EXHIBIT 1.1
CONFIDENTIAL
February 17, 2004
Mr. William M. Pierce, Jr.
President & Chief Executive Officer
Monadnock Community Bank
One Jaffrey Road
P.O. Box 888
Peterborough, NH 03458
Re: PROPOSED MUTUAL HOLDING COMPANY FORMATION - SUBSCRIPTION
ENHANCEMENT & Administrative Services
Dear Mr. Pierce:
Ryan Beck & Co., Inc. ("RBCO") is pleased to submit this engagement letter
setting forth the terms of the proposed engagement between RBCO and Monadnock
Community Bank, (the "Institution" or the "Company") in connection with the
potential corporate reorganization of the Institution and sale of common stock
by the Institution.
1. BACKGROUND ON RYAN BECK
Ryan Beck & Co., 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.
RBCO's Financial Institutions Group represents one of the largest such groups
devoted solely to financial institution matters in the country.
2. MUTUAL HOLDING COMPANY FORMATION AND STOCK OFFERING
The Institution is considering the reorganization into a two-tier mutual holding
company structure by forming a mutual holding company and middle-tier holding
company ("Holding Company") pursuant to applicable regulations. The common stock
(the "Common Stock") would be offered in a subscription offering with any
remaining shares sold in a community offering (collectively the "Offering"). In
connection therewith, the Institution's Board of Directors would adopt a stock
issuance plan (the "Plan") whereby shares of Common Stock would be offered for
sale in the Offering. In connection with the Offering, RBCO would
Mr. William M. Pierce, Jr.
Monadnock Community Bank
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propose to act as financial advisor to the Institution with respect to the Plan
and selling agent/manager with respect to the Offering of the shares of Common
Stock in the Offering. Specific terms of services shall be set forth in a
definitive agency agreement (the "Definitive Agreement") between RBCO 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
offering. RBCO serves as lead coordinator of the financial advisory,
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, RBCO, will
evaluate the financial, marketing and regulatory issues involved in
the Offering. Our specific responsibilities include:
- Advise with respect to business planning issues in preparation for a
public offering;
- Advise with respect to the choice of charter and form of organization;
- Review and advise with respect to the Plan;
- Review and provide input with respect to the Business Plan to be
prepared in connection with the Offering;
- Participate in drafting the Prospectus and assist in obtaining all
requisite regulatory approvals;
- Review and provide 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 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 STOCK SALE CENTER MANAGEMENT - RBCO
will manage all aspects of the Offering. A successful Offering
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. RBCO's experience in
managing many thrift reorganizations and mutual holding company
minority stock offerings will minimize the burden on your management
and disruption to normal banking business. At the same
Mr. William M. Pierce, Jr.
Monadnock Community Bank
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time, our legal, accounting and regulatory background ensures that
details are attended to in a professional fashion. An Offering
requires accurate and timely record keeping and reporting.
Furthermore, customer inquiries must be handled professionally and
accurately. The Center centralizes all data and work effort relating
to the Offering.
RBCO will supervise and administer the Center. We will train Center staff to
help record stock orders, answer customer inquiries and handle special
situations as they arise. 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 Center, the focal point of sales
and proxy solicitation activity;
- Administer the Center. All substantive stock and proxy related
matters will be handled by employees of RBCO;
- Organize and implement all proxy solicitation efforts (if
applicable);
- Prepare procedures for processing proxies, stock orders and cash,
and for handling requests for information;
- RBCO will outsource all Offering agent/data processing/transfer
agent functions. The cost of such services will be borne by the
Institution and are subject to separate agreement. RBCO will provide
the Institution with the proposed agreements for such services prior
to the execution of such agreements by RBCO or the Institutions;
- 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 Offering, 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 - RBCO 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:
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Monadnock Community Bank
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- 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 Offering and investment
opportunities;
- 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 Offering 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 RBCO a total
inclusive Advisory and Marketing fee of $125,000. In consideration of our fee
for services under this proposal, we understand that the Institution will
give us the first opportunity to submit a proposal to service as financial
advisor should it undergo a second step conversion in the future.
For stock sold by a group of NASD member firms (which will include RBCO)
pursuant to a syndicated community offering solely managed by RBCO (the
"Selling Group"), a fee equal to one percent (1.00%), which fee along with
the fee payable directly by the Company to selected dealers shall not exceed
six percent (6.00%) in the aggregate. In consultation with RBCO, the
Institution shall be authorized to determine which NASD member firms
participate in the syndicated community offering and the extent of their
participation. RBCO will not commence sales of the stock through members of
the Selling Group without the specific prior approval of the Company.
Such fees (less the amount of any advance payments) are to be paid to RBCO at
the closing of the Offering. The Institution will pay RBCO $25,000 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, RBCO is required to provide
significant additional services, the parties shall mutually agree to the
dollar amount of the additional compensation due (if any).
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Monadnock Community Bank
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b. If, after adoption of the Plan, (i) the Plan is abandoned or terminated by
the Institution; (ii) the Offering is not consummated by March 31, 2005;
(iii) RBCO terminates this relationship because there has been a material
adverse change in the financial condition or operations of the Institution
since September 30, 2003; or (iv) immediately prior to commencement of the
Offering, RBCO 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; RBCO 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 $25,000.
5. MARKET MAKING
If applicable, RBCO 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
Offering so that there are at least three market makers for the Common Stock
after the Offering.
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 applications to banking and
securities regulators 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,
RBCO 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 RBCO, or its counsel, available to them upon reasonable
request. RBCO's counsel will prepare, subject to the approval of the
Institution's counsel, the Definitive Agreement. RBCO's counsel shall be
selected by RBCO, subject to the approval of the Institution.
7. EXPENSES AND REIMBURSEMENT
The Institution will bear all of its expenses in connection with the
Reorganization 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, "road show" expenses, syndicate related expenses, temporary
personnel expenses and the preparation of stock certificates. In the event RBCO
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Monadnock Community Bank
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incurs such expenses on behalf of the Institution, the Institution shall pay or
reimburse RBCO for such reasonable fees and expenses regardless of whether the
Reorganization is successfully completed. RBCO 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 RBCO for reasonable out-of-pocket
expenses, including legal fees and expenses, incurred by RBCO in connection with
the services contemplated hereunder. RBCO will not incur legal fees and expenses
(including expenses of RBCO) in excess of $40,000 without the approval of the
Institution. The parties acknowledge, however, that such cap may be increased by
the mutual consent of the Institution and RBCO in the event of any material
delay in the Offering 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, RBCO 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
Offering including RBCO's participation therein and shall furnish RBCO a copy
thereof addressed to RBCO or upon which such counsel shall state RBCO may rely.
9. AVAILABILITY OF "STARS" PROGRAM
As an additional service to the Institution, RBCO will make available for a
period of 1 year following the completion of the Offering, advisory services
through the RBCO Strategic Advisory Services ("STARS") program. The undersigned
will serve as the senior relationship manager for this program. If the
Institution elects to avail itself of the STARS program, RBCO will meet with the
Institution at its request. RBCO also will provide opinions and recommendations,
upon request, for the areas covered below:
Valuation Analysis
Merger and Acquisition Planning and 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
Financial Disclosure
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Monadnock Community Bank
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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 not extend to any in-depth merger and
acquisition analyses or studies which are available under RBCO's
normal fee schedule, and does not include retention of RBCO by the
Institution for any specific merger/acquisition situation.)
If the Institution elects to utilize the STARS program RBCO will waive the
regular retainer fee and hourly charges for this program for the first year. The
Institution also will reimburse RBCO's reasonable out-of-pocket expenses
incurred in conjunction with the performance of these services. Such
out-of-pocket expenses shall include travel, legal and other miscellaneous
expenses. RBCO will not incur any single expense in excess of $1,000 pursuant to
this paragraph without the prior approval of the Institution.
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 RBCO 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 RBCO's own bad faith, willful misconduct or gross negligence.
11. CONFIDENTIALITY
To the extent consistent with legal requirements and except as otherwise set
forth in the Prospectus, all information given to RBCO by the Institution,
unless publicly available or otherwise available to RBCO without restriction to
breach of any confidentiality agreement ("Confidential Information"), will be
held by RBCO in confidence and will not be disclosed to anyone other than RBCO's
agents without the Institution's prior approval or used for any purpose other
than those referred to in this engagement letter. Upon any termination of its
engagement, RBCO shall promptly deliver to the Institution all materials
specifically produced for it and will return to the Institution all Confidential
Information provided to RBCO during the course of its engagement hereunder.
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Monadnock Community Bank
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12. NASD MATTERS
RBCO has an obligation to file certain documents and to make certain
representations to the National Association of Security Dealers ("NASD") in
connection with the Offering. The Institution agrees to cooperate with RBCO and
provide such information as may be necessary for RBCO to comply with all NASD
requirements applicable to it in connection with its participation as
contemplated herein in the Offering. RBCO is and will remain through completion
of the Offering 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 RBCO 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 Offering, any legal obligations between
RBCO 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; (iv) those set forth in
paragraph 11 regarding confidentiality; and (v) as set forth in a duly
negotiated and executed Definitive Agreement.
(b) The obligation of RBCO to enter into the Definitive Agreement shall be
subject to there being, in RBCO'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.
14. INDEPENDENT CONTRACTOR; NO FIDUCIARY DUTY
The Company acknowledges and agrees that it is a sophisticated business
enterprise and that RBCO has been retained pursuant to this Agreement to act as
financial advisor to the Company solely with respect to the matters set forth
herein. In such capacity, RBCO shall act as an independent contractor, and any
duties of RBCO arising out of this engagement pursuant to this Agreement shall
be contractual in nature and shall be owed solely to the Company. Each party
disclaims any intention to impose any fiduciary duty on the other.
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Monadnock Community Bank
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15. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New Jersey applicable to contracts executed and to be wholly
performed therein without giving effects to its conflicts of laws principles or
rules. Any dispute here under shall be brought in a court in the State of New
Jersey.
16. WAIVER OF TRAIL BY JURY
EACH OF RBCO AND THE COMPANY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
RELATED TO OR ARISING OUT OF THIS AGREEMENT.
Mr. William M. Pierce, Jr.
Monadnock Community Bank
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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 $25,000. We look forward to working with
you.
RYAN BECK & CO., INC.
BY: /s/ Mark B. Cohen
------------------------------------------
Mark B. Cohen
Managing Director
Accepted and Agreed to This 19th Day of February, 2004
MONADNOCK COMMUNITY BANK
BY: /s/ William M. Pierce, Jr.
------------------------------------------
William M. Pierce, Jr.
President & Chief Executive Officer