EX-99.1 11 tv523004_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1 

 

 

March 5, 2019

 

Mr. David P. Mansfield

President and Chief Executive Officer
Provident Bancorp, Inc. / The Provident Bank

5 Market Street

Amesbury, MA 01913

 

Dear Mr. Mansfield:

 

This letter sets forth the agreement between The Provident Bank, Amesbury, Massachusetts (the “Bank”), a state-chartered bank wholly-owned by Provident Bancorp, Inc. (the “Company”), which in turn is majority owned by Provident Bancorp, a mutual holding company (the “MHC”), collectively “Provident” or the “Company,” and RP® Financial, LC. (“RP Financial”), whereby RP Financial will provide the independent conversion appraisal services in conjunction with Provident’s second step conversion offering.

 

The scope, timing and fee structure for these appraisal services are described below. These appraisal services will be directed by the undersigned, with the assistance of Gregory E. Dunn, Director of RP Financial, and other consulting staff.

 

Description of Appraisal Services

 

Pursuant to this appraisal engagement, RP Financial will conduct financial due diligence of Provident, including senior management interviews and reviews of historical and pro forma financial information to be included in the prospectus and other documents and records, to gain insight into the operations, financial condition, profitability, market area, risks and various internal and external factors, for the purpose of estimating the pro forma market value of the Company in accordance with the applicable regulatory appraisal guidelines. RP Financial will prepare a detailed written valuation report of the Company consistent with applicable regulatory appraisal guidelines and standard pro forma valuation practices. The appraisal report will include an analysis of the Company’s financial condition and operating results, as well as an assessment of the interest rate, credit, liquidity, and other key risks. The appraisal report will incorporate an evaluation of the Company’s business strategies, recent transactions, market area, future prospects, and intended use of proceeds. RP Financial will select a peer group of relatively comparable public banking companies for the purpose of determining appropriate valuation adjustments for the Company relative to the peer group’s pricing ratios based on key fundamental differences.

 

We will review pertinent sections of the Company’s prospectus and conduct discussions with representatives of the Company and its other conversion advisors to obtain necessary data and information for the appraisal report, including key deal elements such as dividend policy, use of proceeds, reinvestment rate, tax rate, offering expenses, and characteristics of stock plans.

 

 

Washington Headquarters  
4250 N. Fairfax Drive, Suite 600 Direct: (703) 647-6543
Arlington, VA  22203 Main: (703) 528-1700
www.rpfinanical.com | rriggins@rpfinancial.com Fax: (703) 528-1788

 

 

 

 

Mr. David P. Mansfield

March 5, 2019

Page 2

 

The original appraisal report will conclude with a midpoint pro forma market value in accordance with applicable regulatory requirements, which will then establish the resulting range of value for all shares as well as the offering range of value.

 

As we understand, RP Financial will complete an initial appraisal report based on December 31, 2018 financial statements for purposes of filing along with the preliminary regulatory application. RP Financial will then update the initial appraisal report with March 31, 2019 financials to accompany the formal filing of the regulatory application.

 

After the formal filing of the regulatory application, the appraisal report may be periodically updated, with the Company authorizing the filing of subsequent updates. There will be at least one updated appraisal prepared at the time of the closing of the second step offering to determine the number of shares to be issued in accordance with the conversion regulations. In the event of a syndicated community offering, it will be necessary to file an update in conjunction with the close of the subscription offering and prior to the pricing phase in the syndicated community offering.

 

RP Financial agrees to deliver all appraisal reports and updates, in writing, to the Company at the above address. Subsequent updates, upon authorization by the Company, will be filed promptly as certain events occur which would warrant the preparation and filing of such appraisal updates pursuant to regulatory guidelines.

 

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, both Federal and state regulators, regarding the initial appraisal, the appraisal filed with the formal application and subsequent updates. In the event of a syndicated community offering phase, RP Financial will participate in the various calls regarding the offering, pricing discussions and timing.

 

RP Financial will formally present the appraisal report, including the appraisal methodology, peer group selection and assumptions, to the Board of Directors for review and consideration. If appropriate, RP Financial will present subsequent updates to the Board. It is understood that this appraisal may be presented either in person or telephonically.

 

Fee Structure and Payment Schedule

 

The Company agrees to pay RP Financial fees for preparation and delivery of the initial appraisal report, the appraisal report filed with the formal application and subsequent appraisal updates as shown below, plus reimbursable expenses. Payment of these fees shall be made according to the following schedule:

 

·$15,000 upon execution of this letter of agreement engaging RP Financial’s appraisal services;

 

·$25,000 upon delivery of the initial appraisal report based on December 31, 2018 financial statements to accompany the preliminary application filing;

 

 

 

 

Mr. David P. Mansfield

March 5, 2019

Page 3

 

·$65,000 upon delivery of the appraisal report based on March 31, 2019 financial statements to accompany the formal filing of the application; and

 

·$15,000 upon delivery of each subsequent appraisal update required for the regulatory application and stock offering. Under the conversion regulations a closing appraisal update is required in conjunction with the completion of the offering. In addition, there may be appraisal updates required prior to commencement of the offering if interim changes in market conditions or financial results dictate. Also, if there is a syndicated offering phase, it will be necessary to prepare an update immediately upon completion of the subscription/ community offering and prior to the commencement of the syndicated phase of the offering.

 

The Company will reimburse RP Financial for reasonable out-of-pocket expenses incurred in preparation of the original appraisal and subsequent updates. Such out-of-pocket expenses will likely include travel, printing, communications, shipping, computer and data services, and will not exceed $10,000 in the aggregate, without the Company’s authorization to exceed this level.

 

In the event the Company shall, for any reason, discontinue the proposed transaction prior to delivery of the completed original appraisal report or subsequent updates and payment of the corresponding fees, the Company 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 retainer fee towards such payment, together with reasonable out-of-pocket expenses, subject to the cap on such expenses as set forth above. RP Financial’s standard billing rates range from $75 per hour for research associates to $450 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 Company and RP Financial. Such unforeseen events shall include, but not be limited to, material changes to the structure of the transaction such as inclusion of a simultaneous business combination transaction, material changes in the conversion regulations, appraisal guidelines or processing procedures as they relate to conversion appraisals, material 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.

 

Covenants, Representations and Warranties

 

The Company and RP Financial agree to the following:

 

1.      The Company 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 Company 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 promptly return to the Company the original and any copies of such information.

 

 

 

 

Mr. David P. Mansfield

March 5, 2019

Page 4

 

2.      The Company represents and warrants to RP Financial that any information provided to RP Financial does not and will not, to the best of the Company’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 Company agrees that it will indemnify and hold harmless RP Financial, any affiliates of RP Financial, the respective members, 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, reasonable attorneys’ fees, and 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 Company 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 Company to RP Financial; or (iii) any action or omission to act by the Company, or the Company’s respective officers, directors, employees or agents, which action or omission is undertaken in bad faith or is negligent. The Company will be under no obligation to indemnify RP Financial hereunder if a court determines that RP Financial was negligent or acted in bad faith or with willful misconduct 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 RP Financial is deemed entitled to indemnification hereunder, shall be an indemnifiable cost payable by the Company at the normal hourly professional rate chargeable by such employee.

 

(b)       RP Financial shall give written notice to the Company 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, including the name of counsel that RP Financial intends to engage in connection with any indemnification related matter. In the event the Company elects, within seven days of the receipt of the original notice thereof, to contest such claim by written notice to RP Financial, the Company 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 Company hereunder within five days after the final non-appealable determination of such contest either by written acknowledgement of the Company or a decision of a court of competent jurisdiction or alternative adjudication forum, unless it is determined in accordance with Section 3(c) hereof that RP Financial is not entitled to indemnity hereunder. If the Company does not so elect to contest a claim for indemnification by RP Financial hereunder, RP Financial shall (subject to the Company’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 Company of detailed billing statements or invoices for which RP Financial is entitled to reimbursement under Section 3(c) hereof.

 

 

 

 

Mr. David P. Mansfield

March 5, 2019

Page 5

 

(c)       Subject to the Company’s right to contest under Section 3(b) hereof, the Company shall pay for or reimburse the reasonable expenses, including reasonable 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 Company: (1) a written statement of RP Financial’s good faith belief that it is entitled to indemnification hereunder; (2) a written undertaking to repay the advance if it ultimately is determined in a final, non-appealable adjudication of such proceeding that RP Financial is not entitled to such indemnification; and (3) a detailed invoice of the expenses for which reimbursement is sought.

 

(d)       In the event the Company 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.

 

(e)       Any indemnification payments to be made by the Company hereunder are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 USC 1828(k)) and the Regulations promulgated thereunder by the Federal Deposit Insurance Corporation (12 CFR Part 359).

 

This agreement constitutes the entire understanding of the Company and RP Financial concerning the subject matter addressed herein, and such contract shall be governed and construed in accordance with the Commonwealth of Massachusetts. This agreement may not be modified, supplemented or amended except by written agreement executed by both parties.

 

The Company and RP Financial are not affiliated, and neither the Company 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. RP Financial represents and warrants that it is not aware of any fact or circumstance that would cause it not to be “independent” within the meaning of the conversion regulations of the federal banking agencies or otherwise prohibit or restrict in anyway RP Financial from serving in the role of independent appraiser for the Company.

 

* * * * * * * * * * *

 

Please acknowledge your agreement to the foregoing by signing below and returning to RP Financial a signed copy of this letter, together with the initial retainer fee of $15,000.

 

  Sincerely,
 
  Ronald S. Riggins
  President and Managing Director

 

Agreed to and Accepted by: David P. Mansfield /s/ David P. Mansfield
  President and Chief Executive Officer

 

For: The Provident Bank, subsidiary of Provident Bancorp, Inc., Amesbury, Massachusetts

 

Date Executed: April 3, 2019