[RP Financial, LC. Letterhead]
August 17, 1999
Board of Directors
Mutual Federal Savings Bank
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000-0000
Dear Members of the Board:
This letter sets forth the agreement between Mutual Federal Savings Bank,
Muncie, Indiana ("Mutual" or the "Bank"), and RP Financial, LC. ("RP Financial")
for the independent appraisal services pertaining to the mutual-to-stock
conversion transaction, whereby the Bank will become a wholly-owned subsidiary
of a stock holding company. The specific appraisal services to be rendered by RP
Financial are described below. These appraisal services will be managed by one
of RP Financial's Managing Directors.
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 market value of
the Bank. RP Financial will prepare a written detailed valuation report of the
Bank which will be fully consistent with applicable regulatory guidelines and
standard pro forma valuation practices. 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.
We will review pertinent sections of the applications and conversion 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 value which will establish the range of value. The appraisal
report may be periodically updated throughout the conversion process if
appropriate, and there will be at least one updated valuation prepared at the
time of the closing of the conversion.
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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
Mutual agrees to pay RP Financial a fixed fee of $27,500 for these
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 $20,000 upon delivery of the completed original appraisal report; and
o $2,500 upon completion of the conversion to cover all subsequent
valuation updates that may be required, provided that the transaction
is not delayed for reasons described below.
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
engagement and in connection with the preparation of a regulatory business plan
as described in the accompanying letter, subject to written authorization from
the Bank to exceed such level.
In the event Mutual 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, Mutual 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 $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 Mutual 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.
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Representations and Warranties
Mutual 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 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.
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(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.
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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 State of Indiana. This agreement may not be
modified, supplemented or amended except by written agreement executed by both
parties.
Mutual and RP Financial are not affiliated, and neither Mutual 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.
Sincerely,
/s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
President and Managing Director
Agreed To and Accepted By: X. Xxxx Xxxxxxx /s/ X. Xxxx Xxxxxxx
-------------------------------------
President and Chief Executive Officer
Upon Authorization by the
Board of Directors For: Mutual Federal Savings Bank
Muncie, Indiana
Date Executed: August 25, 1999
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