Exhibit 1.1
June 2, 2005
Mr. David C. Mancuso
President & CEO
Lake Shore Savings
128 E. 4 th Street
Dunkirk, NY 14048
CONFIDENTIAL
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Re:
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Proposed
Conversion and Reorganization–Advisory, Administrative and
Marketing Services
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Dear Mr. Mancuso:
Ryan Beck & Co., Inc.
(“RBCO”) is pleased to submit this engagement letter
setting forth the terms of the proposed engagement between RBCO and
Lake Shore Savings (the “Institution” or the
“Company”) in connection with the potential corporate
reorganization of the Institution and sale of common stock by the
Institution.
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1.
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BACKGROUND
ON RYAN BECK
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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
is one of the nation’s largest such groups devoted solely to
investment banking services for financial institutions.
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2.
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MUTUAL
HOLDING COMPANY FORMATION AND STOCK OFFERING
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The Institution is considering 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 expected to be
sold in a community offering and, if necessary, a syndicated
community offering (collectively the “Offering”). In
connection therewith, the Institution’s Board of Directors
would adopt a stock issuance plan (the “Plan”)
regarding the reorganization and the
Offering. RBCO proposes to act as financial
advisor to the Institution with respect to the reorganization and
Offering and as selling agent with respect to 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 regulatory authorities. In
the event that an acquisition or merger is planned, this letter
shall cover our services for a Full Conversion.
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3.
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SERVICES TO
BE PROVIDED BY RYAN BECK
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RBCO provides and helps coordinate advisory,
administrative and marketing services in connection with thrift
reorganizations and related stock offerings. Our existing team has
worked together on numerous such transactions.
a. Advisory Services - As your investment
banker, RBCO will work with you and your counsel to evaluate
financial, marketing and regulatory issues. Our working knowledge
of the law and “lore” of bank regulators, securities
regulators and NASD is essential. Our legal, accounting and
regulatory background is equally important.
Our specific advisory responsibilities
include:
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Advise with
respect to business planning issues in preparation for a public
offering;
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Advise with
respect to the choice of charter and form of
organization;
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Review and
advise with respect to the stock issuance plan (e.g. sizes of
benefit plan purchases; max purchase limits for
investors);
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Advise with
respect to which trading venue the shares should trade
on;
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Review and
provide input with respect to the business plan to be prepared in
connection with the Offering;
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Discuss the
appraisal process and analyze the appraisal with the Board of
Directors;
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Participate in
drafting the offering document and any proxy materials, and assist
in obtaining all requisite regulatory approvals;
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Develop a
marketing plan for the subscription and community offerings,
considering various sales method options, including direct mail,
advertising, community meetings and telephone
solicitation;
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Develop a proxy
solicitation plan, to include telephone calls and
mailings;
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RBCO does not
offer data processing agent, printing and transfer agent functions.
Costs of such services will be borne by the Institution and are
subject to agreements signed by the Institution and each service
provider. RBCO will work with the Institution to provide
specifications and assistance in selecting these and any other
professionals that will perform administrative functions in
connection with the offering and the proxy solicitation
process;
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Develop a
layout for the Stock Information Center (the “Center”),
where stock order and proxy card processing occur;
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Provide a list
of equipment, staff and supplies needed for the Center;
and
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Draft marketing
materials including letters, order form, advertisement, brochure.
If a community meeting or road show is anticipated, we will help
draft the presentation – saving you time and legal expense;
and
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Consulting with
management, determine whether and when to assemble a selling group
of selected local broker-dealers to assist in selling stock after
the community offering;
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b. Administrative Services and Stock
Information Center Management – RBCO will manage all
aspects of a thrift reorganization’s stock offering and proxy
solicitation. Successful stock sale and vote results require
thorough planning and an enormous amount of attention to detail.
Our efforts are meant to avoid mistakes, costly surprises and lost
opportunities. We identify key logistics, define responsibilities
and create timetables to help avoid confusion among the many
members of the working group. An offering also requires accurate
and timely record keeping and reporting. Furthermore, customers
must be handled professionally and their questions must be answered
accurately.
The Stock Information Center is the
“command center” during a stock offering. RBCO
staff’s experience in managing many thrift minority stock
offerings and full conversion offerings will help them minimize the
burden on your management and staff. They will train and supervise
the staff that you assign to the Center to help record stock
orders, answer customer inquiries and participate in other
activities of the Center.
Our administrative services include the
following:
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Provide
experienced on-site RBCO registered representatives to manage and
supervise the Center. All substantive stock offering and proxy vote
matters and customer inquiries will be handled by RBCO;
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Prepare
procedures for processing proxies, stock orders and cash, and for
handling requests for material;
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Provide scripts
and training for the telephone team who will solicit proxies and,
if needed, help conduct a stock sales telemarketing
effort;
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Educate the
Institution’s directors, officers and employees about the
reorganization and Offering, their roles and relevant securities
laws;
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Train branch
managers and customer-contact employees on the proper response to
stock purchase and proxy vote inquiries;
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Coordinate
functions with and between the data processing agent, printer,
transfer agent, stock certificate printer and other
professionals;
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Design and
implement procedures for handling IRA and Keogh orders;
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Supervise
Center staff in proxy card and order processing and in proxy
solicitation calling efforts;
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Prepare daily
vote and sales reports for management, ensuring funds received
balance to the reports;
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Manage the
pro-ration process in the event of oversubscription;
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Coordinate with
the stock exchange and DTC to ensure a smooth closing and stock
trading; Provide post-offering subscriber assistance.
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c. Securities Marketing Services - RBCO
uses various sales techniques including direct mail, advertising,
community investor meetings, telephone solicitation, and if
necessary, assembling a selling
group of broker-dealers for a syndicated
community offering. The sales approach for your stock offering will
be tailored to fit your specific situation, in order to best mange
the offering and attract a stockholder base comprised largely of
community-oriented individuals loyal to the Institution.
Our specific marketing services
include:
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If applicable,
assist management in developing a list of potential investors who
are viewed as priority prospects;
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The RBCO
registered representatives at the Center will solicit orders from
the eligible prospects described above;
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Respond to
questions related to information in the offering document and in
any proxy materials, and answer investment-related
questions;
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If the sales
plan calls for community meetings, participate in them. Community
meetings can relieve customer anxiety and generate local publicity
for the Offering;
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Continually
advise management on sales progress, market conditions and
customer/community responsiveness to the Offering;
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Prepare broker
“fact sheets” and arrange “road shows” for
the purpose of stimulating interest in the stock and informing the
brokerage community of the particulars of the Offering;
and
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Contact other
market-makers to trade the stock in the after-market.
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For its services hereunder, the Institution will
pay to RBCO a the following compensation:
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a.
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A
reorganization and proxy vote advisory and administrative services
fee of $50,000 in connection with certain services set forth in
section 3.a. and 3.b. hereof. In view of the long preparation phase
prior to commencement of the Offering, this fee shall be
payab
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