RP FINANCIAL, LC.
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Financial Services Industry Consultants
July 11, 2001
Xx. Xxxxxxx X. Xxxx
Chairman, President and Chief Executive Officer
Xxxxx Xxxxxxx Xxxxxxxxxx, Inc., subsidiary of
Xxxxx Xxxxxxx Bankshares, MHC
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxx 00000
Dear Xx. Xxxx:
This letter sets forth the agreement between Xxxxx Xxxxxxx Bankshares,
Inc. ("Xxxxx Savings" or the "Company"), subsidiary of Xxxxx Savings Bankshares,
MHC, Wooster, Ohio (the "MHC"), and RP Financial, LC. ("RP Financial") for
independent conversion appraisal services pertaining to the mutual-to-stock
conversion of the MHC. 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
In conjunction with 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 Xxxxx Xxxxxxx, all of which
will be considered in estimating the pro forma market value of the Company. RP
Financial will prepare a detailed written valuation report of the Company that
will be fully consistent with applicable federal regulatory guidelines and
standard pro forma valuation practices. The appraisal report will include an
analysis of the Company's financial condition and operating results, as well as
an assessment of the Company's interest rate risk, credit risk and liquidity
risk. The appraisal report will describe the Company's business strategies,
market area, prospects for the future and the intended use of proceeds. A peer
group analysis relative to comparable publicly-traded savings and banking
institutions will be conducted for the purpose of determining appropriate
valuation adjustments for the Company relative to the peer group.
We will review pertinent sections of the Company's prospectus and hold
discussions with the Company 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 structure
of any contribution to a charitable foundation immediately following the
offering if applicable.
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Xx. Xxxxxxx X. Xxxx
July 11, 2001
Page 2
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 that would
be prepared at the time of the closing of the stock offering. RP Financial
agrees to deliver the original appraisal report and subsequent updates, in
writing, to the Company at the above address in conjunction with the filing of
the regulatory applications. 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 Company agrees to pay RP Financial a fixed fee of $45,000 for
appraisal 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 appraisal services;
o $37,500 upon delivery of the original appraisal report concurrent
with filing the regulatory applications; and
o $2,500 upon completion of the stock offering to cover all
subsequent valuation updates that may be required, provided that
the transaction is not delayed for reasons described below.
The Company 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 in
conjunction with the appraisal and business planning engagements, subject to
written authorization from the Company to exceed such level.
In the event the Company 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 Company 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.
Xx. Xxxxxxx X. Xxxx
July 11, 2001
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 Company 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
The Company and RP Financial agree to the following:
1. The Company 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 Company 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 Company the original and any
copies of such information.
2. The Company hereby represents and warrants to RP Financial that any
information provided to RP Financial does not and will not, to the best of the
Company'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 Company 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,
reasonable attorneys fees, 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 Company
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 Company to RP Financial; or (iii)
any action or omission to act by the Company, or the Company's respective
officers, directors, employees or agents, which action or omission is
Xx. Xxxxxxx X. Xxxx
July 11, 2001
Page 4
undertaken in bad faith or is negligent. The Company 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 Company at
the normal hourly professional rate chargeable by such employee.
(b) RP Financial shall give written notice to the Company 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, including the name of counsel that RP Financial
intends to engage in connection with any indemnification related matter. In the
event the Company elects, within seven days of the receipt of the original
notice thereof, to contest such claim by written notice to RP Financial, the
Company 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 Company
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 Company
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 Company does not so elect to contest a
claim for indemnification by RP Financial hereunder, RP Financial shall (subject
to the Company'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 Company of billing statements or invoices for which RP Financial is
entitled to reimbursement under Section 3(c) hereof.
(c) Subject to the Company's right to contest under Section 3(b)
hereof, the Company 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 Company: (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 Company 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.
This agreement constitutes the entire understanding of the Company 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.
Xxxxx Xxxxxxx and RP Financial are not affiliated, and neither Xxxxx
Xxxxxxx nor RP Financial has an economic interest in, or is held in common with,
the other and has not derived
Xx. Xxxxxxx X. Xxxx
July 11, 2001
Page 5
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
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Xxxxxxx X. Xxxxxxxxxxx
Chief Executive Officer and
Managing Director
Agreed To and Accepted By: Xxxxxxx X. Xxxx /s/ Xxxxxxx X. Xxxx
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Chairman, President and Chief Executive Officer
Upon Authorization by the Board of Directors For: Xxxxx Xxxxxxx Bancshares,Inc.,
subsidiary of
Xxxxx Savings Bankshares, MHC
Wooster, Ohio
Date Executed:
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