Exhibit 99.1
[LETTERHEAD OF RP FINANCIAL, LC.]
April 6, 1998
Xx. Xxxxx X. Xxxxxxxxx
President and Chief Executive Officer
Compass Bank for Savings, Subsidiary of The 1855 Bancorp
000 Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxxxxx 00000-0000
Dear Xx. Xxxxxxxxx:
This letter sets forth the agreement between Compass Bank for Savings
("Compass" or the "Bank"), subsidiary of The 1855 Bancorp, New Bedford,
Massachusetts ("Bancorp" or the 'Mutual Holding Company"), and RP Financial, LC.
("RP Financial") for independent conversion appraisal services pertaining to the
mutual-stock- stock conversion of Bancorp and the stock acquisition of Sandwich
Bancorp, Sandwich, Massachusetts ("Sandwich"). 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.
Description of Appraisal Services
Prior to 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 Compass and Sandwich, all of which will be
considered in estimating the pro forma market value of the Bank. 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 Bank
which 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,
including an analysis on a pro forma basis taking into account the related
merger transaction. The appraisal report will describe the Bank'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 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, offering expenses, characteristics of stock plans, the structure of
any contribution to a charitable foundation immediately following the offering
and the pro forma impact of the merger transaction.
Xx. Xxxxx X. Xxxxxxxxx
April 6, 1998
Page 2
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 which would
be prepared at the time of the closing of the stock offering.
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 Directors for review and acceptance.
Fee Structure and Payment Schedule
The Bank agrees to pay RP Financial a fixed fee of $45,000 for
preparation and delivery of the original appraisal report and a $5,000 fee for
each subsequent appraisal update, 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 $40,000 upon delivery of the completed original appraisal report;
and,
o $5,000 upon completion of each subsequent valuation update that
may be required.
The Bank 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 Bank to exceed
to such level.
In the event the Bank 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 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 applying full credit to the initial
$5,000 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 Bank 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
appraisal, 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
The Bank and RP Financial agree to the following:
Xx. Xxxxx X. Xxxxxxxxx
April 6, 1998
Page 3
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 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 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 undertaken in bad faith 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. Reasonable time devoted by RP Financial to situations for
which indemnification is provided hereunder, shall be an indemnificable cost
payable by the Bank at the normal hourly professional rate chargeable by such
employee.
(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, the Bank 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 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 acknowledgment of the Bank
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 Bank does not so elect to contest a
claim for indemnification by RP Financial hereunder, RP Financial shall (subject
to the Bank'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 Bank of billing statements or invoices for which RP Financial is entitled
to reimbursement under Section 3(c) hereof.
(c) Subject to the Bank's right to contest under Section 3(b)
hereof, the Bank shall pay for or reimburse the reasonable expenses, including
attorneys' fees, incurred by RP Financial in advance of the final
Xx. Xxxxx X. Xxxxxxxxx
April 6, 1998
Page 4
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) 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.
Compass and RP Financial are not affiliated, and neither Compass 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.
Sincerely,
/s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
President and Managing Director
Agreed To and Accepted By: Xxxxx X. Xxxxxxxxx /s/ Xxxxx X. Xxxxxxxxx
----------------------
President and Chief Executive Officer
Upon Authorization by the Board of Directors For: Compass Bank for Savings,
Subsidiary of The 1855 Bancorp
New Bedford, Massachusetts
Date Executed: March 31, 1998
