHEAD OF RYAN, BECK & CO., INC.]
CONFIDENTIAL
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February 9, 1998
Mr. Kevin Champagne
President and Chief Executive Officer
Compass Bank for Savings
791 Purchase Street
New Bedford, MA 02740
Re: Mutual Holding Company Stock Issuance - Subscription Enhancement &
Administrative Services
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Dear Mr. Champagne:
Ryan, Beck & Co. ("Ryan, Beck") is pleased to submit this engagement letter
setting forth the terms of the proposed engagement between Ryan, Beck and
Compass Bank for Savings (the "Institution") and The 1855 Bancorp (the "Holding
Company") in connection with the proposal sale of shares of common stock by the
Institution.
1. BACKGROUND ON RYAN, BECK
Ryan, Beck, Inc., was organized in 1946 and is one of the nation's reacting
investment bankers for financial institutions. The firm has been publicly held
since 1986 and 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 corporate finance department is one of the
largest such groups devoted solely to financial institution matters in the
country. Moreover, Ryan, Beck is one of the largest market makers in bank and
thrift stocks.
2. MUTUAL HOLDING COMPANY STOCK ISSUANCE AND
SIMULTANEOUS ACQUISITION
The Institution (or a middle-tier holding company formed by it) proposes to
issue shares of common stock pursuant to a Stock Issuance Plan (the "Plan"). In
connection with this stock issuance, Ryan, Beck proposes to act as financial
advisor to the Institution, and selling agent/lead manager with respect to the
offering of the shares of common stock (the "Common Stock") pursuant to the
Plan. The Plan has been adopted in connection with the potential simultaneous
acquisition by the Institution (or middle tier holding company) of another
depository institution (the "Acquisition"). Ryan, Beck is aware that the firm of
McConnell, Budd and Downes ("MB&D") serves as advisor to the Institution in
connection with the Acquisition and that such Firm will be designated a
Co-manager of the offering. Specific terms of services 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.
3. SERVICES TO BE PROVIDED BY RYAN, BECK
a. Advisory Services - Thorough planning is essential to a successful initial
public offering. Ryan, Beck serves as 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:
- 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 offering including direct mail,
advertising, community meetings and telephone solicitation;
- Provide specifications and assistance in selecting a conversion agent,
printer and other professionals;
- Calculate the number of new phone lines required;
- Provide a list of equipment and supplies needed for the Conversion
Center;
- Draft marketing materials including letters, brochures, slide show
script advertisements; and
- Assist in arranging market-makers for post-conversion trading.
b. Administrative Services and Conversion Center Management - Ryan, Beck
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 and initial public offerings of mutual
holding companies 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 effort relating to the conversion.
Ryan, Beck will supervise and administer 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 on-site registered representatives to minimize
disruption of day-to-day business;
- Identify and organize space for the on-site Conversion Center, the
focal point of conversion activity;
- Administer the Conversion Center;
- Prepare procedures for processing stock orders and cash, and for
handling requests for information;
- Provide scripts, training and guidance for the telephone team in the
stock sales telemarketing effort;
- Educate the Institution's directors, officers and employees about the
conversion, their roles and relevant securities laws;
- Train branch managers and customer-contact employees on the proper
response to stock purchase inquiries;
- Train and supervise Conversion Center staff assisting with 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
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 Conversion 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 conversion and investment
opportunity;
- Organize, coordinate and participate in community informational
meetings. These meetings are intended to both relieve customer anxiety
and attract potential investors. The meetings generate widespread
publicity for the conversion while providing local exposure of the
Institution and promoting favorable stockholder relations;
- 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 offering; and
- If appropriate, assemble a selling group of selected local
broker-dealers to assist in selling stock during the offering. In so
doing, prepare broker "fact sheets" and arrange "road shows" for the
purpose of stimulating local interest in the stock and informing the
brokerage community of the particulars of the offering.
4. COMPENSATION
a. For its services hereunder, the Institution will pay to Ryan, Beck and to
McDonnell, Budd & Downes the following aggregate compensation in connection
with the Conversion:
(1) An advisory and management fee of $50,000 in connection with the
advisory and administrative services set forth in section 3(a) and (b)
hereof ("Management Fee");
(2) A fee of one percent (1.0%) of the dollar amount of the Common Stock
sold in the Subscription Offering and Community Offerings ("Marketing
Fee"). No fee shall be payable pursuant to this subsection in
connection with the sale of stock to officers, directors, employees
(and immediate family thereof), and employee benefit plans of the
Institution; and
(3) For stock sold by a selling group of NASD member firms (including
Ryan, Beck and MB&D) under a selected dealer agreements (the "Selling
Group"), a fee equal to five percent (5.0%) in the aggregate. No more
than 1.0% of such fee shall be attributable to selling group
management services. Ryan, Beck will not commerce sales of the stock
through members of the Selling Group without 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 Conversion. The Institution will pay Ryan, Beck
$50,000 upon execution of this letter which will be applied to any fees due
hereunder, including fees payable pursuant to subparagraph (b) below. If,
pursuant to a resolicitation undertaken by the Institution, Ryan, Beck is
required to provide significant additional services, the parties shall
mutually agree to the dollar amount of the additional compensation due (if
any).
b. If (i) the Plan is abandoned or terminated by the Institution; (ii) the
Offerings are not consummated by December 31, 1998; (iii) Ryan, Beck
terminates this relationship because there has been a material adverse
change in the financial condition or operations of the Institution since
September 30, 1997; or (iv) immediately prior to commencement of the
Offerings, Ryan, Beck terminates this relationship for 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 fee of $50,000.
5. MARKET MAKING
Ryan, Beck agrees to use its best efforts to maintain a market and to solicit
other broker-dealers to make a market in the Common Stock after the Conversion.
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 an Offering Circular 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 sky" legal fees, expenses
for appraisal, auditing and accounting services, advertising expenses, printing
expenses, temporary personnel expenses and the preparation of stock
certificates. In the 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, and $15,000 in other out-of-pocket expenses. The parties acknowledge,
however, that such caps may be exceeded in the event of 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. Not later than three days before closing, 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. 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, indemnity 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 reasonable 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.
10. 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 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 of 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.
11. 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
with 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.
12. 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 9 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 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.
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. MCCONNELL, BUDD & DOWNES
BY: /s/ Ben A. Plotkin BY:
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Ben A. Plotkin
President and Chief Executive Officer
Accepted and Agreed to this 17 Day of February, 1998
COMPASS BANK FOR SAVINGS THE 1855 BANCORP
BY: /s/ Kevin G. Champagne BY: /s/ Kevin G. Champagne
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Kevin G. Champagne Kevin G. Champagne
President and Chief Executive Officer President and Chief Executive
Officer