[XXXXX, XXXXXXXX & XXXXX, INC. LETTERHEAD]
March 14, 2003
Xx. Xxxx X. Xxxxxxxxx, Xx.
Chairman
Xxxxxxx Xxxxxxx Bank, SLA
0000 Xxx Xxxxxx Xxxxxx
Xxxxx Xxxxx
Xxxxxxx, XX 00000
Dear Xx. Xxxxxxxxx:
This proposal is in connection with Clifton Savings Bank, SLA (the "Client" or
"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.
Xxxxx, Xxxxxxxx and Xxxxx, Inc. ("KBW") will act as the Bank's and the Company's
exclusive financial advisor and marketing agent in connection with the
Conversion and stock issuance. 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, KBW will provide the Bank and the Company with a
comprehensive program of services designed to promote an orderly, efficient,
cost-effective and long-term stock distribution. KBW will provide financial and
logistical advice to the Bank and the Company concerning the Conversion and
related issues. KBW 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.
KBW 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.
Additionally, post Conversion financial advisory services will include advice on
shareholder relations, after-market trading, dividend policy (for both regular
and special dividends), stock
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March 14, 2003
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repurchase strategy and communication with market makers. Prior to the closing
of the Conversion, KBW 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 KBW as the Bank's and the Company's financial advisor
and marketing agent is 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 and minority
stock issuance. KBW will attend meetings to review these documents and advise
you on their form and content. KBW 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 KBW as the
Bank's and the Company's financial advisor and marketing agent, KBW 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 KBW all relevant information, whether or not publicly
available, which KBW reasonably requests, and will permit KBW to discuss with
management the operations and prospects of the Bank. KBW will treat all material
non-public information as confidential. The Bank acknowledges that KBW 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
Conversion and offering documents to be filed with all regulatory agencies
including, the Securities and Exchange Commission ("SEC"), the National
Association of Securities Dealers ("NASD"), the Office of Thrift Supervision
("OTS"), and such state securities commissioners as may be determined by the
Bank.
5. AGENCY AGREEMENT. The specific terms of KBW's services, including stock
offering enhancement and syndicated offering services contemplated in this
letter shall be set forth in a mutually agreed upon Agency Agreement between KBW
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 to be agreed upon representations, warranties and covenants by the
Bank and KBW, and for the
Xx. Xxxx X. Xxxxxxxxx, Xx.
March 14, 2003
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Company to indemnify KBW and their controlling persons (and, if applicable, the
members of the selling group and their controlling persons), and for KBW 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 KBW at closing unless stated otherwise:
(a) MANAGEMENT FEE. A Management Fee of $50,000 payable in four
consecutive monthly installments of $12,500 commencing with the
adoption of the Plan of Conversion. 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 KBW, KBW shall
have earned and be entitled to be paid fees accruing through the stage
at which point the termination occurred.
(b) SUCCESS FEE: A Success Fee of 1.35% 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 family) 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. The Management Fee
described in 7(a) will be applied against the Success Fee.
(c) BROKER-DEALER PASS-THROUGH. If any shares of the Company's stock
remain available after the subscription offering, at the request of
the Bank, KBW 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. KBW 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. KBW will be paid a
fee not to exceed 5.5% of the aggregate Purchase Price of the shares
of common stock sold by them. From this fee, KBW 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 KBW shall
be transmitted by KBW to such broker/dealer. THE DECISION TO UTILIZE
SELECTED BROKER-DEALERS WILL BE MADE BY THE BANK upon consultation
with KBW. 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(b).
8. ADDITIONAL SERVICES. KBW FURTHER AGREES TO PROVIDE FINANCIAL ADVISORY
ASSISTANCE
Xx. Xxxx X. Xxxxxxxxx, Xx.
March 14, 2003
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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 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 KBW. 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 KBW incurs expenses on behalf of Client, Client will reimburse KBW for such
expenses.
KBW shall be reimbursed for reasonable out-of-pocket expenses, including costs
of travel, meals and lodging, photocopying, telephone, facsimile and couriers.
Expenses not to exceed $40,000. The selection of KBW's counsel will be done by
KBW, with the approval of the Bank. The Bank will reimburse KBW for the fees and
expenses of its counsel which will not exceed $35,000.
10. CONDITIONS. KBW's willingness and obligation to proceed hereunder shall be
subject to, among other things, satisfaction of the following conditions in
KBW's opinion, which opinion shall have been formed in good faith by KBW 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 KBW, 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 KBW'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 KBW.
13. DEFINITIVE AGREEMENT. This letter reflects KBW's present intention of
proceeding to work with the Bank on its proposed Conversion and minority stock
issuance. It does not create a binding obligation on the part of the Bank, the
Company or KBW 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
Xx. Xxxx X. Xxxxxxxxx, Xx.
March 14, 2003
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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 KBW 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.
KBW 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, KBW 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,
XXXXX, XXXXXXXX & XXXXX, INC.
By: /s/ Xxxxxxxx X. XxXxxxx
-------------------------------
Xxxxxxxx X. XxXxxxx
Managing Director
XXXXXXX SAVINGS BANK, SLA
By: /s/ Xxxx X. Xxxxxxxxx, Xx. Date: March 20, 2003
------------------------------- ------------------
Xxxx X. Xxxxxxxxx, Xx.
Chairman
cc: Xxxxxx Xxxxxx
EXHIBIT A
CONVERSION SERVICES PROPOSAL
TO XXXXXXX SAVNGS BANK, SLA
KBW provides thrift institutions converting from the mutual to stock form of
ownership with a comprehensive program of stock issuance services designed to
promote an orderly, efficient, cost-effective and long-term stock distribution.
The following list is representative of the stock issuance 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.
STOCK 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 KBW'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 (if
applicable), 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 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.
STOCK 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.
AFTER-MARKET SUPPORT SERVICES.
KBW will use their best efforts to secure trading and on-going research
commitment from at least two NASD firms, one of which will be Xxxxx, Xxxxxxxx &
Xxxxx, Inc.
