XXXXXX & COMPANY, INC.
FINANCIAL INSTITUTION CONSULTANTS
000 XXXXX XXXXX XXXXX
XXXXX 000
XXXXXX, XXXX 00000
(000) 000-0000
(000) 000-0000 FAX
December 4, 2003
The Boards of Directors
Dearborn Mutual Holding Company
Dearborn Financial Corporation
000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Re: Conversion Valuation Agreement
Attn: Xxxxxx Xxxxxxx
Xxxxxx & Company, Inc. (hereinafter referred to as XXXXXX) hereby proposes
to prepare an independent conversion appraisal of Dearborn Financial
Corporation, the 100% stock holding company of Dearborn Savings Association,
F.A. (collectively, "Dearborn Financial") and Dearborn Savings Association, F.A.
("Dearborn Savings"), relating to the second stage conversion (the "Conversion")
of Dearborn Mutual Holding Company ("Dearborn MHC"). XXXXXX will provide a pro
forma valuation of the market value of the shares of Dearborn Financial to be
sold in connection with the Conversion.
XXXXXX is a financial consulting firm that primarily serves the financial
institution industry. XXXXXX is experienced in evaluating and appraising thrift
institutions and thrift institution holding companies. XXXXXX is an approved
conversion appraiser for filings with the Office of Thrift Supervision ("OTS")
and the Federal Deposit Insurance Corporation ("FDIC"), and is also approved by
the Internal Revenue Service as an expert in bank and thrift stock valuations.
XXXXXX has completed conversion appraisals related to standard conversions,
mutual holding company reorganizations, second stage mutual holding company
conversions and conversions involving foundations.
XXXXXX agrees to prepare the conversion appraisal in the format required by
the OTS in a timely manner for prompt filing with the OTS and the Securities and
Exchange Commission. XXXXXX will provide any additional information as requested
and will complete appraisal updates in accordance with regulatory requirements
and based on market conditions.
The appraisal report will provide a detailed description of Dearborn
Savings, including its financial condition, operating performance, asset
quality, rate sensitivity position, liquidity level and
management qualifications. The appraisal will include a description of Dearborn
Savings' market area, including both economic and demographic characteristics
and trends. An analysis of other publicly-traded thrift institutions will be
performed to determine a comparable group, and adjustments to the appraised
value will be made based on a comparison of Dearborn Savings with the comparable
group and recognizing the risk related to the Conversion.
In making its appraisal, XXXXXX will rely upon the information in the
subscription and community offering prospectus, including the audited financial
statements. Among other factors, XXXXXX will also consider the following: the
present and projected operating results and financial condition of Dearborn
Savings; the economic and demographic conditions in Dearborn Savings' existing
marketing area; pertinent historical financial and other information relating to
Dearborn Savings; a comparative evaluation of the operating and financial
statistics of Dearborn Savings with those of other thrift institutions; the
proposed price per share; the aggregate size of the offering of common stock;
the impact of the conversion on Dearborn Savings' capital position and earnings
potential; Dearborn Financial's proposed initial dividend, if any; and the
trading market for securities of comparable institutions and general conditions
in the market for such securities. In preparing the appraisal, XXXXXX will rely
solely upon, and assume the accuracy and completeness of, financial and
statistical information provided by Dearborn Savings, and will not independently
value the assets or liabilities of Dearborn Savings in order to prepare the
appraisal.
Upon completion of the conversion appraisal, XXXXXX will make a
presentation to the boards of directors of Dearborn MHC and Dearborn Financial
to review the content of the appraisal, the format and the assumptions. A
written presentation will be provided to each board member as a part of the
overall presentation.
For its services in making this appraisal, XXXXXX'x fee will be $28,000,
plus out-of-pocket expenses not to exceed $200. The appraisal fee will include
the preparation of one valuation update and any requested analysis regarding the
financial impact of a charitable foundation in the conversion appraisal. All
additional valuation updates will be subject to an additional fee of $1,000
each. Upon the acceptance of this proposal, XXXXXX shall be paid a retainer of
$3,000 to be applied to the total appraisal fee of $28,000, the balance of which
will be payable at the time of the completion of the appraisal.
Dearborn Financial agrees, by the acceptance of this proposal, to indemnify
XXXXXX and its employees and affiliates for certain costs and expenses,
including reasonable legal fees, in
connection with claims or litigation relating to the appraisal and arising out
of any misstatement or untrue statement of a material fact in information
supplied to XXXXXX by Dearborn Financial or by an intentional omission by
Dearborn Financial to state a material fact in the information so provided,
except where XXXXXX or its employees and affiliates have been negligent or at
fault.
XXXXXX agrees to indemnify Dearborn Financial and Dearborn MHC and its
employees and affiliates for certain cost and expenses, including reasonable
legal fees, in connection with claims or litigation relating to or based upon
the negligence or willful misconduct of XXXXXX or its employees or affiliates.
This proposal will be considered accepted upon the execution of the two
enclosed copies of this agreement and the return of one executed copy to XXXXXX,
accompanied by the specified retainer.
XXXXXX & COMPANY, INC. DEARBORN MUTUAL HOLDING COMPANY
By: \s\ Xxxxxxx X. Xxxxxx By: \s\ Xxxxxx Xxxxxxx
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Xxxxxxx X. Xxxxxx Xxxxxx Xxxxxxx
President President
DEARBORN FINANCIAL CORPORATION
By: \s\ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx
President
Date: 12-11-03
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