Exhibit 1.1
[CAPITAL RESOURCES, INC. LETTERHEAD]
October 29, 1997
Mr. Lewis E. Kolar
President and Chief Executive Officer
Gloversville Federal Savings and
Loan Association
52 N. Main Street
Gloversville, New York 12078
Dear Mr. Kolar:
We are pleased to submit this proposal to set forth the terms of the
proposed engagement between Capital Resources, Inc. and Gloversville Federal
Savings and Loan Association ("Gloversville Federal" or the "Association") for
your planned mutual-to-stock conversion (the "Conversion") and the offering of
your shares of common stock (the "Offering").
BACKGROUND ON CAPITAL RESOURCES
Capital Resources is a National Association of Securities Dealers
("NASD") member investment banking firm specializing in raising capital for
financial institutions. Members of our professional staff are licensed
securities representatives and have extensive experience in conducting local
sales efforts for thrift conversions. Our "hands-on" philosophy and direct sales
involvement have resulted in many successful conversions and a satisfied
clientele. We combine the critical and necessary operational and data processing
support within our package of marketing services to help ensure a smooth,
professionally conducted, successful Conversion.
As you are undoubtedly aware, there are substantial benefits to be
derived from a successful local offering of your stock. A successful local
offering not only results in stable, loyal stockholders, but also provides a
rare opportunity to capture many ancillary benefits to the Association, such as
the opportunity for enhancing local identity and increasing local exposure.
The conversion process involves an enormous amount of attention to detail
and requires extensive knowledge and expertise in conversion regulations and
securities regulations. Capital Resources' experience in managing thrift
conversions will help alleviate the burden on management and minimize disruption
to normal banking business while ensuring each detail is attended to in a timely
and accurate manner.
The following describes the scope of conversion marketing, operational
and staff training services Capital Resources proposes to provide Gloversville
Federal.
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 2
PROPOSED SERVICES
Capital Resources proposes to act as placement agent and marketing
representative on behalf of Gloversville Federal with respect to the offering of
common stock pursuant to the Conversion. We will also serve as "Conversion
Manager" to assist you in numerous operational areas with respect to the
Conversion. In this regard, we combine four critical roles of the Conversion
process:
I. Sales and Marketing Assistance
II. Comprehensive Staff Training
III. Stock Center Management
IV. Proxy Solicitation
V. Additional Value-Added Services
Each area is discussed in the following sections.
I. SALES AND MARKETING ASSISTANCE
Capital Resources proposes to represent Gloversville Federal as placement
agent in the sale of the common stock in a Subscription and Community Offering.
Our marketing assistance program is designed to inform your true customer base
of this investment opportunity and to educate your customers on the conversion
process. Our main objective is to target sales to your local customers who will
have subscription rights (the "Subscription Offering"). Typically, the entire
issue will be bought by your customers. In the event shares remain available
after customer subscriptions, we will market remaining shares to achieve a wide
distribution to "friendly" local shareholders (the "Community Offering").
Our specific responsibilities as such will be as follows:
o Assign licensed professionals from our staff to work at Gloversville
Federal's offices as sales representatives on behalf of the Association.
Our professionals will be responsible for all customer contact and
inquiries regarding the Offering.
o Work with your conversion counsel regarding the prospectus and the
language in it from a marketing perspective.
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 3
o If desirable, conduct a series of community meetings to provide
information on the Offering. Capital Resources' representatives will take
an active role in these meetings. These meetings serve as a customer
relations tool as well as enhance local exposure of Gloversville Federal
and set the stage for favorable stockholder relations after Conversion.
o Design and prepare for the Association a marketing campaign, including
appropriate marketing literature and media advertisements.
o After the Subscription and Community Offerings if shares remain
unsubscribed, we will assemble a selected dealer's syndicate to
distribute remaining shares (the "Syndicated Community Offering"). We
will meet with local brokers to educate them on the particulars of thrift
stocks, discuss the salient terms of Gloversville Federal's Offering,
create after-market interest and stimulate local interest in Gloversville
Federal's stock.
o We will make a market in the stock after Conversion and assist in
arranging other market-makers.
II. COMPREHENSIVE CONVERSION TRAINING
Capital Resources will conduct comprehensive training sessions before the
formal commencement date of the Offering. Our training sessions are designed to
ensure that members of the board, management and staff are knowledgeable of the
conversion process, aware of their roles and capable of dealing with problems,
inquiries and events. Each session is tailored to the audience involved and each
covers a different level of detail and area of the Conversion, as follows:
Management Meeting: A structured discussion pertaining to organization,
role assignments, facilities, marketing, accounting, reporting and timetables.
Board Meeting: A presentation regarding the conversion process and board
members' roles and responsibilities, with emphasis on insider behavior.
Staff Meeting: A comprehensive presentation to the entire staff to
discuss the nature of the Conversion, roles and responsibilities, and the
opportunity to elaborate community involvement. A slide presentation and
handouts are used.
Stock Center Training: We will train and supervise Bank personnel
specifically responsible for assisting us in the Stock Center with clerical
tasks (see section III below). Computer training, account balancing procedures
and stock recordkeeping are covered.
In addition to our personalized training meetings, Capital Resources
documents the many details and functions of the conversion process in
easy-to-read study manuals. Our conversion study
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 4
manuals are intended to be used in conjunction with our training sessions and as
a reference during the Conversion. The manuals provide instruction, sample forms
and general information vital to understanding the conversion process. This
information has been collected and updated by Capital Resources over many years.
III. STOCK CENTER MANAGEMENT
A conversion requires accurate and timely recordkeeping and reporting.
Furthermore, customer inquiries must be handled professionally and accurately.
The Stock Center centralizes all data and work effort relating to the
Conversion. Capital Resources will establish the Stock Center, preferably
on-site at the Association's offices, from which we will supervise all
activities relating to the Conversion. Our professionals will be on-site
throughout the Offering to handle customer inquiries and special situations as
they arise. In addition, we will require two of the Association's employees to
assist us on a full time basis in the Stock Center with clerical tasks. We will
train and supervise these employees. Stock Center activities for which Capital
Resources will be responsible for include the following:
o Collect, respond to and record all mail regarding conversion.
o Meet with customers who wish to discuss the Offering.
o Tabulate stock orders.
o Tabulate proxies.
o Mail "Stock-Grams", "Proxy-Grams", and other literature as applicable.
o Prepare and mail order confirmations.
o Sort and track prospects.
o Coordinate and record community meetings and attendance.
o Coordinate mailings to customers and prospects.
o Balance daily totals.
o Respond to mail and telephone inquiries.
o Generate daily management reports.
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 5
o Coordinate with the printer for the initial sorting and mailing to
different categories of prospective subscribers.
Closing Assistance: The end of the Offering is a critical time that
requires coordination of many events. Capital Resources will be on-site to
coordinate tasks such as mailing interest checks, sending "welcome" letters to
shareholders, balancing accounts, tabulating final stock information, and
preparing stockholder records for the transfer agent, as well as answering
post-offering questions from subscribers.
In performing the various Stock Center tasks outlined above, Capital
Resources will utilize its proprietary conversion program, the "Back Office
Stock System" ("BOSS"). BOSS is a menu-driven, user-friendly program which will
help ensure efficient, accurate recordkeeping and timely reporting during the
Conversion. To use BOSS, we would require a computer to be provided by
Gloversville Federal for Stock Center use during the conversion.
IV. PROXY SOLICITATION
Regulations require that over 50% of the outstanding members' votes must
be in favor of the Plan of Conversion. As part of our engagement, we will
solicit proxies to ensure this vote requirement is met.
V. ADDITIONAL VALUE-ADDED SERVICES
Capital Resources will provide, at no charge, general financial
consulting to the Association with respect to issues facing stock companies for
a year following Conversion. A representative from Capital Resources will attend
Board meetings semi-annually, as requested, to discuss such issues. The Bank
will reimburse Capital Resources for out-of-pocket expenses related to such
meetings.
Capital Resources will also provide certain other post-conversion
services as part of this engagement at no charge, including stock research
coverage and stock benefit plan shares purchases at no commission.
PROPOSED FEE STRUCTURE
For our services as described herein, we propose a compensation structure
as follows:
A. A marketing fee of ninety thousand dollars ($90,000) payable as follows:
$25,000 upon execution of this proposal and the commencement of our
engagement, $25,000 upon filing of
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 6
the Application for Conversion, and the balance upon closing. This fee
covers all professional services for advisory services, due diligence,
training, proxy solicitation, and marketing services. Progress payments
are for consulting work performed prior to the Offering.
B. Reimbursement for out-of-pocket expenses incurred by us on behalf of the
Conversion. Such expenses shall include, but are not limited to, travel,
legal, communications and postage. We will provide you with a detailed
accounting of all reimbursable expenses and will bill you monthly.
Reimbursable out-of-pocket expenses shall not exceed $15,000, and our
legal expenses shall not exceed $20,000 without management's prior
approval.
ADDITIONAL PROVISIONS
Furthermore, it is understood that:
o Prior to the commencement of the Offering, Gloversville Federal and
Capital Resources will enter into a formal agency agreement generally
used by Capital Resources for securities offerings which provides for
mutual indemnities and warranties. Our sales and marketing services are
subject to the usual warranties, indemnities and conditions contained in
the agency agreement.
o Our role as your NASD agent is subject to our normal underwriting
criteria and examination of relevant books and records.
o The Association will pay all other expenses of the conversion, including
but not limited to attorney's fees, National Association of Securities
Dealers, Inc. filing fees, all fees and expenses relating to "blue sky"
research and filings, state licensing and securities registration fees,
all fees relating to auditing and accounting, all printing and
advertising fees and all costs associated with retaining temporary
staffing, if any, in connection with the Conversion.
o Capital Resources will conduct an examination of the relevant documents
and records of Gloversville Federal as appropriate. Gloversville Federal
agrees to make all documents and records deemed appropriate or necessary
by Capital Resources available upon request.
o Our obligations stated herein will be subject to there being no material
changes, in the opinion of our firm, in the Association's condition or in
market conditions so as to significantly delay the Offering or to render
the Offering inadvisable.
o Our marketing obligations pursuant to this agreement will terminate upon
the completion or termination of the initial Offering, but in no event
later than 12 months from the date of this letter. All fees or expenses
due to Capital Resources but unpaid will be payable to Capital Resources
at that time. In the event the offering is extended beyond this term, the
Association
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 7
and Capital Resources may mutually agree to renew this engagement under
mutually acceptable terms.
* * * * * * *
To engage our services, please sign in the space provided below and
return the signed letter to me. I have enclosed a signed copy for your files.
This proposal is open for your acceptance for thirty (30) days from the date of
this letter.
We look forward to working with Gloversville Federal on this most
exciting and challenging project.
Sincerely,
CAPITAL RESOURCES, INC.
David P. Rochester
Chairman and Chief
Executive Officer
DPR/am
Agreed To and Accepted By:
Gloversville Federal Savings and Loan Association
- ------------------------------------------------
signed date
- ------------------------------------------------
Lewis E. Kolar, President
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 1
[CAPITAL RESOURCES, INC. LETTERHEAD]
November 18, 1997
Mr. Lewis E. Kolar
President and Chief Executive Officer
Gloversville Federal Savings and
Loan Association
52 N. Main Street
Gloversville, New York 12078
Dear Mr. Kolar:
This letter describes the records management services that Capital
Resources Group, Inc. ("CRG") proposes to provide Gloversville Federal Savings
and Loan Association (the "Association") in connection with your planned
mutual-to-stock conversion (the "Conversion").
RECORDS MANAGEMENT
CRG proposes to act as your "Conversion Agent" to be responsible for
consolidating member accounts of and calculating subscription rights for your
depositors and borrowers. Specifically, the services to be provided Gloversville
Federal shall consist of the following:
Conversion and Consolidation of Member Files
o Convert depositor and loan customer files to establish a file for the
initial mailing of Conversion packages.
A. Members holding savings accounts as of the specified eligibility
record date;
B. Members holding savings accounts as of the supplemental
eligibility record date; and
C. Members holding savings accounts and/or loans as of the "Other
Member" date.
o Build an interim data base as of the latest practical date for the
purpose of providing a suspected same ownership report.
o Edit tapes to identify records with missing names and addresses and/or
other incomplete information.
o Perform audit to ensure that complete and correct data has been
converted. o Consolidate accounts with the same registration.
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 2
o Segregate accounts coded "Bad Address" and "No Mail".
o Household sort accounts residing at the same address.
o Print consolidated addresses on mailing media.
File Analysis/Solicitation Aids
o Provide a household aggregate dollar balance range survey for determining
a target group for stock order solicitation.
o Provide zip code surveys for determining a plan for the mailing of
conversion packages.
o Provide geographic surveys for determining the "Blue Sky" states.
o Provide a telephone deck for stock order solicitation.
o Provide a list of eligible subscribers coded by eligibility categories
according to the "Plan of Conversion".
o Imprint name and address on request cards to non-target members, if
applicable.
o Code request cards or subscription forms with eligibility category
according to the Plan of Conversion.
Proxy Form Preparation and Analysis
o Provide list of all members entitled to receive a proxy for voting on the
conversion.
o Provide vote range survey for determining a target group for proxy
solicitation (if applicable).
o Imprint name and address on proxy cards.
o Print the number of eligible votes on the proxy cards.
o Code IRA and Keogh accounts as applicable.
o Segregate and produce proxies coded "Bad Address" or "No Mail".
o Print proxies and sort in household groups for mailing.
o Tabulate all validly executed proxies.
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 3
o Furnish daily reports to management.
o Produce and mail second mailing proxies (i.e., "Proxygrams") to unvoted
target members, if necessary.
o Provide an inspector of elections to attend the special meeting of
members.
o Provide proxy vote final list showing all members entitled to vote, if
they voted, how they voted and the number of votes voted.
Subscription Preparation and Processing
o Imprint name and address on subscription forms, if applicable.
o Imprint code for subscription eligibility category on form.
o Segregate and process subscription forms by category as stated in the
Plan of Conversion.
o Create and maintain a file for all subscribers.
o Produce and mail acknowledgment letters to subscribers daily.
o Verify shares purchased daily.
o Generate reports which confirm shares purchased.
o Issue a final report and confirm the final shares sold.
o Generate a pricing matrix showing the additional shares for a range of
prices (if applicable).
o Provide to transfer agent data for the issuance of stock certificates.
o Calculate and generate refund/interest checks.
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 4
FEE SCHEDULE
For records management services, our fee will be $10,000. The fees for
these services will be payable as follows: $5,000 payable upon execution of this
proposal and the commencement of our services; $2,500 upon regulatory approval
of the Conversion; and the balance either after the Special Meeting of Members
or the termination of the Conversion, whichever is sooner. In the rare event of
a recision or resolicitation, an additional fee of $2,500 for resolicitation of
stock subscriptions would be payable. In addition, we will bill you on a monthly
basis for direct out-of-pocket expenses incurred by us in performing our duties.
Such expenses shall include items such as travel (if necessary), communication,
shipping/postage, and supplies and shall not exceed $5,000 without prior
approval of the Association.
ADDITIONAL PROVISIONS
1. Gloversville Federal will provide CRG with all information we may
normally request in order to carry out the duties under this Agreement. The
information shall be provided on magnetic tape in the format required by us and
shall include, but not be limited to, names and addresses of all persons or
entities holding deposits in Gloversville Federal or who are borrowers thereof.
2. CRG may subcontract with any one or more of its affiliates to perform
part or all of its obligations herein with diligence and in a workmanlike
manner, and shall not be liable or responsible for delays or errors occurring by
reason of circumstances beyond its control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown,
flood or catastrophe, acts of God, insurrection, war, riots or failure of
communication or power supply.
3. Gloversville Federal shall indemnify and hold CRG harmless with
respect to any damages, liabilities, claims and expenses, unless caused in whole
or part by the negligence or willful misconduct by CRG under this Agreement.
Under no circumstances shall CRG be responsible for special or consequential
damages arising out of CRG's performance of its duties under this Agreement.
4. All data relating to Gloversville Federal's business submitted by the
Association to CRG pursuant to this Agreement will be safeguarded by us and CRG
will not disclose confidential information to third persons, except as provided
in Paragraph 5 below.
5. While all data submitted by Gloversville Federal required hereunder is
regarded to be disclosed in confidence, nothing herein shall prevent or prohibit
disclosure by CRG of any information if it has been made public or if required
to be disclosed by any provision of law, rule or regulation, or in those cases
where CRG is satisfied that it is liable to any governmental agency or third
person, or will be held in contempt for failure to disclose such information.
CAPITAL RESOURCES, INC.
Mr. Lewis E. Kolar
November 18, 1997
Page 5
6. This Agreement constitutes the entire Agreement between the parties
and cannot be changed orally.
7. Should Gloversville Federal decide, at any time during the Conversion
process, to discontinue such Conversion, Gloversville Federal shall be required
to pay CRG only for such work as has been completed up to the time that the
Conversion process was stopped, based on an equitable proration of the fee.
If the terms herein meet with your approval, please execute this contract
below and return it to me. I have enclosed a signed copy for your files.
We look forward to serving you in this capacity.
Sincerely,
CAPITAL RESOURCES GROUP, INC.
David P. Rochester
Chairman and Chief
Executive Officer
DPR/am
Agreed To and Accepted By:
Gloversville Federal Savings and Loan Association
- ------------------------------------------------
signed date
- ------------------------------------------------
Lewis E. Kolar, President