CONFIDENTIAL

Exhibit 1.1

 

 

June 2, 2005

 

Mr. David C. Mancuso

President & CEO

Lake Shore Savings

128 E. 4^th Street

Dunkirk, NY 14048

 

CONFIDENTIAL

 

Re:

Proposed Conversion and Reorganization–Advisory, Administrative and Marketing Services

 

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.

 

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 is one of the nation’s largest such groups devoted solely to investment banking services for financial institutions.

 

2.	MUTUAL HOLDING COMPANY FORMATION AND STOCK OFFERING

 

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.

 

3.	SERVICES TO BE PROVIDED BY RYAN BECK

 

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;

 

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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