Agreement to provide Appraisal and Business Plan Services
SECTION 1: SERVICES TO BE RENDERED
APPRAISAL
As part of the Second Step Conversion and Stock Offering services, the following
major tasks will be included:
o conduct financial due diligence, including on-site interviews of senior
management and reviews of financial and other records;
o gather an understanding of the Bank's financial condition, profitability,
risk characteristics, operations and external factors that might influence
or impact the Bank;
o prepare a detailed written valuation report of the Bank and the Company,
that is consistent with applicable regulatory guidelines and standard
valuation practices;
o 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 stock offering, have no value.
The valuation report will:
o include an in-depth analysis of the operating results and financial
condition of the Bank;
o assess the interest rate risk, credit risk and liquidity risk;
o describe the business strategies of the Bank and the Company, the market
area, competition and potential for the future; o include a detailed peer
analysis of publicly traded savings institutions for use in determining
appropriate valuation adjustments based upon multiple factors;
o include a midpoint pro forma valuation along with a range of value around
the midpoint value;
o 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 Second Step
Conversion and Stock Offering.
The valuation report may be periodically updated throughout the Second Step
Conversion 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.
September 16, 2002
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BUSINESS PLAN
In connection with the preparation of the business plan and any other strategy
planning services, the following major tasks will be included:
o compile a historical trend analysis utilizing the past five year ends of
Regulatory Reports;
o perform detailed peer analysis;
o assess competitive situation;
o analyze the Bank markets and customers from a demographic standpoint;
o Assess the regulatory, social, political and economic environment;
o document the internal situation assessment;
o analyze the current ALM position;
o analyze the CRA position;
o identify and document strengths and weaknesses;
o document the Bank's mission statement;
o document the objectives and goals;
o document strategies;
o meet with the Regional Office of the OTS to review the business plan prior
to filing holding company applications if necessary;
o compile five year projections of performance;
o prepare assessment of strategic alternatives;
o conduct one or two planning retreats with the Board and Management to
review strategies;
o map the Bank's general ledger to FinPro's planning model and to the
Regulatory Reports;
o assess the Bank from a capital markets perspective including comparison to
national, regional, state and similar size organizations;
o 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 holding
company, offering prospectus and other documents concerning the holding
company formation and stock offering.
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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:
o 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;
o allow FinPro the opportunity, from time to time, to discuss the operations
of the Bank with Bank personnel;
o promptly advise FinPro of any material or contemplated material
transactions that may have an effect on the day-to-day operations of the
Bank;
o provide FinPro with all support schedules required to compile Regulatory,
Board and Management reports;
o provide FinPro with offering circular, prospectus and all other materials
relevant to the appraisal function for the Second Step Conversion;
o have system download capability;
o 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;
o 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. Computation of the Exchange Ratio
3. Mapping of the Bank's general ledger to XxxXxx's five year cash flow
projection model
4. 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 as the point man for this engagement.
Although other FinPro staff may perform some back office analytics, Xxx will be
the firm's point man on this engagement and will be active in all aspects of
this engagement.
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SECTION 5: FEES AND EXPENSES
FinPro's fees for providing the services outlined in this Agreement will be:
o $16,000 for the appraisal.
o $15,000 for the business plan.
This fee is payable according to the following schedule:
o prior to starting, a retainer of $5,000; plus
o upon the submission of the business plan to the regulators, a
non-refundable fee of $15,000; plus
o upon submission of the appraisal to the regulators, a non-refundable
fee of $5,000; plus
o upon completion of the Stock Offering, a non-refundable fee equal to
the remainder.
Should FinPro need to provide an updated appraisal for any reason outside of its
control, other than any updates required by market movements or required as a
normal part of the process such as the final appraisal update, an additional fee
of $6,500 per update will be assessed. Examples of reasons for an appraisal
update that would result in such a fee include, but are not limited to, the
financials going stale, significant accounting or regulatory adjustment to the
balance sheet or income statement, and/or the announcement or inclusion of a
transaction not originally contemplated such as a branch acquisition, large
leverage transaction, etc. Based on our understanding of the Bank's specific
situation, the need for such an update is not anticipated.
In addition to any fees that may be payable to FinPro hereunder, the Bank hereby
agrees to reimburse FinPro for all of XxxXxx's travel and other out-of-pocket
expenses incurred in connection with XxxXxx's engagement. 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 be capped at $3,000 excluding any color copies, which will be
billed on a pass through basis and only upon Bank direction. It is FinPro policy
to provide you with an itemized accounting of the out-of-pocket expenditures so
that you can control them.
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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 noted above. FinPro's standard hourly rates are as
follows:
o Director Level and Above $300
o Staff Consultant Level $150
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 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.
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 XxxXxx'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, valuation, proxy, prospectus and
related material to the 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.
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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 (hereinafter
referred to as the "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.
(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.
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(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 Jersey. 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. 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/ Xxxxxxx X. XxXxxxxxxx
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Xxxxxx X. Xxxxx Xxxxxxx XxXxxxxxxx
President President and Chief Executive Officer
6/24/02 7/23/02
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Date Date
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