Exhibit 99.1
[LETTERHEAD OF RP FINANCIAL, LC.]
May 14, 2002
Xx. Xxxxx X. Xxxx
Executive Vice President and Chief Operating Officer
The Provident Bank
000 Xxxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000-0000
Dear Xx. Xxxx:
This letter sets forth the agreement between The Provident Bank, Jersey
City, New Jersey ("Provident" or the "Bank"), and RP Financial, LC. ("RP
Financial") for independent conversion appraisal services pertaining to the
Bank's simultaneous holding company formation and mutual-to-stock conversion.
The specific appraisal services to be rendered by RP Financial are described
below. These services will be directed by the undersigned.
Description of Appraisal Services
Prior to preparing the conversion 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 Bank's operations, financial condition, profitability, market
area, risks and various internal and external factors which impact the pro forma
market value of the Bank.
RP Financial will prepare a detailed written valuation report of the Bank
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 Bank's financial condition and operating results, as well as an
assessment of the Bank's interest rate risk, credit risk and liquidity risk. The
appraisal report will describe the Bank's business strategies, market area,
prospects for the future and the intended use of proceeds. A peer group analysis
relative to comparable publicly-traded savings institutions will be conducted
for the purpose of determining appropriate valuation adjustments for the Bank
relative to the peer group.
We will review pertinent sections of the Bank's prospectus and hold
discussions with the Bank 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, conversion expenses and characteristics of stock plans.
The appraisal report will establish a midpoint pro forma market value. The
appraisal report may be periodically updated throughout the conversion process
as appropriate. The conversion appraisal guidelines require at least one updated
valuation just prior to the time of the closing of the stock offering.
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May 14, 2002
Page 2
RP Financial agrees to deliver the appraisal report and subsequent updates,
in writing, to the Bank 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. RP Financial expects to formally present the
appraisal report, including the appraisal methodology, peer group selection and
assumptions, to the Board of Managers for review and acceptance.
Fee Structure
The Bank agrees to pay RP Financial a fixed fee of $100,000 for preparation
and delivery of the original appraisal report and appraisal update at closing.
The Bank agrees to pay RP Financial an additional fixed fee of $5,000 for
preparation and delivery of each additional interim appraisal update required,
if any. 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;
. $85,000 upon delivery of the completed original appraisal report;
. $5,000 upon delivery of the final appraisal update at the closing of
the conversion offering; and,
. $5,000 upon delivery of each interim appraisal update, if any.
The Bank will reimburse RP Financial for out-of-pocket expenses incurred in
preparation of the valuation reports. 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 in conjunction
with the business planning engagement to $10,000 subject to written
authorization from the Bank to exceed such level.
In the event the Bank 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, 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
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 directors.
If during the course of the proposed transaction, unforeseen events occur
so as to fundamentally 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 Bank and RP Financial. Such unforeseen events shall
include, but not be limited to, major
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May 14, 2002
Page 3
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
The Bank 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: 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 Bank 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 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 the Bank 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 Bank to RP Financial; or (iii) any action or omission to act by the Bank,
or the Bank's respective officers, board of managers, employees or agents which
action or omission is willful or negligent. The Bank 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
the Bank at the normal hourly professional rate chargeable by such employee.
Xx. Xxxxx X. Xxxx
May 14, 2002
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(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 annual rate of prime plus two percent 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) If an indemnification is to be sought hereunder by RP
Financial, then RP Financial shall promptly notify the Bank of the commencement
of any action or proceeding or investigation in respect thereof but failure to
so notify the Bank shall not relieve the Bank from any liability which it may
have otherwise than on account of this agreement. The Bank shall be entitled to
assume the defense of any action for which indemnification is sought hereunder
with counsel of its choice at its expense (in which case it shall not thereafter
be responsible for the fees and expenses of any separate counsel retained by RP
Financial except as set forth below); provided, however, that such counsel shall
be satisfactory to RP Financial in the exercise of its reasonable judgment.
Notwithstanding the Bank's election to assume the defense of such action, RP
Financial shall have the right to employ separate counsel and to participate in
the defense of such action and the Bank shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of such counsel chosen by
the Bank to represent RP Financial would present such counsel with a conflict of
interest (in which case the Bank shall not have the right to assume the defense
of such action on RP Financial's behalf); (ii) the actual or potential
defendant's in, or targets of, any such action include both the Bank and RP
Financial, and RP Financial shall have reasonably concluded that there may be
legal defenses available to RP Financial which are different from or additional
to those available to the Bank (in which case the Bank shall not have the right
to assume the defense of such action on RP Financial's behalf); (iii) the Bank
shall not have employed counsel reasonably satisfactory to RP Financial to
represent RP Financial within a reasonable time after notice of the institution
of such action; or (iv) the Bank shall authorize in writing RP Financial to
employ separate counsel at the Bank's expense. It is expressly understood that
the Bank shall only be obligated to pay for one separate counsel (in addition to
any required local counsel) in any one action or proceeding or group of related
actions or proceedings for all indemnified parties collectively. The Bank will
not be liable under this letter agreement for any amount paid by RP Financial to
settle any claims or actions if the settlement is entered into without the
Bank's consent, which shall not be reasonably withheld.
Xx. Xxxxx X. Xxxx
May 14, 2002
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(e) 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 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.
Provident and RP Financial are not affiliated, and neither Provident 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/ Xxxxxxx X. Xxxxxxxxxxx
CEO and Managing Director
Agreed To and Accepted By:
Xx. Xxxxx X. Xxxx
May 14, 2002
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/s/ Xxxxx X. Xxxx, Executive Vice President and Chief Operating Officer
Upon Authorization by the Board of Managers For: The Provident Bank
Jersey City, New Jersey
Date Executed: May 21, 2002
