RP FINANCIAL, LC.
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Financial Services Industry Consultants
July 29, 1997
Xx. Xxxxxxx Xxxxxxxx
President and Chief Executive Officer
PSB Financial Corporation
Pennsylvania Savings Bank
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Dear Xx. Xxxxxxxx:
This letter sets forth the agreement between Pennsylvania Savings Bank,
Philadelphia, Pennsylvania ("Pennsylvania Savings" or the "Bank") and RP
Financial, LC. ("RP Financial") for certain conversion appraisal services
pertaining to the mutual-to-stock conversion of PSB Financial Corporation (the
"MHC"), the mutual holding company and the majority shareholder of Pennsylvania
Savings, and the plan of reorganization between the MHC and the Pennsylvania
Savings. The specific services to be rendered by RP Financial are described
below. These services will be rendered by a team of two senior consultants on
staff.
Description of Conversion Appraisal Services
RP Financial will prepare a written detailed valuation report which will be
fully consistent with applicable regulatory guidelines and standard valuation
practices. The valuation report will conclude with an estimate of the pro forma
market value of the shares of stock to be offered and sold in the conversion. RP
Financial understands that as part of the conversion, the shares of Pennsylvania
Savings which are held by public shareholders (i.e. stockholders other than the
MHC) will be exchanged for newly issued shares of common stock of a newly
organized stock holding company ("SHC") and that shares offered in the
conversion will be SHC shares. The valuation report will incorporate such key
transaction parameters as the financial strength and operations of Pennsylvania
Savings, the proposed treatment in the conversion of the publicly-traded shares
of Pennsylvania Savings (including the proposed exchange), and the financial
strength and operations of the MHC unconsolidated. The estimate of pro forma
market value will be a preliminary value, subject to confirmation by RP
Financial at the closing of the offering.
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
operations, financial condition, profitability, risks and external factors which
impact the Bank. The valuation will include an in-depth analysis of the Bank's
financial condition and operating results, as well as assess the Bank's interest
rate risk, credit risk and liquidity risk. The valuation report will describe
the Bank's business strategies and market area and prospects for the future. 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. The valuation report will conclude with a midpoint pro
forma valuation for the shares to be offered in the conversion, as well as a
range of value around the midpoint value. The valuation report may be
periodically updated throughout the conversion process and there will be at
least one updated valuation prepared at the time of the closing of the stock
offering.
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Washington Headquarters
Rosslyn Center
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000 Telephone: (000) 000-0000
Arlington, VA 22209 Fax No.: (000) 000-0000
RP Financial, LC.
Xx. Xxxxxxx Xxxxxxxx
July 29, 1997
Page 2
RP Financial agrees to deliver the valuation appraisal and subsequent
updates, in writing, to Pennsylvania Savings 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
Pennsylvania Savings agrees to pay RP Financial a fixed fee of $20,000 for
these 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
services as outlined herein;
o $12,500 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.
The Bank will reimburse RP Financial for out-of-pocket expenses incurred in
the preparation of the appraisal report. Such out-of-pocket expenses, which are
not expected to exceed $5,000 inclusive of expenses for the business plan and
appraisal, will include travel, telephone, facsimile, copying, shipping,
computer and data. RP Financial will make all attempts to keep out-of-pocket
expenses to a minimum.
In the event Pennsylvania Savings or the MHC 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,
Pennsylvania Savings 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 consultants.
If during the course of the proposed transaction, unforeseen events occur
so as to materially change the nature of the work content of the services
described in this contract, the terms of said contract shall be subject to
renegotiation by Pennsylvania Savings 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
Pennsylvania Savings 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:
RP Financial, LC.
Xx. Xxxxxxx Xxxxxxxx
July 29, 1997
Page 3
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 of RP Financial shall remain
strictly confidential (unless such information is otherwise made available to
the public), and if conversion is 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 Pennsylvania Savings 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 Pennsylvania Savings to RP Financial or (iii) any action or
omission to act by Pennsylvania Savings, or Pennsylvania Savings' respective
officers, directors, employees or agents which action or omission is willful or
negligent. Pennsylvania Savings 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 Pennsylvania
Savings at the normal hourly professional rate chargeable by such employee.
(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 the RF Financial 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 RP
Financial, RP Financial 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 fifteen percent (15%) per annum within five days after the final
determination of such content either by written acknowledgement of the Bank or a
final judgment 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.
(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.
RP Financial, LC.
Xx. Xxxxxxx Xxxxxxxx
July 29, 1997
Page 4
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
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 Bank and RP Financial concerning the subject matter
addressed herein. This agreement may not be modified, supplemented or amended
except by written agreement executed by both parties.
Pennsylvania Savings and RP Financial are not affiliated, and neither
Pennsylvania Savings 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.
The MHC and RP Financial are not affiliated, and neither the MHC 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/ Xxxxxxx X. Xxxxxxxxxxx
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Xxxxxxx X. Xxxxxxxxxxx
Chief Executive Officer
and Managing Director
Agreed To and Accepted By: Xx. Xxxxxxx Xxxxxxxx /s/ Xxxxxxx Xxxxxxxx
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President and Chief Executive Officer
For: Pennsylvania Savings Bank
Philadelphia, Pennsylvania
Date Executed: 7/31/97
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