[LETTERHEAD OF RP FINANCIAL, LC.]
EXHIBIT 99.3
August 28, 1997
Mr. Robert W. Orr
President and Chief Executive Officer
Perpetual Bank, a Federal Saving Bank
907 N. Main Street
Anderson, South Carolina 29621
Dear Mr. Orr:
This letter sets forth the agreement between Perpetual Bank, a Federal
Savings Bank, Anderson, South Carolina ("Perpetual" or the "Bank"), and RP
Financial, LC, ("RP Financial"), whereby the Bank has engaged RP Financial to
assist in the preparation of the regulatory business plan and financial
projections to be adopted by the Bank pursuant to the formation of a holding
company. These services are described in greater detail below.
Description of Proposed Services
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RP Financial's business services will include, but are not limited to,
the following ares: (1) gaining an understanding of Perpetual's current
financial and operating condition, business strategies and anticipated
strategies in the future; (2) analyzing and quantifying the impact of business
strategies to enhance profitability, capitalization, competitiveness and
compliance with applicable regulations; (3) preparing detailed financial
projections on a quarterly basis for a period of at least three fiscal years to
reflect the impact of Board approved business strategies; and (4) preparing the
written business plan document which conform with any applicable regulatory
guidelines.
The business plan will clearly describe and demonstrate the business
and operating strategies and objectives of Perpetual and the holding company for
three fiscal years, with the objective of demonstrating the financial viability
and operating strength of the Bank and holding company cash flows. Contents of
the business plan will include:
Philosophy/Goals
Economic Environment and Background
Lending, Leasing and Investment Activities
Deposit, Savings and Borrowing Activity
Asset and Liability Management
Operations
Records, Systems and Controls
Growth, Profitability and Capital
Responsibility for Monitoring this Plan
The business plan will include detailed financial projections prepared
on a quarterly basis covering three fiscal years. The financial projections will
reflect the anticipated timing and financial impact of the Board-approved
strategies.
________________________________________________________________________________
WASHINGTON HEADQUARTERS
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No: (703) 528-1788
RP Financial, LC.
Mr. Robert W. Orr
August 28, 1997
Page 2
Fee Structure and Payment Schedule
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The Bank agrees to compensate RP Financial for preparation of the business
plan on an hourly basis, with the professional fees not to exceed $7,500. the
Bank will reimburse RP Financial for our-of-pocket expenses incurred in the
preparation of the business plan. Such out-of-pocket expenses, which are not
expected to exceed $7,500 inclusive of expenses for the business plan and
appraisal, will include but not be limited to, 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 the Bank shall, for any reason, discontinue this planning
engagement prior to delivery of the completed business plan and payment of the
business planning Fee, the Bank 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 fee cap described
above.
If during the course of the planning engagement, unforeseen events occur so
as to materially change the nature or the work content of the business planning
services described in this contract, the terms of said contract shall be subject
to renegotiation by the Bank and RP Financial. Such unforeseen events may
include changes in regulatory requirements as it specifically relates to
Perpetual or potential transactions which will dramatically impact the Bank such
as a pending acquisition or branch transaction.
.................
Please acknowledge your agreement to the foregoing by signing as indicated
below and returning to RP Financial a signed copy of this letter.
Sincerely,
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
and Managing Director
Agreed To and Accepted By: Mr.Robert W. Orr /s/ Robert W. Orr
------------------------
President and chief Executive Officer
For: Perpetual Bank, a Federal Savings Bank
Anderson, South Carolina
Date Executed: September 4, 1997
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[LETTERHEAD OF RP FINANCIAL, LC.]
August 28, 1997
Mr. Robert W. Orr
President and Chief Executive Officer
Perpetual Bank, a Federal Savings Bank
907 N. Main Street
Anderson, South Carolina 29621
Dear Mr. Orr:
This letter sets forth the agreement between Perpetual Bank, a Federal
Savings Bank, Anderson, South Carolina ("Perpetual" or the "Bank") and RP
Financial, LC. ("RP Financial") for certain conversion appraisal services
pertaining to the mutual-to-stock conversion of SouthBanc Shares, M.H.C. (the
"MHC"), a federal mutual holding company and the majority shareholder of
Perpetual, and the Plan of Reorganization between the MHC and Perpetual. 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
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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 Perpetual
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 Perpetual, the proposed
treatment in the conversion of the publicly-traded shares of Perpetual
(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.
RP Financial, LG,--
Mr. Robert W Orr
August 28, 1997
Page 2
RP Financial agrees to deliver the valuation appraisal and subsequent
updates, in writing, to Perpetual 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
- ----------------------------------
Perpetual agrees to pay RP Financial a fixed fee of $30,000 for these
services, plus reimbursable expenses. Payment of these fees shall be made
according to the following schedule:
. $5,000 upon execution of the letter of agreement engaging RP
Financial's services as outlines herein;
. $20,000 upon delivery of the completed original appraisal report; and
. $5,000 upon completion of the convention 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 Perpetual 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, Perpetual 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 or the work content of the services
described in this contract, the terms of said contract shall be subject to
renegotiation by Perpetual 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
- ------------------------------
Perpetual 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.
MR. ROBERT W. ORR
AUGUST 28, 1997
PAGE 5
annual financial statements, periodic regulatory filings and materials
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 to 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 Perpetual 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 Perpetual to RP Financial or (iii) any action or omission to act by
Perpetual, or Perpetual's respective officers, directors, employees or agents
which action or omission is willful or negligent. Perpetual 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 Perpetual 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 RP 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 contest 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.
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
RP Financial, LC.
Mr. Robert W. Orr
August 28, 1997
Page 4
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, and such contract shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia. This agreement may not
be modified, supplemented or amended except by written agreement executed by
both parties.
Perpetual and RP Financial are not affiliated, and neither Perpetual 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/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
and Managing Director
Agreed To and Accepted By: Mr. Robert W. Orr /s/ Robert W. Orr
---------------------
President and Chief Executive Officer
For: Perpetual Bank, a Federal Savings Bank
Anderson, South Carolina
September 4, 1997
Date Executed: ___________________________________