Exhibit 99.2
RP FINANCIAL, LC.
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Financial Services Industry Consultants
October 7, 1998
Xx. Xxxxx X. Xxxxxxxx
Chairman, President and Chief Executive Officer
First Federal Savings Bank of Siouxland
000 Xxxxxx Xxxxxx
Xxxxx Xxxx, Xxxx 00000-0000
Dear Xx. Xxxxxxxx:
This letter sets forth the agreement between First Federal Savings Bank
of Siouxland ("First Federal" or the "Bank"), subsidiary of First Federal
Bankshares, M.H.C., Sioux City, Iowa ("Bankshares" or the "Mutual Holding
Company"), and RP Financial, LC. ("RP Financial"), whereby the Bank has engaged
RP Financial to prepare the written document and financial projections
reflecting the post-conversion activities of the Bank in conjunction with the
public stock offering of shares of common stock of First Federal and the
contemporaneous cash acquisition of Mid-Iowa Financial Corp., Newton, Iowa
("Mid-Iowa Financial"). These services are described in greater detail below.
DESCRIPTION OF PROPOSED SERVICES
RP Financial's business planning services will include the following
areas: (1) determining the Bank's current financial and operating condition,
business strategies and anticipated future strategies, both currently and
incorporating the merger transaction; (2) quantifying the impact of business
strategies, incorporating the use of offering proceeds; (3) preparing detailed
financial projections on a quarterly basis for a period of at least three fiscal
years to reflect the impact of selected business strategies, the use of offering
proceeds and the merger transaction; (4) preparing the written business plan
document which conforms with applicable regulatory guidelines, including a
description of the use of offering proceeds, post-merger operations and how the
convenience and needs of the community will be addressed; and (5) preparing the
detailed schedules of the capitalization and inter-company cash flows.
Contents of the business plan will include: Philosophy/Goals; Economic
Environment and Background; Lending, Leasing and Investment Activities; Deposit,
Savings and Borrowing Activity; Asset and Liability Management; Operations;
Records, Systems and Controls; Growth, Profitability and Capital; Responsibility
for Monitoring this Plan.
RP Financial agrees to prepare the business plan and accompanying
financial projections in writing such that the business plan conforming to
regulatory guidelines can be filed with the appropriate federal and state
regulatory agencies in conjunction with the filing of the stock offering and
merger applications.
XX. XXXXX X. XXXXXXXX
OCTOBER 7, 1998
PAGE 2
FEE STRUCTURE AND PAYMENT SCHEDULE
The Bank agrees to compensate RP Financial for preparation of the
business plan on a fixed fee basis of $10,000. Payment of the professional fees
shall be made upon delivery of the completed business plan.
The Bank also agrees to reimburse RP Financial for those direct
reasonable out-of-pocket expenses necessary and incidental to providing the
business planning services. Reimbursable expenses will likely include shipping,
telephone/facsimile printing, computer and data services, and shall be paid to
RP Financial as incurred and billed. RP Financial will agree to limit
reimbursable expenses to an amount not to exceed $10,000 in conjunction with the
business planning and appraisal engagements, subject to written authorization
from the Bank to exceed such level.
In the event the Bank shall, for any reason, discontinue this planning
engagement prior to delivery of the completed business plan and payment of the
progress payment fee, the Bank 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 fixed fee described above, plus
reimbursable expenses incurred.
If during the course of the planning engagement, unforeseen events
occur so as to materially change the nature or the work content of the business
planning services described in this contract, the terms of said contract shall
be subject to renegotiation by the Bank and RP Financial. Such unforeseen events
may include changes in regulatory requirements as it specifically relates to the
Bank or changes in the structure of the merger transaction which will
dramatically impact the Bank.
* * * * * * * * * * *
Please acknowledge your agreement to the foregoing by signing as
indicated below and returning to RP Financial a signed copy of this letter.
Very truly yours,
/s/ Xxxxxxx X. Xxxxxxxxxxx
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Xxxxxxx X. Xxxxxxxxxxx
CEO and Managing Director
Agreed To and Accepted By: Xxxxx X. Xxxxxxxx /s/ Xxxxx X. Xxxxxxxx
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Chairman, President and Chief Executive Officer
Upon Authorization by the Board of Directors For: First Federal Savings Bank of
Siouxland Subsidiary of First
Federal Bankshares, M.H.C.
Sioux City, Iowa
Date Executed: 10-19-98
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RP FINANCIAL, LC.
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Financial Services Industry Consultants
October 7, 1998
Xx. Xxxxx X. Xxxxxxxx
Chairman, President and Chief Executive Officer
First Federal Savings Bank of Siouxland
000 Xxxxxx Xxxxxx
Xxxxx Xxxx, Xxxx 00000-0000
Dear Xx. Xxxxxxxx:
This letter sets forth the agreement between First Federal Savings Bank
of Siouxland ("First Federal" or the "Bank"), subsidiary of First Federal
Bankshares, M.H.C., Sioux City, Iowa ("Bankshares" or the "Mutual Holding
Company"), and RP Financial, LC. ("RP Financial") for independent conversion
appraisal services pertaining to the mutual-to-stock conversion of Bankshares
and the cash acquisition of Mid-Iowa Financial Corp., Newton, Iowa ("Mid-Iowa
Financial"). The specific appraisal services to be rendered by RP Financial are
described below. These appraisal services will be rendered by a team of two
senior consultants on staff and will be directed by the undersigned.
DESCRIPTION OF APPRAISAL SERVICES
Prior to preparing the appraisal 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, market area, risks and various
internal and external factors of First Federal, all of which will be considered
in estimating the pro forma market value of the Bank. In addition, RP Financial
will evaluate the anticipated expected synergies and costs as well as accounting
and other adjustments resulting from the merger.
RP Financial will prepare a detailed written valuation report of the
Bank which will be fully consistent with applicable federal regulatory
guidelines and standard pro forma valuation practices. The appraisal report will
include an analysis of the Bank's financial condition and operating results, as
well as an assessment of the Bank's interest rate risk, credit risk and
liquidity risk, including an analysis on a pro forma basis taking into account
the related merger transaction. The appraisal report will describe the Bank's
business strategies, market area, prospects for the future and the intended use
of proceeds, incorporating the merger transaction. A peer group analysis
relative to comparable publicly-traded savings institutions will be conducted
for the purpose of determining appropriate valuation adjustments for the Bank
relative to the peer group.
XX. XXXXX X. XXXXXXXX
OCTOBER 7, 1998
PAGE 2
We will review pertinent sections of the Bank's prospectus and hold
discussions with the Bank to obtain necessary data and information for the
appraisal report, including the impact of key deal elements on the pro forma
market value, such as dividend policy, use of proceeds and reinvestment rate,
tax rate, offering expenses, characteristics of stock plans, and the pro forma
impact of the merger transaction.
The appraisal report will establish a midpoint pro forma market value.
The appraisal report may be periodically updated throughout the conversion
process as appropriate. There will be at least one updated valuation which would
be prepared at the time of the closing of the stock offering.
RP Financial agrees to deliver the appraisal report and subsequent
updates, in writing, to the Bank 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. RP Financial expects to formally
present the appraisal report, including the appraisal methodology, peer group
selection and assumptions, to the Board of Directors for review and acceptance.
FEE STRUCTURE AND PAYMENT SCHEDULE
The Bank agrees to pay RP Financial a fixed fee of $30,000 for
preparation and delivery of the original appraisal report and a $5,000 fee for
each subsequent appraisal update, plus reimbursable expenses. Payment of these
fees shall be made according to the following schedule:
- $5,000 upon execution of the letter of agreement engaging RP
Financial's appraisal services;
- $25,000 upon delivery of the completed original appraisal report;
and,
- $5,000 upon completion of each subsequent valuation update that
may be required.
The Bank will reimburse RP Financial for reasonable out-of-pocket
expenses incurred in preparation of the valuation. Such out-of-pocket expenses
will likely include travel, printing, telephone, facsimile, shipping, computer
and data services. RP Financial will agree to limit reimbursable expenses to an
amount not to exceed $10,000 in conjunction with the appraisal and business
planning engagements, subject to written authorization from the Bank to exceed
such level.
XX. XXXXX X. XXXXXXXX
OCTOBER 7, 1998
PAGE 3
In the event the Bank shall, for any reason, discontinue the proposed
transaction prior to delivery of the completed documents set forth above and
payment of the respective progress payment fees, the Bank 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 applying full credit to the initial
$5,000 retainer fee towards such payment. RP Financial's standard billing rates
range from $75 per hour for research associates to $250 per hour for managing
directors.
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 the Bank 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, changes in the structure of the merger terms, major changes in
management or procedures, operating policies or philosophies, and excessive
delays or suspension of processing of conversion or merger applications by the
regulators such that completion of the conversion transaction requires the
preparation by RP Financial of a new appraisal.
REPRESENTATIONS AND WARRANTIES
The Bank and RP Financial agree to the following:
1. The Bank 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 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 Bank to RP Financial shall remain
strictly confidential (unless such information is otherwise made available to
the public), and if the conversion is not consummated or the services of RP
Financial are terminated hereunder, RP Financial shall upon request promptly
return to the Bank the original and any copies of such information.
2. The Bank hereby represents and warrants to RP Financial that any
information provided to RP Financial does not and will not, to the best of the
Bank's knowledge, at the times it is provided to RP Financial, contain any
untrue statement of a material fact or in response to informational requests by
RP Financial 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 Bank 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
XX. XXXXX X. XXXXXXXX
OCTOBER 7, 1998
PAGE 4
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
the Bank 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 the Bank to RP Financial;
or (iii) any action or omission to act by the Bank, or the Bank's respective
officers, directors, employees or agents which action or omission is undertaken
in bad faith or negligent. The Bank 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. Reasonable
time devoted by RP Financial to situations for which indemnification is provided
hereunder, shall be an indemnifiable cost payable by the Bank at the normal
hourly professional rate chargeable by such employee.
(b) RP Financial shall give written notice to the Bank 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 Bank elects, within seven days of
the receipt of the original notice thereof, to contest such claim by written
notice to RP Financial, the Bank shall not be obligated to make payments under
Section 3(c), but RP Financial will be entitled to be paid any amounts payable
by the Bank hereunder, together with interest on such costs from the date
incurred at the annual rate of prime plus two percent within five days after the
final determination of such contest either by written acknowledgement of the
Bank or a final judgment of a court of competent jurisdiction, unless it is
determined in accordance with Section 3(c) hereof that RP Financial is not
entitled to indemnity hereunder. If the Bank does not so elect to contest a
claim for indemnification by RP Financial hereunder, RP Financial shall (subject
to the Bank's receipt of the written statement and undertaking under Section
3(c) hereof) be paid promptly and in any event within thirty days after receipt
by the Bank of billing statements or invoices for which RP Financial is entitled
to reimbursement under Section 3(c) hereof.
(c) Subject to the Bank's right to contest under Section 3(b)
hereof, the Bank 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 Bank: (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 Bank 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.
It is understood that, in connection with RP Financial's
above-mentioned engagement, RP Financial may also be engaged to act for the Bank
in one or more additional capacities, and that
XX. XXXXX X. XXXXXXXX
OCTOBER 7, 1998
PAGE 5
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 Bank 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.
First Federal and RP Financial are not affiliated, and neither First
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.
* * * * * * * * * * *
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.
Very truly yours,
/s/ Xxxxxxx X. Xxxxxxxxxxx
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Xxxxxxx X. Xxxxxxxxxxx
CEO and Managing Director
Agreed To and Accepted By: Xxxxx X. Xxxxxxxx /s/ Xxxxx X. Xxxxxxxx
----------------------------
Chairman, President and Chief Executive Officer
Upon Authorization by the Board of Directors For: First Federal Savings Bank of
Siouxland, Subsidiary of First
Federal Bankshares, M.H.C.
Sioux City, Iowa
Date Executed: 10-19-98
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