RP® FINANCIAL, LC.
Exhibit
99.2
RP®
FINANCIAL,
LC.
Financial
Services Industry Consultants
January
25, 2007
Xx. Xxxxx
Xxxxxxx
Senior
Vice President and Chief Financial Officer
Fairport
Savings Bank
00
Xxxxx
Xxxx Xxxxxx
Fairport,
New York 14450
Dear
Xx. Xxxxxxx:
This
letter sets forth the agreement between Fairport Savings Bank, Fairport, New
York (the
“Bank”), and RP® Financial, LC. (“RP Financial”) for
the independent appraisal services in connection
with the “Minority Stock Issuance” by a newly formed mid-tier stock holding
company
that will be a subsidiary of a newly formed mutual holding company (the “MHC”).
The specific
appraisal services to be rendered by RP Financial are described
below.
Description
of Conversion Appraisal Services
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 Bank’s operations, financial condition,
profitability, market area,
risks and various internal and external factors which impact the pro forma
value
of the Bank. RP
Financial will prepare a written detailed valuation report of the Bank that
will
be fully consistent
with applicable regulatory guidelines and standard pro forma valuation
practices. In this
regard, the applicable regulatory guidelines are those set forth in the Office
of Thrift Supervision’s
(“OTS”) October 21, 1994 “Guidelines for Appraisal Reports for the Valuation of
Savings
and Loan Associations Converting from Mutual to Stock Form of
Organization,”
which
have
been
endorsed by the Federal Deposit Insurance Corporation (“FDIC”) and various state
banking
agencies.
The
appraisal report will include an in-depth 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.
The
appraisal report will describe the Bank’s business strategies, market area,
prospects for the
future and the intended use of proceeds both in the short term and over the
longer term. 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.
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Washington
Headquarters
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Rosslyn
Center
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Direct:
(000) 000-0000
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0000
Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
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Telephone:
(000) 000-0000
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Arlington,
VA 22209
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Fax
No.: (000) 000-0000
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E-Mail:
xxxxxxxxxxxx@xxxxxxxxxxx.xxx
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Toll-Free
No.: (000) 000-0000
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Xx.
Xxxxx Xxxxxxx
January
25, 2007
Page
2
We
will
review pertinent sections of the applications and offering documents to obtain
necessary
data and information for the appraisal, including the impact of key deal
elements on the appraised
value, such as dividend policy, use of proceeds and reinvestment rate, tax
rate,
conversion
expenses, and characteristics of stock plans. The appraisal report will conclude
with a midpoint
pro forma market value that will establish the range of value, and reflect
the
Minority Stock
Issuance size and offering price per share determined by the Bank’s Board of
Directors. The
appraisal report may be periodically updated prior to the commencement of the
Minority Stock
Issuance and the appraisal is required to be updated just prior to the closing
of the Minority Stock
Issuance.
RP
Financial agrees to deliver the valuation appraisal 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.
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 $5,000 on delivery of each update to the
valuation, plus reimbursable
expenses. Payment of these fees shall be made according to the following
schedule:
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$5,000
upon execution of the letter of agreement engaging RP Financial’s
appraisal
services;
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$25,000
upon delivery of the completed original appraisal report;
and
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$5,000
upon delivery of each completed updated appraisal
report.
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The
Bank
will reimburse RP Financial for 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
in connection with this appraisal engagement, subject to written authorization
from the Bank to exceed such level.
In
the
event the Bank shall, for any reason, discontinue the proposed Minority Stock
Issuance
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 giving full credit
to
the initial retainer
fee. RP Financial’s standard billing rates range from $75 per hour for research
associates to
$350
per hour for managing directors.
Xx. Xxxxx
Xxxxxxx
January
25, 2007
Page
3
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 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 transaction requires
the preparation by RP Financial of a new appraisal or financial
projections.
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
Reorganization and Minority Stock
Issuance are 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
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 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 willful 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.
Any
time devoted by employees of 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.
Xx. Xxxxx
Xxxxxxx
January
25, 2007
Page
4
(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 RP Financial
intends to base a claim for indemnification hereunder. In the event the Bank
elects, within
ten business 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 Bank
hereunder within five days after the final determination of such contest either
by written acknowledgement
of the Bank or a final judgment (including all appeals therefrom) of a court
of
competent jurisdiction. If the Bank does not so elect, RP Financial shall be
paid promptly and in any
event
within thirty days after receipt by the Bank of the notice of the
claim.
(c)
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. The Bank
may
assume the defense
of any claim (as to which notice is given in accordance with 3(b)) with counsel
reasonably satisfactory
to RP Financial, and after notice from the Bank to RP Financial of its election
to assume
the defense thereof, the Bank will not be liable to RP Financial for any legal
or other expenses
subsequently incurred by RP Financial (other than reasonable costs of
investigation and assistance
in discovery and document production matters). Notwithstanding the foregoing,
RP
Financial
shall have the right to employ their own counsel in any action or proceeding
if
RP Financial
shall have concluded that a conflict of interest exists between the Bank and
RP
Financial which
would materially impact the effective representation of RP Financial. In the
event that RP Financial
concludes that a conflict of interest exists, RP Financial shall have the right
to select counsel
reasonably satisfactory to the Bank which will represent RP Financial in any
such action or
proceeding and the Bank shall reimburse RP Financial for the reasonable legal
fees and expenses
of such counsel and other expenses reasonably incurred by RP Financial. In
no
event shall
the
Bank be liable for the fees and expenses of more than one counsel, separate
from
its own counsel,
for all indemnified parties in connection with any one action or separate but
similar or related
actions in the same jurisdiction arising out of the same allegations or
circumstances. The Bank
will
not be liable under the foregoing indemnification provision in respect of any
compromise
or settlement of any action or proceeding made without its consent, which
consent shall
not
be unreasonably withheld.
(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 the terms of the original engagement may be incorporated
by
reference 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.
Xx. Xxxxx
Xxxxxxx
January
25, 2007
Page
5
The
Bank
and RP Financial are not affiliated, and neither the Bank 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.
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* * * * * * * * * *
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.
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Sincerely,
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| /s/ Xxxxxxx X. Xxxxxxxxxxx | |||
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Xxxxxxx
X. Xxxxxxxxxxx
Chief
Executive Officer and
Managing
Director
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| Agreed To and Accepted By: | /s/ Xxxxx Xxxxxxx | |
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| Xxxxx
Xxxxxxx Senior Vice President and Chief Financial Officer |
| Upon Authorization by the Board of Directors For: |
Fairport
Savings Bank
Fairport,
New York
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Date
Executed: 1/29/07
