RP FINANCIAL, LC.
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Financial Services Industry Consultants
October 13, 1999
Board of Directors
First Federal Savings and Loan Association of Olathe
000 Xxxx Xxxx
Xxxxxx, Xxxxxx 00000-3463
Dear Members of the Board:
This letter sets forth the agreement between First Federal Savings and
Loan Association of Olathe, Kansas ("First Federal" or the "Association"), and
RP Financial, LC. ("RP Financial") for the independent appraisal services
pertaining to the mutual-to-stock conversion transaction, whereby the
Association 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
Association's operations, financial condition, profitability, market area, risks
and various internal and external factors which impact the pro forma market
value of the Association. RP Financial will prepare a written detailed valuation
report of the Association 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 Association's financial
condition and operating results, as well as an assessment of the Association's
interest rate risk, credit risk and liquidity risk. The appraisal report will
describe the Association'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.
________________________________________________________________________________
WASHINGTON HEADQUARTERS
Rosslyn Center
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000 Telephone: (000) 000-0000
Arlington, VA 22209 Fax No.: (000) 000-0000
Board of Directors
October 13, 1999
Page 2
RP Financial agrees to deliver the valuation appraisal and subsequent
updates, in writing, to the Association 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
First Federal 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 conversion to cover all subsequent
valuation updates that may be required, provided that the
transaction is not delayed for reasons described below.
The Association 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 Association to exceed such level.
In the event First Federal 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, First Federal 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 First Federal and RP Financial. Such unforeseen events shall
include, but not be limited to, major changes in
Board of Directors
October 13, 1999
Page 3
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.
Representations and Warranties
First Federal and RP Financial agree to the following:
1. The Association 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 Association 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 Association the original and any copies of such
information.
2. The Association hereby represents and warrants to RP Financial that
any information provided to RP Financial does not and will not, to the best
of the Association'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 Association 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 Association 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 Association to RP Financial; or (iii) any action or
omission to act by the Association, or the Association's respective
officers, Directors, employees or agents which action or omission is
willful or negligent. The Association 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 Association at the normal hourly
professional rate chargeable by such employee.
Board of Directors
October 13, 1999
Page 4
(b) RP Financial shall give written notice to the Association 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 Association 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 Association hereunder within five
days after the final determination of such contest either by written
acknowledgement of the Association or a final judgment (including all
appeals therefrom) of a court of competent jurisdiction. If the Association
does not so elect, RP Financial shall be paid promptly and in any event
within thirty days after receipt by the Association of the notice of the
claim.
(c) The Association 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 Association: (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
Association 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 Association to RP Financial of its
election to assume the defense thereof, the Association 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 Association 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 Association which will represent RP Financial in any such action or
proceeding and the Association 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 Association 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 Association 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 Association 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
Association 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,
Board of Directors
October 13, 1999
Page 5
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 Association 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 Kansas. This
agreement may not be modified, supplemented or amended except by written
agreement executed by both parties.
First Federal and RP Financial are not affiliated, and neither First
Federal 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
CEO and Managing Director
Agreed To and Accepted By: Xxxxx Xxxxxxx Xxxxx Xxxxxxx
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President and Chief Executive Officer
Upon Authorization by the Board of
Directors For: First Federal Savings and Loan Association
of Olathe, Kansas
Date Executed: October 25, 1999
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