A special meeting of stockholders of Lake Sunapee Bank Group, or LSBG, will be held at the Lake Sunapee Bank Building, 1868 Room, 9 Main
Street, Newport, NH 03773 on October 24, 2016, at 10:00 a.m., local time, for the following purposes:
The merger agreement and proposed
merger of LSBG with and into BHB is more fully described in the attached joint proxy statement/prospectus, which you should read carefully and in its entirety before voting. A copy of the merger agreement is included
as
Annex
A
to the attached joint proxy statement/prospectus.
The board of directors of LSBG has
established the close of business on August 29, 2016 as the record date for the special meeting. Only record holders of LSBG common stock as of the close of business on that date will be entitled to notice of and vote at the special meeting or
any adjournment or postponement of that meeting. A list of stockholders entitled to vote at the special meeting will be available for inspection by any LSBG stockholder at the offices of LSBG for a period of 10 days prior to the special meeting
until the close of such meeting. The affirmative vote of holders of at least a majority of the shares of LSBG common stock outstanding and entitled to vote at the special meeting is required to adopt the merger agreement.
A special meeting of shareholders of Bar Harbor Bankshares, or BHB, will be
held at the Bar Harbor Bank & Trust Corporate Offices, Board of Directors Room, 3rd floor, 82 Main Street, Bar Harbor, Maine 04609 on October 20, 2016, at 10:00 a.m., local time, for the following purposes:
The merger agreement and proposed
merger of LSBG with and into BHB is more fully described in the attached joint proxy statement/prospectus, which you should read carefully and in its entirety before voting. A copy of the merger agreement is included
as
Annex
A
to the attached joint proxy statement/prospectus.
The board of directors of BHB has
established the close of business on August 29, 2016 as the record date for the special meeting. Only record holders of BHB common stock as of the close of business on that date will be entitled to notice of and vote at the special meeting or
any adjournment or postponement of that meeting. A list of shareholders entitled to vote at the special meeting will be available for inspection by any BHB shareholder at any time prior to or during the special meeting or any adjournment thereof.
The affirmative vote of holders of at least a majority of the shares of BHB common stock outstanding and entitled to vote at the special meeting is required to adopt and approve the merger agreement.
The accompanying joint proxy statement/prospectus incorporates by reference important business and financial information about BHB and LSBG
from documents that are not included in or delivered with the joint proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference into this
joint proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:
For a more detailed description of the information incorporated by reference into the accompanying joint proxy
statement/prospectus and how you may obtain it, see Where You Can Find More Information beginning on page 120.
The
accompanying joint proxy statement/prospectus provides a detailed description of the merger and the merger agreement. We urge you to read the joint proxy statement/prospectus, including any documents incorporated by reference into the joint proxy
statement/prospectus, and its annexes carefully and in their entirety. If you have any questions concerning the merger, the other meeting matters or the joint proxy statement/prospectus, or need assistance voting your shares, please contact Alliance
Advisors, the proxy solicitor for BHB and LSBG, at the address or telephone number listed below:
We are delivering this joint proxy statement/prospectus to you as both a joint proxy statement of BHB and LSBG and a prospectus of BHB. It is a
joint proxy statement because the boards of directors of both BHB and LSBG are soliciting proxies from their respective shareholders. Your proxy will be used at your respective special meeting or at any adjournment or postponement of that special
meeting. It is also a prospectus because BHB will issue BHB common stock to LSBG stockholders as consideration in the merger, and this prospectus contains information about that common stock.
The value of the
stock consideration is dependent upon the value of BHB common stock and therefore will fluctuate with the market price of BHB common stock. Accordingly, any change in the price of BHB common stock prior to the merger will affect the market value of
the stock consideration that LSBG stockholders will receive as a result of the merger.
The quorum requirement for LSBGs special meeting is the presence in person or by proxy of one third of the total number of outstanding
shares of common stock entitled to vote.
If you decide to revoke your proxy by mail, you should send your notice of revocation to the appropriate company at:
If you have instructed a bank, broker or other nominee to vote your shares, you must follow the directions you
receive from your bank, broker or other nominee to change your voting instructions.
Upon completion of the merger, all of the outstanding shares of
LSBG common stock will be converted into shares of BHB common stock. The ratio at which the shares will be converted is fixed at 0.4970 shares of BHB common stock for each share of LSBG common stock. There will be no adjustment in the exchange ratio
for changes in the market price of either LSBG common stock or BHB common stock. Any change in the price of BHB common stock will affect the aggregate value LSBG stockholders will receive in the merger. Stock price changes may result from a variety
of factors, including changes in businesses, operations and prospects, regulatory considerations, and general market and economic conditions. Many of these factors are beyond our control. Accordingly, at the time of the special meeting, LSBG
stockholders will not know the value of the stock consideration they will receive in the merger.
There will be a time period between the completion of the merger and the time at which former LSBG
stockholders actually receive their shares of BHB common stock. Until shares are received, former LSBG stockholders may not be able to sell their BHB shares in the open market and, therefore, will not be able to avoid losses resulting from any
decrease, or secure gains resulting from any increase, in the trading price of BHB common stock during this period.
The businesses
of BHB and LSBG differ and, accordingly, the results of operations of the combined company and the market price of the combined companys shares of common stock may be affected by factors different from those currently affecting the independent
results of operations and market prices of common stock of each of BHB and LSBG. For a discussion of the businesses of BHB and LSBG and of certain factors to consider in connection with those businesses, see the documents incorporated by reference
into this joint proxy statement/prospectus and referred to under Where You Can Find More Information beginning on page 120.
Each of LSBG and BHB shareholders currently has the right to vote in the election of their respective board of directors and on other matters
affecting their respective company. Upon completion of the merger, each LSBG stockholder will become a shareholder of BHB with a percentage ownership of the combined company that is much smaller than such stockholders current percentage
ownership of LSBG. It is expected that the former stockholders of LSBG as a group will receive shares in the merger constituting approximately 40.81% of the outstanding shares of BHB common stock immediately after the merger. Furthermore,
because shares of BHB common stock will be issued to existing LSBG stockholders, current BHB shareholders will have their ownership and voting interests diluted approximately 40.81%. Accordingly, both LSBG and BHB shareholders will have less
influence on the management and policies of the combined company than they now have on the management and policies of their respective companies.
Upon completion of the merger, LSBG stockholders will become BHB
shareholders. Differences in LSBGs articles of organization and amended and restated bylaws and BHBs articles of organization, as amended, and amended and restated bylaws will result in changes to the rights of LSBG stockholders who
become BHB shareholders. For more information, see Comparison of Shareholders Rights, beginning on page 102 of this joint proxy statement/prospectus.
Until the completion of the merger, LSBG is prohibited from soliciting, initiating, encouraging, or with some exceptions, considering
any inquiries or proposals that may lead to a proposal or offer for a merger or other business combination transaction with any person other than BHB. In addition, LSBG has agreed to pay a termination fee of $5.5 million to BHB in specified
circumstances. These provisions could discourage other companies from trying to acquire LSBG even though those other companies might be willing to offer greater value to LSBG stockholders than BHB has offered in the merger. The payment of the
termination fee also could have a material adverse effect on LSBGs results of operations.
Uncertainty about the effect of the merger on employees, suppliers and customers
may have an adverse effect on BHB and LSBG. These uncertainties may impair BHBs or LSBGs ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers, suppliers and others who deal with
BHB or LSBG to seek to change existing business relationships. BHB and LSBG employee retention and recruitment may be particularly challenging prior to the effective time of the merger, as employees and prospective employees may experience
uncertainty about their future roles with the combined company.
The pursuit of the merger and the preparation for the integration may
place a significant burden on management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process could affect the financial
results of BHB or LSBG and, following the merger, the combined company. In addition, the merger agreement requires that LSBG operate in the ordinary course of business consistent with past practice and restricts LSBG from taking certain actions
prior to the effective time of the merger or termination of the merger agreement. These restrictions may prevent LSBG from pursuing attractive business opportunities that may arise prior to the completion of the merger.
In considering the information contained in this joint proxy statement/prospectus, you should be aware that LSBGs
directors and executive officers have financial interests in the merger that are different from, or in addition to, the interests of LSBG stockholders generally. These interests include, among other things:
Also, BHB and BHB Bank entered into an employment agreement with Mr. McIver regarding his continuing role with the combined company following
the merger. See the section of this joint proxy statement/prospectus entitled The MergerInterests of LSBGs Directors and Executive Officers in the Merger beginning on page 59 for a discussion of these financial interests.
The unaudited pro forma financial data
in this joint proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what the combined companys actual financial position or results of operations would have been had the merger been
completed on the dates indicated. The pro forma financial data reflects adjustments, which are based on preliminary estimates, to record LSBGs identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill
recognized. The purchase price allocation reflected in this joint proxy statement/prospectus is preliminary and final allocation of the purchase price will be based on the actual purchase price and the fair value of the assets and liabilities of
LSBG as of the date of the completion of the merger. As a result, the final purchase accounting adjustments may differ materially from the pro forma adjustments reflected in this joint proxy statement/prospectus.
Griffin, LSBGs financial advisor in connection with the proposed merger, orally delivered to the
board of directors of LSBG its opinion, which was subsequently confirmed in writing dated as of May 5, 2016. The Griffin opinion stated that as of such date, and based on and subject to the factors and assumptions set forth therein, the exchange
ratio was fair to LSBG stockholders from a financial point of view. Sandler ONeill, BHBs financial advisor in connection with the proposed merger, orally delivered to the board of directors of BHB its opinion, which was subsequently
confirmed in writing dated as of May 5, 2016, to the effect that, as of such date, and based on and subject to the factors, limitations and assumptions set forth therein, the exchange ratio was fair to BHB from a financial point of view. The
opinions do not reflect changes that may occur or may have occurred after the dates of the opinions, including changes to the operations and prospects of BHB or LSBG, changes in general market and economic conditions or regulatory or other factors.
Any such changes, or changes in other factors on which the opinions were based, may materially alter or affect the relative values of BHB and LSBG.
The merger agreement is subject to a number of conditions that must be fulfilled in order to complete the merger. Those conditions include, but
are not limited to:
In addition,
LSBG may choose to terminate the merger agreement during the five-day period commencing on the 10
th
day prior to the closing date of the merger, if the price of BHB common stock decreases by a
certain percentage and also decreases by a certain percentage relative to the SNL Bank Index. Any such termination would be subject to the right of BHB to increase the amount of BHB common stock to be provided to LSBG stockholders pursuant to the
formula prescribed in the merger agreement. See the section of this joint proxy statement/prospectus entitled The Merger AgreementTermination beginning on page 99 for a more complete discussion of the circumstances under which
the merger agreement could be terminated.
To
accomplish the merger and the bank merger, various approvals or consents must be obtained from state and federal governmental authorities, including the FRB, the FDIC, the BFI and the NHBD. The U.S. Department of Justice is able to provide
input regarding the approval process of the federal banking agencies to challenge the Transaction on antitrust grounds. BHB and LSBG have filed all required applications, notices and waiver requests to obtain the regulatory approvals and
nonobjections necessary to consummate the Transaction. BHB and LSBG cannot predict whether the required regulatory approvals will be obtained, when they will be received, or whether such approvals will be subject to any
conditions.
If the merger is not completed, the ongoing businesses of BHB and LSBG may be adversely affected, and BHB and
LSBG will be subject to several risks, including the following:
In addition, if the merger is not completed, BHB
and/or LSBG may experience negative reactions from the financial markets and from their respective customers and employees. BHB and/or LSBG also could be subject to litigation related to any failure to complete the merger or to enforcement
proceedings commenced against BHB or LSBG to perform their respective obligations under the merger agreement. If the merger is not completed, BHB and LSBG cannot assure their respective shareholders that the risks described above will not
materialize and will not materially affect the business, financial results and stock prices of BHB and/or LSBG.
The benefits and synergies expected to result from
the proposed transaction will depend in part on whether the operations of LSBG can be integrated in a timely and efficient manner with those of BHB. BHB will face challenges in consolidating its functions with those of LSBG, and integrating the
organizations, procedures and operations of the two businesses. The integration of BHB and LSBG will be complex and time-consuming, and the management of both companies will have to dedicate substantial time and resources to it. These efforts could
divert managements focus and resources from other strategic opportunities and from day-to-day operational matters during the integration process. Failure to successfully integrate the operations of BHB and LSBG could result in the failure to
achieve some of the anticipated benefits from the transaction, including cost savings and other operating efficiencies, and BHB may not be able to capitalize on the existing relationships of LSBG to the extent anticipated, or it may take longer, or
be more difficult or expensive than expected to achieve these goals. This could have an adverse effect on the business, results of operations, financial condition or prospects of BHB after the transaction.
BHB believes that it has reasonably estimated the likely costs of integrating the operations of BHB and LSBG, and the incremental costs of
operating as a combined company. However, it is possible that unexpected transaction costs such as taxes, fees or professional expenses or unexpected future operating expenses such as increased personnel costs or increased taxes, as well as other
types of unanticipated adverse developments, could have a material adverse effect on the results of operations and financial condition of the combined company. If unexpected costs are incurred, the merger could have a dilutive effect on the combined
companys earnings per share. In other words, if the merger is completed, the earnings per share of BHB common stock could be less than anticipated or even less than they would have been if the merger had not been completed.
Any estimates as to the future value of
the combined company, including estimates regarding the earnings per share of the combined company, are inherently uncertain. The future value of the combined company will depend upon, among other factors, the combined companys ability to
achieve projected revenue and earnings expectations and to realize the anticipated synergies described in this joint proxy statement/prospectus, all of which are subject to the risks and uncertainties described in this joint proxy
statement/prospectus, including these risk factors. Accordingly, you should not rely upon any estimates as to the future value of the combined company, whether made before or after the date of this joint proxy statement/prospectus by BHBs and
LSBGs respective management or affiliates or others, without considering all of the information contained or incorporated by reference into this joint proxy statement/prospectus.
This joint proxy statement/prospectus, including information included or incorporated by reference into this joint proxy statement/prospectus,
may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about the benefits of the merger between BHB and LSBG,
including future financial and operating results and performance; statements about BHBs and LSBGs plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by
words such as expects, anticipates, intends, plans, believes, seeks, estimates, will, should, may or words of similar meaning.
These forward-looking statements are based on the current beliefs and expectations of BHBs and LSBGs management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which
are difficult to predict and generally beyond the control of BHB and LSBG. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results
may differ materially from the anticipated results discussed in these forward-looking statements.
The following factors, among others,
could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
Additional factors that could cause BHBs and LSBGs results to differ materially from those described in the forward-looking
statements can be found in the section of this joint proxy statement/prospectus entitled Risk Factors beginning on page 24, and BHBs and LSBGs filings with the Securities and Exchange Commission, or the SEC, including
BHBs and LSBGs respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2015 and their respective Quarterly Reports on Form 10-Q for the quarter ended June 30, 2016.
You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this joint proxy
statement/prospectus or the date of any document incorporated by reference into this joint proxy statement/prospectus. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this joint proxy
statement/prospectus and attributable to BHB or LSBG or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable
law or regulation, BHB and LSBG undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this joint proxy statement/prospectus or to reflect the occurrence of unanticipated events.
BHB, a Maine corporation, was formed on January 19, 1984 and is a bank holding company registered under the Bank Holding Act of 1956, as
amended, and is subject to supervision, regulation and examination by the Board of Governors of the Federal Reserve System or FRB. BHB is also a Maine Financial Institution Holding Company for the purposes of the laws of the state of Maine, and as
such is subject to the jurisdiction of the Superintendent of the Maine Bureau of Financial Institutions or BFI. BHB offers trust and investment management services through its second tier subsidiary, Bar Harbor Trust Services, a Maine chartered
non-depository trust company. These products and services are offered to individuals, businesses, not-for-profit organizations and municipalities.
BHB Bank is a community bank and a wholly-owned first tier operating subsidiary of BHB. BHB Bank offers a wide range of deposit, loan and
related banking products, as well as brokerage services provided through a third-party brokerage arrangement. BHB Bank, originally founded in 1887, is a Maine financial institution, and its deposits are insured by the Federal Deposit Insurance
Corporation or FDIC up to the maximum extent permitted by law. The Bank has fourteen branch offices located throughout downeast, midcoast and central Maine, including its principal office located at 82 Main Street, Bar Harbor.
BHB Banks branch offices are located in Hancock, Washington, Knox, Kennebec and Sagadahoc Counties, representing BHB Banks
principal market areas. The Hancock County offices, in addition to Bar Harbor, are located in Blue Hill, Deer Isle, Ellsworth, Northeast Harbor, Somesville, Southwest Harbor, and Winter Harbor. The Washington County offices are located in Milbridge,
Machias, and Lubec. The Knox, Kennebec and Sagadahoc County offices are located in Rockland, South China, and Topsham. BHB Bank delivers its operations and technology support services from its operations center located in Ellsworth, Maine.
BHB Bank is a retail bank serving individual and business customers, retail establishments and restaurants, seasonal lodging, biological
research laboratories, and a large contingent of retirees. As a predominately coastal bank, it serves the tourism, hospitality, lobstering, fishing, boat building and marine services industries. It also serves Maines wild blueberry industry
through its Hancock and Washington County offices. BHB Bank operates in a competitive market that includes other community banks, savings institutions, credit unions, and branch offices of statewide and interstate bank holding companies located in
the BHB Banks market area.
At June 30, 2016, BHB had $1.7 billion in assets, $990 million in deposits and $165 million of
shareholders equity.
BHBs principal executive offices are located at 82 Main Street, Bar Harbor, Maine 04609, its phone
number is (207) 288-3314 and its website is www.bhbt.com. Information that is included in this website does not constitute part of this joint proxy statement/prospectus. BHB common stock is traded on the NYSE MKT under the symbol BHB.
LSBG, formerly New Hampshire Thrift Bancshares, Inc., is a Delaware holding company organized on July 5, 1989 and is the parent company of LSBG
Bank, a federally chartered savings association. LSBG Bank was originally chartered by the State of New Hampshire in 1868 as the Newport Savings Bank. LSBG became a member of the FDIC in 1959 and a member of the Federal Home Loan Bank of Boston in
1978. On December 1, 1980, LSBG Bank was the first bank in the United States to convert from a state-chartered mutual savings bank to a federally chartered mutual savings bank. In 1981, LSBG Bank changed its name to Lake Sunapee Savings Bank,
fsb and in 1994, changed its name to Lake Sunapee Bank, fsb. LSBG Banks deposits are insured by the Deposit Insurance Fund of the FDIC.
LSBG Bank is a thrift institution established for the purposes of providing the public with a
convenient and safe place to invest funds, for the financing of housing, consumer-oriented products and commercial loans, and for providing a variety of other consumer-oriented financial services. The Bank is a full-service community institution
promoting the ideals of thrift, security, home ownership and financial independence for its customers. LSBG Banks operations are conducted from its home office located in Newport, New Hampshire and its branch offices located in Andover,
Bradford, Claremont, Concord, Enfield, Grantham, Guild, Hanover, Hillsboro, Lebanon, Milford, Nashua, Newbury, New London, Peterborough, Sunapee and West Lebanon, New Hampshire, and Brandon, Pittsford, Quechee, Randolph, Rochester, Bethel, Rutland,
South Royalton, West Rutland, Williamstown and Woodstock, Vermont.
LSBG Bank has four wholly owned subsidiaries: Charter Holding Corp.;
McCrillis & Eldredge Insurance, Inc.; Lake Sunapee Group, Inc.; and Lake Sunapee Financial Services Corporation.
At June 30, 2016,
LSBG had $1.59 billion in assets, $1.15 billion in deposits and $141 million of stockholders equity.
LSBGs principal
executive offices are located at 9 Main Street, P.O. Box 9, Newport, New Hampshire 03773, its phone number is (603) 863-0886 and its website is www.lakesunbank.com. Information that is included in this website does not constitute part of this joint
proxy statement/prospectus. LSBG common stock is traded on the NASDAQ under the symbol LSBG.
This joint proxy statement/prospectus is being furnished to holders of LSBG common stock for use at a special meeting of LSBG stockholders and
any adjournments or postponements thereof.
LSBG will hold its special meeting of shareholders at the Lake Sunapee Bank Building, 1868 Room, 9 Main Street, Newport, NH
03773 on October 24, 2016, at 10:00 a.m., local time.
At the special meeting, LSBG stockholders as of the record date will be asked to consider and vote on the following proposals:
The LSBG board of directors has unanimously approved the merger agreement and recommends that you vote your shares as follows:
Only holders of record of LSBG common stock at the close of business on the record date of August 29, 2016, are entitled to
notice of and to vote at LSBGs special meeting. As of the record date, there were 8,387,716 shares of LSBG common stock outstanding, held of record by approximately 1,115 shareholders. Each holder of LSBG common stock is entitled to
one vote for each share of LSBG common stock owned as of the record date.
A list of shareholders entitled to vote at the special meeting
will be available for inspection at the special meeting and before the special meeting, during the period beginning two business days after notice of the meeting is given and upon written request by any LSBG stockholder.
A quorum of LSBG stockholders is necessary to hold a valid meeting. If the holders of at least one-third of the total number of the outstanding
shares of LSBG common stock entitled to vote are represented in person or by proxy at the special meeting, a quorum will exist. Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by
your broker, bank or other nominee), vote in person
at the annual meeting, or vote by proxy over the telephone or the Internet as described in the enclosed instructions. Abstentions and broker non-votes will be counted towards the quorum
requirement. If there is no quorum, the holders of a majority of shares present at the annual meeting in person or represented by proxy may adjourn the annual meeting to another date.
The affirmative vote of holders of at least a majority of the shares of LSBG common stock outstanding and entitled to vote at the special
meeting is required to adopt the merger agreement. The affirmative vote of holders of at least a majority of votes cast at the special meeting is required to approve, on an advisory (non-binding) basis, the compensation payable to the named
executive officers of LSBG in connection with the merger, and the proposal to adjourn the special meeting. Abstentions and broker non-votes will have the same effect as a vote
AGAINST
the adoption of the merger agreement, but will
have no effect on the other proposals.
As of the record date, the directors and executive officers of LSBG and their affiliates collectively owned 640,626 shares of LSBG
common stock, or approximately 7.64% of LSBGs outstanding shares
Each of the directors and executive officers of LSBG has
entered into a voting agreement with BHB, requiring each of them to vote all shares of LSBG common stock beneficially owned by such person in favor of adoption of the merger agreement.
When considering the LSBG board of directors recommendation that you vote in favor of the adoption of the merger agreement, you should
be aware that the directors and executive officers of LSBG have financial interests in the merger that may be different from, or in addition to, the interests of stockholders of LSBG. See The MergerInterests of LSBGs Directors and
Executive Officers in the Merger beginning on page 59.
If you are a LSBG stockholder, the LSBG board of directors requests that you return the proxy card accompanying this joint proxy
statement/prospectus for use at the LSBG special meeting. Please complete, date and sign the proxy card and promptly return it in the enclosed postage-paid envelope, or submit a proxy through the Internet or by telephone as described in the
instructions on the enclosed proxy card.
All properly signed proxies received prior to the special meeting and not revoked before the
vote at the special meeting will be voted at the special meeting according to the instructions indicated on the proxies or,
if no instructions are given, the shares will be voted FOR adoption of the merger agreement, FOR
approval, on an advisory (non-binding) basis, of the compensation payable to the named executive officers of LSBG in connection with the merger, and FOR an adjournment of the special meeting to solicit additional proxies, if
necessary.
If you have any questions concerning the merger, the other meeting matters or this joint proxy statement/prospectus or
need assistance voting your shares, please contact Alliance Advisors, LSBGs proxy solicitor at the address or telephone number listed below:
If you hold your shares of LSBG common stock in street name, meaning in the name of a
bank, broker or other nominee who is the record holder, you must either direct the record holder of your shares of LSBG common stock how to vote your shares or obtain a proxy from the record holder to vote your shares in person at the special
meeting.
If you fail to properly submit your proxy card or fail to instruct your broker, bank or other nominee to vote your shares of
LSBG common stock and you do not attend the special meeting and vote your shares in person, your shares will not be voted. This will have the same effect as a vote
AGAINST
adoption of the merger agreement, but will have no impact
on the outcome of the other proposals.
If you are a LSBG stockholder, you may revoke your proxy at any time by taking any of the following actions before your proxy is voted at the
special meeting:
If you decide to revoke your proxy by mail you should send your notice of revocation to Kimberly Pruett-Ilg, Corporate Secretary, at the following address:
P.O. Box 9
If
you have instructed a bank, broker or other nominee to vote your shares, you must follow the directions you receive from your bank, broker or other nominee to change your vote.
If you are a LSBG stockholder and plan to attend the LSBG special meeting and wish to vote in person, you will be given a ballot at the special
meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the special meeting, you must obtain a proxy from the broker, bank or other nominee in order to vote your shares.
Whether or not you plan to attend the special meeting, LSBG requests that you complete, sign, date and return the enclosed proxy card as soon
as possible in the enclosed postage-paid envelope, or submit a proxy through the Internet or by telephone as described in the instructions accompanying this joint proxy statement/prospectus. This will not prevent you from voting in person at the
special meeting, but will assure that your vote is counted if you are unable to attend.
Only shares affirmatively voted for each proposal, including shares represented by properly executed proxies that do not contain
voting instructions, will be counted as votes
FOR
the proposal.
Brokers who hold shares of LSBG common stock in street name for a customer who is the beneficial
owner of those shares may not exercise voting authority on the customers shares with respect to the actions proposed in this joint proxy statement/prospectus without specific instructions from the customer. When a broker does not vote on a
particular proposal because the broker does not have discretionary voting power with respect to a proposal and has not received voting instructions from the beneficial owner it is referred to as broker non-votes. If your broker holds your LSBG stock
in street name, your broker will vote your shares only if you provide instructions on how to vote by filling out the voter instruction form sent to you by your broker with this joint proxy statement/prospectus.
Accordingly, you are urged to mark and return the enclosed proxy card to indicate your vote, or fill out the voter instruction form, if
applicable. Abstentions and broker non-votes will be included in determining the presence of a quorum at the special meeting. Abstentions and broker non-votes will have the same effect as a vote
AGAINST
the adoption of the merger
agreement, but will have no effect on the other proposals.
If you are a LSBG stockholder, the enclosed proxy is solicited by and on behalf of the LSBG board of directors. LSBG will pay the expenses of
soliciting proxies to be voted at the special meeting, including any attorneys and accountants fees, except LSBG and BHB have each agreed to share equally the costs of printing this joint proxy statement/prospectus. Following the
original mailing of the proxies and other soliciting materials, LSBG and its agents may also solicit proxies by mail, telephone, facsimile or in person. No additional compensation will be paid to directors, officers or other employees of LSBG for
making these solicitations. LSBG has retained a proxy solicitation firm, Alliance Advisors, to aid in the solicitation process. BHB and LSBG will pay a joint fee of approximately $16,500, split equally, plus reasonable out-of-pocket expenses to
Alliance Advisors. LSBG intends to reimburse persons who hold LSBG common stock of record but not beneficially, such as brokers, custodians, nominees and fiduciaries, for their reasonable expenses in forwarding copies of proxies and other soliciting
materials to, and requesting authority for the exercise of proxies from, the persons for whom they hold the shares.
This joint proxy
statement/prospectus and the proxy card are first being sent to LSBG stockholders on or about September 12, 2016.
If you are a LSBG stockholder, you should not send in any certificates representing LSBG common stock. Following the completion of the merger,
you will receive separate instructions for the exchange of your certificates representing LSBG common stock.
LSBG is requesting that holders of the outstanding shares of LSBG common stock consider and
vote on a proposal to authorize the named proxies to approve one or more adjournments of the LSBG special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the merger proposal at the time
of the special meeting. Even though a quorum may be present at the special meeting, it is possible that LSBG may not receive sufficient votes to adopt the merger agreement by the time of the special meeting. In that event, LSBG would need to adjourn
the special meeting in order to solicit additional proxies. The adjournment proposal relates only to an adjournment of the special meeting for purposes of soliciting additional proxies to obtain the requisite stockholder approval to adopt the merger
agreement. Any other adjournment of the special meeting (e.g., an adjournment required because of the absence of a quorum) would be voted on pursuant to the discretionary authority granted by the proxy card. The LSBG board of directors retains full
authority to the extent set forth in LSBGs amended and restated certificate of incorporation, or LSBGs amended and restated bylaws, and Delaware law to adjourn the special meeting for any other purpose, or to postpone the special meeting
before it is convened, without the consent of any LSBG stockholders.
If LSBG stockholders approve the adjournment proposal, LSBG could adjourn the special meeting and
any adjourned session of the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from LSBG stockholders who have previously voted. LSBG is not required to notify stockholders of any
adjournment if the new place, date and time are announced at the special meeting before adjournment. If, after the adjournment, a new record date is fixed for the adjourned special meeting, notice of the adjourned special meeting shall be given to
each stockholder of record entitled to vote at the special meeting.
This joint proxy statement/prospectus is being furnished to holders of BHB common stock for use at a special meeting of BHB shareholders and
any adjournments or postponements thereof.
BHB will hold its special meeting of shareholders at Bar Harbor Bank & Trust Corporate Offices, Board of Directors Room, 3rd
floor, 82 Main Street, Bar Harbor, Maine 04609, on October 20, 2016, at 10:00 a.m., local time.
At the special meeting, BHB shareholders as of the record date will be asked to consider and vote on the following
proposals:
The BHB board of directors has unanimously approved the merger agreement and recommends that you vote your shares as follows:
Only holders of record of BHB common stock at the close of business on the record date of August 29, 2016 are entitled to notice of and to
vote at BHBs special meeting. As of the record date, there were 6,047,419 shares of BHB common stock outstanding, held of record by approximately 876 shareholders. Each holder of BHB common stock is entitled to one vote for each
share of BHB common stock owned as of the record date.
A list of shareholders entitled to vote at the special meeting will be available
for inspection at the special meeting and before the special meeting, during the period beginning two business days after notice of the meeting is given and upon written request by any BHB shareholder.
A quorum of BHB shareholders is necessary to hold a valid meeting. If the holders of at least a majority of the total number of the outstanding
shares of BHB common stock entitled to vote are represented in person or by proxy at the special meeting, a quorum will exist. Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by
your broker, bank or other nominee), vote in person at the special meeting, or vote by proxy over the telephone or the Internet as described in the enclosed instructions. Abstentions and broker non-votes will be counted towards the quorum
requirement. If there is no quorum, the holders of a majority of shares present at the special meeting in person or represented by proxy may adjourn the special meeting to another date.
The affirmative vote of holders of at least a majority of the shares of BHB common stock
outstanding and entitled to vote at the special meeting is required to approve the merger agreement. At least a majority of votes cast at the special meeting by the holders of shares present in person or represented by proxy and entitled to vote is
required to approve the proposal to adjourn the special meeting. Abstentions and broker non-votes will have the same effect as a vote
AGAINST
the adoption and approval of the merger agreement, but will have no effect on the other
proposals.
As of the record date, the directors and executive officers of BHB and their affiliates collectively owned 85,309 shares of BHB
common stock, or approximately 1.41% of BHBs outstanding shares.
If you are a BHB shareholder, the BHB board of directors requests that you return the proxy card accompanying this joint proxy
statement/prospectus for use at the BHB special meeting. Please complete, date and sign the proxy card and promptly return it in the enclosed postage-paid envelope, or submit a proxy through the Internet or by telephone as described in the
instructions contained in the enclosed proxy card.
All properly signed proxies received prior to the special meeting and not revoked
before the vote at the special meeting will be voted at the special meeting according to the instructions indicated on the proxies or,
if no instructions are given, the shares will be voted FOR adoption and approval of the merger
agreement, and FOR an adjournment of the special meeting to solicit additional proxies, if necessary.
If you have any
questions concerning the merger, the other meeting matters or this joint proxy statement/ prospectus or need assistance voting your shares, please contact BHBs proxy solicitor at the address or telephone number listed below:
If you hold your shares of BHB common stock in street name, meaning in the name of a bank, broker
or other nominee who is the record holder, you must either direct the record holder of your shares of BHB common stock how to vote your shares or obtain a proxy from the record holder to vote your shares in person at the special meeting.
If you fail to properly submit your proxy card or to fail to instruct your broker, bank or other nominee to vote your shares of BHB common
stock and you do not attend the special meeting and vote your shares in person, your shares will not be voted. This will have the same effect as a vote
AGAINST
adoption and approval of the merger agreement, but will have no impact
on the outcome of the other proposals.
If any other matter is presented at the special meeting, your proxy will vote the shares
represented by all properly executed proxies on such matters as a majority of BHBs board of directors determines. As of the date of this joint proxy statement/prospectus, BHB knows of no other matters that may be presented at the special
meeting, other than those listed above.
If you are a BHB shareholder, you may revoke your proxy at any time by taking any of the following actions before your proxy is voted at the
special meeting:
If you decide to revoke your proxy by mail you should send your notice of revocation to Marsha C. Sawyer, Clerk, at the following address:
If you have instructed a bank, broker or other nominee to vote your shares, you must follow the directions you receive from your bank, broker
or other nominee to change your vote.
If you are a BHB shareholder and plan to attend the BHB special meeting and wish to vote in person, you will be given a ballot at the special
meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the special meeting, you must obtain a proxy from the broker, bank or other nominee in order to vote your shares.
Whether or not you plan to attend the special meeting, BHB requests that you complete, sign, date and return the enclosed proxy card as soon
as possible in the enclosed postage-paid envelope, or submit a proxy through the Internet or by telephone as described in the instructions accompanying this joint proxy statement/ prospectus. This will not prevent you from voting in person at the
special meeting but will assure that your vote is counted if you are unable to attend.
Only shares affirmatively voted for each proposal, including shares represented by properly executed proxies that do not contain
voting instructions, will be counted as votes
FOR
the proposal.
Broker non-votes occur when brokers or
other nominees holding shares on behalf of their clients who have not been given specific voting instructions from their clients with respect to non-routine matters and, therefore, do not have discretionary voting power to vote on these matters.
Brokers may, under applicable rules, sign and submit proxies for shares they hold on routine matters. The BHB proposals are considered non-routine under the stock exchange rules. If your broker returns a proxy but does not vote on a
proposal, this will constitute a broker non-vote.
Accordingly, you are urged to mark and return the enclosed proxy card to
indicate your vote, or fill out the voter instruction form, if applicable. Abstentions and broker non-votes will be included in determining the presence of a quorum at the special meeting. Abstentions and broker non-votes will have the same effect
as a vote
AGAINST
the adoption and approval of the merger agreement, but will have no effect on the other proposal.
If you are a BHB shareholder, the enclosed proxy is solicited by and on behalf of the BHB board of directors. BHB will pay the expenses of
soliciting proxies to be voted at the special meeting, including any attorneys and accountants fees, except LSBG and BHB have each agreed to share equally the costs of printing this joint proxy statement/prospectus. Following the
original mailing of the proxies and other soliciting materials, BHB and its agents may also solicit proxies by mail, telephone, facsimile or in person. No additional compensation will be paid to directors, officers or other employees of BHB for
making these solicitations. BHB has retained a proxy solicitation firm, Alliance Advisors, to aid in the solicitation process. BHB and LSBG will pay a joint fee of approximately $16,500, split equally, plus reasonable out-of-pocket expenses to
Alliance Advisors. BHB intends to reimburse persons who hold BHB common stock of record but not beneficially, such as brokers, custodians, nominees and fiduciaries, for their reasonable expenses in forwarding copies of proxies and other soliciting
materials to, and requesting authority for the exercise of proxies from, the persons for whom they hold the shares.
This joint proxy
statement/prospectus and the proxy card are first being sent to BHB shareholders on or about September 12, 2016.
BHB is requesting that holders of the outstanding shares of BHB common stock consider and vote on a proposal to authorize the named proxies to
approve one or more adjournments of the BHB special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the merger proposal at the time of the special meeting. Even though a quorum may be
present at the special meeting, it is possible that BHB may not receive sufficient votes to approve the merger agreement by the time of the special meeting. In that event, BHB would need to adjourn the special meeting in order to solicit additional
proxies. The adjournment proposal relates only to an adjournment of the special meeting for purposes of soliciting additional proxies to obtain the requisite shareholder approval to approve the merger agreement. Any other adjournment of the special
meeting (e.g., an adjournment required because of the absence of a quorum) would be voted on pursuant to the discretionary authority granted by the proxy card. The BHB board of directors retains full authority to the extent set forth in BHBs
articles of incorporation, or BHBs bylaws, and Maine law to adjourn the special meeting for any other purpose, or to postpone the special meeting before it is convened, without the consent of any BHB shareholders.
If BHB shareholders approve the adjournment proposal, BHB could adjourn the special meeting and any adjourned session of the special meeting
and use the additional time to solicit additional proxies, including the solicitation of proxies from BHB shareholders who have previously voted. BHB is not required to notify shareholders of any adjournment if the new place, date and time are
announced at the special meeting before adjournment. If the date of any adjourned special meeting is more than 30 days after the date of the original special meeting or if a new record date is fixed for the adjourned special meeting, written notice
of the adjourned special meeting shall be given to each shareholder of record entitled to vote at the special meeting.
On May 5, 2016, the boards of directors of BHB and LSBG each unanimously approved the merger agreement. The merger
agreement provides for merger of LSBG with and into BHB, with BHB as the surviving corporation. Following the merger, LSBG Bank will be merged with and into BHB Bank, with BHB Bank as the surviving entity.
See The Merger Agreement, beginning on page 87, for additional and more detailed information regarding the legal documents
that govern the merger, including information about the conditions to the merger and the provisions for terminating or amending the merger agreement.
Upon completion of the merger, LSBG stockholders will be entitled to receive 0.4970
shares of BHB common stock for each outstanding share of LSBG common stock held at the time of the merger (other than shares held directly or indirectly by BHB and shares held by LSBG as treasury shares).
LSBGs board of directors and executive management team have periodically reviewed LSBGs strategic alternatives and assessed various
opportunities for increasing long-term stockholder value. These reviews have included analysis compiled by executive management and/or LSBGs financial advisor of LSBGs current and projected financial performance and capital needs and
trends in the financial marketplace, including merger and acquisition activity in the New England market. In some instances, these reviews included a discussion by LSBGs legal counsel Hogan Lovells US LLP, or Hogan Lovells, of the legal
standards applicable to the decisions and actions of LSBGs board of directors.
BHBs board of directors and senior management
have also periodically reviewed BHBs strategic opportunities and alternatives as part of their on-going efforts to grow BHBs banking franchise and enhance long-term shareholder value. These reviews have focused on assessing opportunities
for increasing earnings through internally generated growth and for growth through acquisitions of other banks. As part of the strategic reviews, BHBs board of directors and senior management have considered potential acquisition targets in
various northern New England markets.
In recent years, LSBGs board of directors and executive management had periodically discussed
matters of succession planning, recognizing that Stephen R. Theroux, LSBGs Vice Chairman, President and Chief Executive Officer, would attain the age of 66 in 2016. As part of an effort to gather information on succession planning experiences
of peer institutions, on October 21, 2015, Mr. Theroux met with Curtis C. Simard, BHBs President and Chief Executive Officer, who succeeded BHBs previous chief executive officer in 2013, to discuss BHBs recent experience with
respect to CEO succession matters. During these discussions on succession matters, Messrs. Theroux and Simard also discussed the economic conditions and the business and regulatory climate for banks operating in their market areas, as well as their
respective institutions operating philosophies, strengths and weaknesses, and business focus going forward.
On December 21, 2015, Mr. Theroux and other members of executive management of LSBG met with
representatives of Griffin and Hogan Lovells to review strategic alternatives, including potential acquisitions and the strength and value of LSBGs independent business plan, ahead of and in preparation for the upcoming regularly scheduled
meeting of LSBGs board of directors in January 2016 and off-site board retreat in February 2016. In addition, in light of perceived challenges related to growth, the need for additional capital and looming succession matters, Griffin was asked
to present information about potential merger partners, the financial and non-financial strengths and weaknesses of potential partners, and the capacity of potential partners to consummate a transaction with LSBG. Among these possibilities, BHB was
identified at this meeting as a potential merger partner.
Following their meeting in October 2015, Mr. Theroux remained in telephone
contact with Mr. Simard on two occasions regarding matters related to the banking industry and their two institutions. At one point during these conversations, Mr. Simard indicated that BHB would be interested in exploring a potential
combination with LSBG. Concurrently, in the course of ordinary business, Mr. Theroux was also occasionally contacted by executives from other New England area banks to meet and discuss market developments, succession matters and merger and
acquisition activity in the market; however, none of these discussions materialized into serious discussions or indications of interest regarding a combination with LSBG.
On January 14, 2016, the board of directors of LSBG held its regular meeting which was attended by representatives of Griffin and Hogan
Lovells, at which the board reviewed strategic alternatives for LSBG, including its stand-alone business plan and potential merger and acquisition partners. This review included examination of various factors relating to the feasibility of
potential acquisition targets and merger partners, including capacity to complete a transaction, effect on capital, dividend history, liquidity of the common stock of the surviving institution, and cost savings and operating efficiency. Among
other possible transactions, the board discussed the potential value of a strategic combination with BHB.
From February 11 to 13,
2016, the board of directors of LSBG held its regular annual off-site planning session to discuss strategic alternatives. During these meetings, the board of directors discussed the prospects of LSBG remaining independent, succession planning,
and the value to stockholders of a potential merger of LSBG with a larger institution. As a result of these discussions, the board established a timeline to pursue a succession planning process, and simultaneously directed Mr. Theroux to continue to
explore the possibility of a strategic combination with BHB.
On March 4, 2016, Mr. Theroux and William J. McIver , LSBGs Senior
Executive Vice President and Chief Operating Officer, met with Mr. Simard to further discuss the possibility of a strategic merger between the companies. The discussions included the importance to LSBG of maintaining its culture and focus on quality
customer service in its markets. Mr. Simard raised the possibility that at least one member of LSBGs executive management team would continue with the combined entity in a senior management capacity as a regional president for the New
Hampshire and Vermont markets. Based on the strength and consistency of BHBs financial performance and common stock dividend, its strong regulatory capital ratios, the complementary business models of the two institutions, in particular the
commercial lending background and expertise of Mr. Simard, coupled with his history and experience in LSBGs New Hampshire markets, similarity of customer profiles, lack of geographic overlap, and the potential succession solution for LSBG
posed by a merger, the parties determined to conduct preliminary due diligence to facilitate discussions regarding the terms of the transaction. To facilitate the exchange of confidential information, on March 14, 2016, the parties executed a mutual
confidentiality agreement and began to populate data sites with documentation for due diligence purposes.
From March 16 to March 22,
2016, the management teams of LSBG and BHB exchanged initial diligence information. These efforts included identification of overlapping products and services, development of financial models to analyze the transaction, and the analysis of
potential synergies and cost savings that would be recognized in connection with the potential combination.
The LSBG board of directors and executive management were previously advised by Hogan Lovells
that BHB was a client of Hogan Lovells, which created a potential conflict for Hogan Lovells should LSBG continue to pursue a potential transaction with BHB. Hogan Lovells further advised the board of directors and executive management that, in
order to avoid any potential conflict of interest, Hogan Lovells would advise BHB to retain independent legal counsel with respect to any potential transaction with LSBG. Similarly, a representative of Griffin, which had provided advice to BHB in
the past, informed BHB that Griffin expected to be engaged by LSBG and would not be able to represent BHB with respect to a potential strategic transaction with LSBG.
On March 25, 2016, Messrs. Theroux and McIver met with Mr. Simard to further discuss the potential combination, focusing on matters related to
the structure and organization of the potential combined entity.
On March 29, 2016, the board of directors of LSBG held a special meeting
at which management provided an update regarding the preliminary due diligence process and findings with respect to BHB and the likely structure of a potential merger. Representatives of Griffin made a presentation to the LSBG board regarding
the potential transaction with BHB, the merger and acquisition market in general and among peer institutions, and the strategic rationale for a combination with BHB. The presentation included a summary of the discussions that had been held to date
between the management teams of the two institutions, the possible terms of the transaction, the potential costs savings and the financial benefits of a combination between the two institutions. Representatives of Hogan Lovells made a presentation
to the LSBG board regarding the fiduciary duties of the board of directors in connection with a potential strategic transaction. At the conclusion of the discussion, the LSBG board voted unanimously in favor of continuing discussions of a potential
combination with BHB and directed Mr. Theroux to ask BHB for a written indication of interest. The board also provided management guidance as to the parameters within which it would view a non-binding term sheet as being favorable such that it would
recommend that management continue the due diligence and negotiation process prior to the boards next meeting. In making its determination to continue to pursue a transaction with BHB rather than other strategic alternatives, the board of
directors discussed that a merger with BHB provided an attractive solution to management succession at LSBG and offered the opportunity for the combined organization to realize enhanced balance sheet growth and significant operational efficiencies
that could enable LSBG stockholders to realize long-term benefits and continued strong common stock dividends through their significant ownership interest in the combined entity without having to incur the ownership dilution that would result from
the raising of additional common stock which otherwise would likely be necessary. The board also discussed its confidence in BHBs management team and the likelihood that BHB would terminate negotiations if it believed that LSBG was soliciting
other possible merger partners. At the same time, the board indicated that absent substantial progress on a strategic transaction with BHB, it would also be moving forward with its succession planning, likely engaging a third party to begin a search
for a new CEO in the near future.
On April 1, 2016, BHB formally engaged Donald Gaiter, a private, independent consultant and former bank
executive, who was assisting with financial modeling and due diligence in connection with the potential transaction.
On April 1, 2016,
BHB submitted preliminary terms to LSBG with respect to the transaction, which included 100% stock consideration and offered a preliminary price range of $17.00 to $17.25 per share, up to four seats on the board of the resulting institution, the
continuation of Mr. McIver as a regional president for the New Hampshire and Vermont markets, and a commitment to maintain the Lake Sunapee brand in LSBGs markets, all of which terms were non-binding and contingent upon satisfactory completion
of due diligence and the negotiation of a definitive agreement. These terms were within the parameters established by the LSBG board at its March 29, 2016 meeting, and accordingly management proceeded to continue the due diligence and negotiation
process.
On April 5 and 6, 2016, management of LSBG and BHB, including Messrs. McIver and Simard, met in Boston together with
representatives of Griffin and Hogan Lovells, and Mr. Gaiter, financial advisor to BHB, to continue due diligence discussions regarding the potential combination. The parties had detailed discussions around corporate structure, personnel, cost
savings and issues related to the operational integration, and considered a detailed timeline for moving forward toward the consummation of a transaction.
On April 6, 2016, LSBG entered into a confidentiality agreement with its technology platform
provider, to discuss its contractual obligations and potential related cost savings in the context of a merger with BHB.
On April 16
and 18, 2016, BHB consulted with K&L Gates LLP, or K&L Gates, with respect to the potential transaction with LSBG and on April 25, 2016 formally engaged K&L Gates as special counsel.
From April 8 to April 22, 2016, the parties continued to populate the data sites with due diligence documentation and conducted reviews
of the information and documentation provided.
On April 11, 2016, LSBG formally engaged Griffin as its financial advisor in connection
with the proposed transaction with BHB.
On April 13, 2016, Mr. Simard met with Mr. Theroux and Stephen W. Ensign, Chairman of LSBGs
board of directors, to discuss the strategic advantages of combining their institutions, the complementary nature of their markets, and the financial benefits to the parties and their respective shareholders in a strategic partnership.
On April 14, 2016, the LSBG board of directors held a regularly scheduled meeting at which members of management provided an update to the
board of directors regarding the due diligence performed with respect to BHB and the continued discussions related to a potential transaction. The board discussed that in the context of a strategic partnership, both BHB and LSBG shareholders
would maintain significant equity ownership in the combined institution and benefit from the long-term value proposition of the combined entity.
From April 16-17, 2016, a third party consultant engaged by LSBG conducted a review of BHBs credit files. BHB reviewed LSBGs
credit files as well remotely over a generally similar time period.
On April 19, 2016, Hogan Lovells provided K&L Gates with a draft
of the merger agreement. Also on April 19, 2016, BHB formally engaged Sandler ONeill as its financial advisor.
From April 22
to May 3, 2016, the parties negotiated the terms and conditions of the definitive merger agreement and conducted further due diligence and cost savings analyses. During this time, discussions among the parties continued regarding strategic
matters such as technology, efficiencies, wealth management opportunities, and staffing. The parties also discussed compensation matters given that BHB required that any new employment agreements and severance agreements be agreed upon by all
parties and affected executives before the merger agreement was executed.
On April 25 and 26, 2016, executives of LSBG and BHB,
together with their respective legal and financial advisors, held due diligence meetings in Boston and continued reciprocal document review. During this time, the parties also conducted management interviews, at which questions regarding cost
savings and strategic benefits of a combination between the two parties were further addressed and the potential terms of the transaction were further discussed. The parties also further discussed the terms of Mr. McIvers proposed continuation
with the combined entity.
On April 29, 2016, BHBs board of directors held a special meeting to review and consider the proposed
transaction with LSBG. Copies of the draft merger agreement and ancillary documents were distributed to the members of the BHB board of directors in advance of the meeting. Representatives of Sandler ONeill made a presentation, a copy of which
had been provided in advance to the directors, of an overview of the proposed merger, including information about LSBGs management, location of its branches, performance of its stock, and various comparative market information, a review of the
current merger landscape and a pro forma merger analysis. A representative of K&L Gates reviewed the terms of the draft merger agreement, described the merger process and responded to questions from the members of the board. Mr. Gaiter also
discussed the terms of the proposed merger and other recent merger activity. Following these presentations, the invited guests excused themselves and the board of directors continued its discussion about the proposed merger.
On May 2, 2016, a special meeting of the LSBG board of directors was held. At the meeting, representatives of Griffin distributed an
analysis of the proposed transaction with BHB and a summary of the negotiations
between the two parties that had occurred up to that point, including that the parties were still negotiating with respect to the exchange ratio in the merger. The Griffin analysis included
information as to the strategic and financial rationale for the proposed transaction, pro forma analysis of the combined company and a valuation analysis of LSBG. Representatives of Hogan Lovells reviewed in detail with the board the terms and
conditions of the draft merger agreement and ancillary documents, including the: (1) voting agreements to be entered into by the directors and senior management; and (2) settlement agreements and employment agreement to be entered into by certain of
LSBGs senior management, including the fact that, in entering into his settlement agreement, Mr. Theroux would be agreeing to receive less consideration than he would otherwise be entitled to under his existing employment agreement and waiving
his right to be indemnified for golden parachute taxes. In particular, representatives of Hogan Lovells noted that the merger agreement included a termination provision allowing LSBG to terminate the transaction, subject to a BHB option to offer
more shares of its common stock, if BHBs stock price fell by 20% or more and by 20% or more relative to the NASDAQ Bank Index. The board of directors also addressed and considered the proposed resulting executive management team and other
officers of the combined company and the composition of the board of directors of the resulting company. The board of directors also reviewed the favorable due diligence findings of the LSBG management team and advisers and the projected cost
savings and efficiencies that had been identified and agreed upon by the LSBG and BHB management teams. After review of these items, the board of directors unanimously determined that LSBG management and its advisors should continue to pursue the
transaction, negotiate a final exchange ratio for consideration by the board, and finalize a definitive merger agreement.
On May 2, 2016,
representatives of Sandler ONeill informed representatives of Griffin that BHB proposed to use its closing trading price to establish an exchange ratio based on an offer of $17.00 per share of LSBG common stock, which would have resulted in a
proposed exchange ratio of 0.4895 per share of LSBG common stock, based upon the closing price that day. LSBG proposed that the exchange ratio be calculated based on the 10-day average closing price of BHB for the period ended May 4, 2016. BHB
agreed, and after the market closed on May 4, 2016, the 10-day average price of BHB was calculated to be $34.207 per share, resulting in a proposed exchange ratio of 0.4970.
On May 4, 2016, the board of directors of LSBG held a telephonic meeting, also attended by Hogan Lovells and Griffin, and received an update
from LSBGs management regarding the proposed exchange ratio and further negotiations regarding the definitive merger agreement.
On
May 5, 2016, the LSBG board of directors held a special meeting regarding the proposed strategic transaction between LSBG and BHB. A copy of the merger agreement that had been negotiated to date, as well as certain ancillary documents, had been
provided to the members of the Board of Directors on May 4, 2016. During the meeting, representatives of Griffin provided an update on the key items of the transaction that had changed since the May 2 special meeting due to further negotiations
between the parties. Representatives of Griffin noted that, in addition to the four board seats that would be provided to LSBG, Mr. McIver would remain with the combined institution in a senior management capacity. The LSBG board also addressed the
negotiations regarding the proposed exchange ratio and the rise in BHBs stock price over the past several weeks and the agreement in principle to an exchange ratio of 0.4970 based on BHBs stock price at $34.207 per share. The board
discussed its confidence in Mr. Simard and the fact that the combination would accomplish an orderly succession for LSBG. The board also discussed the benefits to LSBG stockholders if BHB maintained its historical practices with respect to paying
dividends. The terms of the draft merger agreement were also discussed with Hogan Lovells highlighting material changes since it was last presented to the board, including the successful negotiation of a lower termination fee as compared to the fee
proposed by BHB. Representatives of Hogan Lovells also discussed the proposed resolutions that the board would be requested to approve. Finally, representatives of Griffin made a presentation, a copy of which had been provided in advance to the
directors, regarding the fairness of the proposed exchange ratio to LSBG stockholders from a financial point of view and delivered its written opinion to the effect that, as of May 5, 2016 and subject to the limitations and qualifications set forth
in the opinion, the exchange ratio of 0.4970 was fair to LSBG stockholders from a financial point of view.
During its discussions on May 5, 2016, the board of directors of LSBG considered: (1) the fact
that the offer price of $17.00 per share of LSBG common stock on which the exchange ratio was based was within the range included in BHBs indication of interest and represented a 21% increase from the then-current trading price of LSBG shares,
(2) the strategic fit and financial advantages of the BHB transaction, including that LSBG stockholders would recognize accretion to LSBGs estimated earnings per share in the first full year after completion of the transaction; (3) that the
combined bank would serve attractive markets in New Hampshire, Vermont and Maine; (4) that LSBG stockholders would own approximately 41% of the outstanding shares in the combined company; (5) the stand-alone valuation of LSBG relative to the value
being paid in the proposed transaction; (6) the pro forma dividend of the combined institution and the potential for future increases in the common stock dividend; (7) the pro forma regulatory capital ratios of the combined institution and the
absence of a need for additional common equity, which would have likely been necessary should LSBG have remained independent, and (8) the prospect of other possible acquirors having limited capacity to effect a combination with LSBG on terms that
would be attractive to LSBG and the combined company. The board of directors also discussed that a merger with BHB would represent a strategic alliance offering the opportunity for the combined organization to realize significant efficiencies and
improvements that could enable LSBG stockholders to realize long-term benefits through their ownership interest in the combined entity. Following these presentations and discussions among the members of the LSBG board of directors, the LSBG board of
directors determined that the merger agreement and the transactions contemplated thereby were advisable and in the best interests of LSBG and its stockholders and the directors unanimously voted to adopt the merger agreement and the transactions
contemplated thereby and recommended that LSBGs stockholders approve the merger agreement.
On May 5, 2016, BHBs board of
directors held a special meeting to continue its review and consideration of the proposed transaction with LSBG. Copies of the draft merger agreement and proposed resolutions were distributed to the members of the BHB board of directors in advance
of the meeting. At the meeting, Mr. Simard reviewed the changes to the draft merger agreement since the April 29, 2016 board of directors meeting. Representatives of Sandler ONeill made, and the BHB board of directors considered, a
presentation as to certain financial aspects of the proposed transaction. Sandler ONeill concluded its presentation by giving its oral opinion, later confirmed in writing, that, as of such date and based upon the qualifications and assumptions
set forth in the written opinion, such exchange ratio, as defined in the merger agreement, was fair, from a financial point of view, to BHB. After these presentations and further discussion, BHBs board of directors unanimously approved the
merger agreement, authorized BHBs management to execute and deliver the merger agreement, and recommended that BHBs shareholders approve the merger agreement.
Following the completion of the BHB and LSBG board meetings on May 5, 2016, the merger agreement and ancillary documents were executed and
delivered. Following the close of the market on May 5, 2016, BHB and LSBG issued a joint press release announcing the execution of the merger agreement.
In the course of its evaluation of the merger and the merger agreement, the LSBG board of directors and Special Committee held numerous
meetings, consulted with its senior management as well as its legal counsel and financial advisor. In reaching their decision to approve the merger and the merger agreement and recommend the approval of the merger agreement by its stockholders, the
Special Committee and LSBG board of directors considered a number of factors, including, among others, the following, which are not presented in order of priority:
The LSBG board of directors also weighed the factors described above against certain factors and potential
risks associated with entering into the merger agreement, including, among others, the following:
In considering the recommendation of the LSBG board of directors with respect to the proposal to
approve the merger agreement, you should be aware that certain of LSBGs directors and executive officers have interests
in the merger that are different from yours. The LSBG board of directors was aware of and considered these interests, among other matters, in evaluating the merger agreement and the transactions
contemplated by the merger agreement and in recommending that the merger agreement be approved by the LSBG stockholders. See Interests of LSBGs Directors and Executive Officers in the Merger.
The foregoing discussion of the information and factors considered by the LSBG board of directors in reaching its conclusions and
recommendations is not intended to be exhaustive, but includes the material factors considered by the LSBG board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger agreement and the
transactions contemplated by the merger agreement, and the complexity of these matters, the LSBG board of directors did not find it practicable to, and did not attempt to, quantify, rank or otherwise assign any relative or specific weights to the
various specific factors considered in reaching its determination and making its recommendation. The LSBG board of directors considered all of the foregoing factors as a whole and based its recommendation on the totality of the information
presented.
The LSBG board of directors has unanimously approved the merger agreement and recommends that LSBG stockholders vote
FOR
adoption of the merger agreement and the transactions contemplated thereby.
Pursuant to an engagement letter, dated April 11, 2016, LSBG engaged Griffin to act as LSBGs financial
advisor in connection with a potential sale to BHB. Griffin is a nationally recognized, Financial Industry Regulatory Authority-licensed investment banking firm that is regularly engaged in the valuation of financial institutions and their
securities in connection with mergers and acquisitions and other corporate transactions. LSBG hired Griffin on the basis of Griffins qualifications, experience in transactions similar to the merger and its reputation as investment bankers in
the banking and thrift industry to provide its opinion as to the fairness, from a financial point of view, of the exchange ratio (as defined in the merger agreement) by which the common stock of LSBG is exchanged into common stock of BHB in the
proposed merger of BHB and LSBG.
On May 5, 2016, Griffin provided its written opinion to the LSBG board of directors that, subject to the
assumptions, qualifications, limitations and other matters set forth therein, the exchange ratio was fair, from a financial point of view, to the stockholders of LSBG. The full text of Griffins written opinion, dated May 5, 2016, is attached
to this joint proxy statement/prospectus as
Annex B
and is incorporated herein by reference. LSBGs stockholders are urged to read the opinion in its entirety for a description of the assumptions made, matters considered, procedures
followed and qualifications and limitations on the review undertaken by Griffin. Griffins opinion is subject to the assumptions and conditions contained in its opinion and is necessarily based on economic, market and other conditions as in
effect on, and the information made available to Griffin as of, the date of its opinion. The description of the opinion set forth herein is qualified in its entirety by reference to the full text of such opinion.
Griffins opinion has been approved by its fairness opinion committee in conformity with its policies and procedures established under
the requirement of Rule 5150 of the Financial Industry Regulatory Authority. In conducting its review and providing its opinion, Griffin relied upon the accuracy and completeness of information that was publicly available to it or that was furnished
to or discussed with Griffin by LSBG or BHB or otherwise reviewed by Griffin including, particularly, the forward looking earnings estimates, projections, cost savings and pro forma growth rates. Griffin did not independently verify (nor assume
responsibility or liability for independently verifying) any such information or its accuracy or completeness. Griffin did not review individual loan files or deposit information of LSBG or BHB, nor was Griffin provided with or did it conduct any
valuation or appraisal of any assets, deposits, or other liabilities of LSBG or BHB. Griffin does not specialize in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowance for loan and lease losses with
respect thereto, and accordingly, has assumed that such allowances for loan and lease losses are adequate. In relying on financial analyses provided to or discussed with Griffin by LSBG or BHB or derived therefrom, Griffin assumed that such analyses
had been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management. Griffin expressed no view as to such analyses, forecasts, estimates, or the assumptions on which they were based.
Griffin is not a legal, regulatory, or tax expert and has relied on the assessments made by advisors to LSBG with respect to such issues.
For purposes of providing its opinion, Griffin assumed that, in all respects material to its analysis:
In performing its analysis, Griffin made various assumptions with regard to economic, market, and
other conditions, which are beyond the control of Griffin, LSBG and BHB. Griffins opinion is limited to the fairness, from a financial point of view, to the stockholders of LSBG with regard to the exchange ratio by which the common stock of
LSBG is exchanged into common stock of BHB in the merger, and expresses no opinion as to the fairness of the merger to creditors or other stakeholders of LSBG, the underlying decision by LSBG to engage in the merger, the relative merits of the
merger compared to other transactions available to LSBG, or the relative merits of the merger compared to other strategic alternatives that may be available to LSBG. Griffin did not and was not asked to contact any other interested parties other
than those specifically indicated by the Board. Furthermore, Griffin did not take into account and expressed no opinion with respect to the amount or nature of any bonuses and any other compensation or consideration to any officers, directors, or
employees of LSBG or BHB paid or payable by reason or as a result of the merger.
The following is a summary of the material analyses
presented by Griffin to the LSBG board of directors in connection with Griffins fairness opinion. The summary is not a complete description of the analyses underlying the Griffin opinion or the presentation made by Griffin to the LSBG board of
directors, but summarizes the material analyses performed and presented in connection with such opinion.
The preparation of the fairness
opinion is a comprehensive and complex analytical process, involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a
fairness opinion is not readily susceptible to partial analysis or summary description. In accordance with customary investment banking practice, Griffin employed generally accepted valuation methods in reaching its opinion. The following is a
summary of the material financial analyses undertaken by Griffin in connection with providing the Griffin opinion. The following summary, however, does not purport to be a complete description of the financial analyses performed by Griffin. In
arriving at its opinion, Griffin did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. The financial analyses
summarized within include information presented in tabular format. Accordingly, Griffin believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on
the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of the process underlying its analyses and opinion. The tables alone do not constitute a complete description of the financial analyses.
Pursuant to
the merger agreement, at the effective time of the merger, LSBG will merge with and into BHB, with BHB as the resulting or surviving corporation and LSBGs wholly owned subsidiary, LSBG Bank, will merge into and with BHB Bank, with BHB Bank
surviving the merger. Each of the 8,381,713 issued and outstanding shares of LSBG common stock will be converted into the right to receive 0.4970 shares of BHB common stock. The terms and conditions of the merger are more fully described in the
Agreement.
As of May 5, 2016, the date of Griffins opinion, based upon the closing stock price of BHBs common stock of $34.55 per share on May
4, 2016, the total purchase price payable to the stockholders of LSBG was approximately $143.9 million, which is equal to 164% of LSBGs tangible book value at March 31, 2016 and 15.9 times its earnings for the twelve month period ending March
31, 2016.
Using publicly available information, Griffin compared the financial performance and condition of LSBG to the following banks and thrifts
traded on a national exchange with institutional ownership greater than 10% and total assets between $750 million and $2.5 billion, return on average assets over the last twelve months or LTM ROAA between 0.40% and 1.00%, and non-performing assets
or NPAs / assets of less than 2.00%, excluding any banks that were targets of announced mergers. Because there were few comparable companies headquartered in New England, Griffin also included banks headquartered in Pennsylvania and upstate New York
(excluding metropolitan markets) which appear to be somewhat similar in market demographics to LSBG. Companies included in this group were:
To perform this analysis, Griffin used financial information as of March 31, 2016, or the most recently
available quarter, and market price information as of May 4, 2016 as reported by SNL Financial. Griffins analysis showed the following concerning LSBG and its peers financial condition, risk profile, valuation and liquidity:
No company used as a comparison in the above
analysis is identical to LSBG. In addition, Griffin presumed that the trading valuations for peers exclude any change in control premium. Accordingly, an analysis of these results is not purely mathematical. Rather, it involves complex
considerations and judgments concerning differences in financial and operating characteristics of the companies and of the banking environment at the time of the opinion.
Using publicly available information, Griffin compared the financial performance and condition of BHB to the following banks and thrifts traded
on a national exchange with total assets between $750 million and $2.5 billion with institutional ownership greater than 10%, LTM ROAA greater than 0.50%, and NPAs to assets of less than 2.00%, excluding any banks that were targets of announced
mergers. Because there were few comparable companies headquartered in New England, Griffin also included banks headquartered in Pennsylvania and upstate New York (excluding metro markets) which appear to be somewhat similar in market demographics to
BHB. Companies included in this group were:
To perform this analysis, Griffin used financial information as of March 31, 2016, or the most recently
available quarter, and market price information as of May 4, 2016 as reported by SNL Financial. Griffins analysis showed the following concerning BHB and its peers financial condition, risk profile, valuation and liquidity:
No company used as a comparison in the above analysis
is identical to BHB. In addition, Griffin presumed that the trading valuations for peers exclude any change in control premium. Accordingly, an analysis of these results is not purely mathematical. Rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of the companies and of the banking environment at the time of the opinion.
Griffin reviewed and compared the merger to publicly available information as reported by SNL Financial related to whole bank acquisitions
nationwide (excluding metropolitan markets) announced after January 1, 2014, with targets between $500 million and $3.0 billion in total assets, an ROAA between 0.40% and 1.0%, NPAs/assets of less than 3.00% and a three-year cumulative growth rate
in loans less than 20%, which included the following transactions:
Griffin also reviewed and compared the merger to publicly available information as reported by
SNL Financial related to a subset of the aforementioned group of transactions, namely whole bank acquisitions of targets headquartered in New England and Mid-Atlantic regions (excluding metropolitan markets) with the same criteria as the prior
nationwide group, which included the following transactions:
No
company or transaction used as a comparison in the above analyses is identical to LSBG, BHB or the merger. Accordingly, an analysis of these results is not purely mathematical. Rather, it involves complex considerations and judgments concerning
differences in financial and operating characteristics of the companies and of the banking environment at the time of the opinion.
Griffin performed a discounted cash flow analysis to estimate a range of the present value of estimated
free cash flows that LSBG could generate on a stand-alone basis. In performing this analysis, Griffin utilized the following assumptions, among others:
These calculations resulted in a range of implied per share values, exclusive of any change in control premium, of $7.39 to $12.19 per share
of LSBGs common stock, assuming a required tangible common equity to tangible assets capitalization level of 8%, and $6.02 to $13.18 per share of LSBGs common stock, using a constant discount rate, with a required tangible common equity
to tangible assets capitalization level of between 7% and 9%.
Griffin performed a change of control affordability analysis, which factors
in cash flows to be realized by BHB in the merger as projected by management. In performing this analysis, Griffin utilized the following assumptions, among others:
These calculations resulted in a range of implied per share values of $14.56 to $22.97 per share of LSBGs common stock, assuming a
required tangible common equity to tangible assets capitalization level of 8%, and $13.77 to $23.05 per share of LSBGs common stock, using a constant discount rate, with a required tangible common equity to tangible assets capitalization level
of between 7% and 9%.
Griffin performed an additional change of control affordability analysis based on adding incremental loan growth
beyond that which LSBG could achieve on its own, as provided by BHB management, to the existing projections provided by management. These calculations resulted in a range of implied per share values of $16.37 to $26.51 per share of LSBGs
common stock, assuming a required tangible common equity to tangible assets capitalization level of 8%, and $15.55 to $26.47 per share of LSBGs common stock, using a constant discount rate, with a required tangible common equity to tangible
assets capitalization level of between 7% and 9%.
The discounted cash flow analysis is a widely used valuation methodology that relies on
numerous assumptions, including asset and earnings growth rates, terminal values and discount rates. The analysis did not purport to be indicative of the actual value or expected value of LSBG.
Griffin performed a discounted cash flow analysis to estimate a range of the present value of estimated free cash flows that BHB could generate
on a stand-alone basis. In performing this analysis, Griffin utilized the following assumptions, among others:
These calculations resulted in a range of implied per share values, exclusive of any change in control premium, of $28.06 to $38.87 per share
of BHBs common stock, assuming a required tangible common equity to tangible assets capitalization level of 8%, and $26.36 to $39.65 per share of BHBs common stock, using a constant discount rate, with a required tangible common equity
to tangible assets capitalization level of between 7% and 9%.
The discounted cash flow analysis is a widely used valuation methodology
that relies on numerous assumptions, including asset and earnings growth rates, terminal values and discount rates. The analysis did not purport to be indicative of the actual value or expected value of BHB.
Griffin analyzed the relative contribution of LSBG and BHB to the pro forma market capitalization, balance sheet and income statement items of
the combined entity, including pro forma ownership, assets, loans, deposits, tangible common equity, and projected 2016, 2017, and 2018 net income. This analysis excluded all purchase accounting adjustments and was based on the projected balance
sheets of LSBG and BHB at closing of the merger, and LSBGs and BHBs closing prices on May 4, 2016 of $14.19 per share and $34.55 per share, respectively.
Griffin performed pro forma merger analyses that combined projected LSBG and BHB balance sheet and income statement information for periods
through 2022. Projected growth, earnings estimates and other assumptions (including, without limitation, purchase accounting adjustments, cost savings and transaction related expenses) were provided by or derived from material provided by LSBG and
BHBs management. The analyses indicated that the merger is expected to be dilutive to BHBs tangible book value per common share as of the projected completion date of the merger of March 31, 2017, accretive to earnings per common share
in subsequent periods, and that BHB is expected to maintain well-capitalized regulatory capital ratios, although certain projected capital ratios immediately following the completion of the merger (including common equity Tier 1 capital ratio, Tier
1 risk-based capital ratio and total risk based capital ratio) would be lower than BHBs respective projected capital ratios on a stand-alone basis. Actual results may be different from the projected results, and these differences may be
material.
The summary set forth above is not a complete description of the analyses and procedures performed by Griffin in the course of
arriving at its opinion.
LSBG retained Griffin as its financial adviser regarding the merger. As part of its investment banking business,
Griffin is, from time to time, engaged in the valuation of bank and bank holding company securities in connection with mergers and acquisitions, public and private placement of listed and unlisted securities, rights offerings and other forms of
valuations for various purposes. In the ordinary course of its business as a
broker-dealer,
Griffin may, from time to time, purchase securities from, and sell securities to, LSBG and BHB. As a market maker in
securities, Griffin may from time to time have a long or short position in, or buy or sell, debt or equity securities of institutions like and possibly including LSBG or BHB for Griffins own account and for the accounts of its customers. To
the extent Griffin held any such positions, it was disclosed to LSBG and BHB.
Pursuant to the Griffin engagement agreement, LSBG agreed
to pay Griffin (a) an engagement fee of $50,000, which will credited against the Transaction Fee, (b) a fee of $350,000 payable upon the delivery of its fairness opinion, which will credited against the Transaction Fee, and (c) a fee of 1.25% of the
aggregate transaction value contingent on the completion of the merger. In addition, LSBG has agreed to reimburse Griffin for reasonable out of pocket expenses incurred in connection with Griffins engagement and to indemnify and hold harmless
partners, officers, agents, employees and affiliates from and against all losses, claims, judgments, liabilities, costs, damages and expenses based upon or arising from Griffins engagement. During the two years preceding the date of this
letter, Griffin served as a financial advisor to BHB, and received a $25,000 retainer, on a previous unsuccessful acquisition opportunity. Griffin also served as LSBGs financial advisor in connection with its subordinated debt offering for
which it received payment of $510,000, and its acquisition of Central Financial Corporation for which it received payment of $175,000. Griffin also received a $25,000 retainer from LSBG for an unsuccessful acquisition opportunity.
In considering LSBGs board of directors recommendation to vote in favor of the adoption of the merger agreement, you should be
aware that LSBGs executive officers and directors might have interests in the merger that are different from, or in addition to, the interests of LSBGs stockholders generally. LSBGs board was aware of these interests and considered
them, among other matters, when it approved the merger agreement.
As of August 29, 2016, the record date for the special meeting of LSBGs stockholders, the directors and named executive officers of
LSBG may be deemed to be the beneficial owners of 640,626 shares, representing 7.64% of the outstanding shares of LSBGs common stock.
At the time of the signing of the merger agreement, Mr. William J. McIver entered into an employment agreement with BHB and BHB Bank that will
become effective on the closing date of the merger.
Mr. McIvers employment agreement has a term commencing on the closing date of
the merger and ending on May 31, 2019. During the term, Mr. McIver serves as the Executive Vice President, Regional PresidentNew Hampshire and Vermont Markets and receives an annual base salary of $295,000. In addition, Mr. McIver will be a
participant in BHBs annual incentive plan, long term incentive plan, and eligible to participate in any performance compensation plans agreed upon by the parties. He will receive medical, dental, disability, retirement, life insurance, and
other employee benefits on the same basis as provided to other similarly situated employees of BHB and BHB Bank.
If, during the
applicable term of employment, Mr. McIvers employment is terminated by either BHB or BHB Bank without cause (as defined in the employment agreement) or by Mr. McIver for good reason (as defined in the employment agreement), in addition to
receiving any accrued benefits, he will be entitled to: (i) a lump sum payment equal to one times his base salary in effect as of the effective date of termination, and (ii) continued medical, dental, and vision insurance benefits to which he and
his eligible dependents, if any, were entitled under such plan immediately prior to the date of his termination of employment for the greater of a period of twelve (12) months or the period to which he would have been entitled to continue coverage
under the group health plan pursuant to COBRA, and he will be required to make the same premium contributions that he was required to make immediately prior to his termination of employment. The severance payment and benefits are conditioned on his
execution and delivery of a general release.
Mr. McIvers employment agreement also contains confidentiality provisions and one year
post-termination non-competition and non-solicitation of customers provisions.
At the time LSBG entered into the merger agreement, its directors and certain of its officers held shares of restricted stock
granted under the Lake Sunapee Bank Group 2004 and 2014 Stock Incentive Plans. Under the terms of the merger agreement, all unvested awards of restricted stock issued by LSBG that are outstanding at the effective time of the merger will fully
vest as of the effective time, and convert into the right to receive the same merger consideration that all other shares of LSBG common stock are entitled to receive in the merger.
The following table sets forth the value that the named executive officers and directors of LSBG will receive in connection with the merger as
a result of the accelerated vesting of the restricted stock as described above. The estimated values set forth below are determined using a per share price of LSBG common stock of $15.22, which is the average closing price per share of LSBG
common stock over the first five business days following the public announcement of the merger.
LSBG Bank and LSBG previously entered into change in control agreements with each of William J. McIver, Laura Jacobi, and Sharon Whitaker. The
change in control agreements provide for severance benefits in the event of a termination without cause or resignation by the executive for good reason after a change in control or pending change in control (as such terms are defined in the change
in control agreements), each a qualifying termination. Upon a qualifying termination and subject to the execution of a release, the executives are entitled to receive a lump sum cash payment equal to one times (or three times, in the case of Mr.
McIver) the executives highest annual rate of salary prior to termination. Four other employees are party to similar change in control agreements.
LSBG Bank and LSBG each previously entered into employment agreements with Stephen R. Theroux in his role as President and Chief Executive
Officer of LSBG Bank and LSBG. The employment agreements, which are substantially identical, have an initial term of three years with the option to renew for additional three year period. The agreements provide Mr. Theroux an annual base salary of
$455,000, participation in employee benefit plans and arrangements, reimbursement for travel, and annual contributions to the separate trust for the New Hampshire Thrift Bancshares, Inc. Supplemental Executive Retirement Plan. Upon a termination of
employment by LSBG Bank and LSBG in connection with a change in control for any reason other than death, disability, or for cause or upon a termination of employment for good reason (as defined in the employment agreements), Mr. Theroux is entitled
to receive: (i) continued group life, health, dental, accident, and long-term disability benefits for three years, (ii) a lump sum payment equal to the salary that Mr. Theroux would have earned if he had continued working for three years at the
highest annual rate of salary prior to termination, and (iii) a lump sum payment equal to the value of the payments that would have been made to Mr. Theroux under any cash bonus or long-term or short-term cash incentive plan if he had continued
working for three years and earned the maximum bonus or incentive award each calendar year. The employment agreement with LSBG also provides that, in the event Mr. Therouxs employment is terminated upon or following a change in control (as
defined in the employment agreement), Mr. Theroux is entitled to a gross up payment for any excise taxes imposed under Section 4999 of the Code. However, Mr. Theroux has waived his rights to such gross-up payment.
LSBG previously entered into a consulting Agreement with Stephen Ensign, Chairman of the board of directors of LSBG, in connection with the
termination of his services as Executive Chairman of LSBG. The consulting agreement has an initial term of five years with automatic renewals for one year unless notice of non-renewal is given. The consulting agreement provides for a
consulting fee of $90,000 per year.
In connection with the merger, BHB; BHB Bank; LSBG; and LSBG Bank entered into settlement agreements
with each of Stephen R. Theroux, William J. McIver, Laura Jacobi, Sharon Whitaker, and Stephen Ensign pursuant to which each executive or director will receive the payments and benefits provided under the settlement agreements in satisfaction of all
rights to payments and benefits under the executive or directors individual change in control agreement (or employment agreements, in the case of Stephen R. Theroux or consulting agreements, in the case of Stephen Ensign). BHB; BHB Bank; LSBG;
and LSBG Bank also entered into similar settlement agreements with two of the other employees who were party to change in control agreements. In connection with the merger, rights to certain payments and benefits would have otherwise been triggered
absent the settlement agreements. Upon the closing of the merger, each settlement agreement (except in the case of Messrs. McIver and Ensign) specifies that the executive will execute a release of claims against BHB; BHB Bank; LSBG; and LSBG Bank.
The terms of each settlement agreement are substantially similar, except as noted below. Under the settlement agreements, Messrs.
Theroux, McIver, and Ensign, and Mses. Jacobi and Whitaker will receive, as severance, lump sum payments equal to $960,407, $845,000, $180,000, $250,000 and $223,000, respectively. The settlement agreements with the two other employees also provide
for lump sum payments, which in the aggregate total $309,227. The agreements have an Internal Revenue Code Section 280G cut-back such that no excise taxes will be triggered. In addition, Mr. Theroux is to receive (1) continued health, dental,
accident,
LSBG has provided supplemental deferred income benefits for Messrs. Theroux, McIver, and Ensign, and Mses. Jacobi and Whitaker through the
Supplemental Executive Retirement Plan or SERP, which is a
non-qualified
deferred compensation plan. Under the SERP, LSBG makes annual contributions on behalf of each eligible executive officer equal to a
specified percentage of each eligible executive officers base salary (Mr. Ensign has an account under the plan but no longer receives annual contributions). The specified percentage was 10% for the contributions made in 2015, 2014 and 2013.
All amounts in the participants accounts are deemed to be 100% vested at all times. A portion of each executive officers account balance is deemed to be invested in LSBG common stock. In the event of a change in control, the participants
in the SERP are entitled to receive the total amount of the balance of their respective SERP accounts in a cash payment. The merger will not result in any accelerated vesting, additional contributions or other enhancements to the SERP accounts,
though any increase in the price per share of LSBG common stock as a result of the merger will increase the value of the SERP accounts to the extent that the balances are deemed invested in LSBG common stock.
Messrs. Theroux, Ensign and McIver and Mses. Jacobi and Whitaker are entitled to the following amounts with respect to the SERP: $891,142;
$674,511; $94,518; $73,804; and $43,941 respectively (based upon a per share price of LSBG common stock of $15.22, which is the average closing price per share of LSBG common stock over the first five business days following the public announcement
of the merger).
LSBG and LSBG Bank have entered into salary continuation agreements or SCAs with Messrs. Theroux, McIver, Ensign and Mses. Jacobi and
Whitaker. Upon a change in control, the named executive officers become 100% vested in the retirement benefit of the SCAs, and shall receive the benefit as if the executive had been continuously employed by the Bank until the executives normal
retirement age as listed in the agreement, but such amounts shall not be paid until such normal retirement age. The agreements provide for benefit payments of $60,000 per year to Mr. Theroux, $50,000 per year to Ms. Jacobi and
Mr. McIver, and $25,000 per year to Ms. Whitaker and Mr. Ensign for life payable in monthly installments upon each executives retirement after attainment of age 65, or, age 67 in the case of Ms. Jacobi and age 70 in the case of
Mr. Ensign. Ten other employees are party to similar salary continuation agreements.
LSBG and LSBG Bank have split dollar life insurance plan agreements with Messrs. Theroux, McIver, Ensign and Ms. Whitaker. These agreements
provide a death benefit equal to one years base salary to the executive officers named beneficiaries upon the death of the executive, provided the death occurs while the executive is employed. There are also change in control provisions
in these agreements which specify that if the executives are terminated following a change in control, except for cause, then the executive shall be fully vested in the death benefit, and the death benefit shall be immediately payable upon the death
of the executive, regardless of when that death occurs beyond the change in control date, so long as it occurs before the executive attains age 65.
Under the terms of the merger agreement, BHB has agreed that it will, from and after the closing of the merger, indemnify and hold harmless
each present and former director and officer of LSBG and each other
person entitled to indemnification under the bylaws of BHB, against any costs or expenses (including reasonable attorneys fees and expenses), judgments, fines, losses, claims, damages, or
liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the effective time, whether asserted
or claimed prior to, at or after the effective time, arising in whole or in part out of or pertaining to the fact that he or she was a director or officer of LSBG or is or was serving at the request of LSBG as a director, officer, employee or other
agent of any other organization or in any capacity with respect to any employee benefit plan of LSBG, including matters relating to the negotiation, execution and performance of the merger agreement or any of the transactions contemplated thereby,
to the fullest extent to which such indemnified parties would be entitled under the amended and restated bylaws of LSBG in effect as of the date of the merger agreement. BHBs obligation shall continue in full force and effect for a period of
six years from the effective time of the merger, provided, however that all rights to indemnification in respect of any claim asserted or made within such period shall continue until the final disposition of such claim. In addition, BHB shall
advance expenses to the indemnified parties to the fullest extent which such indemnified parties would be entitled under the amended and restated bylaws of LSBG as in effect on the date of the merger agreement without regard to director approval of
such advancement of expenses.
In connection with the merger, BHB has also agreed to use its reasonable best efforts to cause the persons
serving as directors and officers of LSBG immediately prior to the effective time of the merger to be covered by the directors and officers liability insurance policy maintained by LSBG (provided that BHB may substitute therefor policies
which are not materially less advantageous than such policy or single premium tail coverage with policy limits equal to LSBGs existing coverage limits) for a six year period following the merger effective time with respect to acts or omissions
occurring prior to the effective time which were committed by such directors and officers in their capacity as such, provided that in no event BHB shall be required to expend in any one year more than an amount equal to 175% of the current annual
amount expended by LSBG to maintain such insurance. If BHB is unable to maintain or obtain the insurance, BHB shall use its reasonable best efforts to obtain as much comparable insurance as is available for the insurance amount.
Under the
terms of the merger agreement, immediately following the effective time of the merger, four directors of LSBG, including Steven H. Dimick, Stephen W. Ensign, and Stephen R. Theroux, will be appointed to the board of directors of BHB and BHB Bank,
each of whom will serve for a term expiring at BHBs next annual meeting of shareholders.
FUTURE SHAREHOLDER PROPOSALS
LSBG
In view of the pending merger with BHB, LSBG intends to hold its 2017 annual meeting of stockholders only if the merger is not completed. If
such a meeting is held, stockholder proposals will only be considered for inclusion in LSBGs proxy statement for the 2017 annual meeting if they (a) are submitted to LSBGs Secretary at Lake Sunapee Bank Group, 9 Main Street, P.O. Box 9,
Newport, New Hampshire 03773, not later than the close of business on November 28, 2016, and (b) concern a matter that may properly be considered and acted upon at the annual meeting in accordance with law and the rules of the SEC, including Rule
14a-8 under the Exchange Act.
If a stockholder wishes to submit a proposal for presentation at the 2017 annual meeting, without including
such proposal in the proxy materials, the stockholder must deliver timely notice thereof in writing to the Secretary. To be timely, the notice must be received not less than 30 days nor more than 90 days prior to the date of the 2017 Annual Meeting;
provided, however, that in the event that less than 40 days notice or prior public disclosure of the date of the 2017 annual meeting is given or made to stockholders, notice by the stockholders to be timely must be received not later than the
close of business on the 10th day following the day on which notice of the date of the 2017 annual meeting was mailed or public disclosure was made. The stockholders written notice must contain certain information specified in LSBGs
bylaws.
BHB
If the merger is completed, LSBG stockholders will become shareholders of BHB. BHB currently intends to hold a regularly scheduled annual
meeting of shareholders in 2017. To be included in BHBs 2017 annual meeting, shareholder proposals will only be considered for inclusion in BHBs proxy statement for the 2017 annual meeting if they (a) are submitted to Marsha C. Sawyer,
Clerk, Bar Harbor Bankshares, 82 Main Street, Bar Harbor, ME 04609, not later than the close of business on December 19, 2016, and (b) concern a matter that may properly be considered and acted upon at the annual meeting in accordance with law and
the rules of the SEC, including Rule 14a-8 under the Exchange Act.
119
In addition, BHB bylaws provide that BHB will consider nominees for election to the board
recommended by shareholders if made in the same manner provided for under BHB bylaws with regard to typical shareholder proposals. These procedures require in part, that to be timely, a shareholders notice shall be delivered to the Clerk at
BHBs principal executive offices no later than the close of business of the 120th day nor earlier than the close of business on the 150
th
day prior to the first anniversary of the preceding
years Annual Meeting. Such shareholders notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including such persons written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons
for conducting such business at the meeting, any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made, and the names and addresses of other shareholders known by the
shareholder proposing such business to support such proposal, and the class and number of shares of BHB capital stock beneficially owned by such other shareholders; and (c) as to the shareholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made (i) the name and address of such shareholder, as they appear on BHB books, and of such beneficial owner, and (ii) the class and number of shares of BHB common stock, which are owned beneficially and of
record by such shareholder and such beneficial owner.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy
statements and annual reports with respect to two or more shareholders sharing the same address by delivering a single proxy statement addressed to those shareholders. This process, which is commonly referred to as householding,
potentially means extra convenience for shareholders and cost savings for companies.
This year, a number of brokers with account holders
who are shareholders of BHB or LSBG will be householding the proxy materials. A single joint proxy statement/prospectus will be delivered to multiple shareholders sharing an address, unless contrary instructions have been received from
the affected shareholders. Once you have received notice from your broker that they will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your
consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, please notify your broker.
Shareholders who currently receive multiple copies of the proxy statement at their addresses and would like to request
householding of their communications should contact their brokers.
WHERE YOU CAN FIND MORE
INFORMATION
BHB and LSBG file annual, quarterly and current reports, proxy statements and other information with the SEC. You may
read and copy any reports, statements or other information on file with the SEC at the SECs public reference room located at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the public reference room
by calling the SEC at 1-800-SEC-0330. SEC filings are also available to the public at the SECs website at www.sec.gov.
BHB has
filed a registration statement on Form S-4 to register with the SEC the shares of BHB common stock that LSBG stockholders will receive in the merger. This joint proxy statement/prospectus is part of BHBs registration statement on Form S-4, and
is a prospectus of BHB and a joint proxy statement of LSBG and BHB for their respective special meetings.
120
The SEC permits BHB and LSBG to incorporate by reference information into this joint
proxy statement/prospectus. This means that BHB and LSBG can disclose important information to you by referring to another document filed separately with the SEC. The information incorporated by reference is considered a part of this joint proxy
statement/prospectus, except for any information superseded by information contained directly in this joint proxy statement/prospectus or by information contained in documents filed with or furnished to the SEC after the date of this joint proxy
statement/prospectus that is incorporated by reference into this joint proxy statement/prospectus.
This joint proxy statement/prospectus
incorporates by reference the documents set forth below that have been previously filed with the SEC. These documents contain important information about BHB and LSBG and their financial conditions.
|
|
|
BHB SEC Filings (SEC File Number 001-13349)
|
|
Period or Date Filed
|
Annual Report on Form 10-K
|
|
Year ended December 31, 2015, filed March 14, 2016
|
|
|
Quarterly Reports on Form 10-Q
|
|
Quarter ended March 31, 2016, filed May 6, 2016 and quarter ended June 30, 2016, filed on August 8, 2016
|
|
|
Current Reports on Form 8-K
|
|
Filed January 19, 2016, April 19, 2016, May 5, 2016, May 9, 2016, May 18, 2016, May 19, 2016, June 16, 2016, July 19, 2016 and August 16, 2016 (other than the portions of those documents not deemed to be filed)
|
|
|
Description of BHB common stock contained in BHBs registration statement on Form 8-A, filed September 10, 1997, and any amendment or
report filed for the purpose of updating such description.
BHB Proxy Statement on
Schedule 14A, filed March 23, 2016 (excluding those portions that are not incorporated by reference into our Annual Report on Form 10-K)
|
|
|
|
|
LSBG SEC Filings (SEC File Number 000-17859)
|
|
Period or Date Filed
|
Annual Report on Form 10-K
|
|
Year ended December 31, 2015, filed March 15, 2016
|
|
|
Quarterly Reports on Form 10-Q
|
|
Quarter ended March 31, 2016, filed May 10, 2016 and quarter ended June 30, 2016, filed on August 9, 2016
|
|
|
Current Reports on Form 8-K
|
|
Filed March 14, 2016, May 5, 2016, May 9, 2016 and May 16, 2016 (other than the portions of those documents not deemed to be filed)
|
|
|
Description of LSBG common stock contained in LSBGs registration statement on Form 8-A, filed August 3, 1999, and any amendment or
report filed for the purpose of updating such description.
LSBG Proxy Statement on
Schedule 14A, filed March 28, 2016 (excluding those portions that are not incorporated by reference into our Annual Report on Form 10-K)
|
|
|
In addition, BHB and LSBG also incorporate by reference additional documents that either company may file with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, between the date of this joint proxy statement/prospectus and the date of the BHB special meeting or the LSBG special meeting, as the case may be. These documents include Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
121
Reports on Form 8-K and proxy statements. To the extent that any information contained in any Current Report on Form 8-K, or any exhibit to such report, was furnished to, rather than filed with,
the SEC, such information or exhibit is not specifically incorporated by reference into this joint proxy statement/prospectus.
Documents
incorporated by reference are available from BHB and LSBG, without charge, excluding all exhibits unless an exhibit has been specifically incorporated by reference into this joint proxy statement/ prospectus. You can obtain documents incorporated by
reference into this joint proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:
|
|
|
Bar Harbor Bankshares
82 Main Street
Bar Harbor, Maine
04609
Attention: Marsha C. Sawyer, Clerk
(207)288-2639
www.bhbt.com
(Shareholder Relations tab)
|
|
Lake Sunapee Bank Group
9 Main Street
P.O. Box 9
Newport, New Hampshire 03773
Attention: Laura Jacobi, CFO
(603)863-0886
www.lakesunbank.com
(Investor Relations tab)
|
Neither BHB nor LSBG has authorized anyone to give any information or make any representation about the merger
or the special meetings that is different from, or in addition to, that contained in this joint proxy statement/prospectus or in any of the materials that are incorporated by reference into this joint proxy statement/prospectus. Therefore, if anyone
gives you information of this sort, you should not rely on it. This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this joint proxy statement/prospectus, or
the solicitation of a proxy, in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction. Neither the delivery of this joint proxy
statement/prospectus nor any distribution of securities pursuant to this joint proxy statement/prospectus shall, under any circumstances, create any implication that there has been no change in the information set forth or incorporated into this
joint proxy statement/prospectus by reference or in our affairs since the date of this joint proxy statement/prospectus. The information contained in this joint proxy statement/prospectus with respect to BHB was provided by BHB, and the information
contained in this joint proxy statement/prospectus with respect to LSBG was provided by LSBG. The information contained in this joint proxy statement/prospectus speaks only as of the date of this joint proxy statement/prospectus unless the
information specifically indicates that another date applies.
122
Annex A Agreement and Plan of Merger
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 5, 2016
BY AND BETWEEN
BAR
HARBOR BANKSHARES
AND
LAKE SUNAPEE BANK GROUP
A-1
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE I THE MERGER
|
|
|
1
|
|
Section 1.01
|
|
Terms of the Merger
|
|
|
1
|
|
Section 1.02
|
|
Bank Merger
|
|
|
1
|
|
Section 1.03
|
|
Tax Consequences
|
|
|
2
|
|
Section 1.04
|
|
Articles of Incorporation and Bylaws
|
|
|
2
|
|
Section 1.05
|
|
Directors of Surviving Corporation After Effective Time
|
|
|
2
|
|
Section 1.06
|
|
Effect of the Merger
|
|
|
2
|
|
Section 1.07
|
|
Effective Date and Effective Time; Closing
|
|
|
2
|
|
Section 1.08
|
|
Alternative Structure
|
|
|
2
|
|
Section 1.09
|
|
Additional Actions
|
|
|
3
|
|
Section 1.10
|
|
Absence of Control
|
|
|
3
|
|
Section 1.11
|
|
Lake Sunapee Bank Name and Branding
|
|
|
3
|
|
|
|
ARTICLE II CONSIDERATION; EXCHANGE PROCEDURES
|
|
|
3
|
|
Section 2.01
|
|
Merger Consideration
|
|
|
3
|
|
Section 2.02
|
|
Rights as Shareholders; Stock Transfers
|
|
|
3
|
|
Section 2.03
|
|
No Fractional Shares
|
|
|
3
|
|
Section 2.04
|
|
Treasury Shares
|
|
|
3
|
|
Section 2.05
|
|
Reserved
|
|
|
3
|
|
Section 2.06
|
|
Exchange Procedures
|
|
|
3
|
|
Section 2.07
|
|
Reservation of Shares
|
|
|
5
|
|
Section 2.08
|
|
Listing of Additional Shares
|
|
|
5
|
|
Section 2.09
|
|
Effect on Outstanding Shares of BHB Common Stock
|
|
|
5
|
|
Section 2.10
|
|
Effect on Outstanding LSBG Equity Awards
|
|
|
5
|
|
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF LSBG
|
|
|
5
|
|
Section 3.01
|
|
Organization, Standing and Authority of LSBG
|
|
|
5
|
|
Section 3.02
|
|
Organization, Standing and Authority of Lake Sunapee Bank
|
|
|
6
|
|
Section 3.03
|
|
LSBG Capital Stock
|
|
|
6
|
|
Section 3.04
|
|
Subsidiaries
|
|
|
6
|
|
Section 3.05
|
|
Corporate Power; Minute Books
|
|
|
6
|
|
Section 3.06
|
|
Execution and Delivery
|
|
|
6
|
|
Section 3.07
|
|
Regulatory Approvals; No Defaults
|
|
|
7
|
|
Section 3.08
|
|
Financial Statements
|
|
|
7
|
|
Section 3.09
|
|
Securities Filings
|
|
|
7
|
|
Section 3.10
|
|
Absence of Certain Changes or Events.
|
|
|
8
|
|
Section 3.11
|
|
Absence of Undisclosed Liabilities
|
|
|
8
|
|
Section 3.12
|
|
Financial Controls and Procedures
|
|
|
8
|
|
Section 3.13
|
|
Regulatory Matters
|
|
|
9
|
|
Section 3.14
|
|
Legal Proceedings
|
|
|
9
|
|
Section 3.15
|
|
Compliance with Laws
|
|
|
9
|
|
Section 3.16
|
|
Material Contracts; Defaults
|
|
|
10
|
|
Section 3.17
|
|
Brokers
|
|
|
10
|
|
Section 3.18
|
|
Employee Benefit Plans
|
|
|
10
|
|
Section 3.19
|
|
Labor Matters
|
|
|
12
|
|
Section 3.20
|
|
Environmental Matters
|
|
|
13
|
|
Section 3.21
|
|
Tax Matters
|
|
|
13
|
|
Section 3.22
|
|
Investment Securities
|
|
|
15
|
|
Section 3.23
|
|
Derivative Transactions
|
|
|
15
|
|
Section 3.24
|
|
Loans; Nonperforming and Classified Assets
|
|
|
15
|
|
i
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
Section 3.25
|
|
Tangible Properties and Assets
|
|
|
16
|
|
Section 3.26
|
|
Intellectual Property
|
|
|
16
|
|
Section 3.27
|
|
Fiduciary Accounts
|
|
|
16
|
|
Section 3.28
|
|
Insurance
|
|
|
17
|
|
Section 3.29
|
|
Antitakeover Provisions
|
|
|
17
|
|
Section 3.30
|
|
Joint Proxy Statement/Prospectus
|
|
|
17
|
|
Section 3.31
|
|
Disclosure
|
|
|
17
|
|
Section 3.32
|
|
Charter Holding Corp.; Charter Trust Company
|
|
|
17
|
|
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BHB
|
|
|
18
|
|
Section 4.01
|
|
Organization, Standing and Authority of BHB
|
|
|
18
|
|
Section 4.02
|
|
Organization, Standing and Authority of Bar Harbor Bank
|
|
|
18
|
|
Section 4.03
|
|
BHB Capital Stock
|
|
|
18
|
|
Section 4.04
|
|
Subsidiaries
|
|
|
18
|
|
Section 4.05
|
|
Corporate Power; Minute Books
|
|
|
19
|
|
Section 4.06
|
|
Execution and Delivery
|
|
|
19
|
|
Section 4.07
|
|
Regulatory Approvals; No Defaults
|
|
|
19
|
|
Section 4.08
|
|
Financial Statements
|
|
|
19
|
|
Section 4.09
|
|
Securities Filings
|
|
|
20
|
|
Section 4.10
|
|
Absence of Certain Changes or Events
|
|
|
20
|
|
Section 4.11
|
|
Financial Controls and Procedures
|
|
|
20
|
|
Section 4.12
|
|
Regulatory Matters
|
|
|
20
|
|
Section 4.13
|
|
Legal Proceedings
|
|
|
21
|
|
Section 4.14
|
|
Compliance with Laws
|
|
|
21
|
|
Section 4.15
|
|
Material Contracts; Defaults
|
|
|
21
|
|
Section 4.16
|
|
Brokers
|
|
|
22
|
|
Section 4.17
|
|
Employee Benefit Plans
|
|
|
22
|
|
Section 4.18
|
|
Labor Matters
|
|
|
22
|
|
Section 4.19
|
|
Environmental Matters
|
|
|
23
|
|
Section 4.20
|
|
Tax Matters
|
|
|
23
|
|
Section 4.21
|
|
Derivative Transactions
|
|
|
24
|
|
Section 4.22
|
|
Loans; Nonperforming and Classified Assets
|
|
|
25
|
|
Section 4.23
|
|
Tangible Properties and Assets
|
|
|
25
|
|
Section 4.24
|
|
Intellectual Property
|
|
|
26
|
|
Section 4.25
|
|
Fiduciary Accounts
|
|
|
26
|
|
Section 4.26
|
|
Insurance
|
|
|
26
|
|
Section 4.27
|
|
Absence of Undisclosed Liabilities
|
|
|
26
|
|
Section 4.28
|
|
Antitakeover Provisions
|
|
|
26
|
|
Section 4.29
|
|
BHB Common Stock
|
|
|
26
|
|
Section 4.30
|
|
Joint Proxy Statement/Prospectus
|
|
|
27
|
|
Section 4.31
|
|
Disclosure
|
|
|
27
|
|
|
|
ARTICLE V COVENANTS
|
|
|
27
|
|
Section 5.01
|
|
Covenants of LSBG
|
|
|
27
|
|
Section 5.02
|
|
Covenants of BHB
|
|
|
30
|
|
Section 5.03
|
|
Reasonable Best Efforts
|
|
|
30
|
|
Section 5.04
|
|
Shareholder Approval
|
|
|
31
|
|
Section 5.05
|
|
Merger Registration Statement; Joint Proxy Statement/Prospectus
|
|
|
31
|
|
Section 5.06
|
|
Cooperation and Information Sharing
|
|
|
31
|
|
Section 5.07
|
|
Supplements or Amendment
|
|
|
32
|
|
Section 5.08
|
|
Regulatory Approvals
|
|
|
32
|
|
Section 5.09
|
|
Press Releases
|
|
|
32
|
|
ii
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
Section 5.10
|
|
Access; Information
|
|
|
32
|
|
Section 5.11
|
|
No Solicitation
|
|
|
33
|
|
Section 5.12
|
|
Indemnification
|
|
|
34
|
|
Section 5.13
|
|
Employees; Benefit Plans
|
|
|
35
|
|
Section 5.14
|
|
Notification of Certain Changes
|
|
|
36
|
|
Section 5.15
|
|
Current Information
|
|
|
37
|
|
Section 5.16
|
|
Board Packages
|
|
|
37
|
|
Section 5.17
|
|
Transition; Informational Systems Conversion
|
|
|
37
|
|
Section 5.18
|
|
Board of Directors
|
|
|
37
|
|
Section 5.19
|
|
Exemption from Liability Under Section 16(b)
|
|
|
37
|
|
|
|
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER
|
|
|
38
|
|
Section 6.01
|
|
Conditions to Obligations of the Parties to Effect the Merger
|
|
|
38
|
|
Section 6.02
|
|
Conditions to Obligations of BHB
|
|
|
38
|
|
Section 6.03
|
|
Conditions to Obligations of LSBG
|
|
|
39
|
|
Section 6.04
|
|
Frustration of Closing Conditions
|
|
|
40
|
|
|
|
ARTICLE VII TERMINATION
|
|
|
40
|
|
Section 7.01
|
|
Termination
|
|
|
40
|
|
Section 7.02
|
|
Termination Fee
|
|
|
42
|
|
Section 7.03
|
|
Effect of Termination and Abandonment
|
|
|
42
|
|
|
|
ARTICLE VIII MISCELLANEOUS
|
|
|
42
|
|
Section 8.01
|
|
Survival
|
|
|
42
|
|
Section 8.02
|
|
Waiver; Amendment
|
|
|
43
|
|
Section 8.03
|
|
Counterparts
|
|
|
43
|
|
Section 8.04
|
|
Governing Law
|
|
|
43
|
|
Section 8.05
|
|
Expenses
|
|
|
43
|
|
Section 8.06
|
|
Notices
|
|
|
43
|
|
Section 8.07
|
|
Entire Understanding; No Third Party Beneficiaries
|
|
|
44
|
|
Section 8.08
|
|
Severability
|
|
|
44
|
|
Section 8.09
|
|
Enforcement of the Agreement
|
|
|
44
|
|
Section 8.10
|
|
Interpretation
|
|
|
44
|
|
Section 8.11
|
|
Assignment
|
|
|
44
|
|
|
|
ARTICLE IX ADDITIONAL DEFINITIONS
|
|
|
45
|
|
Section 9.01
|
|
Additional Definitions
|
|
|
45
|
|
EXHIBITS
|
|
|
Exhibit A
|
|
Form of Voting Agreement
|
Exhibit B
|
|
Plan of Bank Merger
|
Exhibit C
|
|
Form of Employment Agreement
|
Exhibits D-1 to D-7
|
|
Forms of Settlement Agreements
|
iii
TABLE OF DEFINITIONS
|
|
|
|
|
|
|
Page
|
|
Acquisition Proposal
|
|
|
44
|
|
Acquisition Transaction
|
|
|
44
|
|
Affiliate
|
|
|
45
|
|
Agreement
|
|
|
1
|
|
Average Closing Price
|
|
|
41
|
|
Bank Merger
|
|
|
1
|
|
Bar Harbor Bank
|
|
|
1
|
|
BHB
|
|
|
1
|
|
BHB Benefit Plans
|
|
|
45
|
|
BHB Board
|
|
|
45
|
|
BHB Common Stock
|
|
|
45
|
|
BHB Defined Benefit Plan
|
|
|
22
|
|
BHB Disclosure Schedule
|
|
|
45
|
|
BHB Equity Award
|
|
|
18
|
|
BHB ERISA Affiliate
|
|
|
22
|
|
BHB Financial Statements
|
|
|
19
|
|
BHB Intellectual Property
|
|
|
45
|
|
BHB Meeting
|
|
|
30
|
|
BHB Preferred Stock
|
|
|
18
|
|
BHB Ratio
|
|
|
41
|
|
BHB Share Price
|
|
|
45
|
|
BHBs SEC Reports
|
|
|
20
|
|
BOLI
|
|
|
17
|
|
Business Day
|
|
|
45
|
|
Certificate
|
|
|
45
|
|
Certificate(s)
|
|
|
4
|
|
Change in Recommendation
|
|
|
31
|
|
Closing
|
|
|
2
|
|
Closing Date
|
|
|
2
|
|
Code
|
|
|
1
|
|
Community Reinvestment Act
|
|
|
9
|
|
Confidentiality Agreement
|
|
|
32
|
|
Derivative Transaction
|
|
|
45
|
|
Determination Date
|
|
|
41
|
|
Effective Time
|
|
|
2
|
|
Environmental Law
|
|
|
45
|
|
ERISA
|
|
|
45
|
|
Exchange Act
|
|
|
45
|
|
Exchange Agent
|
|
|
4
|
|
Exchange Ratio
|
|
|
3
|
|
Excluded Shares
|
|
|
45
|
|
FDIC
|
|
|
46
|
|
FHLB
|
|
|
46
|
|
Final Index Price
|
|
|
42
|
|
Fractional Shares
|
|
|
3
|
|
FRB
|
|
|
46
|
|
GAAP
|
|
|
46
|
|
Governmental Authority
|
|
|
46
|
|
Hazardous Substance
|
|
|
46
|
|
|
|
|
|
|
|
|
Page
|
|
Indemnified Parties
|
|
|
34
|
|
Indemnifying Party
|
|
|
34
|
|
Index Group
|
|
|
42
|
|
Index Price
|
|
|
42
|
|
Surviving Corporation
|
|
|
1
|
|
Tax
|
|
|
48
|
|
Tax Returns
|
|
|
48
|
|
Index Ratio
|
|
|
41
|
|
Informational Systems Conversion
|
|
|
37
|
|
Insurance Amount
|
|
|
35
|
|
Insurance Policies
|
|
|
16
|
|
Intellectual Property
|
|
|
46
|
|
IRS
|
|
|
46
|
|
Joint Proxy Statement/Prospectus
|
|
|
46
|
|
Knowledge
|
|
|
46
|
|
Lake Sunapee Bank
|
|
|
1
|
|
Leases
|
|
|
16
|
|
Letter of Transmittal
|
|
|
3
|
|
Lien
|
|
|
46
|
|
Loan Property
|
|
|
46
|
|
Loans
|
|
|
15
|
|
LSBG
|
|
|
1
|
|
LSBG Benefit Plans
|
|
|
10
|
|
LSBG Board
|
|
|
46
|
|
LSBG Common Stock
|
|
|
6
|
|
LSBG Defined Benefit Plan
|
|
|
11
|
|
LSBG Disclosure Schedule
|
|
|
46
|
|
LSBG Employees
|
|
|
10
|
|
LSBG ERISA Affiliate
|
|
|
11
|
|
LSBG Financial Statements
|
|
|
7
|
|
LSBG Intellectual Property
|
|
|
47
|
|
LSBG Meeting
|
|
|
31
|
|
LSBG Pension Plan
|
|
|
11
|
|
LSBG Preferred Stock
|
|
|
6
|
|
LSBG Restricted Share Award
|
|
|
5
|
|
LSBGs SEC Reports
|
|
|
7
|
|
Material Adverse Effect
|
|
|
47
|
|
Material Contracts
|
|
|
10
|
|
MBCA
|
|
|
2
|
|
MBFI
|
|
|
47
|
|
Merger
|
|
|
1
|
|
Merger Consideration
|
|
|
3
|
|
Merger Registration Statement
|
|
|
31
|
|
NASDAQ
|
|
|
47
|
|
Notice of Superior Proposal
|
|
|
33
|
|
NYSE
|
|
|
47
|
|
OCC
|
|
|
47
|
|
OREO
|
|
|
15
|
|
Person
|
|
|
47
|
|
iv
|
|
|
|
|
|
|
Page
|
|
Plan of Bank Merger
|
|
|
1
|
|
Regulatory Approvals
|
|
|
37
|
|
Regulatory Order
|
|
|
9
|
|
Rights
|
|
|
47
|
|
Securities Act
|
|
|
47
|
|
Settlement Agreement
|
|
|
36
|
|
Software
|
|
|
47
|
|
|
|
|
|
|
|
|
Page
|
|
Starting Date
|
|
|
42
|
|
Starting Price
|
|
|
42
|
|
Subsidiary
|
|
|
47
|
|
Superior Proposal
|
|
|
47
|
|
Taxes
|
|
|
48
|
|
Termination Date
|
|
|
40
|
|
Voting Agreement
|
|
|
1
|
|
v
This AGREEMENT AND PLAN OF MERGER
(this Agreement) is dated as of May 5,
2016, by and between Bar Harbor Bankshares, a Maine corporation (BHB), and Lake Sunapee Bank Group, a Delaware corporation (LSBG).
WITNESSETH
WHEREAS
, the Board of Directors of BHB and the Board of Directors of LSBG have each (i) determined that this Agreement and the
business combination and related transactions contemplated hereby are in the best interests of their respective entities and shareholders; (ii) determined that this Agreement and the transactions contemplated hereby are consistent with and in
furtherance of their respective business strategies; and (iii) approved this Agreement;
WHEREAS
, in accordance with the terms
of this Agreement, LSBG will merge with and into BHB, and BHB shall be the surviving entity (the Merger);
WHEREAS
, as
a material inducement to BHB to enter into this Agreement, each of the directors and certain executive officers of LSBG have entered into a voting agreement with BHB dated as of the date hereof (a Voting Agreement), substantially in the
form attached hereto as
Exhibit A
, pursuant to which each such director or executive officer has agreed, among other things, to vote all shares of LSBG Common Stock (as defined herein) owned by such person in favor of the approval of this
Agreement and the transactions contemplated hereby, upon the terms and subject to the conditions set forth in such agreement;
WHEREAS
, the parties intend for the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the Code), and that this Agreement be and hereby is adopted as a plan of reorganization within the meaning of Sections 354 and 361 of the Code; and
WHEREAS
, the parties desire to make certain representations, warranties and agreements in connection with the transactions described in
this Agreement and to prescribe certain conditions thereto.
NOW, THEREFORE,
in consideration of the mutual promises herein
contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01
Terms of the Merger
. Subject to the terms and conditions of this Agreement, at the Effective Time,
LSBG shall merge with and into BHB, and BHB shall be the surviving entity (hereinafter sometimes referred to as the Surviving Corporation) and shall continue to be governed by the laws of the State of Maine and its name and separate
corporate existence, with all of its rights, privileges, immunities, powers and franchises, shall continue unaffected by the Merger. As part of the Merger, shares of LSBG Common Stock shall, at the Effective Time, be converted into the right to
receive the Merger Consideration pursuant to the terms of Article II.
Section 1.02
Bank Merger
. Concurrently
with or as soon as practicable after the execution and delivery of this Agreement, Bar Harbor Bank & Trust (Bar Harbor Bank), a wholly owned subsidiary of BHB, and Lake Sunapee Bank, fsb (Lake Sunapee Bank), a wholly
owned subsidiary of LSBG, shall enter into the Plan of Bank Merger (the Plan of Bank Merger), substantially in the form attached hereto as Exhibit B, pursuant to which Lake Sunapee Bank will merge with and into Bar Harbor Bank, and Bar
Harbor Bank shall be the surviving institution (the Bank Merger). The parties intend that the Bank Merger will become effective simultaneously with or immediately following the Effective Time.
1
Section 1.03
Tax Consequences
.
It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a plan of reorganization as that term is used in Sections 354 and 361 of the Code. From and after the date
of this Agreement and until the Closing, each party hereto shall use its reasonable best efforts to cause the Merger to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action to
fail to be taken, which action or failure to act would reasonably be expected to prevent the Merger from qualifying as a reorganization under Section 368(a) of the Code. LSBG and BHB each hereby agree to deliver a certificate substantially in
compliance with IRS published advance ruling guidelines, with customary exceptions and modifications thereto, to enable its counsel to deliver the legal opinion contemplated by Section 6.01(e).
Section 1.04
Articles of Incorporation and Bylaws
. The Articles of Incorporation, as amended, of BHB, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended in accordance with applicable law. The Amended and Restated Bylaws of BHB, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended in accordance with applicable law.
Section 1.05
Directors of Surviving Corporation After Effective Time
. Subject to Section 5.18, immediately after the
Effective Time, until their respective successors are duly elected or appointed and qualified, the directors of the Surviving Corporation shall consist of the directors of BHB serving immediately prior to the Effective Time.
Section 1.06
Effect of the Merger
. At the Effective Time, the effect of the Merger shall be as provided under the Maine
Business Corporation Act (the MBCA), and the regulations promulgated thereunder. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, the separate corporate existence of LSBG shall cease and all
of the rights, privileges, powers, franchises, properties, assets, debts, liabilities, obligations, restrictions, disabilities and duties of LSBG shall be vested in and assumed by BHB.
Section 1.07
Effective Date and Effective Time; Closing
.
(a) Subject to the terms and conditions of this Agreement, BHB will make all such filings as may be required to consummate the Merger by
applicable laws and regulations. The Merger shall become effective at such time as the Articles of Merger are duly filed with the Secretary of the State of Maine or at such later date or time as BHB and LSBG agree and specify in the Articles of
Merger (the date and time the Merger becomes effective being the Effective Time).
(b) The closing of the Merger (the
Closing) shall take place at 10:00 a.m., Eastern time on the Closing Date (as defined below), at the principal offices of K&L Gates LLP in Boston, MA, or such other place or at such other time on the Closing Date as the parties may
mutually agree upon. At the Closing, there shall be delivered to BHB and LSBG the certificates and other documents required to be delivered under Article VI hereof. Subject to the satisfaction or waiver of all conditions to closing contained in
Article VI hereof, the Closing shall occur no later than ten Business Days following the latest to occur of (i) the receipt of all Regulatory Approvals, and the expiration of any applicable waiting periods, (ii) the approval of the Merger
by the stockholders of BHB and by the stockholders of LSBG, or (iii) at such other date or time upon which BHB and LSBG mutually agree (the Closing Date).
Section 1.08
Alternative Structure
. BHB may, at any time prior to the Effective Time, change the method of effecting the
combinations of BHB and LSBG, or Bar Harbor Bank and Lake Sunapee Bank, respectively if and to the extent it deems such change to be necessary, appropriate or desirable;
provided, however,
that no such change shall (a) alter or change
the Merger Consideration in any way; (b) adversely affect the tax treatment of LSBGs shareholders pursuant to this Agreement; (c) adversely affect the tax treatment of BHB or LSBG pursuant to this Agreement; or (d) be reasonably
likely to materially impede or delay consummation of the transactions contemplated by this Agreement or the Plan of Bank Merger. In the event BHB
2
makes such a change, LSBG agrees to execute an appropriate amendment to this Agreement or the Plan of Bank Merger, as applicable, in order to reflect such change.
Section 1.09
Additional Actions
. If, at any time after the Effective Time, BHB shall consider or be advised that any
further deeds, documents, assignments or assurances in law or any other acts are necessary or desirable to (i) vest, perfect or confirm, or record or otherwise, in BHB its right, title or interest in, to or under any of the rights, properties
or assets of LSBG, or (ii) otherwise carry out the purposes of this Agreement, LSBG and its officers and directors shall be deemed to have granted to BHB an irrevocable power of attorney to execute and deliver, in such official corporate
capacities, all such deeds, assignments or assurances in law or any other acts as are necessary or desirable to (a) vest, perfect or confirm, of record or otherwise, in BHB its right, title or interest in, to or under any of the rights,
properties or assets of LSBG or (b) otherwise carry out the purposes of this Agreement, and the officers and directors of BHB are authorized in the name of LSBG or otherwise to take any and all such action.
Section 1.10
Absence of Control
.
It is the intent of the parties to this Agreement that BHB by reason of this
Agreement shall not be deemed (until consummation of the transactions contemplated herein) to control, directly or indirectly, LSBG and shall not exercise or be deemed to exercise, directly or indirectly, a controlling influence over the management
or policies of LSBG.
Section 1.11
Lake Sunapee Bank Name and Branding
. It is the intent of the parties to this
Agreement that, from and after the Effective Time, all Lake Sunapee Bank locations in New Hampshire and Vermont (a) shall be maintained and remain in operation (unless such maintenance and operation would not be commercially reasonable) and
(b) shall operate under the Lake Sunapee Bank brand (subject to any reference to Bar Harbor Bank required by applicable regulations).
ARTICLE II
CONSIDERATION; EXCHANGE PROCEDURES
Section 2.01
Merger Consideration
. Subject to the provisions of this Agreement, by virtue of the Merger, automatically and
without any action on the part of the holder thereof, each share of LSBG Common Stock issued and outstanding at the Effective Time, other than Excluded Shares, shall become and be converted into, as provided in and subject to the limitations set
forth in this Agreement, the right to receive 0.4970 shares (the Exchange Ratio) of BHB Common Stock plus cash in lieu of Fractional Shares as provided for in Section 2.03 (the Merger Consideration).
Section 2.02
Rights as Shareholders; Stock Transfers
. At the Effective Time, holders of LSBG Common Stock shall cease to
be, and shall have no rights as, shareholders of LSBG other than the right to receive the Merger Consideration provided under this Article II. Upon and after the Effective Time, there shall be no transfers on the stock transfer books of LSBG of
shares of LSBG Common Stock.
Section 2.03
No Fractional Shares
. Notwithstanding any other provision of this
Agreement, neither certificates nor scrip for fractional shares of BHB Common Stock (Fractional Shares) shall be issued in the Merger. Each holder of a Certificate who otherwise would have been entitled to a fraction of a share of BHB
Common Stock shall receive in lieu thereof cash (without interest) in an amount determined by multiplying the fractional share interest to which such holder would otherwise be entitled (after taking into account all shares of LSBG Common Stock owned
by such holder at the Effective Time) by the BHB Share Price. No such holder shall be entitled to dividends, voting rights or any other rights in respect of any fractional share.
Section 2.04
Treasury Shares; Shares Owned by the Parties
. Notwithstanding any other provision of this Agreement, all
shares of LSBG Common Stock that are (i) held by LSBG as treasury shares or (ii) owned by BHB or any of its Subsidiaries immediately prior to the Effective Time, shall be cancelled and retired and
3
shall cease to exist, and no shares of BHB Common Stock or other consideration shall be delivered in exchange therefor. Any shares of BHB Common Stock that are owned by LSBG or any of its
Subsidiaries immediately prior to the Effective Time shall be cancelled and retired.
Section 2.05
Reserved
.
Section 2.06
Exchange Procedures
.
(a) Appropriate transmittal materials (Letter of Transmittal) in a form satisfactory to BHB and LSBG shall be mailed as soon as
practicable, but in no event later than five Business Days after the Closing Date, after the Effective Time to each holder of record of LSBG Common Stock as of the Effective Time. A Letter of Transmittal will be deemed properly completed only if
accompanied by certificates representing all shares of LSBG Common Stock (Certificate(s)) to be converted thereby.
(b) At and
after the Effective Time, each Certificate shall represent only the right to receive the Merger Consideration.
(c) Prior to the Effective
Time, BHB shall (i) reserve for issuance with its transfer agent and registrar a sufficient number of shares of BHB Common Stock to provide for payment of the aggregate Merger Consideration pursuant to Section 2.07 and (ii) deposit,
or cause to be deposited, with American Stock Transfer & Trust Company, LLC (the Exchange Agent), for the benefit of the holders of shares of LSBG Common Stock, for exchange in accordance with this Section 2.06, an amount
of cash sufficient to pay any cash in lieu of Fractional Shares pursuant to Section 2.03.
(d) The Letter of Transmittal shall
(i) specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent, (ii) be in a form and contain any other provisions as are reasonably
satisfactory to LSBG and BHB and (iii) include instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon the proper surrender of the Certificates to the Exchange Agent, together with a
properly completed and duly executed Letter of Transmittal, the holder of such Certificates shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of BHB Common Stock that such holder has the right
to receive pursuant to Section 2.01, and a check in the amount equal to the cash in lieu of Fractional Shares, if any, that such holder has the right to receive pursuant to Section 2.03, and any dividends or other distributions to which
such holder is entitled pursuant to this Section 2.06. Certificates so surrendered shall forthwith be canceled. As soon as practicable following receipt of the properly completed Letter of Transmittal and any necessary accompanying
documentation, the Exchange Agent shall distribute BHB Common Stock and cash as provided herein. The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to the shares of BHB Common Stock held by it from time
to time hereunder, except that it shall receive and hold all dividends or other distributions paid or distributed with respect to such shares for the account of the persons entitled thereto. If there is a transfer of ownership of any shares of LSBG
Common Stock not registered in the transfer records of LSBG, the Merger Consideration shall be issued to the transferee thereof if the Certificates representing such LSBG Common Stock are presented to the Exchange Agent, accompanied by all documents
required, in the reasonable judgment of BHB and the Exchange Agent, to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid.
(e) No dividends or other distributions declared or made after the Effective Time with respect to BHB Common Stock issued pursuant to this
Agreement shall be remitted to any person entitled to receive shares of BHB Common Stock hereunder until such person surrenders his or her Certificates in accordance with this Section 2.06. Upon the surrender of such persons Certificates,
such person shall be entitled to receive any dividends or other distributions, without interest thereon, which subsequent to the Effective Time had become payable but not paid with respect to shares of BHB Common Stock represented by such
persons Certificates.
4
(f) The stock transfer books of LSBG shall be closed immediately upon the Effective Time and from
and after the Effective Time there shall be no transfers on the stock transfer records of LSBG of any shares of LSBG Common Stock. If, after the Effective Time, Certificates are presented to BHB, they shall be canceled and exchanged for the Merger
Consideration deliverable in respect thereof pursuant to this Agreement in accordance with the procedures set forth in this Section 2.06.
(g) Any portion of the aggregate amount of cash to be paid pursuant to Section 2.03, any dividends or other distributions to be paid
pursuant to this Section 2.06 or any proceeds from any investments thereof that remains unclaimed by the shareholders of LSBG for nine months after the Effective Time shall be repaid by the Exchange Agent to BHB upon the written request of BHB.
After such request is made, any shareholders of LSBG who have not theretofore complied with this Section 2.06 shall look only to BHB for the Merger Consideration and cash in lieu of Fractional Shares, if any, deliverable in respect of each
share of LSBG Common Stock such shareholder holds, as determined pursuant to Section 2.06 of this Agreement, without any interest thereon. If outstanding Certificates are not surrendered prior to the date on which such payments would otherwise
escheat to or become the property of any governmental unit or agency, the unclaimed items shall, to the extent permitted by any abandoned property, escheat or other applicable laws, become the property of BHB (and, to the extent not in its
possession, shall be paid over to it), free and clear of all claims or interest of any person previously entitled to such claims. Notwithstanding the foregoing, neither the Exchange Agent nor any party to this Agreement (or any affiliate thereof)
shall be liable to any former holder of LSBG Common Stock for any amount delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.
(h) BHB and the Exchange Agent shall be entitled to rely upon LSBGs stock transfer books to establish the identity of those persons
entitled to receive the Merger Consideration, which books shall be conclusive with respect thereto. In the event of a dispute with respect to ownership of stock represented by any Certificate, BHB and the Exchange Agent shall be entitled to deposit
any Merger Consideration and cash in lieu of Fractional Shares, if any, represented thereby in escrow with an independent third party and thereafter be relieved with respect to any claims thereto.
(i) If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Exchange Agent or BHB, the posting by such person of a bond in such amount as the Exchange Agent may direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration and cash in lieu of Fractional Shares, if any, deliverable in respect thereof pursuant to Section 2.03.
Section 2.07
Reservation of Shares
. Effective upon the date of this Agreement, BHB shall reserve for issuance a sufficient
number of shares of the BHB Common Stock for the purpose of issuing shares of BHB Common Stock to LSBG shareholders in accordance with this Article II.
Section 2.08
Listing of Additional Shares
. Prior to the Effective Time, BHB shall notify NYSE of the additional shares of
BHB Common Stock to be issued by BHB in exchange for the shares of LSBG Common Stock.
Section 2.09
Effect on Outstanding
Shares of BHB Common Stock
. At the Effective Time, each share of BHB Common Stock issued and outstanding immediately prior to the Effective Time shall remain an issued and outstanding share of common stock of the Surviving Corporation and shall
not be affected by the Merger.
Section 2.10
Effect on Outstanding LSBG Equity Awards
. Each unvested award of
restricted stock issued by LSBG and outstanding at the Effective Time pursuant to the LSBG 2014 Stock Incentive Plan (each, a LSBG Restricted Share Award) shall be fully vested as of the Effective Time and converted into BHB Common Stock
in the same manner as any other outstanding share of LSBG Common Stock pursuant to the terms of this Article II.
5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LSBG
As a material inducement to BHB to enter into this Agreement and to consummate the transactions contemplated hereby, LSBG hereby makes to BHB
the representations and warranties contained in this Article III.
Section 3.01
Organization, Standing and Authority
of LSBG
. LSBG is a Delaware corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and is duly registered as a bank holding company under the Home Owners Loan Act of 1933, as amended, as
administered by the FRB. LSBG has full corporate power and authority to carry on its business as now conducted. LSBG is duly licensed or qualified to do business in the States of the United States and foreign jurisdictions where its ownership or
leasing of property or the conduct of its business requires such qualification, except where the failure to be so qualified or licensed and in good standing would not have a Material Adverse Effect on LSBG. The Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws of LSBG, copies of which have been made available to BHB, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement.
Section 3.02
Organization, Standing and Authority of Lake Sunapee Bank
.
Lake Sunapee Bank is a federally chartered
savings association duly organized, validly existing and in good standing under the laws of the State of New Hampshire. Lake Sunapee Banks deposits are insured by the FDIC in the manner and to the fullest extent provided by applicable law, and
all premiums and assessments required to be paid in connection therewith have been paid by Lake Sunapee Bank when due. Lake Sunapee is a member in good standing of the FHLB and owns the requisite amount of stock in the FHLB as set forth on
LSBG
Disclosure Schedule 3.02
. The charter and Bylaws of Lake Sunapee Bank, copies of which have been made available to BHB, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement.
Section 3.03
LSBG Capital Stock
.
(a) The authorized capital stock of LSBG consists of 32,500,000 shares, of which 30,000,000 are common stock, $0.01 par value per share, of
which 8,381,713 shares are outstanding as of the date hereof (LSBG Common Stock), and 2,500,000 shares are preferred stock, $0.01 par value per share, none of which are outstanding as of the date hereof (LSBG Preferred
Stock). As of the date hereof, there are 434,329 shares of LSBG Common Stock held in treasury by LSBG. The outstanding shares of LSBG Common Stock and LSBG Preferred Stock have been duly authorized and validly issued and are fully paid and
non-assessable and free of preemptive rights. LSBG does not have any Rights issued or outstanding with respect to LSBG Common Stock or LSBG Preferred Stock and LSBG does not have any commitment to authorize, issue or sell any LSBG Common Stock, LSBG
Preferred Stock or Rights.
(b)
LSBG Disclosure Schedule 3.03(b)
contains a list setting forth, as of the date of this Agreement,
all outstanding LSBG Restricted Share Awards, a list of all holders with respect to each such award including identification of any such grantees that are not current or former employees, directors or officers of LSBG, the date of grant, and any
vesting schedule applicable to each unvested award. No election has been made with respect to any LSBG Restricted Share Award pursuant to Section 83(b) of the Code. Upon issuance in accordance with the terms of the outstanding award agreements,
the shares of LSBG Common Stock issued pursuant to the LSBG Restricted Share Awards shall be issued in compliance with all applicable laws.
Section 3.04
Subsidiaries
. Except as disclosed on
LSBG Disclosure Schedule 3.04
, LSBG does not have any equity
interest, direct or indirect, in any other bank or corporation or in any partnership, joint venture or other business enterprise or entity, and the business carried on by LSBG has not been conducted through any other direct or indirect Subsidiary or
Affiliate of LSBG. All of the issued and outstanding shares of
6
capital stock or other equity ownership interests of each Subsidiary of LSBG are owned by LSBG, directly or indirectly, free and clear of any Liens, and all such shares or equity ownership
interests are duly authorized and validly issued and are fully paid and nonassessable and free of preemptive rights. No such Subsidiary has any Rights issued or outstanding with respect to its capital stock or other equity ownership interests, and
it does not have any commitment to authorize, issue or sell any capital stock or other equity ownership interests or Rights. No equity investment identified in
LSBG Disclosure Schedule 3.04
is prohibited by the State of New Hampshire, the New
Hampshire Banking Department, the OCC or the FDIC.
Section 3.05
Corporate Power; Minute Books
. Each of LSBG and Lake
Sunapee Bank has the corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets; and each of LSBG and Lake Sunapee Bank has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions contemplated hereby, subject to receipt of all necessary approvals of Governmental Authorities and the approval of the shareholders of LSBG and BHB of this Agreement.
The minute books of LSBG, true and complete copies of which have been made available to BHB, contain true, complete and accurate records of all meetings and other corporate actions held or taken by shareholders of LSBG and the LSBG Board (including
committees of the LSBG Board).
Section 3.06
Execution and Delivery
. Subject to the approval of this Agreement by the
shareholders of LSBG, this Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action of LSBG and the LSBG Board on or prior to the date hereof. The LSBG Board has directed that this Agreement be
submitted to LSBGs shareholders for approval at a meeting of such shareholders and, except for the approval and adoption of this Agreement by the requisite affirmative vote of the holders of the outstanding shares of LSBG Common Stock entitled
to vote thereon, no other vote of the shareholders of LSBG is required by law, the Amended and Restated Certificate of Incorporation, the Amended and Restated Bylaws of LSBG or otherwise to approve this Agreement and the transactions contemplated
hereby. LSBG has duly executed and delivered this Agreement and, assuming due authorization, execution and delivery by BHB, this Agreement is a valid and legally binding obligation of LSBG, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors rights or by general equity principles).
Section 3.07
Regulatory Approvals; No Defaults
.
(a) Except as disclosed on
LSBG Disclosure Schedule 3.07
, no consents or approvals of, or waivers by, or filings or registrations with,
any Governmental Authority or with any third party are required to be made or obtained by LSBG or any of its Subsidiaries in connection with the execution, delivery or performance by LSBG or Lake Sunapee Bank of this Agreement or to consummate the
transactions contemplated hereby, except for (i) filings of applications or notices with, and consents, approvals or waivers by the OCC, as may be required, and (ii) the approval of this Agreement by the requisite affirmative vote of the
holders of the outstanding shares of LSBG Common Stock. As of the date hereof, LSBG is not aware of any reason why the approvals set forth above and referred to in Section 6.01(a) will not be received in a timely manner.
(b) Subject to receipt, or the making, of the consents, approvals, waivers and filings referred to in the preceding paragraph, and the
expiration of related waiting periods, the execution, delivery and performance of this Agreement by LSBG, as applicable, and the consummation of the transactions contemplated hereby do not and will not (i) constitute a breach or violation of,
or a default under, the charter or Bylaws (or similar governing documents) of LSBG or any of its Subsidiaries, (ii) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to LSBG or any of
its Subsidiaries, or any of their properties or assets or (iii) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of LSBG or
any
7
of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, contract, agreement or other instrument or obligation
to which LSBG or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected.
Section 3.08
Financial Statements
. LSBG has previously made available to BHB copies of (i) the consolidated balance
sheets of LSBG as of December 31 for the fiscal years 2015 and 2014, and the related consolidated statements, comprehensive income, changes in stockholders equity, and cash flows for the fiscal years 2015, 2014 and 2013, in each case
accompanied by the audit report of Baker Newman and Noyes, LLC (or its predecessor Shatswell, Macleod & Company, P.C.), the independent registered public accounting firm of LSBG (the LSBG Financial Statements) and (ii) the
consolidated report of condition and income filed with the FDIC by Lake Sunapee Bank for the period ended December 31, 2015. The LSBG Financial Statements (including the related notes, where applicable) fairly present in all material respects
the results of the operations and financial position of LSBG and its consolidated Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth; each of such statements (including the related notes, where applicable)
complies with applicable accounting requirements; and each of such statements (including the related notes, where applicable) has been prepared in accordance with GAAP consistently applied during the periods involved. The books and records of LSBG
have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. Baker Newman and Noyes, LLC has not resigned or been dismissed as independent public
accountants of LSBG as a result of or in connection with any disagreements with LSBG on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
Section 3.09
Securities Filings
. Other than as disclosed on
LSBG Disclosure Schedule 3.09
, LSBG has filed with the
SEC all reports, schedules, registration statements, definitive proxy statements and other documents that it has been required to file under the Securities Act or the Exchange Act since December 31, 2013 (collectively, LSBGs SEC
Reports). None of LSBGs SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under
which they were made, not misleading. As of their respective dates of filing with the SEC, all of LSBGs SEC Reports complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder. Each of the financial statements (including, in each case, any notes thereto) of LSBG included or incorporated by reference in LSBGs SEC Reports complied as to form, as of
their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto. There are no outstanding comments from or unresolved issues
raised by the SEC staff with respect to LSBGs SEC Reports. None of LSBGs Subsidiaries is required to file periodic reports with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
Section 3.10
Absence of Certain Changes or Events
.
(a) Since December 31, 2015, there has been no change or development or combination of changes or developments which, individually or in
the aggregate, has had or is reasonably likely to have a Material Adverse Effect on LSBG.
(b) Since December 31, 2015, each of LSBG
and its Subsidiaries has carried on its business only in the ordinary and usual course of business consistent with its past practices (except for the incurrence of expenses in connection with this Agreement).
(c) Except as set forth in
LSBG Disclosure Schedule 3.10
, since December 31, 2015, none of LSBG or any of its Subsidiaries has
(i) increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any officer, employee or director from the amount thereof in effect as of December 31, 2015, granted any severance or termination
pay, entered into any contract to make or grant any severance or termination pay, or paid any bonus, (ii) declared, set aside or paid any dividend or other distribution (whether in
8
cash, stock or property) with respect to any of its capital stock, (iii) effected or authorized any split, combination or reclassification of any of its capital stock or any issuance or
issued any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iv) changed any accounting methods (or underlying assumptions), principles or practices affecting its assets, liabilities or business,
including any reserving, renewal or residual method, practice or policy, except in accordance with GAAP, (v) made any tax election or any settlement or compromise of any income tax liability, (vi) made any material change in its policies
and procedures in connection with underwriting standards, origination, purchase and sale procedures or hedging activities with respect to any Loans, (vii) suffered any strike, work stoppage, slow-down, or other labor disturbance,
(viii) been a party to a collective bargaining agreement, contract or other agreement or understanding with a labor union or organization, (ix) had any union organizing activities or (x) made any agreement or commitment (contingent or
otherwise) to do any of the foregoing.
Section 3.11
Absence of Undisclosed Liabilities
. None of LSBG or any of its
Subsidiaries has any liabilities or obligations, whether accrued, absolute, contingent or otherwise, known or unknown, whether due or to become due, whether or not required to be disclosed in a balance sheet prepared in accordance with GAAP, except
for those (i) liabilities properly accrued or reserved against in the consolidated balance sheet of LSBG as of December 31, 2015 included in the LSBG SEC Reports, (ii) liabilities and obligations incurred since December 31, 2015
in the ordinary course of business consistent with past practice, (iii) liabilities and obligations that are not material to LSBG and its Subsidiaries, taken as a whole, and (iv) any liabilities and obligations incurred with respect to the
transactions contemplated by this Agreement.
Section 3.12
Financial Controls and Procedures
. During the periods
covered by the LSBG Financial Statements, each of LSBG and its Subsidiaries has had in place internal controls over financial reporting which are designed and maintained to ensure that (i) transactions are executed in accordance with
managements general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets, (iii) access to assets is
permitted only in accordance with managements general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to
any differences. None of LSBGs or any of its Subsidiaries records, systems, controls, data or information are recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of LSBG or its accountants or agents.
Section 3.13
Regulatory Matters
.
(a) Each of LSBG and its Subsidiaries has timely filed all reports, registrations and statements, together with any amendments required to be
made with respect thereto, that it was required to file since December 31, 2012 with any Governmental Authority, and has paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by any
Governmental Authority in the regular course of the business, and except as set forth in
LSBG Disclosure Schedule 3.13(a)
, no Governmental Authority has initiated any proceeding, or to the Knowledge of LSBG, investigation into the business or
operations of LSBG or any of its Subsidiaries, since December 31, 2012. Other than as set forth in
LSBG Disclosure Schedule 3.13(a)
, there is no unresolved violation, criticism, or exception by any Governmental Authority with respect to
any report or statement relating to any examinations of Lake Sunapee Bank. Lake Sunapee Bank is well-capitalized as defined in applicable laws and regulations, and Lake Sunapee Bank has a Community Reinvestment Act of 1977, as amended
(the Community Reinvestment Act), rating of satisfactory or better.
(b) LSBG has timely filed with the SEC and
NASDAQ all documents required by the Securities Act and the Exchange Act, and such documents, as the same may have been amended, complied, at the time filed with the SEC, in all material respects with the Securities Act and the Exchange Act.
9
(c) Other than as set forth in
LSBG Disclosure Schedule 3.13(c)
, neither LSBG nor Lake
Sunapee Bank is a party to or is subject to any order, decree, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter (each a Regulatory
Order) from, any Governmental Authority charged with the supervision or regulation of financial institutions or issuers of securities or engaged in the insurance of deposits or the supervision or regulation of it. Each of LSBG and Lake Sunapee
Bank has not been advised by, or has any Knowledge of facts which could give rise to an advisory notice by, any Governmental Authority that such Governmental Authority is contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any Regulatory Order.
Section 3.14
Legal Proceedings
.
(a) Other than as set forth in
LSBG Disclosure Schedule 3.14
, there are no pending or, to LSBGs Knowledge, threatened legal,
administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against LSBG or any of its Subsidiaries.
(b) Other than as set forth in
LSBG Disclosure Schedule 3.14
, none of LSBG or any of its Subsidiaries is a party to any, or are there
any pending or, to LSBGs Knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against LSBG or any of its Subsidiaries in which, to the Knowledge
of LSBG, there is a reasonable probability of any material recovery against or other Material Adverse Effect on LSBG or any of its Subsidiaries or which challenges the validity or propriety of the transactions contemplated by this Agreement.
(c) There is no injunction, order, judgment or decree imposed upon LSBG or any of its Subsidiaries, or their respective assets, and none of
LSBG or any of its Subsidiaries has been advised of, or is aware of, the threat of any such action.
Section 3.15
Compliance with Laws
.
(a) Each of LSBG and its Subsidiaries is in compliance with all applicable federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including the Equal Credit Opportunity Act, as amended, the Fair Housing Act, as amended, the Community
Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act of 1970, as amended, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, and all other applicable
fair lending and fair housing laws or other laws relating to discrimination;
(b) Each of LSBG and its Subsidiaries has all permits,
licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Authorities that are required in order to permit it to own or lease its properties and to conduct its business as
presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to LSBGs Knowledge, no suspension or cancellation of any of them is threatened; and
(c) Other than as set forth in
LSBG Disclosure Schedule 3.15
, none of LSBG or any Subsidiary has received, since December 31,
2013, any notification or communication from any Governmental Authority (i) asserting that it is not in compliance with any of the statutes, regulations or ordinances which such Governmental Authority enforces or (ii) threatening to revoke
any license, franchise, permit or governmental authorization (nor, to LSBGs Knowledge, do any grounds for any of the foregoing exist).
Section 3.16
Material Contracts; Defaults
.
(a) Other than as set forth in
LSBG Disclosure Schedule 3.16(a)
, none of LSBG or any of its Subsidiaries is a party to, bound by or
subject to any agreement, contract, arrangement, commitment or
10
understanding (whether written or oral): (i) with respect to the employment of any directors, officers, employees or consultants; (ii) which would entitle any present or former
director, officer, employee or agent of LSBG or any Subsidiary to indemnification from LSBG or such Subsidiary; (iii) which is not terminable on sixty (60) days or less notice and involving the payment of more than $25,000 per annum;
(iv) which materially restricts the conduct of any business by LSBG or any Subsidiary or (v) which is a material contract (as such term is defined in Item 601(b)(1) of Regulation S-K of the SEC) not filed as an exhibit to
LSBGs Annual Report on Form 10-K for the year ended December 31, 2015 or a subsequently filed Current Report on Form 8-K or Quarterly Report on Form 10-Q of LSBG (collectively, Material Contracts). LSBG has previously
delivered to BHB true, complete and correct copies of each such document.
(b) To LSBGs Knowledge, none of LSBG or any of its
Subsidiaries is in default under any contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party, by which its assets, business, or operations may be bound or affected, or under which it or its
assets, business, or operations receives benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. Except as set forth in
LSBG Disclosure Schedule 3.16(b)
, no
power of attorney or similar authorization given directly or indirectly by LSBG or any of its Subsidiaries is currently outstanding.
Section 3.17
Brokers
. LSBG has received the opinion of Griffin Financial Group LLC to the effect that, as of the date
hereof, the Exchange Ratio is fair, from a financial point of view, to LSBGs shareholders. Other than for financial advisory services performed for LSBG by Griffin Financial Group LLC pursuant to an agreement dated April 11, 2016, a true
and complete copy of which has been previously delivered or made available to BHB, neither LSBG nor any of its Subsidiaries, nor any of their respective officers, directors, employees or agents, has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or finders fees, and no broker or finder has acted directly or indirectly for LSBG or any of its Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
Section 3.18
Employee Benefit Plans
.
(a) All benefit and compensation plans, contracts, policies or arrangements covering current or former employees of LSBG (the LSBG
Employees) and current or former directors of LSBG including, but not limited to, employee benefit plans within the meaning of Section 3(3) of LSBG, and deferred compensation, stock option, stock purchase, stock appreciation
rights, stock based, incentive and bonus plans (the LSBG Benefit Plans), are identified in
LSBG Disclosure Schedule 3.18(a)
. True and complete copies of all LSBG Benefit Plans including, but not limited to, any trust instruments
and insurance contracts forming a part of any LSBG Benefit Plans and all amendments thereto, have been provided to BHB. With respect to the LSBG Benefit Plans, true and complete copies of the following have been provided to BHB, where applicable:
(i) a copy of the most recent determination, opinion or advisory letter from the Internal Revenue Service, (ii) a copy of the three most recently filed Forms 5500 and summary annual reports, with schedules and financial statements
attached, (iii) actuarial valuations and reports for the three most recently completed plan years, and (iv) copies of material notices, letters or other correspondence from any Governmental Authority, copies of current and prior IRS or DOL
audits or inquiries, and any filings under any amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Authority. Except as set forth in
LSBG Disclosure Schedule 3.18(a)
, LSBG may amend or
terminate any such LSBG Benefit Plan at any time without incurring any material liability thereunder.
(b) Each LSBG Benefit Plan covering
LSBG Employees are in substantial compliance with its terms and all applicable laws (including ERISA, the Code, and the Affordable Care Act). Each LSBG Benefit Plan which is an employee pension benefit plan within the meaning of
Section 3(2) of ERISA (a LSBG Pension Plan) and which is intended to be qualified under Section 401(a) of the Code, has received a favorable determination letter from the IRS, and to the Knowledge of LSBG, there are no
circumstances likely to result in revocation of any such favorable determination letter or the loss of the qualification of such LSBG Pension Plan under Section 401(a) of the Code. There is no pending or, to LSBGs Knowledge, threatened
investigation, audit,
11
or litigation relating to the LSBG Benefit Plans. LSBG has not engaged in a transaction with respect to any LSBG Benefit Plan or LSBG Pension Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject LSBG to a material tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.
(c) No LSBG Pension Plan is an employee stock ownership plan (as defined in Section 4975(e)(7) of the Code). Except as
identified in
LSBG Disclosure Schedule 3.18(c)
, neither LSBG nor or any entity which is considered one employer with LSBG under Section 4001 of ERISA or Section 414 of the Code (a LSBG ERISA Affiliate) has ever sponsored
a LSBG Pension Plan that is subject to Title IV of ERISA. Neither LSBG nor any LSBG ERISA Affiliate has ever sponsored or contributed to any multiemployer plan, as defined in Section 3(37) of ERISA or multiple employer
plan, as defined in Section 4063 of ERISA. No liability to any Governmental Entity, other than PBGC premiums arising in the ordinary course of business, has been or is expected by LSBG or any Subsidiary with respect to any LSBG Benefit
Plan which is subject to Title IV of ERISA (LSBG Defined Benefit Plan) currently or formerly maintained by LSBG or any LSBG ERISA Affiliate. No notice of a reportable event, within the meaning of Section of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be filed for any LSBG Defined Benefit Plan or by any LSBG ERISA Affiliate within the 12 month period ending on the date hereof or will be required to be filed in connection
with the transactions contemplated by this Agreement. No LSBG Defined Benefit Plan or single-employer plan of any LSBG ERISA Affiliate has an accumulated funding deficiency (whether or not waived) within the meaning of Section 412
of the Code or Section 302 of ERISA and no ERISA Affiliate has an outstanding funding waiver. LSBG has not provided, and is not required to provide, security to any LSBG Defined Benefit Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code. No complete or partial termination of any LSBG Defined Benefit Plan has occurred or is expected to occur. Neither LSBG nor any LSBG ERISA Affiliate has ever contributed to, sponsored or maintained any
multiple employer welfare arrangement within the meaning of Section 3(40) of ERISA.
(d) All material contributions
required to be made under the terms of any LSBG Benefit Plan and applicable law have been timely made, and all anticipated contributions and funding obligations are accrued on LSBGs consolidated financial statements to the extent required by
GAAP. LSBG and its Subsidiaries have expensed and accrued as a liability the present value of future benefits under each applicable LSBG Benefit Plan for financial reporting purposes as required by GAAP.
(e) Other than as set forth in
LSBG Disclosure Schedule 3.18(e)
, none of LSBG or any of its Subsidiaries has any obligations for
retiree health and life benefits under any LSBG Benefit Plan, other than coverage as may be required under Section 4980B of the Code or Part 6 of Title I of ERISA, or under the continuation of coverage provisions of the laws of any state or
locality.
(f) Other than as set forth in
LSBG Disclosure Schedule 3.18(f)
, the execution of this Agreement, shareholder approval
of this Agreement or consummation of any of the transactions contemplated by this Agreement (either alone or upon the occurrence of any additional or subsequent events) will not (i) entitle any LSBG Employees to severance pay or any increase in
severance pay upon any termination of employment after the date hereof, (ii) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the
amount payable or trigger any other material obligation pursuant to, any of the LSBG Benefit Plans, (iii) result in any breach or violation of, or a default under, any of the LSBG Benefit Plans, (iv) result in any payment that would be a
parachute payment to a disqualified individual as those terms are defined in Section 280G of the Code, without regard to whether such payment is reasonable compensation for personal services performed or to be performed
in the future, (v) limit or restrict the right of LSBG, or after the consummation of the transactions contemplated herby, BHB or Surviving Corporation, to merge amend, or terminate any of the LSBG Benefit Plans, or (vi) result in payments
that would not be deductible under Section 162(m) of the Code.
LSBG Disclosure Schedule 3.18(f)
contains a schedule showing the present value of the monetary amounts payable as of the date specified in such schedule, whether individually
or in the aggregate (including good faith estimates of all amounts not subject to precise
12
quantification as of the date of this Agreement), under certain employment, change-in-control, severance and similar contracts, plans and arrangements with or which cover any present or former
director, officer or employee of LSBG who are entitled to any such amount and identifying the types and estimated amounts of the in-kind benefits due under any LSBG Benefit Plans (other than a plan qualified under Section 401(a) of the Code)
for each such person, specifying the assumptions in such schedule and providing estimates of other related fees or expenses.
(g) Each
LSBG Benefit Plan that is a deferred compensation plan and any deferral elections thereunder are in compliance with the terms of the plan and the operational and documentary requirements Section 409A of the Code, to the extent applicable. Other
than as disclosed on
LSBG Disclosure Schedule 3.18(g)
, LSBG does not have any obligation to gross up, indemnify or otherwise reimburse any individual for any excise taxes, interest or penalties incurred under Section 409A or
Section 4999 of the Code.
(h) Each LSBG Restricted Share Award (i) was granted in compliance with all applicable laws and all
of the terms and conditions of the applicable plan pursuant to which it was issued, (ii) has a grant date identical to the date on which the LSBG Board or the LSBGs compensation committee actually awarded it, (iii) is exempt from the
Section 409A of the Code, and (iv) qualifies for the tax and accounting treatment afforded to such award in the LSBG Tax Returns and the LSBG Financial Statements, respectively.
Section 3.19
Labor Matters
.
(a) None of LSBG or any of its Subsidiaries is a party to or bound by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is LSBG or any of its Subsidiaries the subject of a proceeding asserting that it has committed an unfair labor practice (within the meaning of the National Labor Relations Act, as amended)
or seeking to compel LSBG or any of its Subsidiaries to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving it pending or, to LSBGs Knowledge, threatened, nor is
LSBG or any of its Subsidiaries aware of any activity involving its employees seeking to certify a collective bargaining unit or engaging in other organizational activity.
(b) Since December 31, 2012, each of LSBG and its Subsidiaries has complied in all material respects with all applicable legal
requirements and employment or worker practices related to the employment of its employees and the engagement of its independent contractors, consultant, interns, or other non-employee service providers, including provisions related to wages, hours,
overtime exemption classification, independent contractor classification, leaves of absence, equal opportunity, privacy right, retaliation, immigration, wrongful discharge, occupational health and safety, workers compensation, severance,
employee handbooks or manuals, and the payment of social security and other taxes. There are no material actions, suits, complaints, charges, arbitrations, claims, disputes, grievances, or controversies pending or, to the Knowledge of LSBG,
threatened between either LSBG or any of its Subsidiaries and any of their respective present or former employees or independent contractors, consultants, interns, or other non-employee service providers, except as described in
LSBG Disclosure
Schedule 3.19(b)
.
(c) To the Knowledge of LSBG, no senior executive officer or manager of any material operations of LSBG or any of
its Subsidiaries or any material group of employees of LSBG or any of its Subsidiaries has or have any present plans to terminate their employment with LSBG or such Subsidiary.
(d) LSBG has delivered or made available to BHB a true and complete list of the names, corporate and functional titles, hire dates and full or
part-time status (collectively, LSBG Employees) as of the date hereof. Except as otherwise set forth on
LSBG Disclosure Schedule 3.19(d)
, (A) none of the LSBG Employees has a contract of employment with LSBG or any of its
Subsidiaries, (B) all LSBG Employees are employees at will whose employment is terminable without liability therefor and (C) none of the LSBG Employees has a contract with, or is otherwise entitled to receive any payments from,
LSBG or any of its Subsidiaries relating to any other bonuses, retention or stay payments, severance pay or benefits, or other perquisites or benefits.
13
Section 3.20
Environmental Matters
.
(a) To LSBGs Knowledge, LSBG and its Subsidiaries and their respective owned real properties are in material compliance with all
Environmental Laws. LSBG is not aware of, nor has LSBG or any of its Subsidiaries received notice of, any past, present, or future conditions, events, activities, practices or incidents that may interfere with or prevent the material compliance of
LSBG and its Subsidiaries with all Environmental Laws.
(b) To LSBGs Knowledge, each of LSBG and its Subsidiaries has obtained all
material permits, licenses and authorizations that are required under all Environmental Laws.
(c) To LSBGs Knowledge, no Hazardous
Substance exist on, about or within any of the owned real properties, nor have any Hazardous Substance previously existed on, about or within or been used, generated, stored, transported, disposed of, on or released from any of the Properties. The
use that each of LSBG and its Subsidiaries makes and intends to make of the owned real properties shall not result in the use, generation, storage, transportation, accumulation, disposal or release of any Hazardous Substance on, in or from any of
those properties.
(d) There is no action, suit, proceeding, investigation, or inquiry before any court, administrative agency or other
governmental authority pending or to LSBGs Knowledge threatened against LSBG or any of its Subsidiaries relating in any way to any Environmental Law. To LSBGs Knowledge, none of LSBG or any of its Subsidiaries has any liability for
remedial action under any Environmental Law. None of LSBG or any of its Subsidiaries has received any request for information by any governmental authority with respect to the condition, use or operation of any of the owned real properties or LSBG
Loan Property nor has LSBG or any of its Subsidiaries received any notice of any kind from any governmental authority or other person with respect to any violation of or claimed or potential liability of any kind under any Environmental Law with
respect to any of the owned real properties or LSBG Loan Property.
Section 3.21
Tax Matters
.
(a) Each of LSBG and its Subsidiaries has filed all Tax Returns that it was required to file under applicable laws and regulations, other than
Tax Returns that are not yet due or for which a request for extension was filed. All such Tax Returns were correct and complete in all material respects and have been prepared in substantial compliance with all applicable laws and regulations. All
Taxes due and owing by LSBG and its Subsidiaries (whether or not shown on any Tax Return) have been paid other than Taxes that have been reserved or accrued on the balance sheet of LSBG and which LSBG or such Subsidiary is contesting in good faith.
None of LSBG or any of its Subsidiaries is the beneficiary of any extension of time within which to file any Tax Return, and other than as set forth on
LSBG Disclosure Schedule 3.21(a)
, neither LSBG nor any of its Subsidiaries currently has
any open tax years. No claim has ever been made by an authority in a jurisdiction where LSBG or any Subsidiary thereof does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Liens for Taxes (other than
Taxes not yet due and payable) upon any of the assets of LSBG or any of its Subsidiaries.
(b) Each of LSBG and its Subsidiaries has
withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, shareholder, or other third party.
(c) No foreign, federal, state, or local tax audits or administrative or judicial Tax proceedings are being conducted or to the Knowledge of
LSBG are pending with respect to LSBG or any of its Subsidiaries. None of LSBG or any of its Subsidiaries has received from any foreign, federal, state, or local taxing authority (including jurisdictions where LSBG or any Subsidiary has not filed
Tax Returns) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) notice of deficiency or
14
proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against LSBG or any of its Subsidiaries.
(d) Each of LSBG and its Subsidiaries has provided BHB with true and complete copies of the United States federal, state, local, and foreign
income Tax Returns filed with respect to LSBG or such Subsidiary, as the case may be, for taxable periods ended December 31, 2015, 2014 and 2013. Each of LSBG and its Subsidiaries has delivered to BHB correct and complete copies of all
examination reports, and statements of deficiencies assessed against or agreed to by LSBG or such Subsidiary, as the case may be, filed for the years ended December 31, 2015, 2014 and 2013. Each of LSBG and its Subsidiaries has timely and
properly taken such actions in response to and in compliance with notices LSBG or such Subsidiary, as the case may be, has received from the IRS in respect of information reporting and backup and nonresident withholding as are required by law.
(e) None of LSBG or any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(f) None of LSBG or any of its Subsidiaries has been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii). Each of LSBG and its Subsidiaries has disclosed on its federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662. Other than as set forth on
LSBG Disclosure Schedule 3.21(f)
, none of LSBG or any of its Subsidiaries is a party to or
bound by any Tax allocation or sharing agreement. Except for an affiliated group with its Subsidiaries or LSBG (as applicable), none of LSBG or any of its Subsidiaries (i) has been a member of an affiliated group filing a consolidated federal
income Tax Return, or (ii) has any liability for the Taxes of any individual, bank, corporation, partnership, association, joint stock company, business trust, limited liability company, or unincorporated organization (other than LSBG or such
Subsidiary) under Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.
(g) The unpaid Taxes of LSBG and its Subsidiaries (i) did not, as of the end of the most recent period covered by LSBGs or such
Subsidiarys call reports filed on or prior to the date hereof, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the
financial statements included in LSBGs or such Subsidiarys call reports filed on or prior to the date hereof (rather than in any notes thereto), and (ii) do not exceed that reserve as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of LSBG or such Subsidiary in filing its Tax Returns. Since the end of the most recent period covered by LSBGs or any of its Subsidiarys call reports filed prior to the date
hereof, none of LSBG or any of its Subsidiaries has incurred any liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, outside the ordinary course of business consistent with past custom and practice.
(h) None of LSBG or any of its Subsidiaries shall be required to include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) closing agreement as
described in Code Section 7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (iii) intercompany transactions or any excess loss account described in Treasury
Regulations under Code Section 1502 (or any corresponding or similar provision of state, local or foreign income Tax law); (iv) installment sale or open transaction disposition made on or prior to the Closing Date; or (v) prepaid
amount received on or prior to the Closing Date.
(i) None of LSBG or any of its Subsidiaries has distributed stock of another Person or
had its stock distributed by another Person in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.
15
(j) None of LSBG or any of its Subsidiaries has participated in a listed transaction within the
meaning of Reg. Section 1.6011-4 (or any predecessor provision) and none of LSBG or any of its Subsidiaries has been notified of, or to LSBGs Knowledge has participated in, a transaction that is described as a reportable
transaction within the meaning of Reg. Section 1.6011-4(b)(1).
Section 3.22
Investment Securities
. LSBG
Disclosure Schedule 3.22 sets forth the book and market value as of March 31, 2016 of the investment securities, mortgage backed securities and securities held for sale of LSBG and its Subsidiaries, as well as, with respect to such securities,
descriptions thereof, CUSIP numbers, book values, fair values and coupon rates.
Section 3.23
Derivative Transactions
.
(a) All Derivative Transactions entered into by LSBG or any of its Subsidiaries or for the account of any of their respective customers
were entered into in accordance with applicable laws, rules, regulations and regulatory policies of any Governmental Authority, and in accordance with the investment, securities, commodities, risk management and other policies, practices and
procedures employed by LSBG and its Subsidiaries, and were entered into with counterparties believed at the time to be financially responsible and able to understand (either alone or in consultation with its advisers) and to bear the risks of such
Derivative Transactions. Each of LSBG and its Subsidiaries has duly performed all of its obligations under the Derivative Transactions to the extent that such obligations to perform have accrued, and, to the Knowledge of LSBG, there are no breaches,
violations or defaults or allegations or assertions of such by any party thereunder.
(b) Except as set forth in
LSBG Disclosure
Schedule 3.23
, no Derivative Transactions, were it to be a Loan held by LSBG or any of its Subsidiaries, would be classified as Special Mention, Substandard, Doubtful, Loss, Classified,
Criticized, Credit Risk Assets, Concerned Loans, Watch List or words of similar import. The financial position of LSBG and its Subsidiaries under or with respect to each such Derivative Transactions
has been reflected in the books and records of LSBG in accordance with GAAP consistently applied, and no open exposure of LSBG or any of its Subsidiaries with respect to any such instrument (or with respect to multiple instruments with respect to
any single counterparty) exists.
Section 3.24
Loans; Nonperforming and Classified Assets
.
(a) Except as set forth in
LSBG Disclosure Schedule 3.24(a)
, as of the date hereof, none of LSBG or any of its Subsidiaries is a party
to any written or oral (i) loan, loan agreement, note or borrowing arrangement (including, leases, credit enhancements, commitments, guarantees and interest-bearing assets) (collectively, Loans), under the terms of which the obligor
was, as of December 31, 2015, over sixty (60) days delinquent in payment of principal or interest or in default of any other material provision, or (ii) Loan with any director, executive officer or five percent or greater shareholder
of LSBG or any of its Subsidiaries, or to the Knowledge of LSBG, any person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing.
LSBG Disclosure Schedule 3.24(a)
identifies (x) each
Loan that as of December 31, 2015 was classified as Special Mention, Substandard, Doubtful, Loss, Classified, Criticized, Credit Risk Assets, Concerned
Loans, Watch List or words of similar import by LSBG or any of its Subsidiaries or any bank examiner, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower
thereunder, and (y) each asset of LSBG that as of December 31, 2015 was classified as other real estate owned (OREO) and the book value thereof.
(b) Except as identified in
LSBG Disclosure Schedule 3.24(b)
, each Loan (i) is evidenced by notes, agreements or other evidences
of indebtedness that are true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid Liens which have been perfected and (iii) to the Knowledge of LSBG, is a legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors rights and to general equity principles.
16
(c) The loan documents with respect to each Loan were in compliance with applicable laws and
regulations and LSBGs or the applicable LSBG Subsidiarys lending policies at the time of origination of such Loans and are complete and correct.
(d) Except as set forth in
LSBG Disclosure Schedule 3.24(d)
, none of LSBG or any of its Subsidiaries is a party to any agreement or
arrangement with (or otherwise obligated to) any Person which obligates LSBG or any of its Subsidiaries to repurchase from any such Person any Loan or other asset of LSBG or any of its Subsidiaries.
Section 3.25
Tangible Properties and Assets
.
(a)
LSBG Disclosure Schedule 3.25(a)
sets forth a true, correct and complete list of all real property owned by LSBG or any of its
Subsidiaries. Except as set forth in
LSBG Disclosure Schedule 3.25(a)
, and except for properties and assets disposed of in the ordinary course of business or as permitted by this Agreement, LSBG or one of its Subsidiaries has good and clear
record and marketable title to, valid leasehold interests in or otherwise legally enforceable rights to use all of the real property, personal property and other assets (tangible or intangible), used, occupied and operated or held for use by it in
connection with its business as presently conducted in each case, free and clear of any Lien, except for (i) statutory Liens for amounts not yet delinquent and (ii) Liens incurred in the ordinary course of business or imperfections of
title, easements and encumbrances, if any, that, individually and in the aggregate, are not material in character, amount or extent, and do not materially detract from the value and do not materially interfere with the present use, occupancy or
operation of any material asset.
(b)
LSBG Disclosure Schedule 3.25(b)
sets forth a true, correct and complete schedule of all
leases, subleases, licenses and other agreements under which LSBG or any of its Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, real property (the Leases). Each of the Leases is valid, binding and
in full force and effect and, as of the date hereof, none of LSBG or any of its Subsidiaries has received a written notice of, or otherwise has Knowledge of any, default or termination with respect to any Lease. There has not occurred any event and
no condition exists that would constitute a termination event or a material breach by LSBG or any of its Subsidiaries of, or material default by LSBG or any of its Subsidiaries in, the performance of any covenant, agreement or condition contained in
any Lease, and to LSBGs Knowledge, no lessor under a Lease is in material breach or default in the performance of any material covenant, agreement or condition contained in such Lease. Except as set forth on
LSBG Disclosure Schedule
3.25(b)
, there is no pending or, to LSBGs Knowledge, threatened proceeding, action or governmental or regulatory investigation of any nature by any Governmental Authority with respect to the real property that LSBG or any of its
Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, including a pending or threatened taking of any of such real property by eminent domain. Each of LSBG and its Subsidiaries has paid all rents and other charges to
the extent due under the Leases.
Section 3.26
Intellectual Property
. LSBG Disclosure Schedule 3.26 sets forth a true,
complete and correct list of all LSBG Intellectual Property. LSBG or one of its Subsidiaries owns or has a valid license to use all LSBG Intellectual Property, free and clear of all Liens, royalty or other payment obligations (except for royalties
or payments with respect to off-the-shelf Software at standard commercial rates). LSBG Intellectual Property constitutes all of the Intellectual Property necessary to carry on the business of LSBG and its Subsidiaries as currently conducted. LSBG
Intellectual Property owned by LSBG or any of its Subsidiaries, and to the Knowledge of LSBG, all other LSBG Intellectual Property, is valid and enforceable and has not been cancelled, forfeited, expired or abandoned, and none of LSBG or any of its
Subsidiaries has received notice challenging the validity or enforceability of LSBG Intellectual Property. To the Knowledge of LSBG, the conduct of the business of LSBG and its Subsidiaries does not violate, misappropriate or infringe upon the
Intellectual Property rights of any third party. The consummation of the transactions contemplated by this Agreement will not result in the loss or impairment of the right of LSBG and its Subsidiaries to own or use any of the LSBG Intellectual
Property.
17
Section 3.27
Fiduciary Accounts
. Since December 31, 2015, each of LSBG
and its Subsidiaries has properly administered all accounts for which it is or was a fiduciary, including accounts for which it serves or served as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in
accordance with the terms of the governing documents and applicable laws and regulations. To the Knowledge of LSBG, neither LSBG nor any of its Subsidiaries nor any of their respective directors, officers or employees, has committed any breach of
trust with respect to any fiduciary account and the records for each such fiduciary account are true and correct and accurately reflect the assets of such fiduciary account.
Section 3.28
Insurance
.
(a)
LSBG Disclosure Schedule 3.28(a)
identifies all of the material insurance policies, binders, or bonds currently maintained by LSBG
or any of its Subsidiaries, other than credit-life policies (the Insurance Policies), including the insurer, policy numbers, amount of coverage, effective and termination dates and any pending claims thereunder involving more than
$50,000. Each of LSBG and its Subsidiaries is insured with reputable insurers against such risks and in such amounts as the management of LSBG reasonably has determined to be prudent in accordance with industry practices. All the Insurance Policies
are in full force and effect, none of LSBG or any of its Subsidiaries is in material default thereunder and all claims thereunder have been filed in due and timely fashion.
(b)
LSBG Disclosure Schedule 3.28(b)
sets forth a true, correct and complete description of all bank owned life insurance
(BOLI) owned by LSBG or any of its Subsidiaries, including the value of BOLI as of the end of the month prior to the date hereof. The value of such BOLI as of the date hereof is fairly and accurately reflected in the LSBG Financial
Statements in accordance with GAAP.
Section 3.29
Antitakeover Provisions
. No control share acquisition,
business combination moratorium, fair price or other form of antitakeover statute or regulation is applicable to this Agreement and the transactions contemplated hereby.
Section 3.30
Joint Proxy Statement/Prospectus
. As of the date of the Joint Proxy Statement/Prospectus and the dates of the
meeting of the shareholders of LSBG to which such Joint Proxy Statement/Prospectus relates, the Joint Proxy Statement/Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading, provided that information filed with the SEC and either incorporated by reference in the Joint Proxy Statement/Prospectus or otherwise amending the Joint
Proxy Statement/Prospectus as of a later date shall be deemed to modify information as of an earlier date, and further provided that no representation and warranty is made with respect to information relating to BHB and its Subsidiaries provided in
writing by BHB and included in the Joint Proxy Statement/Prospectus.
Section 3.31
Disclosure
. The representations and
warranties contained in this Article III, when considered as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Article III
not misleading.
Section 3.32
Charter Holding Corp.; Charter Trust Company
.
(a) Charter Holding Corp., a wholly-owned subsidiary of Lake Sunapee Bank, is a New Hampshire corporation duly organized, validly existing and
in good standing under the laws of the State of New Hampshire. The charter and bylaws of Charter Holding Corp., copies of which have been made available to BHB, are true, complete and correct copies of such documents as in full force and effect as
of the date of this Agreement.
(b) Charter Trust Company, a wholly-owned subsidiary of Charter Holding Corp. is a New Hampshire-chartered
non-depository trust company duly organized, validly existing and in good standing under the laws of the State of New Hampshire. The charter and bylaws of Charter Trust Company, copies of which have been made available to BHB, are true, complete and
correct copies of such documents as in full force and effect as of the date of this Agreement.
18
(c) Each of Charter Holding Corp. and Charter Trust Company has the corporate power and authority
to carry on its business as it is now being conducted and to own all its properties and assets.
(d) Neither Charter Holding Corp. nor
Charter Trust Company is a party to or is subject to any Regulatory Order from any Governmental Authority charged with the supervision or regulation of it. Each of Charter Holding Corp. and Charter Trust Company has not been advised by, or has any
Knowledge of facts which could give rise to an advisory notice by, any Governmental Authority that such Governmental Authority is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any Regulatory
Order.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BHB
As a material inducement to LSBG to enter into this Agreement and to consummate the transactions contemplated hereby, BHB hereby makes to LSBG
the representations and warranties contained in this Article IV.
Section 4.01
Organization, Standing and Authority
of BHB
. BHB is a Maine corporation duly organized, validly existing and in good standing under the laws of the State of Maine, and is duly registered as a savings and loan holding company under the Home Owners Loan Act of 1933, as amended.
BHB has full corporate power and authority to carry on its business as now conducted. BHB is duly licensed or qualified to do business in the States of the United States and foreign jurisdictions where its ownership or leasing of property or the
conduct of its business requires such qualification, except where the failure to be so qualified or licensed and in good standing would not have a Material Adverse Effect on BHB. The Articles of Incorporation, as amended, and Amended and Restated
Bylaws of BHB, copies of which have been made available to LSBG, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement.
Section 4.02
Organization, Standing and Authority of Bar Harbor Bank
. Bar Harbor Bank is a Maine chartered financial
institution duly organized, validly existing and in good standing under the laws of the United States. Bar Harbor Banks deposits are insured by the FDIC in the manner and to the fullest extent provided by applicable law, and all premiums and
assessments required to be paid in connection therewith have been paid by Bar Harbor Bank when due. Bar Harbor Bank is a member in good standing of the FHLB and owns the requisite amount of stock in the FHLB as set forth on
BHB Disclosure
Schedule 4.02
. The charter and Bylaws of Bar Harbor Bank, copies of which have been made available to LSBG, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement.
Section 4.03
BHB Capital Stock
.
(a) The authorized capital stock of BHB consists of 20,000,000 shares of BHB Common Stock, par value $2.00 per share, of which 6,023,077
shares are outstanding as of the date hereof, and 1,000,000 shares of authorized preferred stock, of which no shares are outstanding (BHB Preferred Stock). As of the date hereof, 765,331 shares of BHB Common Stock are held in treasury by
BHB. The outstanding shares of BHB Common Stock have been duly authorized and validly issued and are fully paid and non-assessable and free of preemptive rights. Except for the BHB Common Stock to be issued pursuant to this Agreement and pursuant to
outstanding BHB Option Awards, BHB does not have any Rights issued or outstanding with respect to BHB Common Stock or BHB Preferred Stock and BHB does not have any commitments to authorize, issue or sell any BHB Common Stock, BHB Preferred Stock or
Rights.
(b) As of the date hereof, 13,976,923 shares of BHB Common Stock are available for issuance upon the exercise of outstanding BHB
Option Awards or available for issuance pursuant to the Bar Harbor Bankshares and Subsidiaries Incentive Stock Option Plan of 2000, the 2009 Bar Harbor Bankshares and Subsidiaries Equity
19
Incentive Plan and the 2015 Bar Harbor Bankshares and Subsidiaries Equity Incentive Plan. Upon issuance in accordance with the terms of the outstanding award agreements, the shares of BHB Common
Stock issued pursuant to the BHB Option Awards shall be issued in compliance with all applicable laws.
Section 4.04
Subsidiaries
. Except as disclosed on
BHB Disclosure Schedule 4.04
, BHB does not have any equity interest, direct or indirect, in any other bank or corporation or in any partnership, joint venture or other business enterprise or entity,
and the business carried on by BHB has not been conducted through any other direct or indirect Subsidiary or Affiliate of BHB. All of the issued and outstanding shares of capital stock or other equity ownership interests of each Subsidiary of BHB
are owned by BHB, directly or indirectly, free and clear of any Liens, and all such shares or equity ownership interests are duly authorized and validly issued and are fully paid and nonassessable and free of preemptive rights. No such Subsidiary
has any Rights issued or outstanding with respect to its capital stock or other equity ownership interests, and it does not have any commitment to authorize, issue or sell any capital stock or other equity ownership interests or Rights. No equity
investment identified in
BHB Disclosure Schedule 4.04
is prohibited by the State of Maine, the MBFI or the FDIC.
Section 4.05
Corporate Power; Minute Books
. Each of BHB and Bar Harbor Bank has the corporate power and authority to carry
on its business as it is now being conducted and to own all its properties and assets; and each of BHB and Bar Harbor Bank has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby, subject to receipt of all necessary approvals of Governmental Authorities and the approval of the shareholders of LSBG and BHB of this Agreement. The minute books of BHB, true and complete copies of which have
been made available to LSBG, contain true, complete and accurate records of all meetings and other corporate actions held or taken by shareholders of BHB and the BHB Board (including committees of the BHB Board).
Section 4.06
Execution and Delivery
. Subject to the approval of this Agreement by the shareholders of BHB, this Agreement
and the transactions contemplated hereby have been authorized by all necessary corporate action of BHB and the BHB Board on or prior to the date hereof. The BHB Board has directed that this Agreement be submitted to BHBs shareholders for
approval at a meeting of such shareholders and, except for the approval and adoption of this Agreement by the requisite affirmative vote of the holders of the outstanding shares of BHB Common Stock entitled to vote thereon, no other vote of the
shareholders of BHB is required by law, the Articles of Incorporation, as amended, of BHB, the Amended and Restated Bylaws of BHB or otherwise to approve this Agreement and the transactions contemplated hereby. BHB has duly executed and delivered
this Agreement and, assuming due authorization, execution and delivery by LSBG, this Agreement is a valid and legally binding obligation of BHB, enforceable in accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors rights or by general equity principles).
Section 4.07
Regulatory Approvals; No Defaults
.
(a) No consents or approvals of, or waivers by, or filings or registrations with, any Governmental Authority or with any third party are
required to be made or obtained by BHB or any of its Subsidiaries in connection with the execution, delivery or performance by BHB or Bar Harbor Bank of this Agreement or to consummate the transactions contemplated hereby, except for
(i) filings of applications or notices with, and consents, approvals or waivers by the FRB and MBFI, as may be required, and (ii) the approval of this Agreement by the requisite affirmative vote of the holders of the outstanding shares of
BHB Common Stock. As of the date hereof, BHB is not aware of any reason why the approvals set forth above and referred to in Section 6.01(a) will not be received in a timely manner.
(b) Subject to receipt, or the making, of the consents, approvals, waivers and filings referred to in the preceding paragraph and expiration
of the related waiting periods, the execution, delivery and performance of this Agreement by BHB, and the consummation of the transactions contemplated hereby do not and will not (i) constitute a breach or violation of, or a default under, the
charter or Bylaws (or similar governing documents)
20
of BHB or any of its Subsidiaries, (ii) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to BHB or any of its Subsidiaries, or
any of their respective properties or assets or (iii) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of BHB or any of
its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, contract, agreement or other instrument or obligation to which BHB or any of its Subsidiaries is a party, or by
which they or any of their respective properties or assets may be bound or affected.
Section 4.08
Financial
Statements
. BHB has previously made available to LSBG copies of the consolidated balance sheets of BHB and its Subsidiaries as of December 31 for the fiscal years 2015 and 2014, and the related consolidated statements of income,
comprehensive income, changes in shareholders equity, and cash flows for the fiscal years 2015, 2014 and 2013, in each case accompanied by the audit report of RSM US LLP, the independent registered public accounting firm of BHB (or KMPG LLP,
the previous independent registered public accounting firm of BHB) (the BHB Financial Statements). The BHB Financial Statements (including the related notes, where applicable) fairly present in all material respects the results of the
consolidated operations and consolidated financial position of BHB and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth; each of such statements (including the related notes, where applicable)
complies with applicable accounting requirements and each of such statements (including the related notes, where applicable) has been prepared in accordance with GAAP consistently applied during the periods involved. The books and records of BHB and
its Subsidiaries have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. RSM US LLP has not resigned or been dismissed as independent public
accountants of BHB as a result of or in connection with any disagreements with BHB on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
Section 4.09
Securities Filings
. BHB has filed with the SEC all reports, schedules, registration statements, definitive
proxy statements and other documents that it has been required to file under the Securities Act or the Exchange Act since December 31, 2013 (collectively, BHBs SEC Reports). None of BHBs SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. As of their respective dates
of filing with the SEC, all of BHBs SEC Reports complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder.
Each of the financial statements (including, in each case, any notes thereto) of BHB included or incorporated by reference in BHBs SEC Reports complied as to form, as of their respective dates of filing with the SEC, in all material respects
with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto. There are no outstanding comments or unresolved issued raised by the SEC staff with respect to BHBs SEC Reports. None of
BHBs Subsidiaries is required to file periodic reports with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
Section 4.10
Absence of Certain Changes or Events
.
(a) Since December 31, 2015, there has been no change or development or combination of changes or developments which, individually or in
the aggregate, has had or is reasonably likely to have a Material Adverse Effect on BHB.
(b) Since December 31, 2015, each of BHB
and its Subsidiaries has carried on its business only in the ordinary and usual course of business consistent with its past practices (except for the incurrence of expenses in connection with this Agreement).
21
Section 4.11
Financial Controls and Procedures
. During the periods covered by
the BHB Financial Statements, each of BHB and its Subsidiaries has had in place internal controls over financial reporting which are designed and maintained to ensure that (i) transactions are executed in accordance with managements
general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in
accordance with managements general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
None of BHBs or any of its Subsidiaries records, systems, controls, data or information are recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of BHB or its accountants or agents.
Section 4.12
Regulatory Matters
.
(a) Each of BHB and its Subsidiaries has timely filed all reports, registrations and statements, together with any amendments required to be
made with respect thereto, that it was required to file since December 31, 2012 with any Governmental Authority, and has paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by any
Governmental Authority in the regular course of the business, and except as set forth in
BHB Disclosure Schedule 4.12(a)
, no Governmental Authority has initiated any proceeding, or to the Knowledge of BHB, investigation into the business or
operations of BHB and its Subsidiaries, since December 31, 2012. Other than as set forth in
BHB Disclosure Schedule 4.12(a)
there is no unresolved violation, criticism, or exception by any Governmental Authority with respect to any
report or statement relating to any examinations of Bar Harbor Bank. Bar Harbor Bank is well-capitalized as defined in applicable laws and regulations, and Bank has a Community Reinvestment Act rating of satisfactory or
better.
(b) BHB has timely filed with the SEC and NYSE all documents required by the Securities Act and the Exchange Act, and such
documents, as the same may have been amended, complied, at the time filed with the SEC, in all material respects with the Securities Act and the Exchange Act.
(c) Other than as set forth in
BHB Disclosure Schedule 4.12(c)
, neither BHB, nor any of its properties is a party to or is subject to
any Regulatory Order from any Governmental Authority charged with the supervision or regulation of financial institutions or issuers of securities or engaged in the insurance of deposits or the supervision or regulation of it. BHB has not been
advised by, or has any Knowledge of facts which could give rise to an advisory notice by, any Governmental Authority that such Governmental Authority is contemplating issuing or requesting (or is considering the appropriateness of issuing or
requesting) any Regulatory Order.
Section 4.13
Legal Proceedings
.
(a) Other than as set forth in
BHB Disclosure Schedule 4.13(a)
, there are no pending or, to BHBs Knowledge, threatened legal,
administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against BHB or any of its Subsidiaries.
(b) None of BHB or any of its Subsidiaries is a party to any, or are there any pending or, to BHBs Knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against BHB or any of its Subsidiaries in which, to the Knowledge of BHB, there is a reasonable probability of any material
recovery against or other Material Adverse Effect on BHB or any of its Subsidiaries or which challenges the validity or propriety of the transactions contemplated by this Agreement.
(c) There is no injunction, order, judgment or decree imposed upon BHB or any of its Subsidiaries, or their respective assets, and none of BHB
or any of its Subsidiaries has been advised of, or is aware of, the threat of any such action.
22
Section 4.14
Compliance with Laws
.
(a) Each of BHB and its Subsidiaries is in compliance with all applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including the Equal Credit Opportunity Act, as amended, the Fair Housing Act, as amended, the Community Reinvestment Act, the Home
Mortgage Disclosure Act, the Bank Secrecy Act of 1970, as amended, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, and all other applicable fair lending and fair housing
laws or other laws relating to discrimination;
(b) Each of BHB and its Subsidiaries has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with, all Governmental Authorities that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full force and effect and, to BHBs Knowledge, no suspension or cancellation of any of them is threatened; and
(c) Other than as set forth in
BHB Disclosure Schedule 4.14(c)
, none of BHB or any Subsidiary has received, since December 31,
2013, any notification or communication from any Governmental Authority (i) asserting that it is not in compliance with any of the statutes, regulations or ordinances which such Governmental Authority enforces, or (ii) threatening to
revoke any license, franchise, permit or governmental authorization (nor, to BHBs Knowledge, do any grounds for any of the foregoing exist).
Section 4.15
Material Contracts; Defaults
. None of BHB or any of its Subsidiaries is a party to, bound by or subject to
any agreement, contract, arrangement, commitment or understanding (whether written or oral) which is a material contract (as such item is defined in Item 601(b)(10) of
Regulation S-K
of
the SEC) not filed as an exhibit to BHBs Annual Report or a subsequently filed Current Report on
Form 8-K
or Quarterly Report on Form 10-Q of BHB. To its Knowledge, none of BHB or any of its
Subsidiaries is in default under any contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party, by which its assets, business, or operations may be bound or affected, or under which it or its
assets, business, or operations receives benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. No power of attorney or similar authorization given directly or
indirectly by BHB or any of its Subsidiaries is currently outstanding.
Section 4.16
Brokers
. BHB has received the
opinion of Sandler ONeill & Partners, L.P. to the effect that, as of the date hereof, the Exchange Ratio is fair, from a financial point of view, to BHB. Other than for financial advisory services performed for BHB by Sandler
ONeill & Partners, L.P. pursuant to an agreement dated April 19, 2016, a true and complete copy of which has been previously delivered or made available to LSBG, neither BHB nor any of its Subsidiaries, nor any of their
respective officers, directors, employees or agents, has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finders fees, and no broker or finder has acted directly or
indirectly for BHB or any of its Subsidiaries in connection with this Agreement or the transactions contemplated hereby.
Section 4.17
Employee Benefit Plans
.
(a) To the Knowledge of BHB, each BHB Benefit Plan has been operated and administered in all material respects in accordance with its terms
and with applicable law, including, but not limited to, ERISA, the Code, the Securities Act, the Exchange Act, the Age Discrimination in Employment Act, COBRA, HIPAA, and any regulations or rules promulgated thereunder, and all material filings,
disclosures and notices required by ERISA, the Code, the Securities Act, the Exchange Act, the Age Discrimination in Employment Act, COBRA, and HIPAA and any other applicable law have been timely made or any interest, fines, penalties or other
impositions for late filings have been paid in full. Neither BHB nor any of its Subsidiaries have engaged in a transaction, or omitted to take any action, with respect to any BHB Benefit Plan that would reasonably be
23
expected to subject BHB or any Subsidiary to a material unpaid tax or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
(b) No BHB Benefit Plan currently maintained by BHB or any entity which is considered one employer with BHB under Section 4001(b)(1) of
ERISA or Section 414 of the Code (an BHB ERISA Affiliate) is subject to Title IV of ERISA (BHB Defined Benefit Plan). Neither BHB nor any BHB ERISA Affiliate has contributed to any multiemployer plan, as
defined in Section 3(37) of ERISA.
Section 4.18
Labor Matters
.
(a) None of BHB or any of its Subsidiaries is a party to or bound by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is BHB or any of its Subsidiaries the subject of a proceeding asserting that it has committed an unfair labor practice (within the meaning of the National Labor Relations Act, as amended)
or seeking to compel BHB or any of its Subsidiaries to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving it pending or, to BHBs Knowledge, threatened, nor is
BHB or any of its Subsidiaries aware of any activity involving its employees seeking to certify a collective bargaining unit or engaging in other organizational activity.
(b) Since December 31, 2012, each of BHB and its Subsidiaries has complied in all material respects with all applicable legal
requirements and employment or worker practices related to the employment of its employees and the engagement of its independent contractors, consultant, interns, or other non-employee service providers, including provisions related to wages, hours,
overtime exemption classification, independent contractor classification, leaves of absence, equal opportunity, privacy right, retaliation, immigration, wrongful discharge, occupational health and safety, workers compensation, severance,
employee handbooks or manuals, and the payment of social security and other taxes. To the Knowledge of BHB, there are no material actions, suits, complaints, charges, arbitrations, claims, disputes, grievances, or controversies pending or threatened
between either BHB or any of its Subsidiaries and any of their respective present or former employees or independent contractors, consultants, interns, or other non-employee service providers.
(c) To the Knowledge of BHB, no senior executive officer or manager of any material operations of BHB or any of its Subsidiaries or any
material group of employees of BHB or any of its Subsidiaries has or have any present plans to terminate their employment with BHB or such Subsidiary.
Section 4.19
Environmental Matters
.
(a) To BHBs Knowledge, BHB and its Subsidiaries and their respective owned real properties are in material compliance with all
Environmental Laws. BHB is not aware of, nor has BHB or any of its Subsidiaries received notice of, any past, present, or future conditions, events, activities, practices or incidents that may interfere with or prevent the material compliance of BHB
and its Subsidiaries with all Environmental Laws.
(b) To BHBs Knowledge, each of BHB and its Subsidiaries has obtained all material
permits, licenses and authorizations that are required under all Environmental Laws.
(c) To BHBs Knowledge, no Hazardous Substance
exist on, about or within any of the owned real properties, nor to BHBs Knowledge have any Hazardous Substance previously existed on, about or within or been used, generated, stored, transported, disposed of, on or released from any of the
Properties. The use that each of BHB and its Subsidiaries makes and intends to make of the owned real properties shall not result in the use, generation, storage, transportation, accumulation, disposal or release of any Hazardous Substance on, in or
from any of those properties.
(d) There is no action, suit, proceeding, investigation, or inquiry before any court, administrative agency
or other governmental authority pending or to BHBs Knowledge threatened against BHB or any of its
24
Subsidiaries relating in any way to any Environmental Law. To BHBs Knowledge, none of BHB or any of its Subsidiaries has any liability for remedial action under any Environmental Law. None
of BHB or any of its Subsidiaries has received any request for information by any governmental authority with respect to the condition, use or operation of any of the owned real properties or BHB Loan Property nor has BHB or any of its Subsidiaries
received any notice of any kind from any governmental authority or other person with respect to any violation of or claimed or potential liability of any kind under any Environmental Law with respect to any of the owned real properties or BHB Loan
Property
Section 4.20
Tax Matters
.
(a) Each of BHB and its Subsidiaries has filed all Tax Returns that it was required to file under applicable laws and regulations, other than
Tax Returns that are not yet due or for which a request for extension was filed. All such Tax Returns were correct and complete in all material respects and have been prepared in substantial compliance with all applicable laws and regulations. All
Taxes due and owing by BHB and its Subsidiaries (whether or not shown on any Tax Return) have been paid other than Taxes that have been reserved or accrued on the balance sheet of BHB and which BHB or such Subsidiary is contesting in good faith.
None of BHB or any of its Subsidiaries is the beneficiary of any extension of time within which to file any Tax Return, and neither BHB nor any of its Subsidiaries currently has any open tax years. No claim has ever been made by an authority in a
jurisdiction where BHB or any Subsidiary thereof does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of BHB or any of
its Subsidiaries.
(b) Each of BHB and its Subsidiaries has withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, independent contractor, creditor, shareholder, or other third party.
(c) No
foreign, federal, state, or local tax audits or administrative or judicial Tax proceedings are being conducted or to the Knowledge of BHB are pending with respect to BHB or any of its Subsidiaries. None of BHB or any of its Subsidiaries has received
from any foreign, federal, state, or local taxing authority (including jurisdictions where BHB or any Subsidiary has not filed Tax Returns) any (i) notice indicating an intent to open an audit or other review, (ii) request for information
related to Tax matters, or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against BHB or any of its Subsidiaries.
(d) Each of BHB and its Subsidiaries has provided LSBG with true and complete copies of the United States federal, state, local, and foreign
income Tax Returns filed with respect to BHB or such Subsidiary, as the case may be, for taxable periods ended December 31, 2015, 2014 and 2013. Each of BHB and its Subsidiaries has delivered to LSBG correct and complete copies of all
examination reports, and statements of deficiencies assessed against or agreed to by BHB or such Subsidiary, as the case may be, filed for the years ended December 31, 2015, 2014 and 2013. Each of BHB and its Subsidiaries has timely and
properly taken such actions in response to and in compliance with notices BHB or such Subsidiary, as the case may be, has received from the IRS in respect of information reporting and backup and nonresident withholding as are required by law.
(e) None of BHB or any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(f) None of BHB or any of its Subsidiaries has been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii). Each of BHB or any of its Subsidiaries has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662. None of BHB or any of its Subsidiaries is a party to or bound by any Tax allocation or sharing agreement. Except for an
affiliated group with its Subsidiaries or BHB (as applicable), none
25
of BHB or any of its Subsidiaries (i) has been a member of an affiliated group filing a consolidated federal income Tax Return, or (ii) has any liability for the Taxes of any
individual, bank, corporation, partnership, association, joint stock company, business trust, limited liability company, or unincorporated organization (other than BHB or such Subsidiary) under Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or otherwise.
(g) The unpaid Taxes of BHB and its Subsidiaries
(i) did not, as of the end of the most recent period covered by BHBs or such Subsidiarys call reports filed on or prior to the date hereof, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) set forth on the face of the financial statements included in BHBs or such Subsidiarys call reports filed on or prior to the date hereof (rather than in any notes thereto), and
(ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of BHB or such Subsidiary in filing its Tax Returns. Since the end of the most recent period covered by
BHBs or any of its Subsidiarys call reports filed prior to the date hereof, none of BHB or any of its Subsidiaries has incurred any liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, outside the
ordinary course of business consistent with past custom and practice.
(h) None of BHB or any of its Subsidiaries has distributed stock of
another Person or had its stock distributed by another Person in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.
(i) None of BHB or any of its Subsidiaries has participated in a listed transaction within the meaning of Reg. Section 1.6011-4 (or any
predecessor provision) and none of BHB or any of its Subsidiaries has been notified of, or to BHBs Knowledge has participated in, a transaction that is described as a reportable transaction within the meaning of Reg.
Section 1.6011-4(b)(1).
Section 4.21
Derivative Transactions
.
(a) All Derivative Transactions entered into by BHB or any of its Subsidiaries or for the account of any of their respective customers were
entered into in accordance with applicable laws, rules, regulations and regulatory policies of any Governmental Authority, and in accordance with the investment, securities, commodities, risk management and other policies, practices and procedures
employed by BHB and its Subsidiaries, and were entered into with counterparties believed at the time to be financially responsible and able to understand (either alone or in consultation with its advisers) and to bear the risks of such Derivative
Transactions. Each of BHB and its Subsidiaries has duly performed all of its obligations under the Derivative Transactions to the extent that such obligations to perform have accrued, and, to the Knowledge of BHB, there are no breaches, violations
or defaults or allegations or assertions of such by any party thereunder.
(b) Except as set forth in
BHB Disclosure Schedule
4.21(b)
, no Derivative Transactions, were it to be a Loan held by BHB or any of its Subsidiaries, would be classified as Special Mention, Substandard, Doubtful, Loss, Classified,
Criticized, Credit Risk Assets, Concerned Loans, Watch List or words of similar import. The financial position of BHB and its Subsidiaries under or with respect to each such Derivative Transactions has
been reflected in the books and records of BHB in accordance with GAAP consistently applied, and no open exposure of BHB or any of its Subsidiaries with respect to any such instrument (or with respect to multiple instruments with respect to any
single counterparty) exists.
Section 4.22
Loans; Nonperforming and Classified Assets
.
(a) Except as set forth in
BHB Disclosure Schedule 4.22(a)
, as of the date hereof, none of BHB or any of its Subsidiaries is a party to
any written or oral (i) Loans, under the terms of which the obligor was, as of December 31, 2015, over sixty (60) days delinquent in payment of principal or interest or in default of any other material provision, or (ii) Loan
with any director, executive officer or five percent or greater shareholder of BHB
26
or any of its Subsidiaries, or to the Knowledge of BHB, any person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing.
BHB Disclosure
Schedule 4.22(a)
identifies (x) each Loan that as of December 31, 2015 was classified as Special Mention, Substandard, Doubtful, Loss, Classified, Criticized,
Credit Risk Assets, Concerned Loans, Watch List or words of similar import by BHB or any of its Subsidiaries or any bank examiner, together with the principal amount of and accrued and unpaid interest on each such
Loan and the identity of the borrower thereunder, and (y) each asset of BHB that as of December 31, 2015 was classified as OREO and the book value thereof.
(b) Each Loan (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to
be, (ii) to the extent secured, has been secured by valid Liens which have been perfected and (iii) to the Knowledge of BHB, is a legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors rights and to general equity principles.
(c) The loan documents with respect to each Loan were in compliance with applicable laws and regulations and BHBs or the applicable BHB
Subsidiarys lending policies at the time of origination of such Loans and are complete and correct.
(d) Except as set forth in
BHB Disclosure Schedule 4.22(d)
, none of BHB or any of its Subsidiaries is a party to any agreement or arrangement with (or otherwise obligated to) any Person which obligates BHB or any of its Subsidiarys to repurchase from any such
Person any Loan or other asset of BHB or any of its Subsidiaries.
Section 4.23
Tangible Properties and Assets
.
(a) Except as set forth in
BHB Disclosure Schedule 4.23(a)
, and except for properties and assets disposed of in the ordinary course of
business or as permitted by this Agreement, BHB or one of its Subsidiaries has good and clear record and marketable title to, valid leasehold interests in or otherwise legally enforceable rights to use all of the real property, personal property and
other assets (tangible or intangible), used, occupied and operated or held for use by it in connection with its business as presently conducted in each case, free and clear of any Lien, except for (i) statutory Liens for amounts not yet
delinquent and (ii) Liens incurred in the ordinary course of business or imperfections of title, easements and encumbrances, if any, that, individually and in the aggregate, are not material in character, amount or extent, and do not materially
detract from the value and do not materially interfere with the present use, occupancy or operation of any material asset.
(b) Each of
the Leases of BHB is valid, binding and in full force and effect and, as of the date hereof, BHB has not received a written notice of, and otherwise has no Knowledge of any, default or termination with respect to any Lease. There has not occurred
any event and no condition exists that would constitute a termination event or a material breach by BHB of, or material default by BHB in, the performance of any covenant, agreement or condition contained in any Lease, and to BHBs Knowledge,
no lessor under a Lease is in material breach or default in the performance of any material covenant, agreement or condition contained in such Lease. Except as set forth on
BHB Disclosure Schedule 4.23(b)
, there is no pending or, to
BHBs Knowledge, threatened proceeding, action or governmental or regulatory investigation of any nature by any Governmental Authority with respect to the real property that BHB or any of its Subsidiaries uses or occupies or has the right to
use or occupy, now or in the future, including a pending or threatened taking of any of such real property by eminent domain. Each of BHB and its Subsidiaries has paid all rents and other charges to the extent due under the Leases.
Section 4.24
Intellectual Property
. BHB or one of its Subsidiaries owns or has a valid license to use all BHB Intellectual
Property, free and clear of all Liens, royalty or other payment obligations (except for royalties or payments with respect to off-the-shelf Software at standard commercial rates). BHB Intellectual Property constitutes all of the Intellectual
Property necessary to carry on the business of BHB and its Subsidiaries as currently conducted. BHB Intellectual Property owned by BHB or any of its Subsidiaries, and to the
27
Knowledge of BHB, all other BHB Intellectual Property, is valid and enforceable and has not been cancelled, forfeited, expired or abandoned, and none BHB or any of its Subsidiaries has received
notice challenging the validity or enforceability of BHB Intellectual Property. To the Knowledge of BHB, the conduct of the business of BHB and its Subsidiaries does not violate, misappropriate or infringe upon the Intellectual Property rights of
any third party. The consummation of the transactions contemplated by this Agreement will not result in the loss or impairment of the right of BHB and its Subsidiaries to own or use any of the BHB Intellectual Property.
Section 4.25
Fiduciary Accounts
. Since December 31, 2015, each of BHB and its Subsidiaries has properly administered
all accounts for which it is or was a fiduciary, including accounts for which it serves or served as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing
documents and applicable laws and regulations. To the Knowledge of BHB, neither BHB nor any of its Subsidiaries nor any of their respective directors, officers or employees, has committed any breach of trust with respect to any fiduciary account and
the records for each such fiduciary account are true and correct and accurately reflect the assets of such fiduciary account.
Section 4.26
Insurance
.
(a) Each of BHB and its Subsidiaries is insured with reputable insurers against such risks and in such amounts as the management of BHB
reasonably has determined to be prudent in accordance with industry practices. All the Insurance Policies are in full force and effect, none of BHB or any of its Subsidiaries is in material default thereunder and all claims thereunder have been
filed in due and timely fashion.
(b)
BHB Disclosure Schedule 4.26(b)
sets forth a true, correct and complete description of all
BOLI owned by BHB or any of its Subsidiaries, including the value of BOLI as of the end of the month prior to the date hereof. The value of such BOLI as of the date hereof is fairly and accurately reflected in the BHB Financial Statements in
accordance with GAAP.
Section 4.27
Absence of Undisclosed Liabilities
.
None of BHB and its Subsidiaries has
any liabilities or obligations, whether accrued, absolute, contingent or otherwise, known or unknown, whether due or to become due, whether or not required to be disclosed in a balance sheet prepared in accordance with GAAP, except for those
(i) liabilities properly accrued or reserved against in the consolidated balance sheet of BHB as of December 31, 2015 included in the BHB SEC Reports, (ii) liabilities and obligations incurred since December 31, 2015 in the
ordinary course of business consistent with past practice, (iii) liabilities and obligations that are not material to BHB and its Subsidiaries, taken as a whole, and (iv) any liabilities and obligations incurred with respect to the
transactions contemplated by this Agreement.
Section 4.28
Antitakeover Provisions
.
No control share
acquisition, business combination moratorium, fair price or other form of antitakeover statute or regulation is applicable to this Agreement and the transactions contemplated hereby.
Section 4.29
BHB Common Stock
. The shares of BHB Common Stock to be issued pursuant to this Agreement, when issued in
accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and subject to no preemptive rights.
Section 4.30
Joint Proxy Statement/Prospectus
.
As of the date of the Joint Proxy Statement/Prospectus and the dates
of the meeting of the shareholders of BHB to which such Joint Proxy Statement/Prospectus relates, the Joint Proxy Statement/Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading, provided that information filed with the SEC and either incorporated by reference in the Joint Proxy Statement/Prospectus or otherwise amending the Joint
Proxy Statement/Prospectus as of a later date shall be deemed to modify information as of an earlier date, and further provided that no representation and warranty is made with respect to information relating to LSBG and its Subsidiaries provided in
writing by LSBG and included in the Joint Proxy Statement/Prospectus.
28
Section 4.31
Disclosure
. The representations and warranties contained in this
Article IV, when considered as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Article IV not misleading.
ARTICLE V
COVENANTS
Section 5.01
Covenants of LSBG
. During the period from the date of this Agreement and continuing until the
Effective Time, except as expressly contemplated or permitted by this Agreement or with the prior written consent of BHB, LSBG shall, and shall cause each of its Subsidiaries to, carry on its business in the ordinary course consistent with past
practice and consistent with prudent banking practice and in compliance in all material respects with all applicable laws and regulations. LSBG will, and shall cause each of its Subsidiaries to, use its reasonable best efforts to (i) preserve
its business organization intact, (ii) keep available to itself and BHB the present services of the current officers and employees of LSBG and (iii) preserve for itself and BHB the goodwill of the customers of LSBG and others with whom
business relationships exist. Without limiting the generality of the foregoing, and except as set forth in the LSBG Disclosure Schedule or as otherwise expressly contemplated or permitted by this Agreement or consented to in writing by BHB, LSBG
shall not, and shall cause each of its Subsidiaries not to:
(a)
Capital Stock
. Other than pursuant to stock options or stock-based
awards outstanding as of the date hereof and listed in the LSBG Disclosure Schedules, (i) issue, sell or otherwise permit to become outstanding, or authorize the creation or reservation of, any additional shares of capital stock or any Rights,
(ii) permit any additional shares of capital stock to become subject to grants of employee or director stock options, warrants or other Rights, or (iii) redeem, retire, purchase or otherwise acquire, directly or indirectly, any LSBG Common
Stock, or obligate itself to purchase, retire or redeem, any of its shares of LSBG Common Stock.
(b)
Dividends; Etc
.
(i) Make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on, any shares of stock other than (x) dividends from wholly owned Subsidiaries to LSBG or any other wholly owned
Subsidiary of LSBG, as applicable, or (y) regular quarterly cash dividends on LSBG Common Stock no greater than the rate paid during the fiscal quarter immediately preceding the date hereof with record and payment dates consistent with past
practice (subject to the last sentence of this clause (b)), or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its capital stock. After the date hereof, LSBG shall
coordinate with BHB regarding the declaration of any dividends in respect of LSBG Common Stock and the record dates and payment dates relating thereto, it being the intention of the parties hereto that holders of LSBG Common Stock shall not receive
two (2) dividends for any single calendar quarter with respect to their shares of LSBG Common Stock and any shares of BHB Common Stock that such holders receive in exchange therefor in the Merger.
(c)
Compensation; Employment Agreements, Etc
. Enter into or amend or renew any employment, consulting, severance or similar agreements
or arrangements with any director, officer or employee of LSBG or any of its Subsidiaries or grant any salary or wage increase or increase any employee benefit or pay any incentive or bonus payments, except (i) for normal increases in
compensation to officers, directors and employees in the ordinary course of business consistent with past practice, provided that no such increase shall be more than three percent (3%) with respect to any individual officer, director or
employee and provided further that any increases, either singularly or in the aggregate, shall be consistent with LSBGs 2016 budget, a copy of which has been made available to BHB, (ii) LSBG shall be permitted to make cash contributions
to the tax-qualified LSBG Pension Plans in the ordinary course of business consistent with past practice, (iii) LSBG shall be permitted to make cash contributions to the supplemental retirement plans in the amounts listed on
LSBG Disclosure
Schedule 5.01(c)(iii)
, (iv) LSBG and its Subsidiaries shall be permitted to pay year-end accrued bonuses for fiscal year 2016 in the ordinary course of business consistent with past practice to those employees whose estimated bonus payment
amounts for full-fiscal year 2016 are listed on
LSBG Disclosure Schedule 5.01(c)(iv)
,
29
which payment shall be pro-rated through the Closing Date if the Closing occurs in 2016, and (v) if the Closing occurs in 2017, LSBG and its Subsidiaries shall be permitted to pay accrued
bonuses for fiscal year 2017 at the Closing Date consistent with past practice and prorated through the Closing Date to those employees whose estimated bonus payment amounts for full-fiscal year 2017 are listed on
LSBG Disclosure Schedule
5.01(c)(v)
.
(d)
Hiring
. Hire any person as an employee of LSBG or any of its Subsidiaries or promote any employee, except
(i) to satisfy contractual obligations existing as of the date hereof and set forth on
LSBG Disclosure Schedule 5.01(d)
and (ii) persons hired to fill any vacancies in positions existing as of the date hereof arising after the date
hereof at an annual salary of less than $50,000 and whose employment is terminable at the will of LSBG or the applicable LSBG Subsidiary.
(e)
Benefit Plans
. Enter into, establish, adopt, amend, modify or terminate (except (i) as may be required by or to make
consistent with applicable law or the terms of this Agreement, subject to the provision of prior written notice and consultation with respect thereto to BHB, or (ii) to satisfy contractual obligations existing as of the date hereof and set
forth on
LSBG Disclosure Schedule 5.01(e)
), any pension, retirement, stock option, stock purchase, savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract,
plan or arrangement, or any trust agreement (or similar arrangement) related thereto, in respect of any current or former director, officer or employee of LSBG or any of its Subsidiaries.
(f)
Transactions with Affiliates
. Pay, loan or advance any amount to, or sell, transfer or lease any properties or assets (real,
personal or mixed, tangible or intangible) to, or enter into any agreement or arrangement with, any of its officers or directors or any of their immediate family members or any affiliates or associates (as such terms are defined under the Exchange
Act) of any of its officers or directors, other than (i) compensation in the ordinary course of business consistent with past practice, (ii) loans, subject to subsection 5.01(r), or (iii) deposit transactions;
provided that
,
BHB shall have been deemed to have consented to any such renewal, extension or modification of any agreement or arrangement with any such officer or director or any of their immediate family members or affiliates or associates if BHB does not object
to any such proposed renewal, extension or modification within five business days of receipt by BHB of a request by LSBG to renew, extend or modify such a transaction along with all financial or other data that BHB may reasonably request in order to
evaluate the same;
(g)
Dispositions
. Sell, transfer, mortgage, pledge, encumber or otherwise dispose of or discontinue any of its
assets, deposits, business or properties except in the ordinary course of business consistent with past practice and in a transaction that, together with all other such transactions, is not material to LSBG and its Subsidiaries, taken as a whole.
(h)
Acquisitions
. Acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of business consistent with past practice) all or any portion of the assets, business, deposits or properties of any other entity.
(i)
Capital Expenditures
. Other than as set forth on
LSBG Disclosure Schedule 5.01(i)
, make any capital expenditures other than
capital expenditures in the ordinary course of business consistent with past practice in amounts not exceeding $25,000 individually or $100,000 in the aggregate.
(j)
Governing Documents
. Amend LSBGs Amended and Restated Certificate of Incorporation or Bylaws.
(k)
Accounting Methods
. Implement or adopt any change in its accounting principles, practices or methods, other than as may be required
by applicable laws or regulations or GAAP.
30
(l)
Contracts
. Except in the ordinary course of business consistent with past practice or
as otherwise expressly permitted by this Agreement, enter into, amend, modify or terminate any Material Contract, Lease or Insurance Policy.
(m)
Claims
. Enter into any settlement or similar agreement with respect to any action, suit, proceeding, order or investigation to
which LSBG or any of its Subsidiaries is or becomes a party after the date of this Agreement, which settlement, agreement or action involves payment by LSBG or any of its Subsidiaries of an amount which exceeds $50,000 and/or would impose any
material restriction on the business of LSBG or any of its Subsidiaries.
(n)
Banking Operations
. Enter into any new material line
of business; materially change its material lending, investment, underwriting, risk and asset liability management and other material banking and operating policies, except as required by applicable law, regulation or policies imposed by any
Governmental Authority; or file any application or make any contract with respect to branching or site location or site relocation.
(o)
Derivatives Transactions.
Enter into any Derivatives Transactions, except in the ordinary course of business consistent with past practice.
(p)
Indebtedness
. Incur any indebtedness for borrowed money (other than deposits, federal funds purchased, borrowings from the FHLB and
securities sold under agreements to repurchase, in each case in the ordinary course of business consistent with past practice) or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person,
other than in the ordinary course of business consistent with past practice.
(q)
Investment Securities
. Acquire (other than by way
of foreclosures or acquisitions in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary course of business consistent with past practice) (i) any debt security or equity
investment other than federal funds or United States government securities or United States government agency securities, in each case with a term of one year or less, (ii) dispose of any debt security or equity investment other than in the
ordinary course of business or (iii) restructure or materially change its investment securities portfolio or its gap position, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported under GAAP. Any
acquisitions or disposals that are subject to this
Section 5.01(q)
shall not in the aggregate exceed $10,000,000.
(r)
Loans
. Except to satisfy contractual obligations existing as of the date hereof and set forth on
LSBG Disclosure Schedule 5.01(r)
, make, renegotiate, renew, increase, extend, modify or purchase any Loan, other than in accordance with
LSBGs loan policies and procedures in effect as of the date hereof; provided, however, (x) that the prior notification and approval of BHB is required for (i) any residential mortgage loans in excess of $750,000, (ii) any new
origination other than residential mortgage loans in excess of $2,000,000, (iii) any additional extension of credit to a borrower whose Loan is determined to be substandard or classified, (iv) restructuring any loan or (v) classifying
any loan as a troubled debt restructuring. For purposes of this Section 5.01(r), consent shall be deemed given unless BHB objects within 48 hours of notification.
(s)
Investments in Real Estate
. Make any investment or commitment to invest in real estate or in any real estate development project
(other than by way of foreclosure or acquisitions in a bona fide fiduciary capacity or in satisfaction of a debt previously contracted in good faith, in each case in the ordinary course of business consistent with past practice).
(t)
Taxes
. Make or change any Tax election, file any amended Tax Return, enter into any closing agreement, settle or compromise any
liability with respect to Taxes, agree to any adjustment of any Tax attribute, file any claim for a refund of Taxes, or consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment.
31
(u)
Compliance with Agreements
. Knowingly commit any act or omission which constitutes a
material breach or default by LSBG or any of its Subsidiaries under any agreement with any Governmental Authority or under any Material Contract, Lease or other material agreement or material license to which it is a party or by which it or its
properties is bound.
(v)
Environmental Assessments
. Foreclose on or take a deed or title to any commercial real estate without
first conducting a Phase I environmental assessment of the property or foreclose on any commercial real estate if such environmental assessment indicates the presence of a Hazardous Substance in amounts which, if such foreclosure were to occur,
would be material.
(w)
Insurance
. Cause or allow the loss of insurance coverage, unless replaced with coverage which is
substantially similar (in amount and insurer) to that now in effect.
(x)
Liens
. Discharge or satisfy any Lien or pay any
obligation or liability, whether absolute or contingent, due or to become due, except in the ordinary course of business consistent with normal banking practices.
(y)
Adverse Actions
. Knowingly take any action or fail to take any action that is intended or is reasonably likely to result in
(i) any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time, (ii) any of the conditions to the Merger set forth in Article VI not
being satisfied or (iii) a material violation of any provision of this Agreement, except, in each case, as may be required by applicable law or regulation.
(z)
Commitments
. Enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.
Section 5.02
Covenants of BHB
.
From the date hereof until the Effective Time, except as expressly contemplated or
permitted by this Agreement, without the prior written consent of LSBG, BHB will not, and will cause each of its Subsidiaries not to:
(a)
Adverse Actions
. (i) take any action reasonably likely to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time,
(ii) take any action reasonably likely to result in any of the conditions to the Merger set forth in Article VI not being satisfied, (iii) take any action reasonably likely to prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code, (iv) agree to take, make any commitment to take, or adopt any resolutions of its Board of Directors in support of, any of the actions prohibited by this Section 5.02,
(v) enter into any material definitive merger agreement, purchase and assumption agreement or similar document involving BHB or any of its Subsidiaries with respect to the acquisition of any other insured depository institution or its assets or
the assumption of its liabilities, (vi) issue any additional shares of BHB Common Stock or any securities convertible into BHB Common Stock, except for existing and future grants under BHBs stock-based benefit plans, (vii) take any
action reasonably likely to adversely affect or delay its ability to perform its obligations under this Agreement or to consummate the transactions contemplated hereby, (viii) take any action reasonably likely to result in a material violation
of any provision of this Agreement except, in each case, as may be required by applicable law or regulation, or (ix) operate its business other than in the ordinary course consistent with past practice and consistent with prudent banking
practice and in compliance in all material respects with all applicable laws and regulations.
(b)
Commitments
. Enter into any
contract with respect to, or otherwise agree or commit to do, any of the foregoing.
Section 5.03
Reasonable Best
Efforts
. Subject to the terms and conditions of this Agreement, each of the parties to this Agreement agrees to use its reasonable best efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws, so as
32
to permit consummation of the transactions contemplated hereby as promptly as practicable, and otherwise to enable consummation of the transactions contemplated by this Agreement, including the
satisfaction of the conditions set forth in Article VI hereof, and shall cooperate fully with the other parties hereto to that end.
Section 5.04
Shareholder Approval
.
(a) BHB agrees to take, in accordance with applicable law, the Articles of Incorporation, as amended, and the Amended and Restated Bylaws of
BHB, all action necessary to convene a special meeting of its shareholders to consider and vote upon the approval of this Agreement and any other matters required to be approved by BHBs shareholders in order to permit consummation of the
transactions contemplated by this Agreement (including any adjournment or postponement, the BHB Meeting) and, subject to Section 5.08, shall take all lawful action to solicit such approval by such shareholders. BHB agrees to use its
reasonable best efforts to convene the BHB Meeting within thirty-five (35) days after the initial mailing of the Joint Proxy Statement/Prospectus to shareholders of BHB pursuant to Section 5.05, and in any event shall convene the BHB
Meeting within forty-five (45) days after such mailing. Except for matters that would ordinarily be considered at BHBs annual meeting of shareholders or with the prior approval of LSBG, no other matters shall be submitted for the approval
of BHB shareholders at the BHB Meeting. The BHB Board shall at all times prior to and during the BHB Meeting recommend adoption of this Agreement by the shareholders of BHB and shall not withhold, withdraw, amend or modify such recommendation in any
manner or take any other action or make any other public statement inconsistent with such recommendation.
(b) LSBG agrees to take, in
accordance with applicable law, the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws of LSBG, all action necessary to convene a special meeting of its shareholders to consider and vote upon the approval of this
Agreement and any other matters required to be approved by LSBGs shareholders in order to permit consummation of the transactions contemplated by this Agreement (including any adjournment or postponement, the LSBG Meeting) and,
subject to Section 5.08, shall take all lawful action to solicit such approval by such shareholders. LSBG agrees to use its reasonable best efforts to convene the LSBG Meeting within thirty-five (35) days after the initial mailing of the
Joint Proxy Statement/Prospectus to shareholders of LSBG pursuant to Section 5.05, and in any event shall convene the LSBG Meeting within forty-five (45) days after such mailing. Except for matters that would ordinarily be considered at
LSBGs annual meeting of shareholders or with the prior approval of BHB, no other matters shall be submitted for the approval of LSBG shareholders at the LSBG Meeting. The LSBG Board shall at all times prior to and during the LSBG Meeting
recommend adoption of this Agreement by the shareholders of LSBG (the LSBG Recommendation) and shall not withhold, withdraw, amend or modify such recommendation in any manner adverse to BHB or take any other action or make any other
public statement inconsistent with such recommendation, except as and to the extent expressly permitted by Section 5.11 (a Change in Recommendation). Notwithstanding any Change in Recommendation, this Agreement shall be submitted to
the shareholders of LSBG for their approval at the LSBG Meeting and nothing contained herein shall be deemed to relieve LSBG of such obligation (unless and until this agreement is terminated in accordance with Section 7.01).
Section 5.05
Merger Registration Statement; Joint Proxy Statement/Prospectus
. For the purposes of (x) registering BHB
Common Stock to be offered to holders of LSBG Common Stock in connection with the Merger with the SEC under the Securities Act and applicable state securities laws and (y) holding the BHB Meeting and the LSBG Meeting, BHB shall draft and
prepare, and LSBG shall cooperate in the preparation of, a registration statement on Form S-4 for the registration of the shares to be issued by BHB in the Merger (the Merger Registration Statement), including the Joint Proxy
Statement/Prospectus. BHB shall provide LSBG with appropriate opportunity to review and comment on the Merger Registration Statement and Joint Proxy Statement/Prospectus prior to the time they are initially filed with the SEC. BHB shall file the
Merger Registration Statement with the SEC. Each of BHB and LSBG shall use its reasonable best efforts to have the Merger Registration Statement declared effective under the Securities Act as promptly as practicable after such filing, and the
parties shall thereafter promptly mail the Joint Proxy Statement/Prospectus to their respective shareholders. BHB shall also use its reasonable best efforts to obtain any necessary state securities law or Blue
33
Sky permits and approvals required to carry out the transactions contemplated by this Agreement, and LSBG shall furnish to BHB all information concerning LSBG and the holders of LSBG Common
Stock as may be reasonably requested in connection with such action.
Section 5.06
Cooperation and Information
Sharing
. LSBG shall provide BHB with any information concerning LSBG that BHB may reasonably request in connection with the drafting and preparation of the Merger Registration Statement and Joint Proxy Statement/Prospectus, and each party shall
notify the other promptly of the receipt of any comments of the SEC with respect to the Merger Registration Statement or Joint Proxy Statement/Prospectus and of any requests by the SEC for any amendment or supplement thereto or for additional
information and shall provide to the other party promptly copies of all correspondence between it or any of its representatives and the SEC. BHB shall provide LSBG with appropriate opportunity to review and comment on all amendments and supplements
to the Merger Registration Statement and Proxy Statement/Prospectus and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of BHB and LSBG agrees to use all
reasonable efforts, after consultation with the other party hereto, to respond promptly to all such comments of and requests by the SEC. Each of BHB and LSBG agrees to cause the Joint Proxy Statement/Prospectus and all required amendments and
supplements thereto to be mailed to the holders of LSBG Common Stock entitled to vote at the LSBG Meeting and the holders of BHB Common Stock entitled to vote at the BHB Meeting, respectively, at the earliest practicable time.
Section 5.07
Supplements or Amendments
. LSBG and BHB shall promptly notify the other party if at any time it becomes aware
that the Joint Proxy Statement/Prospectus or the Merger Registration Statement contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading. In such event, LSBG shall cooperate with BHB in the preparation of a supplement or amendment to such Proxy Statement/Prospectus which corrects such misstatement or omission, and
BHB shall file an amended Merger Registration Statement with the SEC, and each of BHB and LSBG shall mail an amended Proxy Statement/Prospectus to their respective shareholders.
Section 5.08
Regulatory Approvals
. Each of LSBG and BHB will cooperate with the other and use all reasonable efforts to
promptly prepare all necessary documentation, to effect all necessary filings and to obtain all necessary permits, consents, approvals and authorizations of all third parties and Governmental Authorities necessary to consummate the transactions
contemplated by this Agreement. LSBG and BHB shall each promptly furnish the other with copies of written communications to, or received by them from, any Governmental Authority with respect to the transactions contemplated by this Agreement, to the
extent permitted by applicable law. LSBG and BHB will furnish each other and each others counsel with all information concerning themselves, their subsidiaries, directors, officers and shareholders and such other matters as may be necessary or
advisable in connection with the Joint Proxy Statement/Prospectus and any application, petition or any other statement or application made by or on behalf of BHB or LSBG to any Governmental Authority in connection with the Merger and the Bank Merger
and the other transactions contemplated by this Agreement. Each party hereto shall have the right to review and approve in advance all characterizations of the information relating to such party and any of its Subsidiaries that appear in any filing
made in connection with the transactions contemplated by this Agreement with any Governmental Authority. In addition, BHB and LSBG shall each furnish to the other for review a copy of each such filing made in connection with the transactions
contemplated by this Agreement with any Governmental Authority prior to its filing.
Section 5.09
Press Releases
. LSBG
and BHB shall consult with each other before issuing any press release with respect to this Agreement or the transactions contemplated hereby and shall not issue any such press release or make any such public statements without the prior consent of
the other party, which shall not be unreasonably withheld or delayed;
provided, however
, that a party may, without the prior consent of the other party (but after such consultation, to the extent practicable in the circumstances), issue such
press release or make such public statements as may upon the advice of outside counsel be required by law. LSBG and BHB shall cooperate to develop all public announcement materials and make appropriate management available at presentations related
to this Agreement as reasonably requested by the other party.
34
Section 5.10
Access; Information
.
(a) Each of BHB and LSBG agrees that upon reasonable notice and subject to applicable laws relating to the exchange of information, it shall
afford the other party and the other partys officers, employees, counsel, accountants and other authorized representatives such access during normal business hours throughout the period prior to the Effective Time to its books, records
(including Tax Returns and work papers of independent registered public accountants), properties and personnel and to such other information relating to it as the other party may reasonably request and, during such period, shall furnish promptly to
the other party all information concerning its business, properties and personnel as may reasonably request.
(b) All information
furnished pursuant to Section 5.10(a) shall be subject to, and each party shall hold all such information in confidence in accordance with, the provisions of the Mutual Agreement of Confidentiality, dated as of March 14, 2016, by and
between LSBG and BHB (the Confidentiality Agreement).
(c) No investigation by a party of the business and affairs of the
other party shall affect or be deemed to modify or waive any representation, warranty, covenant or agreement in this Agreement, or the conditions to the obligations of such party to consummate the transactions contemplated by this Agreement.
Section 5.11
No Solicitation
.
(a) From the date of this Agreement through the Effective Time, LSBG shall not, nor shall it authorize or permit any of its Subsidiaries or
their respective directors, officers or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it to, directly or indirectly through another Person, (i) solicit, initiate or encourage
(including by way of furnishing information or assistance), or take any other action designed to facilitate or that is likely to result in, any inquiries or the making of any proposal that constitutes, or is reasonably likely to lead to, any
Acquisition Proposal, (ii) enter into any agreement with respect to an Acquisition Proposal, (iii) participate in any discussions or negotiations regarding any Acquisition Proposal or furnish, or otherwise afford access, to any Person
(other than BHB) any information or data with respect to LSBG or any of the LSBG Subsidiaries or otherwise relating to an Acquisition Proposal, or (iv) make or authorize any statement or recommendation in support of any Acquisition Proposal.
Notwithstanding the foregoing sentence, LSBG may take any of the actions described in clause (iii) of the foregoing sentence only if, (A) LSBG has received a bona fide unsolicited written Acquisition Proposal prior to the LSBG Meeting that
did not result from a breach of this Section 5.11, (B) the LSBG Board of Directors determines in good faith, after consultation with and having considered the advice of its outside legal counsel and its financial advisor, that such
Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Proposal, (C) LSBG provides BHB with at least three (3) Business Days prior notice of such determination (the Notice of Superior Proposal),
which notice shall include the name of such Person and the material terms and conditions of any such Acquisition Proposal, and (D) prior to furnishing or affording access to any information or data with respect to LSBG or otherwise relating to
an Acquisition Proposal, LSBG receives from such Person a confidentiality agreement with terms no less favorable to LSBG than those contained in the Confidentiality Agreement between BHB and LSBG. LSBG shall promptly provide to BHB any non-public
information regarding LSBG and its Subsidiaries provided to any other Person that was not previously provided to BHB, such additional information to be provided no later than the date of provision of such information to such other party.
(b) Notwithstanding Section 5.04, prior to the date of the LSBG Meeting, the LSBG Board may approve or recommend to the stockholders of
LSBG a Superior Proposal and withdraw, change, qualify or modify the LSBG Recommendation in connection therewith (a Change in Recommendation) after the fifth (5th) Business Day following BHBs receipt of the Notice of Superior
Proposal advising BHB that the LSBG Board has decided that a bona fide unsolicited written Acquisition Proposal that it received (that did not result from a breach of this Section 5.11) constitutes a Superior Proposal (it being understood that
LSBG shall be required to deliver a new Notice of Superior Proposal in respect of any revised Superior Proposal from such third party or its affiliates that LSBG proposes to accept and the subsequent notice period (which shall not shorten
35
such original five (5) Business Day period) shall be two (2) Business Days) if, but only if, (a) the LSBG Board has reasonably determined in good faith, after consultation with and
having considered the advice of outside legal counsel and its financial advisor, that the failure to take such actions would be reasonably likely to violate its fiduciary duties to LSBGs stockholders under applicable law, and
(b) (i) during such five (5) Business Day period or two (2) Business Day Period (as the case may be), LSBG has negotiated, and has used its reasonable best efforts to cause its financial and legal advisors to negotiate, with BHB
in good faith to make such adjustments, modifications or amendments in the terms and conditions of this Agreement such that such Acquisition Proposal would no longer constitute a Superior Proposal and (ii) at the end of such five
(5) Business Day period or two (2) Business Day period (as the case may be), after taking into account any such adjusted, modified or amended terms as may have been committed to in writing by BHB since its receipt of such Notice of
Superior Proposal (provided, however, that BHB shall not have any obligation to propose any adjustments, modifications or amendments to the terms and conditions of this Agreement), the LSBG Board has again in good faith made the determination
(x) in clause (a) of this Section 5.11, and (y) that such Acquisition Proposal constitutes a Superior Proposal. Notwithstanding the foregoing, the withdrawal, changing, qualifying or modifying of the LSBG Recommendation or the
making of a Change in Recommendation by the LSBG Board shall not change the approval of the LSBG Board for purposes of causing any applicable moratorium, control share, fair price, takeover,
interested stockholder or similar law to be inapplicable to this Agreement and the LSBG Voting Agreements and the transactions contemplated hereby and thereby, including the Merger.
(c) LSBG shall immediately cease and cause to be terminated any existing discussions or negotiations with any Persons (other than BHB)
conducted heretofore with respect to any of the foregoing, and shall use reasonable best efforts to cause all Persons other than BHB who have been furnished confidential information regarding LSBG in connection with the solicitation of or
discussions regarding an Acquisition Proposal within the twelve (12) months prior to the date hereof promptly to return or destroy such information. LSBG agrees not to release any third party from the confidentiality and standstill provisions
of any agreement to which LSBG is or may become a party, and shall immediately take all steps necessary to terminate any approval that may have been heretofore given under any such provisions authorizing any Person (other than BHB) to make an
Acquisition Proposal.
LSBG shall ensure that the directors, officers, employees, agents and representatives (including any investment bankers, financial
advisors, attorneys, accountants or other retained representatives) of LSBG are aware of the restrictions described in this Section 5.11 as reasonably necessary to avoid violations thereof. It is understood that any violation of the
restrictions set forth in this Section 5.11 by any director, officer, employee, agent or representative (including any investment banker, financial advisor, attorney, accountant or other retained representative) of LSBG, at the direction or
with the consent of LSBG, shall be deemed to be a breach of this Section 5.11 by LSBG.
Section 5.12
Indemnification
.
(a) From and after the Effective Time, BHB (the Indemnifying Party) shall indemnify and hold harmless
each present and former director and officer of LSBG and each other Person entitled to indemnification under the Bylaws of BHB as in effect on the date hereof, as applicable, determined as of the Effective Time (the Indemnified Parties)
against any costs or expenses (including reasonable attorneys fees and expenses), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, arising in whole or in part out of or pertaining to the
fact that he or she was a director or officer of LSBG or is or was serving at the request of LSBG as a director, officer, employee or other agent of any other organization or in any capacity with respect to any employee benefit plan of LSBG,
including matters related to the negotiation, execution and performance of this Agreement or any of the transactions contemplated hereby, to the fullest extent which such Indemnified Parties would be entitled under the Amended and Restated Bylaws of
LSBG as in effect on the date hereof (subject to change as required by law). BHBs obligations under this
36
Section 5.12(a) shall continue in full force and effect for a period of six years from the Effective Time;
provided, however,
that all rights to indemnification in respect of any
claim asserted or made within such period shall continue until the final disposition of such claim. In addition, BHB shall advance expenses to the Indemnified Parties to the fullest extent which such Indemnified Parties would be entitled under the
Amended and Restated Bylaws of LSBG as in effect on the date hereof without regard to director approval of such advancement of expenses.
(b) Any Indemnified Party wishing to claim indemnification under this Section 5.12, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify the Indemnifying Party, but the failure to so notify shall not relieve the Indemnifying Party of any liability it may have to such Indemnified Party except to the extent that such failure does
actually prejudice the Indemnifying Party. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) the Indemnifying Party shall have the right to assume the defense
thereof and the Indemnifying Party shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if
the Indemnifying Party elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between the Indemnifying Party and the Indemnified Parties, the Indemnified Parties may
retain counsel which is reasonably satisfactory to the Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements therefor are received, the reasonable fees and expenses of such counsel for the Indemnified Parties (which may
not exceed one firm in any jurisdiction unless counsel for the Indemnified Parties advises that there are issues that raise conflicts of interest between the Indemnified Parties), (ii) the Indemnified Parties will cooperate in the defense of
any such matter, (iii) the Indemnifying Party shall not be liable for any settlement effected without its prior written consent and (iv) the Indemnifying Party shall have no obligation hereunder in the event that indemnification of an
Indemnified Party in the manner contemplated hereby is prohibited by applicable laws and regulations or by an applicable federal or state banking agency or a court of competent jurisdiction.
(c) Prior to the Effective Time, BHB shall use its reasonable best efforts to cause the persons serving as directors and officers of LSBG
immediately prior to the Effective Time to be covered by the directors and officers liability insurance policy maintained by LSBG (provided that BHB may substitute therefor policies which are not materially less advantageous than such
policy or single premium tail coverage with policy limits equal to LSBGs existing coverage limits) for a six-year period following the Effective Time with respect to acts or omissions occurring prior to the Effective Time which were committed
by such directors and officers in their capacities as such, provided that in no event shall BHB be required to expend in any one year more than an amount equal to 175% of the current annual amount expended by LSBG to maintain such insurance (the
Insurance Amount), and further provided that if BHB is unable to maintain or obtain the insurance called for by this Section 5.12(c) as a result of the preceding provision, BHB shall use its reasonable best efforts to obtain as much
comparable insurance as is available for the Insurance Amount.
(d) If BHB or any of its successors or assigns shall consolidate with or
merge into any other entity and shall not be the continuing or surviving entity of such consolidation or merger or shall transfer all or substantially all of its assets to any other entity, then and in each case, proper provision shall be made so
that the successors and assigns of BHB shall assume the obligations set forth in this Section 5.12.
Section 5.13
Employees; Benefit Plans
.
(a) Following the Closing Date, BHB may choose to maintain any or all of the LSBG Benefit Plans in its
sole discretion. Effective no later than the day immediately preceding the Closing Date, LSBG shall terminate any LSBG Benefit Plans for which participant consent is not required and that BHB has requested to be terminated by providing written
notice to LSBG at least fifteen (15) days prior to the Closing Date. No later than the day immediately preceding the Closing Date, LSBG shall provide BHB with evidence that such LSBG Benefit Plans have been terminated. However, for any LSBG
Benefit Plan terminated for which there is a
37
comparable BHB Benefit Plan of general applicability (other than the defined benefit pension plan or any nonqualified deferred compensation plans or arrangements maintained by BHB), BHB shall
take all reasonable action so that employees of LSBG shall be entitled to participate in such BHB Benefit Plan to the same extent as similarly-situated employees of BHB (it being understood that inclusion of the employees of LSBG in the BHB Benefit
Plans may occur at different times with respect to different plans). BHB shall cause each BHB Benefit Plan in which employees of LSBG are eligible to participate to take into account for purposes of eligibility and vesting under the BHB Benefit
Plans (but not for purposes of benefit accrual) the service of such employees with LSBG and its Subsidiaries to the same extent as such service was credited for such purpose by LSBG (other than for the defined benefit pension plan or any
nonqualified deferred compensation plans or arrangements maintained by BHB);
provided, however,
that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits. Nothing herein shall
limit the ability of BHB to amend or terminate any of the LSBG Benefit Plans or BHB Benefit Plans in accordance with their terms at any time;
provided, however,
that BHB shall continue to maintain the LSBG Benefit Plans (other than
stock-based or incentive plans and the defined benefit pension plan and any nonqualified deferred compensation plans or arrangements) for which there is a comparable BHB Benefit Plan until the LSBG Employees are permitted to participate in the BHB
Benefit Plans, unless such BHB Benefit Plan has been frozen or terminated with respect to similarly-situated employees of BHB or any Subsidiary of BHB.
(b) BHB shall assume and honor, under the vacation policies of LSBG, as disclosed on
LSBG Disclosure Schedule 3.18
, the accrued
but unused vacation time of employees of the Surviving Corporation who were employees of LSBG prior to the Effective Time. BHB shall also assume and honor, under the severance pay policies of LSBG, as disclosed on
LSBG Disclosure
Schedule 3.18
, the rights to severance of the employees of the Surviving Corporation who were employees of LSBG prior to the Effective Time. Following the Effective Time BHB shall, and shall cause Bar Harbor Bank, to give priority to
terminated LSBG Employees with respect to any job postings at BHB or Bar Harbor Bank, as applicable, for which any such LSBG Employee is qualified.
(c) If employees of LSBG become eligible to participate in a medical, dental or health plan of BHB upon termination of such plan of LSBG, BHB
shall make all commercially reasonable efforts to cause each such plan to (i) waive any preexisting condition limitations to the extent such conditions are covered under the applicable medical, health or dental plans of BHB, and (ii) waive
any waiting period limitation or evidence of insurability requirement which would otherwise be applicable to such employee on or after the Effective Time, in each case to the extent such employee had satisfied any similar limitation or requirement
under an analogous LSBG Benefit Plan prior to the Effective Time.
(d) Concurrently with the execution of this Agreement, LSBG shall
obtain from each of the individuals named in
LSBG Disclosure Schedule 5.13(d)
an agreement (a Settlement Agreement) to accept in full settlement of his or her rights under the specified programs the amounts and benefits determined
under his or her Settlement Agreement (the aggregate amounts of such payments to be specified in
LSBG Disclosure Schedule 5.13(d)
) and pay such amounts to such individuals who are employed at the Effective Time pursuant to the terms of
the Settlement Agreement, subject to a cut-back of any payment that would constitute an excess parachute payment, as defined in Section 280G of the Code, such that no portion of the payment will be subject to the excise tax imposed
by Section 4999 of the Code. As to, and only as to, each individual who enters into a Settlement Agreement, BHB acknowledges and agrees that (i) the Merger constitutes a change of control or change in control for
all purposes pursuant to such agreements, and (ii) LSBG will pay out all cash amounts under such agreements at the Closing Date, to the extent permitted by Section 409A of the Code. Any officer or employee of LSBG who is a party to a
Settlement Agreement shall be entitled to receive the benefits payable or to be otherwise provided pursuant to the terms of such Settlement Agreement, and BHB agrees to provide the non-cash benefits, if any, pursuant to the terms of the Settlement
Agreement.
(e) Concurrently with the execution of this Agreement, BHB and Bar Harbor Bank are entering into an employment agreement with
William J. McIver in the form attached hereto as Exhibit C to be effective as of the Effective Time, and BHB, Bar Harbor Bank, LSBG and Lake Sunapee Bank will enter into settlement
38
agreements with Stephen R. Theroux, William J. McIver, Laura Jacobi, Sharon Whitaker, Jodi Hoyt, Stephen W. Ensign and Bliss Dayton in the forms attached hereto as Exhibits D-1 to D-7 hereto,
respectively, to be effective as of the Effective Time.
(f) BHB shall provide a retention pool in an amount up to $350,000 for the
benefit of certain employees of LSBG to be designated by BHB at its sole discretion; provided that, any such designations shall be made in consultation with LSBG. Such designated employees will enter into retention agreements to be agreed upon by
BHB and LSBG.
(g) This Section 5.13 shall be binding upon and inure solely to the benefit of each of the parties to this Agreement,
and nothing in this Section 5.13, express or implied, shall confer upon any LSBG or BHB employee, or any legal representative or beneficiary thereof, any rights or remedies, including any right to employment or continued employment for any
specified period, or compensation or benefits of any nature or kind whatsoever under this Agreement. Nothing in this Section 5.13, express or implied, shall be deemed an amendment of any plan providing benefits to any LSBG or BHB employee.
Section 5.14
Notification of Certain Changes
. BHB and LSBG shall promptly advise the other party of any change or event
having, or which could be reasonably expected to have, a Material Adverse Effect on it or which it believes would, or which could reasonably be expected to, cause or constitute a material breach of any of its representations, warranties or covenants
contained herein. From time to time prior to the Effective Time (and on the date prior to the Closing Date), each party will supplement or amend its Disclosure Schedules delivered in connection with the execution of this Agreement to reflect any
matter which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedules or which is necessary to correct any information in such Disclosure Schedules which has
been rendered inaccurate thereby. No supplement or amendment to such Disclosure Schedules shall have any effect for the purpose of determining the accuracy of the representations and warranties of the parties contained in Article III and Article IV
in order to determine the fulfillment of the conditions set forth in Sections 6.02(a) or 6.03(a) hereof, as the case may be, or the compliance by LSBG or BHB, as the case may be, with the respective covenants and agreements of such parties contained
herein.
Section 5.15
Current Information
. During the period from the date of this Agreement to the Effective Time,
each party will cause one or more of its designated representatives to confer on a regular and frequent basis with representatives of the other party and to report the general status of its ongoing operations. Without limiting the foregoing, each
party agrees to provide the other party (i) a copy of each report filed by it with a Governmental Authority within one (1) Business Day following the filing thereof and (ii) monthly updates of the information required to be set forth
in
LSBG Disclosure Schedule 3.14
or
BHB Disclosure Schedule 4.14
, as the case may be.
Section 5.16
Board Packages
.
LSBG shall distribute a copy of its Board package, including the agenda and any draft minutes, to BHB at the same time and in the same manner in which it distributes a copy of such packages to its Board;
provided,
however,
that LSBG shall not be required to copy BHB on any documents that disclose confidential discussions of this Agreement or the transactions contemplated hereby or any third party proposal to acquire control of LSBG or any other matter
that LSBGs Board has been advised of by counsel that such distribution to BHB may violate a confidentiality obligation or fiduciary duty or any law or regulation.
Section 5.17
Transition; Informational Systems Conversion
. From and after the date hereof, BHB and LSBG shall use their
reasonable best efforts to facilitate the integration of the businesses of LSBG and BHB following consummation of the transactions contemplated hereby, and shall meet on a regular basis to discuss and plan for the conversion of data processing and
related electronic informational systems (the Informational Systems Conversion) to a single such system. It is the intent of the Parties that, to the extent commercially reasonable, the systems of BHB and Bar Harbor Bank be converted to
those used by LSBG and Lake Sunapee Bank. Such planning shall include, but not be limited to: (a) discussion of the parties third-party service provider
39
arrangements; (b) non-renewal of personal property leases and software licenses used in connection with the discontinued systems operations; (c) retention of outside consultants and
additional employees to assist with the conversion; (d) outsourcing, as appropriate, of proprietary or self-provided system services; and (e) any other actions necessary and appropriate to facilitate the conversion, as soon as practicable
following the Effective Time. LSBG shall take all action which is necessary and appropriate to facilitate the Informational Systems Conversion; provided, however, that BHB shall indemnify LSBG for any reasonable out-of-pocket fees, expenses or
charges that LSBG may incur as a result of taking, at the request of BHB, any action to facilitate the Informational Systems Conversion. If this Agreement is terminated by BHB and/or LSBG in accordance with Section 7.01(a), 7.01(b), 7.01(c), or
7.01(f), or by LSBG only in accordance with Section 7.01(d), 7.01(e) or 7.01(h)(ii), BHB shall indemnify LSBG for any reasonable fees, expenses or charges related to reversing the Informational Systems Conversion.
Section 5.18
Board of Directors
. Effective immediately following the Effective Time, BHB shall take, and shall cause Bar
Harbor Bank to take, all action necessary to expand the size of the Board of Directors of each of BHB and Bar Harbor Bank by four seats and to appoint four members of LSBGs Board of Directors, selected by BHB after consultation with LSBG, to
each of BHBs and Bar Harbor Banks Board of Directors, each to serve on BHBs and Bar Harbor Banks Board of Directors for a term expiring at the next annual meeting of BHBs shareholders, at which meeting each such
appointee shall be included as a nominee for election to BHBs and Bar Harbor Banks Board of Directors to serve until the following annual meeting of BHBs shareholders.
Section 5.19
Exemption from Liability Under Section 16(b)
. Prior to the Effective Time, BHB shall take all steps as
may be required to cause any acquisitions of BHB Common Stock resulting from the transactions contemplated by this Agreement by each director or officer of LSBG who becomes subject to the reporting requirements of Section 16(a) of the Exchange
Act with respect to LSBG to be exempt under
Rule 16b-3
promulgated under the Exchange Act.
ARTICLE VI
CONDITIONS
TO CONSUMMATION OF THE MERGER
Section 6.01
Conditions to Obligations of the Parties to Effect the Merger
. The
respective obligations of LSBG and BHB to consummate the Merger are subject to the fulfillment or, to the extent permitted by applicable law, written waiver by the parties hereto prior to the Closing Date of each of the following conditions:
(a)
Regulatory Approvals
. All consents and approvals of a Governmental Authority required to consummate the transactions contemplated by
this Agreement (Regulatory Approvals) shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired or been terminated.
(b)
Merger Registration Statement Effective
. The Merger Registration Statement shall have been declared effective by the SEC and no stop
order with respect thereto shall be in effect.
(c)
NYSE Listing
. The shares of BHB Common Stock issuable pursuant to this Agreement
shall have been approved for listing on NYSE, subject to official notice of issuance.
(d)
No Injunctions or Restraints; Illegality
.
No judgment, order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of any of the transactions contemplated by this Agreement shall be in effect. No
statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Authority that prohibits or makes illegal the consummation of any of such transactions.
(e)
Tax Opinions
. BHB shall have received a letter setting forth the written opinion of Hogan Lovells US LLP, in form and substance
reasonably satisfactory to BHB, dated as of the Closing Date, and LSBG shall
40
have received a letter setting forth the written opinion of K&L Gates LLP, in form and substance reasonably satisfactory to LSBG, dated as of the Closing Date, in each case substantially to
the effect that, on the basis of the facts, representations and assumptions set forth in such letter, the Merger will constitute a tax free reorganization described in Section 368(a) of the Code.
Section 6.02
Conditions to Obligations of BHB
. The obligations of BHB to consummate the Merger also are subject to the
fulfillment or written waiver by BHB prior to the Closing Date of each of the following conditions:
(a)
Representations and
Warranties
. The representations and warranties of LSBG set forth in:
(i) Section 3.10(a) shall be true and
correct in all respects;
(ii) Section 3.03(a) shall be true and correct in all respects (other than de minimis
inaccuracies therein);
(iii) Sections 3.01, 3.04, 3.05, 3.06, 3.07(b), 3.15(a) and (c), 3.16(b), 3.17, 3.18(d) and (f),
3.24(c) and 3.29 shall be true and correct in all material respects; and
(iv) this Agreement (other than the
representations and warranties that are the subject of clauses (i), (ii) or (iii)) shall be true and correct in all respects (without giving effect to any materiality, Material Adverse Effect or similar qualifiers
contained in any such representations and warranties), except where the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, has not had and would not reasonably be expected
to have a Material Adverse Effect on LSBG;
in each case, as of the date of this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except, to the extent such representations and warranties speak as of an earlier date, in which event such representation and warranty shall be so true and correct as of such specified date.
BHB shall have received a certificate, dated the Closing Date, signed on behalf of LSBG by the Chief Executive Officer and the Chief Financial Officer of LSBG
to the effect of this Section 6.02(a).
(b)
Performance of Obligations of LSBG
. LSBG shall have performed in all material
respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, including pursuant to Section 5.13(d) and (e), and BHB shall have received a certificate, dated the Closing Date, signed on behalf of
LSBG by the Chief Executive Officer of LSBG to such effect.
(c)
No Adverse Regulatory Conditions
. No regulatory approval referred
to in Section 6.01(a) hereof shall contain any condition, restriction or requirement which the Board of Directors of BHB reasonably determines in good faith would, individually or in the aggregate, materially reduce the benefits of the Merger
to such a degree that BHB would not have entered into this Agreement had such condition, restriction or requirement been known at the date hereof.
(d)
Voting Agreements
. The Voting Agreements shall have been executed and delivered by each director and executive officer of LSBG set
forth on
Schedule 6.01(d)
concurrently with LSBGs execution and delivery of this Agreement.
(e)
Shareholder Approval
.
This Agreement shall have been duly approved by the requisite vote of the holders of outstanding shares of LSBG Common Stock.
(f)
Other
Actions
. LSBG shall have furnished BHB with such certificates of its respective officers or others and such other documents to evidence fulfillment of the conditions set forth in Sections 6.01 and 6.02 as BHB may reasonably request.
41
Section 6.03
Conditions to Obligations of LSBG
. The obligations of LSBG to
consummate the Merger also are subject to the fulfillment or written waiver by LSBG prior to the Closing Date of each of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of BHB set forth in:
(i) Section 4.10(a) shall be true and correct in all respects;
(ii) Section 4.03 shall be true and correct in all respects (other than de minimis inaccuracies therein);
(iii) Sections 4.01, 4.04, 4.05, 4.06, 4.07(b), 4.14(a) and (c), 4.15, 4.16, 4.17(c), 4.22(c) and 4.28 shall be true and
correct in all material respects;
(iv) this Agreement (other than the representations and warranties that are the subject
of clauses (i), (ii) or (iii)) shall be true and correct in all respects (without giving effect to any materiality, Material Adverse Effect or similar qualifiers contained in any such representations and
warranties), except where the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on BHB;
in each case, as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date, except, to the extent such
representations and warranties speak as of an earlier date, in which event such representation and warranty shall be so true and correct as of such specified date.
LSBG shall have received a certificate, dated the Closing Date, signed on behalf of BHB by the Chief Executive Officer and the Chief Financial Officer of BHB
to the effect of this Section 6.03(a).
(b)
Performance of Obligations of BHB
. BHB shall have performed in all material
respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and LSBG shall have received a certificate, dated the Closing Date, signed on behalf of BHB by the Chief Executive Officer and the Chief
Financial Officer of BHB to such effect.
(c)
No Adverse Regulatory Conditions
. No regulatory approval referred to in
Section 6.01(a) hereof shall contain any condition, restriction or requirement which the Board of Directors of LSBG reasonably determines in good faith would, individually or in the aggregate, materially reduce the benefits of the Merger to
such a degree that LSBG would not have entered into this Agreement had such condition, restriction or requirement been known at the date hereof.
(d)
Shareholder Approval
. This Agreement shall have been duly approved by the requisite vote of the holders of outstanding shares of BHB
Common Stock.
(e)
Other Actions
. BHB shall have furnished LSBG with such certificates of its respective officers or others and such
other documents to evidence fulfillment of the conditions set forth in Sections 6.01 and 6.03 as LSBG may reasonably request.
Section 6.04
Frustration of Closing Conditions
. Neither BHB nor LSBG may rely on the failure of any condition set forth in
Section 6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was caused by such partys failure to use reasonable best efforts to consummate any of the transactions contemplated by this Agreement, as required by and
subject to Section 5.03.
ARTICLE VII
TERMINATION
Section 7.01
Termination
. This Agreement may be terminated, and the transactions contemplated hereby may be abandoned:
(a)
Mutual Consent
. At any time prior to the Effective Time, by the mutual consent of BHB and LSBG if the Board of Directors of
each so determines by vote of a majority of the members of its entire Board.
42
(b)
No Regulatory Approval
. By either BHB or LSBG, if its Board of Directors so determines
by a vote of a majority of the members of its entire Board, in the event the approval of any Governmental Authority required for consummation of the transactions contemplated by this Agreement shall have been denied by final, nonappealable action by
such Governmental Authority or an application therefor shall have been permanently withdrawn at the request of a Governmental Authority.
(c)
No Shareholder Approval
. By either BHB or LSBG (provided that the terminating party is not in material breach of any of its
obligations under Section 5.04), if the approval of the shareholders of either party required for the consummation of the transactions contemplated by this Agreement shall not have been obtained by reason of the failure to obtain the required
vote at a duly held meeting of such shareholders or at any adjournment or postponement thereof.
(d)
Breach of Representations and
Warranties
. By either BHB or LSBG (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a breach of any of the representations
or warranties set forth in this Agreement by the other party, which breach is not cured within thirty (30) days following written notice to the party committing such breach, or which breach, by its nature, cannot be cured prior to the Closing;
provided, however,
that neither party shall have the right to terminate this Agreement pursuant to this Section 7.01(d) unless the breach of representation or warranty, together with all other such breaches, would entitle the party
receiving such representation or warranty not to consummate the Merger under Section 6.02(a) (in the case of a breach of a representation or warranty by LSBG) or Section 6.03(a) (in the case of a breach of a representation or warranty by
BHB).
(e)
Breach of Covenants
. By either BHB or LSBG (provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein) if there shall have been a breach of any of the covenants or agreements set forth in this Agreement on the part of the other party, which breach shall not have been cured within
thirty (30) days following receipt by the breaching party of written notice of such breach from the other party hereto, or which breach, by its nature, cannot be cured prior to the Closing,
provided, however
, that neither party shall
have the right to terminate this Agreement pursuant to this Section 7.01(e) unless the breach of covenant or agreement, together with all other such breaches, would entitle the party receiving the benefit of such covenant or agreement not to
consummate the Merger under Section 6.02(b) (in the case of a breach of a covenant or agreement by LSBG) or Section 6.03(b) (in the case of a breach of a representation or warranty by BHB).
(f)
Delay
. By either BHB or LSBG if the Merger shall not have been consummated on or before March 31, 2017 (the Termination
Date), unless the failure of the Closing to occur by such date shall be due to a material breach of this Agreement by the party seeking to terminate this Agreement.
(g)
Superior Proposal
. By LSBG if it has received a Superior Proposal and the LSBG Board of Directors has determined to accept such
Superior Proposal in accordance with Section 5.11 (including the obligation therein of the LSBG Board to take into account any adjusted, modified or amended terms of this Agreement proposed by BHB).
(h)
Failure to Recommend; Third-Party Acquisition Transaction; Etc
.
(i) By BHB, if (A) LSBG shall have materially breached its obligations under Section 5.11, (B) the LSBG Board
shall have failed to make its recommendation referred to in Section 5.04(b), withdrawn such recommendation or modified or changed such recommendation in a manner adverse in any respect to the interests of BHB, (C) the LSBG Board shall have
recommended, proposed, or publicly announced its intention to recommend or propose, to engage in an Acquisition Transaction with any Person other than BHB or a Subsidiary of BHB or (D) LSBG shall have materially breached its obligations under
Section 5.04(b) by failing to call, give notice of, convene and hold the LSBG Meeting in accordance with Section 5.04(b).
(ii) By LSBG, if BHB shall have materially breached its obligations under Section 5.04(a) by failing to call, give notice
of, convene and hold the BHB Meeting or by failing to make its
43
recommendation or withdrawing, modifying or changing such recommendation in any manner adverse in any respect to the interests of LSBG in accordance with Section 5.04(a).
(i)
Decrease in BHB Stock Price
. By LSBG, if the LSBG Board so determines by a vote of the majority of the members of the entire LSBG
Board, at any time during the five-day period commencing with the Determination Date (as defined below), if both of the following conditions are satisfied:
(A) The quotient obtained by dividing the Average Closing Price by the Starting Price (as defined below) (the BHB
Ratio) shall be less than 0.80; and
(B) (x) the BHB Ratio shall be less than (y) the quotient obtained by
dividing the Final Index Price by the Index Price on the Starting Date (each as defined below) and subtracting 0.20 from the quotient in this clause (B)(y) (such number in this clause (B)(y) that results from dividing the Final Index Price by the
Index Price on the Starting Date being referred to herein as the Index Ratio);
subject, however, to the following three
sentences. If LSBG elects to exercise its termination right pursuant to this Section 7.01(i), it shall give written notice to BHB promptly, and in any event within the five-day period commencing with the Determination Date. During the five-day
period commencing with its receipt of such notice, BHB shall have the option to increase the consideration to be received by the holders of LSBG Common Stock hereunder, by adjusting the Exchange Ratio (calculated to the nearest one one-thousandth)
to equal the lesser of (x) a number (rounded to the nearest one one-thousandth) obtained by dividing (A) the product of the Starting Price, 0.80 and the Exchange Ratio (as then in effect) by (B) the Average Closing Price and
(y) a number (rounded to the nearest one one-thousandth) obtained by dividing (A) the product of the Index Ratio and the Exchange Ratio (as then in effect) by (B) the BHB Ratio. If BHB so elects within such five-day period, it shall
give prompt written notice to LSBG of such election and the revised Exchange Ratio, whereupon no termination shall have occurred pursuant to this Section 7.01(i) and this Agreement shall remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified.)
For purposes of this Section 7.01(i) the following terms shall have the meanings
indicated:
Average Closing Price
shall mean the average of the daily closing prices for the shares of BHB Common Stock
for the 20 consecutive full trading days on which such shares are actually traded on NYSE (as reported by
Bloomberg
or, if not reported thereby, any other authoritative source) ending at the close of trading on the Determination Date.
Determination Date
shall mean the 10th day prior to the Closing Date, provided that if shares of the BHB Common Stock are
not actually traded on NYSE on such day, the Determination Date shall be the immediately preceding day to the 10th day prior to the Closing Date on which shares of BHB Common Stock actually trade on NYSE.
Final Index Price
shall mean the average of the Index Prices for the 20 consecutive full trading days ending on the trading
day prior to the Determination Date.
Index Group
shall mean the SNL Bank Index.
Index Price
shall mean the closing price on such date of the SNL Bank Index.
Starting Date
shall mean the last trading day immediately preceding the date of the first public announcement of entry into
this Agreement.
Starting Price
shall mean the closing price of a share of BHB Common Stock on NYSE (as reported by
Bloomberg
, or if not reported therein, in another authoritative source) on the Starting Date.
Section 7.02
Termination Fee
. In recognition of the efforts, expenses and other opportunities foregone by BHB while structuring and pursuing the Merger, the parties hereto agree that LSBG shall pay to BHB a termination fee of $5,500,000 within three
(3) Business Days after written demand for payment is made by BHB, following the occurrence of any of the events set forth below:
(a)
BHB terminates this Agreement pursuant to Section 7.01(h)(i) or LSBG terminates this Agreement pursuant to 7.01(g); or
44
(b) LSBG enters into a definitive agreement relating to an Acquisition Proposal or the
consummation of an Acquisition Proposal involving LSBG within twelve (12) months following the termination of this Agreement by BHB pursuant to Section 7.01(d) or Section 7.01(e) because of a willful breach by LSBG after an
Acquisition Proposal has been publicly announced or otherwise made known LSBG.
Section 7.03
Effect of Termination and
Abandonment
. In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article VII, no party to this Agreement shall have any liability or further obligation to any other party hereunder except (i) as
set forth in Section 7.01 and Section 8.01 and (ii) that termination will not relieve a breaching party from liability for money damages for any breach of any covenant, agreement, representation or warranty of this Agreement giving
rise to such termination. Nothing in Section 7.02 or this Section 7.03 shall be deemed to preclude either party from seeking specific performance in equity to enforce the terms of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.01
Survival
. No representations, warranties, agreements and covenants contained in this Agreement shall survive
the Effective Time (other than agreements or covenants contained herein that by their express terms are to be performed after the Effective Time) or the termination of this Agreement if this Agreement is terminated prior to the Effective Time (other
than Sections 5.10(b), 5.18, 7.02 and this Article VIII, which shall survive any such termination). Notwithstanding anything in the foregoing to the contrary, no representations, warranties, agreements and covenants contained in this Agreement
shall be deemed to be terminated or extinguished so as to deprive a party hereto or any of its affiliates of any defense at law or in equity which otherwise would be available against the claims of any Person, including any shareholder or former
shareholder.
Section 8.02
Waiver; Amendment
. Prior to the Effective Time, any provision of this Agreement may be
(a) waived by the party benefited by the provision or (b) amended or modified at any time, by an agreement in writing among the parties hereto executed in the same manner as this Agreement, except that after the LSBG Meeting and the BHB
Meeting no amendment shall be made which by law requires further approval by the shareholders of LSBG or BHB, respectively, without obtaining such approval.
Section 8.03
Counterparts
. This Agreement may be executed in one or more counterparts (including by PDF or electronic
signature), each of which shall be deemed to constitute an original.
Section 8.04
Governing Law
. This Agreement shall
be governed by, and interpreted in accordance with, the laws of the State of Maine, without regard for conflict of law provisions.
Section 8.05
Expenses
. Each party hereto will bear all expenses incurred by it in connection with this Agreement and the
transactions contemplated hereby, including fees and expenses of its own financial consultants, accountants and counsel, except that printing expenses for the Joint Proxy Statement/Prospectus shall be shared equally between BHB and LSBG;
provided, however,
that nothing contained herein shall limit either partys rights to recover any damages arising out of the other partys willful breach of any provision of this Agreement.
45
Section 8.06
Notices
. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given if personally delivered, mailed by registered or certified mail (return receipt requested) or sent by reputable courier service to such party at its address set forth below or such
other address as such party may specify by notice to the parties hereto.
If to BHB:
Bar Harbor Bankshares
P.O. Box
400, 82 Main Street
Bar Harbor, Maine 04609
|
Attention:
|
Curtis C. Simard
|
|
|
President and Chief Executive Officer
|
With a copy to:
K&L Gates LLP
State Street
Financial Center, One Lincoln Street
Boston, MA 02111-2950
|
Attention:
|
Stanley V. Ragalevsky
|
|
Email:
|
stanley.ragalevsky@klgates.com
|
If to LSBG:
Lake Sunapee Bank Group
9 Main
Street, PO Box 9
Newport, New Hampshire 03773
|
Attention:
|
Stephen R. Theroux
|
|
|
President and Chief Executive Officer
|
|
Email:
|
stheroux@lakesunbank.com
|
With a copy to:
Hogan Lovells US LLP
55
Thirteenth Street, N.W.
Washington, D.C. 20004
|
Attention:
|
Richard A. Schaberg
|
|
Email:
|
richard.schaberg@hoganlovells.com
|
Section 8.07
Entire Understanding; No Third
Party Beneficiaries
. This Agreement, the Plan of Bank Merger, the Voting Agreements, and the Confidentiality Agreement represent the entire understanding of the parties hereto and thereto with reference to the transactions, and this Agreement,
the Plan of Bank Merger, the Voting Agreements, and the Confidentiality Agreement supersede any and all other oral or written agreements heretofore made. Except for the Indemnified Parties right to enforce BHBs obligation under
Section 5.12, which are expressly intended to be for the irrevocable benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives, nothing in this Agreement, expressed or implied, is intended to
confer upon any Person, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
Section 8.08
S
everability
. In the event that any one or more provisions of this Agreement shall for any reason be held
invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties shall use their reasonable efforts to
substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.
46
Section 8.09
Enforcement of the Agreement
. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
Section 8.10
Interpretation
. When a reference is made in this Agreement to
sections, exhibits or schedules, such reference shall be to a section of, or exhibit or schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and are
not part of this Agreement. Whenever the words include, includes or including are used in this Agreement, they shall be deemed to be followed by the words without limitation.
Section 8.11
Assignment
. No party may assign either this Agreement or any of its rights, interests or obligations
hereunder without the prior written approval of the other party. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.
ARTICLE IX
ADDITIONAL
DEFINITIONS
Section 9.01
Additional Definitions
. In addition to any other definitions contained in this
Agreement, the following words, terms and phrases shall have the following meanings when used in this Agreement:
Acquisition
Proposal means any proposal or offer with respect to any of the following (other than the transactions contemplated hereunder) involving BHB or LSBG: (a) any merger, consolidation, share exchange, business combination or other similar
transactions; (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets and/or liabilities that constitute a substantial portion of the net revenues, net income or assets of LSBG in a single transaction or series
of transactions; (c) any tender offer or exchange offer for 20% or more of the outstanding shares of its capital stock or the filing of a registration statement under the Securities Act in connection therewith; or (d) any public
announcement by any Person (which shall include any regulatory application or notice, whether in draft or final form) of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.
Acquisition Transaction means any of the following (other than the transactions contemplated hereunder): (a) a merger,
consolidation, share exchange, business combination or any similar transaction, involving the relevant companies; (b) a sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets and/or liabilities that constitute a
substantial portion of the net revenues, net income or assets of the relevant companies in a single transaction or series of transactions; (c) a tender offer or exchange offer for 20% or more of the outstanding shares of the capital stock of
the relevant companies or the filing of a registration statement under the Securities Act in connection therewith; or (d) an agreement or commitment by the relevant companies to take any action referenced above.
Affiliate means, with respect to any Person, any person that directly, or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, such Person and, without limiting the generality of the foregoing, includes any executive officer, director, manager or Person who beneficially owns more than ten percent of the equity or voting
securities of such Person.
BHB Benefit Plans means all benefit and compensation plans, contracts, policies or arrangements
covering current or former employees of BHB and its Subsidiaries and current or former directors of BHB and its Subsidiaries including employee benefit plans within the meaning of Section 3(3) of ERISA, and deferred compensation,
stock option, stock purchase, stock appreciation rights, stock based, incentive and bonus plans.
47
BHB Board means the Board of Directors of BHB.
BHB Common Stock means the common stock, par value $2.00 per share, of BHB.
BHB Disclosure Schedule means the disclosure schedule delivered by BHB to LSBG on or prior to the date hereof setting forth, among
other things, items the disclosure of which is necessary or appropriate either in response to an express provision of this Agreement or as an exception to one or more of its representations and warranties in Article IV or its covenants in Article V.
BHB Intellectual Property means the Intellectual Property used in or held for use in the conduct of the business of BHB.
BHB Share Price means the average of the closing sales prices of one share of BHB Common Stock for the ten (10) trading days
immediately preceding the Effective Time on NYSE as reported by
Bloomberg
.
Business Day means Monday through Friday of
each week, except a legal holiday recognized as such by the U.S. government or any day on which banking institutions in the State of Maine are authorized or obligated to close.
Certificate means any certificate that immediately prior to the Effective Time represents shares of LSBG Common Stock.
Derivative Transaction means any swap transactions, option, warrant, forward purchase or sale transactions, futures transactions,
cap transactions, floor transactions or collar transactions relating to one or more currencies, commodities, bonds, equity securities, loans, interest rates, catastrophe events, weather-related events, credit-related events or conditions or any
indexes, or any other similar transactions (including any option with respect to any of these transactions) or combination of any of these transactions, including collateralized mortgage obligations or other similar instruments or any debt or equity
instruments evidencing or embedding any such types of transactions, and any related credit support, collateral or other similar arrangements related to such transactions.
Environmental Law means any federal, state or local law, regulation, order, decree, permit, authorization, opinion or agency
requirement relating to: (a) the protection or restoration of the environment, health, safety, or natural resources, (b) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (c) wetlands,
indoor air, pollution, contamination or any injury or threat of injury to persons or property in connection with any Hazardous Substance.
ERISA means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
Excluded Shares shall consist of (i) shares held directly or indirectly by BHB (other than shares held in a fiduciary capacity
or in satisfaction of a debt previously contracted) and (ii) shares of LSBG Common Stock that are held by LSBG as treasury shares immediately prior to the Effective Time.
FDIC means the Federal Deposit Insurance Corporation.
FHLB means the Federal Home Loan Bank of Boston, or any successor thereto.
FRB means the Board of Governors of the Federal Reserve System.
GAAP means accounting principles generally accepted in the United States of America.
Governmental Authority means any federal, state or local court, administrative agency or commission or other governmental authority
or instrumentality.
Hazardous Substance includes but is not limited to any and all substances (whether solid, liquid or gas)
defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous
48
materials, extremely hazardous wastes, or words of similar meaning or regulatory effect under any present or future Environmental Laws or that may have a negative impact on human health or the
environment, including petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables and explosives, mold, mycotoxins, microbial matter and airborne pathogens
(naturally occurring or otherwise), but excluding substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purposes of cleaning or other maintenance or operations.
Intellectual Property means (a) trademarks, service marks, trade names, Internet domain names, designs, logos, slogans, and
general intangibles of like nature, together with all goodwill, registrations and applications related to the foregoing; (b) patents and industrial designs (including any continuations, divisionals, continuations-in-part, renewals, reissues,
and applications for any of the foregoing); (c) copyrights (including any registrations and applications for any of the foregoing); (d) Software; and (e) technology, trade secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models, and methodologies.
IRS means the Internal Revenue Service.
Joint Proxy Statement/Prospectus means the joint proxy statement and prospectus, satisfying all applicable requirements of
applicable state securities and banking laws, and of the Securities Act and the Exchange Act, and the rules and regulations thereunder, together with any amendments and supplements thereto, as prepared by BHB and LSBG and as delivered to holders of
BHB Common Stock and LSBG Common Stock in connection with the solicitation of their approval of this Agreement.
Knowledge as
used with respect to a Person (including references to such Person being aware of a particular matter) means those facts that are known by the senior officers and directors of such Person, and includes any facts, matters or circumstances set forth
in any written notice from any Governmental Authority or any other written notice received by that Person.
Lien means any
mortgage, pledge, lien, security interest, conditional and installment sale agreement, encumbrance, charge or other claim of third parties of any kind.
Loan Property means any property in which the applicable party (or a subsidiary of it) holds a security interest and, where
required by the context, includes the owner or operator of such property, but only with respect to such property.
LSBG Board
means the Board of Directors of LSBG.
LSBG Disclosure Schedule means the disclosure schedule delivered by LSBG to BHB on or
prior to the date hereof setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express provision of this Agreement or as an exception to one or more of its representations and
warranties in Article III or its covenants in Article V.
LSBG Intellectual Property means the Intellectual Property used in or
held for use in the conduct of the business of LSBG.
Material Adverse Effect means with respect to BHB and its Subsidiaries,
taken as a whole, or LSBG and its Subsidiaries, taken as a whole, any event, circumstance, development, change or effect that alone or in the aggregate with other events, circumstances, developments, changes or effects, that is material and adverse
to its condition (financial or otherwise), results of operations, properties, assets, liabilities or business or that would materially delay or impair its ability to perform its obligations under this Agreement or otherwise materially delays or
impairs its ability to consummate the transactions contemplated by this Agreement;
provided, however
, that Material Adverse Effect shall not be deemed to include the impact of (i) changes in banking and similar laws of general
applicability or interpretations thereof by Governmental Authorities, (ii) changes in GAAP or regulatory accounting requirements applicable to insured depository institutions and their holding companies generally, (iii) changes in general
economic conditions (including interest rates) affecting insured depository institutions and their holding companies generally, unless such change has a materially disproportionate adverse effect on such party relative to other similarly situated
Persons, (iv) any modifications or changes to valuation policies and practices in connection with the transactions contemplated by this Agreement or restructuring
49
charges taken in connection with the transactions contemplated by this Agreement, in each case in accordance with GAAP, (v) reasonable expenses incurred in connection with the transactions
contemplated by this Agreement; (vi) the effects of any action or omission taken with the prior consent of the other party or as otherwise expressly permitted or contemplated by this Agreement; and (vii) any changes in international or
domestic political or social conditions, including the occurrence of any military or terrorist attack upon or within the United States of America.
MBFI means the Maine Bureau of Financial Institutions.
NASDAQ means The Nasdaq Stock Market, LLC.
NYSE means the New York Stock Exchange
OCC means the Office of the Comptroller of the Currency.
Person means any individual, bank, corporation, partnership, association, joint-stock company, business trust, limited liability
company, unincorporated organization or other organization or firm of any kind or nature.
Rights means, with respect to any
Person, warrants, options, rights, convertible securities and other arrangements or commitments which obligate the Person to issue or dispose of any of its capital stock or other ownership interests.
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Software means computer programs, whether in source code or object code form (including any and all software implementation of
algorithms, models and methodologies), databases and compilations (including any and all data and collections of data), and all documentation (including user manuals and training materials) related to the foregoing.
Subsidiary means, with respect to any party, any corporation or other entity of which a majority of the capital stock or other
ownership interest having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such party.
Superior Proposal means any bona fide written Acquisition Proposal made by a third party to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 25% of the
combined voting power of the shares of LSBG Stock then outstanding or all or substantially all of the assets of LSBG and otherwise (a) on terms which the LSBG Board determines in good faith, after consultation with its financial advisor, to be
more favorable from a financial point of view to LSBGs shareholders than the transactions contemplated by this Agreement, and (b) that constitutes a transaction that, in the LSBG Boards good faith judgment, is reasonably likely to
be consummated on the terms set forth, taking into account all legal, financial, regulatory and other aspects of such proposal.
Tax and Taxes mean all federal, state, local or foreign income, gross income, gains, gross receipts, sales, use, ad
valorem, goods and services, capital, production, transfer, franchise, windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp, occupation, property, environmental, custom duties,
unemployment or other taxes of any kind whatsoever, together with any interest, additions or penalties thereto and any interest in respect of such interest and penalties.
Tax Returns means any return, declaration or other report (including elections, declarations, schedules, estimates and information
returns) with respect to any Taxes.
(Remainder of page intentionally left blank.)
50
IN WITNESS WHEREOF
, the parties hereto have caused this Agreement to be executed in
counterparts by their duly authorized officers, all as of the day and year first above written.
|
|
|
BAR HARBOR BANKSHARES
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
|
|
|
LAKE SUNAPEE BANK GROUP
|
|
|
By:
|
|
/s/ Stephen R. Theroux
|
Name:
|
|
Stephen R. Theroux
|
Title:
|
|
President and Chief Executive Officer
|
[Signature Page to
Agreement and Plan of Merger]
Exhibit A
Voting Agreement
52
VOTING AGREEMENT
VOTING AGREEMENT
(
Agreement
), dated as of May 5, 2016, by and between Bar Harbor Bankshares, a Maine corporation
(
Buyer
), and the undersigned holder (
Shareholder
) of common stock, $0.01 par value per share (
Common Stock
), of Lake Sunapee Bank Group, a Delaware corporation (the
Company
).
WHEREAS
, concurrently with the execution of this Agreement, Buyer and the Company have entered into an
Agreement and Plan of Merger (as such agreement may be subsequently amended or modified, the
Merger Agreement
), providing for the merger of the Company with and into Buyer (the
Merger
);
WHEREAS
, the Shareholder beneficially owns (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
Exchange
Act
)) and has sole voting power with respect to the number of shares of Common Stock, and holds other rights to acquire the number of shares of Common Stock, indicated opposite the Shareholders name on
Schedule 1
attached
hereto (as used herein, the term
Shares
means all shares of Common Stock, whether such shares of Common Stock are held by the Shareholder on the date of this Agreement or are subsequently acquired prior to the Expiration Date (as
defined in Section 2));
WHEREAS
, it is a condition to the willingness of Buyer to enter into the Merger Agreement that the Shareholder
execute and deliver this Agreement; and
WHEREAS
, all capitalized terms used in this Agreement without definition herein shall have the
meanings ascribed to them in the Merger Agreement.
NOW
,
THEREFORE
, in consideration of the foregoing recitals, the mutual covenants
and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Shareholder and Buyer agree as follows:
1.
Agreement to Vote Shares
. The Shareholder agrees that, prior to the Expiration Date, at any meeting of the shareholders of the Company, or any
adjournment or postponement thereof, and in connection with any written consent of the shareholders of the Company, with respect to the Merger Agreement or any of the transactions contemplated thereby (including the Merger), the Shareholder shall:
|
(a)
|
appear at such meeting or otherwise cause the Shares to be counted as present thereat for purposes of calculating a quorum; and
|
|
(b)
|
vote (or cause to be voted), in person or by proxy, (i) in favor of the approval and adoption of the Merger Agreement and the consummation of the Merger or any of the transactions contemplated by the Merger
Agreement and (ii) against any other Acquisition Proposal and any other matter that could reasonably be expected to materially impede, interfere with, delay, postpone or adversely affect the consummation of the Merger or any of the transactions
contemplated by the Merger Agreement.
|
Any such vote shall be cast or consent shall be given in accordance with such procedures relating
thereto so as to ensure that it is duly counted for purposes of determining that a quorum is present and for purposes of recording the results of such vote or consent.
2.
Expiration Date
. As used in this Agreement, the term
Expiration Date
shall mean the earliest to occur of (a) the Effective
Time, (b) such date and time as the Merger Agreement shall be terminated pursuant to Article VII thereof, or (c) upon mutual written agreement of the parties hereto to terminate this Agreement. Upon termination or expiration of this
Agreement, no party shall have any further obligations or liabilities under this Agreement;
provided
,
however
, that such termination or expiration shall not relieve any party from liability for any willful breach of this Agreement
prior to the termination or expiration hereof.
3.
Agreement to Retain Shares
. The Shareholder shall not, except as contemplated by this Agreement
or the Merger Agreement, directly or indirectly, (a) sell, assign, transfer, or otherwise dispose of (including, without limitation, by the creation of a Lien (as defined in Section 4(c)), any Shares, (b) enter into any contract,
option, commitment or other arrangement or understanding with respect to the sale, transfer, assignment or other disposition of, any Shares, (c) deposit any Shares in a voting trust or enter into a voting agreement or similar
agreement with respect to any Shares or grant any proxy or power of attorney with respect thereto, or (d) take any action that would make any representation or warranty of the Shareholder
contained herein untrue or incorrect or have the effect of preventing or disabling the Shareholder from performing the Shareholders obligations under this Agreement. Notwithstanding the foregoing, the Shareholder may make (w) transfers of
Shares by will or by operation of law, subject to the transferee agreeing in writing to be bound by the terms of, and perform the obligations of the Shareholder under, this Agreement, (x) transfers of Shares in connection with estate and
charitable planning purposes, including transfers to relatives, trusts and charitable organizations, subject to the transferee agreeing in writing to be bound by the terms of, and perform the obligations of the Shareholder under, this Agreement,
(y) disposition of Shares to the Company solely to satisfy required withholding tax obligations applicable upon the vesting of restricted shares of Common Stock, and (z) as Buyer may otherwise agree in writing in its sole discretion.
4.
Representations and Warranties of Shareholder
. Except as disclosed on
Schedule 1
hereto, the Shareholder hereby represents and warrants to
Buyer as follows:
|
(a)
|
the Shareholder has the full power and authority to execute and deliver this Agreement and to perform the Shareholders obligations hereunder;
|
|
(b)
|
this Agreement has been duly executed and delivered by the Shareholder and (assuming this Agreement constitutes a valid and binding agreement of Buyer) is a valid and legally binding agreement with respect to the
Shareholder, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting
creditors rights or by general equity principles);
|
|
(c)
|
the Shareholder beneficially owns the number of Shares indicated opposite such Shareholders name on
Schedule 1
, free and clear of any liens, claims, charges or other encumbrances or restrictions of any kind
whatsoever (
Liens
), and has sole, and otherwise unrestricted, voting and investment power with respect to such Shares, and none of the Shares are subject to any voting trust or other agreement, arrangement or restriction with
respect to the voting of the Shares, except as contemplated by this Agreement (the Shareholder agrees to promptly notify Buyer in writing of the nature and amount of any Shares acquired after the date hereof, and such Shares shall be subject to the
foregoing representations and warranties);
|
|
(d)
|
the Shares listed on Schedule 1 constitute the Shareholders entire interest in the outstanding shares of the Companys Common Stock, and the Shareholder is not the beneficial or record holder of, and does not
exercise voting power over, any other outstanding shares of capital stock of the Company;
|
|
(e)
|
the Shareholder understands that, at the Effective Time, each outstanding Share listed on
Schedule 1
(including any restricted shares of Common Stock the vesting of which accelerates at or prior to the Effective
Time) shall be converted into, as provided in and subject to the limitations set forth in the Merger Agreement, the right to receive 0.4970 shares of Buyer Common Stock, plus cash for any fractional shares in accordance with Section 2.03 of the
Merger Agreement;
|
|
(f)
|
the execution and delivery of this Agreement by the Shareholder does not, and the performance by the Shareholder of his obligations hereunder and the consummation by the Shareholder of the transactions contemplated
hereby will not, violate or conflict with, or constitute a default under (with or without notice or lapse of time or both), any agreement, instrument, contract or other obligation or any order, arbitration award, judgment or decree to which the
Shareholder is a party or by which the Shareholder is bound, or any statute, rule or regulation to which the Shareholder is subject or, in the event that the Shareholder is a corporation, partnership, trust or other entity, any bylaw or other
organizational document of the Shareholder; and
|
|
(g)
|
the execution and delivery of this Agreement by the Shareholder does not, and the performance of this Agreement
by the Shareholder does not and will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or other Person by the
|
2
|
Shareholder except for applicable requirements, if any, of the Exchange Act, and except where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay the performance by the Shareholder of his obligations under this Agreement in any respect.
|
5.
Irrevocable Proxy
. Subject to the last sentence of this
Section 5
, by execution of this Agreement, the Shareholder does hereby appoint Buyer with full power of substitution to any Affiliate of Buyer, as the Shareholders true
and lawful attorney and irrevocable proxy, to the full extent of the Shareholders rights with respect to the Shares, to vote, if the Shareholder is unable to perform his obligations under this Agreement, each of such Shares that the
Shareholder shall be entitled to so vote with respect to the matters set forth in Section 1 hereof at any meeting of the shareholders of the Company, and at any adjournment or postponement thereof, and in connection with any action of the
shareholders of the Company taken by written consent. The Shareholder intends this proxy to be irrevocable and coupled with an interest hereafter until the Expiration Date and hereby revokes any proxy previously granted by the Shareholder with
respect to the Shares. Notwithstanding anything contained herein to the contrary, this irrevocable proxy shall automatically terminate upon the Expiration Date of this Agreement.
6.
No Solicitation
. From and after the date hereof until the Expiration Date, the Shareholder, in his capacity as a shareholder of the Company, shall
not, nor shall such Shareholder authorize any advisor or representative of, such Shareholder or any of his Affiliates, other than the Company in accordance with the terms of the Merger Agreement, to (and, to the extent applicable to the Shareholder,
such Shareholder shall use reasonable best efforts to prevent any of his advisors or representatives or Affiliates, other than the Company in accordance with the terms of the Merger Agreement, to) (a) initiate, solicit, induce or knowingly
encourage, or take any action to facilitate the making of, any inquiry, offer or proposal which constitutes, or could reasonably be expected to lead to, an Acquisition Proposal, (b) participate in any discussions or negotiations regarding any
Acquisition Proposal (other than the Merger), or furnish, or otherwise afford access, to any person (other than Buyer) any information or data with respect to the Company or any of its Subsidiaries or otherwise relating to an Acquisition Proposal
(other than the Merger), (c) enter into any agreement, agreement in principle or letter of intent with respect to an Acquisition Proposal (other than the Merger), (d) solicit proxies or become a participant in a
solicitation (as such terms are defined in Regulation 14A under the Exchange Act) with respect to an Acquisition Proposal (other than the Merger) or otherwise encourage or assist any party in taking or planning any action that would
compete with, restrain or otherwise serve to interfere with or inhibit the timely consummation of the Merger in accordance with the terms of the Merger Agreement, (e) initiate a shareholders vote or action by consent of the Companys
shareholders with respect to an Acquisition Proposal (other than the Merger), or (f) except by reason of this Agreement, become a member of a group (as such term is used in Section 13(d) of the Exchange Act) with respect to any
voting securities of the Company that takes any action in support of an Acquisition Proposal (other than the Merger).
7.
Specific Enforcement
. The
parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof or was otherwise breached. It is accordingly agreed that the parties shall be entitled to
specific relief hereunder, including, without limitation, an injunction or injunctions to prevent and enjoin breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, in any state or federal court in
any competent jurisdiction, in addition to any other remedy to which they may be entitled at law or in equity. Any requirements for the securing or posting of any bond with respect to any such remedy are hereby waived.
8.
No Waivers
. No waivers of any breach of this Agreement extended by Buyer to the Shareholder shall be construed as a waiver of any rights or remedies
of Buyer with respect to any other shareholder of the Company who has executed an agreement substantially in the form of this Agreement with respect to Shares beneficially owned by such shareholder or with respect to any subsequent breach of the
Shareholder or any other such shareholder of the Company. No waiver of any provisions hereof by either party shall be deemed a waiver of any other provisions hereof by any such party, nor shall any such waiver be deemed a continuing waiver of any
provision hereof by such party.
3
9.
Capacity as Shareholder
. Notwithstanding anything herein to the contrary, the covenants and agreements
set forth herein shall not prevent the Shareholder (a) from exercising his duties and obligations as a director of the Company or otherwise taking any action, subject to the applicable provisions of the Merger Agreement, while acting in such
capacity as a director of the Company, or (b) if the Shareholder is serving as a trustee or fiduciary of any ERISA plan or trust, from exercising his duties and obligations as a trustee or fiduciary of such ERISA plan or trust. The Shareholder
is executing this Agreement solely in his capacity as a shareholder of the Company.
10.
Entire Agreement; Amendments
. This Agreement supersedes all
prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof and contains the entire agreement among the parties with respect to the subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an instrument in writing signed by each party hereto.
11.
Further
Assurances
. From time to time and without additional consideration, the Shareholder shall execute and deliver, or cause to be executed and delivered, such additional transfers, assignments, endorsements, proxies, consents and other instruments,
and shall take such further actions, as Buyer may reasonably request for the purpose of carrying out and furthering the intent of this Agreement.
12.
Severability
. If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
13.
Counterparts
. This Agreement may be executed in one or more counterparts, each of
which will be deemed an original but all of which together shall constitute one and the same instrument.
14.
Effect of Headings
. The section
headings herein are for convenience only and shall not affect the construction or interpretation of this Agreement.
15.
Public Disclosure
. The
Shareholder shall not issue or cause the publication of any press release or other public announcement (to the extent not previously issued or made in accordance with the Merger Agreement) with respect to this Agreement, the Merger Agreement or the
transactions contemplated by the Merger Agreement, including the Merger, without the prior consent of Buyer. The Shareholder hereby permits Buyer to publish and disclose in any document and/or schedule filed by Buyer with the Securities and Exchange
Commission such Shareholders identity and ownership of Shares and the nature of such Shareholders commitments and obligations pursuant to this Agreement.
16.
Assignment
. This Agreement may not be assigned by any party hereto without the prior written consent of the other party hereto;
provided
,
however
, that, notwithstanding the foregoing, Buyer may assign its rights and obligations under this Agreement to any Subsidiary wholly owned by it. All of the covenants and agreements contained in this Agreement shall be binding upon, and
inure to the benefit of, the respective parties and their permitted successors, assigns, heirs, executors, administrators and other legal representatives, as the case may be.
17.
Attorneys Fees
. In the event that either party institutes litigation to enforce or protect its rights under this Voting Agreement, the
prevailing party will be entitled to reasonable attorneys fees and other out-of-pocket costs and expenses incurred by it in connection with the enforcement or protection of its rights hereunder.
18.
Governing Law
. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of Delaware, without giving effect to
the principles of conflicts of law provisions.
19.
Waiver of Jury Trial
. The parties hereto hereby waive any right to trial by jury with respect to
any action or proceeding related to or arising out of this Agreement, any document executed in connection herewith and the matters contemplated hereby and thereby.
4
20.
No Agreement Until Executed
. Irrespective of negotiations among the parties or the exchanging of
drafts of this Agreement, this Agreement shall not constitute or be deemed to evidence a contract, agreement, arrangement or understanding between the parties hereto unless and until (a) the Board of Directors of the Company has approved, for
purposes of any applicable anti-takeover laws and regulations, and any applicable provision of the Companys Articles of Incorporation, as amended, the transactions contemplated by the Merger Agreement, (b) the Merger Agreement is executed
by all parties thereto, and (c) this Agreement is executed by all parties hereto.
[
Signature Page Follows
]
5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.
|
|
|
BAR HARBOR BANKSHARES
|
|
|
By:
|
|
|
|
|
Name:
|
|
|
Title:
|
|
SHAREHOLDER:
|
|
|
Name:
|
|
|
6
SCHEDULE 1
Exhibit B
Plan of Bank Merger
PLAN OF BANK MERGER
BY AND BETWEEN
BAR
HARBOR BANK & TRUST
AND
LAKE SUNAPEE BANK
DATED AS OF
[ ], 2016
PLAN OF BANK MERGER
This
PLAN OF BANK MERGER
, dated as of [ ], 2016 (this
Agreement
), is entered into by and between Bar Harbor
Bank & Trust, a Maine-chartered bank whose main office is located in Bar Harbor, Maine (
Bar Harbor
), and Lake Sunapee Bank, a federally-chartered savings association whose main office is located in Newport, New Hampshire
(
Lake Sunapee
).
WHEREAS
, Bar Harbor is the wholly-owned subsidiary of Bar Harbor Bankshares, a Maine
corporation (
BHB
), and Lake Sunapee is the wholly-owned subsidiary of Lake Sunapee Bank Group, a Delaware corporation (
LSBG
);
WHEREAS
, Bar Harbor and Lake Sunapee desire that Lake Sunapee merge with and into Bar Harbor as part of the related Agreement and Plan
of Merger dated as of May 5, 2016, by and between BHB and LSBG (the
Merger Agreement
), that provides for the merger of LSBG with and into BHB, with BHB as the surviving entity;
WHEREAS
, the Boards of Directors of Bar Harbor and Lake Sunapee have determined that it is in the best interests of their respective
institutions and sole stockholders to consummate the business combination transaction provided for herein; and
WHEREAS
, all
capitalized terms used in this Agreement without definition herein shall have the meanings ascribed to them in the Merger Agreement.
NOW
,
THEREFORE
, in consideration of the mutual promises and covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, Bar Harbor and Lake Sunapee hereto agree as follows:
Section 1.
The Bank Merger
. Subject to the terms and conditions set forth in this Agreement, in the Merger Agreement and pursuant
to applicable federal laws and regulations, at the Effective Time (as defined herein), Lake Sunapee shall merge with and into Bar Harbor (the
Bank Merger
). Bar Harbor shall be the surviving institution (sometimes referred to
herein as the
Surviving Bank
) of the Bank Merger and shall continue its corporate existence as a Maine-chartered bank subject to the Maine Revised Statutes (the
MRS
), following consummation of the Bank Merger.
Upon consummation of the Bank Merger, the separate corporate existence of Lake Sunapee shall cease.
(a)
Closing;
Closing Date
. A closing in respect of the transactions contemplated in this Agreement (the
Closing
) shall take place at 10:00 a.m., Eastern time on the Closing Date (as defined below), at the principal offices of Hogan Lovells
US LLP in Washington, D.C., or at such other place or at such other time as the parties may mutually agree upon, which date shall be referred to as the Closing Date.
(b)
Name and Purpose
. At the Effective Time, the name of the Surviving Bank shall be Bar Harbor Bank & Trust.
The purpose of the Surviving Bank shall be to continue its existence as a Maine-chartered bank and to engage in the business of banking and activities incidental thereto consistent with applicable federal law and the laws of the State of Maine.
(c)
Charter
. From and after the Effective Time, the charter of Bar Harbor, as in effect immediately prior to the
Effective Time, shall be the charter of the Surviving Bank until amended in accordance with applicable law.
(d)
Bylaws
. From and after the Effective Time, the bylaws of Bar Harbor, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Bank until amended in accordance with applicable law.
(e)
Directors
. The directors of the Surviving Bank immediately after the Effective Time shall consist of the directors
of Bar Harbor in office immediately prior to the Effective Time and four additional members of the LSBG Board of Directors appointed in accordance with Section 5.18 of the Merger Agreement.
3
(f)
Officers
. The officers of the Surviving Bank shall consist of
(i) the officers of Bar Harbor in office immediately prior to the Effective Time, and (ii) William J. McIver as an executive vice president and regional president. Each of the officers of the Surviving Bank immediately after the Effective
Time shall hold office until his or her successor is elected and qualified or otherwise in accordance with the charter and bylaws of the Surviving Bank.
Section 2.
Effects of the Bank Merger
. At and after the Effective Time, the Bank Merger shall have the effects provided herein and
set forth in applicable provisions of federal law and the MRS.
(a)
Surviving Bank
. Without limiting the generality
of the foregoing and subject thereto, at the Effective Time, the Surviving Bank shall be considered the same business and corporate entity as each of Bar Harbor and Lake Sunapee and thereupon and thereafter all the property, rights, privileges,
powers and franchises of Lake Sunapee and of Bar Harbor shall vest in the Surviving Bank, and all debts, liabilities, obligations, restrictions, disabilities and duties of Lake Sunapee and of Bar Harbor shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Bank. Any reference to either of Lake Sunapee and Bar Harbor in any contract, will or document, whether executed or taking effect before or after the Effective Time, shall be
considered a reference to the Surviving Bank if not inconsistent with the other provisions of the contract, will or document; and any pending action or other judicial proceeding to which either of Lake Sunapee or Bar Harbor is a party shall not be
deemed to have abated or to have been discontinued by reason of the Bank Merger, but may be prosecuted to final judgment, order or decree in the same manner as if the Bank Merger had not been made or the Surviving Bank may be substituted as a party
to such action or proceeding, and any judgment, order or decree may be rendered for or against it that might have been rendered for or against either of Lake Sunapee or Bar Harbor if the Bank Merger had not occurred.
(b)
Deposits
. All deposit accounts of Lake Sunapee shall be and become deposit accounts in the Surviving Bank without
change in their respective terms, maturity, minimum required balances or withdrawal value. Appropriate evidence of the deposit account in the Surviving Bank shall be provided by the Surviving Bank to each deposit account holder of Lake Sunapee, as
necessary, after consummation of the Bank Merger. All deposit accounts of Bar Harbor prior to consummation of the Bank Merger shall continue to be deposit accounts in the Surviving Bank after consummation of the Bank Merger without any change
whatsoever in any of the provisions of such deposit accounts, including, without limitation, their respective terms, maturity, minimum required balances or withdrawal value.
(c)
Offices
. At the Effective Time, the main office of the Surviving Bank shall be located in Bar Harbor, Maine.
Section 3.
Approvals Required
. The consummation of the transactions contemplated by this Agreement is specifically conditioned upon
receipt of all necessary regulatory approvals and nonobjections, including, but not limited to, those approvals and nonobjections from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Maine
Bureau of Financial Institutions, as may be required, and the expiration of all applicable waiting periods with respect to the Bank Merger. The sole shareholders of Lake Sunapee and of Bar Harbor shall have taken appropriate action to vote to
approve this Agreement and the Bank Merger.
Section 4.
Conditions Precedent
. The respective obligations of each party under
this Agreement shall be subject to: (i) the receipt of all required regulatory approvals and the expiration of any required waiting periods specified by applicable federal law or regulation; and (ii) the approval of this Agreement by LSBG
in its capacity as the sole shareholder of Lake Sunapee and the approval of this Agreement by BHB in its capacity as sole shareholder of Bar Harbor.
Section 5.
Representations
. Each of Bar Harbor and Lake Sunapee represents that this Agreement has been duly authorized, executed
and delivered by such party and constitutes a legal, valid and binding obligation of such party, enforceable against it in accordance with the terms hereof.
4
Section 6.
Effective Date and Effective Time
. Subject to the terms and conditions of
this Agreement, Bar Harbor and Lake Sunapee each shall make all such filings as may be required to consummate the Bank Merger in accordance with applicable laws and regulations. The Bank Merger shall become effective on the date specified on the
certificate to be issued by the Superintendent of the State of Maine (the
Bank Merger Effective Date
), and at the time specified therein (the
Bank Merger Effective Time
).
Section 7.
Amendments
. To the extent permitted by applicable federal banking law and Maine law, this Agreement may be amended by a
subsequent writing signed by the parties hereto upon the approval of the Board of Directors of each of the parties hereto.
Section 8.
Termination
. Consummation of the Bank Merger is conditioned upon the satisfaction of all conditions set forth in Article VI of the Merger Agreement. This Agreement shall terminate and forthwith become void automatically and without any action
on the part of Bar Harbor or Lake Sunapee immediately upon the termination of the Merger Agreement in accordance with Article VII thereof and, except as set forth in Article VII of the Merger Agreement, there shall be no further liability on the
part of Bar Harbor or Lake Sunapee upon such termination.
Section 9.
Entire Agreement
. This Agreement supersedes all prior
agreements, written or oral, among the parties hereto with respect to the subject matter hereof and contains the entire agreement among the parties with respect to the subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an instrument in writing signed by each party hereto. No waiver of any provisions hereof by either party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party.
Section 10.
Successors
.
This Agreement shall be binding on the successors of Bar Harbor or Lake Sunapee.
Section 11.
Governing Law
. This Agreement
shall be governed by, and interpreted in accordance with, the laws of the United States of America and the laws of the State of Maine without regard for conflict of law provisions.
[SIGNATURE PAGE FOLLOWS]
5
IN WITNESS WHEREOF
, Bar Harbor Bank & Trust and Lake Sunapee Bank have executed
and delivered this Agreement as of the date first above written.
|
|
|
BAR HARBOR BANK & TRUST
|
|
|
By:
|
|
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
|
LAKE SUNAPEE BANK
|
|
|
By:
|
|
|
Name:
|
|
Stephen R. Theroux
|
Title:
|
|
President and Chief Executive Officer
|
[SIGNATURE PAGE TO PLAN OF BANK
MERGER]
Exhibit C
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT
(the
Agreement
) is made this 5th day of May, 2016, by and between
BAR HARBOR
BANKSHARES
, a Maine corporation with its headquarters located in Bar Harbor, Maine (the
Company
),
BAR HARBOR BANK & TRUST
, a wholly-owned subsidiary of the Company (the
Bank
) (together, the
Employer
), and
WILLIAM J. MCIVER
, residing at the address on file with the Employer (the
Executive
).
W I T N E S S E T H:
WHEREAS,
the Employer desires to employ the Executive, and the Executive desires to accept such employment upon the terms and conditions set forth herein, including, without limitation, the restrictive covenants in Sections 10 and 11 herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by the parties hereto, the parties agree as follows:
1.
DEFINITIONS
.
1.1.
Cause
shall mean solely the Executives conviction by a court of competent jurisdiction of a felony involving
dishonesty or fraud on the part of the Executive in his relationship with the Employer.
1.2.
Code
shall mean the
Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated thereunder.
1.3.
Confidential
Information
shall mean any and all information and compilations of information, in whatever form or medium (including any copies thereof), relating to any part of the business of the Company, the Bank, or any of their subsidiaries or
affiliates, or the business of their customers, provided to the Executive, or which the Executive obtained or compiled or had obtained or compiled on his behalf, which information or compilations of information are not a matter of public record or
generally known or available to the public, including, without limitation, but subject to the foregoing, the following:
|
1.3.1.
|
Financial information regarding the Company, the Bank, or any of their subsidiaries or affiliates;
|
|
1.3.2.
|
Personnel data, including compensation arrangements relating to the Executive or any other employees of the Company, the Bank, or any of their subsidiaries or affiliates;
|
|
1.3.3.
|
Internal plans, practices, and procedures of the Company, the Bank, or any of their subsidiaries or affiliates;
|
|
1.3.4.
|
The names, portfolio information, investment strategies, requirements, lending or deposit information, or any similar information of any customers, clients, or prospects of the Company, the Bank, or any of their
subsidiaries or affiliates;
|
|
1.3.5.
|
Business methods and marketing strategies of the Company, the Bank, or any of their subsidiaries or affiliates;
|
|
1.3.6.
|
Any other information expressly identified to Executive as confidential by the officers and directors of the Company, the Bank, or any of their subsidiaries or affiliates; and
|
|
1.3.7.
|
The terms and conditions of this Agreement and any documents or instruments executed in connection herewith that are not of public record.
|
1.4.
Disability
shall mean a condition: (a) which causes the Executive to be unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or which can be expected to last for a continuous period of not less than twelve (12) months; or (b) which results in his receiving, by reason of any
medically determinable physical or mental impairment which can be expected to result in death or which can be expected to last for a continuous period of not less than twelve (12) months, income replacement benefits for a period of not less
than three (3) months under an accident and health plan covering employees of the Employer. Disability shall be deemed to exist only when the disability has been certified to the Board of Directors of the Company by a licensed physician
approved by the Board of Directors of the Company.
1.5.
Effective Date
shall mean the Closing Date, as such term is
defined in the Agreement and Plan of Merger, dated as of May 5, 2016, by and between the Company and Lake Sunapee Bank Group.
1.6.
Good Reason
shall mean the occurrence of one or more of the following events without the consent of the Executive:
|
1.6.1.
|
A material diminution in the Executives Base Compensation;
|
|
1.6.2.
|
A material diminution or adverse change in the Executives authority, duties, or responsibilities;
|
|
1.6.3.
|
A material diminution in the budget over which the Executive retains authority;
|
|
1.6.4.
|
A material change in the geographic location at which the Executive must perform a substantial portion of his services, which for purposes of this Agreement means a location that is more than one hundred
(100) miles from Newport, New Hampshire;
|
|
1.6.5.
|
Any other action or inaction that constitutes a material breach by the Employer of the Agreement or any other agreement under which the Executive provides services to the Employer or Employer provides compensation or
benefits to Executive; or
|
|
1.6.6.
|
If Employer delivers a Notice of Termination for Cause pursuant to Section 7.1 and it is determined by an arbitrator pursuant to Section 13.4 that grounds for termination for Cause did not in fact exist.
|
1.7.
Notice of Termination
shall mean the written communication provided to the other party in the event
of the Executives termination of employment (i) by the Employer for Cause or on account of the Executives Disability or (ii) by the Executive for Good Reason. A Notice of Termination must indicate the specific provisions in
this Agreement upon which the applicable party relies as the basis for the Executives termination of employment and must also set forth in reasonable detail the facts and circumstances claimed to provide the basis for such termination of
employment under the provisions so indicated.
1.8.
Restrictive Period
shall mean the period commencing on the Effective
Date and terminating on the one (1)-year anniversary of the Executives termination of employment with the Company, the Bank, and all of their subsidiaries and affiliates, regardless of reason and whether or not pursuant to this Agreement.
2.
EMPLOYMENT
.
As of the Effective Date, the Employer employs the Executive, and the Executive accepts employment by the Employer, as the
Executive Vice President, Regional PresidentNew Hampshire and Vermont Markets of the Employer on the terms and conditions specified herein.
3.
TERM OF EMPLOYMENT
.
3.1.
Term
. The Executives employment shall be for a term of commencing on the Effective
Date and ending on May 31, 2019 (the
Term
), unless terminated sooner pursuant to this Agreement.
3.2.
Expiration
. Upon expiration of this Agreement, the Executives employment with the Employer shall cease, and this Agreement shall terminate without further obligations to the Executive, except as provided under Section 8.1.
4.
RESPONSIBILITIES AND OTHER ACTIVITIES
.
The Executive shall be employed as the Executive Vice President, Regional PresidentNew Hampshire and Vermont Markets of the Employer as
of the Effective Date. In such roles, the Executive shall undertake the
2
overall management, responsibilities, and duties related to these positions as defined by the Chief Executive Officer of the Company or of the Bank, as applicable, and summarized in the job
description attached hereto as
Exhibit A
. The Executive shall faithfully perform the duties of his positions as described herein; shall devote substantially all of his business time and energies to the business and affairs of the Employer;
and shall use his best efforts, skills, and abilities to promote the Employers interests. The Executive may not engage in any business activities or render any services of a business, commercial, or professional nature (whether or not for
compensation) that would adversely affect the Executives performance of his responsibilities and duties hereunder or conflict with the business of the Employer for the benefit of any person or entity, unless the Executive receives the prior
written consent of the Employer.
5.
COMPENSATION
.
5.1.
Base Compensation
. The Employer shall pay the Executive an annual base salary of Two Hundred and Ninety Five Thousand Dollars and
Zero Cents Dollars ($295,000) (
Base Compensation
). The Base Compensation shall be paid in substantially equal installments in accordance with the Employers compensation policies and procedures on the payroll dates
established by the Employer for its senior executive officers. The Base Compensation shall be reviewed annually by the Compensation Committee of the Companys Board of Directors and may be adjusted in the Companys sole discretion,
provided that the Base Compensation may not be adjusted downwards during the initial Term.
5.2.
Other Compensation
.
|
5.2.1.
|
The Executive shall be a participant in the Companys Annual Incentive Plan, in the form attached hereto as
Exhibits B and B(a)
as may be amended from time to time in the Companys sole discretion, with
his award, if any, for the calendar year of the Effective Date to be prorated from the Effective Date.
|
|
5.2.2.
|
The Executive shall be a participant in the Companys Long Term Incentive Plan, in the form attached hereto as
Exhibits C and C(a)
, as may be amended from time to time in the Companys sole discretion.
|
|
5.2.3.
|
The Executive shall be eligible to participate in any performance compensation plans agreed upon by the parties during the Term of this Agreement in concert with the Employers evolving goals and objectives.
Notwithstanding any provision herein to the contrary, all incentive compensation shall be provided consistent with the Employers risk-management policies and the requirements of all applicable laws, including without limitation any rules
adopted and applicable to the Executive under Section 956 of the Dodd-Frank Act.
|
6.
OTHER BENEFITS
.
6.1.
Benefits
. The Executive shall be eligible to participate in such medical, dental, disability, retirement, life insurance, and other
employee benefits on the same basis as may be provided to other similarly-situated employees of the Employer. As to all other benefits to which the Executive may be entitled in parity with all other employees, such benefits may be created, changed,
or terminated from time to time in the Employers sole discretion.
6.2.
Vacation
. The Executive shall be entitled to
reasonable paid vacations and sick leave benefits consistent with the Employers vacation and sick leave policies.
6.3.
Reimbursements
. The Employer shall reimburse the Executive for all ordinary and necessary business expenses described in Code Section 62(a)(2)(A) which are incurred by the Executive in the performance of his duties hereunder and which
are subject to reimbursement in accordance with the Employers policies; provided, however, that: (i) such expenses shall be reimbursed no later than the end of the calendar year following the calendar year in which the expenses were
incurred, with the expectation that such amounts shall be reimbursed by the end of the calendar month following the year in which the expenses were incurred; (ii) the amount of such expenses eligible for reimbursement in one calendar year
cannot affect the amount of such expenses eligible for reimbursement in another calendar year; and (iii) the right to reimbursement is not subject to liquidation or exchange for another benefit.
3
7.
TERMINATION
.
This Agreement may terminate prior to the expiration of the Term in accordance with this Section 7.
7.1.
By the Employer For Cause
. The Employer may elect to terminate this Agreement and to terminate the Executives employment at
any time for Cause. Such termination shall be effective immediately upon Notice of Termination to the Executive. If the Employer terminates the Executives employment for Cause during the Term, this Agreement shall terminate without further
obligations to the Executive, except as provided under Section 8.2.
7.2.
By the Employer Without Cause
. The Employer may elect
to terminate this Agreement and to terminate the Executives employment at any time by giving the Executive thirty (30) days prior written notice of his termination of employment. The Executives termination of employment shall
occur on the date specified in such written notice. If the Employer terminates the Executives employment without Cause during the Term, this Agreement shall terminate without further obligations to the Executive, except as provided under
Section 8.3.
7.3.
By the Executive without Good Reason
. The Executive may elect to terminate this Agreement and voluntarily to
resign his employment at any time for any reason by giving the Employer not less than thirty (30) days prior written notice of his termination of employment. The Executives termination of employment shall occur on the date specified
in such written notice, unless the Employer elects to terminate the Executives employment as of a date prior thereto. If the Executive terminates this Agreement pursuant to this Section 7.3 during the Term, this Agreement shall terminate
without further obligations to the Executive, except as provided under Section 8.2.
7.4.
By the Executive for Good Reason
. The
Executive may elect to terminate this Agreement and his employment for Good Reason within the two (2)-year period following the initial existence of the condition or conditions giving rise to Good Reason. Before the Executive may terminate this
Agreement for Good Reason, the Executive must provide the Employer with a Notice of Termination describing the existence of the condition or conditions giving rise to Good Reason no later than ninety (90) days after the date of the initial
occurrence of such condition or conditions, and the Employer must have failed to remedy such condition or conditions within the thirty (30)-day period following such Notice of Termination. If the Executive terminates this Agreement for Good Reason
during the Term, this Agreement shall terminate without further obligations to the Executive, except as provided under Section 8.3.
7.5.
Death
. The Executives employment shall terminate on account of the Executives death. If the Executives employment
is terminated on account of the Executives death during the Term, this Agreement shall terminate without further obligations to the Executives estate or other legal representatives under this Agreement, except as provided under
Section 8.4.
7.6.
Disability
. The Employer may elect to terminate this Agreement and to terminate the Executives
employment on account of the Executives Disability. Such termination shall be effective immediately upon Notice of Termination to the Executive. If the Executives employment is terminated on account of the Executives Disability
during the Term, this Agreement shall terminate without further obligations to the Executive, except as provided under Section 8.4.
8.
PAYMENTS
TO EXECUTIVE UPON TERMINATION
.
8.1.
Generally
. Regardless of the reason for any termination of this Agreement and subject
to this Section 8, the Executive (or the Executives estate or other legal representatives if the Agreement terminates on account of the Executives death) shall be entitled to receive (together,
Accrued Benefits
):
|
8.1.1.
|
Payment of the Executives earned but unpaid Base Compensation (including, without limitation, all items which constitute wages under applicable law) as of the effective date of the Executives termination of
employment, with such payment to be made in accordance with the Employers compensation policies and procedures but in no event later than the date required by applicable law;
|
4
|
8.1.2.
|
Payment of the Executives earned but unused vacation time as of the effective date of the Executives termination of employment, with such payment to be made in accordance with the Employers vacation
pay policy; and
|
|
8.1.3.
|
All rights and benefits (if any) to which the Executive is entitled due to his termination of employment as required independent of this Agreement by the terms of any employee benefit plans and programs of the Company
or of the Bank in existence as of the date of the Executives termination of employment, such as The Bar Harbor Bankshares and Subsidiaries Equity Incentive Plan of 2015, the 2013 Annual Incentive Plan, the Long-Term Executive Incentive Plan or
any other Company or Bank incentive plan, with such rights and benefits to be determined in accordance with the terms of such plans and programs.
|
8.2.
Termination by the Employer for Cause or without Good Reason
. If the Employer terminates the Executives employment for Cause
pursuant to Section 7.1 or the Executive terminates his employment without Good Reason pursuant to Section 7.3, the Executive shall be entitled to receive payment of his Accrued Benefits.
8.3.
Termination by the Employer without Cause or by the Executive for Good Reason
. If the Employer terminates the Executives
employment without Cause pursuant to Section 7.2 or the Executive terminates his employment for Good Reason pursuant to Section 7.4, the Executive shall be entitled, subject to Section 8.6, to receive:
|
8.3.1.
|
Payment of his Accrued Benefits;
|
|
8.3.2.
|
Lump sum payment equal to one (1) times the Executives Base Compensation as of the effective date of the Executives termination of employment, with such payment to be made at the time specified in
Section 8.6; and
|
|
8.3.3.
|
Continued medical, health, dental, and vision insurance benefits to which the Executive and his eligible dependents, if any, were entitled under such plans immediately prior to the date of the Executives
termination of employment, for the greater of (i) a period of twelve (12) months (the
Continuation Period
) or (ii) the period to which the Executive would be entitled to continue coverage under the Employers
group health plan pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (
COBRA
), where during the Continuation Period the Executive shall be required to make the same premium contributions that he was required to
make immediately prior to his termination of employment and, to the extent COBRA continues to apply after expiration of the Continuation Period, the Executive shall be required to pay one hundred percent (100%) of the premiums due for such
continuation coverage after expiration of the Continuation Period; provided, however, that, to the extent that the promise or provision of any continued group health benefit pursuant to this Section 8.3.3 would cause a group health plan
maintained for the officers or employees of the Employer to fail to comply with Section 2716 of the Public Health Service Act, the nondiscrimination rules of Code Section 105(h)(2), or any statute or regulation of similar effect
(including, without limitation, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), the Executive shall be provided with distributions of cash in lieu of such benefit, at the
same times and in the same forms as the premium payments which would have been made to provide such benefit, in amounts adequate for the Executive to purchase a comparable health benefit; provided, further, that notwithstanding the foregoing, the
benefit under this Section 8.3.3 shall cease and shall no longer be available upon the Executives commencement of employment with another employer in all events.
|
If the Executive shall die prior to the receipt of all such payments under this Section 8.3, the remainder of such payments shall be paid
to his surviving spouse or, if he has no surviving spouse, to his estate.
Notwithstanding the above, the amounts described in
Section 8.3.2 that are payable subsequent to the Executives termination of employment shall be subject to Section 18.2.
5
8.4.
Termination due to Death or Disability
. In the event of termination of this Agreement
on account of the Executives death or on account of the Executives Disability pursuant to Section 7.6, the Executive or the Executives estate or other legal representatives shall be entitled to receive payment of the
Executives Accrued Benefits.
8.5.
No Mitigation
. The Executive shall not be required to mitigate the amount of any severance
benefits described in this Section 8 by seeking other employment, other than as provided in Section 8.3.3 hereof.
8.6.
Release
. Payment and provision of the benefits described in Sections 8.3.2 and 8.3.3 hereof (the
Severance Payments
) are subject to the Executives execution and delivery to the Employer of a general release, in a
form acceptable to the Employer, within forty five (45) days of the Executives termination of employment, which has (and not until it has) become irrevocable, satisfactory to the Employer in the reasonable exercise of its discretion,
releasing the Company, the Bank, their subsidiaries, their affiliates, and their Directors, officers, and employees, from any and all claims or potential claims arising from or related to the Executives employment with the Employer or
termination of employment. Notwithstanding payment timing provisions to the contrary in this Agreement but still subject to the requirements of the preceding sentence, the Severance Payments shall commence on the Employers first regular
payroll date occurring on or after the sixtieth (60
th
) date following the Executives termination of employment (the
First Payroll Date
), with amounts otherwise
payable under the Employers normal payroll procedures prior to the First Payroll Date, to be paid in lump sum on the First Payroll Date without interest thereon.
9.
CODE SECTIONS 280G AND 4999
.
Notwithstanding anything contained herein to the contrary, in the event it shall be determined that any payment or distribution made at any
time by the Company, the Bank, or any corporation which is a member of an affiliated group (as defined in Code Section 1504(a), without regard to Code Section 1504(b)) of which the Company or the Bank is a member, to or for the
benefit of the Executive (whether paid or payable, or distributed or distributable, pursuant to the terms of this Agreement or otherwise) (a
Payment
) would constitute an excess parachute payment (as defined in Code
Section 280G(b)(2)), such Payment shall be reduced to the extent necessary to ensure that no portion of such Payment will be non-deductible to the Employer by Code Section 280G or will be subject to the excise tax imposed by Code
Section 4999 (the
Reduced Payment
), and the Executive shall have no further rights or claims with respect to an amount in excess of the Reduced Payment. If a Payment is reduced pursuant to this Section 9, the Employer
shall reduce or eliminate the following portions of the Payment in successive order to reach the Reduced Payment: (i) first, the benefits portion of the Payment, (ii) then, the cash portion of the Payment, and (iii) then, the equity
portion of the Payment. Any determination required under this Section 9 (including, without limitation, the amount of the Reduced Payment and the assumptions to be utilized in arriving at such determination) shall be made by the Employer and
its tax advisors, whose determination shall be conclusive and binding upon the Executive.
10.
CONFIDENTIALITY
.
10.1. The Executive recognizes and acknowledges that certain assets of the Company, the Bank, and their affiliates or subsidiaries constitute
Confidential Information.
10.2. The Executive shall not, without the prior written consent of the Company, the Bank, or any of their
subsidiaries or affiliates, use or disclose, or negligently permit any unauthorized person to use, disclose, or gain access to, any Confidential Information, except in connection with any dispute that arises between the Company and/or the Bank and
the Executive, in which case such disclosure may be made to the extent necessary to the Executives personal legal advisers and to courts having jurisdiction over such matters.
10.3. Upon termination of employment, the Executive hereby agrees to deliver promptly to the Company, the Bank, or any of their subsidiaries or
affiliates all memoranda, notes, records, manuals, or other documents, including all copies of such materials, containing Confidential Information, whether made or compiled by the Executive or furnished to him from any source by virtue of the
Executives relationship with the Company, the Bank, or any of their subsidiaries or affiliates.
6
10.4. Regardless of the reason for his cessation of employment, the Executive will furnish such
information as may be in the Executives possession and will cooperate with the Company, the Bank, or any of their subsidiaries or affiliates as may reasonably be requested in connection with any claims or legal actions in which the Company,
the Bank, or any of their subsidiaries or affiliates are or may become a party. The Employer will reimburse the Executive for any reasonable out-of-pocket expenses the Executive incurs in order to satisfy his obligations under this
Section 10.4.
11.
NON-COMPETITION AND NON-SOLICITATION
.
11.1. In consideration of the covenants of the Employer contained herein, the Executive covenants and agrees with the Employer that, during the
Restrictive Period and within a one hundred and fifty (150) air mile radius from Newport, New Hampshire, the Executive shall not, without specific written approval of the Employer, directly or indirectly:
|
11.1.1.
|
Engage in any insurance, brokerage, trust, banking, or other financial services as an owner, employee, consultant, representative, or in any other capacity;
|
|
11.1.2.
|
Directly or indirectly request or advise any past, present, or future customers of the Company, the Bank, or any of their subsidiaries or affiliates to withdraw, curtail, or cancel his or her or its business with the
Company, the Bank, or any of their subsidiaries or affiliates;
|
|
11.1.3.
|
Directly or indirectly cause, suggest, or induce others to call on any past, present, or future customers of the Company, the Bank, or any of their subsidiaries or affiliates; or
|
|
11.1.4.
|
Canvas, solicit, or accept any business on behalf of any other bank, insurance agency, trust, or other financial services business, other than the Company, the Bank, or any of their subsidiaries or affiliates, from any
past or present customer of the Company, the Bank, or any of their subsidiaries or affiliates.
|
11.2. During the Restrictive
Period, the Executive shall not, directly or indirectly, by any means or device whatsoever, for himself or on behalf of, or in conjunction with, any other person, partnership, or corporation, solicit, entice, hire, or attempt to hire or employ any
employee of the Company, the Bank, or any of their subsidiaries or affiliates.
11.3.
Other Agreements
. The Executive represents and
warrants that neither the Executives employment with the Employer nor the Executives performance of his obligations hereunder will conflict with or violate the Executives obligations under the terms of any agreement with a previous
employer or other party, including agreements to refrain from competing, directly or indirectly, with the business of such previous employer or other party. Prior to the Effective Date hereof, the Executive has provided copies of all restrictive
covenants (e.g., non-solicitation and non-competition agreements) to which he is a party to the Employer in order to ensure compliance with this Section 11.3.
12.
REFORMATION AND INJUNCTIVE RELIEF
.
12.1.
Reformation
. All the parties hereto acknowledge that the parties have carefully considered the nature and scope of this Agreement.
The activities, period, and area covered by Sections 10 and 11 are expressly acknowledged and agreed to be fair, reasonable, and necessary. To the extent that any covenant contained in Sections 10 and 11 is held to be invalid, illegal, or
unenforceable because of the extent of activities, duration of such covenant, the geographic area covered thereby, or otherwise, the parties agree that the court making such determination shall reform such covenant to include as much of its nature
and scope as will render it enforceable and, in its reduced form, said covenant shall be valid, legal, and enforceable to the fullest extent of the law.
12.2.
Injunctive Relief
. The Executive acknowledges and agrees that, upon any breach by the Executive of his obligations under Sections
10 and 11 hereof, the Employer will have no adequate remedy at law, and accordingly will be entitled to specific performance and other appropriate injunctive and equitable relief, notwithstanding Section 13 hereof. Nothing herein shall be
construed as prohibiting the Employer from pursuing any other remedies available to it, including the recovery of damages from the Executive.
7
13.
MEDIATION AND ARBITRATION
.
13.1.
Generally
. If the Executive and the Employer have any dispute whatsoever relating to the interpretation, validity, or performance
of this Agreement, or any other dispute arising out of this Agreement, every reasonable attempt will be made to resolve any differences or dispute within thirty (30) days of an issuance of written notice by either party to the other party. If a
successful resolution of any differences or dispute has not been achieved to the satisfaction of both parties at the end of the thirty (30)-day period, the steps outlined in the following Sections 13.2, 13.3, and 13.4 shall apply.
13.2.
ADR
. Except as otherwise expressly provided hereunder, the parties agree that any and all disputes arising out of the
Executives employment, or cessation of employment, including but not limited to any dispute, controversy, or claim arising under any federal, state, or local statute, law, ordinance, or regulation or under this Agreement, shall be resolved
exclusively by Alternative Dispute Resolution described in this Agreement (
ADR
). The initiation of ADR shall first require mediation, and the parties agree to first try to settle any dispute through mediation. Mediation shall be
initiated by either party by the serving of a written notice of intent to mediate (a
Mediation Notice
) by one party upon the other. If no resolution has been mutually agreed through mediation within ninety (90) days of
service of a Mediation Notice, then and only then may the dispute be submitted to arbitration. Arbitration shall be initiated by the serving of a written notice of intent to arbitrate (an
Arbitration Notice
) by one party upon the
other.
13.3.
Mediation
. In the event that a party wishes to initiate ADR, a Mediation Notice must be served on the other party
within six (6) months from the date on which the claim arose. If the parties cannot mutually agree on a mediator, then a mediator shall be selected in accordance with the Employment Mediation Rules of the American Arbitration Association.
13.4.
Arbitration
. In the event that mediation is unsuccessful and arbitration is initiated, it shall be conducted under the National
Rules for the Resolution of Employment Disputes of the American Arbitration Association. There shall be a single arbitrator to be agreed upon by the parties; provided that, if the parties are unable to agree upon a single arbitrator, the Executive
and the Employer shall each name an arbitrator, and the two (2) arbitrators so named shall name a third (3
rd
) arbitrator. The arbitration proceedings shall be heard by the arbitrator(s),
and the decision of the arbitrator, or of a majority of the panel if one has been selected, shall be final and binding on the parties. Judgment upon the arbitration award may be entered in any court of competent jurisdiction. An Arbitration Notice
must be served on the other party within one (1) year from the date on which the claim arose, and failure to bring such a claim within such one (1)-year period shall constitute a waiver of such claim and an absolute bar to any further
proceedings in any forum with respect to it. All mediation and arbitration proceedings shall be conducted in Bangor, Maine, unless the parties otherwise agree in writing.
13.5.
Costs
. The cost of any mediation proceeding under this Section 13 will be paid entirely by the Employer. The cost of any
arbitration proceeding shall be shared equally by the parties to the dispute; provided, however, that if the dispute is resolved in favor of the Executive, such cost shall be paid in full by the Employer. Each party shall be responsible for its own
cost of representation and counsel.
8
14.
NOTICES
.
All notices, requests, demands, waivers, and other communications required or permitted to be given under this Agreement will be in writing and
will be deemed to have been duly given: (a) if delivered personally or sent by facsimile or electronic mail, on the date received; (b) if delivered by overnight courier, on the day after mailing; and (c) if mailed, five days after
mailing with postage prepaid. Any such notice will be sent as follows:
|
|
|
To the Employer:
|
|
Bar Harbor Bankshares
ATTN: Human Resources
Department
82 Main Street
P.O. Box 400
Bar Harbor, ME 04609
Fax: (207) 288-2811
Email: msawyer@bhbt.com
With copies to:
Richard Schaberg, Esq.
Hogan Lovells US LLP
555 Thirteenth Street NW
Washington, DC 20004
Fax: (202) 637-5671
Email:
richard.schaberg@hoganlovells.com
|
|
|
To the Executive:
|
|
At the address on file with the Employer
|
15.
SUCCESSORS AND ASSIGNS
.
15.1. The rights and obligations of the Executive hereunder are not assignable or delegable, and any such assignment or delegation will be null
and void, provided, however, that in the event of his death any and all amounts due Executive hereunder shall be paid to his surviving spouse, or if he has no surviving spouse, to his estate, including without limitation any amounts due Executive
under Section 8 hereof.
15.2. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their
respective successors, beneficiaries, heirs, and personal representatives.
15.3. The Employer shall require any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Employer to expressly assume and agree to perform its obligations under this Agreement in the same manner and to the same
extent that the Employer would be required to perform them if no such succession had taken place. Each such successor shall execute a written agreement evidencing its assumption of the Employers obligations under this Agreement prior to the
effective date of any such purchase, merger, consolidation, or other transaction.
15.4. The failure of the Employer to obtain from each
successor the written agreement described in Section 15.3 shall be deemed to be a material breach of the obligations of the Employer under this Agreement, and shall entitle the Executive to incur a separation from service for Good Reason
pursuant to Section 7.4.
15.5. As used in this Section 15, the Employer shall include the Company, the Bank, and any successor
to all or substantially all of the business and/or assets of any of them (whether direct or indirect, by purchase, merger, consolidation, or otherwise) which executes and delivers the written agreement described in Section 15.3 or which
otherwise becomes bound by all the terms and provisions of this Agreement.
16.
SURVIVAL
.
Notwithstanding anything contained herein to the contrary, the provisions of this Agreement which by their terms are to be performed subsequent
to termination, including, without limitation, Sections 8, 10, 11, 12, and 13 and this Section 16, shall survive the termination of this Agreement and shall remain fully enforceable.
9
17.
NON-DUPLICATION
.
In the event that the Executive shall perform services for the Company, the Bank, and/or any of their direct or indirect subsidiaries, any
compensation or benefits provided to the Executive by such employer or pursuant to such employers employee benefit plans shall be applied to offset the obligations of the Employer hereunder, it being intended that the provisions of this
Agreement shall set forth the aggregate compensation and benefits payable to the Executive for all services rendered to the Company, the Bank, and any of their direct or indirect subsidiaries.
18.
CODE SECTION 409A
.
18.1. The
Executive and the Employer acknowledge that each of the payments and benefits promised to the Executive under this Agreement must either comply with the requirements of Code Section 409A and the regulations thereunder or qualify for an
exception from compliance. To that end, the Executive and the Employer agree that:
|
18.1.1.
|
The Executive will be deemed to have a date of termination of employment for purposes of determining the timing of any payments or benefits hereunder that are classified as deferred compensation only upon a
separation from service within the meaning of Code Section 409A;
|
|
18.1.2.
|
The expense reimbursements described in Section 6.3 are intended to satisfy the requirements for a reimbursement plan described in Treasury Regulation Section 1.409A-3(i)(1)(iv)(A) and shall be
administered to satisfy such requirements;
|
|
18.1.3.
|
The payments described in Sections 8.1.1 and 8.1.2 are intended to be excepted from compliance with Code Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(3) as payment made pursuant to the
Employers customary payment timing arrangement;
|
|
18.1.4.
|
The benefits and payments described in Section 8.1.3 are expected to comply with or be excepted from compliance with Code Section 409A on their own terms; and
|
|
18.1.5.
|
The welfare benefits provided in kind under Section 8.3.3 are intended to be excepted from compliance with Code Section 409A as welfare benefits pursuant to Treasury Regulation Section 1.409A-1(a)(5)
and/or as benefits not includible in gross income. To the extent not otherwise excepted from compliance with Code Section 409A, such benefits will be administered to satisfy the requirements for a reimbursement plan described in
Treasury Regulation Section 1.409A-3(i)(1)(iv)(A).
|
18.2. With respect to payments under this Agreement, for purposes of
Code Section 409A, each severance payment (if there is more than one payment) will be considered one of a series of separate payments. The Executive and the Employer further agree that, to the extent not otherwise exempt, the termination
benefits described in this agreement are intended to be exempt from Code Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(4) as short-term deferrals or as payments pursuant to a separation pay plan pursuant to Treasury
Regulation Section 1.409A-1(b)(9)(iii). In the case of a payment that is not excepted from compliance with Code Section 409A and that is not otherwise designated to be paid immediately upon a permissible payment event within the meaning of
Treasury Regulation Section 1.409A-3(a), the payment shall not be made prior to the later of (i) the date specified in Section 8.6 and, (ii) if the Executive is a specified employee (within the meaning of Treasury Regulation
Section 1.409A-1(i)) on the date of his separation from service, the first day of the seventh month following the Executives separation from service. Furthermore, this Agreement shall be construed and administered in such manner as shall
be necessary to effect exemption from, and/or compliance with, Code Section 409A. Neither the Bank nor the Company make any representations or warranties that the payments provided under this Agreement comply with, or are exempt from, Code
Section 409A, and in no event shall either the Bank or the Company be liable for any portion of any taxes, penalties, interest, or other expenses that may be incurred by Executive on account of non-compliance with Code Section 409A.
10
19.
COMPLIANCE WITH FDI ACT
.
Notwithstanding anything contained herein to the contrary, any payments to the Executive by the Employer, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(k), and any regulations promulgated thereunder.
20.
GENERAL PROVISIONS
.
20.1.
Entire Agreement
. This Agreement and the attachments hereto constitute the entire understanding and agreement between the parties hereto with respect to the Employers employment of the Executive, and supersedes and revokes any and all
prior agreements and understandings, whether oral or written, between the parties relating to the subject matter of this Agreement.
20.2.
Withholding
. The Employer may withhold from any payments to be made hereunder such amounts as it may be required or permitted to withhold under applicable federal, state, or other law, and transmit such withheld amounts, as appropriate, to
the appropriate taxing authorities.
20.3.
Governing Law
. This Agreement shall be interpreted under, subject to, and governed by the
substantive laws of the State of Maine, without giving effect to provisions thereof regarding conflict of laws.
20.4.
Modification and
Waiver
. This Agreement may not be modified or amended, except by an instrument in writing signed by the parties hereto. Notwithstanding the preceding sentence, this Agreement shall be construed and administered in such manner as shall be
necessary to effect compliance with Code Section 409A and shall be subject to amendment in the future, in such manner as the Employer, in consultation with the Executive, may deem necessary or appropriate to effect such compliance; provided,
that any such amendment shall preserve for the Executive the benefit originally afforded pursuant to this Agreement. No term or condition of this Agreement shall be deemed to have been waived, except by written instrument of the party charged with
such waiver. A waiver shall operate only as to the specific term or condition waived and will not constitute a waiver of any other term or condition of this Agreement or as to any subsequent occurrence of the term or condition.
20.5.
Cooperation
. Each of the parties agrees to execute all further instruments and documents and to take all further action as the
other party may reasonably request in order to effectuate the terms and purposes of this Agreement.
20.6.
Captions
. The captions
appearing in this Agreement are for convenience of reference only and in no way define, limit, or affect the scope or substance of any section of this Agreement.
20.7.
Severability
. The invalidity or unenforceability of any provision of this Agreement shall not affect any other provision hereof,
and this Agreement shall be construed in all respects as if such invalid or unenforceable provision was omitted. Furthermore, in lieu of such illegal, invalid, or unenforceable provision there shall automatically be added as a part of this Agreement
a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable.
20.8.
Counterparts
. This Agreement may be executed simultaneously in two or more counterparts, each of which will be deemed an original,
but all of which will together constitute one and the same instrument.
21.
ACKNOWLEDGEMENT
.
The Executive acknowledges that he has had a full and complete opportunity to review the terms, enforceability, and implications of this
Agreement; that he has had a full and complete opportunity to present it to competent legal counsel for review; and that the Employer has not made any representations and warranties to the Executive concerning the terms, enforceability, and
implications of this Agreement other than as reflected in this Agreement.
11
IN WITNESS WHEREOF,
the parties have executed this Agreement as of the date and year first
written above.
|
|
|
|
|
|
|
Witness:
/s/ Witness
|
|
|
|
BAR HARBOR BANKSHARES
|
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
|
|
|
|
Name: Curtis C. Simard
Title:
President and Chief Executive Officer
|
|
|
|
Witness:
/s/ Witness
|
|
|
|
BAR HARBOR BANK & TRUST
|
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
|
|
|
|
Name: Curtis C. Simard
Title:
President and Chief Executive Officer
|
|
|
|
Witness:
/s/ Witness
|
|
|
|
EXECUTIVE
/s/ William J. McIver
|
|
|
|
|
WILLIAM J. MCIVER
|
[Signature Page to McIver Employment
Agreement]
12
EXHIBIT A
Job Description
(attached)
13
POSITION DESCRIPTION
|
|
|
POSITION TITLE:
|
|
Executive Vice President
|
|
|
|
|
Regional President
|
|
|
|
|
New Hampshire and Vermont markets
|
|
|
RESPONSIBILITY LEVEL
:
|
|
Executive
|
|
|
REPORTS TO
:
|
|
CEO and President
|
|
|
PROVIDES SUPERVISION
|
|
|
|
|
And GUIDANCE FOR:
|
|
New Hampshire and Vermont Branch Teams and Global BHB Residential Lending
|
|
|
GUIDANCE TO:
|
|
New Hampshire and Vermont staff
|
GENERAL RESPONSIBILITIES:
The position is responsible for customer retention, growth, and administrative duties of assigned banking functions to include branch and residential lending
divisions in the New Hampshire and Vermont geographic service areas to achieve maximum overall profitability. Oversight of branch teams will include working with other BHB divisions to help unite the culture and unify delivery standards. Oversight
of residential lending will extend to all of BHB.
This position will particularly focus on the communication and benefits of the BHB affiliation to
customers and employees alike. The position will serve as a critical component to decisions around the future operation of the combined organization.
KNOWLEDGE, ABILITY and SKILLS REQUIRED:
The ability to
analyze, interpret findings and results, and to draw logical conclusions in carrying out assigned responsibilities. The ability to use and analyze financial and economic information for problem solving; the flexibility to learn and keep current with
changing markets, products, procedures, laws and regulations, varying job responsibilities, technological advances and new equipment; the ability to manage multiple priorities and direct work teams in a fast paced, high volume environment with
critical deadlines.
A minimum of five years experience in a similar or related position. Proven leadership, people management and communication skills
both with reports and peer groups.
14
SPECIFIC RESPONSIBILITIES:
|
|
|
Exercising the usual authority concerning staffing, training, performance appraisals, promotions, salary recommendations and terminations. Communicating through departmental meetings employee suggestions, questions,
concerns, and following through on pending items. Directing the activities for subordinates and providing ongoing support, supervision, and training.
|
|
|
|
Participating in the development and leading the execution of the Companys strategies in the New Hampshire and Vermont markets as well as the entire BHB for Residential lending for generating profitable revenue
over a long term horizon.
|
|
|
|
Communicating and providing guidance to customers and employees on the advantages of our business combination with a critical eye to preserving culture while preventing development of new subcultures.
|
|
|
|
Serving as a member of the Senior Executive Team (SET), Asset & Liability Committee, Management Loan Committee, Disclosure Controls & Procedures Committee, Enterprise Risk Management Committee, and
other Committees deemed appropriate.
|
|
|
|
Directing, monitoring, coaching, and participating in business development and customer relations program for the New Hampshire and Vermont markets. Calling on present and prospective customers introducing the Company,
explaining and selling bank services, and providing financial advice. Encouraging staff to cross sell deposits, products and services and to proactively refer business over multiple business lines.
|
|
|
|
Participating in professional industry organizations and civic groups to enhance the Companys (including Lake Sunapee Bank) visibility and to further personal development.
|
This description is a summary of major responsibilities and is not intended to include all duties that may be assigned. Flexible work hours may be necessary
and hours over 40 are expected as required.
15
EXHIBITS B and B(a)
Annual Incentive Plan
(attached)
16
2016 Executive Annual Incentive Program
Bar Harbor Bankshares (BHB) Annual Incentive Program is designed to recognize and reward executives for their collective contributions to
BHBs success. Our program focuses on rewarding for the achievement of specific goals that are critical to BHBs growth and profitability. Individually and collectively, we believe our executive team has the ability to influence and drive
our success. Our program is designed to reward our executives for driving the BHBs success. This document summarizes the elements and features of the program.
In short, the objectives of this incentive program are to:
|
|
|
Focus executive attention on key business metrics.
|
|
|
|
Align pay with organizational and individual performance.
|
|
|
|
Encourage teamwork and collaboration across all areas of BHB.
|
|
|
|
Motivate and reward the achievement of specific, measurable performance objectives.
|
|
|
|
Provide competitive total cash compensation.
|
|
|
|
Provide significant reward for achieving and exceeding performance results.
|
|
|
|
Enable BHB to attract and retain the talent needed to drive success.
|
Eligibility
|
|
|
Eligibility will be limited to executive positions the Board has identified as having a significant impact on the success of the organization.
|
|
|
|
New employees and newly promoted employees will receive pro-rated awards based on date of hire or dates of eligibility into the management team.
|
|
|
|
Participants must be an active employee as of the reward payout date to receive an award.
|
|
|
|
Participants performance must be in good standing for the measurement period.
|
Performance Period
The performance period and program operates on a calendar year basis (January 1
st
December 31
st
). Actual payout awards are made in cash following year-end after BHBs financial results and performance have been audited and confirmed.
Incentive Payout Opportunity
Each participant will have
a target incentive opportunity based on his/her role. The target incentive will reflect a percentage of base salary and be determined consistent with competitive market practices. Actual awards will vary based on achievement of specific goals. The
opportunity reflects a range of potential awards. Actual awards may range from 0% for less than Threshold (for not achieving minimal performance) to 150% of target (for exceptional performance). The table below summarizes the incentive ranges for
the 2016 calendar year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Short-Term Incentive Targets
|
|
Role
|
|
Below
Threshold
|
|
|
Threshold
(50% of Target)
|
|
|
Target
(100%)
|
|
|
Stretch
(150% of Target)
|
|
CEO/President
|
|
|
0
|
%
|
|
|
15.00
|
%
|
|
|
38.00
|
%
|
|
|
57.00
|
%
|
EVP/CFO
|
|
|
0
|
%
|
|
|
13.75
|
%
|
|
|
28.00
|
%
|
|
|
42.00
|
%
|
EVPs
|
|
|
0
|
%
|
|
|
12.50
|
%
|
|
|
25.00
|
%
|
|
|
37.50
|
%
|
SVP
|
|
|
0
|
%
|
|
|
10.00
|
%
|
|
|
20.00
|
%
|
|
|
30.00
|
%
|
17
Incentive Plan Measures
Each participant will have predefined performance goals that will determine his/her annual incentive award. There are two performance categories: BHB and
Individual. BHB performance will be reflected by common goals for all participants. Individual goals will reflect each participants individual contributions based on their role. The specific allocation of goals will be weighted to reflect the
focus and contribution for each role/level in the Bank.
The table below provides guidelines for the allocation of participants incentives for each
performance component
|
|
|
|
|
Position
|
|
BHB/Team
Performance
|
|
Departmental
or Individual
Performance
|
CEO/President
|
|
75%
|
|
25%
|
EVP/CFO
|
|
70%
|
|
30%
|
Executive Officer
|
|
30%
|
|
70%
|
Executive Officers
|
|
50%-55%
|
|
45%-50%
|
Senior Vice Presidents
|
|
50%-70%
|
|
30%-50%
|
BHB Performance
BHB
performance goals for 2016 are Net Income and Efficiency Ratio. The table below shows the specific performance goal at threshold, budget and stretch for 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Performance
|
|
2016 Performance Goals
|
|
Measures
|
|
Threshold
|
|
|
Target
|
|
|
Stretch
|
|
Net Income* (millions)
|
|
|
93
|
%
|
|
|
Budget
|
|
|
|
110
|
%
|
Efficiency Ratio
|
|
|
>2.00
|
|
|
|
Budget
|
|
|
|
<2.00
|
|
*
|
Net Income Available to Common Shareholders
|
Individual Performance
In addition to BHBs performance, participants may have individual goals that will focus on either department/team performance (e.g. loan growth, deposit
growth, asset quality measures) and/or individual performance. The mix of these goals will vary by role. Whenever possible, performance targets and ranges for each measure will be set at the beginning of the calendar year. A minimum achievement of
threshold level performance is required for the program to pay for each component.
Plan Trigger
In order for the Annual Incentive Program to activate or turn on, Bar Harbor must achieve at least
TBD million
in Net Income. If BHB does
not meet this level, the program will not pay out any awards for the year, regardless of performance on other goals.
Payouts
Payouts will be made in cash as soon as reasonably possible after the closing of BHBs financials each year. Participants must be an active employee as of
the reward payout date to receive an award. Awards are calculated based on actual performance relative to target. Achieving threshold performance will pay out at 50% of target incentive, target performance will pay out 100% of target, and stretch
performance will pay out at 150% of target incentive. Performance payouts below threshold will be zero. Payouts are assessed by component such that one goal may achieve stretch and another may achieve only threshold. Actual payouts for each
performance goal will be pro-rated between threshold, target and stretch levels to reward incremental improvement.
18
Below is an illustration of a simple program design for a SVP (Tier 5) with a base salary of $100,000 and an
incentive target of 20% of base salary ($20,000). Goals are for illustration purposes only.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Participant Goals
|
|
|
Performance and Payout
|
|
Performance Measure
|
|
Performance
Goal
threshold/
target/stretch
|
|
|
Weight
|
|
|
At Target
|
|
|
Actual Performance
|
|
Payout
Allocation
(0% - 150%)
|
|
|
Payout ($)
|
|
Net Income
|
|
|
TBD
|
|
|
|
30
|
%
|
|
$
|
6,000
|
|
|
Target
|
|
|
100
|
%
|
|
$
|
6,000
|
|
Efficiency Ratio
|
|
|
TBD
|
|
|
|
30
|
%
|
|
$
|
6,000
|
|
|
Threshold
|
|
|
50
|
%
|
|
$
|
3,000
|
|
Individual performance goal #1
|
|
|
TBD
|
|
|
|
20
|
%
|
|
$
|
4,000
|
|
|
Stretch
|
|
|
150
|
%
|
|
$
|
6,000
|
|
Individual performance goal #2
|
|
|
TBD
|
|
|
|
10
|
%
|
|
$
|
2,000
|
|
|
Below Threshold
|
|
|
0
|
%
|
|
$
|
0
|
|
Individual performance goal #3
|
|
|
TBD
|
|
|
|
10
|
%
|
|
$
|
2,000
|
|
|
Threshold-Target
|
|
|
75
|
%
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
100
|
%
|
|
$
|
20,000
|
|
|
85% payout
|
|
|
|
|
|
$
|
16,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This participants payout of $16,000 is 80% of target. The payout reflects BHBs Net Income performance at
Target, Efficiency Ratio at Threshold, one Individual goal at stretch, another that was not achieved, and another at halfway between Threshold and Target.
19
Terms and Conditions
Effective Date
This program is effective January 1, 2016 to reflect calendar year January 1, 2016 to December 31, 2016. The program will be reviewed annually
by the BHBs Compensation and Human Resources Committee and Executive Management to ensure proper alignment with BHBs business objectives. BHB retains the rights as described below to amend, modify or discontinue the program at any time
during the specified period. The incentive program will remain in effect until December 31, 2016.
Program Administration
The program is authorized and voted by the Compensation and Human Resources Committee. The Compensation Committee has the sole authority to interpret the
program and to make or nullify any rules and procedures, as necessary, for proper administration. Any determination by the Committee will be final and binding on all participants.
Program Changes or Discontinuance
BHB has developed the
program based on existing business, market and economic conditions. If substantial changes occur that affect these conditions, BHB may add to, amend, modify or discontinue any of the terms or conditions of the Program at any time. The Compensation
and Human Resources Committee may, at its sole discretion, waive, change or amend the plan as it deems appropriate.
Incentive Award Payments
Awards will be paid as a cash bonus by no later than March 15 following the calendar year. Awards will be paid out as a percentage of a participants
base salary (less any amounts paid for short term disability benefits or grandfathered sick time) earned during the year as of December 31
st
for a given calendar year. Incentive awards will
be considered taxable income to participants in the year paid and will be subject to withholding for required income and other applicable taxes.
Any
rights accruing to a participant or his/her beneficiary under the program shall be solely those of an unsecured general creditor of BHB. Nothing contained in the program, and no action taken pursuant to the provisions hereof, will create or be
construed to create a trust of any kind, or a pledge, or a fiduciary relationship between BHB or the CEO and the participant or any other person. Nothing herein will be construed to require BHB or the CEO to maintain any fund or to segregate any
amount for a participants benefit.
New Hires, Promotions, and Transfers
Participants newly employed by BHB will be eligible for participation into the program and will receive a pro rata incentive award based on their length of
eligibility.
A participant whose work schedule changes during the year will be eligible for prorated treatment that reflects his/her time in the
different schedules.
If a participant changes his/her role or is promoted during the program year, he/she will be eligible for the new roles target
incentive award on a pro rata basis (i.e. the award will be prorated based on the number of months employed in the respective positions.)
Termination
of Employment
If a participant is terminated by BHB, no incentive award will be paid. If a participant voluntarily leaves BHB before the award is
paid, s/he will not receive payment unless their resignation is due to a hardship, retirement,
20
death, disability, or extenuating family situation and BHB determines to make a payment. The Compensation Committee reserves the right to make a decision on whether or not to pay a pro-rated
share of any incentive earned for the calendar year in question.
Disability, Death, or Retirement
If a participant is disabled by an accident or illness, and is disabled long enough to be placed on short- term or long-term disability, his/her incentive
award for the program period shall be prorated so that no award will be earned during their absence.
In the event of death, BHB will pay to the
participants estate the pro rata portion of the award that had been earned by the participant.
In the event of retirement (other than retirement
due to disability above), BHB may, in its discretion, pay to the participant a pro rata portion of the award that had been earned by the participant.
Any
pro rata payments that BHB determines to pay shall be made no later than March 15 of the year following the year in which the participant terminated employment
.
Ethics and Interpretation
If there is any ambiguity as
to the meaning of any terms or provisions of this program or any questions as to the correct interpretation of any information contained therein, BHBs interpretation expressed by the Compensation and Human Resources Committee will be final and
binding.
The altering, inflating, and/or inappropriate manipulation of performance/financial results or any other infraction of recognized ethical
business standards, will subject the employee to disciplinary action up to and including termination of employment. In addition, any incentive compensation as provided by the program to which the employee would otherwise be entitled will be revoked.
The Company will recover any payments made under this program, if the payment was based on statements of earnings, revenues, gains, or other criteria
that are later found to be materially inaccurate.
Participants who have willfully engaged in any activity, injurious to the BHB, will upon termination of
employment, death, or retirement, forfeit any incentive award earned during the award period in which the termination occurred.
Miscellaneous
The program will not be deemed to give any participant the right to be retained in the employ of BHB, nor will the program interfere with the right of BHB to
discharge any participant at any time.
In the absence of an authorized, written employment contract, the relationship between employees and BHB is one of
at-will employment. This program does not alter the relationship.
This incentive program and the transactions and payments hereunder shall, in all
respect, be governed by, and construed and enforced in accordance with the laws of the State of Maine.
Each provision in this plan is severable, and if
any provision is held to be invalid, illegal, or unenforceable, the validity, legality and enforceability of the remaining provisions shall not, in any way, be affected or impaired thereby.
This program is proprietary and confidential to BHB and its employees and should not be shared outside the organization except as authorized by the
Compensation Committee for public disclosure documents.
21
EXHIBITS C and C(a)
Long Term Executive Incentive Plan
(attached)
22
2016 through 2018 Long Term Executive Incentive Plan (D)
Bar Harbor Bankshares and Subsidiaries (BHB) Long Term Executive Incentive Plan (LTEIP) is part of a total compensation package, which
includes base salary, annual incentives, long-term incentives and benefits.
Individually and collectively, BHB believes the executive team has the
ability to influence and drive our success. The LTEIP is designed to reward executives for driving BHBs success. This document summarizes the elements and features of the LTEIP.
The objectives of the LTEIP are to:
|
|
|
Align executives with shareholder interests;
|
|
|
|
Increase executive stock ownership/holdings;
|
|
|
|
Ensure sound risk management by providing a balanced view of performance and aligning rewards with the time horizon of risk;
|
|
|
|
Position BHBs total compensation to be competitive with market for meeting performance goals;
|
|
|
|
Motivate and reward long-term sustained performance; and
|
|
|
|
Enable BHB to attract and retain talent needed to drive BHBs success.
|
Eligibility
|
|
|
Eligibility will be limited to named executive officers and selected senior management officers nominated by the CEO and approved by the Compensation and Human Resources Committee of the Board of Directors (the
Committee); and
|
|
|
|
Participants must be an active employee as of the reward payout date to receive an award with the exception of retirement, death, or disability discussed further in this document.
|
Program Components
The 2016-2018 LTEIP consists of a
combination of Time-vesting Restricted Stock and Performance-vesting Restricted Stock Units. Participants may receive Time-vested Restricted Stock, Performance-vested Restricted Stock Units, or both under this LTEIP.
|
|
|
Time-vested Restricted Stock supports executive ownership and retention objectives. Grants vest over three years (e.g. 1/3 per year) and are subject to a three year holding requirement (i.e. executive cant
sell for at least three years after vesting); and
|
|
|
|
Performance-vested Restricted Stock Units promote pay for performance since the awards are only paid out when predefined performance goals are met. Grants are earned and cliff vest after three years and are subject to a
further three-year holding requirement after vesting.
|
The following table summarizes the measures and payout ranges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Executive Incentive Program Guidelines
Performance Period 2016-2018
|
|
Participants
|
|
Below
Threshold
<45% percentile
|
|
|
Threshold
(50% of Target)
45
th
percentile
|
|
|
Target
(100% of Target)
50
th
percentile
|
|
|
Stretch
(150% of Target)
75
th
percentile
and above
|
|
CEO/President
|
|
|
0
|
%
|
|
|
15.00
|
%
|
|
|
30.00
|
%
|
|
|
45.00
|
%
|
EVP/CFO
|
|
|
0
|
%
|
|
|
13.75
|
%
|
|
|
27.50
|
%
|
|
|
41.25
|
%
|
EVPs
|
|
|
0
|
%
|
|
|
12.50
|
%
|
|
|
25.00
|
%
|
|
|
37.50
|
%
|
SVP (Set Members)
|
|
|
0
|
%
|
|
|
10.00
|
%
|
|
|
20.00
|
%
|
|
|
30.00
|
%
|
23
Time-vested Restricted Stock is measured on a more holistic basis and is intended to allow for appropriate
reflection of BHBs performance, business environment, affordability, and individual performance and contribution. All awards are at the discretion of the Committee.
Performance-vested Restricted Stock Units will be granted at guideline level (i.e. target) and vesting will be determined by BHBs future performance
(i.e. three years after the grant).
Individual grant agreements will be provided to each individual upon grant and will specify the terms and conditions
of the grant.
Performance Period-Performance-vested Restricted Stock Units
.
Performance shares are granted at the start of each performance period. For the 2016-2018 LTEIP the start of the Performance Period will be January 1
st
2016. Each performance cycle (i.e. performance period) is three years. The vesting (i.e. earning) of the award is contingent on actual performance of pre-defined measures at the end of the
performance period (i.e. third year). The result is a rolling series of annual awards, each vesting over three years. (i. e. 2014 through 2016, 2015 through 2017, and 2016 through 2018). This plan document is for the 2016 through 2018 calendar
years.
Performance-vested Restricted Stock Units-Metrics
Relative ROA will be selected for the performance measurement considering BHBs Strategic Plan, growth strategy, as well as alignment with shareholder
interests. The Committee will review the proposed performance goal (s) annually and approve the targets and ranges consistent with business plans and expectations for each subsequent rolling year plan. Threshold, target, and stretch goals will
be established for each performance period and detailed in the table above.
Plan year for 2016 through 2018
For the performance period of January 1, 2016 to December 31, 2018, relative ROA will be used to determine the vesting of performance based
restricted stock units. Due to the long-term period, performance will be compared to an approved industry index that allows comparison of BHB to its peers. BHB will be using the SNL $750M to $3B Bank Index for peer measurement purposes.
The ROA measure will be calculated using each of the twelve quarters relative ROA ranking, then average the results for the final measurement.
In addition to relative ROA, there will be a Total Shareholder Return (TSR) modifier to further align shareholder interest. If the TSR calculation
for the same performance measurement period is negative, a payout cannot exceed a threshold payout level regardless of the relative ROA performance results.
Vesting
Restricted stock awards will have a three-year
installment vesting schedule while performance vested restricted stock units will have a three-year cliff vesting schedule. At the time of the vesting, sufficient shares of restricted stock units may be withheld to cover the executives
tax liabilities.
Grants will vest during the second quarter of each year to allow for the gathering of calendar-year peer ROA statistics and to remain in
compliance with Code Section 409A regulations. Performance vested restricted stock unit awards will be made as soon as administratively possible after the third year anniversary of the performance grants.
24
Terms and Conditions
Effective Date
This LTEIP is effective January 1, 2016 to reflect a performance period of January 1, 2016 to December 31, 2018. The LTEIP will be reviewed
annually by the BHBs Compensation and Human Resources Committee and Executive Management to ensure proper alignment with BHBs business objectives. The Committee and the independent members of the Board of Directors retain the right to
amend or modify the LTEIP at any time during the specified period. The established performance measurement will remain constant for the three year term. This LTEIP will remain in effect until December 31, 2018.
Program Administration
The LTEIP is authorized by the
Compensation and Human Resources Committee and further voted by the independent members of the Board of Directors. The Committee has the sole authority to interpret the LTEIP and to make or nullify any rules and procedures, as necessary, for proper
administration. Any determination by the Committee will be final and binding on all participants with the exception of the performance measure.
Program Changes or Discontinuance
BHB has developed the
LTEIP based on existing business, market and economic conditions; current services; and staff assignments. If substantial changes occur that affect these conditions, BHB may add to, amend, modify or discontinue any of the terms or conditions of the
LTEIP at any time. The established performance measurement will remain constant for the three year term. The Committee may, at its sole discretion, waive, change, amend, or discontinue any of the terms or conditions of the LTEIP at any time as it
deems appropriate.
The Board of Directors also may, at its sole discretion, waive, change or amend the LTEIP as it deems appropriate.
Plan and Award Agreements
All awards granted under the
LTEIP will be subject to the terms and conditions of an award agreement executed between BHB and the executive. Further, all awards will be subject to the terms of conditions of the shareholder-approved equity plan under which the awards will be
granted.
New Hires, Promotions, and Transfers
A
participant who is promoted or hired into the approved participant group generally will not be eligible for the current three-year plan, but will become a participant in the next rolling three-year program. The Committee
may
make exceptions
to this provision at its discretion by allowing a pro-rated payment (based on the months the new entrant participates in the current year plan) on a case by case basis.
Termination of Employment
To encourage employees to
remain in the employment of BHB, a participant must be an active employee of BHB on the day the award is paid (see exceptions for disability, death, or retirement).
If a participant is terminated by BHB, participation under the program is forfeited in its entirety.
If a participant voluntarily leaves BHB at any time during the performance period including the period before the award is paid, s/he will not be eligible for
payment.
The Committee reserves the right to make a decision on whether or not to pay a pro-rated share of any incentive earned for the performance
period in question.
25
Disability, Death, or Retirement
If a participant is disabled by an accident or illness, and is disabled long enough to be placed on long-term disability, his/her incentive award for the
performance period shall be prorated so that no award will be earned during the period of long-term disability. Payment will be made on the same schedule as with other participants.
In the event of death, BHB will pay to the participants estate the pro rata portion of the award that had been earned by the participant. Payment will
be made on the same schedule as with other participants.
In the event of retirement, BHB will pay to the participant a pro rata portion of the award that
had been earned by the participant
.
Payment will be made on the same schedule as with other participants.
In the event of a Change in Control
time-based grants will vest at 100% and Performance-based grants will vest at 100% of target. Payment will be made as soon as administratively possible after the Change of Control event is finalized. A Change of Control event will be determined as
defined in BHBs currently executed Change of Control agreements.
Participants who have willfully engaged in any activity, injurious to the BHB,
will upon termination of employment, death, or retirement, forfeit any incentive award earned during a performance period in which the termination occurred.
Ethics and Interpretation
If there is any ambiguity as
to the meaning of any terms or provisions of this LTEIP or any questions as to the correct interpretation of any information contained therein, BHBs interpretation expressed by the Board of Directors will be final and binding.
Clawback
(pending further refinement of pending SEC regulations)
In the event that BHB is required to prepare an accounting restatement due to error, omission, or fraud (as determined by the members of the Board of Directors
who are considered independent for purposes of the listing standards of the NYSE MKT) each plan participant shall reimburse BHB for part or the entire incentive award made to such plan participant on the basis of having met or exceeded
specific targets for the performance periods. For purposes of the LTEIP, the term incentive awards means awards made under the BHBs LTEIP, the amount of which is determined in whole or in part upon specific performance targets
relating to the financial results of BHB. BHB may seek to reclaim incentives within a three-year period of the incentive payout.
In addition, the
altering, inflating, and/or inappropriate manipulation of performance/financial results or any other infraction of recognized ethical business standards, will subject the employee to disciplinary action up to and including termination of employment.
In addition, any incentive compensation as provided by the LTEIP to which the employee would otherwise be entitled will be revoked even though an accounting reinstatement may not be required.
Miscellaneous
The LTEIP will not be deemed to give any
participant the right to be retained in the employ of BHB, nor will the LTEIP interfere with the right of BHB to discharge any participant at any time.
In the absence of an authorized, written employment contract, the relationship between employees and BHB is one of at-will employment. The LTEIP does not
alter the relationship.
This LTEIP and the transactions and payments hereunder shall, in all respect, be governed by, and construed and enforced in
accordance with the laws of the State of Maine.
26
Each provision in this LTEIP is severable, and if any provision is held to be invalid, illegal, or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not, in any way, be affected or impaired thereby.
This Plan is proprietary
and confidential to BHB and its employees and should not be shared outside the organization except as authorized by the Compensation and Human Resources Committee for public disclosure documents.
27
Exhibit D-1
SETTLEMENT AGREEMENT
This Settlement Agreement (the
Agreement
) is entered into as of May 5, 2016 by and among Stephen R. Theroux (the
Executive
), Bar Harbor Bankshares, a bank holding company (
Buyer
), Bar Harbor Bank & Trust, a wholly-owned subsidiary of Buyer (
Buyer Bank
), Lake Sunapee Bank Group a bank holding
company (
Seller
), and Lake Sunapee, FSB, a wholly-owned subsidiary of Seller (
Seller Bank
).
WITNESSETH:
WHEREAS
, concurrently with the execution of this Agreement, Buyer and Seller are entering into an Agreement and Plan of Merger, dated
as of May 5, 2016 (the
Merger Agreement
), and all capitalized terms not defined herein shall have the meaning set forth in the Merger Agreement; and
WHEREAS
, Buyer, Buyer Bank, Seller, Seller Bank, and the Executive desire to enter into this Agreement, which shall supersede the
Amended and Restated Employment Agreement between New Hampshire Thrift Bancshares, Inc., Sellers former name, and the Executive, dated June 1, 2012, and the Amended and Restated Employment Agreement between Lake Sunapee Bank, FSB and the
Executive, dated June 1, 2012 (collectively, the
Employment Agreements
), effective immediately prior to the Effective Time of the Merger, and in lieu of any rights and payments under the Employment Agreements, the Executive
shall be entitled to the rights and payments set forth herein and shall terminate employment with Seller and Seller Bank (which for the avoidance of doubt, the parties agree shall be the rights and payments to which the Executive is entitled in the
event of the Executives termination of employment following a Change of Control, except in the case of Termination for Cause or as the result of his death or Disability (as such terms are defined in the Employment Agreements) as
contemplated by Section 5 of the Employment Agreements).
NOW THEREFORE
, in consideration of the foregoing and other good and
valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Executive, Buyer, Buyer Bank, Seller, and Seller Bank agree as follows:
1.
Settlement Amount
.
1.1
Employment Agreements Amount
. On the later of the Closing Date, or the earliest payment date permitted under Section 2, provided the Executive has remained employed with the Seller and Seller Bank to and including the Closing Date and
has executed the release attached as
Exhibit A
hereto at least eight days prior to the Closing Date (and any revocation period has elapsed), Seller shall, or shall cause an affiliate to, pay to the Executive a lump sum cash amount equal to
the total of $960,407, less applicable tax withholdings (the
Employment Agreements Amount
), in full satisfaction of the payment obligations of Seller and Seller Bank under the Employment Agreements. The Employment Agreements
Amount shall be subject to further reduction pursuant to
Section 1.2
hereof as may be needed.
For the avoidance of doubt, the
payment of the Employment Agreements Amount under this Agreement shall not release Buyer, Buyer Bank, Seller, or Seller Bank, as applicable, from any of the following obligations: (a) obligations to pay to the Executive accrued but unpaid
wages, and make payments for accrued but unused vacation, earned up to the Effective Time of the Merger to the extent required by applicable law, including any benefits that become vested as a result of the Merger; (b) the payment of any of the
Executives vested benefits under the tax-qualified and non-qualified plans of Seller or Seller Bank; (c) the payment of the Merger Consideration with respect to the Executives common stock of Seller as contemplated by
Section 2.01 of the Merger Agreement; (d) obligations regarding vested benefits under a supplemental executive retirement plan; (e) the payment of the Executives vested benefits under any salary continuation agreement between
the Executive and the Seller or Seller Bank; or (f) rights to indemnification under applicable corporate law, the organizational documents of Seller or Seller Bank, as an insured under any directors and officers liability insurance
policy new or previously in force, or pursuant to Section 5.12 of the Merger Agreement.
1.2
Section 280G Cut Back
. Notwithstanding anything in this Agreement to the
contrary, if the Employment Agreements Amount provided for in this Agreement, together with any other payments which the Executive has the right to receive from Buyer, Buyer Bank, Seller, Seller Bank, or any corporation which is a member of an
affiliated group (as defined in Code Section 1504(a), without regard to Code Section 1504(b)) of which Buyer, Buyer Bank, Seller, or Seller Bank is a member, would constitute an excess parachute payment (as defined
in Code Section 280G(b)(2)), payments pursuant to this Agreement shall be reduced to the extent necessary to ensure that no portion of such payments will be subject to the excise tax imposed by Code Section 4999. It is hereby understood
that the Employment Agreements Amount as determined under this
Section 1.2
will be subject to further adjustment upon the consummation of the Merger. Any determination required under this
Section 1.2
shall be made by Seller
and Buyer and their respective tax advisors, whose determination shall be conclusive and binding upon the Executive, Seller, and Seller Bank, and it is hereby understood that such determination will follow the same methodology for calculating the
Code Section 280G limitation in order to avoid an excess parachute payment as provided in Seller Bank Disclosure Schedule 3.18(f) to the Merger Agreement.
1.3
Section 280G Waiver
. Executive acknowledges and specifically waives his rights under Section 6 of the Amended and Restated
Employment Agreement between New Hampshire Thrift Bancshares, Inc. and Executive, dated June 1, 2012, including, but not limited to, any right to indemnification for any excise tax imposed under Code Section 4999.
1.4
Welfare Benefits
. Buyer agrees to provide the Executive with continued health, dental, accident, long-term disability and life
insurance coverage at Buyers expense for a period of three (3) years following his date of termination, with the coverage equivalent to the coverage the Executive would have been entitled had he continued in employment with Seller during
such period; provided that, if providing such continued group health coverage to the Executive would cause Buyers group health plan to fail to comply with relevant nondiscrimination requirements, Buyer will, in lieu of providing such coverage,
distribute cash payments to the Executive at the same times and in the same forms as the premium payments, in amounts sufficient to cover the cost of a comparable health benefit.
1.5
No Further Adjustment
. The parties hereby agree that the Employment Agreements Amount as determined in the manner provided under
Section 1.1
and
Section 1.2
hereof is final and binding on all parties and shall not otherwise be subject to further adjustment.
1.6
Restrictive Covenants
.
(a)
Restrictive Covenants
. In addition to the Employment Agreements Amount, Byer shall pay, or cause Buyer Bank to pay a total
aggregate amount of $300,000, less any applicable tax withholdings, in equal monthly installments over the two-year period following the Closing Date in exchange for Executives adherence to the restrictive covenants contained in this
Section 1.6.
(b)
Non-Competition
. The Executive hereby covenants and agrees that for a period of two years following Closing
Date, he shall not, without the written consent of the Buyer, become an officer, employee, consultant, director or trustee of any savings bank, savings and loan association, savings and loan holding company, bank or bank holding company, credit
union or any direct or indirect subsidiary or affiliate of any such entity, that entails working within any county in which the Buyer, Buyer Bank, Seller or Seller Bank maintains an office as of the Closing Date.
(c)
Confidentiality
. Unless he obtains the prior written consent of the Buyer, the Executive shall keep confidential and shall refrain
from using for the benefit of himself, or any person or entity other than the Buyer or any entity which is a subsidiary of the Buyer or of which the Buyer is a subsidiary, any material document or information obtained from the Buyer, Buyer Bank,
Seller, or Seller Bank concerning their properties, operations or business (unless such document or information is readily ascertainable from public or published information or trade sources or has otherwise been made available to the public through
no fault of his own) until the same becomes so ascertainable or available;
provided, however,
that nothing in this
Section 1.6
shall prevent the Executive, with or without the Buyers consent, from participating in or
disclosing documents or information in connection with any judicial or administrative investigation, inquiry or proceeding to the extent that such participation or disclosure is required under applicable law.
(d)
Non-Solicitation
. Further, the Executive hereby covenants and agrees that, for a
period of two years following the Closing Date, he shall not, without the written consent of the Seller, either directly or indirectly:
(i) solicit, offer employment to, or take any other action intended, or that a reasonable person acting in like circumstances would expect, to
have the effect of causing any officer or employee of the Buyer, Buyer Bank, Seller, or Seller Bank, or any of their respective subsidiaries or affiliates to terminate his or her employment and accept employment or become affiliated with, or provide
services for compensation in any capacity whatsoever to, any savings bank, savings and loan association, bank, bank holding company, savings and loan holding company, or other institution engaged in the business of accepting deposits, making loans
or doing business within the counties specified in this
Section 1.6
;
(ii) provide any information, advice or recommendation
with respect to any such officer or employee of any savings bank, savings and loan company, bank, bank holding company, savings and loan holding company, or other institution engaged in the business of accepting deposits, making loans providing
wealth management services or doing business within the counties specified in this
Section 1.6
; that is intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any officer or
employee of the Buyer, Buyer Bank, Seller, or Seller Bank, or any of their respective subsidiaries or affiliates to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity
whatsoever to, any savings bank, savings and loan association, bank, bank holding company, savings and loan holding company, or other institution engaged in the business of accepting deposits, making loans or doing business within the county
specified in this
Section 1.6
;
(iii) solicit, provide any information, advice or recommendation or take any other action
intended, or that a reasonable person acting in like circumstances would expect, to have the effect of causing any customer of the Buyer, Buyer Bank, Seller, or Seller Bank, or any of their respective subsidiaries to terminate an existing business
or commercial relationship with any of them.
The Executive agrees that the relevant public policy and legal aspects of covenants not to
compete have been discussed with him and that every effort has been made to limit the restrictions placed upon the Executive to those that are reasonable and necessary to protect Buyers legitimate interests. The Executive hereby acknowledges
that, based upon his education, experience, and training, the non-compete and non-solicitation provisions of this
Section 1.6
will not prevent him from earning a livelihood and supporting and his family during the relevant time-period.
The existence of a claim, charge, or cause of action by the Executive against Buyer, Buyer Bank, Seller, or Seller Bank, or any of their affiliates shall not constitute a defense to the enforcement by Buyer or Buyer Bank of the foregoing restrictive
covenants, but such claim, charge, or cause of action shall be litigated separately. If any restriction set forth in this
Section 1.6
is found by any court of competent jurisdiction to be unenforceable because it extends for too long a
period of time or over too great a range of activities or in too broad a geographic area, the court is hereby expressly authorized to modify this Agreement or to interpret this Agreement to extend only over the maximum period of time, range of
activities, or geographic areas as to which it may be enforceable.
1.7
Complete Satisfaction
. In consideration of the payment of
the Employment Agreements Amount and the other provisions of this Agreement, the Executive, Buyer, Buyer Bank, Seller, and Seller Bank hereby agree that effective immediately following the Effective Time of the Merger, the Executive agrees that the
full payment of the Employment Agreements Amount, as determined in accordance
Section 1.1
and
Section 1.2
, shall be in complete satisfaction of all rights to payments due to Executive under the Employment Agreements.
2.
Code Section 409A Compliance
. The intent of the parties is that payments under this Agreement either be exempt from or comply
with Code Section 409A and the Treasury Regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. Notwithstanding any other provision of
this Agreement, if the Employment Agreements Amount is determined to constitute nonqualified deferred compensation within the meaning of Section 409A and the Executive is determined to be a specified employee as defined
in Section 409A(a)(2)(b)(i), then the Employment Agreements Amount shall not be paid until the first payroll date to occur following the six-month anniversary of the Executives termination of employment with Seller and
Seller Bank. None of Buyer, Buyer Bank, Seller, or Seller Bank make any representations or warranties that the payments provided under this Agreement comply with, or are exempt from,
Section 409A, and in no event shall any of Buyer, Buyer Bank, Seller, or Seller Bank be liable for any portion of any taxes, penalties, interest, or other expenses that may be incurred by Executive on account of non-compliance with
Section 409A. To the extent required by Section 409A, each reimbursement or in-kind benefit provided under the Agreement shall be provided in accordance with the following: (i) the amount of expenses eligible for reimbursement, or
in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (ii) any reimbursement of an eligible expense shall be paid to the
Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred, and (iii) any right to reimbursements or in-kind benefits under the Agreement shall not be subject to liquidation or
exchange for another benefit.
3.
General
.
3.1
Heirs, Successors, and Assigns
. The terms of this Agreement shall be binding upon the parties hereto and their respective heirs,
successors, assigns and legal representatives.
3.2
Final Agreement
. This Agreement represents the entire understanding of the
parties with respect to the subject matter hereof and supersedes all prior understandings, written or oral, except as set forth in a separate written employment agreement by and between Buyer, Buyer Bank and the Executive. The terms of this
Agreement may be changed, modified, or discharged only by an instrument in writing signed by each of the parties hereto.
3.3
Withholdings
. Seller, Seller Bank, Buyer, and Buyer Bank may withhold from any amounts payable under this Agreement such federal, state, or local taxes as may be required to be withheld pursuant to applicable law or regulation.
3.4
Governing Law
. This Agreement shall be construed, enforced, and interpreted in accordance with and governed by the laws of the State
of New Hampshire, without reference to its principles of conflicts of law, except to the extent that federal law shall be deemed to preempt such state laws.
3.5
Regulatory Limitations
. Notwithstanding any other provision of this Agreement, neither Buyer, Buyer Bank, Seller, nor Seller Bank
shall be obligated to make, and Executive shall have no right to receive, any payment under this Agreement which would violate any law, regulation, or regulatory order applicable to Buyer, Buyer Bank, Seller, or Seller Bank, as applicable, at the
time such payment is due, including, without limitation, Section 1828(k)(1) of Title 12 of the United States Code and any regulation or order thereunder of the Federal Deposit Insurance Corporation.
3.6
Voluntary Action and Waiver
. The Executive acknowledges that by his free and voluntary act of signing below, the Executive agrees to
all of the terms of this Agreement and intends to be legally bound thereby. The Executive acknowledges that he has been advised to consult with an attorney prior to executing this Agreement.
3.7
Counterparts
. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
4.
Effectiveness
. Notwithstanding anything to the contrary contained
herein, this Agreement shall be subject to consummation of the Merger in accordance with the terms of the Merger Agreement, as the same may be amended by the parties thereto in accordance with its terms. In the event the Merger Agreement is
terminated for any reason or the Merger does not occur, this Agreement shall be deemed null and void.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF
,
Buyer, Buyer Bank, Seller, and Seller Bank have each caused
this Agreement to be executed by their duly authorized officers, and the Executive has signed this Agreement, effective as of the date first above written.
|
EXECUTIVE:
|
|
/s/ Stephen R. Theroux
|
Stephen R. Theroux
|
|
|
|
|
LAKE SUNAPEE BANK GROUP
|
|
|
By:
|
|
/s/ Stephen W. Ensign
|
Name:
|
|
Stephen W. Ensign
|
Title:
|
|
Chairman of the Board
|
|
LAKE SUNAPEE BANK, FSB
|
|
|
By:
|
|
/s/ Stephen W. Ensign
|
Name:
|
|
Stephen W. Ensign
|
Title:
|
|
Chairman of the Board
|
|
BAR HARBOR BANKSHARES
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
|
BAR HARBOR BANK & TRUST
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
[SIGNATURE PAGE TO THE THEROUX
SETTLEMENT AGREEMENT]
EXHIBIT A
RELEASE OF CLAIMS
I, Stephen R. Theroux,
of [City], [County], New Hampshire, (hereinafter, the Employee), in consideration of the Employment Agreements Amount as described below, on behalf of himself and his heirs and assigns, hereby irrevocably and unconditionally releases and
forever discharges, individually and collectively, Bar Harbor Bankshares, a bank holding company (
Buyer
), Bar Harbor Bank & Trust, a wholly-owned subsidiary of Buyer (
Buyer Bank
), Lake Sunapee Bank
Group, a bank holding company (
Seller
), and Lake Sunapee, FSB, a wholly-owned subsidiary of Seller (
Seller Bank
), their affiliated companies, and each of their respective officers, directors, employees,
shareholders, representatives, parent companies, subsidiaries, predecessors, successors, assigns, attorneys and all persons acting by, through or in concert with them (collectively, the Released Parties), of and from any and all charges,
claims, complaints, demands, liabilities, causes of action, losses, costs or expenses of any kind whatsoever (including related attorneys fees and costs), known or unknown, suspected or unsuspected, that Employee may now have or has ever had
against the Released Parties by reason of any act, omission, transaction, or event occurring up to and including the date of the signing of this Agreement.
This waiver, release and discharge includes without limitation, claims related to any wrongful or unlawful discharge, discipline or retaliation, whether
express or implied, any promotions or demotions, compensation, the Seller or Seller Banks benefit plan(s) and the management thereof, defamation, slander, libel, invasion of privacy, misrepresentation, fraud, infliction of emotional distress,
stress, breach of any covenant of good faith and fair dealing, and any other claims relating to the Employees employment with the Seller or Seller Bank and the termination thereof. This waiver, release and discharge further applies but is not
limited to any claims based on Title VII of the Civil Rights Act of 1964, the Post Civil War Civil Rights Act (41 U.S.C. ss. 198188), the Civil Rights Act of 1991, the Equal Pay Act, the Age Discrimination Employment Act, the Older
Workers Benefit Protection Act, the Rehabilitation Act of 1973, the Americans with Disabilities Act, the Vietnam Era Veterans Readjustment Act, the Fair Labor Standards Act, the Workers Adjustment and Retraining Notification Act,
Executive Order 11246, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act, the New Hampshire Protective Legislation Law, the New Hampshire Unemployment Compensation Law, the New Hampshire Uniform Trade Secrets Act,
the New Hampshire Whistleblowers Protection Act, the New Hampshire Minimum Wage Act, the New Hampshire Safety and Health of Employees Law, and the New Hampshire Law Against Discrimination (all as they may be amended), and any other applicable
federal, state or local laws, ordinances and regulations including those relating to discrimination to the extent permitted by law; provided, however, that, notwithstanding anything in this Release of Claims to the contrary, this Release of Claims
does not apply to any of the items described in the second paragraph of Section 1.1 of the Settlement Agreement between the Buyer, Buyer Bank, Seller, and Seller Bank and the Employee, dated May 5, 2016. Employee expressly waives all
claims, including those which he does not know or suspect to exist in his favor as of the date of this Agreement against the Released Parties. As used herein, the Employee understand the word claims to include all actions, claims, and
grievances, whether actual or potential, known or unknown, and specifically but not exclusively including all claims against the Seller or Seller Bank or otherwise arising from Employees employment with the Seller Bank, the termination thereof
or any other conduct occurring on or prior to the date the Employee signs this Release of Claims. All such claims are forever barred by this Release of Claims whether they arise in contract or tort or under a statute or any other law.
EMPLOYMENT AGREEMENTS AMOUNT
. In return for Employees execution of and adherence to this Release of Claims, the Seller Bank shall pay the
Employee the Employment Agreements Amount, as set forth in the Settlement Agreement between the Buyer, Buyer Bank, Seller, and Seller Bank and the Employee, dated May 5, 2016, in the total amount of
($ ), subject to reduction under
Section 1.2 of the Settlement Agreement. Payment of the Employment Agreements Amount shall be made in a lump sum, subject to usual and customary deductions required by law and Seller Bank policy.
CONFIDENTIAL TERMS.
Employee and the Buyer, Buyer Bank, Seller, and Seller Bank agree that each will keep the contents of this Release of Claims
(including its existence and the terms and provisions hereof) and the
negotiations leading to it completely confidential, that neither will hereafter publish or disclose any information concerning such matters to anyone, and that each shall take every reasonable
precaution to prevent the direct or indirect disclosure of such information to third parties, provided that the foregoing provisions shall not be construed to prevent Employee from disclosing such matters to his accountant or to prevent the Buyer,
Buyer Bank, Seller, and Seller Bank from disclosing such matters to its accountants, and provided further that Employee may also make such disclosures as are finally compelled by law provided Employee gives the Buyer, Buyer Bank, Seller, and Seller
Bank immediate notice of such legal process in order that the Buyer, Buyer Bank, Seller, and Seller Bank shall have the opportunity to object to the disclosure of such information.
INJUNCTIVE RELIEF
. Employee acknowledges and recognizes that a violation of this Release of Claims and its covenants will cause irreparable damage to
the Buyer, Buyer Bank, Seller, and Seller Bank and the Buyer, Buyer Bank, Seller, and Seller Bank will have no adequate remedy at law for such violation. Accordingly, Employee agrees that the Buyer, Buyer Bank, Seller, and Seller Bank will be
entitled, as a matter of right, to an injunction from any court of competent jurisdiction restraining any further violation of this Release of Claims or the terms and conditions provided herein. This right to injunctive relief will be cumulative and
in addition to whatever remedies the parties may otherwise have at law.
CONSIDERATION AND REVOCATION PERIOD
. I acknowledge that I am hereby
advised to consult with an attorney before signing this Release of Claims. I further understand that I may consider this Release of Claims for up to forty-five (45) days before deciding whether to sign it. In addition, I acknowledge that at the
commencement of the forty-five (45) day period referenced herein, I was provided with the class, unit or group of individuals considered for the Release of Claims program, the employees eligible and selected for the Release of Claims program,
the job title and ages of all individuals selected for the program and the ages of all individuals in the same job classification or organizational unit who are not selected for the program. A copy of the lists and information referenced herein are
attached as Addendum A. If I signed this Release of Claims before the expiration of that forty-five (45) day period, I acknowledge that such decision was entirely voluntary. I understand that if I do not sign and return this Release of Claims
to the Seller Bank by the end of that forty-five (45) day period, the Employment Agreements Amount described above will expire. I understand that for a period of seven (7) days after I execute this Release of Claims, I have the right to
revoke it by a written notice to be received by the Seller Bank by the end of that period. I also understand that this Release of Claims shall not be effective or enforceable until the expiration of that seven (7) day period. I further
represent and agree that I have carefully read and fully understand all of the provisions of this Release of Claims and that I am voluntarily agreeing to those provisions. I acknowledge that I have not been induced to sign this Release of Claims by
any representatives of any released party other than the Employment Agreements Amount as stated above.
Employee understands and agrees that Employee has
carefully read and fully understands all of the provisions of this Agreement and knowingly and voluntarily agrees to all of the terms set forth in this Release of Claims. Employee knowingly and voluntarily intends to be legally bound by the same.
Signed as a sealed instrument this , 20 .
THE STATE OF NEW HAMPSHIRE
Before me, the undersigned notary public, personally appeared STEPHEN R. THEROUX, personally known, to be the
person whose name is signed on the preceding document, and acknowledged to me that he signed it voluntarily for its stated purpose.
ADDENDUM A
1.
|
The class, unit, or group of individuals considered or eligible for the Release of Claims program, are the executive employees of the Seller Bank.
|
2.
|
All persons who are being offered consideration under a waiver Agreement must sign the Agreement and return it to the Company within 45-days after receiving it. Once the employee has signed the waiver Agreement he or
she has seven days to revoke the Agreement.
|
3.
|
Set forth below is a listing of the ages and job titles of all employees who were selected for this release program, as well as a listing of the ages and job titles of all employees who were not selected for this
release program.
|
|
|
|
E
MPLOYEES
S
ELECTED
F
OR
T
HE
R
ELEASE
P
ROGRAM
|
|
|
JOB
TITLE
|
|
AGE
|
|
|
|
|
|
|
|
|
|
|
|
|
E
MPLOYEES
N
OT
S
ELECTED
F
OR
T
HE
R
ELEASE
P
ROGRAM
|
|
|
JOB
TITLE
|
|
AGE
|
|
|
|
|
|
|
|
|
|
Exhibit D-2
SETTLEMENT AGREEMENT
This Settlement Agreement (the
Agreement
) is entered into as of May 5, 2016 by and among William J. McIver (the
Executive
), Bar Harbor Bankshares, a bank holding company (
Buyer
), Bar Harbor Bank & Trust, a wholly-owned subsidiary of Buyer (
Buyer Bank
), Lake Sunapee Bank Group, a bank holding
company (
Seller
), and Lake Sunapee, FSB, a wholly-owned subsidiary of Seller (
Seller Bank
).
WITNESSETH:
WHEREAS
, concurrently with the execution of this Agreement, Buyer and Seller are entering into an Agreement and Plan of Merger, dated
as of May 5, 2016 (the
Merger Agreement
), and all capitalized terms not defined herein shall have the meaning set forth in the Merger Agreement; and
WHEREAS
, Buyer, Buyer Bank, Seller, Seller Bank, and the Executive desire to enter into this Agreement, which shall supersede the
Change of Control Agreement by and among New Hampshire Thrift Bancshares (Sellers former name), Seller Bank and the Executive, dated February 14, 2013 (the
Change of Control Agreement
), effective immediately prior to
the Effective Time of the Merger, and in lieu of any rights and payments under the Change of Control Agreement, the Executive shall be entitled to the rights and payments set forth herein.
NOW THEREFORE
, in consideration of the foregoing and other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the Executive, Buyer, Buyer Bank, Seller, and Seller Bank agree as follows:
1.
Settlement Amount
.
1.1
Change of Control Agreement Amount
. On the Closing Date, provided the Executive has remained employed with the Seller and Seller
Bank to and including the Closing Date, Seller shall, or shall cause an affiliate to, pay to the Executive a lump-sum cash amount equal to the total of $845,000, in full satisfaction of the payment obligations of Seller and Seller Bank under the
Change of Control Agreement, less applicable tax withholdings (the total of such sum, the
Change of Control Agreement Amount
) with such amount to be further reduced pursuant to
Section 1.2
hereof as may be needed.
For the avoidance of doubt, the payment of the Change of Control Agreement Amount under this Agreement shall not release Buyer, Buyer Bank,
Seller, or Seller Bank, as applicable, from any of the following obligations: (a) obligations to pay to the Executive accrued but unpaid wages, and make payments for accrued but unused vacation, earned up to the Effective Time of the Merger to
the extent required by applicable law; (b) the payment of any of the Executives vested benefits under the tax-qualified and non-qualified plans of Seller or Seller Bank, including any benefits that become vested as a result of the Merger;
(c) obligations regarding accelerated vesting of equity awards, if any, under any equity awards granted by Seller to the Executive and outstanding immediately prior to the Effective Time; (d) the payment of any of the Executives
vested benefits under any salary continuation agreement between the Executive and the Seller or Seller Bank; (e) obligations regarding vested benefits under a supplemental executive retirement plan; (f) any change in control protection or
change in control rights in any bank-owned life insurance policy held by Seller Bank on the life of the Executive; (g) the payment of the Merger Consideration with respect to the Executives common stock of Seller as contemplated by
Section 2.01 of the Merger Agreement; or (h) rights to indemnification under applicable corporate law, the organizational documents of Seller or Seller Bank, as an insured under any directors and officers liability insurance
policy new or previously in force, or pursuant to Section 5.12 of the Merger Agreement.
1.2
Section 280G Cut-Back
.
Notwithstanding anything in this Agreement to the contrary, if the Change of Control Agreement Amount provided for in this Agreement, together with any other payments which the Executive has the right to receive from Buyer, Buyer Bank, Seller,
Seller Bank, or any corporation which is a member of an affiliated group (as defined in Code Section 1504(a), without regard to Code Section 1504(b)) of
which Buyer, Buyer Bank, Seller, or Seller Bank is a member, would constitute an excess parachute payment (as defined in Code Section 280G(b)(2)), payments pursuant to this
Agreement shall be reduced to the extent necessary to ensure that no portion of such payments will be subject to the excise tax imposed by Code Section 4999. It is hereby understood that the Change of Control Agreement Amount as determined
under this
Section 1.2
will be subject to further adjustment upon the consummation of the Merger. Any determination required under this
Section 1.2
shall be made by Seller and Buyer and their respective tax advisors, whose
determination shall be conclusive and binding upon the Executive, Seller, and Seller Bank, and it is hereby understood that such determination will follow the same methodology for calculating the Code Section 280G limitation in order to avoid
an excess parachute payment as provided in Seller Bank Disclosure Schedule 3.18(f) to the Merger Agreement.
1.3
No
Further Adjustment
. The parties hereby agree that the Change of Control Agreement Amount as determined in the manner provided under
Section 1.1
and
Section 1.2
hereof is final and binding on all parties and shall not
otherwise be subject to further adjustment.
1.4
Employment with Buyer
. Buyer and Buyer Bank agree to employ the Executive following
the Closing Date, and the Executive hereby agrees to such continued employment, the terms of which shall be memorialized in an employment agreement effective as of the Closing Date.
1.5
Complete Satisfaction
. In consideration of the payment of the Change of Control Agreement Amount, the employment by Buyer and/or
Buyer Bank following the Closing Date and the other provisions of this Agreement, the Executive, Buyer, Buyer Bank, Seller, and Seller Bank hereby agree that effective immediately following the Effective Time of the Merger, the Executive agrees that
the full payment of the Change of Control Agreement Amount, as determined in accordance
Section 1.1
and
Section 1.2
, shall be in complete satisfaction of all rights to payments due to Executive under the Change of Control
Agreement.
2. Code
Section 409A Compliance
. The intent of the parties is that payments under this Agreement either be exempt
from or comply with Code Section 409A and the Treasury Regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. To that end, Executive,
Buyer, Seller, and Seller Bank agree that the payment described in
Section 1
is intended to be excepted from compliance with Code Section 409A as a short-term deferral pursuant to Treasury Regulation Section 1.409A-1(b)(4).
None of Buyer, Buyer Bank, Seller, or Seller Bank make any representations or warranties that the payments provided under this Agreement comply with, or are exempt from, Section 409A, and in no event shall any of Buyer, Buyer Bank, Seller, or
Seller Bank be liable for any portion of any taxes, penalties, interest, or other expenses that may be incurred by Executive on account of non-compliance with Section 409A.
3.
General
.
3.1
Heirs,
Successors, and Assigns
. The terms of this Agreement shall be binding upon the parties hereto and their respective heirs, successors, assigns and legal representatives.
3.2
Final Agreement
. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof and
supersedes all prior understandings, written or oral, except as set forth in a separate written employment agreement by and between Buyer, Buyer Bank and the Executive. The terms of this Agreement may be changed, modified, or discharged only by an
instrument in writing signed by each of the parties hereto.
3.3
Withholdings
. Seller, Seller Bank, Buyer, and Buyer Bank may
withhold from any amounts payable under this Agreement such federal, state, or local taxes as may be required to be withheld pursuant to applicable law or regulation.
3.4
Governing Law
. This Agreement shall be construed, enforced, and interpreted in accordance with and governed by the laws of the State
of New Hampshire, without reference to its principles of conflicts of law, except to the extent that federal law shall be deemed to preempt such state laws.
3.5
Regulatory Limitations
. Notwithstanding any other provision of this Agreement, neither Buyer, Buyer Bank, Seller, nor Seller Bank
shall be obligated to make, and Executive shall have no right to receive, any payment under this Agreement which would violate any law, regulation, or regulatory order applicable to Buyer,
Buyer Bank, Seller, or Seller Bank, as applicable, at the time such payment is due, including, without limitation, Section 1828(k)(1) of Title 12 of the United States Code and any regulation
or order thereunder of the Federal Deposit Insurance Corporation.
3.6
Voluntary Action and Waiver
. The Executive acknowledges that
by his free and voluntary act of signing below, the Executive agrees to all of the terms of this Agreement and intends to be legally bound thereby. The Executive acknowledges that he has been advised to consult with an attorney prior to executing
this Agreement.
3.7
Counterparts
. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be
an original but all of which together shall constitute one and the same instrument.
4.
Effectiveness
. Notwithstanding anything to
the contrary contained herein, this Agreement shall be subject to consummation of the Merger in accordance with the terms of the Merger Agreement, as the same may be amended by the parties thereto in accordance with its terms. In the event the
Merger Agreement is terminated for any reason or the Merger does not occur, this Agreement shall be deemed null and void.
IN WITNESS WHEREOF
,
Buyer, Buyer Bank, Seller, and Seller Bank have each caused
this Agreement to be executed by their duly authorized officers, and the Executive has signed this Agreement, effective as of the date first above written.
|
EXECUTIVE:
|
|
/s/ William J. McIver
|
William J. McIver
|
|
|
|
|
LAKE SUNAPEE BANK GROUP
|
|
|
By:
|
|
/s/ Stephen R. Theroux
|
Name:
|
|
Stephen R. Theroux
|
Title:
|
|
President and Chief Executive Officer
|
|
LAKE SUNAPEE BANK, FSB
|
|
|
By:
|
|
/s/ Stephen R. Theroux
|
Name:
|
|
Stephen R. Theroux
|
Title:
|
|
President and Chief Executive Officer
|
|
BAR HARBOR BANKSHARES
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
|
BAR HARBOR BANK & TRUST
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
[SIGNATURE PAGE TO THE MCIVER
SETTLEMENT AGREEMENT]
Exhibit D-3
SETTLEMENT AGREEMENT
This Settlement Agreement (the
Agreement
) is entered into as of May 5, 2016 by and among Laura Jacobi (the
Officer
), Bar Harbor Bankshares, a bank holding company (
Buyer
), Bar Harbor Bank & Trust, a wholly-owned subsidiary of Buyer (
Buyer Bank
), Lake Sunapee Bank Group, a bank holding
company (
Seller
), and Lake Sunapee, FSB, a wholly-owned subsidiary of Seller (
Seller Bank
).
WITNESSETH:
WHEREAS
, concurrently with the execution of this Agreement, Buyer and Seller are entering into an Agreement and Plan of Merger, dated
as of May 5, 2016 (the
Merger Agreement
), and all capitalized terms not defined herein shall have the meaning set forth in the Merger Agreement; and
WHEREAS
, Buyer, Buyer Bank, Seller, Seller Bank, and the Officer desire to enter into this Agreement, which shall supersede the Change
of Control Agreement by and among New Hampshire Thrift Bancshares, Inc. (Sellers former name), Seller Bank and the Officer, dated March 9, 2012 (the
Change of Control Agreement
), effective immediately prior to the
Effective Time of the Merger, and in lieu of any rights and payments under the Change of Control Agreement, the Executive shall be entitled to the rights and payments set forth herein and shall terminate employment with Seller and Seller Bank (which
for the avoidance of doubt, the parties agree shall be the rights and payments to which the Executive is entitled in the event of the Executives termination of employment without Cause or for Good Reason following a
Change of Control or Pending Change of Control (as such terms are defined in the Change of Control Agreement) as contemplated by Sections 6 and 7 of the Change of Control Agreement).
NOW THEREFORE
, in consideration of the foregoing and other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the Officer, Buyer, Buyer Bank, Seller, and Seller Bank agree as follows:
1.
Settlement Amount
.
1.1
Change of Control Agreement Amount
. On the later of the Closing Date or the earliest payment date permitted under Section 2,
provided the Officer has remained employed with the Seller and Seller Bank to and including the Closing Date and has executed the release attached as
Exhibit A
hereto at least eight days prior to the Closing Date (and any revocation period
has elapsed), Seller shall, or shall cause an affiliate to pay to the Officer lump-sum cash amount equal to the total of $250,000, in full satisfaction of the payment obligations of Seller and Seller Bank under the Change of Control Agreement, less
applicable tax withholdings (the
Change of Control Agreement Amount
). The Change of Control Agreement shall be subject to further reduction pursuant to
Section 1.2
hereof as may be needed.
For the avoidance of doubt, the payment of the Change of Control Agreement Amount under this Agreement shall not release Buyer, Buyer Bank,
Seller, or Seller Bank, as applicable, from any of the following obligations: (a) obligations to pay to the Officer accrued but unpaid wages, and make payments for accrued but unused vacation, earned up to the Effective Time of the Merger to
the extent required by applicable law; (b) the payment of any of the Officers vested benefits under the tax-qualified and non-qualified plans of Seller or Seller Bank, including any benefits that become vested as a result of the Merger;
(c) obligations regarding accelerated vesting of equity awards, if any, under any equity awards granted by Seller Bank to the Officer and outstanding immediately prior to the Effective Time; (d) the payment of any of the Officers
vested benefits under any salary continuation agreement between the Executive and the Seller or Seller Bank; (e) obligations regarding vested benefits under a supplemental executive retirement plan; (f) any change in control protection or
change in control rights in any bank-owned life insurance policy held by Seller Bank on the life of the Executive; (g) the payment of the Merger Consideration with respect to the Officers common stock of Seller Bank as contemplated by
Section 2.01 of the Merger Agreement; or (h) rights to indemnification under applicable corporate law, the organizational documents of Seller or Seller Bank, as an insured under any directors and officers liability insurance
policy new or previously in force, or pursuant to Section 5.12 of the Merger Agreement.
1.2
Section 280G Cut-Back
. Notwithstanding anything in this Agreement to the
contrary, if the Change of Control Agreement Amount provided for in this Agreement, together with any other payments which the Officer has the right to receive from Buyer, Buyer Bank, Seller, Seller Bank, or any corporation which is a member of an
affiliated group (as defined in Code Section 1504(a), without regard to Code Section 1504(b)) of which Buyer, Buyer Bank, Seller, or Seller Bank is a member, would constitute an excess parachute payment (as defined
in Code Section 280G(b)(2)), payments pursuant to this Agreement shall be reduced to the extent necessary to ensure that no portion of such payments will be subject to the excise tax imposed by Code Section 4999. It is hereby understood
that the Change of Control Agreement Amount as determined under this
Section 1.2
will be subject to further adjustment upon the consummation of the Merger. Any determination required under this
Section 1.2
shall be made by
Seller and Buyer and their respective tax advisors, whose determination shall be conclusive and binding upon the Officer, Seller, and Seller Bank, and it is hereby understood that such determination will follow the same methodology for calculating
the Code Section 280G limitation in order to avoid an excess parachute payment as provided in Seller Bank Disclosure Schedule 3.18(f) to the Merger Agreement.
1.3
No Further Adjustment
. The parties hereby agree that the Change of Control Agreement Amount as determined in the manner provided
under
Section 1.1
and
Section 1.2
hereof is final and binding on all parties and shall not otherwise be subject to further adjustment.
1.4
Complete Satisfaction
. In consideration of the payment of the Change of Control Agreement Amount, the employment by Buyer and/or
Buyer Bank following the Closing Date and the other provisions of this Agreement, the Officer, Buyer, Buyer Bank, Seller, and Seller Bank hereby agree that effective immediately following the Effective Time of the Merger, the Officer agrees that the
full payment of the Change of Control Agreement Amount, as determined in accordance
Section 1.1
and
Section 1.2
, shall be in complete satisfaction of all rights to payments due to Officer under the Change of Control
Agreement.
2. Code
Section 409A Compliance
. The intent of the parties is that payments under this Agreement either be exempt
from or comply with Code Section 409A and the Treasury Regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. To that end, Officer,
Buyer, Seller, and Seller Bank agree that the payment described in
Section 1
is intended to be excepted from compliance with Code Section 409A as a short-term deferral pursuant to Treasury Regulation Section 1.409A-1(b)(4).
None of Buyer, Buyer Bank, Seller, or Seller Bank make any representations or warranties that the payments provided under this Agreement comply with, or are exempt from, Section 409A, and in no event shall any of Buyer, Buyer Bank, Seller, or
Seller Bank be liable for any portion of any taxes, penalties, interest, or other expenses that may be incurred by Officer on account of non-compliance with Section 409A.
3.
General
.
3.1
Heirs, Successors, and Assigns
. The terms of this Agreement shall be binding upon the parties hereto and their respective heirs, successors, assigns and legal representatives.
3.2
Final Agreement
. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof and
supersedes all prior understandings, written or oral, except as set forth in a separate written employment agreement by and between Buyer, Buyer Bank and the Executive. The terms of this Agreement may be changed, modified, or discharged only by an
instrument in writing signed by each of the parties hereto.
3.3
Withholdings
. Seller, Seller Bank, Buyer, and Buyer Bank may
withhold from any amounts payable under this Agreement such federal, state, or local taxes as may be required to be withheld pursuant to applicable law or regulation.
3.4
Governing Law
. This Agreement shall be construed, enforced, and interpreted in accordance with and governed by the laws of the State
of New Hampshire, without reference to its principles of conflicts of law, except to the extent that federal law shall be deemed to preempt such state laws.
3.5
Regulatory Limitations
. Notwithstanding any other provision of this Agreement, neither Buyer, Buyer Bank, Seller, nor Seller Bank
shall be obligated to make, and Officer shall have no right to receive, any
payment under this Agreement which would violate any law, regulation, or regulatory order applicable to Buyer, Buyer Bank, Seller, or Seller Bank, as applicable, at the time such payment is due,
including, without limitation, Section 1828(k)(1) of Title 12 of the United States Code and any regulation or order thereunder of the Federal Deposit Insurance Corporation.
3.6
Voluntary Action and Waiver
. The Officer acknowledges that by her free and voluntary act of signing below, the Officer agrees to all
of the terms of this Agreement and intends to be legally bound thereby. The Officer acknowledges that she has been advised to consult with an attorney prior to executing this Agreement.
3.7
Counterparts
. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
4.
Effectiveness
. Notwithstanding anything to the contrary contained
herein, this Agreement shall be subject to consummation of the Merger in accordance with the terms of the Merger Agreement, as the same may be amended by the parties thereto in accordance with its terms. In the event the Merger Agreement is
terminated for any reason or the Merger does not occur, this Agreement shall be deemed null and void.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF
, Buyer, Buyer Bank, Seller, and Seller Bank have each caused this
Agreement to be executed by their duly authorized officers, and the Executive has signed this Agreement, effective as of the date first above written.
|
EXECUTIVE:
|
|
/s/ Laura Jacobi
|
Laura Jacobi
|
|
LAKE SUNAPEE BANK GROUP
|
|
By: /s/ Stephen R. Theroux
|
Name: Stephen R. Theroux
|
Title: President and Chief Executive Officer
|
|
LAKE SUNAPEE BANK, FSB
|
|
By: /s/ Stephen R. Theroux
|
Name: Stephen R. Theroux
|
Title: President and Chief Executive Officer
|
|
BAR HARBOR BANKSHARES
|
|
By: /s/ Curtis C. Simard
|
Name: Curtis C. Simard
|
Title: President and Chief Executive Officer
|
|
BAR HARBOR BANK & TRUST
|
|
By: /s/ Curtis C. Simard
|
Name: Curtis C. Simard
|
Title: President and Chief Executive Officer
|
[SIGNATURE PAGE TO
THE JACOBI SETTLEMENT AGREEMENT]
EXHIBIT A
RELEASE OF CLAIMS
I, Laura
Jacobi, of [City], [County], New Hampshire, (hereinafter, the Employee), in consideration of the Change of Control Amount as described below, on behalf of himself and his heirs and assigns, hereby irrevocably and unconditionally releases
and forever discharges, individually and collectively, Bar Harbor Bankshares, a bank holding company (
Buyer
), Bar Harbor Bank & Trust, a wholly-owned subsidiary of Buyer (
Buyer Bank
), Lake Sunapee Bank
Group, a bank holding company (
Seller
), and Lake Sunapee, FSB, a wholly-owned subsidiary of Seller (
Seller Bank
), their affiliated companies, and each of their respective officers, directors, employees,
shareholders, representatives, parent companies, subsidiaries, predecessors, successors, assigns, attorneys and all persons acting by, through or in concert with them (collectively, the Released Parties), of and from any and all charges,
claims, complaints, demands, liabilities, causes of action, losses, costs or expenses of any kind whatsoever (including related attorneys fees and costs), known or unknown, suspected or unsuspected, that Employee may now have or has ever had
against the Released Parties by reason of any act, omission, transaction, or event occurring up to and including the date of the signing of this Agreement.
This waiver, release and discharge includes without limitation, claims related to any wrongful or unlawful discharge, discipline or retaliation, whether
express or implied, any promotions or demotions, compensation, the Seller or Seller Banks benefit plan(s) and the management thereof, defamation, slander, libel, invasion of privacy, misrepresentation, fraud, infliction of emotional distress,
stress, breach of any covenant of good faith and fair dealing, and any other claims relating to the Employees employment with the Seller or Seller Bank and the termination thereof. This waiver, release and discharge further applies but is not
limited to any claims based on Title VII of the Civil Rights Act of 1964, the Post Civil War Civil Rights Act (41 U.S.C. ss. 198188), the Civil Rights Act of 1991, the Equal Pay Act, the Age Discrimination Employment Act, the Older
Workers Benefit Protection Act, the Rehabilitation Act of 1973, the Americans with Disabilities Act, the Vietnam Era Veterans Readjustment Act, the Fair Labor Standards Act, the Workers Adjustment and Retraining Notification Act,
Executive Order 11246, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act, the New Hampshire Protective Legislation Law, the New Hampshire Unemployment Compensation Law, the New Hampshire Uniform Trade Secrets Act,
the New Hampshire Whistleblowers Protection Act, the New Hampshire Minimum Wage Act, the New Hampshire Safety and Health of Employees Law, and the New Hampshire Law Against Discrimination (all as they may be amended), and any other applicable
federal, state or local laws, ordinances and regulations including those relating to discrimination to the extent permitted by law; provided, however, that, notwithstanding anything in this Release of Claims to the contrary, this Release of Claims
does not apply to any of the items described in the second paragraph of Section 1.1 of the Settlement Agreement between the Buyer, Buyer Bank, Seller, Seller Bank and the Employee, dated May 5, 2016. Employee expressly waives all claims,
including those which she does not know or suspect to exist in his favor as of the date of this Agreement against the Released Parties. As used herein, the Employee understand the word claims to include all actions, claims, and
grievances, whether actual or potential, known or unknown, and specifically but not exclusively including all claims against the Seller or Seller Bank or otherwise arising from Employees employment with the Seller Bank, the termination thereof
or any other conduct occurring on or prior to the date the Employee signs this Release of Claims. All such claims are forever barred by this Release of Claims whether they arise in contract or tort or under a statute or any other law.
CHANGE OF CONTROL AGREEMENT AMOUNT
. In return for Employees execution of and adherence to this Release of Claims, the Seller Bank shall pay the
Employee the Change of Control Agreement Amount, as set forth in the Settlement Agreement between the Buyer, Buyer Bank, Seller, and Seller Bank and the Employee, dated May 5, 2016, in the total amount of
Dollars ($ )]. Payment of the Change of Control Agreement Amount shall be made in a lump sum, subject to
usual and customary deductions required by law and Seller Bank policy.
CONFIDENTIAL TERMS.
Employee and the Buyer, Buyer Bank, Seller, and Seller Bank agree that each will keep
the contents of this Release of Claims (including its existence and the terms and provisions hereof) and the negotiations leading to it completely confidential, that neither will hereafter publish or disclose any information concerning such matters
to anyone, and that each shall take every reasonable precaution to prevent the direct or indirect disclosure of such information to third parties, provided that the foregoing provisions shall not be construed to prevent Employee from disclosing such
matters to his accountant or to prevent the Buyer, Buyer Bank, Seller, and Seller Bank from disclosing such matters to its accountants, and provided further that Employee may also make such disclosures as are finally compelled by law provided
Employee gives the Buyer, Buyer Bank, Seller, and Seller Bank immediate notice of such legal process in order that the Buyer, Buyer Bank, Seller, and Seller Bank shall have the opportunity to object to the disclosure of such information.
INJUNCTIVE RELIEF
. Employee acknowledges and recognizes that a violation of this Release of Claims and its covenants will cause irreparable damage to
the Buyer, Buyer Bank, Seller, and Seller Bank and the Buyer, Buyer Bank, Seller, and Seller Bank will have no adequate remedy at law for such violation. Accordingly, Employee agrees that the Buyer, Buyer Bank, Seller, and Seller Bank will be
entitled, as a matter of right, to an injunction from any court of competent jurisdiction restraining any further violation of this Release of Claims or the terms and conditions provided herein. This right to injunctive relief will be cumulative and
in addition to whatever remedies the parties may otherwise have at law.
CONSIDERATION AND REVOCATION PERIOD
. I acknowledge that I am hereby
advised to consult with an attorney before signing this Release of Claims. I further understand that I may consider this Release of Claims for up to forty-five (45) days before deciding whether to sign it. In addition, I acknowledge that at the
commencement of the forty-five (45) day period referenced herein, I was provided with the class, unit or group of individuals considered for the Release of Claims program, the employees eligible and selected for the Release of Claims program,
the job title and ages of all individuals selected for the program and the ages of all individuals in the same job classification or organizational unit who are not selected for the program. A copy of the lists and information referenced herein are
attached as Addendum A. If I signed this Release of Claims before the expiration of that forty-five (45) day period, I acknowledge that such decision was entirely voluntary. I understand that if I do not sign and return this Release of Claims
to the Seller Bank by the end of that forty-five (45) day period, the Change of Control Amount described above will expire. I understand that for a period of seven (7) days after I execute this Release of Claims, I have the right to revoke
it by a written notice to be received by the Seller Bank by the end of that period. I also understand that this Release of Claims shall not be effective or enforceable until the expiration of that seven (7) day period. I further represent and
agree that I have carefully read and fully understand all of the provisions of this Release of Claims and that I am voluntarily agreeing to those provisions. I acknowledge that I have not been induced to sign this Release of Claims by any
representatives of any released party other than the Change of Control Agreement Amount as stated above.
Employee understands and agrees that Employee
has carefully read and fully understands all of the provisions of this Agreement and knowingly and voluntarily agrees to all of the terms set forth in this Release of Claims. Employee knowingly and voluntarily intends to be legally bound by the
same.
Signed as a sealed instrument this ,
20 .
THE STATE OF NEW HAMPSHIRE
Before me, the undersigned notary public, personally appeared Laura Jacobi, personally known, to be the person
whose name is signed on the preceding document, and acknowledged to me that she signed it voluntarily for its stated purpose.
|
|
____________________________, Notary Public
|
ADDENDUM A
1.
|
The class, unit, or group of individuals considered or eligible for the Release of Claims program, are the executive employees of the Seller Bank.
|
2.
|
All persons who are being offered consideration under a waiver Agreement must sign the Agreement and return it to the Company within 45-days after receiving it. Once the employee has signed the waiver Agreement he or
she has seven days to revoke the Agreement.
|
3.
|
Set forth below is a listing of the ages and job titles of all employees who were selected for this release program, as well as a listing of the ages and job titles of all employees who were not selected for this
release program.
|
|
|
|
E
MPLOYEES
S
ELECTED
F
OR
T
HE
R
ELEASE
P
ROGRAM
|
|
|
J
OB
T
ITLE
|
|
A
GE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E
MPLOYEES
N
OT
S
ELECTED
F
OR
T
HE
R
ELEASE
P
ROGRAM
|
|
|
J
OB
T
ITLE
|
|
A
GE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit D-4
SETTLEMENT AGREEMENT
This Settlement Agreement (the
Agreement
) is entered into as of May 5, 2016 by and among Sharon Whitaker (the
Officer
), Bar Harbor Bankshares, a bank holding company (
Buyer
), Bar Harbor Bank & Trust, a wholly-owned subsidiary of Buyer (
Buyer Bank
), Lake Sunapee Bank Group, a bank holding
company (
Seller
), and Lake Sunapee, FSB, a wholly-owned subsidiary of Seller (
Seller Bank
).
WITNESSETH:
WHEREAS
, concurrently with the execution of this Agreement, Buyer and Seller are entering into an Agreement and Plan of Merger, dated
as of May 5, 2016 (the
Merger Agreement
), and all capitalized terms not defined herein shall have the meaning set forth in the Merger Agreement; and
WHEREAS
, Buyer, Buyer Bank, Seller, Seller Bank, and the Officer desire to enter into this Agreement, which shall supersede the Change
of Control Agreement by and among New Hampshire Thrift Bancshares, Inc. (Sellers former name), Seller Bank and the Officer, dated March 9, 2012 (the
Change of Control Agreement
), effective immediately prior to the
Effective Time of the Merger, and in lieu of any rights and payments under the Change of Control Agreement, the Executive shall be entitled to the rights and payments set forth herein and shall terminate employment with Seller and Seller Bank (which
for the avoidance of doubt, the parties agree shall be the rights and payments to which the Executive is entitled in the event of the Executives termination of employment without Cause or for Good Reason following a
Change of Control or Pending Change of Control (as such terms are defined in the Change of Control Agreement) as contemplated by Sections 6 and 7 of the Change of Control Agreement).
NOW THEREFORE
, in consideration of the foregoing and other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the Officer, Buyer, Buyer Bank, Seller, and Seller Bank agree as follows:
1.
Settlement Amount
.
1.1
Change of Control Agreement Amount
. On the later of the Closing Date or the earliest payment date permitted under Section 2,
provided the Officer has remained employed with the Seller and Seller Bank to and including the Closing Date and has executed the release attached as
Exhibit A
hereto at least eight days prior to the Closing Date (and any revocation period
has elapsed), Seller shall, or shall cause an affiliate to pay to the Officer lump-sum cash amount equal to the total of $223,000, in full satisfaction of the payment obligations of Seller and Seller Bank under the Change of Control Agreement, less
applicable tax withholdings (the
Change of Control Agreement Amount
). The Change of Control Agreement shall be subject to further reduction pursuant to
Section 1.2
hereof as may be needed.
For the avoidance of doubt, the payment of the Change of Control Agreement Amount under this Agreement shall not release Buyer, Buyer Bank,
Seller, or Seller Bank, as applicable, from any of the following obligations: (a) obligations to pay to the Officer accrued but unpaid wages, and make payments for accrued but unused vacation, earned up to the Effective Time of the Merger to
the extent required by applicable law; (b) the payment of any of the Officers vested benefits under the tax-qualified and non-qualified plans of Seller or Seller Bank, including any benefits that become vested as a result of the Merger;
(c) obligations regarding accelerated vesting of equity awards, if any, under any equity awards granted by Seller Bank to the Officer and outstanding immediately prior to the Effective Time; (d) the payment of any of the Officers
vested benefits under any salary continuation agreement between the Executive and the Seller or Seller Bank; (e) obligations regarding vested benefits under a supplemental executive retirement plan; (f) any change in control protection or
change in control rights in any bank-owned life insurance policy held by Seller Bank on the life of the Executive; (g) the payment of the Merger Consideration with respect to the Officers common stock of Seller Bank as contemplated by
Section 2.01 of the Merger Agreement; or (h) rights to indemnification under applicable corporate law, the organizational documents of Seller or Seller Bank, as an insured under any directors and officers liability insurance
policy new or previously in force, or pursuant to Section 5.12 of the Merger Agreement.
1.2
Section 280G Cut-Back
. Notwithstanding anything in this Agreement to the
contrary, if the Change of Control Agreement Amount provided for in this Agreement, together with any other payments which the Officer has the right to receive from Buyer, Buyer Bank, Seller, Seller Bank, or any corporation which is a member of an
affiliated group (as defined in Code Section 1504(a), without regard to Code Section 1504(b)) of which Buyer, Buyer Bank, Seller, or Seller Bank is a member, would constitute an excess parachute payment (as defined
in Code Section 280G(b)(2)), payments pursuant to this Agreement shall be reduced to the extent necessary to ensure that no portion of such payments will be subject to the excise tax imposed by Code Section 4999. It is hereby understood
that the Change of Control Agreement Amount as determined under this
Section 1.2
will be subject to further adjustment upon the consummation of the Merger. Any determination required under this
Section 1.2
shall be made by
Seller and Buyer and their respective tax advisors, whose determination shall be conclusive and binding upon the Officer, Seller, and Seller Bank, and it is hereby understood that such determination will follow the same methodology for calculating
the Code Section 280G limitation in order to avoid an excess parachute payment as provided in Seller Bank Disclosure Schedule 3.18(f) to the Merger Agreement.
1.3
No Further Adjustment
. The parties hereby agree that the Change of Control Agreement Amount as determined in the manner provided
under
Section 1.1
and
Section 1.2
hereof is final and binding on all parties and shall not otherwise be subject to further adjustment.
1.4
Complete Satisfaction
. In consideration of the payment of the Change of Control Agreement Amount, the employment by Buyer and/or
Buyer Bank following the Closing Date and the other provisions of this Agreement, the Officer, Buyer, Buyer Bank, Seller, and Seller Bank hereby agree that effective immediately following the Effective Time of the Merger, the Officer agrees that the
full payment of the Change of Control Agreement Amount, as determined in accordance
Section 1.1
and
Section 1.2
, shall be in complete satisfaction of all rights to payments due to Officer under the Change of Control
Agreement.
2. Code
Section 409A Compliance
. The intent of the parties is that payments under this Agreement either be exempt
from or comply with Code Section 409A and the Treasury Regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. To that end, Officer,
Buyer, Seller, and Seller Bank agree that the payment described in
Section 1
is intended to be excepted from compliance with Code Section 409A as a short-term deferral pursuant to Treasury Regulation Section 1.409A-1(b)(4).
None of Buyer, Buyer Bank, Seller, or Seller Bank make any representations or warranties that the payments provided under this Agreement comply with, or are exempt from, Section 409A, and in no event shall any of Buyer, Buyer Bank, Seller, or
Seller Bank be liable for any portion of any taxes, penalties, interest, or other expenses that may be incurred by Officer on account of non-compliance with Section 409A.
3.
General
.
3.1
Heirs, Successors, and Assigns
. The terms of this Agreement shall be binding upon the parties hereto and their respective heirs, successors, assigns and legal representatives.
3.2
Final Agreement
. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof and
supersedes all prior understandings, written or oral, except as set forth in a separate written employment agreement by and between Buyer, Buyer Bank and the Executive. The terms of this Agreement may be changed, modified, or discharged only by an
instrument in writing signed by each of the parties hereto.
3.3
Withholdings
. Seller, Seller Bank, Buyer, and Buyer Bank may
withhold from any amounts payable under this Agreement such federal, state, or local taxes as may be required to be withheld pursuant to applicable law or regulation.
3.4
Governing Law
. This Agreement shall be construed, enforced, and interpreted in accordance with and governed by the laws of the State
of New Hampshire, without reference to its principles of conflicts of law, except to the extent that federal law shall be deemed to preempt such state laws.
3.5
Regulatory Limitations
. Notwithstanding any other provision of this Agreement, neither Buyer, Buyer Bank, Seller, nor Seller Bank
shall be obligated to make, and Officer shall have no right to receive, any
payment under this Agreement which would violate any law, regulation, or regulatory order applicable to Buyer, Buyer Bank, Seller, or Seller Bank, as applicable, at the time such payment is due,
including, without limitation, Section 1828(k)(1) of Title 12 of the United States Code and any regulation or order thereunder of the Federal Deposit Insurance Corporation.
3.6
Voluntary Action and Waiver
. The Officer acknowledges that by her free and voluntary act of signing below, the Officer agrees to all
of the terms of this Agreement and intends to be legally bound thereby. The Officer acknowledges that she has been advised to consult with an attorney prior to executing this Agreement.
3.7
Counterparts
. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
4.
Effectiveness
. Notwithstanding anything to the contrary contained
herein, this Agreement shall be subject to consummation of the Merger in accordance with the terms of the Merger Agreement, as the same may be amended by the parties thereto in accordance with its terms. In the event the Merger Agreement is
terminated for any reason or the Merger does not occur, this Agreement shall be deemed null and void.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF
, Buyer, Buyer Bank, Seller, and Seller Bank have each caused this
Agreement to be executed by their duly authorized officers, and the Executive has signed this Agreement, effective as of the date first above written.
|
|
|
EXECUTIVE:
|
|
/s/ Sharon Whitaker
|
Sharon Whitaker
|
|
LAKE SUNAPEE BANK GROUP
|
|
|
By:
|
|
/s/ Stephen R. Theroux
|
Name:
|
|
Stephen R. Theroux
|
Title:
|
|
President and Chief Executive Officer
|
|
LAKE SUNAPEE BANK, FSB
|
|
/s/ Stephen R. Theroux
|
Name:
|
|
Stephen R. Theroux
|
Title:
|
|
President and Chief Executive Officer
|
|
BAR HARBOR BANKSHARES
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
|
BAR HARBOR BANK & TRUST
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
[SIGNATURE PAGE TO
THE WHITAKER SETTLEMENT AGREEMENT]
EXHIBIT A
RELEASE OF CLAIMS
I, Sharon
Whitaker, of [City], [County], New Hampshire, (hereinafter, the Employee), in consideration of the Change of Control Amount as described below, on behalf of himself and his heirs and assigns, hereby irrevocably and unconditionally
releases and forever discharges, individually and collectively, Bar Harbor Bankshares, a bank holding company (
Buyer
), Bar Harbor Bank & Trust, a wholly-owned subsidiary of Buyer (
Buyer Bank
), Lake
Sunapee Bank Group, a bank holding company (
Seller
), and Lake Sunapee, FSB, a wholly-owned subsidiary of Seller (
Seller Bank
), their affiliated companies, and each of their respective officers, directors,
employees, shareholders, representatives, parent companies, subsidiaries, predecessors, successors, assigns, attorneys and all persons acting by, through or in concert with them (collectively, the Released Parties), of and from any and
all charges, claims, complaints, demands, liabilities, causes of action, losses, costs or expenses of any kind whatsoever (including related attorneys fees and costs), known or unknown, suspected or unsuspected, that Employee may now have or
has ever had against the Released Parties by reason of any act, omission, transaction, or event occurring up to and including the date of the signing of this Agreement.
This waiver, release and discharge includes without limitation, claims related to any wrongful or unlawful discharge, discipline or retaliation, whether
express or implied, any promotions or demotions, compensation, the Seller or Seller Banks benefit plan(s) and the management thereof, defamation, slander, libel, invasion of privacy, misrepresentation, fraud, infliction of emotional distress,
stress, breach of any covenant of good faith and fair dealing, and any other claims relating to the Employees employment with the Seller or Seller Bank and the termination thereof. This waiver, release and discharge further applies but is not
limited to any claims based on Title VII of the Civil Rights Act of 1964, the Post Civil War Civil Rights Act (41 U.S.C. ss. 198188), the Civil Rights Act of 1991, the Equal Pay Act, the Age Discrimination Employment Act, the Older
Workers Benefit Protection Act, the Rehabilitation Act of 1973, the Americans with Disabilities Act, the Vietnam Era Veterans Readjustment Act, the Fair Labor Standards Act, the Workers Adjustment and Retraining Notification Act,
Executive Order 11246, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act, the New Hampshire Protective Legislation Law, the New Hampshire Unemployment Compensation Law, the New Hampshire Uniform Trade Secrets Act,
the New Hampshire Whistleblowers Protection Act, the New Hampshire Minimum Wage Act, the New Hampshire Safety and Health of Employees Law, and the New Hampshire Law Against Discrimination (all as they may be amended), and any other applicable
federal, state or local laws, ordinances and regulations including those relating to discrimination to the extent permitted by law; provided, however, that, notwithstanding anything in this Release of Claims to the contrary, this Release of Claims
does not apply to any of the items described in the second paragraph of Section 1.1 of the Settlement Agreement between the Buyer, Buyer Bank, Seller, Seller Bank and the Employee, dated May 5, 2016. Employee expressly waives all claims,
including those which she does not know or suspect to exist in his favor as of the date of this Agreement against the Released Parties. As used herein, the Employee understand the word claims to include all actions, claims, and
grievances, whether actual or potential, known or unknown, and specifically but not exclusively including all claims against the Seller or Seller Bank or otherwise arising from Employees employment with the Seller Bank, the termination thereof
or any other conduct occurring on or prior to the date the Employee signs this Release of Claims. All such claims are forever barred by this Release of Claims whether they arise in contract or tort or under a statute or any other law.
CHANGE OF CONTROL AGREEMENT AMOUNT
. In return for Employees execution of and adherence to this Release of Claims, the Seller Bank shall pay the
Employee the Change of Control Agreement Amount, as set forth in the Settlement Agreement between the Buyer, Buyer Bank, Seller, and Seller Bank and the Employee, dated May 5, 2016, in the total amount of
Dollars ($ )]. Payment of the Change of Control Agreement Amount shall be made in a lump sum, subject to
usual and customary deductions required by law and Seller Bank policy.
CONFIDENTIAL TERMS.
Employee and the Buyer, Buyer Bank, Seller, and Seller Bank agree that each will keep
the contents of this Release of Claims (including its existence and the terms and provisions hereof) and the negotiations leading to it completely confidential, that neither will hereafter publish or disclose any information concerning such matters
to anyone, and that each shall take every reasonable precaution to prevent the direct or indirect disclosure of such information to third parties, provided that the foregoing provisions shall not be construed to prevent Employee from disclosing such
matters to his accountant or to prevent the Buyer, Buyer Bank, Seller, and Seller Bank from disclosing such matters to its accountants, and provided further that Employee may also make such disclosures as are finally compelled by law provided
Employee gives the Buyer, Buyer Bank, Seller, and Seller Bank immediate notice of such legal process in order that the Buyer, Buyer Bank, Seller, and Seller Bank shall have the opportunity to object to the disclosure of such information.
INJUNCTIVE RELIEF
. Employee acknowledges and recognizes that a violation of this Release of Claims and its covenants will cause irreparable damage to
the Buyer, Buyer Bank, Seller, and Seller Bank and the Buyer, Buyer Bank, Seller, and Seller Bank will have no adequate remedy at law for such violation. Accordingly, Employee agrees that the Buyer, Buyer Bank, Seller, and Seller Bank will be
entitled, as a matter of right, to an injunction from any court of competent jurisdiction restraining any further violation of this Release of Claims or the terms and conditions provided herein. This right to injunctive relief will be cumulative and
in addition to whatever remedies the parties may otherwise have at law.
CONSIDERATION AND REVOCATION PERIOD
. I acknowledge that I am hereby
advised to consult with an attorney before signing this Release of Claims. I further understand that I may consider this Release of Claims for up to forty-five (45) days before deciding whether to sign it. In addition, I acknowledge that at the
commencement of the forty-five (45) day period referenced herein, I was provided with the class, unit or group of individuals considered for the Release of Claims program, the employees eligible and selected for the Release of Claims program,
the job title and ages of all individuals selected for the program and the ages of all individuals in the same job classification or organizational unit who are not selected for the program. A copy of the lists and information referenced herein are
attached as Addendum A. If I signed this Release of Claims before the expiration of that forty-five (45) day period, I acknowledge that such decision was entirely voluntary. I understand that if I do not sign and return this Release of Claims
to the Seller Bank by the end of that forty-five (45) day period, the Change of Control Amount described above will expire. I understand that for a period of seven (7) days after I execute this Release of Claims, I have the right to revoke
it by a written notice to be received by the Seller Bank by the end of that period. I also understand that this Release of Claims shall not be effective or enforceable until the expiration of that seven (7) day period. I further represent and
agree that I have carefully read and fully understand all of the provisions of this Release of Claims and that I am voluntarily agreeing to those provisions. I acknowledge that I have not been induced to sign this Release of Claims by any
representatives of any released party other than the Change of Control Agreement Amount as stated above.
Employee understands and agrees that Employee
has carefully read and fully understands all of the provisions of this Agreement and knowingly and voluntarily agrees to all of the terms set forth in this Release of Claims. Employee knowingly and voluntarily intends to be legally bound by the
same.
Signed as a sealed instrument this
, 20 .
THE STATE OF NEW HAMPSHIRE
Before me, the undersigned notary public, personally appeared Sharon Whitaker, personally known, to be the
person whose name is signed on the preceding document, and acknowledged to me that she signed it voluntarily for its stated purpose.
ADDENDUM A
1.
|
The class, unit, or group of individuals considered or eligible for the Release of Claims program, are the executive employees of the Seller Bank.
|
2.
|
All persons who are being offered consideration under a waiver Agreement must sign the Agreement and return it to the Company within 45-days after receiving it. Once the employee has signed the waiver Agreement he or
she has seven days to revoke the Agreement.
|
3.
|
Set forth below is a listing of the ages and job titles of all employees who were selected for this release program, as well as a listing of the ages and job titles of all employees who were not selected for this
release program.
|
|
|
|
E
MPLOYEES
S
ELECTED
F
OR
T
HE
R
ELEASE
P
ROGRAM
|
|
|
J
OB
T
ITLE
|
|
A
GE
|
|
|
|
|
E
MPLOYEES
N
OT
S
ELECTED
F
OR
T
HE
R
ELEASE
P
ROGRAM
|
|
|
J
OB
T
ITLE
|
|
A
GE
|
Exhibit D-5
SETTLEMENT AGREEMENT
This Settlement Agreement (the
Agreement
) is entered into as of May 5, 2016 by and among Jodi Hoyt (the
Officer
), Bar Harbor Bankshares, a bank holding company (
Buyer
), Bar Harbor Bank & Trust, a wholly-owned subsidiary of Buyer (
Buyer Bank
), Lake Sunapee Bank Group, a bank holding
company (
Seller
), and Lake Sunapee, FSB, a wholly-owned subsidiary of Seller (
Seller Bank
).
WITNESSETH:
WHEREAS
, concurrently with the execution of this Agreement, Buyer and Seller are entering into an Agreement and Plan of Merger, dated
as of May 5, 2016 (the
Merger Agreement
), and all capitalized terms not defined herein shall have the meaning set forth in the Merger Agreement; and
WHEREAS
, Buyer, Buyer Bank, Seller, Seller Bank, and the Officer desire to enter into this Agreement, which shall supersede the Change
of Control Agreement by and among New Hampshire Thrift Bancshares, Inc. (Sellers former name), Seller Bank and the Officer, dated March 14, 2012 (the
Change of Control Agreement
), effective immediately prior to the
Effective Time of the Merger, and in lieu of any rights and payments under the Change of Control Agreement, the Executive shall be entitled to the rights and payments set forth herein and shall terminate employment with Seller and Seller Bank (which
for the avoidance of doubt, the parties agree shall be the rights and payments to which the Executive is entitled in the event of the Executives termination of employment without Cause or for Good Reason following a
Change of Control or Pending Change of Control (as such terms are defined in the Change of Control Agreement) as contemplated by Sections 6 and 7 of the Change of Control Agreement).
NOW THEREFORE
, in consideration of the foregoing and other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the Officer, Buyer, Buyer Bank, Seller, and Seller Bank agree as follows:
1.
Settlement Amount
.
1.1
Change of Control Agreement Amount
. On the later of the Closing Date or the earliest payment date permitted under Section 2,
provided the Officer has remained employed with the Seller and Seller Bank to and including the Closing Date and has executed the release attached as
Exhibit A
hereto at least eight days prior to the Closing Date (and any revocation period
has elapsed), Seller shall, or shall cause an affiliate to pay to the Officer lump-sum cash amount equal to the total of $167,800, in full satisfaction of the payment obligations of Seller and Seller Bank under the Change of Control Agreement, less
applicable tax withholdings (the
Change of Control Agreement Amount
). The Change of Control Agreement shall be subject to further reduction pursuant to
Section 1.2
hereof as may be needed.
For the avoidance of doubt, the payment of the Change of Control Agreement Amount under this Agreement shall not release Buyer, Buyer Bank,
Seller, or Seller Bank, as applicable, from any of the following obligations: (a) obligations to pay to the Officer accrued but unpaid wages, and make payments for accrued but unused vacation, earned up to the Effective Time of the Merger to
the extent required by applicable law; (b) the payment of any of the Officers vested benefits under the tax-qualified and non-qualified plans of Seller or Seller Bank, including any benefits that become vested as a result of the Merger;
(c) obligations regarding accelerated vesting of equity awards, if any, under any equity awards granted by Seller Bank to the Officer and outstanding immediately prior to the Effective Time; (d) the payment of any of the Officers
vested benefits under any salary continuation agreement between the Executive and the Seller or Seller Bank; (e) any change in control protection or change in control rights in any bank-owned life insurance policy held by Seller Bank on the
life of the Executive; (f) the payment of the Merger Consideration with respect to the Officers common stock of Seller Bank as contemplated by Section 2.01 of the Merger Agreement; or (g) rights to indemnification under
applicable corporate law, the organizational documents of Seller or Seller Bank, as an insured under any directors and officers liability insurance policy new or previously in force, or pursuant to Section 5.12 of the Merger
Agreement.
1.2
Section 280G Cut-Back
. Notwithstanding anything in this Agreement to the
contrary, if the Change of Control Agreement Amount provided for in this Agreement, together with any other payments which the Officer has the right to receive from Buyer, Buyer Bank, Seller, Seller Bank, or any corporation which is a member of an
affiliated group (as defined in Code Section 1504(a), without regard to Code Section 1504(b)) of which Buyer, Buyer Bank, Seller, or Seller Bank is a member, would constitute an excess parachute payment (as defined
in Code Section 280G(b)(2)), payments pursuant to this Agreement shall be reduced to the extent necessary to ensure that no portion of such payments will be subject to the excise tax imposed by Code Section 4999. It is hereby understood
that the Change of Control Agreement Amount as determined under this
Section 1.2
will be subject to further adjustment upon the consummation of the Merger. Any determination required under this
Section 1.2
shall be made by
Seller and Buyer and their respective tax advisors, whose determination shall be conclusive and binding upon the Officer, Seller, and Seller Bank, and it is hereby understood that such determination will follow the same methodology for calculating
the Code Section 280G limitation in order to avoid an excess parachute payment as provided in Seller Bank Disclosure Schedule 3.18(f) to the Merger Agreement.
1.3
No Further Adjustment
. The parties hereby agree that the Change of Control Agreement Amount as determined in the manner provided
under
Section 1.1
and
Section 1.2
hereof is final and binding on all parties and shall not otherwise be subject to further adjustment.
1.4
Complete Satisfaction
. In consideration of the payment of the Change of Control Agreement Amount, the employment by Buyer and/or
Buyer Bank following the Closing Date and the other provisions of this Agreement, the Officer, Buyer, Buyer Bank, Seller, and Seller Bank hereby agree that effective immediately following the Effective Time of the Merger, the Officer agrees that the
full payment of the Change of Control Agreement Amount, as determined in accordance
Section 1.1
and
Section 1.2
, shall be in complete satisfaction of all rights to payments due to Officer under the Change of Control
Agreement.
2. Code
Section 409A Compliance
. The intent of the parties is that payments under this Agreement either be exempt
from or comply with Code Section 409A and the Treasury Regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. To that end, Officer,
Buyer, Seller, and Seller Bank agree that the payment described in
Section 1
is intended to be excepted from compliance with Code Section 409A as a short-term deferral pursuant to Treasury Regulation Section 1.409A-1(b)(4).
None of Buyer, Buyer Bank, Seller, or Seller Bank make any representations or warranties that the payments provided under this Agreement comply with, or are exempt from, Section 409A, and in no event shall any of Buyer, Buyer Bank, Seller, or
Seller Bank be liable for any portion of any taxes, penalties, interest, or other expenses that may be incurred by Officer on account of non-compliance with Section 409A.
3.
General
.
3.1
Heirs, Successors, and Assigns
. The terms of this Agreement shall be binding upon the parties hereto and their respective heirs, successors, assigns and legal representatives.
3.2
Final Agreement
. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof and
supersedes all prior understandings, written or oral, except as set forth in a separate written employment agreement by and between Buyer, Buyer Bank and the Executive. The terms of this Agreement may be changed, modified, or discharged only by an
instrument in writing signed by each of the parties hereto.
3.3
Withholdings
. Seller, Seller Bank, Buyer, and Buyer Bank may
withhold from any amounts payable under this Agreement such federal, state, or local taxes as may be required to be withheld pursuant to applicable law or regulation.
3.4
Governing Law
. This Agreement shall be construed, enforced, and interpreted in accordance with and governed by the laws of the State
of New Hampshire, without reference to its principles of conflicts of law, except to the extent that federal law shall be deemed to preempt such state laws.
3.5
Regulatory Limitations
. Notwithstanding any other provision of this Agreement, neither Buyer, Buyer Bank, Seller, nor Seller Bank
shall be obligated to make, and Officer shall have no right to receive, any
payment under this Agreement which would violate any law, regulation, or regulatory order applicable to Buyer, Buyer Bank, Seller, or Seller Bank, as applicable, at the time such payment is due,
including, without limitation, Section 1828(k)(1) of Title 12 of the United States Code and any regulation or order thereunder of the Federal Deposit Insurance Corporation.
3.6
Voluntary Action and Waiver
. The Officer acknowledges that by her free and voluntary act of signing below, the Officer agrees to all
of the terms of this Agreement and intends to be legally bound thereby. The Officer acknowledges that she has been advised to consult with an attorney prior to executing this Agreement.
3.7
Counterparts
. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
4.
Effectiveness
. Notwithstanding anything to the contrary contained
herein, this Agreement shall be subject to consummation of the Merger in accordance with the terms of the Merger Agreement, as the same may be amended by the parties thereto in accordance with its terms. In the event the Merger Agreement is
terminated for any reason or the Merger does not occur, this Agreement shall be deemed null and void.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF
, Buyer, Buyer Bank, Seller, and Seller Bank have each caused this
Agreement to be executed by their duly authorized officers, and the Executive has signed this Agreement, effective as of the date first above written.
|
|
|
EXECUTIVE:
|
|
/s/ Jodi Hoyt
|
Jodi Hoyt
|
|
LAKE SUNAPEE BANK GROUP
|
|
|
By:
|
|
/s/ Stephen R. Theroux
|
Name:
|
|
Stephen R. Theroux
|
Title:
|
|
President and Chief Executive Officer
|
|
LAKE SUNAPEE BANK, FSB
|
|
|
By:
|
|
/s/ Stephen R. Theroux
|
Name:
|
|
Stephen R. Theroux
|
Title:
|
|
President and Chief Executive Officer
|
|
BAR HARBOR BANKSHARES
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
|
BAR HARBOR BANK & TRUST
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
[SIGNATURE PAGE TO
THE HOYT SETTLEMENT AGREEMENT]
EXHIBIT A
RELEASE OF CLAIMS
I, Jodi Hoyt,
of [City], [County], New Hampshire, (hereinafter, the Employee), in consideration of the Change of Control Amount as described below, on behalf of himself and his heirs and assigns, hereby irrevocably and unconditionally releases and
forever discharges, individually and collectively, Bar Harbor Bankshares, a bank holding company (
Buyer
), Bar Harbor Bank & Trust, a wholly-owned subsidiary of Buyer (
Buyer Bank
), Lake Sunapee Bank
Group, a bank holding company (
Seller
), and Lake Sunapee, FSB, a wholly-owned subsidiary of Seller (
Seller Bank
), their affiliated companies, and each of their respective officers, directors, employees,
shareholders, representatives, parent companies, subsidiaries, predecessors, successors, assigns, attorneys and all persons acting by, through or in concert with them (collectively, the Released Parties), of and from any and all charges,
claims, complaints, demands, liabilities, causes of action, losses, costs or expenses of any kind whatsoever (including related attorneys fees and costs), known or unknown, suspected or unsuspected, that Employee may now have or has ever had
against the Released Parties by reason of any act, omission, transaction, or event occurring up to and including the date of the signing of this Agreement.
This waiver, release and discharge includes without limitation, claims related to any wrongful or unlawful discharge, discipline or retaliation, whether
express or implied, any promotions or demotions, compensation, the Seller or Seller Banks benefit plan(s) and the management thereof, defamation, slander, libel, invasion of privacy, misrepresentation, fraud, infliction of emotional distress,
stress, breach of any covenant of good faith and fair dealing, and any other claims relating to the Employees employment with the Seller or Seller Bank and the termination thereof. This waiver, release and discharge further applies but is not
limited to any claims based on Title VII of the Civil Rights Act of 1964, the Post Civil War Civil Rights Act (41 U.S.C. ss. 198188), the Civil Rights Act of 1991, the Equal Pay Act, the Age Discrimination Employment Act, the Older
Workers Benefit Protection Act, the Rehabilitation Act of 1973, the Americans with Disabilities Act, the Vietnam Era Veterans Readjustment Act, the Fair Labor Standards Act, the Workers Adjustment and Retraining Notification Act,
Executive Order 11246, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act, the New Hampshire Protective Legislation Law, the New Hampshire Unemployment Compensation Law, the New Hampshire Uniform Trade Secrets Act,
the New Hampshire Whistleblowers Protection Act, the New Hampshire Minimum Wage Act, the New Hampshire Safety and Health of Employees Law, and the New Hampshire Law Against Discrimination (all as they may be amended), and any other applicable
federal, state or local laws, ordinances and regulations including those relating to discrimination to the extent permitted by law; provided, however, that, notwithstanding anything in this Release of Claims to the contrary, this Release of Claims
does not apply to any of the items described in the second paragraph of Section 1.1 of the Settlement Agreement between the Buyer, Buyer Bank, Seller, Seller Bank and the Employee, dated May 5, 2016. Employee expressly waives all claims,
including those which she does not know or suspect to exist in his favor as of the date of this Agreement against the Released Parties. As used herein, the Employee understand the word claims to include all actions, claims, and
grievances, whether actual or potential, known or unknown, and specifically but not exclusively including all claims against the Seller or Seller Bank or otherwise arising from Employees employment with the Seller Bank, the termination thereof
or any other conduct occurring on or prior to the date the Employee signs this Release of Claims. All such claims are forever barred by this Release of Claims whether they arise in contract or tort or under a statute or any other law.
CHANGE OF CONTROL AGREEMENT AMOUNT
. In return for Employees execution of and adherence to this Release of Claims, the Seller Bank shall pay the
Employee the Change of Control Agreement Amount, as set forth in the Settlement Agreement between the Buyer, Buyer Bank, Seller, and Seller Bank and the Employee, dated May 5, 2016, in the total amount of
Dollars ($ )]. Payment of the Change of Control Agreement Amount shall be made in a lump sum, subject to
usual and customary deductions required by law and Seller Bank policy.
CONFIDENTIAL TERMS.
Employee and the Buyer, Buyer Bank, Seller, and Seller
Bank agree that each will keep the contents of this Release of Claims (including its existence and the terms and provisions hereof) and the negotiations leading to it completely confidential, that neither will hereafter publish or disclose any
information concerning such matters to anyone, and that each shall take every reasonable precaution to prevent the direct or
indirect disclosure of such information to third parties, provided that the foregoing provisions shall not be construed to prevent Employee from disclosing such matters to his accountant or to
prevent the Buyer, Buyer Bank, Seller, and Seller Bank from disclosing such matters to its accountants, and provided further that Employee may also make such disclosures as are finally compelled by law provided Employee gives the Buyer, Buyer Bank,
Seller, and Seller Bank immediate notice of such legal process in order that the Buyer, Buyer Bank, Seller, and Seller Bank shall have the opportunity to object to the disclosure of such information.
INJUNCTIVE RELIEF
. Employee acknowledges and recognizes that a violation of this Release of Claims and its covenants will cause irreparable damage to
the Buyer, Buyer Bank, Seller, and Seller Bank and the Buyer, Buyer Bank, Seller, and Seller Bank will have no adequate remedy at law for such violation. Accordingly, Employee agrees that the Buyer, Buyer Bank, Seller, and Seller Bank will be
entitled, as a matter of right, to an injunction from any court of competent jurisdiction restraining any further violation of this Release of Claims or the terms and conditions provided herein. This right to injunctive relief will be cumulative and
in addition to whatever remedies the parties may otherwise have at law.
CONSIDERATION AND REVOCATION PERIOD
. I acknowledge that I am hereby
advised to consult with an attorney before signing this Release of Claims. I further understand that I may consider this Release of Claims for up to forty-five (45) days before deciding whether to sign it. In addition, I acknowledge that at the
commencement of the forty-five (45) day period referenced herein, I was provided with the class, unit or group of individuals considered for the Release of Claims program, the employees eligible and selected for the Release of Claims program,
the job title and ages of all individuals selected for the program and the ages of all individuals in the same job classification or organizational unit who are not selected for the program. A copy of the lists and information referenced herein are
attached as Addendum A. If I signed this Release of Claims before the expiration of that forty-five (45) day period, I acknowledge that such decision was entirely voluntary. I understand that if I do not sign and return this Release of Claims
to the Seller Bank by the end of that forty-five (45) day period, the Change of Control Amount described above will expire. I understand that for a period of seven (7) days after I execute this Release of Claims, I have the right to revoke
it by a written notice to be received by the Seller Bank by the end of that period. I also understand that this Release of Claims shall not be effective or enforceable until the expiration of that seven (7) day period. I further represent and
agree that I have carefully read and fully understand all of the provisions of this Release of Claims and that I am voluntarily agreeing to those provisions. I acknowledge that I have not been induced to sign this Release of Claims by any
representatives of any released party other than the Change of Control Agreement Amount as stated above.
Employee understands and agrees that Employee
has carefully read and fully understands all of the provisions of this Agreement and knowingly and voluntarily agrees to all of the terms set forth in this Release of Claims. Employee knowingly and voluntarily intends to be legally bound by the
same.
Signed as a sealed instrument this
, 20 .
THE STATE OF NEW HAMPSHIRE
Before me, the undersigned notary public, personally appeared Jodi Hoyt, personally known, to be the person
whose name is signed on the preceding document, and acknowledged to me that she signed it voluntarily for its stated purpose.
ADDENDUM A
1.
|
The class, unit, or group of individuals considered or eligible for the Release of Claims program, are the executive employees of the Seller Bank.
|
2.
|
All persons who are being offered consideration under a waiver Agreement must sign the Agreement and return it to the Company within 45-days after receiving it. Once the employee has signed the waiver Agreement he or
she has seven days to revoke the Agreement.
|
3.
|
Set forth below is a listing of the ages and job titles of all employees who were selected for this release program, as well as a listing of the ages and job titles of all employees who were not selected for this
release program.
|
E
MPLOYEES
S
ELECTED
F
OR
T
HE
R
ELEASE
P
ROGRAM
E
MPLOYEES
N
OT
S
ELECTED
F
OR
T
HE
R
ELEASE
P
ROGRAM
Exhibit D-6
SETTLEMENT AGREEMENT
This Settlement Agreement (the
Agreement
) is entered into as of May 5, 2016 by and among Stephen Ensign (the
Consultant
), Bar Harbor Bankshares, a bank holding company (
Buyer
), Bar Harbor Bank & Trust, a wholly-owned subsidiary of Buyer (
Buyer Bank
), Lake Sunapee Bank Group, a bank holding
company (
Seller
), and Lake Sunapee, FSB, a wholly-owned subsidiary of Seller (
Seller Bank
).
WITNESSETH:
WHEREAS
, concurrently with the execution of this Agreement, Buyer and Seller are entering into an Agreement and Plan of Merger, dated
as of May 5, 2016 (the
Merger Agreement
), and all capitalized terms not defined herein shall have the meaning set forth in the Merger Agreement; and
WHEREAS
, Buyer, Buyer Bank, Seller, Seller Bank, and the Consultant desire to enter into this Agreement, which shall supersede the
letter agreement by and among New Hampshire Thrift Bancshares, Inc. (Sellers former name), Seller Bank and the Consultant, dated February 14, 2013, related to Consultants provision of consulting services to Buyer and Buyer Bank (the
Consulting Agreement
), effective immediately prior to the Effective Time of the Merger, and in lieu of any rights and payments under the Consulting Agreement, the Consultant shall be entitled to the rights and payments set forth
herein (which for the avoidance of doubt, the parties agree shall be the rights and payments to which the Executive is entitled in the event Seller or Seller Bank terminates the Consulting Agreement during the Initial Term (as such term
is defined in the Consulting Agreement) as contemplated by Section 8 of the Consulting Agreement).
NOW THEREFORE
, in
consideration of the foregoing and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Consultant, Buyer, Buyer Bank, Seller, and Seller Bank agree as follows:
1.
Settlement Amount
.
1.1
Consulting Agreement Amount
. On the Closing Date, Seller shall, or shall cause an affiliate to, pay to the Consultant a lump-sum
cash amount equal to the total of $180,000, in full satisfaction of the payment obligations of Seller and Seller Bank under the Consulting Agreement, less applicable tax withholdings (the total of such sum, the
Consulting Agreement
Amount
) with such amount to be further reduced pursuant to
Section 1.2
hereof as may be needed.
For the avoidance of
doubt, the payment of the Consulting Agreement Amount under this Agreement shall not release Buyer, Buyer Bank, Seller, or Seller Bank, as applicable, from any of the following obligations: (a) obligations to pay to the Consultant accrued but
unpaid installments of his consulting fee; (b) the payment of any of the Consultants vested benefits under the tax-qualified and non-qualified plans of Seller or Seller Bank, including any benefits that become vested as a result of the
Merger; (c) obligations regarding accelerated vesting of equity awards, if any, under any equity awards granted by Seller Bank to the Consultant and outstanding immediately prior to the Effective Time; (d) the payment of any of the
Consultants vested benefits under any salary continuation agreement between the Consultant and the Seller or Seller Bank; (e) obligations regarding vested benefits under a supplemental executive retirement plan; (f) the payment of
the Merger Consideration with respect to the Consultants common stock of Seller Bank as contemplated by Section 2.01 of the Merger Agreement; or (g) rights to indemnification under applicable corporate law, the organizational
documents of Seller or Seller Bank, as an insured under any directors and officers liability insurance policy new or previously in force, or pursuant to Section 5.12 of the Merger Agreement.
1.2
Section 280G Cut-Back
. Notwithstanding anything in this Agreement to the contrary, if the Consulting Agreement Amount provided
for in this Agreement, together with any other payments which the Consultant has the right to receive from Buyer, Buyer Bank, Seller, Seller Bank, or any corporation which is a
member of an affiliated group (as defined in Code Section 1504(a), without regard to Code Section 1504(b)) of which Buyer, Buyer Bank, Seller, or Seller Bank is a member,
would constitute an excess parachute payment (as defined in Code Section 280G(b)(2)), payments pursuant to this Agreement shall be reduced to the extent necessary to ensure that no portion of such payments will be subject to the
excise tax imposed by Code Section 4999. It is hereby understood that the Consulting Agreement Amount as determined under this
Section 1.2
will be subject to further adjustment upon the consummation of the Merger. Any determination
required under this
Section 1.2
shall be made by Seller and Buyer and their respective tax advisors, whose determination shall be conclusive and binding upon the Consultant, Seller, and Seller Bank, and it is hereby understood that such
determination will follow the same methodology for calculating the Code Section 280G limitation in order to avoid an excess parachute payment as provided in Seller Bank Disclosure Schedule 3.18(f) to the Merger Agreement.
1.3
No Further Adjustment
. The parties hereby agree that the Consulting Agreement Amount as determined in the manner provided under
Section 1.1
and
Section 1.2
hereof is final and binding on all parties and shall not otherwise be subject to further adjustment.
1.4
Advisory Board Appointment
. Following the Closing Date, Buyer and Buyer Bank agree to appoint the Consultant to serve as Chairman of
the Lake Sunapee Bank Group Advisory Board for a period of three (3) years following the Closing Date, and the Consultant hereby agrees to serve in such role.
1.5
Complete Satisfaction
. In consideration of the payment of the Consulting Agreement Amount, the appointment to board positions
described in
Section 1.4
following the Closing Date and the other provisions of this Agreement, the Consultant, Buyer, Buyer Bank, Seller, and Seller Bank hereby agree that effective immediately following the Effective Time of the
Merger, the Consultant agrees that the full payment of the Consulting Agreement Amount, as determined in accordance
Section 1.1
and
Section 1.2
, shall be in complete satisfaction of all rights to payments due to Consultant
under the Consulting Agreement.
2. Code
Section 409A Compliance
. The intent of the parties is that payments under this
Agreement either be exempt from or comply with Code Section 409A and the Treasury Regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance
therewith. To that end, Consultant, Buyer, Seller, and Seller Bank agree that the payment described in
Section 1
is intended to be excepted from compliance with Code Section 409A as a short-term deferral pursuant to Treasury
Regulation Section 1.409A-1(b)(4). None of Buyer, Buyer Bank, Seller, or Seller Bank make any representations or warranties that the payments provided under this Agreement comply with, or are exempt from, Code Section 409A, and in no event
shall any of Buyer, Buyer Bank, Seller, or Seller Bank be liable for any portion of any taxes, penalties, interest, or other expenses that may be incurred by Consultant on account of non-compliance with Code Section 409A.
3.
General
.
3.1
Heirs, Successors, and Assigns
. The terms of this Agreement shall be binding upon the parties hereto and their respective heirs, successors, assigns and legal representatives.
3.2
Final Agreement
. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof and
supersedes all prior understandings, written or oral. The terms of this Agreement may be changed, modified, or discharged only by an instrument in writing signed by each of the parties hereto.
3.3
Withholdings
. Seller, Seller Bank, Buyer, and Buyer Bank may withhold from any amounts payable under this Agreement such federal,
state, or local taxes as may be required to be withheld pursuant to applicable law or regulation.
3.4
Governing Law
. This Agreement
shall be construed, enforced, and interpreted in accordance with and governed by the laws of the State of New Hampshire, without reference to its principles of conflicts of law, except to the extent that federal law shall be deemed to preempt such
state laws.
3.5
Regulatory Limitations
. Notwithstanding any other provision of this Agreement, neither Buyer, Buyer Bank, Seller,
nor Seller Bank shall be obligated to make, and Consultant shall have no right to receive, any payment under this Agreement which would violate any law, regulation, or regulatory order applicable to Buyer, Buyer Bank, Seller, or Seller Bank, as
applicable, at the time such payment is due, including, without limitation,
Section 1828(k)(1) of Title 12 of the United States Code and any regulation or order thereunder of the Federal Deposit Insurance Corporation.
3.6
Voluntary Action and Waiver
. The Consultant acknowledges that by his free and voluntary act of signing below, the Consultant agrees
to all of the terms of this Agreement and intends to be legally bound thereby. The Consultant acknowledges that he has been advised to consult with an attorney prior to executing this Agreement.
3.7
Counterparts
. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
4.
Effectiveness
. Notwithstanding anything to the contrary contained
herein, this Agreement shall be subject to consummation of the Merger in accordance with the terms of the Merger Agreement, as the same may be amended by the parties thereto in accordance with its terms. In the event the Merger Agreement is
terminated for any reason or the Merger does not occur, this Agreement shall be deemed null and void.
IN WITNESS WHEREOF
, Buyer, Buyer Bank, Seller, and Seller Bank have each caused this
Agreement to be executed by their duly authorized officers, and the Consultant has signed this Agreement, effective as of the date first above written.
|
|
|
CONSULTANT
|
|
/s/ Stephen Ensign
|
Stephen Ensign
|
|
LAKE SUNAPEE BANK GROUP
|
|
|
By:
|
|
/s/ Stephen R. Theroux
|
Name:
|
|
Stephen R. Theroux
|
Title:
|
|
President and Chief Executive Officer
|
|
LAKE SUNAPEE BANK, FSB
|
|
|
By:
|
|
/s/ Stephen R. Theroux
|
Name:
|
|
Stephen R. Theroux
|
Title:
|
|
President and Chief Executive Officer
|
|
BAR HARBOR BANKSHARES
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
|
BAR HARBOR BANK & TRUST
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
[SIGNATURE PAGE TO
THE ENSIGN SETTLEMENT AGREEMENT]
Exhibit D-7
SETTLEMENT AGREEMENT
This Settlement Agreement (the
Agreement
) is entered into as of May 5, 2016 by and among H. Bliss Dayton (the
Officer
), Bar Harbor Bankshares, a bank holding company (
Buyer
), Bar Harbor Bank & Trust, a wholly-owned subsidiary of Buyer (
Buyer Bank
), Lake Sunapee Bank Group, a bank holding
company (
Seller
), and Lake Sunapee, FSB, a wholly-owned subsidiary of Seller (
Seller Bank
).
WITNESSETH:
WHEREAS
, concurrently with the execution of this Agreement, Buyer and Seller are entering into an Agreement and Plan of Merger, dated
as of May 5, 2016 (the
Merger Agreement
), and all capitalized terms not defined herein shall have the meaning set forth in the Merger Agreement; and
WHEREAS
, Buyer, Buyer Bank, Seller, Seller Bank, and the Officer desire to enter into this Agreement, which shall supersede the Change
of Control Agreement by and among New Hampshire Thrift Bancshares, Inc. (Sellers former name), Seller Bank and the Officer, dated March 9, 2012 (the
Change of Control Agreement
), effective immediately prior to the
Effective Time of the Merger, and in lieu of any rights and payments under the Change of Control Agreement, the Executive shall be entitled to the rights and payments set forth herein and shall terminate employment with Seller and Seller Bank (which
for the avoidance of doubt, the parties agree shall be the rights and payments to which the Executive is entitled in the event of the Executives termination of employment without Cause or for Good Reason following a
Change of Control or Pending Change of Control (as such terms are defined in the Change of Control Agreement) as contemplated by Sections 6 and 7 of the Change of Control Agreement).
NOW THEREFORE
, in consideration of the foregoing and other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the Officer, Buyer, Buyer Bank, Seller, and Seller Bank agree as follows:
1.
Settlement Amount
.
1.1
Change of Control Agreement Amount
. On the later of the Closing Date or the earliest payment date permitted under Section 2,
provided the Officer has remained employed with the Seller and Seller Bank to and including the Closing Date and has executed the release attached as
Exhibit A
hereto at least eight days prior to the Closing Date (and any revocation period
has elapsed), Seller shall, or shall cause an affiliate to pay to the Officer lump-sum cash amount equal to the total of $141,427, in full satisfaction of the payment obligations of Seller and Seller Bank under the Change of Control Agreement, less
applicable tax withholdings (the
Change of Control Agreement Amount
). The Change of Control Agreement shall be subject to further reduction pursuant to
Section 1.2
hereof as may be needed.
For the avoidance of doubt, the payment of the Change of Control Agreement Amount under this Agreement shall not release Buyer, Buyer Bank,
Seller, or Seller Bank, as applicable, from any of the following obligations: (a) obligations to pay to the Officer accrued but unpaid wages, and make payments for accrued but unused vacation, earned up to the Effective Time of the Merger to
the extent required by applicable law; (b) the payment of any of the Officers vested benefits under the tax-qualified and non-qualified plans of Seller or Seller Bank, including any benefits that become vested as a result of the Merger;
(c) obligations regarding accelerated vesting of equity awards, if any, under any equity awards granted by Seller Bank to the Officer and outstanding immediately prior to the Effective Time; (d) the payment of any of the Officers
vested benefits under any salary continuation agreement between the Executive and the Seller or Seller Bank; (e) any change in control protection or change in control rights in any bank-owned life insurance policy held by Seller Bank on the
life of the Executive; (f) the payment of the Merger Consideration with respect to the Officers common stock of Seller Bank as contemplated by Section 2.01 of the Merger Agreement; or (g) rights to indemnification under
applicable corporate law, the organizational documents of Seller or Seller Bank, as an insured under any directors and officers liability insurance policy new or previously in force, or pursuant to Section 5.12 of the Merger
Agreement.
1.2
Section 280G Cut-Back
. Notwithstanding anything in this Agreement to the
contrary, if the Change of Control Agreement Amount provided for in this Agreement, together with any other payments which the Officer has the right to receive from Buyer, Buyer Bank, Seller, Seller Bank, or any corporation which is a member of an
affiliated group (as defined in Code Section 1504(a), without regard to Code Section 1504(b)) of which Buyer, Buyer Bank, Seller, or Seller Bank is a member, would constitute an excess parachute payment (as defined
in Code Section 280G(b)(2)), payments pursuant to this Agreement shall be reduced to the extent necessary to ensure that no portion of such payments will be subject to the excise tax imposed by Code Section 4999. It is hereby understood
that the Change of Control Agreement Amount as determined under this
Section 1.2
will be subject to further adjustment upon the consummation of the Merger. Any determination required under this
Section 1.2
shall be made by
Seller and Buyer and their respective tax advisors, whose determination shall be conclusive and binding upon the Officer, Seller, and Seller Bank, and it is hereby understood that such determination will follow the same methodology for calculating
the Code Section 280G limitation in order to avoid an excess parachute payment as provided in Seller Bank Disclosure Schedule 3.18(f) to the Merger Agreement.
1.3
No Further Adjustment
. The parties hereby agree that the Change of Control Agreement Amount as determined in the manner provided
under
Section 1.1
and
Section 1.2
hereof is final and binding on all parties and shall not otherwise be subject to further adjustment.
1.4
Complete Satisfaction
. In consideration of the payment of the Change of Control Agreement Amount, the employment by Buyer and/or
Buyer Bank following the Closing Date and the other provisions of this Agreement, the Officer, Buyer, Buyer Bank, Seller, and Seller Bank hereby agree that effective immediately following the Effective Time of the Merger, the Officer agrees that the
full payment of the Change of Control Agreement Amount, as determined in accordance
Section 1.1
and
Section 1.2
, shall be in complete satisfaction of all rights to payments due to Officer under the Change of Control
Agreement.
2. Code
Section 409A Compliance
. The intent of the parties is that payments under this Agreement either be exempt
from or comply with Code Section 409A and the Treasury Regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. To that end, Officer,
Buyer, Seller, and Seller Bank agree that the payment described in
Section 1
is intended to be excepted from compliance with Code Section 409A as a short-term deferral pursuant to Treasury Regulation Section 1.409A-1(b)(4).
None of Buyer, Buyer Bank, Seller, or Seller Bank make any representations or warranties that the payments provided under this Agreement comply with, or are exempt from, Section 409A, and in no event shall any of Buyer, Buyer Bank, Seller, or
Seller Bank be liable for any portion of any taxes, penalties, interest, or other expenses that may be incurred by Officer on account of non-compliance with Section 409A.
3.
General
.
3.1
Heirs, Successors, and Assigns
. The terms of this Agreement shall be binding upon the parties hereto and their respective heirs, successors, assigns and legal representatives.
3.2
Final Agreement
. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof and
supersedes all prior understandings, written or oral, except as set forth in a separate written employment agreement by and between Buyer, Buyer Bank and the Executive. The terms of this Agreement may be changed, modified, or discharged only by an
instrument in writing signed by each of the parties hereto.
3.3
Withholdings
. Seller, Seller Bank, Buyer, and Buyer Bank may
withhold from any amounts payable under this Agreement such federal, state, or local taxes as may be required to be withheld pursuant to applicable law or regulation.
3.4
Governing Law
. This Agreement shall be construed, enforced, and interpreted in accordance with and governed by the laws of the State
of New Hampshire, without reference to its principles of conflicts of law, except to the extent that federal law shall be deemed to preempt such state laws.
3.5
Regulatory Limitations
. Notwithstanding any other provision of this Agreement, neither
Buyer, Buyer Bank, Seller, nor Seller Bank shall be obligated to make, and Officer shall have no right to receive, any payment under this Agreement which would violate any law, regulation, or regulatory order applicable to Buyer, Buyer Bank, Seller,
or Seller Bank, as applicable, at the time such payment is due, including, without limitation, Section 1828(k)(1) of Title 12 of the United States Code and any regulation or order thereunder of the Federal Deposit Insurance Corporation.
3.6
Voluntary Action and Waiver
. The Officer acknowledges that by his free and voluntary act of signing below, the Officer agrees to all
of the terms of this Agreement and intends to be legally bound thereby. The Officer acknowledges that he has been advised to consult with an attorney prior to executing this Agreement.
3.7
Counterparts
. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
4.
Effectiveness
. Notwithstanding anything to the contrary contained
herein, this Agreement shall be subject to consummation of the Merger in accordance with the terms of the Merger Agreement, as the same may be amended by the parties thereto in accordance with its terms. In the event the Merger Agreement is
terminated for any reason or the Merger does not occur, this Agreement shall be deemed null and void.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF
, Buyer, Buyer Bank, Seller, and Seller Bank have each caused this
Agreement to be executed by their duly authorized officers, and the Executive has signed this Agreement, effective as of the date first above written.
|
|
|
EXECUTIVE:
|
|
/s/ H. Bliss Dayton
|
H. Bliss Dayton
|
|
LAKE SUNAPEE BANK GROUP
|
|
|
By:
|
|
/s/ Stephen R. Theroux
|
Name:
|
|
Stephen R. Theroux
|
Title:
|
|
President and Chief Executive Officer
|
|
LAKE SUNAPEE BANK, FSB
|
|
|
By:
|
|
/s/ Stephen R. Theroux
|
Name:
|
|
Stephen R. Theroux
|
Title:
|
|
President and Chief Executive Officer
|
|
BAR HARBOR BANKSHARES
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
|
BAR HARBOR BANK & TRUST
|
|
|
By:
|
|
/s/ Curtis C. Simard
|
Name:
|
|
Curtis C. Simard
|
Title:
|
|
President and Chief Executive Officer
|
[SIGNATURE PAGE TO
THE DAYTON SETTLEMENT AGREEMENT]
EXHIBIT A
RELEASE OF CLAIMS
I, H. Bliss
Dayton, of [City], [County], New Hampshire, (hereinafter, the Employee), in consideration of the Change of Control Amount as described below, on behalf of himself and his heirs and assigns, hereby irrevocably and unconditionally releases
and forever discharges, individually and collectively, Bar Harbor Bankshares, a bank holding company (
Buyer
), Bar Harbor Bank & Trust, a wholly-owned subsidiary of Buyer (
Buyer Bank
), Lake Sunapee Bank
Group, a bank holding company (
Seller
), and Lake Sunapee, FSB, a wholly-owned subsidiary of Seller (
Seller Bank
), their affiliated companies, and each of their respective officers, directors, employees,
shareholders, representatives, parent companies, subsidiaries, predecessors, successors, assigns, attorneys and all persons acting by, through or in concert with them (collectively, the Released Parties), of and from any and all charges,
claims, complaints, demands, liabilities, causes of action, losses, costs or expenses of any kind whatsoever (including related attorneys fees and costs), known or unknown, suspected or unsuspected, that Employee may now have or has ever had
against the Released Parties by reason of any act, omission, transaction, or event occurring up to and including the date of the signing of this Agreement.
This waiver, release and discharge includes without limitation, claims related to any wrongful or unlawful discharge, discipline or retaliation, whether
express or implied, any promotions or demotions, compensation, the Seller or Seller Banks benefit plan(s) and the management thereof, defamation, slander, libel, invasion of privacy, misrepresentation, fraud, infliction of emotional distress,
stress, breach of any covenant of good faith and fair dealing, and any other claims relating to the Employees employment with the Seller or Seller Bank and the termination thereof. This waiver, release and discharge further applies but is not
limited to any claims based on Title VII of the Civil Rights Act of 1964, the Post Civil War Civil Rights Act (41 U.S.C. ss. 198188), the Civil Rights Act of 1991, the Equal Pay Act, the Age Discrimination Employment Act, the Older
Workers Benefit Protection Act, the Rehabilitation Act of 1973, the Americans with Disabilities Act, the Vietnam Era Veterans Readjustment Act, the Fair Labor Standards Act, the Workers Adjustment and Retraining Notification Act,
Executive Order 11246, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act, the New Hampshire Protective Legislation Law, the New Hampshire Unemployment Compensation Law, the New Hampshire Uniform Trade Secrets Act,
the New Hampshire Whistleblowers Protection Act, the New Hampshire Minimum Wage Act, the New Hampshire Safety and Health of Employees Law, and the New Hampshire Law Against Discrimination (all as they may be amended), and any other applicable
federal, state or local laws, ordinances and regulations including those relating to discrimination to the extent permitted by law; provided, however, that, notwithstanding anything in this Release of Claims to the contrary, this Release of Claims
does not apply to any of the items described in the second paragraph of Section 1.1 of the Settlement Agreement between the Buyer, Buyer Bank, Seller, Seller Bank and the Employee, dated May 5, 2016. Employee expressly waives all claims,
including those which he does not know or suspect to exist in his favor as of the date of this Agreement against the Released Parties. As used herein, the Employee understand the word claims to include all actions, claims, and
grievances, whether actual or potential, known or unknown, and specifically but not exclusively including all claims against the Seller or Seller Bank or otherwise arising from Employees employment with the Seller Bank, the termination thereof
or any other conduct occurring on or prior to the date the Employee signs this Release of Claims. All such claims are forever barred by this Release of Claims whether they arise in contract or tort or under a statute or any other law.
CHANGE OF CONTROL AGREEMENT AMOUNT
. In return for Employees execution of and adherence to this Release of Claims, the Seller Bank shall pay the
Employee the Change of Control Agreement Amount, as set forth in the Settlement Agreement between the Buyer, Buyer Bank, Seller, and Seller Bank and the Employee, dated May 5, 2016, in the total amount of
Dollars ($ )]. Payment of the Change of Control Agreement Amount shall be made in a lump sum, subject to
usual and customary deductions required by law and Seller Bank policy.
CONFIDENTIAL TERMS.
Employee and the Buyer, Buyer Bank, Seller, and Seller
Bank agree that each will keep the contents of this Release of Claims (including its existence and the terms and provisions hereof) and the negotiations leading to it completely confidential, that neither will hereafter publish or disclose any
information
concerning such matters to anyone, and that each shall take every reasonable precaution to prevent the direct or indirect disclosure of such information to third parties, provided that the
foregoing provisions shall not be construed to prevent Employee from disclosing such matters to his accountant or to prevent the Buyer, Buyer Bank, Seller, and Seller Bank from disclosing such matters to its accountants, and provided further that
Employee may also make such disclosures as are finally compelled by law provided Employee gives the Buyer, Buyer Bank, Seller, and Seller Bank immediate notice of such legal process in order that the Buyer, Buyer Bank, Seller, and Seller Bank shall
have the opportunity to object to the disclosure of such information.
INJUNCTIVE RELIEF
. Employee acknowledges and recognizes that a violation of
this Release of Claims and its covenants will cause irreparable damage to the Buyer, Buyer Bank, Seller, and Seller Bank and the Buyer, Buyer Bank, Seller, and Seller Bank will have no adequate remedy at law for such violation. Accordingly, Employee
agrees that the Buyer, Buyer Bank, Seller, and Seller Bank will be entitled, as a matter of right, to an injunction from any court of competent jurisdiction restraining any further violation of this Release of Claims or the terms and conditions
provided herein. This right to injunctive relief will be cumulative and in addition to whatever remedies the parties may otherwise have at law.
CONSIDERATION AND REVOCATION PERIOD
. I acknowledge that I am hereby advised to consult with an attorney before signing this Release of Claims. In
addition, I acknowledge that at the commencement of the forty-five (45) day period referenced herein, I was provided with the class, unit or group of individuals considered for the Release of Claims program, the employees eligible and selected
for the Release of Claims program, the job title and ages of all individuals selected for the program and the ages of all individuals in the same job classification or organizational unit who are not selected for the program. A copy of the lists and
information referenced herein are attached as
Addendum A
. I further understand that I may consider this Release of Claims for up to forty-five (45) days before deciding whether to sign it. If I signed this Release of Claims before the
expiration of that forty-five (45) day period, I acknowledge that such decision was entirely voluntary. I understand that if I do not sign and return this Release of Claims to the Seller Bank by the end of that forty-five (45) day period,
the Change of Control Amount described above will expire. I understand that for a period of seven (7) days after I execute this Release of Claims, I have the right to revoke it by a written notice to be received by the Seller Bank by the end of
that period. I also understand that this Release of Claims shall not be effective or enforceable until the expiration of that seven (7) day period. I further represent and agree that I have carefully read and fully understand all of the
provisions of this Release of Claims and that I am voluntarily agreeing to those provisions. I acknowledge that I have not been induced to sign this Release of Claims by any representatives of any released party other than the Change of Control
Agreement Amount as stated above.
Employee understands and agrees that Employee has carefully read and fully understands all of the provisions of this
Agreement and knowingly and voluntarily agrees to all of the terms set forth in this Release of Claims. Employee knowingly and voluntarily intends to be legally bound by the same.
Signed as a sealed instrument this ,
20 .
THE STATE OF NEW HAMPSHIRE
Before me, the undersigned notary public, personally appeared H. Bliss Dayton, personally known, to be the
person whose name is signed on the preceding document, and acknowledged to me that H. Bliss Dayton signed it voluntarily for its stated purpose.
ADDENDUM A
1.
|
The class, unit, or group of individuals considered or eligible for the Release of Claims program, are the executive employees of the Seller Bank.
|
2.
|
All persons who are being offered consideration under a waiver Agreement must sign the Agreement and return it to the Company within 45-days after receiving it. Once the employee has signed the waiver Agreement he or
she has seven days to revoke the Agreement.
|
3.
|
Set forth below is a listing of the ages and job titles of all employees who were selected for this release program, as well as a listing of the ages and job titles of all employees who were not selected for this
release program.
|
|
|
|
E
MPLOYEES
S
ELECTED
F
OR
T
HE
R
ELEASE
P
ROGRAM
|
|
|
J
OB
T
ITLE
|
|
A
GE
|
|
|
|
|
E
MPLOYEES
N
OT
S
ELECTED
F
OR
T
HE
R
ELEASE
P
ROGRAM
|
|
|
J
OB
T
ITLE
|
|
A
GE
|
Annex B Opinion of Griffin Financial Group LLC
|
|
|
|
|
|
|
485 Madison Avenue, 20th Floor
|
|
|
New York, NY 10022
|
|
|
Phone:
|
|
(646) 254-6387
|
|
|
Email:
|
|
rlq@griffinfingroup.com
|
|
|
Fax:
|
|
(610) 371-7955
|
May 5, 2016
The
Board of Directors
Lake Sunapee Bank Group
9 Main Street
P.O. Box 9
Newport, NH 03773
Members of the Board of Directors:
You have requested our
opinion as to the fairness, from a financial point of view, to the shareholders of Lake Sunapee Bank Group (the Company or LSBG) of the Exchange Ratio (as defined below) by reference to which the common stock of the Company
is converted into the common stock of Bar Harbor Bankshares (Bar Harbor or BHB) pursuant to the proposed transaction described below.
Pursuant to the Agreement and Plan of Merger (the Agreement) by and between Bar Harbor and the Company, at the effective time of the merger, the
Company will merge with and into Bar Harbor, with Bar Harbor as the resulting or surviving corporation and the Companys wholly owned subsidiary, Lake Sunapee Bank, will merge into and with Bar Harbor Bank & Trust, with Bar Harbor
Bank & Trust surviving the merger (together the Transaction). Each of the 8,381,713 issued and outstanding shares of LSBG common stock will be converted into the right to receive 0.4970 shares (the Exchange Ratio) of
BHB common stock.
As of the date of this opinion, based upon the closing stock price of BHB common stock of $34.55 per share on May 4, 2016, the
total purchase price payable to the shareholders of the Company is approximately $143.9 million, which is equal to 164% of Lake Sunapees tangible book value at March 31, 2016 and 15.9 times its earnings for the twelve month period ending
March 31, 2016.
The terms and conditions of the Transaction are more fully described in the Agreement.
In arriving at our opinion, we: (i) reviewed a draft of the Agreement; (ii) reviewed and discussed with the Company and Bar Harbor their respective
financial information as of and for the three months ended March 31, 2016 and the twelve months ended December, 2015, December 31, 2014 and December 31, 2013; (iii) discussed with the management of the Company and Bar
Harbor matters relating to their respective financial condition, growth, liquidity, earnings, profitability, asset quality, capital adequacy, stock market structure and valuation, future prospects, and related matters as of such dates and for the
periods then ended; (iv) reviewed and discussed with management of the Company and Bar Harbor their budgeted balance sheet growth and earnings for 2016, projections, and expected growth trends for assets, loans, deposits, capital and earnings for
future periods; (v) analyzed and discussed with the Company and Bar Harbor the potential strategic implications and operational benefits anticipated by the management of the Company and Bar Harbor; (vi) evaluated the potential
B-1
The Board of Directors
Lake
Sunapee Bank Group
May 5, 2016
Page
2
pro forma financial effects of the Transaction on Bar Harbor on a forward-looking basis; (vii) reviewed and discussed with the Company and Bar Harbor certain publicly available documents and
other business and financial information concerning the Company and Bar Harbor and the economic and regulatory environments in which they operate; (viii) compared the proposed financial terms of the Transaction with the publicly available
financial terms of certain transactions involving whole bank acquisitions that we deemed relevant; (ix) compared the financial condition and implied valuation of the Company to the financial condition and valuation of certain institutions we
deemed relevant; (x) performed discounted cash flow and internal rate of return analyses; (xi) considered the Bar Harbors ownership structure, its stock market performance, and the trading history of its common stock which is being
used as the Merger Consideration and (xii) undertook such other financial studies and analyses, including a contribution analysis, and considered such other information as we deemed appropriate for the purpose of this opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy and completeness of information which was publicly available to us or which was
furnished to or discussed with us by the Company or Bar Harbor or otherwise reviewed by us including, particularly, the forward looking earnings estimates, projections, cost savings and pro forma growth rates, and we have not independently verified
(nor have we assumed responsibility or liability for independently verifying) any such information or its accuracy or completeness. We have not reviewed individual loan files or deposit information of the Company or Bar Harbor, nor have we conducted
or been provided with any valuation or appraisal of any assets, deposits, or other liabilities of the Company or Bar Harbor. We are not experts in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowance
for losses with respect thereto, and accordingly, we have assumed that such allowances for losses are adequate. In relying on financial analyses provided to or discussed with us by the Company or Bar Harbor or derived therefrom, we have assumed that
such analyses have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management. We express no view as to such analyses, forecasts, estimates, or the assumptions on which they were
based.
We have also assumed that the representations and warranties made by the Company and Bar Harbor in the Agreement are and will be true and correct
in all respects material to our analyses, that the covenants and conditions precedent to closing the Transaction contained therein, including approval by Federal and State banking regulators, and by the Companys and Bar Harbors
shareholders will be performed in all respects material to our analyses in a manner which will not give Bar Harbor the ability to terminate the Agreement or decline to close under the Agreement. We are not legal, regulatory, or tax experts and have
relied on the assessments made by advisors to the Company with respect to such issues. We have further assumed that all material governmental, regulatory, shareholder, and any other consents and approvals necessary for the completion of the
Transaction will be obtained without any adverse effect to the Company or Bar Harbor or to the contemplated benefits of the Transaction. Our opinion assumes, with your consent, that the Transaction will be completed in accordance with the terms set
forth in the draft of the Agreement we reviewed.
Our opinion is necessarily based on economic, market, and other conditions as in effect on, as well as
the information made available to us as of, the date of this letter. It should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, confirm, or reaffirm this opinion. Our
opinion is limited to the fairness, from a financial point of view, to the shareholders of the Company with regard to the Exchange Ratio in the Transaction, and we express no opinion as to the fairness of the Transaction to creditors or other
stakeholders of the Company, the underlying decision by the Company to
B-2
The Board of Directors
Lake
Sunapee Bank Group
May 5, 2016
Page
3
B-3
engage in the Transaction, the relative merits of the Transaction compared to other Transactions available to the
Company, or the relative merits of the Transaction compared to other strategic alternatives which may be available to the Company. We did not and were not asked to contact any other interested parties other than those specifically indicated by the
Board. Furthermore, we did not take into account and express no opinion with respect to the amount or nature of any bonuses and any other compensation or consideration to any officers, directors, or employees of the Company or Bar Harbor paid or
payable by reason or as a result of the Transaction.
We have acted as financial advisor to the Company with respect to the proposed Transaction and will
receive a fee from the Company for our services, a substantial portion of which will become payable only if the proposed Transaction is completed. The Company has agreed to indemnify us for certain liabilities which could arise as a result of our
engagement. During the two years preceding the date of this letter, we served as a financial advisor to Bar Harbor, and received a retainer, on a previous unsuccessful acquisition opportunity. We also served as the Companys financial advisor
in connection with its subordinated debt offering, its acquisition of Central Financial Corporation, and have also received a retainer for work on a previous unsuccessful acquisition opportunity.
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Exchange Ratio, as defined in the Agreement, is fair, from a
financial point of view, to the shareholders of the Company.
The delivery of this opinion has been approved by the fairness opinion committee of Griffin
Financial Group, LLC in conformity with our policies and procedures established under the requirement of Rule 5150 of the Financial Industry Regulatory Authority. This letter is provided to the Board of Directors of the Company in connection with
and for the purposes of its evaluation of the Transaction, and may not be relied upon by any other person for any other reason. This opinion does not constitute a recommendation to any shareholder of the Company as to how such shareholder should
vote with respect to the Transaction or any other matter. This opinion speaks as of the date hereof, and we have no obligation to update, confirm, or revise it. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to
any third party for any purpose whatsoever except with our prior written approval. This opinion may, however, be reproduced in any registration statement that the Company will file with the Securities and Exchange Commission in connection with the
Transaction, provided that such reproduction is legally required, the opinion is reproduced in such document in its entirety, and such document includes a summary of the opinion and related analyses in a form prepared or approved by us (such
approval not to be unreasonably withheld), but may not otherwise be disclosed publicly in any manner without our prior written approval.
Very truly yours,
GRIFFIN FINANCIAL GROUP, LLC
Annex C Opinion of Sandler ONeill + Partners,
L.P.
May 5, 2016
Board of Directors
Bar Harbor Bankshares
82 Main Street
P.O. Box 400
Bar Harbor, ME 04609
Ladies and Gentlemen:
Bar Harbor Bankshares (BHB) and Lake Sunapee Bank Group (LSBG) are proposing to enter into an Agreement and Plan of
Merger (the Agreement) pursuant to which LSBG will merge with and into BHB with BHB as the surviving entity in the merger (the Merger). Pursuant to the terms of the Agreement, upon the Effective Time of the Merger, each share
of LSBG common stock, par value $0.01 per share (the LSBG Common Stock), that is issued and outstanding immediately before the Effective Time, except for certain shares of LSBG Common Stock as specified in the Agreement, shall be
converted into, as provided in and subject to the limitations set forth in the Agreement, the right to receive 0.4970 shares (the Exchange Ratio) of common stock, par value $2.00 per share, of BHB (the BHB Common Stock).
Capitalized terms used herein without definition shall have the meanings assigned to them in the Agreement. The terms and conditions of the Merger are more fully set forth in the Agreement. You have requested our opinion as to the fairness, from a
financial point of view, of the Exchange Ratio to BHB.
Sandler ONeill & Partners, L.P. (Sandler ONeill,
we or our), as part of its investment banking business, is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions. In
connection with this opinion, we have reviewed and considered, among other things: (i) a draft of the Agreement, dated May 5, 2016; (ii) certain publicly available financial statements and other historical financial information of BHB
that we deemed relevant; (iii) certain publicly available financial statements and other historical financial information of LSBG and its
wholly-
owned subsidiary, Lake Sunapee Bank, FSB, that we deemed
relevant; (iv) internal financial projections for BHB for the year ending December 31, 2016, as provided by the senior management of BHB, as well as financial projections for BHB for the years ending December 31 , 2017 through December 31,
2020, as discussed with and confirmed by the senior management of BHB; (v) internal financial projections for LSBG for the year ending December 31, 2016, as provided by the senior management of LSBG, as well as financial projections for LSBG
for the years ending December 31, 2017 through December 31, 2020, as discussed with and confirmed by the senior management of BHB; (vii) the pro forma financial impact of the Merger on BHB based on assumptions relating to transaction
expenses, purchase accounting adjustments, a core deposit intangible asset, a customer list intangible asset and cost savings, as provided by the senior management of BHB; (viii) the publicly reported historical price and trading activity for
BHB Common Stock and LSBG Common Stock, including a comparison
SANDLER
ONEILL + PARTNERS, L.P.
1251 Avenue of the Americas, 6th Floor, New York, NY 10020
T: (212) 466-7800
/
(800) 635-6851
www.sandleroneill.com
C-1
of certain stock trading information for BHB Common Stock and LSBG Common Stock and certain stock indices as well as similar publicly available information for certain other companies the
securities of which are publicly traded; (ix) a comparison of certain financial information for BHB and LSBG with similar bank and thrift institutions for which information is publicly available; (x) the financial terms of certain recent
business combinations in the bank and thrift industry (on a regional and nationwide basis), to the extent publicly available; (xi) the current market environment generally and the banking environment in particular; and (xii) such other
information, financial studies, analyses and investigations and financial, economic and market criteria as we considered relevant. We also discussed with certain members of the senior management of BHB the business, financial condition, results of
operations and prospects of BHB and held similar discussions with certain members of the senior management of LSBG regarding the business, financial condition, results of operations and prospects of LSBG.
In performing our review, we have relied upon the accuracy and completeness of all of the financial and other information that was available
to and reviewed by us from public sources, that was provided to us by BHB, LSBG or their respective representatives or that was otherwise reviewed by us and we have assumed such accuracy and completeness for purposes of rendering this opinion
without any independent verification or investigation. We have relied, at the direction of BHB, without independent verification or investigation, on the assessments of the management of BHB as to its existing and future relationships with key
employees and partners, clients, products and services and we have assumed, with your consent, that there will be no developments with respect to any such matters that would affect our analyses or opinion. We have further relied on the assurances of
the respective managements of BHB and LSBG that they are not aware of any facts or circumstances that would make any of such information inaccurate or misleading. We have not been asked to and have not undertaken an independent verification of any
of such information and we do not assume any responsibility or liability for the accuracy or completeness thereof. We did not make an independent evaluation or perform an appraisal of the specific assets, the collateral securing assets or the
liabilities (contingent or otherwise) of BHB or LSBG, or any of their respective subsidiaries, nor have we been furnished with any such evaluations or appraisals. We render no opinion or evaluation on the collectability of any assets or the future
performance of any loans of BHB or LSBG. We did not make an independent evaluation of the adequacy of the allowance for loan losses of BHB or LSBG, or the combined entity after the Merger and we have not reviewed any individual credit files relating
to BHB or LSBG. We have assumed, with your consent, that the respective allowances for loan losses for both BHB and LSBG are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity.
In preparing its analyses, Sandler O Neill used internal financial projections for BHB for the year ending December 31, 2016, as
provided by the senior management of BHB, as well as financial projections for BHB for the years ending December 31 , 2017 through December 31, 2020, as discussed with and confirmed by the senior management of BHB. In addition, in preparing its
analyses Sandler ONeill used internal financial projections for internal for the year ending December 31, 2016, as provided by the senior management of LSBG, as well as financial projections for LSBG for the years ending December 31,
2017 through December 31, 2020, as discussed with and confirmed by the senior management of BHB. Sandler ONeill also received and used in its pro forma analyses certain assumptions relating to transaction expenses, purchase accounting
adjustments, a core deposit intangible asset, a customer list intangible asset and cost savings, as provided by the senior management of BHB. With respect to the foregoing information, the respective managements of BHB and LSBG confirmed to us that
such information reflected the best currently available projections, estimates and judgments of those
C-2
respective managements of the future financial performance of BHB and LSBG, respectively, and we assumed that such performance would be achieved. We express no opinion as to such information, or
the assumptions on which such information is based. We have also assumed that there has been no material change in BHBs or LSBGs assets, financial condition, results of operations, business or prospects since the date of the most recent
financial statements made available to us. We have assumed in all respects material to our analysis that BHB and LSBG will remain as going concerns for all periods relevant to our analyses.
We have also assumed, with your consent, in all respects material to our analysis, that (i) each of the parties to the Agreement will
comply in all material respects with all material terms and conditions of the Agreement and all related agreements, that all of the representations and warranties contained in such agreements are true and correct in all material respects, that each
of the parties to such agreements will perform in all material respects all of the covenants and other obligations required to be performed by such party under such agreements and that the conditions precedent in such agreements are not and will not
be waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the Merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on
BHB, LSBG or the Merger or any related transaction, (iii) the Merger and any related transaction will be consummated in accordance with the terms of the Agreement without any waiver, modification or amendment of any material term, condition or
agreement thereof and in compliance with all applicable laws and other requirements, (iv) the Merger will be consummated without LSBGs rights under Section 7(i) of the Agreement having been triggered, and (v) the Merger will
qualify as a tax-free reorganization for federal income tax purposes. We express no opinion as to any of the legal, accounting or tax matters relating to the Merger or any other transactions contemplated in connection therewith.
Our opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to us
as of, the date hereof. Events occurring after the date hereof could materially affect our opinion. We have not undertaken to update, revise, reaffirm or withdraw this opinion or otherwise comment upon events occurring after the date hereof. We
express no opinion as to the trading values of BHB Common Stock or LSBG Common Stock at any time or what the value of BHB Common Stock will be once it is actually received by the holders of LSBG Common Stock.
We have acted as BHBs financial advisor in connection with the Merger and will receive a fee for our services, which fee is contingent
upon consummation of the Merger. We will also receive a fee for rendering this opinion, which opinion fee will be credited in full towards the fee that will become payable to us on the day of closing of the Merger. BHB has also agreed to indemnify
us against certain claims and liabilities arising out of our engagement and to reimburse us for certain of our out-of-pocket expenses incurred in connection with our engagement. In the ordinary course of our business as a broker-dealer, we may
purchase securities from and sell securities to BHB, LSBG and their respective affiliates. We may also actively trade the equity and debt securities of BHB, LSBG or their respective affiliates for our own account and for the accounts of our
customers.
Our opinion is directed to the Board of Directors of BHB in connection with its consideration of the Agreement and the Merger
and does not constitute a recommendation to any shareholder of BHB as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the Merger. Our opinion is directed only to the fairness, from a financial
point of view, of the Exchange Ratio to BHB and does not address the underlying business decision of BHB to engage in the Merger, the form or structure of the Merger
C-3
or any other transactions contemplated in the Agreement, the relative merits of the Merger as compared to any other alternative transactions or business strategies that might exist for BHB, or
the effect of any other transaction in which BHB might engage. We also do not express any opinion as to the amount or nature of the compensation to be received in the Merger by any BHB or LSBG officer, director or employee, or any class of such
persons, if any, relative to the amount of compensation to be received by any other shareholder. This opinion has been approved by Sandler ONeills fairness opinion committee. This opinion shall not be reproduced without Sandler
ONeills prior written consent;
provided ,
however, Sandler ONeill will provide its consent for the opinion to be included in regulatory filings to be completed in connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Exchange Ratio is fair to BHB from a financial
point of view.
Very truly yours,
C-4
PROXY
LAKE SUNAPEE BANK GROUP