RP(R) FINANCIAL, LC.
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Financial Services Industry Consultants
October 23, 2003
Xx. Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
Home Federal Savings & Loan Association
000 00xx Xxxxxx Xxxxx
Xxxxx, Xxxxx 00000-0000
Dear Xx. Xxxxxxx:
This letter sets forth the agreement between Home Federal Savings and
Loan Association, Nampa, Idaho ("Home Federal" or the "Association"), and RP(R)
Financial, LC. ("RP Financial") for independent conversion appraisal services
pertaining to the Association's simultaneous holding company formation and
mutual-to-stock conversion. The specific appraisal services to be rendered by RP
Financial are described below. These services will be conducted by our senior
consulting staff and will be directed by the undersigned.
Description of Appraisal Services
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Prior to preparing the conversion 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 Association's operations, financial condition, profitability,
market area, risks and various internal and external factors which impact the
pro forma market value of the Association.
RP Financial will prepare a detailed written valuation report of the
Association 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 Association's financial condition and operating
results, as well as an assessment of the Association's interest rate risk,
credit risk and liquidity risk. The appraisal report will describe the
Association'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 institutions will be conducted for the purpose of
determining appropriate valuation adjustments for the Association relative to
the peer group.
We will review pertinent sections of the Association's prospectus and
hold discussions with the Association 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, conversion expenses and characteristics of stock plans.
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Washington Headquarters
Rosslyn Center Telephone: (000) 000-0000
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000 Fax No.: (000) 000-0000
Arlington, VA 22209 Toll-Free No.: (000) 000-0000
xxx.xxxxxxxxxxx.xxx E-Mail: xxxxxxxx@xxxxxxxxxxx.xxx
Xx. Xxxxxx X. Xxxxxxx
October 23, 2003
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. The conversion appraisal guidelines require at least one
updated valuation just prior to the time of the closing of the stock offering.
RP Financial agrees to deliver the appraisal report and subsequent
updates, in writing, to the Association 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
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The Association agrees to pay RP Financial a fixed fee of $60,000 for
preparation and delivery of the original appraisal report and required appraisal
updates, 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 $55,000 upon delivery of the completed original appraisal
report; and
o $5,000 upon completion of each required update appraisal
report.
The Association will reimburse RP Financial for out-of-pocket expenses
incurred in preparation of the valuation reports. 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 business planning engagement, subject to written
authorization from the Association to exceed such level.
In the event the Association 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, the Association 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 $275 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 Association 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
Xx. Xxxxxx X. Xxxxxxx
October 23, 2003
Page 3
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
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The Association 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 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 the 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 the Association 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 Association to RP Financial; or (iii) any action or
omission to act by the Association, or the Association's respective officers,
directors, employees or agents which action or omission is willful or negligent.
The Association 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 Association at the normal hourly
professional rate chargeable by such employee.
Xx. Xxxxxx X. Xxxxxxx
October 23, 2003
Page 4
(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 annual rate of prime plus two percent
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.
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.
Home Federal and RP Financial are not affiliated, and neither Home
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.
* * * * * * * * * * *
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October 23, 2003
Page 5
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/ XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx
President and Managing Director
Agreed To and Accepted By: Xxxxxx X. Xxxxxxx /s/ XXXXXX X. XXXXXXX
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President and Chief Executive Officer
Upon Authorization by the Board of Directors For: Home Federal Savings
& Loan Association
Nampa, Idaho
Date Executed: November 19, 2003
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