[RP FINANCIAL, LC LETTERHEAD]
October 26, 1999
Board of Directors
Alamogordo Financial Corporation
000 00xx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Dear Members of the Board:
This letter sets forth the agreement between Alamogordo Financial
Corporation, Alamogordo, New Mexico (the "Company"), and RP Financial, LC. ("RP
Financial") for the independent appraisal services pertaining to the Company's
minority stock offering (the "Stock Offering"). The specific appraisal services
to be rendered by RP Financial are described below. These appraisal services
will be rendered by a team of two to three senior consultants on staff and will
be directed by the undersigned.
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
Company's operations, financial condition, profitability, market area, risks and
various internal and external factors which impact the pro forma value of the
Company. RP Financial will prepare a written detailed valuation report of the
Company 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 Company's financial condition and operating results, as
well as an assessment of the Company's interest rate risk, credit risk and
liquidity risk. The appraisal report will describe the Company'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 offering 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, and reflect
the Stock Offering size determined by the Company's Board of Directors. The
appraisal report may be periodically updated throughout the offering process and
there will be at least one updated valuation prepared at the time of the closing
of the Stock Offering.
RP Financial agrees to deliver the valuation appraisal and subsequent
updates, in writing, to the Company 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
The Company agrees to pay RP Financial a fixed fee of $17,500 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 $10,000 upon delivery of the completed original appraisal report;
and
o $2,500 upon completion of the Stock Offering to cover all
subsequent valuation updates that may be required, provided that
the transaction is not delayed for reasons described below.
The Company 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 Company to exceed such level.
In the event the Company shall, for any reason, discontinue the
proposed Stock Offering prior to delivery of the completed documents set forth
above and payment of the respective progress payment fees, the Company 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 the Company 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.
2
Representations and Warranties
The Company and RP Financial agree to the following:
1. The Company 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 Company to RP
Financial shall remain strictly confidential (unless such information is
otherwise made available to the public), and if the Stock Offering is not
consummated or the services of RP Financial are terminated hereunder, RP
Financial shall upon request promptly return to the Company the original and any
copies of such information.
2. The Company hereby represents and warrants to RP Financial that
any information provided to RP Financial does not and will not, to the best of
the Company'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 Company 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 Company 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 Company to RP Financial; or (iii) any action or omission
to act by the Company, or the Company's respective officers, Directors,
employees or agents which action or omission is willful or negligent. The
Company 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 Company at the normal hourly
professional rate chargeable by such employee.
3
(b) RP Financial shall give written notice to the Company 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 Company 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 Company hereunder within five days after the final
determination of such contest either by written acknowledgement of the Company
or a final judgment (including all appeals therefrom) of a court of competent
jurisdiction. If the Company does not so elect, RP Financial shall be paid
promptly and in any event within thirty days after receipt by the Company of the
notice of the claim.
(c) The Company 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 Company: (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 Company 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 Company to RP
Financial of its election to assume the defense thereof, the Company 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 Company 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 Company which will represent RP
Financial in any such action or proceeding and the Company 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 Company 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 Company 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 Company 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
Company 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 Company 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 Virginia. This agreement
may not be modified, supplemented or amended except by written agreement
executed by both parties.
4
The Company and RP Financial are not affiliated, and neither the
Company 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.
Very truly yours,
/s/Xxxxxxx X. Xxxxxxxxxxx
Xxxxxxx X. Xxxxxxxxxxx
Chief Executive Officer and
Managing Director
Agreed To and Accepted By: Xxxxx Xxxxxxxxxx /s/Xxxxx Xxxxxxxxxx
---------------------------
President and Chief Executive Officer
Upon Authorization by the Board of
Directors For: Alamogordo Financial Corporation
Alamogordo, New Mexico
Date Executed: 11-1-99
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