[XXXXX, XXXXXXXX & XXXXX, INC. LETTERHEAD]
November 29, 1999
Xx. Xxxxx Xxxxxxxxxx
President and Chief Executive Officer
Alamogordo Financial Corporation
000 00xx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Dear Xx. Xxxxxxxxxx:
This proposal is in connection with the offer and sale by Alamogordo Financial
Corporation (the "Company") the holding company of Alamogordo Federal Savings &
Loan Association (the "Bank") of a minority number of shares of its common stock
first to eligible persons (pursuant to the Company's Plan of Stock Issuance) in
a Subscription and Community Offering.
Xxxxxxx Xxxx & Company, a division of 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 Offering. This letter sets forth selected
terms and conditions of our engagement.
1. Advisory/Offering 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 offering 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 offering and
related issues. KBW will assist in providing offering 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 Company 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 offering financial advisory services will include advice on
shareholder relations, after-market trading, dividend policy (for both regular
and special dividends), stock repurchase strategy and communication with market
makers. Prior to the closing of the offering, KBW shall furnish to client a
Post-Offering 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 Application for a Minority Stock Offering, Prospectus and other
documents to be used in connection with the Offering. 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 Application for a Minority Stock
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 Company's offering documents. The
Company 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
Company. KBW will treat all material non-public information as confidential. The
Company acknowledges that KBW will rely upon the accuracy and completeness of
all information received from the Company, 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
National Association 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 offering services, offering
enhancement and syndicated offering services contemplated in this letter shall
be set forth in an 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 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 KBW, and
for the 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. 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 Offering 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 $75,000.
(c) Broker-Dealer Pass-Thru. 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 Stock
Issuance. 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. 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 Company 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(a) and 7(b).
8. Additional Services. KBW further agrees to provide financial advisory
assistance to the Company and the Bank for a period of one year following
completion of the Offering, 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 Company will bear those expenses of the proposed offering
customarily borne by issuers, including, without limitation, regulatory filing
fees, "Blue Sky," and NASD filing and registration fees; the fees of the
Company's accountants, attorneys, appraiser, transfer agent and registrar,
printing, mailing and marketing and syndicate expenses associated with the
Offering; 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.
KBW reimbursed for its fees of underwriter's counsel (including counsel's
out-of-pocket expenses) not to exceed $35,000. The selection of such counsel
will be done by KBW, after consultation with the Bank.
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 Company on its proposed offering. 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
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 Company and its
agents in connection with the Offering. 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
ALAMOGORDO FINANCIAL CORPORATION
By: /s/Xxxxx Xxxxxxxxxx Date: 12-9-99
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Xxxxx Xxxxxxxxxx
President and Chief Executive Officer
EXHIBIT A
CONVERSION SERVICES PROPOSAL
TO ALAMOGORDO FINANCIAL CORPORATION
Xxxxx, Xxxxxxxx & Xxxxx, Inc. provides thrift institutions with a comprehensive
program of offering services designed to promote an orderly, efficient,
cost-effective and long-term stock distribution. The following list is
representative of the offering services, if appropriate, we propose to perform
on behalf of the Company and 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.
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 Xxxx'x 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 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.
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 Company's common stock.
Aftermarket Support Services.
Xxxx will use their best efforts to secure market making and on-going research
commitment from at least four NASD firms, one of which will be Xxxxx, Xxxxxxxx &
Xxxxx, Inc.
