EXHIBIT 10.1
Bell Plaine Financial LLC
June 26, 1998
Mr. Steven Hertel
President & Chief Executive Officer
Regency Bancorp
7060 North Fresno Street
P.O. Box 16279
Fresno, CA 93755-6279
Dear Mr. Hertel:
This letter will confirm that Regency Bancorp ("Regency") has engaged
Belle Plaine Financial, LLC ("Belle Plaine") as the exclusive financial
advisor to Regency and any entities it may form, acquire or invest in
(collectively, the "Company") in connection with the Company's efforts to (a)
acquire or invest in other depository institutions, excepting therefrom the
opening of individual bank branches in the ordinary course of business; (b)
acquire, invest or sell businesses other than depository institutions,
excepting therefrom transactions between such businesses and the Company that
have a Transaction Value (as defined below) of less than $1 million, (c)
effect a sale of the Company or a material amount of its assets; or (d)
pursue a financing or recapitalization transaction (collectively, the
"Transaction").
1. In connection with a proposed Transaction, at the request of the Company,
Belle Plaine will provide such services as the Company shall reasonably
request including: (i) assisting the Company in the structuring of the
financial aspects of a Transaction; (ii) identifying alternative potential
parties and contacting such parties as the Company may designate; (iii)
negotiating the terms of a Transaction with such parties; (iv) assisting
the Company in communicating the strategic implications of the Transaction
to the investment community; and (v) advising the Company in connection
with its efforts to raise any additional capital that may be required to
facilitate the Transaction.
2. In connection with a proposed Transaction, you will furnish Belle Plaine
with such material regarding the business and financial condition of the
Company as we request, all of which will be accurate and complete in all
material respects at the time furnished. The Company will also use its
best efforts to assure that its personnel, consultants, experts, attorneys
and accountants are made available to Belle Plaine upon Belle Plaine's
reasonable request in connection with services provided or to be provided
by Belle Plaine. During the term of this agreement, the Company shall
promptly notify Belle Plaine of (i) any material changes in the business or
financial condition of the Company from the information provided to Belle
Plaine, and (ii) any material events or developments relating to the
financial condition or business operations or prospects of the Company and
promptly make available for Belle Plaine's review copies of all filings
made by the Company with any regulatory agency and copies of all press
releases issued by the Company. We are relying, without independent
verification, on the accuracy and completeness of all
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Regency Bancorp June 3, 1998
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information furnished to us by the Company or any other party or potential
party to any Transaction. Belle Plaine agrees that all requests for
information from the Company will be directed only to the President or
Chairman of the Board of the Company or such other persons as the
President or Chairman shall specifically designate and that it will not
treat information obtained from any other person or source as having been
provided by the Company. In addition, Belle Plaine agrees to keep any
such non-public information confidential so long as it remains non-public,
unless disclosure is required by law or requested by any governmental or
regulatory agency or body, and Belle Plaine will not make any use thereof,
except in connection with our services hereunder for the Company. Any
advice rendered by Belle Plaine pursuant to this letter shall not be
disclosed in any manner without Belle Plaine's prior written approval and
will be treated by the Company and Belle Plaine as confidential.
3. In consideration of the services to be provided hereunder, the Company
agrees to pay to Belle Plaine the following cash fees:
(A) $5,000 upon the signing of this letter agreement and $5,000 at the
beginning of each fiscal quarter beginning July 1, 1998,
(B) In the event that a sale of the Company is completed, an amount equal
to one and one-half percent (1.5%) of the Transaction Value (as
defined below) for the Transaction, net the cost of a "fairness
opinion" if such opinion is deemed necessary,
(C) In the event that an acquisition of or investment in another financial
institution is completed by the Company, an amount based upon the
following schedule will be owed to Belle Plaine upon the consummation
of the acquisition based upon the Transaction Value for the
Transaction, net the cost of a "fairness opinion" if such opinion is
deemed necessary:
Deal Value
($ in millions) Fees
--------------- ----
(1) If $ 0 LESS THAN $20 then 2.0%
(2) If $20 LESS THAN $50 then $400,000, plus 1.5% of amount in
OR EQUAL TO excess of $20 million, up to $50
million
(3) If $50 GREATER THAN then $850,000, plus 1.0% of amount in
excess of $50 million
(D) In the event of a financing or recapitalization, the fees will be
determined in accordance with paragraph 8 below.
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Regency Bancorp June 3, 1998
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(E) Fees payable pursuant to paragraphs 3 (B), (C) and (D) shall be paid
upon and only upon the closing of the Transaction.
For purposes of this agreement, "Transaction Value" means the sum of (i)
with respect to each class of capital stock of the Company in the event of a
sale of the Company or of the financial institution which is acquired by the
Company or in which the Company invests, the product of (a) the highest
consideration paid or payable for a share of such class of capital stock
determined as described in the following paragraph and (b) the sum of (1) the
total number of shares of such class of capital stock of the Company or such
financial institution plus (2) the number of shares of such class issuable
upon exercise of options, warrants or other rights, or conversion or exchange
of securities to the extent that such options are then exercisable; (ii) the
aggregate liquidation value of any preferred stock or other preferential
interests redeemed or remaining outstanding; (iii) the fair market value of
any assets distributed to the shareholders of the Company or such financial
institution that are purchased; and (iv) the consideration paid or payable
for the assets of the Company or the assets of another financial institution,
as the case may be.
The determination of the "consideration paid or payable for a share of
such class of capital stock" in connection with the Transaction shall include
cash, securities (valued in accordance with the following paragraph), or
other assets or consideration paid or payable by the purchaser or any of its
affiliates, as the case may be, determined without regard to any allocations
between the Company or its affiliates in the event of a sale of the Company
or between the financial institution or its affiliates in the event such
financial institution is acquired by the Company or the Company invests in
such financial institution, including but not limited to (i) assets (net of
debt or payables) of the Company or such financial institution retained by
the Company or such financial institution or their respective stockholders
and affiliates, as the case may be, (ii) any deferred installments of the
purchase price, (iii) any portion of the purchase price held in escrow
subsequent to closing which is payable pursuant to the terms of the escrow
arrangement, irrespective of whether such amounts are in fact paid, (iv) any
extraordinary compensation paid directly or indirectly by the purchaser to
principals, management or employees of the Company or affiliates of the
Company in connection with or in anticipation of the Transaction or by the
Company to principals, management or employees of a financial institution
acquired by the Company or in which the Company invests, including but not
limited to cash payments, stock or option grants, consulting arrangements and
non-competition arrangements, (v) any payments to the Company or the
financial institution and their respective affiliates for non-competition
agreements, (vi) any payments pursuant to earn-outs, royalties or other
similar arrangements, (vii) any payments payable after closing upon the
occurrence of certain contingencies or conditions or the satisfaction of
certain earnings, sales levels or other performance objectives which are
agreed to on or before the closing, irrespective of whether such amounts are
in fact paid, (vii) the amount of any dividends or other extraordinary
payments or distributions to stockholders of the Company or the financial
institution in connection with or in anticipation of the Transaction, and
(iv) consideration paid by the purchaser or its affiliates as a deposit,
reimbursement of expenses, liquidated damages, walk-away fee or other
arrangement.
In the event that all or any portion of the Transaction Value for a
Transaction is paid in stock or other securities, deferred installments or
other non-cash consideration, the amount of the fee payable
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Regency Bancorp June 3, 1998
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with respect to such items shall be determined on the basis of the fair
market cash equivalent value of such non-cash consideration as of the day
preceding the closing date of the Transaction as reasonably determined by
Belle Plaine and the Company, provided that the value of securities (received
as consideration) which have an existing public trading market shall be
determined by the average closing sale (trade) price for such securities
during the five trading days immediately preceding the closing date.
Any portion of the fee which is payable with respect to any earn-out,
royalty or similar arrangement where the amount payable is not a certain
amount, shall be calculated and paid at the closing based upon the estimated
net present value thereof as reasonably determined by Belle Plaine and the
Company.
If a Transaction takes the form of a purchase of assets and an
assumption of liabilities, then the "Transaction Value" of the Company or the
financial institution shall be deemed to include the amount of cash,
securities, or other consideration paid to the Company or the financial
institution and their respective shareholders, and affiliates, as the case
may be, in respect of the assets, plus the aggregate face amount of all
liabilities, including accounts payable, accruals, and income taxes payable
of the Company, or the financial institution, assumed by the purchaser and
its affiliates or the Company, as the case may be.
If a Transaction involves the acquisition of less than all of the
Company's outstanding equity securities, then the fee payable pursuant to
Section 3(B) shall nonetheless be calculated as though all such equity
securities had been so acquired by the purchaser.
4. Regardless of whether a Transaction is completed, the Company will
reimburse Belle Plaine, upon its demand, for all reasonable out-of-pocket
expenses (including travel expenses and fees and disbursements of counsel
retained by Belle Plaine in connection with this engagement). In addition
to professional fees, our billing statements include reimbursable expenses
normally incurred in the conduct of the work. The reimbursable expenses
will include a flat ten percent of Belle Plaine's monthly costs for data
services, telephone, fax, postage and general office expenses which will be
categorized on our statement as indirect expenses, but excluding any
allocation for employee costs or debt service costs.
5. The Company agrees to indemnify and hold Belle Plaine harmless in
accordance with the terms and conditions of Appendix A attached hereto
and made a part hereof as though fully set forth in this agreement. No
termination or modification hereof, or completion of Belle Plaine's
engagement hereunder, shall limit or affect such indemnification.
6. Belle Plaine's services hereunder may be terminated by the Company or Belle
Plaine at any time upon 30 days written notice, provided that Belle Plaine
shall be entitled to any fees payable pursuant to Section 3 and Section 8
hereof in the event that the Company completes a Transaction (i) on which
Belle Plaine provided advice or participated in discussions with any of the
investors in such Transaction or (ii) with any of the parties as to which
Belle Plaine advised the Company or with whom the Company engaged in
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Regency Bancorp June 3, 1998
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discussions regarding a possible Transaction prior to the termination of
this letter agreement, providing that (i) in the event the Company
terminated this agreement, such Transaction is completed within two years
following the termination of this letter agreement or (ii) in the event
Belle Plaine terminated this agreement, the Company executes an agreement
in connection with a proposed Transaction within one year following the
termination of this letter agreement. In addition, Belle Plaine shall
remain entitled to the reimbursement of fees and expenses under the terms
and conditions described in Section 4 hereof, to the extent the same have
been incurred on or prior to the date of such termination and to the
quarterly retainer fee under Section 3(A) to the extent payable prior to
the termination date. Furthermore, the provisions of this Section 6, and
Sections 2, 5 (including Appendix A), 8, 10, 12, 13, 14, and 15 shall
survive any termination of this agreement.
7. In order to coordinate our efforts with respect to any Transaction, during
the period of our engagement hereunder neither the Company nor any
representative thereof (other than Belle Plaine) will initiate discussions
regarding a Transaction except through Belle Plaine. If the Company or its
management receives an inquiry regarding a Transaction, they will promptly
advise Belle Plaine of such inquiry in order that we can evaluate such
prospective party and its interest and assist the Company in any resulting
negotiations.
8. It is understood and agreed that if the Company decides to pursue a
financing or recapitalization Transaction for which Belle Plaine provided
any of the financial advisory services described above in Section 1 hereof,
the Company and Belle Plaine shall negotiate in good faith acceptable
compensation for Belle Plaine in consideration of such services, which
compensation will take into account, among other things, the results
obtained and the custom and practice among investment bankers acting in
similar situations. In consideration of the financial services rendered
pursuant to a financing or recapitalization Transaction, the compensation
payable to Belle Plaine for such services rendered shall not exceed five
percent (5%) of the Transaction Value in cash compensation plus warrants to
purchase an aggregate amount of common stock equal to five percent (5%) of
the newly issued common stock to be outstanding subsequent to the
completion of the financing or recapitalization Transaction. The
compensation owed to Belle Plaine in accordance with the fee structure
agreed upon by the Company and Belle Plaine in respect of a financing or
recapitalization Transaction shall be paid to Belle Plaine in cash upon
the consummation of any such Transaction.
9. Except as expressly provided herein, no fee paid or payable to Belle Plaine
or any of its affiliates shall be used as an offset or credit against any
other fee paid or payable to Belle Plaine or any of its affiliates.
10. This agreement, including the indemnity in Appendix A, embodies the sole
terms of the agreement between the Company and Belle Plaine with respect to
the subject matter hereof and supersedes all previous agreements, whether
oral or written, between the Company and Belle Plaine with respect to the
subject matter hereof. This letter agreement shall be governed by and
construed in accordance with the laws of the State of California without
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Regency Bancorp June 3, 1998
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regard to principles of conflict of laws. Any right to trial by jury with
respect to any claim or proceeding related to or arising out of this
engagement or any transaction or conduct in connection herewith, is waived.
Any claim or dispute arising out of this agreement or the alleged breach
thereof shall be submitted by the parties to binding and nonappealable
arbitration by JAMS/Endispute ("JAMS") in Fresno, California, under the
commercial rules then in effect for JAMS, except as provided herein.
Provided that JAMS is not suitable to arbitrate such claim or dispute, then
such claim or dispute shall be submitted by the parties to binding and
nonappealable arbitration by the American Arbitration Association ("AAA")
in Fresno, California, under the commercial rules then in effect for the
AAA, except as provided herein. JAMS, or in the event that JAMS is deemed
unsuitable to arbitrate such claim or dispute, the AAA shall recommend
three arbitrators who are knowledgeable in the field of investment banking.
The parties shall agree upon one of the three arbitrators or, if no
arbitrator is mutually agreed upon, JAMS or the AAA, as the case may be,
shall appoint one of the three arbitrators within 30 days of such failure.
The award rendered by the arbitrator shall include costs of arbitration,
reasonable attorneys' fees and fees of experts and other witnesses, but
shall not include punitive damages against either party. Each party shall
have the right to request the arbitrator to order reasonable and limited
discovery. Notwithstanding this provision, appropriate injunctive relief
may be sought by either party.
11. This agreement may be executed in counterparts, each of which shall be
deemed an original and all of which shall continue one and the same
instrument.
12. The obligations of the Company hereunder shall be the joint and several
obligations of the entities comprising the term Company.
13. The Company expressly acknowledges that Belle Plaine has been retained
solely as an advisor to the Company, and not as an advisor to or agent of
any other person, and that the Company's engagement of Belle Plaine is not
intended to confer rights upon any persons not a party hereto (including
shareholders, employees or creditors of the Company) as against Belle
Plaine, Belle Plaine's affiliates or their respective directors, officers,
agents and employees. Any advice provided to the Company by Belle Plaine
pursuant to this agreement is solely for the information and assistance of
the Board of Directors of the Company. Such advice shall be treated as
confidential information, shall not be disclosed publicly in any manner
without Belle Plaine's prior written approval and shall not be relied upon
by the Company's shareholders or any third party. Any reference to Belle
Plaine or to any affiliate of Belle Plaine in any release or communication
to any party outside the Company is subject to Belle Plaine's prior written
approval, which approval shall not be unreasonably withheld or delayed. If
this agreement is terminated prior to any release or communication, no
reference shall be made to Belle Plaine without Belle Plaine's prior
written approval.
14. Belle Plaine represents that it has the necessary expertise to provide the
services contemplated by this agreement and that the compensation provided
for herein is fair and reasonable and comparable to the compensation which
would be charged by an
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Regency Bancorp June 3, 1998
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independent provider of such services with the same type, level and
quality of expertise. The Company acknowledges that the services
contemplated herein will meet legitimate needs of the Company and
that it is in the best interests of the Company to obtain such services.
15. After closing of a Transaction, Belle Plaine shall have the right to place
advertisements in financial and other newspapers and other newspapers and
journals at its own expense describing its services to the Company under
this agreement, provided that Belle Plaine shall have submitted a copy of
any such proposed advertisements to the Company for its prior approval,
which approval shall not be unreasonably withheld or delayed.
Please confirm that the foregoing is in accordance with your understanding by
signing and returning to us the duplicates of this agreement and the related
indemnification agreement which shall thereupon constitute binding agreements.
Very truly yours,
/s/ William J. Ruh
Belle Plaine Financial, LLC
William J. Ruh
Senior Vice President
Accepted and agreed:
- ---------------------
on its behalf and on behalf of the Company,
as defined above.
By: /s/ Steven F. Hertel
--------------------------------
Name: Steven F. Hertel
--------------------------------
Title: PRES & CEO
--------------------------------
Date: 7/23/98
--------------------------------
BPF APPENDIX A
This Appendix A is a part of and is incorporated into that certain
letter agreement dated June 3, 1998, between Regency Bancorp (the "Company")
and Belle Plaine Partners, Inc. ("Belle Plaine") (the letter agreement and
this Appendix A are referred to herein as the "Agreement"). Capitalized
terms used herein without definition shall have the meanings ascribed to them
in such letter agreement.
The Company agrees to indemnify and hold harmless Belle Plaine, any
affiliates and the respective officers, directors, partners, representatives
and agents and any other persons controlling Belle Plaine or any of its
affiliates (Belle Plaine and each such other person or entity each being
referred to as an "Indemnified Person"), to the fullest extent lawful, from
and against all claims, liabilities, losses, damages, and expenses,
(including without limitation and as incurred, reimbursement of all
reasonable costs of investigating, preparing, pursuing, or defending any such
claim or action, including fees and expenses of counsel to, and the
reasonable per diem costs and expenses of personnel of, the Indemnified
Person, whether or not arising out of pending litigation, governmental
investigation, arbitration or other alternative dispute resolution, or other
action or proceeding or threatened litigation, governmental investigation,
arbitration or other alternative dispute resolution, or other action or
proceeding) directly or indirectly related to or arising out of, or in
connection with (i) actions taken or omitted to be taken by the Company, its
affiliates, employees, directors, partners, representatives or agents in
connection with any Transaction or activities contemplated by this Agreement;
(ii) actions taken or omitted to be taken by any Indemnified Person pursuant
to the terms of, or in connection with services rendered pursuant to, this
Agreement, provided that in the case of this subsection (ii), the Company
shall not be responsible for any claim, liability, loss, damage or expense
arising primarily out of or based primarily upon the willful misconduct or
gross negligence (as determined by the judgment of a court of competent
jurisdiction, no longer subject to appeal or further review) of or by such
Indemnified Person; and (iii) any untrue statement or alleged untrue
statement of a material fact contained in any information provided to Belle
Plaine by the Company under the Agreement or any omission or alleged omission
to state a material fact necessary to make the statements therein not
misleading (other than untrue statements or alleged untrue statements in, or
omissions or alleged omissions from, information relating to an Indemnified
Person furnished in writing by or on behalf of such Indemnified Person
expressly for use by the Company). If multiple claims are brought against an
Indemnified Person in an arbitration with respect to at least one of which
indemnification is permitted under applicable law and provided for under this
Agreement, the Company agrees that any arbitration award shall be
conclusively deemed to be based on claims as to which indemnification is
permitted and provided for, except to the extent that the arbitration award
expressly states that the award, or any portion thereof, is based solely on a
claim as to which indemnification is not available.
If the indemnification provided for herein is unavailable to an Indemnified
Person in respect of any claims, liabilities, losses, damages or expenses, then
the Company, in lieu of indemnifying such Indemnified Person, shall contribute
to the amount paid or payable by such Indemnified Person as a result of such
claims, liabilities, losses, damages or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Indemnified Person on the other, as well as any other relevant
equitable considerations. It is further agreed that the relative benefits to the
Company on the one hand and Belle Plaine on the other hand with respect to the
services rendered under this Agreement shall be deemed to be in the same
proportion as (i) the aggregate Transaction Value bears to (ii) the fees
actually paid to Belle Plaine with respect to the services provided pursuant to
this Agreement in connection with the Transaction. The Company also agrees that
no Indemnified Person shall have any liability to the Company for or in
connection with this Agreement and the engagement of Belle Plaine hereunder,
except for such
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claims, liabilities, losses, damages, or expenses incurred by the Company to
the extent they are appropriately judicially determined (without possibility
of appeal or review) to have resulted primarily from such Indemnified
Person's willful misconduct or gross negligence, and the Company agrees that
in no event shall the Indemnified Persons be required to contribute an amount
in the aggregate greater than the fees actually received by Belle Plaine for
its services performed under this Agreement.
If any action or other proceeding or investigation is commenced as to
which an Indemnified Person demands indemnification, the Indemnified Person
shall have the right to retain counsel of its own choice to represent it, the
Company shall pay the reasonable fees and expenses of such counsel, and such
counsel shall to the extent consistent with its professional responsibilities
cooperate with the Company and any counsel designated by the Company,
provided, that in no event shall the Company be required to pay fees and
expenses under this indemnity for more than one firm of attorneys for the
Indemnified Person in any jurisdiction in any one legal action or group or
related legal actions. The Company shall be liable as provided herein for any
settlement of any claim against Belle Plaine or any Indemnified Person made
with the Company's written consent, which consent shall not be unreasonably
withheld. The Company agrees that it will not, without the prior written
consent of Belle Plaine, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated by Belle Plaine's engagement (whether or not any
Indemnified Person is a party thereto) unless such settlement, compromise or
consent includes an unconditional release of Belle Plaine and each other
Indemnified Person from all liability arising or that may arise out of such
claim, action, or proceeding.
The indemnity and contribution obligations of the Company set forth
herein shall be in addition to any liability or obligation the Company may
otherwise have to any Indemnified Person. The Company hereby consents to
personal jurisdiction, service and venue in any court in which any claim
which is subject to this Agreement is brought against Belle Plaine or any
other Indemnified Person.
It is understood that, in addition to Belle Plaine's engagement pursuant
to this Agreement, Belle Plaine may also be engaged to act for the Company in
one or more additional capacities, and that the terms of such additional
engagements may be embodied in one or more separate written agreements. The
provisions of this Appendix A shall apply to any such separate agreements,
any modification so this Agreement, and any modifications of such separate
agreements, and the provisions of this Appendix A shall remain in full force
and effect following the completion, expiration or termination of this
Agreement or such additional agreements or modifications of any of the
foregoing.