EXHIBIT 99.1
[LETTERHEAD OF RP FINANCIAL, LC APPEARS HERE]
April 29, 1998
Board of Directors
c/o Xx. Xxxxxx Xxxxxxxx, President and CEO
Provident Bank
000 Xxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Dear Members of the Board:
This letter sets forth the agreement between Provident Bank, Montebello,
New York ("Provident" or the "Bank"), and RP Financial, LC. ("RP Financial") for
the independent appraisal services pertaining to the Bank's formation of 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
--------------------------------------------
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
Bank's operations, financial condition, profitability, market area, risks and
various internal and external factors which impact the pro forma value of the
Bank. RP Financial will prepare a written detailed valuation report of Provident
which 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 Bank's financial condition and operating results, as well
as an assessment 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 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 Bank'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.
Board of Directors
April 29, 1998
Page 2
RP Financial agrees to deliver the valuation appraisal and subsequent
updates, in writing, to Provident 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
----------------------------------
Provident agrees to pay RP Financial a fixed fee of $45,000 for these
appraisal services, 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;
. $30,000 upon delivery of the completed original appraisal report;
and
. $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 Bank 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 an data services. RP
Financial will agree to limit reimbursable expenses to $10,000 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 Bank to exceed such level.
In the even Provident 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, Provident
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, unforseen 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 Provident and RP Financial. Such unforseen 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
Board of Directors
April 29, 1998
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
------------------------------
Provident 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 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 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, Directors, 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
indemnifications is provided hereunder, shall be an indemnifiable cost payable
by the Bank at the normal hourly professional rate chargeable by such employee.
Board of Directors
April 29, 1998
Page 4
(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 RP Financial intends to base a claim for
indemnification hereunder. In the event the Bank 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 Bank hereunder within five days after the final
determination of such contest either by written acknowledgement of the Bank or a
final judgment (including all appeals therefrom) of a court of competent
jurisdiction. If the Bank does not so elect, RP Financial shall be paid
the promptly and in any event within thirty days after receipt by the Bank of
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. The Bank 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 Bank to RP Financial of its election to
assume the defense thereof, the Bank 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 Bank 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 the right to select counsel reasonably satisfactory
to the Bank which will represent RP Financial in any such action or proceeding
and the Bank 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 Bank 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 Bank
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 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
incorporated by reference 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
Board of Directors
April 29, 1998
Page 5
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 State of Maryland. 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/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
President and Managing Director
Agreed To and Accepted By: Xxxxxx Xxxxxxxx /s/ Xxxxxx Xxxxxxxx
-------------------
President and Chief Executive Officer
Upon Authorization by the Board of Directors For: Provident Bank
Montebello, New York
Dated Executed: 5/27/98
------------------------
