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EXHIBIT 99.3
[LETTERHEAD OF RP FINANCIAL, LC.]
March 31, 2000
Mr. Charles C. Pearson, Jr.
President and Chief Executive Officer
Harris Financial, Inc., Subsidiary of Harris Financial MHC
235 North Second Street
Harrisburg, Pennsylvania 17105
Dear Mr. Pearson:
This letter sets forth the agreement between Harris Financial, Inc.
("Harris" or the "Company"), subsidiary of Harris Financial MHC, Harrisburg,
Pennsylvania (the "MHC"), and RP Financial, LC. ("RP Financial") for independent
conversion appraisal services pertaining to the mutual-to-stock conversion of
the MHC and the stock acquisition of York Financial Corp., York, Pennsylvania
("York"). The specific appraisal services to be rendered by RP Financial are
described below. These appraisal services will be rendered by a team of two
senior consultants on staff and will be directed by the undersigned and Ron
Riggins.
Description of Appraisal Services
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In conjunction with preparing the appraisal 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, market area,
risks and various internal and external factors of Harris and York, all of which
will be considered in estimating the pro forma market value of the Company. In
addition, RP Financial will evaluate the anticipated expected synergies and
costs as well as accounting and other adjustments resulting from the merger.
RP Financial will prepare a detailed written valuation report of the
Company that will be fully consistent with applicable federal regulatory
guidelines and standard pro forma valuation practices. The appraisal report will
include an analysis of the Company's financial condition and operating results,
as well as an assessment of the Company's interest rate risk, credit risk and
liquidity risk, including an analysis on a pro forma basis taking into account
the related merger transaction. The appraisal report will describe the Company's
business strategies, market area, prospects for the future and the intended use
of proceeds, incorporating the merger transaction. A peer group analysis
relative to comparable publicly-traded savings and banking institutions will be
conducted for the purpose of determining appropriate valuation adjustments for
the Company relative to the peer group.
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Mr. Charles C. Pearson, Jr.
March 31, 2000
Page 2
We will review pertinent sections of the Company's prospectus and hold
discussions with the Company to obtain necessary data and information for the
appraisal report, including the impact of key deal elements on the pro forma
market value, such as dividend policy, use of proceeds and reinvestment rate,
tax rate, offering expenses, characteristics of stock plans, the structure of
any contribution to a charitable foundation immediately following the offering
if applicable and the pro forma impact of the merger transaction.
The appraisal report will establish a midpoint pro forma market value. The
appraisal report may be periodically updated throughout the conversion process
as appropriate. There will be at least one updated valuation that would be
prepared at the time of the closing of the stock offering. RP Financial agrees
to deliver the original appraisal report and subsequent updates, in writing, to
the Company at the above address in conjunction with the filing of the
regulatory applications. 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. RP Financial expects to formally present the
appraisal report, including the appraisal methodology, peer group selection and
assumptions, to the Board of Directors for review and acceptance.
Fee Structure and Payment Schedule
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The Company agrees to pay RP Financial a fixed fee of $120,000 for
preparation and delivery of the original appraisal report and a $10,000 fee for
each subsequent appraisal update, plus reimbursable expenses. Payment of these
fees shall be made according to the following schedule:
. $10,000 upon execution of the letter of agreement engaging RP
Financial's appraisal services;
. $110,000 upon delivery of the original appraisal report concurrent
with filing the regulatory applications; and
. $10,000 upon completion of each subsequent valuation update that may
be required.
The Company will reimburse RP Financial for reasonable 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 to an
amount not to exceed $10,000 in conjunction with the appraisal and business
planning engagements, subject to written authorization from the Company to
exceed such level.
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Mr. Charles C. Pearson, Jr.
March 31, 2000
Page 3
In the event the Company shall, for any reason, discontinue the proposed
transaction prior to delivery of the completed documents set forth above and
payment of the respective progress payment fees, the Company 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 applying full credit to the
initial $10,000 retainer fee towards such payment. 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 the Company 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, changes in the structure of the merger terms, major changes in
management or procedures, operating policies or philosophies, and excessive
delays or suspension of processing of conversion or merger applications by the
regulators such that completion of the conversion transaction requires the
preparation by RP Financial of a new appraisal.
Representations and Warranties
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The Company and RP Financial agree to the following:
1. The Company 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 Company to RP Financial shall
remain strictly confidential (unless such information is otherwise made
available to the public), and if the conversion is not consummated or the
services of RP Financial are terminated hereunder, RP Financial shall upon
request promptly return to the Company the original and any copies of such
information.
2. The Company hereby represents and warrants to RP Financial that any
information provided to RP Financial does not and will not, to the best of the
Company's knowledge, at the times it is provided to RP Financial, contain any
untrue statement of a material fact or in response to informational requests by
RP Financial 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 Company 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
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Mr. Charles C. Pearson, Jr.
March 31, 2000
Page 4
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 Company 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 Company to RP Financial; or (iii) any action or omission
to act by the Company, or the Company's respective officers, directors,
employees or agents which action or omission is undertaken in bad faith or
negligent. The Company 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. Reasonable time devoted by
RP Financial to situations for which indemnification is provided hereunder,
shall be an indemnifiable cost payable by the Company at the normal hourly
professional rate chargeable by such employee.
(b) RP Financial shall give written notice to the Company 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 Company elects, within seven days of
the receipt of the original notice thereof, to contest such claim by written
notice to RP Financial, the Company shall not be obligated to make payments
under Section 3(c), but RP Financial will be entitled to be paid any amounts
payable by the Company hereunder, together with interest on such costs from the
date incurred at the annual rate of prime plus two percent within five days
after the final determination of such contest either by written acknowledgement
of the Company or a final judgment of a court of competent jurisdiction, unless
it is determined in accordance with Section 3(c) hereof that RP Financial is not
entitled to indemnity hereunder. If the Company does not so elect to contest a
claim for indemnification by RP Financial hereunder, RP Financial shall (subject
to the Company's receipt of the written statement and undertaking under Section
3(c) hereof) be paid promptly and in any event within thirty days after receipt
by the Company of billing statements or invoices for which RP Financial is
entitled to reimbursement under Section 3(c) hereof.
(c) Subject to the Company's right to contest under Section 3(b)
hereof, the Company 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 Company: (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 Company 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 Company in one or
more additional capacities, and
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Mr. Charles C. Pearson, Jr.
March 31, 2000
Page 5
that the terms of the original 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
Company 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.
Harris and RP Financial are not affiliated, and neither Harris 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.
York and RP Financial are not affiliated, and neither York 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 $10,000.
Sincerely,
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer and
Managing Director
Agreed To and Accepted By: /s/ Charles C. Pearson, Jr.
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Charles C. Pearson, Jr.
President and Chief Executive Officer
Upon Authorization by the Board of Directors For: Harris Financial, Inc.,
Subsidiary of Harris
Financial MHC
Harrisburg, Pennsylvania
Date Executed: 4/30/00
