EXHIBIT 10.17
August 10, 2004
XXXX X. XXXXX & ASSOCIATES
OVERDRAFT PRIVILEGE PROGRAM AGREEMENT
Mr. Xxxx Xxxxxxx
SVP/CFO
Cherokee Bank, National Association
0000 Xxxxxxxxxx Xxxxxxx
Xxxxxx, Xxxxxxx 00000
Dear Xx. Xxxxxxx:
Based on our preliminary analysis, I am submitting this proposal for the
engagement of our firm by Cherokee Bank, National Association - Canton, Georgia.
Upon acceptance by Cherokee Bank, National Association, this proposal shall
become the Agreement between Xxxx X. Xxxxx & Associates, Inc. (JMFA) and
Cherokee Bank, National Association.
OBJECTIVES
Our objective is to install JMFA's Overdraft PrivilegeSM program in Cherokee
Bank, NA. There will be an emphasis on installing a product that provides a
competitive and popular service for your account holders and a significant
increase in non-interest income without a significant increase in non-interest
expense. Improvement in earnings will come from account holder acceptance and
use of this proven product enhancement and accelerated account growth. We will
install systems to monitor income streams and associated costs to insure
Cherokee Bank, NA is receiving the appropriate income for the designed product.
Accomplishing these objectives will result in an estimated increase in
first-year earnings between $122,300 and $185,200. Because we are so confident
that this increase is achievable, we offer our service on a contingency basis.
Following is a description of our project deliverables and the terms for the
engagement.
OVERDRAFT PRIVILEGE PROGRAM
1. Perform a comprehensive profile analysis of the demand deposit
account holder base to establish Overdraft Privilege limits.
2. At the financial institution's option, we will perform a
comprehensive analysis of all other non-interest income and non-labor,
non-interest expense and assist in the installation of reasonable
operational changes.
[ ] PLEASE INDICATE YOUR SELECTION OF THIS OPTION BY CHECKING THE
BOX.
Mr. Xxxx Xxxxxxx
March 22, 2005
Page 2
3. Make recommendations, as necessary, regarding deposit agreements
to help insure compliance with truth in lending and other regulations.
4. Perform an analysis of Cherokee Bank, NA's NSF and overdraft
processing and assist Cherokee Bank, NA in making the necessary
changes for an effective Overdraft Privilege Program.
5. Furnish Cherokee Bank, NA with "camera ready" samples of
marketing and advertising material to assure the success of the
overdraft privilege product.
6. Provide mailing services for kickoff and quarterly account holder
communications, billed separately.
7. Provide all necessary operational and systems/procedures training
and materials.
8. Provide sales training and support materials to account holder
contact personnel to insure the success of the programs.
9. Assist Cherokee Bank, NA in the installation of our automated
management and collection system that functions with the core
application processing system.
CONDUCT OF THE ENGAGEMENT
The initial engagement will require approximately six to eight calendar weeks to
complete, with quarterly on-site follow-up lasting for the contracted engagement
period. Cherokee Bank, National Association also agrees to send the recommended
program "kickoff' letter and quarterly "reminder" letters, mailed separately
from other materials, as recommended by Xxxx X. Xxxxx & Associates consultants.
Beginning the 3rd month, we will perform the above-referenced follow-up reviews
quarterly to insure the success of the program. While the majority of the work
will require that we be on-site, certain aspects may be analyzed or handled from
our office.
COST OF THE ENGAGEMENT
The cost to your institution for the engagement will be priced using the monthly
quantified net increase in non-interest income and expenses related to NSF and
overdraft income. Follow-up of the engagement may be extended in twelve-month
increments and includes quarterly on-site visits as an extension of the initial
contractual period for continuance of our Privilege Manager CRM(TM) software
maintenance support and the compliance warranty. The table, below, provides
pricing options. You may wish to consider these alternate pricing options to
reduce (or increase) the amount of time of our consulting relationship. We
would be happy to contract with you using these terms.
Mr. Xxxx Xxxxxxx
March 22, 2005
Page 3
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PRICING OPTION MONTHLY BILLING BILLING BILLING FOLLOW- FOLLOW
MONTHS INITIAL UP UP
BILLING INITIAL
-------------- ------------------ --------- ------- -------- -------
Two Year 1/3 of monthly
Engagement increase in NSF/OD 24 months 9%
income
-------------- ------------------ --------- ------- -------- -------
Three Year 24% of monthly
Engagement increase in NSF/OD 36 months 12%
income
-------------- ------------------ --------- ------- -------- -------
Four Year 20% of monthly
Engagement increase in NSF/OD 48 months 15%
income
-------------- ------------------ --------- ------- -------- -------
Five Year 18% of monthly
Engagement increase in NSF/OD 60 months
income
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Cherokee Bank, NA will pay out-of-pocket expenses during all project phases.
Xxxx X. Xxxxx & Associates has agreed to waive the $10,000 retainer as long as
the overdraft privilege program is installed within 90 days. After the
recommendations have been installed and monitored for not less than sixty (60)
days, we will quantify the increased income and Cherokee Bank, NA agrees to pay
monthly the fees, as referenced above. The monthly xxxxxxxx are to be paid by
the 15th of each month. We will invoice semi-monthly for out-of-pocket expenses
during initial analysis, presentation, implementation or follow-up phases.
Fees to Xxxx X. Xxxxx & Associates will commence not less than sixty (60) days
following the first full month after the installation of recommendations and
will continue throughout the contracted engagement period.
QUANTIFICATION OF EARNINGS
Increases in net NSF and overdraft income are based on reasonable changes that
can be affected on existing income or expenses realized as a result of our
recommendations. Increased labor to collect overdrawn Overdraft Privilege
accounts and charged off overdrafts associated with the Overdraft Privilege
program will be netted against the increases in NSF and overdraft income or
decreases in expenses. Tracking of the increases will begin at the beginning of
the month that occurs not less than 60 days after program implementation.
The normalized base will be used to calculate the net average existing NSF and
OD revenue per active (defined as an account that has not been inactive for more
than 6 months) checking account, not including money market accounts. Increases
in NSF and OD income during the contractual period will be measured using the
net average increase from NSF and OD revenue per active checking account over
the base period. Cherokee Bank, NA agrees to furnish at the beginning of the
initial engagement a list of NSF related areas Cherokee Sank, NA wishes to
exclude from this engagement. Any items not listed on the exclusion list will
be considered open for analysis by JMFA staff and will be added to the
quantification of earnings, as applicable.
Mr. Xxxx Xxxxxxx
March 22, 2005
Page 4
Additionally, the client agrees to provide monthly financial tracking
information including access by JMFA to client's general ledger and its
supporting schedules.
If a recommendation is not approved it will not be included in the fee
calculation. However, if any recommendation, within 24 months of the initial
engagement, is installed or approved or approved as modified, or initially
declined and later approved as recommended or as subsequently modified, it will
be included in the fee calculation.
BEAR IN MIND THAT THESE PROJECTED EARNINGS GAINS ARE FOR THE FIRST YEAR ONLY AND
--------------------------------------------------------------------------------
THAT MUCH, IF NOT ALL, OF THESE EARNINGS WILL CARRY FORWARD INTO SUCCEEDING
--------------------------------------------------------------------------------
YEARS.
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We can provide our assistance in a fashion that is both timely and efficient, as
well as highly cost effective. The specifics of our proposal, including a
description of the approach we will take, are as follows:
ANALYSIS PHASE
1. Identify existing account structures and insufficient funds check
processing procedures, mode of operation, transaction volume levels,
and patterns, etc. currently in use or occurring. This is accomplished
through interviews, empirical observation, and review of historical
data.
2. At the financial institution's option, we will perform a
comprehensive analysis of all other non-interest income and non-labor,
non-interest expense and assist in the installation of reasonable
operational changes.
PRESENTATION PHASE
1. Review with management our recommended changes and the results
that can be anticipated. We will identify each recommendation's impact
on Cherokee Bank, NA's compliance, operations, technology, marketing
and quality of service.
2. Identify those recommendations that are approved. Formulate a
plan and timetable for implementation and designate the individuals
from Cherokee Bank, NA's staff and from our staff who will be
responsible for implementation.
3. Meet with the affected parties to review and "sell" the
recommendations, which have been approved by management for
implementation.
XXXXXXXXXXXXXX XXXXX
0. Coordinate efforts of JMFA and Cherokee Bank, NA's staff to
assist in implementation of all approved recommendations. Cherokee
Bank, NA will be responsible to provide adequate staff to accomplish
implementation objectives.
Mr. Xxxx Xxxxxxx
March 22, 2005
Page 5
2. Insure production and mailing of recommended "kickoff" and
quarterly "reminder" letters at Cherokee Bank, NA's expense.
3. Provide on-site training for all applicable client personnel and
assistance with client and accountholder awareness and marketing
materials. Cherokee Bank, NA will be responsible for utilizing
JMFA-provided materials as recommended.
4. Install systems to monitor income streams and associated costs to
insure Cherokee Bank, NA is receiving the appropriate income for the
designed product. Assist Cherokee Bank, NA's staff with appropriate
training on these systems during the contract period. Cherokee Bank,
NA will be responsible to maintain adequate staff to insure systems
reporting.
5. Design and install monitoring and reporting mechanisms in order
to chart progress, performance, and results. Assist Cherokee Bank,
NA's staff with installation, procedures, and results analysis, as
appropriate.
FOLLOW-UP PHASE
1. Meet with management to review the status and results of changes
which have been approved for implementation.
2. Develop and install any adjustments required to "fine-tune" the
products we have installed.
3. Perform on-site, quarterly follow-up visits to evaluate and
further refine the Overdraft Privilege Program.
PRIVILEGE MANAGER CRM(TM) SUPPORT
If you choose to install the PRIVILEGE MANAGER CRM(TM) solution, we will provide
support during the contractual period at no charge. After the contractual
period, we will provide technical support for $3,000 per year.
Xxxx X. Xxxxx & Associates will provide the initial file layouts to Cherokee
Bank, NA upon completion of the initial installation of the overdraft privilege
product. Cherokee Bank, NA will be responsible for providing Xxxx X. Xxxxx &
Associates with new file layouts prior to an upgrade of their core system. We
will send an upgrade of the PRIVILEGE MANAGER CRM(TM) to Cherokee Bank, NA to be
installed at the same time the core upgrade is implemented. The layouts should
be provided to us at least four weeks in advance of the installation of the core
system upgrade to allow time for Xxxx X. Xxxxx & Associates to upgrade the
software interface between the core system and PRIVILEGE MANAGER CRM(TM).
Should the file layouts not be received four weeks in advance of the core
upgrade we cannot guarantee completion of the interface changes prior to the
system upgrade. Cherokee Bank, NA will be responsible for any
Mr. Xxxx Xxxxxxx
March 22, 2005
Page 6
necessary travel expenses, however none are anticipated.
OUT-OF-POCKET EXPENSES
Our goal is to keep out-of-pocket expenses to a minimum. Out-of-pocket expenses
consist of reasonable travel expenses, telephone ($1.00 per man-hour expended),
copies & supplies ($.75 per man-hour expended), FedEx charges and other unusual
expenses. Airline tickets will not exceed coach fares and Cherokee Bank,
National Association has the choice of either actual cost or per diem for
consultant expenditures.
EMPLOYMENT OF PERSONNEL
Each one of our and your employees and contractors has been highly trained at
each party's respective expense. Should either party hire one of the other
party's employees or contractors on or before one (1) year after the date of
completion of the engagement to be performed hereunder, the hiring party will
compensate the other party for the loss of such employee in an amount equal to
the annual compensation paid by the prior employer to the employee during the
one (1) year period immediately preceding the date of employment. The one (1)
year period provided for in this paragraph shall be independent and separate of
any other restrictive period contained elsewhere in this agreement.
WARRANTY
Xxxx. X. Xxxxx & Associates hereby warrants that its Overdraft Privilege program
is compliant with existing state and federal regulations as currently
interpreted by regulatory agencies. Further, Xxxx X. Xxxxx & Associates
certifies that, to the best of its knowledge, none of its clients have ever
received adverse criticism by any regulatory authority on its Overdraft
Privilege programs. We also warrant that our PRIVILEGE MANAGER CRM(TM) is fully
compatible with your core processing system.
Xxxx X. Xxxxx & Associates will not be liable if Cherokee Bank, NA changes any
of the customer education materials (e.g., kickoff letter, quarterly reminder
letters, or discretionary overdraft privilege policy) provided during the
contracted engagement period. This warranty will be considered nullified if
Cherokee Bank, NA fails to mail the kickoff letter and quarterly letters, with
the discretionary overdraft privilege policy attached, as recommended.
CONFIDENTIALITY
The contents of this proposal should be treated as confidential material between
Xxxx X. Xxxxx & Associates and Cherokee Bank, NA. We agree that neither Xxxx X.
Xxxxx & Associates nor any of our employees or contractors will use or disclose
any data about Cherokee Bank, NA as a result of this consulting engagement that
is not published call report information, without prior written consent from
Cherokee Bank, NA. We understand that we may use the data in our
Mr. Xxxx Xxxxxxx
March 22, 2005
Page 7
database as long as there is no reference to Cherokee Bank, NA. Cherokee Bank,
NA agrees that they will not share any recommendations or materials from this
study with anyone not affiliated with Cherokee Bank, NA. If any recommendations
or materials or software are shared or adopted either in their original or
modified form by other member institutions, companies or affiliated financial
institutions of Cherokee Bank, NA or its holding company, then Cherokee Bank, NA
agrees to compensate Xxxx X. Xxxxx & Associates on the same terms as stated in
this proposal.
We thank you for the opportunity to submit this proposal and look forward to
working with you, your staff and your organization. We would like to begin the
engagement at your earliest convenience.
Sincerely,
Xx Xxxxxxxxx
Regional Director
Mr. Xxxx Xxxxxxx
March 22, 2005
Page 8
ACCEPTED BY:-
Xxxx X. Xxxxx A. R. Xxxxxxx, III
Chairman SVP/CFO
Xxxx X. Xxxxx & Associates Cherokee Bank, National Association
Baytown, Texas Canton, Georgia
______________________________________ ______________________________________
Signature Signature
______________________________________ ______________________________________
Date Date
UPON ACCEPTANCE, PLEASE SIGN BOTH COPIES AND RETURN TO:
XXXX X. XXXXX & ASSOCIATES
000 X. XXXXXX XXXXX
XXXXXXX, XXXXX 00000
