EXHIBIT 99.1
RP FINANCIAL, LC.
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Financial Services Industry Consultants
April 1, 2003
Xx. Xxxxxx X. Xxxxxxx, Xx.
President and Chief Executive Officer
Atlantic Coast Federal
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000
Dear Xx. Xxxxxxx:
This letter sets forth the agreement between Atlantic Coast Federal,
Waycross, Georgia (the "Association"), and RP Financial, LC. ("RP Financial")
for the independent appraisal services pertaining to the Association's
reorganization into a "two-tier" mutual holding company (the "Reorganization"),
including a mid-tier stock holding company and minority stock offering by the
mid-tier stock holding company (the "Stock Offering"). The specific appraisal
services to be rendered by RP Financial are described below. These appraisal
services will be rendered by a team of two to three senior consultants on staff
and will be directed by the undersigned.
DESCRIPTION OF CONVERSION APPRAISAL SERVICES
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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
Association's operations, financial condition, profitability, market area, risks
and various internal and external factors which impact the pro forma value of
the Association. RP Financial will prepare a written detailed valuation report
of the Association that will be fully consistent with applicable regulatory
guidelines and standard pro forma valuation practices. The appraisal report will
include an in-depth analysis of the Association's financial condition and
operating results, as well as an assessment of the Association's interest rate
risk, credit risk and liquidity risk. The appraisal report will describe the
Association's business strategies, market area, prospects for the future and the
intended use of proceeds both in the short term and over the longer term. 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. We will review pertinent sections of the applications and
offering documents to obtain necessary data and information for the appraisal,
including the impact of key deal elements on the appraised value, such as
dividend policy, use of proceeds and reinvestment rate, tax rate, conversion
expenses and characteristics of stock plans. The appraisal report will conclude
with a midpoint pro forma value which will establish the range of value, and
reflect the Stock Offering size determined by the Association's Board of
Directors. The appraisal 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.
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WASHINGTON HEADQUARTERS
Rosslyn Center Telephone: (000) 000-0000
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000 Fax No.: (000) 000-0000
Arlington, VA 22209 Toll-Free No.: (000) 000-0000
xxx.xxxxxxxxxxx.xxx E-Mail: xxxxxxxxxxxx@xxxxxxxxxxx.xxx
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APRIL 1, 2003
PAGE 2
RP Financial agrees to deliver the valuation appraisal and subsequent
updates, in writing, to the Association 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
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The Association agrees to pay RP Financial a fixed fee of $45,000 for
preparation and delivery of the original appraisal report, plus reimbursable
expenses. Payment of these fees shall be made according to the following
schedule:
o $5,000 upon execution of the letter of agreement engaging RP
Financial's appraisal services;
o $35,000 upon delivery of the completed original appraisal report;
and
o $5,000 upon completion of the Reorganization and Stock Offering
to cover all subsequent valuation updates that may be required,
provided that the transaction is not delayed for reasons
described below
The Association will reimburse RP Financial for 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 in
connection with this engagement and in connection with the preparation of a
regulatory business plan as described in the accompanying letter, subject to
written authorization from the Association to exceed such level.
In the event the Association shall, for any reason, discontinue the
proposed Reorganization and Stock Offering prior to delivery of the completed
documents set forth above and payment of the respective progress payment fees,
the Association 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 $275 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 Association 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 appraisals,
major changes in
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APRIL 1, 2003
PAGE 3
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 transaction requires the preparation by RP Financial
of a new appraisal or financial projections.
REPRESENTATIONS AND WARRANTIES
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The Association and RP Financial agree to the following:
1. The Association 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 Association to RP
Financial shall remain strictly confidential (unless such information is
otherwise made available to the public), and if the Reorganization and Stock
Offering are not consummated or the services of RP Financial are terminated
hereunder, RP Financial shall upon request promptly return to the Association
the original and any copies of such information.
2. The Association hereby represents and warrants to RP Financial
that any information provided to RP Financial does not and will not, to the best
of the Association'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 Association 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 Association 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 Association to RP Financial; or (iii) any action or
omission to act by the Association, or the Association's respective officers,
Directors, employees or agents which action or omission is willful or negligent.
The Association 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 Association at the normal hourly
professional rate chargeable by such employee.
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APRIL 1, 2003
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(b) RP Financial shall give written notice to the Association of
such claim or facts within thirty days of the assertion of any claim or
discovery of material facts upon which RP Financial intends to base a claim for
indemnification hereunder. In the event the Association elects, within ten
business 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 Association hereunder within five days after the
final determination of such contest either by written acknowledgement of the
Association or a final judgment (including all appeals therefrom) of a court of
competent jurisdiction. If the Association does not so elect, RP Financial shall
be paid promptly and in any event within thirty days after receipt by the
Association of the notice of the claim.
(c) The Association 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 Association: (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. The Association may assume the defense of any
claim (as to which notice is given in accordance with 3(b)) with counsel
reasonably satisfactory to RP Financial, and after notice from the Association
to RP Financial of its election to assume the defense thereof, the Association
will not be liable to RP Financial for any legal or other expenses subsequently
incurred by RP Financial (other than reasonable costs of investigation and
assistance in discovery and document production matters). Notwithstanding the
foregoing, RP Financial shall have the right to employ their own counsel in any
action or proceeding if RP Financial shall have concluded that a conflict of
interest exists between the Association and RP Financial which would materially
impact the effective representation of RP Financial. In the event that RP
Financial concludes that a conflict of interest exists, RP Financial shall have
the right to select counsel reasonably satisfactory to the Association which
will represent RP Financial in any such action or proceeding and the Association
shall reimburse RP Financial for the reasonable legal fees and expenses of such
counsel and other expenses reasonably incurred by RP Financial. In no event
shall the Association be liable for the fees and expenses of more than one
counsel, separate from its own counsel, for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same allegations or circumstances. The
Association will not be liable under the foregoing indemnification provision in
respect of any compromise or settlement of any action or proceeding made without
its consent, which consent shall not be unreasonably withheld.
(d) In the event the Association 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 Association in one
or more additional capacities, and that the terms of the original engagement may
be incorporated by reference in one or more separate agreements. The provisions
of Paragraph 3 herein shall apply to the original engagement,
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APRIL 1, 2003
PAGE 3
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 Association 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.
The Association and RP Financial are not affiliated, and neither the
Association 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.
Very truly yours,
/s/ Xxxxxxx X. Xxxxxxxxxxx
Xxxxxxx X. Xxxxxxxxxxx
Chief Executive Officer and
Managing Director
Agreed To and Accepted By: Xxxxxx X. Xxxxxxx, Xx. /s/ Xxxxxx X. Xxxxxxx
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President and Chief Executive Officer
Upon Authorization by the Board of Directors For: Atlantic Coast Federal
Waycross, Georgia
Date Executed: 4/14/03
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