[Letterhead]
Xxxxxx County Savings Bank
Agreement to provide Appraisal and Business Plan Services
Section 1: Services to be Rendered
Appraisal
As part of the Mutual Holding Company Reorganization (the "Reorganization") and
Minority Stock Offering (the "Stock Offering"), the following major tasks will
be included:
- conduct financial due diligence, including on-site interviews of senior
management and reviews of financial and other records;
- obtain an understanding of the Bank's financial condition,
profitability, risk characteristics, operations and external factors
that might influence or impact the Bank;
- prepare a detailed written valuation report of the Bank and the
Company, including any appraisal updates required by regulatory
agencies other than any updates required as a result of financial
information in the prospectus going "stale", that is consistent with
applicable regulatory guidelines and standard valuation practices;
- prepare and deliver an opinion, in form and substance acceptable to
legal and tax counsel of the Bank, to the effect that the subscription
rights granted to eligible account holders, the applicable stock
benefit plans and others in connection with the mutual holding company
reorganization and minority stock offering, have no value.
The valuation report will:
- include an in-depth analysis of the operating results and
financial condition of the Bank;
- assess the interest rate risk, credit risk and liquidity risk;
describe the business strategies of the Bank and the Company,
the market area, competition and future business prospects.
- include a detailed peer analysis of publicly traded savings
institutions for use in determining appropriate valuation
adjustments based upon multiple factors;
- include a midpoint pro forma valuation along with a range of values
above and below the midpoint value;
- comply, in form and substance to all applicable requirements of regulatory
authorities for purposes of its use to establish the estimated pro forma
market value of the common stock of the Company following the
Reorganization and Stock Offering.
Xxxxxx County Saving Bank
July 13, 1998 Page 2
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The valuation report may be periodically updated throughout the Stock Offering
process and will be updated at the time of the closing of the Stock Offering.
FinPro will perform such other services as are necessary or required in
connection with the regulatory review of the appraisal and will respond to the
regulatory comments, if any, regarding the valuation appraisal and any
subsequent updates.
Business Plan
In connection with the preparation of the business plan and any other strategy
planning services, the following major tasks will be included:
- compile a historical trend analysis utilizing the past five year ends of
Regulatory Reports;
- perform detailed peer analysis;
- assess the Bank's competitive situation;
- analyze the Bank's markets and customers from a demographic standpoint;
- conduct branch market tour and identify the Bank's competitive
positioning, branching opportunities and market threats;
- assess the regulatory, social, political and economic environment;
- document the internal situation assessment;
- analyze the current ALM position;
- analyze the CRA position;
- identify and document strengths and weaknesses;
- document the Bank's mission statement;
- document the objectives and goals;
- document strategies;
- meet with the Regional Office of the FDIC to review the business plan
prior to filing mutual holding company applications;
- compile five year projections of performance;
- prepare assessment of strategic alternatives;
- conduct one or two planning retreats with the Board and Management to
review strategies;
- map the Bank's general ledger to XxxXxx's planning model and to the
Regulatory Reports;
- assess the Bank from a capital markets perspective including comparison
to national, regional, state and similar size organizations;
- prepare a written business plan in form and substance satisfactory to all
applicable regulatory authorities for purposes of submission and
dissemination in connection with the application to form a mutual holding
company, including a mid-tier stock holding
Xxxxxx County Saving Bank
July 13, 1998 Page 3
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company and related proxy, offering prospectus and other documents
concerning the mutual holding company formation and minority stock
offering.
No other appraisal/planning firm provides the quantity and quality of the
planning services FinPro provides as part of it standard proposals. We urge you
to talk to our clients about the extra advantage that XxxXxx has afforded them.
- Section 2: Information Requirements of the Bank
To accomplish the tasks set forth in Section 1 of this proposal, the following
information and work effort is expected of the Bank:
- provide FinPro with all financial and other information, whether or not
publicly available, necessary to familiarize FinPro with the business
and operations of the Bank;
- allow FinPro the opportunity, from time to time, to discuss the operations
of the Bank with Bank personnel;
- promptly advise FinPro of any material or contemplated material transactions
that may have an effect on the day-to-day operations of the Bank;
- provide FinPro with all support schedules required to compile Regulatory,
Board and Management reports;
- provide FinPro with offering circular, prospectus and all other materials
relevant to the appraisal function for the Stock Offering;
- have system download capability;
- promptly review all work products of FinPro and provide necessary sign-offs
on each work product so that FinPro can move on to the next phase;
- provide FinPro with office space to perform its daily tasks. The office
space requirements consists of a table with at least two chairs along
with access to electrical outlets for FinPro's computers.
Section 3: Project Deliverables
The following is a list of deliverables that will result from XxxXxx's effort:
1. Pro Forma Market Valuation of the Company and the Bank
2. Mapping of the Bank's general ledger to XxxXxx's five year cash flow
projection model
3. Business Plan
Section 4: Term of the Agreement and Staffing
It is anticipated that it will take approximately six months of elapsed time to
complete the tasks outlined in this proposal. During this time, FinPro will be
on-site at the Bank's facilities on a regular basis, during normal business
hours.
FinPro will assign Xxxxxx X. Xxxxx and Xxxxxxx X. Xxxxxxx to this engagement.
Although other FinPro staff may perform some back office analysis, Xxx and Xxx
will be the firm's point men on this engagement and will be active in all
aspects of this engagement.
Xxxxxx County Saving Bank
July 13, 1998 Page 4
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Section 5: Fees and Expenses
FinPro's fees for providing the services outlined in this proposal will be:
- $15,000 for the appraisal.
- $9,000 for the business plan.
This fee is payable according to the following schedule:
- prior to starting, a retainer of $4,000; plus
- upon the submission of the business plan to the regulators, a
non-refundable fee of $5,000; plus
- upon submission of the appraisal to the regulators, a non-refundable fee
of $9,000; plus
- upon completion of the Stock Offering, a non-refundable fee equal to the
remainder, unless only the plan is selected in which case the remainder
would be due upon regulatory approval of the business plan.
In addition to any fees that may be payable to FinPro hereunder, the Bank hereby
agrees to reimburse FinPro for all of FinPro's travel and other out-of-pocket
expenses incurred in connection with XxxXxx's engagement provided that any
individual expenses in excess of $750 shall require the prior approval of the
Bank. Such out-of-pocket expenses will consist of travel to and from the Bank's
facilities from FinPro's offices, normal delivery charges such as Federal
Express, and costs associated with the actual Plan and Valuation documents such
as copying. The out-of-pocket expenses will not include expenses such as food or
lodging as FinPro is local. It is FinPro policy to provide you with an itemized
accounting of the out-of-pocket expenditures so that you can control them.
In the event that the Bank shall, for any reason, discontinue the proposed
Conversion prior to delivery of the completed documents set forth above, the
Bank agrees to compensate FinPro according to XxxXxx's standard billing rates
for consulting services based on accumulated time and expenses, not to exceed
the respective fee caps and fee payment schedule noted above. FinPro's standard
hourly rates are as follows:
- Managing Director Level $250
- Staff Consultant Level $125
Xxxxxx County Saving Bank
July 13, 1998 Page 5
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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 Agreement, the terms of said Agreement shall be subject to
renegotiation by the Bank and FinPro. 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, excessive delays or suspension of processing of conversion
applications by the regulators, and stale financial information such that
completion of the Reorganization and Stock Offering requires the preparation
by FinPro of a new or updated appraisal.
XxxXxx agrees to execute a suitable confidentiality agreement with the Bank.
The Bank acknowledges that all opinions, valuations and advice (written or
oral) given by FinPro to the Bank in connection with FinPro's engagement are
intended solely for the benefit and use of the Bank (and it's directors,
management, and attorneys) in connection with the matters contemplated
hereby, and the Bank agrees that no such opinion, valuation, or advice shall
be used for any other purpose, except with respect to the opinion and
valuation which may be used for the proper corporate purposes of the client,
or reproduced, or disseminated, quoted or referred to at any time, in any
manner or for any purpose, nor shall any public references to FinPro be made
by the Bank (or such persons), without the prior written consent of FinPro,
which consent shall not be unreasonably withheld.
Section 6: Representations and Warranties
FinPro, the Bank and the Company agree to the following:
1.) The Bank agrees to make available or to supply to FinPro the information
set forth in Section 2 of this Agreement.
2.) The Bank hereby represents and warrants to FinPro that any information
provided to FinPro does not and will not, to the best of the Bank's
knowledge, at the times it is provided to FinPro, 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 FinPro, its
directors, officers, agents and employees of FinPro (collectively referred to
in this Section 6 as "FinPro") or its successors who act for or on behalf of
FinPro in connection with the services called for under this Agreement, 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 law) arising out of or in any way related to the
services provided by FinPro under this Agreement, except to the extent
arising out of or attributable to the negligence or willful misconduct of
FinPro, its directors, officers, agents or employees.
Xxxxxx County Saving Bank
July 13, 1998 Page 6
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(b) FinPro shall give written notice to the Bank of such claim for
indemnification or facts within thirty days of the assertion of any claim or
discovery of material facts upon which FinPro intends to base a claim for
indemnification hereunder. In the event the Bank elects, within seven days of
the receipt of the original notice thereof, to contest such claim by written
notice to XxxXxx, XxxXxx will be entitled to be paid any amounts payable by
the Bank hereunder, together with interest on such costs from the date
incurred at the rate of eight percent per annum within five days after a
final determination is made either in writing by the Bank or by a final
judgment of a court of competent jurisdiction that indemnification hereunder
should be made. If the Bank does not elect to challenge the claim for
indemnification, XxxXxx 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 XxxXxx in connection with the contest of any claim
subject to indemnification hereunder in advance of the final determination of
any proceeding within thirty days of the receipt of such request if FinPro
furnishes the Bank:
1. a written statement of XxxXxx's good faith belief that it is
entitled to indemnification hereunder; and
2. a written undertaking by XxxXxx to repay the advance if it is
ultimately determined in a final adjudication of such proceeding that
FinPro is not entitled to such indemnification.
(d) In the event that the Bank elects to contest the claim, (i) FinPro
will cooperate in Good Faith with the contest, (ii) FinPro will provide the
Bank with an irrevocable power-of-attorney permitting the Bank to pursue the
claim in the name of FinPro, and (iii) FinPro will be prohibited from
settling or compromising the claim without written consent of the Bank.
(e) 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. FinPro shall have all remedies available at law or in equity to
enforce such obligation.
This Agreement constitutes the entire understanding of the Bank and FinPro
concerning the subject matter addressed herein, and shall be governed and
construed in accordance with the laws of the State of New York. This
Agreement may not be modified, supplemented or amended except by written
agreement executed by both parties.
The Bank and FinPro are not affiliated, and neither the Bank nor FinPro 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.
Xxxxxx County Saving Bank
July 13, 1998 Page 7
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Please confirm that the foregoing is in accordance with your understanding and
agreement with FinPro by signing and returning to FinPro the duplicate of the
letter enclosed herewith.
Sincerely:
FinPro, Inc.
By: /s/ XXXXXX X. XXXXX /s/ X. XXXXX XXXXXXXXX
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Xxxxxx X. Xxxxx J. Xxxxx Xxxxxxxxx
President President and CEO
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