EXHIBIT 10.5
HOVDE FINANCIAL, INC.
INVESTMENT BANKERS & FINANCIAL ADVISORS
June 5, 1996
Board of Directors
Cupertino National Bancorp
20230 Stevens Creek Boulevard
Cupertino, CA 95014
Gentlemen:
This letter confirms an agreement under which Hovde Financial, Inc.
("Hovde") shall serve as a financial advisor to Cupertino National Bancorp (the
"Company") in connection with the merger of the Company with Mid-Peninsula
Bancorp or a subsidiary thereof ("Mid-Pen"). This confirmation is made pursuant
to the following terms and conditions:
1. Financial Advisory Services. As the Company's financial advisor,
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Hovde shall conduct as in-depth review of the contemplated Transaction (as
defined below) with Mid-Pen and advise the Board of Directors of the Company
regarding post-merger cost savings opportunities and revenue enhancements which
can be effected in connection with the contemplated Transaction with Mid-Pen.
Hovde will consult with and advise the Board concerning the content and
presentation of various materials to the shareholders of the Company, including
Mid-Pen's Registration Statement on Form S-4, relating to the Transaction. The
Company agrees that it will make available to Hovde all relevant information,
whether or not publicly available, which Hovde requests, and will make the
Company's management personnel reasonable available to Hovde to discuss the
operations and prospects of the Company. Hovde will treat all non-public
information as confidential. The Company acknowledges that Hovde will rely upon
the accuracy and completeness of all information received from the Company, its
officers, directors, accountants and legal counsel.
2. Fees. Throughout the term of Hovde's engagement by the Company
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hereunder, the Company agrees to pay Hovde, as compensation for all services to
be performed by Hovde hereunder, the following:
(a) Concurrently with the execution hereof, the Company shall pay
Hovde the sum of $30,000 as a non-refundable retainer (to be applied to any
"Completion Fee"" due to Hovde as provided below).
(b) Upon execution of a definitive agreement under which the Company
is to merge with Mid-Pen (the "Definitive Agreement"), the Company shall pay
Hovde a non-refundable fee (the "Definitive Agreement Fee") equal to twenty five
percent (25%) of the Completion Fee ( as defined in the following paragraph).
The Definitive Agreement will be deemed to be executed upon the execution or
delivery, as the case may be, of all schedules and ancillary agreements called
for in the Definitive Agreement and the satisfaction or waiver thereof of the
conditions related thereto within 20 days from the date of the Definitive
Agreement. The Definitive Agreement Fee will be applied to any Completion Fee
due to Hovde as provided below.
[LETTERHEAD OF HOVDE FINANCIAL, INC.]
Cupertino National Bancorp
June 5, 1996
Page Two
(c) In the event that a Transaction is consummated, the Company agrees
to pay Hovde a fee (the "Completion Fee") equal to $125,000. The Completion Fee
shall be due and payable upon consummation of the Transaction.
For purposes of this letter agreement, "Transaction" is defined as (i) a
merger, consolidation or reorganization, tax-free or otherwise, involving the
Company and Mid-Pen, (ii) any transaction resulting in the direct or indirect
transfer to Mid-Pen, an affiliate thereof, or a newly-formed entity of all or
substantially all of the assets of and/or securities issued by the Company or an
affiliate thereof, or (iii) any transaction resulting in the direct or indirect
transfer to the Company, an affiliate thereof, or a newly-formed entity of all
or substantially all of the assets of and/or securities issued by Mid-Pen or an
affiliate thereof.
3. Expenses. In addition to any fees that may be payable to Hovde
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hereunder, the Company hereby agrees from time to time upon Hovde's written
request, to reimburse Hovde for all reasonable travel, legal and other out-of-
pocket expenses incurred in performing the services hereunder; provided,
however, that such expenses shall not exceed $5,000 in the aggregate without the
Company's prior written consent. Such expenses shall be reimbursed to Hovde
within 30 days of the Company's receipt of a written request therefore.
4. Indemnification and Contribution. The Company agrees to indemnify
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Hovde (including its affiliated entities and its officers, directors, agents,
employees and controlling persons) to the full extent provided by law against
any claims, losses and expenses as incurred (including expenses of investigation
and preparation and reasonable fees and disbursements of Hovde's and such
persons' counsel) arising our of any Transaction or Hovde's engagement
hereunder. However, such indemnification and contribution shall not apply to
any claim, loss or expense which arises from Hovde's negligence or willful
misconduct in performing its services hereunder. If such indemnification were
for any reason not to be available with respect to any matter (other than by
reason of the provision in the immediately preceding sentence), the Company and
Hovde agree to contribute to the settlement, loss, liability or expense for
which indemnification or reimbursement is not available in such proportion so as
to reflect the relative benefits to the Company, on the one hand, and to Hovde,
on the other hand, the relevant fault of each of the Company and Hovde, and any
other relevant equitable considerations. It is agreed that the appropriate
measure of the relative benefits shall be determined on the basis of the
proportion that Hovde's fees payable hereunder bears to the Purchase Price
payable, in each case, in the actual or a proposed Transaction.
Both Hovde and the Company agree that any suit or other action necessary to
enforce the obligations of this letter agreement shall be instituted in the
courts of the State of California, and that the substantially non-prevailing
party, its successors or assigns shall pay to the substantially prevailing
party, its successors or assigns, any counsel or attorneys' fees incurred as a
result of the institution of such suit or action. The indemnity and contribution
provided herein shall remain operative and in full force and effect regardless
of any termination or expiration of this letter agreement or Hovde's engagement
hereunder or the completion of any Transaction.
Cupertino National Bancorp
June 5, 1996
Page Three
5. Term of Agreement. This letter agreement shall commence upon the
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Company's execution hereof and will remain in effect for six (6) full calendar
months, and thereafter shall be automatically extended monthly until terminated
by either party, unless earlier terminated upon 30 days' written notice from one
party to the other party. Should a Transaction involving the Company and Mid-Pen
occur within 18 months from the termination date of this letter agreement, the
Company shall pay Hovde the fees set forth in Section 2. Moreover, the
termination of this letter agreement will not relieve the Company of its
obligation to reimburse Hovde for its expenses as set forth in Section 3. In the
event Hovde must file a lawsuit to collect any outstanding fees, out-of-pocket
expenses, or other expenses due from the Company, the Company agrees to pay all
reasonable costs and attorneys' fees for such action. Any and all fees, out-of-
pocket expenses or other expenses due from the Company to Hovde hereunder shall
be paid within 30 days after the Company's receipt of an invoice regarding same;
in the event such payments are not made within such 30-day period, all overdue
amounts outstanding shall accrue interest thereon at a rate of one and one-half
percent (1 1/2%) per month.
6. Entire Agreement. This letter agreement contains the entire agreement
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between the parties hereto with respect to the subject matter hereof, and all
prior negotiations, agreements and understandings are merged herein. This letter
agreement may not be modified or rescinded except pursuant to a written
instrument signed by the party against whom enforcement is sought.
7. Severability. If any provisions of this letter agreement shall be
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determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this letter agreement, other than
those provisions which have been so determined invalid or unenforceable to any
such extent, shall not be affected thereby, and each provision hereof shall be
valid and shall be enforced to the fullest extent permitted by law.
8. Governing Law. The laws of the State of California shall govern the
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validity, performance and enforcement of this letter agreement.
Cupertino National Bancorp
June 5, 1996
Page Four
If the foregoing correctly sets forth our mutual understanding, please
indicate the Company's acceptance hereof by signing and returning the original
copy of this letter agreement, together with a check in the amount of $30,000
payable to Hovde Financial, Inc. to the undersigned.
Sincerely,
HOVDE FINANCIAL, INC.
By: /s/ Eugene S. Weil
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Eugene S. Weil
Vice President
Accepted and Agreed to this 6th day of
June, 1996
CUPERTINO NATIONAL BANCORP
By: /s/ John Gatto
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John Gatto
Chairman