September 24, 1997
Mr. Xxxx Xxxxxx
President and Chief Executive Officer
Pocahontas Federal Savings and Loan Association
000 Xxxx Xxxxxxxx
Pocahontas, Arkansas 72455-3420
Dear Xx. Xxxxxx:
This letter sets forth the agreement between Pocahontas Federal Savings
and Loan Association, Pocahontas, Arkansas ("Pocahontas Federal" or the
"Association") and RP Financial, LC. ("RP Financial") for certain conversion
appraisal services pertaining to the mutual-to-stock conversion of Pocahontas
Federal Mutual Holding Company (the "MHC"), a federal mutual holding company and
the majority shareholder of Pocahontas Federal, and the Plan of Reorganization
between the MHC and Pocahontas Federal. The specific services to be rendered by
RP Financial are described below. These services will be rendered by a team of
two senior consultants on staff.
Description of Conversion Appraisal Services
RP Financial will prepare a written detailed valuation report which will
be fully consistent with applicable regulatory guidelines and standard valuation
practices. The valuation report will conclude with an estimate of the pro forma
market value of the shares of stock to be offered and sold in the conversion. RP
Financial understands that as part of the conversion, the shares of Pocahontas
Federal which are held by public shareholders (i.e. stockholders other than the
MHC) will be exchanged for newly issued shares of common stock of a newly
organized stock holding company ("SHC") and that shares offered in the
conversion will be SHC shares. The valuation report will incorporate such key
transaction parameters as the financial strength and operations of Pocahontas
Federal, the proposed treatment in the conversion of the publicly-traded shares
of Pocahontas Federal (including the proposed exchange), and the financial
strength and operations of the MHC unconsolidated. The estimate of pro forma
market value will be a preliminary value, subject to confirmation by RP
Financial at the closing of the offering.
Prior to preparing the valuation report, RP Financial will conduct a
financial due diligence, including on-site interviews of senior management and
reviews of financial and other documents and records, to gain insight into the
operations, financial condition, profitability, risks and external factors which
impact the Association. The valuation will include an in-depth analysis of the
Association's financial condition and operating results, as well as assess the
Association's interest rate risk, credit risk and liquidity risk. The valuation
report will describe the Association's business strategies and market area and
prospects for the future. A peer group analysis relative to publicly-traded
savings institutions will be conducted for the purpose of determining
appropriate valuation adjustments relative to the group. The valuation report
will conclude with a midpoint pro forma valuation for the shares to be offered
in the conversion, as well as a range of value around the midpoint value. The
valuation report may be periodically updated throughout the conversion process
and there will be at least one updated valuation prepared at the time of the
closing of the stock offering.
RP Financial, LC.
Mr. Xxxx Xxxxxx
September 24, 1997
Page 2
RP Financial agrees to deliver the valuation appraisal and subsequent
updates, in writing, to Pocahontas Federal at the above address in conjunction
with the filing of the regulatory application. Subsequent updates will be filed
promptly as certain events occur which would warrant the preparation and filing
of such valuation updates. Further, RP Financial agrees to perform such other
services as are necessary or required in connection with the regulatory review
of the appraisal and respond to the regulatory comments, if any, regarding the
valuation appraisal and subsequent updates.
Fee Structure and Payment Schedule
Pocahontas Federal agrees to pay RP Financial a fixed fee of $30,000 for
these services, plus reimbursable expenses. Payment of these fees shall be made
according to the following schedule:
o $5,000 upon execution of the letter of agreement engaging RP
Financial's services as outlined herein;
o $22,500 upon delivery of the completed original appraisal
report; and
o $2,500 upon completion of the conversion to cover all subsequent
valuation updates that may be required.
The Association will reimburse RP Financial for out-of-pocket expenses
incurred in the preparation of the appraisal report. Such out-of-pocket
expenses, which are not expected to exceed $5,000 inclusive of expenses for the
business plan and appraisal, will include travel, telephone, facsimile, copying,
shipping, computer and data. RP Financial will make all attempts to keep
out-of-pocket expenses to a minimum.
In the event Pocahontas Federal or the MHC shall, for any reason,
discontinue the proposed conversion prior to delivery of the completed documents
set forth above and payment of the respective progress payment fees, Xxxxxxxxxx
Federal agrees to compensate RP Financial according to RP Financial's standard
billing rates for consulting services based on accumulated and verifiable time
expenses, not to exceed the respective fee caps noted above, after giving full
credit to the initial retainer fee. RP Financial's standard billing rates range
from $75 per hour for research associates to $250 per hour for managing
consultants.
If during the course of the proposed transaction, unforeseen events occur
so as to materially change the nature or the work content of the services
described in this contract, the terms of said contract shall be subject to
renegotiation by Xxxxxxxxxx Federal and RP Financial. Such unforeseen events
shall include, but not be limited to, major changes in the conversion
regulations, appraisal guidelines or processing procedures as they relate to
conversion appraisals, major changes in management or procedures, operating
policies or philosophies, and excessive delays or suspension of processing of
conversion applications by the regulators such that completion of the conversion
transaction requires the preparation by RP Financial of a new appraisal.
Representations and Warranties
Pocahontas Federal and RP Financial agree to the following:
1. The Association agrees to make available or to supply to RP Financial
such information with respect to its business and financial condition as RP
Financial may reasonably request in order to provide the aforesaid valuation.
Such information heretofore or hereafter supplied or made available to RP
Financial shall
RP Financial, LC.
Mr. Xxxx Xxxxxx
September 24, 1997
Page 3
include: annual financial statements, periodic regulatory filings and material
agreements, debt instruments, off balance sheet assets or liabilities,
commitments and contingencies, unrealized gains or losses and corporate books
and records. All information provided by the Association to RP Financial shall
remain strictly confidential (unless such information is otherwise made
available to the public), and if conversion is not consummated or the services
of RP Financial are terminated hereunder, RP Financial shall upon request
promptly return to the Association the original and any copies of such
information.
2. The Association hereby represents and warrants to RP Financial that any
information provided to RP Financial does not and will not, to the best of the
Association's knowledge, at the times it is provided to RP Financial, contain
any untrue statement of a material fact or fail to state a material fact
necessary to make the statements therein not false or misleading in light of the
circumstances under which they were made.
3. (a) The Association agrees that it will indemnify and hold harmless RP
Financial, any affiliates of RP Financial, the respective directors, officers,
agents and employees of RP Financial or their successors and assigns who act for
or on behalf of RP Financial in connection with the services called for under
this agreement (hereinafter referred to as "RP Financial"), from and against any
and all losses, claims, damages and liabilities (including, but not limited to,
all losses and expenses in connection with claims under the federal securities
laws) attributable to (i) any untrue statement or alleged untrue statement of a
material fact contained in the financial statements or other information
furnished or otherwise provided by Pocahontas Federal to RP Financial, either
orally or in writing, (ii) the omission or alleged omission of a material fact
from the financial statements or other information furnished or otherwise made
available by Pocahontas Federal to RP Financial or (iii) any action or omission
to act by Xxxxxxxxxx Federal, or Pocahontas Federal's respective officers,
directors, employees or agents which action or omission is willful or negligent.
Pocahontas Federal will be under no obligation to indemnify RP Financial
hereunder if a court determines that RP Financial was negligent or acted in bad
faith with respect to any actions or omissions of RP Financial related to a
matter for which indemnification is sought hereunder. Any time devoted by
employees of RP Financial to situations for which indemnification is provided
hereunder, shall be an indemnifiable cost payable by Xxxxxxxxxx Federal at the
normal hourly professional rate chargeable by such employee.
(b) RP Financial shall give written notice to the Association of such
claim or facts within thirty days of the assertion of any claim or discovery of
material facts upon which the RP Financial intends to base a claim for
indemnification hereunder. In the event the Association elects, within seven
days of the receipt of the original notice thereof, to contest such claim by
written notice to RP Financial, RP Financial will be entitled to be paid any
amounts payable by the Association hereunder, together with interest on such
costs from the date incurred at the rate of fifteen percent (15%) per annum
within five days after the final determination of such contest either by written
acknowledgement of the Association or a final judgment of a court of competent
jurisdiction. If the Association does not so elect, RP Financial shall be paid
promptly and in any event within thirty days after receipt by the Association of
the notice of the claim.
(c) The Association shall pay for or reimburse the reasonable expenses,
including attorneys' fees, incurred by RP Financial in advance of the final
disposition of any proceeding within thirty days of the receipt of such request
if RP Financial furnishes the Association: (1) a written statement of RP
Financial's good faith belief that it is entitled to indemnification hereunder;
and (2) a written undertaking to repay the advance if it ultimately is
determined in a final adjudication of such proceeding that it or he is not
entitled to such indemnification.
(d) In the event the Association does not pay any indemnified loss or make
advance reimbursements of expenses in accordance with the terms of this
agreement, RP Financial shall have all remedies available at law or in equity to
enforce such obligation.
RP Financial, LC.
Mr. Xxxx Xxxxxx
September 24, 1997
Page 4
It is understood that, in connection with RP Financial's above-mentioned
engagement, RP Financial may also be engaged to act for the Association in one
or more additional capacities, and that the terms of the original engagement may
be embodied in one or more separate agreements. The provisions of Paragraph 3
herein shall apply to the original engagement, any such additional engagement,
any modification of the original engagement or such additional engagement and
shall remain in full force and effect following the completion or termination of
RP Financial's engagement(s). This agreement constitutes the entire
understanding of the Association and RP Financial concerning the subject matter
addressed herein, and such contract shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia. This agreement may not
be modified, supplemented or amended except by written agreement executed by
both parties.
Pocahontas Federal and RP Financial are not affiliated, and neither
Pocahontas Federal nor RP Financial has an economic interest in, or is held in
common with, the other and has not derived a significant portion of its gross
revenues, receipts or net income for any period from transactions with the
other.
The MHC and RP Financial are not affiliated, and neither the MHC nor RP
Financial has an economic interest in, or is held in common with, the other and
has not derived a significant portion of its gross revenues, receipts or net
income for any period from transactions with the other.
* * * * * * * * * * *
Please acknowledge your agreement to the foregoing by signing as indicated
below and returning to RP Financial a signed copy of this letter, together with
the initial retainer fee of $5,000.
Sincerely,
/s/ Xxxxxxx X. Xxxxxxxxxxx
Xxxxxxx X. Xxxxxxxxxxx
Chief Executive Officer
and Managing Director
Agreed To and Accepted By: Mr. Xxxx Xxxxxx /s/ Xxxx Xxxxxx
-------------------------------------
President and Chief Executive Officer
For: Pocahontas Federal Savings and Loan Association
Pocahontas, Arkansas
Date Executed: October 8, 1997
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