[Keefe Bruyette & Woods, Inc. Letterhead]
June 8, 1998
Mr. Harry Robinson
President and Chief Executive Officer
Cohoes Savings Bank
75 Remsen Street
Cohoes, NY 12047-2892
Dear Mr. Robinson:
This proposal is in connection with Cohoes Savings Bank's (the "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.
Keefe, Bruyette and Woods, Inc. ("KBW") will act as the Bank's and the Company's
exclusive financial advisor and marketing agent in connection with the
Conversion. 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 conversion 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 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, NASDAQ listing, 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-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 are 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. 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
offering documents to be filed with all regulatory agencies including, the
Securities and Exchange Commission ("SEC"), 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 conversion services, conversion
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 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 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) A Management Fee of $40,000 payable in four consecutive monthly
installments of $10,000 commencing with the signing of this letter. 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) A Success Fee of 1.40% on the aggregate Purchase Price of Common Stock
sold in the Subscription Offering and Community Offering Such fee
calculation shall exclude shares purchased by the Bank's officers,
directors, or employees (or members of their immediate families) 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) 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. KBW will pass
onto selected broker-dealers, who assist in the syndicated community
offering, 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 effected 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(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 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 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 will receive reimbursement for reasonable out-of-pocket expenses related to
travel, meals lodging, photocopying, etc. KBW will request reimbursement for
reasonable fees and expenses of their counsel (such fees of counsel will not be
incurred without the prior approval of Client). Such reimbursement of legal fees
will be subject to a cap to be agreed upon with Client.
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. 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 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,
KEEFE, BRUYETTE & WOODS, INC.
By: /s/Patricia A. McJoynt
-------------------------------
Patricia A. McJoynt
Senior Vice President
COHOES SAVINGS BANK
By: /s/Harry Robinson Date: 6/10/98
------------------------------- ------------------
Harry Robinson
President and Chief Executive Officer
EXHIBIT A
CONVERSION SERVICES PROPOSAL
TO COHOES SAVINGS BANK
KBW provides thrift institutions converting from mutual to stock form of
ownership with a comprehensive program of conversion services designed to
promote an orderly, efficient, cost-effective and long-term stock distribution.
The following list is representative of the conversion 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.
Conversion 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,
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.
Conversion 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.
Aftermarket Support Services.
KBW will use their best efforts to secure market making and on-going research
commitment from at least three NASD firms, one of which will be Keefe, Bruyette
& Woods, Inc.