EXHIBIT 99.2
XXXXXXX FINANCIAL ADVISORS, INC.
0000 X Xxxxxx, XX. Suite 205
Washington, DC 20006
(000) 000-0000 . FAX (000) 000-0000
July 18, 2002
Board of Directors
Chesapeake Bank of Maryland
0000 X. Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Members of the Board:
This letter sets forth the agreement between Chesapeake Bank of Maryland
("Chesapeake Bank") and Xxxxxxx Financial Advisors, Inc. ("FFA"), whereby
Chesapeake Bank has engaged FFA to provide an independent appraisal of the
estimated aggregate pro forma market value (the "Valuation") of the shares of
common stock that are to be outstanding upon completion of the Conversion of
Chesapeake Bank from a mutual institution into the stock form of organization.
FFA agrees to deliver the Valuation, in writing, to Chesapeake Bank at the
address above on or before a mutually agreed upon date. Further, FFA agrees to
perform such other services as are necessary or required of the independent
appraiser in connection with comments from Chesapeake Bank's regulatory
authorities and updates of the Valuation as from time to time may be necessary,
both after initial approval by Chesapeake Bank's regulatory authorities and
prior to the time the Conversion is completed. FFA also agrees to assist
Chesapeake Bank in the preparation of its regulatory business plan in connection
with the Conversion application to be filed with the appropriate regulatory
authorities. If requested, FFA will assist Chesapeake Bank at all meetings with
the regulatory authorities and will also assist Chesapeake Bank in responding to
all regulatory inquiries.
Chesapeake Bank agrees to pay FFA a consulting fee of $27,500: $20,000 for FFA's
appraisal services and $7,500 for services in conjunction with the preparation
of Chesapeake Bank's regulatory business plan. Chesapeake Bank also agrees to
reimburse FFA for certain out-of-pocket expenses necessary and incident to the
completion of the services described above. These expenses shall not exceed
$2,000 without the prior consent of Chesapeake Bank. Reimbursable expenses for
courier delivery, copying, travel, data materials and report reproduction shall
be paid to FFA as incurred and billed. Payment of the consulting fee shall be
made according to the following schedule:
. $5,000 upon execution of this Agreement;
. $7,500 upon completion of Chesapeake Bank's regulatory business
plan;
XXXXXXX FINANCIAL ADVISORS, INC.
Board of Directors
Chesapeake Bank of Maryland
July 18, 2002
Page 2
. $10,000 upon delivery of the completed appraisal report to
Chesapeake Bank; and
. $5,000 upon completion of the Conversion.
If, during the course of Chesapeake Bank's Conversion, unforeseen events occur
so as to materially change the nature of the work content of the appraisal
services described above such that FFA must supply services beyond that
contemplated at the time this contract was executed, the terms of this agreement
shall be subject to renegotiation by Chesapeake Bank and FFA. Such unforeseen
events shall include, but not be limited to, major changes in the stock
conversion regulations, appraisal guidelines or processing procedures as they
relate to conversion appraisals, major changes in Chesapeake Bank's management
or operating policies, and excessive delays or suspension of processing of the
Conversion.
In the event Chesapeake Bank shall for any reason discontinue the Conversion
prior to delivery of the completed appraisal and payment of the progress payment
fee totaling $10,000, Chesapeake Bank agrees to compensate FFA according to
FFA's standard billing rates for consulting appraisal services based on
accumulated and verifiable time expended, provided that the total of such
charges shall not exceed $15,000 plus reimbursable expenses.
In order to induce FFA to render the aforesaid services, Chesapeake Bank agrees
to the following:
1. Chesapeake Bank agrees to supply FFA such information with
respect to Chesapeake Bank's business and financial condition as
FFA may reasonably request in order for FFA to perform the
aforesaid services. Such information shall include, without
limitation: annual financial statements, periodic regulatory
filings and material agreements, corporate books and records, and
such other documents as are material for the performance by FFA
of the aforesaid services.
2. Chesapeake Bank hereby represents and warrants to FFA (i) that to
its best knowledge any information provided to FFA by or on
behalf of Chesapeake Bank, will not, at any relevant time,
contain any untrue statement of a material fact or fail to state
a material fact necessary to make the information or statements
therein not false or misleading, (ii) that Chesapeake Bank will
not use the product of FFA services in any manner, including in a
proxy or offering circular, in connection with any untrue
statement of a material fact or in connection with the failure to
state a material fact necessary to make other statements not
false or misleading, and (iii) that all documents incorporating
or relying upon FFA services or
XXXXXXX FINANCIAL ADVISORS, INC.
Board of Directors
Chesapeake Bank of Maryland
July 18, 2002
Page 3
the product of FFA services will otherwise comply with all
applicable federal and state laws and regulations.
3. Any valuations or opinions issued by FFA may be included in its
entirety in any communication by Chesapeake Bank in any
application, proxy statement or prospectus; however, such
valuations or opinions may not be excerpted or otherwise publicly
referred to without FFA's prior written consent nor shall FFA be
publicly referred to without FFA's prior written consent;
however, such consent shall not be unreasonably withheld.
4. FFA's Valuation will be based upon Chesapeake Bank's
representation that the information contained in the Conversion
application and additional information furnished to us by
Chesapeake Bank and its independent auditors is truthful,
accurate, and complete in all material respects. FFA will not
independently verify the financial statements and other
information provided by Chesapeake Bank and its independent
auditors, nor will FFA independently value the assets or
liabilities of Chesapeake Bank. The Valuation will consider
Chesapeake Bank only as a going concern and will not be
considered as an indication of the liquidation value of
Chesapeake Bank.
5. FFA's Valuation is not intended, and must not be represented to
be, a recommendation of any kind as to the advisability of
purchasing shares of common stock in the Conversion. Moreover,
because the Valuation is necessarily based upon estimates and
projections of a number of matters, all of which are subject to
change from time to time, FFA will give no assurance that persons
who purchase shares of common stock in the Conversion will
thereafter be able to sell such shares at prices related to FFA's
Valuation.
6. Chesapeake Bank agrees to indemnify FFA and its affiliates and
all persons employed by or associated with FFA or its affiliates
against all claims, liabilities and related expenses, as
incurred, arising out of this engagement, unless, upon final
adjudication, such claims, liabilities and expenses are found to
have resulted primarily from FFA's bad faith or willful
misconduct. No termination, completion or modification hereof
shall limit or affect such indemnification obligation. In the
event FFA becomes aware of a claim or a possible claim arising
out of this agreement, it shall notify Chesapeake Bank as soon as
possible. Chesapeake Bank will attempt to resolve the claim. In
the event Chesapeake is not able to resolve the claim, it has the
option to retain legal counsel on behalf of FFA to defend the
claim.
XXXXXXX FINANCIAL ADVISORS, INC.
Board of Directors
Chesapeake Bank of Maryland
July 18, 2002
Page 4
7. Chesapeake Bank and FFA are not affiliated, and neither
Chesapeake Bank nor FFA 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. It is understood that
FFA is not a seller of securities within the scope of any federal
or state securities law and any report prepared by FFA shall not
be used as an offer or solicitation with respect to the purchase
or sale of any security, it being understood that the foregoing
shall not be construed to prohibit the filing of any such report
as part of the Conversion application or SEC and blue sky filings
or customary references thereto in applications, filings, proxy
statements and prospectuses.
Please acknowledge your agreement to the foregoing by signing as indicated below
and returning to FFA a signed copy of this letter.
Yours very truly,
XXXXXXX FINANCIAL ADVISORS, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
President
AGREED AND ACCEPTED:
CHESAPEAKE BANK OF MARYLAND
By: /s/ X. Xxxxxx Xxxxxxxxx
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Title: President
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Date: 7/24/02
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