On
March 10, 2016, the boards of directors of LaPorte Bancorp, Inc. (LaPorte) and Horizon Bancorp (Horizon) approved an Agreement and Plan of Merger (which is referred to herein as the Merger Agreement) that
provides for LaPorte to merge with and into Horizon. Immediately following the merger, The LaPorte Savings Bank (LaPorte Savings Bank), the wholly-owned subsidiary of LaPorte, will merge with and into Horizon Bank, National Association
(Horizon Bank), the wholly-owned subsidiary of Horizon, with Horizon Bank as the surviving entity.
If the merger contemplated
by the Merger Agreement is completed, each outstanding share of LaPorte common stock (other than shares then held of record by Horizon) will be converted into the right to receive, at the election of the stockholder, (i) 0.629 shares of Horizon
common stock (subject to certain adjustments as described in the Merger Agreement), or (ii) $17.50 in cash, subject to limitations and prorations such that 65% of the outstanding shares of LaPorte common stock will be converted into the stock
consideration and 35% of the outstanding LaPorte shares will be converted into the cash consideration. A LaPorte stockholder may elect to receive the stock consideration for some of his or her shares and the cash consideration for some of his or her
shares, subject to these limitations and prorations. Each LaPorte stockholder also will receive cash in lieu of any fractional shares of Horizon common stock that such stockholder would otherwise receive in the merger. Additionally, as described in
more detail elsewhere in this proxy statement/prospectus, under the terms of the Merger Agreement LaPorte would have the right to terminate the Merger Agreement during the five-day period following the date on which all regulatory approvals and
other approvals required for the merger are received if Horizons average common stock closing price over a specified period of time decreases below $20.58 per share, and the percentage decrease is more than 15% greater than the percentage
decrease in the SNL Small Cap U.S. Bank and Thrift Index during the same period. If LaPorte elects to exercise its termination rights, Horizon has the right to prevent LaPortes termination under those circumstances by agreeing to increase the
exchange ratio pursuant to a formula set forth in the Merger Agreement.
Horizon common stock is traded on the NASDAQ Global Select Market
under the trading symbol HBNC. On March 9, 2016, the last business day prior to the public announcement of the merger, the closing price of a share of Horizon common stock was $24.21, which, after giving effect to the 0.629 exchange
ratio, results in an implied value of approximately $15.23 per share of LaPorte common stock as of such date. Based on this price with respect to the stock consideration and the cash consideration of $17.50 per share, upon completion of the merger,
a LaPorte stockholder who receives stock for 65% of his or her shares of common stock and receives cash for 35% of his or her shares would receive total merger consideration with an implied value of approximately $16.02 per LaPorte share. On May 27,
2016, the latest practicable date before the date of this document, the closing price of a share of Horizon common stock was $24.91, which, after giving effect to the 0.629 exchange ratio, results in an implied value of approximately $15.67 per
LaPorte share as of such date. Based on this price with respect to the stock consideration and the cash consideration of $17.50 per share, upon completion of the merger a LaPorte stockholder who receives stock for 65% of his or her shares and
receives cash for 35% of his or her shares would receive total merger consideration with an implied value of approximately $16.31 per LaPorte share. You should obtain current market quotations for Horizon before you vote and before you make an
election to receive the merger consideration.
LaPorte common stock is traded on the NASDAQ Capital Market
under the trading symbol LPSB. Based on the 5,580,115 shares of LaPorte common stock outstanding as of May 16, 2016, Horizon will issue an aggregate of 2,281,430 shares of common stock for the stock consideration and pay an aggregate of
$34,178,203 in cash for the cash consideration. Subject to the adjustments described in the Merger Agreement and based on Horizons closing stock price of $24.91 on May 27, 2016, the value of the aggregate consideration that
LaPortes stockholders will receive in the merger is approximately $95.7 million.
You should carefully read this entire proxy statement/prospectus, including the appendices hereto and the documents incorporated by reference
herein, because it contains important information about the merger and the related transactions.
In particular, you should carefully read the information under the section entitled
Risk
Factors
beginning on page 20.
You can also obtain information about Horizon and LaPorte from documents that each has filed with the Securities and Exchange Commission.
THE MERGER
This section of the proxy statement/prospectus describes material aspects of the proposed merger. While Horizon and LaPorte believe that
the description covers the material terms of the merger, this summary may not contain all of the information that is important to you. You should read this entire proxy statement/prospectus and the other documents that we refer to carefully for more
detailed information regarding the merger.
General
Horizons and LaPortes boards of directors have approved and adopted the Merger Agreement, the merger, and the transactions
contemplated thereby. The Merger Agreement provides for the merger of LaPorte with and into Horizon, with Horizon as the surviving corporation. Immediately following the merger, LaPorte Savings Bank, the wholly-owned Indiana-chartered savings bank
subsidiary of LaPorte, will merge with and into Horizon Bank.
In connection with the merger, each outstanding share of LaPorte common
stock will be converted into the right to receive, at the election of the stockholder, (i) 0.629 shares of Horizon common stock (subject to certain adjustments as described in the Merger Agreement), or (ii) $17.50 in cash, subject to
limitations and prorations such that 65% of the outstanding shares of LaPorte common stock will be converted into the stock consideration and 35% of the outstanding LaPorte shares will be converted into the cash consideration. All of the executive
officers and members of the board of directors of LaPorte and LaPorte Savings Bank have entered into a voting agreement pursuant to which they have agreed to vote their shares of LaPorte common stock in favor of the approval and adoption of the
Merger Agreement and the merger.
Under the Merger Agreement, the executive officers and directors of Horizon and Horizon Bank serving at
the effective time of the merger will continue to serve as such after the merger is consummated. In addition, upon the consummation of the merger, Michele M. Thompson, LaPortes President and Chief Financial Officer and a director of LaPorte,
will be appointed to the boards of directors of Horizon and Horizon Bank, effective as of the closing. If the term of the class of directors to which Ms. Thompson is appointed expires less than three years after the effective time of the
merger, Horizon and Horizon Bank will cause her to be nominated and recommended for election by Horizons shareholders at the next election of directors as long as she continues to be eligible and qualified to serve as a director of Horizon and
Horizon Bank.
Please see
The Merger Agreement
beginning on page 64 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 and amending the Merger Agreement.
Background of the Merger
Since completing its conversion from a mutual holding company to a stock holding company and raising $27.1 million in gross proceeds in October
2012, LaPorte has managed its capital through organic growth of its loan portfolio, quarterly cash dividends and share repurchases. From time to time, the LaPorte board of directors considered various strategic alternatives to enhance stockholder
value, including potential acquisitions of other financial institutions. However, after extensive analysis, the board of directors of LaPorte concluded that LaPortes ability to grow through acquisition was limited because LaPortes common
stock traded at a discount to tangible book value, which meant that LaPorte would have to dilute its tangible book value per share in order to pay an adequate market premium to tangible book value for a potential target. In addition, the board
believed there were a limited number of potential targets in LaPortes market area that were of a size appropriate for a merger and available for sale. As the three-year anniversary of LaPortes second-step conversion neared, management
and the board of directors considered LaPortes long-term strategic plan and continued to evaluate the best ways to enhance stockholder value.
In July 2015, Michele Thompson, President and Chief Financial Officer of LaPorte, was invited to meet with the President and Chief Executive
Officer of an Indiana community bank (Company A). The President and Chief Executive Officer of Company A expressed an interest in a possible partnership/acquisition of LaPorte. Ms. Thompson replied that LaPorte was prohibited by
federal law from selling until the fall, but would certainly alert the board to Company As interest. The President and Chief Executive Officer of Company A noted that Company A was only interested in pursuing a merger with LaPorte on a
negotiated basis and that it would not participate in an auction process.
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On October 6, 2015, the board of directors held a retreat to evaluate the strategic
alternatives of LaPorte, which included managements presentation of its long-term strategic outlook, a presentation by representatives of special counsel Luse Gorman, PC (Luse Gorman) and a presentation by representatives of
Raymond James & Associates, Inc. (Raymond James). The lead banker of Raymond James had a long standing relationship with LaPorte having worked on its second-step conversion and offering. He also met with the board of directors
at least yearly to assist with the boards review of its long-term strategic goals and capital management strategies.
Management
began its presentation by describing the long-term challenges in the banking industry dividing the challenges between national concerns affecting all community banks and local concerns that were LaPorte specific. National concerns consisted of
increased regulatory compliance expenses, an increased need for scale to absorb the growing costs of operations, and net interest margin compression in the continuing low interest rate environment. Local concerns consisted of weak commercial loan
demand and slow economic and population growth in LaPortes market area and fierce competition. The board also expressed concern that LaPortes ability to continue to expand its mortgage warehouse lending division could be limited due to
concentration restrictions. In this regard, the board noted the reliance on earnings derived from that business line. In order to provide appropriate stockholder returns and to have the scale to compete with larger banks, management predicted
LaPorte would need to approximately double its size and become a $1.0 billion asset institution. Management also predicted it would need to increase its profitably measures over time to reach goals of 1.0% return on assets and 10.0% return on
equity. Management believed LaPorte could not create enough organic growth to reach these goals and that its currency remained too weak to attract strong acquisition targets. After discussion, the board noted that, as a result of the above factors,
it may be difficult to generate strong stockholder returns in the future on an independent basis. Following managements presentation, Luse Gorman made a presentation on the fiduciary obligations of the LaPorte board of directors with respect
to merger transactions. Ms. Thompson then updated the board on her discussions with Company A.
Raymond James began its presentation
with a general merger and acquisitions update and market/franchise overview. It also provided recent merger and acquisition pricing data based on asset size and geography. Raymond James then presented several pricing analyses of LaPorte, including
precedent transaction analysis, core tangible book value analysis and discounted cash flows valuation. Raymond James listed nine potential acquirers based on LaPortes market area, known interest in LaPorte or history as an active acquirer.
These institutions, which included Company A and Horizon, were selected based on an analysis of their ability to pay a strong price relative to LaPortes potential valuation and the perception of their likely interest. Raymond James then
presented a brief company profile on each potential acquirer as well as a summary ability to pay analysis, which listed Company A as the institution with the greatest ability to pay. The board then discussed each potential merger partner, including
their financial strengths, likely interest in a transaction and potential ability to secure regulatory approval.
After extensive
discussion, the board expressed an interest in reaching out to Company A to explore interest in a potential transaction. Management explained that Company A had told them that Company A was not interested in an auction process and if LaPorte was
interested in exploring a transaction with it, LaPorte would probably need to pursue a privately negotiated transaction. The board also discussed the possible interest of Horizon.
The board, Raymond James and Luse Gorman discussed
concerns regarding Horizons market overlap with LaPorte and the concern that there would be a significant concentration of deposits held by the potential combined entity in the LaPorte, Indiana banking market, which could raise competition
concerns. After discussions, the board concluded that LaPorte should not explore a transaction with Horizon unless this issue could be resolved.
After further discussion, the board determined first to assess the interest level of Company A, and simultaneously prepare due diligence
materials and begin drafting a confidential information memorandum to prepare for a managed auction process should a transaction with Company A not materialize at a compelling price. The board then voted to engage Raymond James as LaPortes
financial advisor with respect to a possible merger transaction based on, among other factors, LaPortes long standing relationship with Raymond James lead investment banker, Raymond James reputation, experience in mergers and
acquisitions in the banking industry, valuations and its familiarity with LaPorte and LaPortes strategic goals.
On October 8,
2015, Raymond James contacted Company A regarding its potential interest in a negotiated merger with LaPorte. Company A responded that it was interested in conducting preliminary due diligence on LaPorte to determine whether a strategic combination
was advisable. Management of LaPorte began to prepare due
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diligence materials and began to draft a confidential information memorandum for a managed auction process should a transaction with Company A not materialize.
On October 14, 2015, Company A executed a non-disclosure agreement with LaPorte and on October 16, 2015, LaPorte made available to
Company A and its advisors certain due diligence materials relating to LaPorte in a virtual data room.
On October 28, 2015,
representatives of Raymond James had discussions with Company As financial advisor to discuss modeling assumptions and transaction structuring. Through its financial advisor, Company A verbally indicated that, based on its initial due
diligence review, it would be interested in pursuing a potential merger with LaPorte at a purchase price of $17.00 per share for LaPortes common stock with 60% to 70% of the merger consideration consisting of Company As common stock. The
initial verbal indication of interest contained no other transaction terms and was subject to additional due diligence.
On
October 30, 2015, the Chief Executive Officer and President and Chief Financial Officer of LaPorte met with management of Company A and discussed certain issues relating to the potential transaction so as to provide Company A with enough
information to determine a proposal price.
On November 3, 2015, Company A revised its verbal indication of interest to a range of
$17.00 to $18.00 per share for LaPortes common stock with consideration consisting of a 60% stock component and a 40% cash component. Company A emphasized that it had a strong bias towards the lower end of the offering range and the board of
directors of LaPorte should not focus on the top portion of the range as it evaluated continuing discussions with Company A.
On
November 5, 2015, the board of directors convened a special meeting to review Company As verbal indication of interest with representatives of Raymond James and Luse Gorman. Raymond James reviewed Company As verbal indication of
interest with the board. The Raymond James representatives stated that they believed Company As preference for the lower end of the range was based on Company As lack of interest in continuing LaPortes mortgage warehouse lending
program as well as concerns over the long-term growth prospects of LaPortes market area. Management confirmed to the board that Company A had advised them of the same issues. Representatives of Raymond James presented to the board several
valuation methodologies and reviewed the indication of interest with the board as well as the impact of the mortgage warehouse lending division on metrics such as net interest income, net interest margin and net income. The board then discussed at
length Company As proposal as well as the fact that Company A had never previously completed an acquisition transaction.
Raymond
James then presented two lists of potential partners, divided into an A list of institutions which it believed would have a greater interest in a merger and/or capacity to pay than those on a B list. The board and Raymond
James then reviewed each institution on the two lists. After extensive discussion and review, including consideration of the possibility that Company A could withdraw its proposal, the board concluded that it would be in the best interests of
stockholders to contact other institutions besides Company A in order to determine whether LaPorte could receive a better proposal than Company As proposal.
The board then authorized Raymond James to contact all of the public institutions on the A list, including Horizon. However, with
respect to Horizon, the board asked counsel to further investigate the deposit concentration issue and report back to the board. In addition, the board decided to authorize Raymond James to contact two institutions from the B list, both
of which appeared to have the potential interest and capability to make an attractive merger proposal. The total number of new institutions to be contacted totaled ten. Company A would be invited to continue in the process. After discussion with
Raymond James, the board established an approximate 30-day deadline to receive indications of interest.
At LaPortes direction,
between November 11, 2015 and November 23, 2015, Raymond James contacted the ten financial institutions to determine their level of interest in a possible strategic business combination with LaPorte. Eight of the ten parties, including
Horizon, indicated an interest and were sent customary non-disclosure agreements. LaPorte, with the assistance of counsel, negotiated and executed non-disclosure agreements with all eight parties. Once each party executed its non-disclosure
agreement, it received a confidential information memorandum about LaPorte and received access to the virtual data room that contained additional information about LaPorte. Parties were given until December 1, 2015 to submit non-binding
indications of interest, which deadline was subsequently extended until December 4, 2015.
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On December 4, 2015, Horizon submitted a non-binding indication of interest for a proposed
price of $17.50 per share for LaPortes common stock based on Horizons ten day average price per share of $27.26 as of December 2, 2015. Horizon specified that 65% of LaPortes common stock would be exchanged for stock
consideration with a fixed exchange ratio of 0.6420 and 35% of the shares of LaPorte common stock would be exchanged for cash. The implied price per share was $17.62 as of December 7, 2015, the day prior to LaPortes board meeting to
consider the proposal. Horizon also offered to appoint one member from LaPortes board to Horizons board and appoint two other board members to its LaPorte County Advisory Board.
Also on December 4, 2015, a second interested party (Company B) also submitted a non-binding indication of interest for
$17.06 per share for LaPortes common stock based on an estimated stock price of $27.00 per share. Company B specified that 65% of LaPortes common stock would be exchanged for stock consideration with a fixed exchange ratio of 0.6319 and
35% of the shares of LaPorte common stock would be exchanged for cash pursuant to stockholder elections. The implied price per share was $16.82 as of December 7, 2015. Company B did not offer any board seats.
On December 8, 2015, the board of directors held its regular meeting and reviewed the process to date along with the indications of
interest from Horizon and Company B with Raymond James and Luse Gorman. Raymond James first reviewed with the board some of the reasons the other six companies gave for declining to make a proposal. Raymond James also noted that Company A had
dropped out of the process and withdrew its previous verbal proposal and advised Raymond James that it was no longer interested in a strategic combination with LaPorte. Raymond James then presented financial analyses of both Horizon and Company B,
including a summary valuation chart, a precedent transaction analysis, a core tangible book value analysis and a discounted cash flow valuation analysis. The board then reviewed a financial and business overview of Horizon and Company B and selected
pro forma financial information of each party following the completion of a merger with LaPorte. Counsel also reported to the board that it had discussed the deposit concentration issue relating to a potential combination with Horizon with the
Federal Reserve Bank of Chicago. In these discussions, counsel learned that the definition of the local market was being changed in such a way so that deposit concentration would not be a material impediment from a regulatory standpoint. The board
discussed both proposals and then voted to invite both companies to conduct further due diligence and then submit updated proposals.
On
December 15, 2015, the Chief Executive Officer and the Chief Financial Officer of Company B met with the board and senior management of LaPorte. They presented the board with an overview of Company B and then met individually with members of
senior management.
On December 15, 2015, at a regular meeting of Horizons board of directors, Horizons management
updated the Board regarding the continuing discussions with LaPorte and the then-current terms and conditions of Horizons offer.
From December 16, 2015 through December 18, 2015, Horizon conducted its due diligence off-site. From January 4, 2016 through
January 6, 2016, Company B conducted its on-site due diligence.
On December 18, 2015, Craig Dwight, Horizons President
and Chief Executive Officer, met with Lee Brady, Chief Executive Officer of LaPorte, and Michele Thompson to discuss Horizons approach to mergers, its past integration experience and various employee transition issues.
In mid-December 2015, Raymond James advised management of LaPorte that it was engaged by Horizon on an unrelated project. In a letter dated
December 21, 2015, Raymond James confirmed the engagement by Horizon, and stated that the unrelated project would not impact its impartiality in connection with its representation of LaPorte. Management advised Raymond James that the board
would need additional information in order to evaluate Raymond James relationship with Horizon. Raymond James contacted Horizon about its engagement by both Horizon and LaPorte, and asked whether Raymond James could disclose certain details
about the KFI transaction (Transaction B) to LaPorte to assist it with its conflict of interest analysis. Horizon agreed to the disclosure of certain general information about Transaction B that would not disclose the identity of KFI
since the definitive agreement for Transaction B had not been signed at that point, and therefore, the transaction had not been publicly announced. Prior to that time, Horizon was aware of Raymond James engagement in both matters, had
discussed it at length with representatives of Raymond James, and had concluded that it did not represent a conflict of interest that would impact Raymond James impartiality and objectivity in either transaction since the two transactions were
not related in any way. Management negotiated and signed a non-disclosure agreement with Horizon on January 13, 2016 in order to obtain additional information about the nature of Horizons
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engagement of Raymond James. Following the execution of the non-disclosure agreement, Raymond James advised LaPorte management of its representation of Horizon in its bid to acquire a bank with
approximately $150 million in assets, but did not disclose any information about KFI that would enable LaPorte to determine the identity of the target.
On January 14, 2016, at a special meeting of Horizons board of directors, Horizons management and its financial advisor
updated the board regarding the continuing discussions with LaPorte and proposed changes to the terms and conditions of Horizons initial offer based upon additional due diligence and other factors, including the nature of LaPortes
mortgage warehouse lending division. After a lengthy discussion and a variety of questions, Horizons board of directors approved a revised non-binding indication of interest containing the terms outlined below.
On January 14, 2016, both Horizon and Company B submitted updated non-binding proposals for consideration by the board. Horizons
revised indication of interest set forth a proposed price of $17.00 per share for LaPorte common stock based on Horizons ten day average price per share of $27.70 as of January 13, 2016. Horizon indicated that 65% of LaPortes common
stock would be exchanged for stock consideration with a fixed exchange ratio of 0.6137 and 35% of the shares of LaPorte common stock would be exchanged for $17.00 in cash. Horizon revised its previous proposal to allow for an election of stock
pursuant to the exchange ratio, $17.00 in cash or a combination thereof. Horizon noted that the reason for lowering the price was related to its decision not to retain a significant part of LaPortes mortgage warehouse lending division. Company
Bs proposal remained the same from its initial proposal. However, Company Bs stock price had declined since the initial proposal resulting in the implied price of its proposal decreasing to $15.35 per share based on Company Bs
closing price on January 13, 2016. Raymond James advised Company B that its proposal was unlikely to be selected by the board at the current pricing level. As a result, on January 18, 2016, Company B gave a verbal indication that it would
increase the exchange ratio to 0.6500 per share for the stock component and increase the cash component to $17.55 per share maintaining the 65% stock and 35% cash election by LaPorte stockholders.
On January 18, 2016, LaPortes board of directors held a special meeting with representatives of Luse Gorman to review the
relationship between Raymond James and Horizon. Management reviewed the facts known to it with the board regarding Transaction B. Raymond James provided information regarding its compensation for and the scope of its engagement with Horizon to the
board and advised that the fee arrangements for the two transactions were independent of each other and Raymond James did not have any financial incentive to encourage LaPorte to pursue a transaction with Horizon as opposed to another potential
partner. The board then discussed Raymond James arrangement with Horizon.
The board next reviewed and discussed the process to
date. The board noted that Raymond James managed a process whereby a large group of potential acquirers were given access to the same information and asked to make a proposal. Management reviewed the communications and negotiation history and
concluded that Raymond James had not appeared to favor Horizon over the other potential acquisition partners. After extensive review, the board concluded that Raymond James had run a fair process to date and, based on the information available to
it, Raymond James involvement with Horizon should not preclude it from representing LaPorte in a transaction with Horizon. However, the board would continue to monitor the situation and reassess as necessary.
On January 19, 2016, the board of directors held its regular meeting and reviewed the revised indications of interest from Horizon and
Company B with representatives of Raymond James and Luse Gorman. Based on the revised non-binding indications of interest, as of January 15, 2016, Horizons proposal represented an implied price per share for LaPortes common stock of
$16.41 while Company Bs proposal represented an implied price per share for LaPortes common stock of $15.69. Raymond James explained that Horizon had lowered its initial proposal because it was not planning to retain a significant
portion of LaPortes mortgage warehouse lending division. The board then reviewed each partys proposal in detail. The board indicated that Horizons proposal was much more detailed than Company Bs proposal and addressed branch
closures, employee retention and Horizons intention to donate $50,000 each year to schools and local nonprofits in LaPorte County. The board also noted some concerns with Horizons proposal, including a termination fee of 5% and a minimum
net worth requirement that would need to be negotiated. Company Bs proposal provided much less detail but did provide that the proposal was conditioned on the negotiation of an employment agreement with the senior officer in charge of mortgage
warehouse lending. The board expressed concern that this condition could lead to increased execution risk.
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Raymond James then reviewed with LaPortes board a summary analysis of the proposals for
Horizon and Company B and presented a pro forma financial analysis and certain pricing and sensitivity analyses for both parties. The board also discussed the current volatility in the stock market and how it might affect a business combination
transaction as well as the risks of remaining independent. After further discussion with Raymond James, the board determined that from a financial standpoint Company B was unlikely to increase its proposal any further, while it appeared Horizon
would have the ability to increase its proposal, which was already higher than Company Bs amended proposal. In addition, the board believed the non-financial aspects of Horizons proposal were superior to Company Bs proposal. The
board instructed Raymond James to contact Horizon to seek a higher price before any final decision would be made.
Subsequently,
representatives of Raymond James contacted Horizon in order to seek a higher price. On January 21, 2016, Horizon verbally revised its non-binding proposal to Raymond James for consideration by the board. Horizons revised indication of
interest increased the fixed exchange ratio to 0.6292 and the cash component to $17.50 per share while maintaining the 65% stock and 35% cash mix. As of January 21, 2016, the implied price was $16.74 per share.
On January 22, 2016, LaPortes board of directors held a special meeting to review Horizons final proposal with
representatives of Raymond James and Luse Gorman. The board noted the implied price of Horizons offer of $16.74 per share as of January 21, 2016 was substantially higher than the proposal of Company B which had an implied price of $15.35
per share as of January 21, 2016 and also was significantly more accretive to LaPorte stockholders earnings per share on an exchange ratio adjusted basis. Horizon also lowered the termination fee to 4% of the deal value. The board noted
that the cash and stock election offered by Horizon would provide stockholders with the opportunity for a liquidity event or to remain an investor in a larger company, and the price offered represented a significant return to stockholders who had
invested in LaPortes stock offering as part of its second-step mutual-to-stock conversion. The board then discussed at length the merger process and the two proposals. After extensive review and discussion, the board unanimously
determined that it would be in the best interests of stockholders to commence reverse due diligence on Horizon and begin negotiations on a definitive merger agreement. The board also instructed Raymond James to inform Company B that the board had
decided to move forward with another partner, but would be open to further discussions if the proposed transaction with Horizon did not lead to a formal agreement.
On January 27, 2016, at a special meeting, Horizons board of directors approved a further revised, written non-binding indication
of interest containing the increased price and related terms, and submitted such updated proposal to LaPorte later that day.
In late
January 2016, prior to sending the first draft of a merger agreement, Horizon began negotiations with certain of LaPortes senior executive officers on terminating their existing employment agreements in connection with the completion of the
merger and non-competition and confidentiality agreements with certain executive officers who would work for Horizon following the merger. Horizon insisted that these agreements would have to be completed before any definitive merger agreement could
be signed.
On February 2, 2016, LaPortes board of directors held a special meeting to review the current market volatility as
it related to Horizons stock price with representatives of Raymond James and Luse Gorman. Raymond James noted that the entire stock market was experiencing a price decline which had been particularly negative towards bank stocks. Raymond James
noted that Horizons stock price had dropped approximately 5% since the last board meeting, which, as of February 1, 2016, produced an implied price per share of $16.34 for LaPorte common stock. However, the Horizon proposal still exceeded
Company Bs last proposal, which, as of February 1, 2016, had an implied price per share of $15.96 for LaPorte common stock. The board agreed that it would continue to monitor Horizons and Company Bs stock prices.
On February 9, 2016, LaPortes board of directors held a regular meeting and had representatives of Raymond James provide a market
update on the proposed Horizon transaction. Raymond James presented to the board an updated pricing comparison between Horizon and Company B based on each companys final proposal which showed Horizons implied price per share at $16.07
and Company Bs implied price per share at $15.63, both as of February 8, 2016. With the current downturn in the stock market, Raymond James explained that both companies stock prices had declined since the last board meeting. The
board concluded that at this point in the negotiations, Horizon would not likely increase the exchange ratio. Raymond James also indicated that nothing in the market volatility appeared to have a fundamental impact on the long-term value of
Horizons stock. The board then
46
discussed the possibility of delaying the strategic alternatives process. Following discussion, the board concluded that LaPorte would be unlikely to receive a substantially better price in the
near future and LaPorte would provide better value to its stockholders in a business combination transaction than as a standalone entity. The board agreed that it was essential to complete reverse due diligence to confirm or update its assumptions
before any final decision would be made.
On February 9, 2016, Luse Gorman received the initial draft of the definitive merger
agreement from Horizons legal counsel, Barnes & Thornburg LLP (Barnes & Thornburg).
On
February 16, 2016, LaPortes management, along with representatives of Luse Gorman and Raymond James, interviewed Horizons management as part of its on-site reverse due diligence effort. LaPorte and its advisors continued its due
diligence to determine if there were any issues concerning Horizon that may affect the suitability of Horizon as a merger partner, the pricing of the transaction or the ability to secure regulatory approval.
On February 17, 2016, representatives of Luse Gorman reviewed the merger agreement with management of LaPorte and prepared a revised
version of the merger agreement which was transmitted to Barnes & Thornburg on February 18, 2016.
On February 23,
2016, the LaPorte board of directors held a regular meeting and management updated the board on the results of its due diligence review of Horizons loan portfolio and noted no material concerns.
From February 29, 2016 to March 7, 2016, LaPorte and its advisors reviewed and negotiated the terms of the merger agreement and
related documents with Horizon and its advisors. The revisions focused on, among other things, narrowing the representations, warranties and covenants of LaPorte.
On March 8, 2016, Horizons management updated the Horizon board of directors on the transaction and provided the board with an
updated draft of the proposed merger agreement.
On March 10, 2016, the board of directors of LaPorte held a special meeting to
review the proposed merger agreement and merger with representatives of Raymond James and Luse Gorman. The board of directors was first informed of the positive results of Luse Gorman, Raymond James and managements due diligence review of
Horizon. The board then excused representatives of Raymond James from the room. The board discussed again the previously disclosed relationship between Horizon and Raymond James on Transaction B. The board again reviewed the facts of the
relationship and considered whether Raymond James had a financial or other interest that could materially impact its advice with respect to the merger. In this regard, the board noted that Raymond James managed a fair process in which a large group
of potential acquirers were given access to the same information and asked to make a proposal. Moreover, of the two institutions that made a proposal, Horizon had proposed the higher price. In addition, management had confirmed with representatives
of Raymond James that they had not prepared for Horizon any analysis of the potential terms of an acquisition of LaPorte during or recently before the merger process. Following extensive review and discussion, the board concluded that the
relationship between Horizon and Raymond James did not constitute a conflict of interest that impinged upon Raymond James ability to represent LaPorte on the transaction or give independent advice with respect to the fairness of the
transaction. The representatives of Raymond James then returned to the room.
The LaPorte board and counsel then reviewed in detail the
terms of the merger agreement and ancillary documents, including the: (i) voting agreements to be entered into by the directors and senior management; (ii) non-competition and confidentiality agreements to be entered into by certain senior
officers; and (iii) termination of employment agreements to be entered into by certain senior executive officers. Luse Gorman also discussed the proposed resolutions that the board would be requested to approve. Raymond James reviewed the
financial aspects of the proposed merger and, at the request of the board, rendered to the board an opinion to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and
limitations on the review undertaken by Raymond James as set forth in its opinion, the merger consideration in the proposed merger was fair, from a financial point of view, to the holders of LaPorte common stock. Following these presentations and
discussion among the members of the LaPorte board of directors, including consideration of the factors described under
LaPortes Reasons for the Merger,
the LaPorte board of directors determined that the merger
agreement and the transactions contemplated thereby were advisable and in the best interests of LaPorte and its stockholders and the directors unanimously voted to adopt the merger agreement and the transactions contemplated thereby and recommended
that LaPortes stockholders approve the merger agreement.
47
On March 10, 2016, the board of directors of Horizon held a special meeting to review the
proposed merger agreement and merger with representatives of its financial advisor and Barnes & Thornburg. Horizons management and financial advisor summarized the various terms and conditions of the transaction, and Barnes &
Thornburg reviewed the terms of the merger agreement and the ancillary documents. Following these presentations and after further discussion among the members of the Horizon board of directors, including consideration of the factors described under
Horizons Reasons for the Merger
, the Horizon board of directors determined that the merger agreement and the transactions contemplated thereby were advisable and in the best interests of Horizon and its shareholders
and the directors voted to adopt the merger agreement and the transactions contemplated thereby.
Following the approval of the boards of
directors of Horizon and LaPorte, the parties executed the merger agreement on March 10, 2016.
LaPorte and Horizon issued a joint
press release publicly announcing the transaction after the closing of the financial markets on March 10, 2016.
LaPortes Reasons for the Merger; Board Recommendation
In determining that the merger and the Merger Agreement were fair to and in the best interest of LaPorte and its stockholders, in authorizing
and approving the merger, in approving and adopting the Merger Agreement and in recommending that LaPorte stockholders vote for adoption and approval of the Merger Agreement, LaPortes board of directors evaluated the merger and the Merger
Agreement in consultation with members of LaPortes management, and with Raymond James and legal counsel, and also considered a number of factors that the LaPorte board of directors viewed as relevant to its decisions, including, without
limitation, the following:
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information concerning the business, earnings, operations, financial condition, asset quality and prospects of LaPorte and Horizon, both individually and as a combined company;
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the discussion and consideration by the board of directors and management of strategic alternatives available to LaPorte;
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managements assessment of the considerable execution risks involved in attaining the performance levels assumed by the forecasts relating to LaPorte;
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the purchase price per share to be paid by Horizon and the resulting valuation multiples;
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the fact that 65% of the merger consideration would be in stock of Horizon, which would allow LaPorte stockholders to participate in the future performance of the combined company;
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the increased need for scale to absorb the growing costs of operations, cyber security and compliance with banking regulations;
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the understanding of LaPortes board of directors of the strategic options available to LaPorte and the board of directors assessment of those options with respect to the prospects and estimated results of
the execution by LaPorte of its business plan as an independent entity under various scenarios and the determination that none of those options or the execution of the business plan was more likely to create greater present value for LaPortes
stockholders than the value to be paid by Horizon;
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the board of directors concern with LaPortes ability to maintain its mortgage warehouse lending divisions level of activity and profitability and the related impact on LaPortes future earnings;
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the compatibility of the business cultures of LaPorte and Horizon;
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the complementary nature of and potential synergies related to LaPortes and Horizons business;
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the historical performance of Horizons common stock, the stocks liquidity in terms of average daily trading volume and the level of future cash dividends anticipated to be received by LaPorte stockholders;
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Horizons agreement to add Michele M. Thompson to Horizons and Horizon Banks board of directors following the completion of the merger;
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the stock component of the merger consideration, including the exchange ratio, the potential value of the Horizon common stock to increase after the signing of the Merger Agreement and the ability of LaPorte to
terminate the Merger Agreement if the price of Horizons common stock drops more than 15% relative to both its price before public announcement of the transaction and the SNL Small Cap U.S. Bank and Thrift Index;
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the financial presentation, dated March 10, 2016, of Raymond James to the LaPorte board of directors and the opinion, dated March 10, 2016, of Raymond James to the LaPorte board of directors as to the
fairness, from a financial point of view and as of the date of the opinion, to the holders of LaPorte common stock of the merger consideration in the proposed merger, as more fully described below under
Opinion of LaPortes Financial
Advisor
;
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the legal analyses as to the structure of the merger, the Merger Agreement, the fiduciary and legal obligations applicable to directors when considering a sale or merger of a company, and the process that LaPorte
(including its board of directors) employed in considering potential strategic alternatives, including the merger with Horizon;
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the terms of the Merger Agreement, including the fixed cash and stock consideration, the expected tax treatment of the merger as a reorganization for United States federal income tax purposes, the size of
the termination fee in relation to the overall deal size and LaPortes ability to consider unsolicited offers from third parties in certain circumstances;
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the anticipated effect of the merger on LaPortes employees (including the fact that Horizon anticipates offering employment to a significant number of the employees of LaPorte following the consummation of the
merger and that LaPorte employees who do not continue as employees of Horizon will be entitled to severance benefits);
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the effect on LaPortes customers and the communities served by LaPorte, including Horizons commitment to donate $50,000 annually to nonprofit organizations and/or community schools in the markets served by
LaPorte; and
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the ability of Horizon to complete the Merger, from a business, financial, and regulatory perspective, and its proven track record of successfully completing acquisition transactions.
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The LaPorte board of directors also considered a number of potential risks and uncertainties in connection with its consideration of the
proposed merger, including, without limitation, the following:
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the challenges of integrating LaPortes business, operations and employees with those of Horizon;
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the need to and likelihood of obtaining approval by stockholders of LaPorte and regulators in order to complete the transaction;
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the risks associated with the operations of the combined company, including the ability to achieve the anticipated cost savings and revenue enhancements contemplated by the respective management teams;
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the risks and costs associated with entering into the Merger Agreement and restrictions on the conduct of LaPortes business before the merger is completed;
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the possibility of a reduction in the trading price of Horizon common stock following the announcement of the Merger Agreement and prior to completion of the merger;
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the fact that a termination fee in the amount of $3,764,000 would have to be paid to Horizon if LaPorte
determined to terminate the Merger Agreement to accept a superior proposal or if Horizon determined to terminate the Merger Agreement due to LaPortes material breach of its non-solicitation obligations, or, after the occurrence of an
Acquisition Proposal, LaPortes breach of its representations or
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warranties, failure to recommend or withdrawal or modification of its recommendation of the Merger Agreement, or entry into an acquisition agreement following its failure to obtain stockholder
approval of the Merger Agreement;
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the impact that provisions of the Merger Agreement relating to payment of a termination fee by LaPorte may have on LaPorte receiving an alternative proposal;
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the potential costs associated with executing the Merger Agreement, including change in control payments and related costs, as well as estimated advisor fees; and
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the possibility of litigation in connection with the merger.
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This discussion of the
information and factors considered by LaPortes board of directors in reaching its conclusions and recommendation includes the factors identified above, but is not intended to be exhaustive and may not include all of the factors considered by
the LaPorte board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the other transactions contemplated by the Merger Agreement, and the complexity of these matters, the LaPorte board
of directors did not find it useful and did not attempt to quantify, rank or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the merger and the other transactions
contemplated by the Merger Agreement, and to make its recommendation to LaPorte stockholders. Rather, the LaPorte board of directors viewed its decisions as being based on the totality of the information presented to it and the factors it
considered, including its discussions with and questioning of members of LaPortes management and outside legal and financial advisors. In addition, individual members of the LaPorte board of directors may have assigned different weights to
different factors.
Certain of LaPortes directors and executive officers have financial interests in the merger that are different
from, or in addition to, those of LaPortes stockholders generally. The LaPorte board of directors was aware of and considered these potential interests, among other matters, in evaluating the merger and in making its recommendation to LaPorte
stockholders. For a discussion of these interests, see
Interests of Certain Directors and Officers of LaPorte in the Merger
.
For the reasons set forth above, LaPortes board of directors has unanimously approved the Merger Agreement, has determined that the
Merger Agreement and the transactions contemplated thereby, including the Merger and merger consideration, are advisable and in the best interests of LaPorte, and unanimously recommends that LaPorte stockholders vote FOR the proposal to
approve and adopt the Merger Agreement, FOR approval of the Merger-Related Compensation Proposal, and FOR the proposal to approve adjournment of the special meeting if there are insufficient votes at the time of the special
meeting to approve the Merger Agreement.
Horizons Reasons for the Merger
In reaching its decision to approve the Merger Agreement, Horizons board of directors consulted with Horizons management, as well
as its financial and legal advisors, and considered a number of factors, including:
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the business, earnings, operations, financial condition, management, prospects, capital levels, and asset quality of both Horizon and LaPorte, taking into account the results of Horizons due diligence review
of LaPorte, including Horizons assessments of LaPortes credit policies, asset quality, adequacy of loan loss reserves, interest rate risk, and litigation;
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the overall greater scale that will be achieved by the merger that will better position the combined company for future growth;
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its belief that Horizon and LaPorte have similar cultures and similar community-oriented philosophies, and the complementary nature of the strengths of the management personnel of each company;
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the additional management depth and operational support that LaPortes employees will add to Horizon;
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the belief of Horizons management that the merger will result in pre-tax annual cost savings of
approximately $2.7 million in 2016, $6.9 million in 2017, and $7.6 million in 2018. Approximately $1.9 million of the expected savings in 2016 are expected to result from reduced expenses for salaries,
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employee benefits, and other employee matters, approximately $170,000 are expected to result from reduced data processing expenses, approximately $17,000 are expected to result from reduced
professional fees, approximately $254,000 are expected to result from reduced occupancy expense, and approximately $455,000 are expected to result from reduced general, administrative, and other expenses;
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the belief of Horizon that the merger will produce earnings enhancement opportunities from additional sources of non-interest income;
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the estimation by Horizons management that the merger will result in after-tax earnings per share accretion of $0.04 in 2016, $0.12 in 2017, and $0.13 in 2018;
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the likelihood of a successful integration of LaPortes business, operations, and workforce with those of Horizon and of successful operation of the combined company, and the belief that customer disruption in
the transition phase would not be significant due to the complementary nature of the markets served by Horizon and LaPorte;
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the historical and current market prices of Horizons common stock and LaPortes common stock;
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the fact that LaPortes stockholders would own approximately 15.3% of the diluted share ownership of the combined company (giving effect to the completion of the previously announced acquisition of KFI);
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the financial and other terms and conditions of the Merger Agreement, including the fact that the exchange ratio and the per share amount of the cash merger consideration are both fixed, provisions designed to limit the
ability of LaPortes board of directors to entertain third party acquisition proposals, and provisions providing for payment by LaPorte to Horizon of a $3,764,000 termination fee if the Merger Agreement is terminated under certain
circumstances;
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the boards belief that Horizon will be able to finance the cash portion of the merger consideration on substantially the terms contemplated by it; and
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the need to obtain LaPortes stockholder approval and regulatory approvals in order to complete the transaction.
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The foregoing discussion of the factors considered by Horizons board of directors is not intended to be exhaustive, but rather includes
the material factors considered by Horizons board of directors. In reaching its decision to approve the Merger Agreement and the merger, Horizons board of directors did not quantify or assign any relative weights to the factors
considered, and individual directors may have given different weights to different factors. Horizons board of directors considered all these factors as a whole, including discussions with, and questioning of, Horizons management and its
financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.
For the
reasons set forth above, Horizons board of directors approved the Merger Agreement and the merger, and the transactions contemplated by the Merger Agreement.
Effects of the Merger
The respective boards of directors of Horizon and LaPorte believe that, over the long-term, the merger will be beneficial to Horizons
shareholders, including the current stockholders of LaPorte who receive the stock consideration and become Horizon shareholders if the merger is completed. The Horizon board of directors believes that one of the potential benefits of the merger is
the cost savings that may be realized by combining the two companies and integrating LaPorte Savings Bank into Horizons banking subsidiary, which savings are expected to enhance Horizons earnings.
Horizon expects to reduce expenses by combining accounting, data processing, retail and lending support, and other administrative functions
after the merger, which will enable Horizon to achieve economies of scale in these areas. Promptly following the completion of the merger, which is expected to occur during the third quarter of 2016, Horizon plans to begin the process of eliminating
redundant functions and eliminating duplicative expenses. It is contemplated that after the merger Horizon Bank will continue to operate the main offices and certain branch offices of LaPorte Savings Bank, however, Horizon intends to close three
LaPorte Savings Bank branches and LaPorte Savings Banks loan production office.
51
The amount of any cost savings Horizon may realize in 2016 will depend upon how quickly and
efficiently Horizon is able to implement the processes outlined above during the year.
Horizon believes that it will achieve cost savings
based on the assumption that it will be able to:
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reduce data processing costs;
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achieve economies of scale in advertising and marketing budgets; and
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reduce legal and accounting fees.
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Horizon has based these assumptions on its present
assessment of where savings could be realized based upon the present independent operations of the two companies. Actual savings in some or all of these areas could be higher or lower than is currently expected.
Horizon also believes that the merger will be beneficial to the customers of LaPorte as a result of the additional products and services
offered by Horizon and because of its increased lending capability.
Negotiations, Transactions, or Materials Contracts
Except as set forth above or elsewhere in this proxy statement/prospectus, none of LaPorte, LaPorte Savings Bank, nor any of their
respective directors, executive officers, or other affiliates had any negotiations, transactions, or material contracts with Horizon, Horizon Bank, or any of their directors, executive officers, or other affiliates during the past three years that
would require disclosure under the rules and regulations of the SEC applicable to this proxy statement/prospectus.
Opinion
of LaPortes Financial Advisor
LaPorte retained Raymond James as financial advisor on October 6, 2015. Pursuant to that
engagement, the LaPorte board of directors requested that Raymond James evaluate the fairness, from a financial point of view, to the holders of LaPortes outstanding common stock of the merger consideration to be received by such holders
pursuant to the Merger Agreement.
At the March 10, 2016 meeting of the LaPorte board of directors, a representative of Raymond James
rendered its oral opinion, which was subsequently confirmed by delivery of a written opinion to the board dated March 10, 2016, as to the fairness, as of such date, from a financial point of view, to the holders of LaPortes outstanding
common stock of the merger consideration to be received by such holders in the transaction pursuant to the Merger Agreement, based upon and subject to the qualifications, assumptions and other matters considered in connection with the preparation of
its opinion.
The full text of the written opinion of Raymond James is attached as
Appendix B
to this document. The summary of the
opinion of Raymond James set forth in this document is qualified in its entirety by reference to the full text of such written opinion. Holders of LaPorte common stock are urged to read this opinion in its entirety.
Raymond James provided its opinion for the information of the LaPorte board of directors (solely in its capacity as such) in connection with,
and for purposes of, its consideration of the merger transaction and its opinion only addresses whether the merger consideration to be received by the holders of the common stock in the transaction pursuant to the Merger Agreement was fair, from a
financial point of view, to such holders. The opinion of Raymond James does not address any other term or aspect of the Merger Agreement or the merger transaction contemplated thereby. The Raymond James opinion does not constitute a recommendation
to the LaPorte board or to any holder of LaPorte common stock as to how the board, such stockholder or any other person should vote or otherwise act with respect to the merger transaction or any other matter. Raymond James does not express any
opinion as to the likely trading range of Horizon common stock following the merger, which may vary depending on numerous factors that generally impact the price of securities or on the financial condition of Horizon at that time.
In connection with its review of the proposed merger transaction and the preparation of its opinion, Raymond James, among other things:
52
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reviewed the financial terms and conditions as stated in the draft of the Merger Agreement by and among Horizon and the LaPorte dated as of March 9, 2016, which we refer to in this section as the Draft
Agreement;
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reviewed certain information related to the historical, current and future operations, financial condition and prospects of LaPorte made available to Raymond James by LaPorte, including, but not limited to, financial
projections prepared by the management of LaPorte relating to LaPorte for the periods ending December 31, 2016 - 2020, as approved for Raymond Jamess use by LaPorte which we refer to in this section as the Projections;
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reviewed LaPortes and Horizons recent public filings and certain other publicly available information regarding LaPorte and Horizon;
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reviewed financial, operating and other information regarding LaPorte and the industry in which it operates;
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reviewed the financial and operating performance of LaPorte and those of other selected public companies that Raymond James deemed to be relevant;
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considered the publicly available financial terms of certain transactions that Raymond James deemed to be relevant;
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reviewed the current and historical market prices and trading volume for LaPortes common stock, and then reviewed the current market prices of the publicly traded securities of certain other companies that Raymond
James deemed to be relevant;
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conducted such other financial studies, analyses and inquiries and considered such other information and factors as Raymond James deemed appropriate; and
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discussed with members of the senior management of LaPorte certain information relating to the aforementioned and any other matters which Raymond James deemed relevant to its inquiry.
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With LaPortes consent, Raymond James assumed and relied upon the accuracy and completeness of all information supplied by or on behalf
of LaPorte, or otherwise reviewed by or discussed with Raymond James, and Raymond James did not undertake any duty or responsibility to, nor did Raymond James, independently verify any of such information. Raymond James did not make or obtain an
independent appraisal of the assets or liabilities (contingent or otherwise) of LaPorte or Horizon. With respect to the Projections and any other information and data provided to or otherwise reviewed by or discussed with Raymond James, Raymond
James, with LaPortes consent, assumed that the Projections and such other information and data were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management of LaPorte and Raymond
James relied upon LaPorte to advise Raymond James promptly if any information previously provided became inaccurate or was required to be updated during the period of its review. Raymond James expressed no opinion with respect to the Projections or
the assumptions on which they were based. Based upon the terms specified in the Merger Agreement, Raymond James assumed that the merger will qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code.
Raymond James relied upon and assumed, without independent verification, that the final form of the Merger Agreement would be substantially similar to the Draft Agreement reviewed by Raymond James in all respects material to its analysis, and that
the Transaction would be consummated in accordance with the terms of the Agreement without waiver of or amendment to any of the conditions thereto. Furthermore, Raymond James assumed, in all respects material to its analysis, that the
representations and warranties of each party contained in the Merger Agreement were true and correct and that each party will perform all of the covenants and agreements required to be performed by it under the Agreement without being waived.
Raymond James also relied upon and assumed, without independent verification, that (i) the merger transaction would be consummated in a manner that complies in all respects with all applicable international, federal and state statutes, rules
and regulations, and (ii) all governmental, regulatory or other consents and approvals necessary for the consummation of the transaction would be obtained and that no delay, limitations, restrictions or conditions would be imposed or
amendments, modifications or waivers made that would have an effect on the transaction or LaPorte that would be material to its analysis or opinion.
53
Raymond James expressed no opinion as to the underlying business decision to effect the merger
transaction, the structure or tax consequences of the transaction, or the availability or advisability of any alternatives to the transaction. The Raymond James opinion is limited to the fairness, from a financial point of view, of the merger
consideration to be received by the holders of LaPortes common stock. Raymond James expressed no opinion with respect to any other reasons (legal, business, or otherwise) that may support the decision of LaPortes board of directors to
approve or consummate the merger transaction. Furthermore, no opinion, counsel or interpretation was intended by Raymond James on matters that require legal, accounting or tax advice. Raymond James assumed that such opinions, counsel or
interpretations had been or would be obtained from appropriate professional sources. Furthermore, Raymond James relied, with the consent of LaPorte, on the fact that LaPorte was assisted by legal, accounting and tax advisors, and, with the consent
of LaPorte relied upon and assumed the accuracy and completeness of the assessments by LaPorte and its advisors, as to all legal, accounting and tax matters with respect to LaPorte and the merger transaction.
In formulating its opinion, Raymond James considered only the merger consideration to be received by the holders of LaPorte common stock, and
Raymond James did not consider, and its opinion did not address, the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of LaPorte, or such class of persons, in connection with
the merger transaction whether relative to the merger consideration or otherwise. Raymond James was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (1) the fairness of the
merger transaction to the holders of any class of securities, creditors or other constituencies of LaPorte, or to any other party, except and only to the extent expressly set forth in the last sentence of its opinion, or (2) the fairness of the
transaction to any one class or group of LaPortes or any other partys security holders or other constituents vis-à-vis any other class or group of LaPortes or such other partys security holders or other constituents
(including, without limitation, the allocation of any consideration to be received in the transaction amongst or within such classes or groups of security holders or other constituents). Raymond James expressed no opinion as to the impact of the
merger transaction on the solvency or viability of LaPorte or Horizon or the ability of LaPorte or Horizon to pay their respective obligations when they come due.
Material Financial Analyses
The
following summarizes the material financial analyses reviewed by Raymond James with the LaPorte board of directors at its meeting on March 10, 2016, which material was considered by Raymond James in rendering its opinion. No company or
transaction used in the analyses described below is identical or directly comparable to LaPorte, Horizon or the contemplated merger transaction.
Selected Companies Analysis
. Raymond James analyzed the relative valuation multiples of 21 publicly-traded banks and thrifts in the
Midwest (Iowa, Illinois, Indiana, Kansas, Kentucky, Michigan, Minnesota, Missouri, North Dakota, Nebraska, Ohio, South Dakota and Wisconsin) with assets between $250 million and $750 million, last twelve months (LTM) ROAA greater than 0.50%,
tangible common equity to tangible assets (TCE/TA) ratio greater than 8.0% and non-performing assets to total assets (NPAs/assets) ratio less than 4.0% that it deemed relevant, including:
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First Savings Financial Group, Inc.
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Mackinac Financial Corporation
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Guaranty Federal Bancshares, Inc.
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First Clover Leaf Financial Corp.
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United Bancshares, Inc.
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United Community Bancorp
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First Menasha Bancshares, Inc.
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First BancTrust Corporation
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Wolverine Bancorp, Inc.
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First Federal of Northern Michigan Bancorp, Inc.
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Commercial Bancshares, Inc.
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Jacksonville Bancorp, Inc.
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Northeast Indiana Bancorp, Inc.
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Raymond James calculated various financial multiples for each company,
including (i) price per share compared to tangible book value (TBV) per share as of December 31, 2015 (or September 30, 2015 when December 31, 2015 data was unavailable), (ii) price per share compared to core tangible book
value (CTBV) per share (core tangible book value assumes a normalized TCE/TA ratio of 8.0%) as of December 31, 2015 (or September 30, 2015 when December 31, 2015 data was unavailable) and (iii) price per share compared to
earnings per share for the most recent LTM ended December 31, 2015 (or September 30, 2015 when December 31, 2015 data was unavailable). Raymond James reviewed the mean, median, 25
th
percentile and 75
th
percentile relative valuation multiples of the selected public companies and compared them to corresponding valuation multiples for LaPorte implied by the merger consideration.
The results of the selected public companies analysis are summarized below:
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Price / TBV
per share
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Price / Core TBV
per share
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Price /
LTM EPS
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Mean
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101%
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102%
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13.1x
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Median
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98%
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98%
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12.0x
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25
th
Percentile
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92%
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92%
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10.7x
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75
th
Percentile
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105%
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108%
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15.2x
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Merger Consideration
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116%
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129%
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18.6x
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Furthermore, Raymond James applied the mean, median, 25
th
percentile and 75
th
percentile relative valuation multiples for each of the metrics to LaPortes actual and projected financial results and determined the implied equity price per share of
LaPorte common stock and then compared those implied equity values per share to the merger consideration of $16.02 per share. The results of this are summarized below:
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Price / TBV
per share
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Price / Core TBV
per share
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Price /
LTM EPS
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Mean
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$13.90
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$13.95
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$11.24
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Median
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13.56
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13.67
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10.29
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25
th
Percentile
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12.74
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13.21
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9.19
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75
th
Percentile
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14.43
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14.41
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13.10
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Merger Consideration
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$16.02
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$16.02
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$16.02
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Selected Transaction Analysis.
Raymond James analyzed publicly available information relating to
selected transactions announced since December 31, 2013 involving targets headquartered in the Midwest region with assets between $250 million and $750 million, LTM ROAA greater than 0.0%, TCE/TA ratio greater than 8.0% and an NPAs/assets ratio
less than 4.0%. The regional transactions that Raymond James analyzed consisted of targets
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headquartered in the following Midwest states: Illinois, Indiana, Kansas, Kentucky, Michigan, Minnesota, Missouri, North Dakota, Nebraska, Ohio, South Dakota and Wisconsin. Raymond James also
analyzed publicly available information relating to selected transactions announced since June 30, 2015 involving nationwide targets with assets between $250 million and $750 million, LTM ROAA greater than 0.0%, TCE/TA ratio greater than 8.0%
and an NPAs/assets ratio less than 4.0%. Raymond James prepared a summary of the relative valuation multiples paid in these transactions. The selected transactions used in the analysis included:
Regional:
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Acquisition of Cheviot Financial Corp. by MainSource Financial Group, Inc. (11/24/15)
|
|
|
|
Acquisition of Fox River Valley Bancorp, Inc. by County Bancorp, Inc. (11/20/15)
|
|
|
|
Acquisition of NI Bancshares Corporation by First Midwest Bancorp, Inc. (11/12/15)
|
|
|
|
Acquisition of River Valley Bancorp by German American Bancorp, Inc. (10/26/15)
|
|
|
|
Acquisition of Ameriana Bancorp by First Merchants Corporation (6/29/15)
|
|
|
|
Acquisition of Metropolitan National Bank by Bear State Financial, Inc. (6/22/15)
|
|
|
|
Acquisition of Peoples Bancorp, Inc. by Horizon Bancorp (2/19/15)
|
|
|
|
Acquisition of National Bancshares Corporation by Farmers National Banc Corp. (1/27/15)
|
|
|
|
Acquisition of Southern Bancshares Corp. by Stupp Bros., Inc. (12/22/14)
|
|
|
|
Acquisition of Herget Financial Corp. by First Busey Corporation (9/26/14)
|
|
|
|
Acquisition of NB&T Financial Group, Inc. by Peoples Bancorp Inc. (8/4/14)
|
|
|
|
Acquisition of Founders Financial Corporation by Old National Bancorp (7/28/14)
|
|
|
|
Acquisition of LSB Financial Corp. by Old National Bancorp (6/4/14)
|
|
|
|
Acquisition of Ohio Heritage Bancorp, Inc. by Peoples Bancorp Inc. (4/4/14)
|
National:
|
|
|
Acquisition of Harmony Bank by Lakeland Bancorp, Inc. (2/18/16)
|
|
|
|
Acquisition of Cheviot Financial Corp. by MainSource Financial Group, Inc. (11/24/15)
|
|
|
|
Acquisition of Fox River Valley Bancorp, Inc. by County Bancorp, Inc. (11/20/15)
|
|
|
|
Acquisition of NI Bancshares Corporation by First Midwest Bancorp, Inc. (11/12/15)
|
|
|
|
Acquisition of TFC Holding Company by RBB Bancorp (11/10/15)
|
|
|
|
Acquisition of Floridian Financial Group, Inc. by Seacoast Banking Corporation of Florida (11/3/15)
|
|
|
|
Acquisition of River Valley Bancorp by German American Bancorp, Inc. (10/26/15)
|
|
|
|
Acquisition of Conestoga Bank by Beneficial Bancorp, Inc. (10/22/15)
|
|
|
|
Acquisition of Heritage Bankshares, Inc. by Southern BancShares (N.C.), Inc. (10/21/15)
|
|
|
|
Acquisition of KeyWorth Bank by Renasant Corporation (10/20/15)
|
|
|
|
Acquisition of County Commerce Bank by CVB Financial Corp. (10/14/15)
|
|
|
|
Acquisition of Security California Bancorp by Pacific Premier Bancorp, Inc. (10/1/15)
|
|
|
|
Acquisition of Jacksonville Bancorp, Inc. by Ameris Bancorp (10/1/15)
|
|
|
|
Acquisition of First Capital Bancorp, Inc. by Park Sterling Corporation (10/1/15)
|
|
|
|
Acquisition of Southcoast Financial Corporation by BNC Bancorp (8/14/15)
|
56
|
|
|
Acquisition of Tradition Bancshares, Inc. by Prosperity Bancshares, Inc. (8/6/15)
|
|
|
|
Acquisition of Pascack Bancorp, Inc. by Lakeland Bancorp, Inc. (8/4/15)
|
|
|
|
Acquisition of Cañon Bank Corporation by Glacier Bancorp, Inc. (7/30/15)
|
|
|
|
Acquisition of Reunion Bank of Florida by National Commerce Corporation (7/7/15)
|
Raymond
James examined valuation multiples of transaction value compared to the target companies most recent quarter (MRQ) TBV, MRQ CTBV, LTM Earnings, and MRQ core deposits, where such information was publicly available. Core deposits are defined as
total deposits less time deposits of $100,000 or more. Raymond James reviewed the mean, median, 25
th
percentile and 75
th
percentile relative
valuation multiples of the selected transactions and compared them to corresponding valuation multiples for LaPorte implied by the merger consideration. Furthermore, Raymond James applied the mean, median, 25
th
percentile and 75
th
percentile relative valuation multiples to LaPortes MRQ TBV, MRQ CTBV, LTM earnings and MRQ core deposits to determine
the implied equity price per share and then compared those implied equity values per share to the merger consideration of $16.02 per share, adjusted for the dilutive effect of LaPortes options. The results of the selected transactions analysis
are summarized below:
57
Regional:
|
|
|
|
|
|
|
Transaction Value /
MRQ TBV
|
|
Implied Equity Price
|
|
|
|
|
Per Share
|
Mean
|
|
147%
|
|
$19.19
|
Median
|
|
147%
|
|
19.29
|
25
th
Percentile
|
|
127%
|
|
16.71
|
75
th
Percentile
|
|
158%
|
|
20.56
|
|
|
|
Merger Consideration
|
|
122%
|
|
$16.02
|
|
|
|
|
|
|
|
Transaction Value /
MRQ Core TBV
|
|
Implied Equity Price
|
|
|
|
|
Per Share
|
Mean
|
|
159%
|
|
$17.45
|
Median
|
|
157%
|
|
17.34
|
25
th
Percentile
|
|
140%
|
|
16.15
|
75
th
Percentile
|
|
174%
|
|
18.49
|
|
|
|
Merger Consideration
|
|
140%
|
|
$16.02
|
|
|
|
|
|
|
|
Transaction Value /
LTM Earnings
|
|
Implied Equity Price
|
|
|
|
|
Per Share
|
Mean
|
|
22.8x
|
|
$17.84
|
Median
|
|
22.2x
|
|
17.36
|
25
th
Percentile
|
|
18.2x
|
|
14.40
|
75
th
Percentile
|
|
27.6x
|
|
21.39
|
|
|
|
Merger Consideration
|
|
20.6x
|
|
$16.02
|
|
|
|
|
|
|
|
Premium to Core Deposits
|
|
Implied Equity Price
|
|
|
|
|
Per Share
|
Mean
|
|
6.6%
|
|
$17.10
|
Median
|
|
6.0%
|
|
16.77
|
25
th
Percentile
|
|
4.5%
|
|
15.89
|
75
th
Percentile
|
|
8.1%
|
|
17.93
|
|
|
|
Merger Consideration
|
|
4.9%
|
|
$16.02
|
National:
|
|
|
|
|
|
|
Transaction Value /
MRQ TBV
|
|
Implied Equity Price
|
|
|
|
|
Per Share
|
Mean
|
|
156%
|
|
$20.37
|
58
|
|
|
|
|
Median
|
|
151%
|
|
19.71
|
25
th
Percentile
|
|
136%
|
|
17.94
|
75
th
Percentile
|
|
168%
|
|
21.84
|
|
|
|
Merger Consideration
|
|
122%
|
|
$16.02
|
|
|
|
|
|
|
|
Transaction Value /
MRQ Core TBV
|
|
Implied Equity Price
|
|
|
|
|
Per Share
|
Mean
|
|
167%
|
|
$18.01
|
Median
|
|
165%
|
|
17.88
|
25
th
Percentile
|
|
149%
|
|
16.76
|
75
th
Percentile
|
|
180%
|
|
18.91
|
|
|
|
Merger Consideration
|
|
140%
|
|
$16.02
|
|
|
|
|
|
|
|
Transaction Value /
LTM Earnings
|
|
Implied Equity Price
|
|
|
|
|
Per Share
|
Mean
|
|
19.9x
|
|
$15.70
|
Median
|
|
18.2x
|
|
14.44
|
25
th
Percentile
|
|
17.3x
|
|
13.77
|
75
th
Percentile
|
|
22.8x
|
|
17.84
|
|
|
|
Merger Consideration
|
|
20.6x
|
|
$16.02
|
|
|
|
|
|
|
|
Premium to Core Deposits
|
|
Implied Equity Price
|
|
|
|
|
Per Share
|
Mean
|
|
8.2%
|
|
$18.00
|
Median
|
|
8.7%
|
|
18.26
|
25
th
Percentile
|
|
5.2%
|
|
16.33
|
75
th
Percentile
|
|
9.4%
|
|
18.66
|
|
|
|
Merger Consideration
|
|
4.9%
|
|
$16.02
|
Discounted Cash Flow Analysis.
Raymond James analyzed the discounted present value of LaPortes
projected free cash flows for the quarter ending June 30, 2016 through the year ending December 31, 2020 on a standalone basis. Raymond James used tangible common equity in excess of a target ratio of 8.0% at the end of each projection
period for free cash flow.
The discounted cash flow analysis was based on the Projections. Consistent with the periods included in the
Projections, Raymond James used calendar year 2020 as the final year for the analysis and applied multiples, ranging from 10.0x to 14.0x, to calendar year 2020 net income in order to derive a range of terminal values for LaPorte in 2020.
The projected unleveraged free cash flows and terminal values were discounted using rates ranging from 11.0% to 15.0%. The resulting range of
present equity values was divided by the number of diluted shares outstanding in order to arrive at a range of present values per LaPorte share. Raymond James reviewed the range of per share prices derived in the discounted cash flow analysis and
compared them to the price per share for LaPorte implied by the merger consideration. The results of the discounted cash flow analysis are summarized below:
59
|
|
|
|
|
|
|
Equity Value/
Per Share
|
|
Minimum
|
|
|
$13.40
|
|
Maximum
|
|
|
16.37
|
|
|
|
Merger Consideration
|
|
|
$16.02
|
|
Additional Considerations.
The preparation of a fairness opinion is a complex process and is not
susceptible to a partial analysis or summary description. Raymond James believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering the analyses taken as a whole, would create an
incomplete view of the process underlying its opinion. In addition, Raymond James considered the results of all such analyses and did not assign relative weights to any of the analyses, but rather made qualitative judgments as to significance and
relevance of each analysis and factor, so the ranges of valuations resulting from any particular analysis described above should not be taken to be the view of Raymond James as to the actual value of LaPorte.
In performing its analyses, Raymond James made numerous assumptions with respect to industry performance, general business, economic and
regulatory conditions and other matters, many of which are beyond the control of LaPorte. The analyses performed by Raymond James are not necessarily indicative of actual values, trading values or actual future results which might be achieved, all
of which may be significantly more or less favorable than suggested by such analyses. Such analyses were provided to the LaPorte board of directors (solely in its capacity as such) and were prepared solely as part of the analysis of Raymond James of
the fairness, from a financial point of view, to the holders of LaPorte common stock of the merger consideration to be received by such holders in connection with the proposed merger transaction pursuant to the Merger Agreement. The analyses do not
purport to be appraisals or to reflect the prices at which companies may actually be sold, and such estimates are inherently subject to uncertainty. The opinion of Raymond James was one of many factors taken into account by the LaPorte board in
making its determination to approve the merger transaction. Neither Raymond James opinion nor the analyses described above should be viewed as determinative of the LaPorte board of directors or LaPorte managements views with
respect to the LaPorte, Horizon or the merger transaction. Raymond James provided advice to LaPorte with respect to the proposed transaction. Raymond James did not, however, recommend any specific amount of consideration to the LaPorte board or that
any specific merger consideration constituted the only appropriate consideration for the merger transaction. LaPorte placed no limits on the scope of the analysis performed, or opinion expressed, by Raymond James.
The Raymond James opinion was necessarily based upon market, economic, financial and other circumstances and conditions existing and disclosed
to it on March 9, 2016, and any material change in such circumstances and conditions may affect the opinion of Raymond James, but Raymond James does not have any obligation to update, revise or reaffirm that opinion. Raymond James relied upon
and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of LaPorte since the respective dates of the most recent financial
statements and other information, financial or otherwise, provided to Raymond James that would be material to its analyses or its opinion, and that there was no information or any facts that would make any of the information reviewed by Raymond
James incomplete or misleading in any material respect.
LaPorte has agreed to pay Raymond James a fee for advisory services in connection
with the merger transaction in an amount equal to 1.4% of the merger consideration at the closing of the transaction. LaPorte has paid Raymond James a retainer fee of $100,000 in connection with its engagement as LaPortes financial advisor,
which will be credited fully towards any transaction fee due at closing. For services rendered in connection with the delivery of its opinion, LaPorte paid Raymond James $250,000 upon delivery of its opinion, $50,000 of which will be credited
towards any transaction fee due at closing. LaPorte has also agreed to reimburse Raymond James for its
60
expenses incurred in connection with its services, including the fees and expenses of its counsel, and will indemnify Raymond James against certain liabilities arising out of its engagement.
Except as described above, LaPorte has paid Raymond James no other fees or commissions for other services during the last two years. In the past two years Raymond James has provided certain investment banking services to Horizon and was the
financial advisor for Horizon for its merger with KFI. For those services Raymond James received compensation totaling approximately $150,000, plus expenses.
Raymond James is actively involved in the investment banking business and regularly undertakes the valuation of investment securities in
connection with public offerings, private placements, business combinations and similar transactions. In the ordinary course of business, Raymond James may trade in the securities of LaPorte and Horizon for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position in such securities. Raymond James may provide investment banking, financial advisory and other financial services to LaPorte and/or Horizon or other participants in the
merger transaction in the future, for which Raymond James may receive compensation.
Certain Financial Projections Utilized
by the LaPorte Board of Directors and LaPortes Financial Advisor
LaPorte does not, as a matter of course, publicly disclose
forecasts or internal projections as to future performance, earnings, or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, LaPortes management provided its financial advisor,
Raymond James, and Horizon with certain nonpublic unaudited prospective financial information regarding LaPorte prepared by LaPortes management that was considered by Raymond James for the purpose of preparing its fairness opinion, as
described in this proxy statement/prospectus under the heading
Opinion of LaPortes Financial Advisor
beginning on page 52. This nonpublic unaudited prospective financial information was prepared as part of
LaPortes overall process of analyzing various strategic initiatives, and was not prepared for the purposes of, or with a view toward, public disclosure or with a view toward complying with the guidelines established by the American Institute
of Certified Public Accountants for preparation and presentation of prospective financial information, published guidelines of the SEC regarding forward-looking statements, or GAAP. A summary of certain significant elements of this information is
set forth below. The information included below does not comprise all of the prospective financial information provided by LaPorte to Raymond James and Horizon.
Although presented with numeric specificity, the financial forecasts reflect numerous estimates and assumptions of LaPortes management
made at the time they were prepared, and assume execution of various strategic initiatives that LaPorte is no longer pursuing in light of the merger. These and the other estimates and assumptions underlying the financial forecasts involve judgments
with respect to, among other things, the future interest rate environment and other economic, competitive, regulatory, and financial market conditions and future business decisions that may not be realized and that are inherently subject to
significant business, economic, competitive, and regulatory uncertainties and contingencies, including, among other things, the inherent uncertainty of the business and economic conditions affecting the industry in which LaPorte operates, and the
risks and uncertainties described under
Risk Factors
beginning on page 20 and
Cautionary Note About Forward-Looking Statements
beginning on page 25, all of which are difficult to predict and many of which are
outside the control of LaPorte and will be beyond the control of the combined company. There can be no assurance that the underlying assumptions would prove to be accurate or that the projected results would be realized, and actual results likely
would differ materially from those reflected in the financial forecasts, whether or not the merger is completed. Further, these assumptions do not include all potential actions that management could or might have taken during these time periods.
The inclusion in this proxy statement/prospectus of the nonpublic unaudited prospective financial information below should not be
regarded as an indication that LaPorte, Horizon, their respective boards of directors, or Raymond James considered, or now consider, these projections and forecasts to be a reliable predictor of future results. The financial forecasts are not fact
and should not be relied upon as being necessarily indicative of future results, and this information should not be relied on as such. In addition, this information represents LaPorte managements evaluation at the time it was prepared of
certain measures of LaPortes expected future financial performance on a stand-alone basis, assuming execution of certain strategic initiatives. The unaudited prospective financial information does not give effect to the merger, including the
impact of negotiating or executing the Merger Agreement, the expenses that may be incurred in connection with consummating the merger, the potential synergies that may be achieved by the combined company as a result of the merger, the effect on
either Horizon or LaPorte, as
61
applicable, of any business or strategic decision or action that has been or will be taken as a result of the Merger Agreement having been executed, or the effect of any business or strategic
decisions or actions which would likely have been taken if the Merger Agreement had not been executed, but which were instead altered, accelerated, postponed, or not taken in anticipation of the merger.
No assurances can be given that these financial forecasts and the underlying assumptions are reasonable or that, if they had been prepared as
of the date of this proxy statement/prospectus, similar assumptions would be used. In addition, the financial forecasts may not reflect the manner in which Horizon would operate the LaPorte business after the merger.
Horizon and LaPorte do not
intend to, and each disclaims any obligation to, make publicly available any update or other revision to this unaudited prospective financial information to reflect circumstances occurring since its preparation or to reflect the occurrence of
unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error, or to reflect changes in general economic or industry conditions.
The financial forecasts summarized in this section were prepared by and are the responsibility of the management of LaPorte. No independent
registered public accounting firm has examined, compiled, or otherwise performed any procedures with respect to the prospective financial information contained in these financial forecasts and, accordingly, no independent registered public
accounting firm has expressed any opinion or given any other form of assurance with respect thereto and no independent registered public accounting firm assumes any responsibility for the prospective financial information.
Further, the unaudited prospective financial information does not take into account the effect on LaPorte or LaPorte Savings Bank of any
possible failure of the merger to occur. None of LaPorte, LaPorte Savings Bank, or Raymond James, or their respective affiliates, officers, directors, advisors, or other representatives has made, makes, or is authorized in the future to make any
representation to any stockholder of LaPorte, or other person regarding LaPortes ultimate performance compared to the information contained in the unaudited prospective financial information or that the projected results will be achieved. The
inclusion of the unaudited prospective financial information herein should not be deemed an admission or representation by Horizon or LaPorte that it is viewed as material information of LaPorte or LaPorte Savings Bank particularly in light of the
inherent risks and uncertainties associated with such projections.
In light of the foregoing, and taking into account that the Special
Meeting will be held several months after the unaudited prospective financial information was prepared, as well as the uncertainties inherent in any forecasted information, LaPorte stockholders are cautioned not to place unwarranted reliance on such
information.
The following table presents select unaudited prospective financial data of LaPorte for the years ending December 31,
2016 through 2020 prepared by LaPortes management and provided to Horizon and Raymond James.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the year Ended December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
Total Assets
|
|
$
|
550,267
|
|
|
$
|
570,498
|
|
|
$
|
591,670
|
|
|
$
|
613,831
|
|
|
$
|
637,056
|
|
Total Loans, net
|
|
|
357,024
|
|
|
|
370,582
|
|
|
|
384,885
|
|
|
|
399,971
|
|
|
|
415,885
|
|
Total Deposits
|
|
|
357,618
|
|
|
|
373,711
|
|
|
|
390,528
|
|
|
|
408,101
|
|
|
|
426,466
|
|
Net Income
|
|
|
4,567
|
|
|
|
4,852
|
|
|
|
5,068
|
|
|
|
5,300
|
|
|
|
5,573
|
|
Earnings Per Share
|
|
|
0.82
|
|
|
|
0.87
|
|
|
|
0.91
|
|
|
|
0.95
|
|
|
|
1.00
|
|
Litigation Related to the Merger
On April 26, 2016, purported LaPorte stockholder Moshe Brodt filed a putative class action and derivative lawsuit on behalf of himself and
a putative class of public LaPorte stockholders, as well as on behalf of LaPorte derivatively, in the Superior Court of LaPorte County, Indiana. The lawsuit, which is captioned
Brodt v. Brady, et al.
, Case No. 46D03-1604-PL-0709, names
LaPorte as a nominal defendant and alleges state law breach of fiduciary duty claims against the LaPorte board of directors for, among other things, seeking to sell LaPorte through an allegedly defective process, for an unfair price, and on unfair
terms. The lawsuit seeks, among other things, to enjoin the consummation of the merger and damages. The complaint alleges that Horizon and LaPorte aided and
62
abetted the LaPorte directors breaches of fiduciary duty. Horizon and LaPorte strongly believe that the lawsuit is without merit and intend to vigorously defend against the pending claims.
63
THE MERGER
1.01
The Merger.
(a)
General Description
. Upon the terms and subject to the conditions of this Agreement, at the
Effective Time (as defined in
Article IX
), LPB shall merge with and into Horizon (the
Merger
).
A-1
Horizon shall survive the Merger (sometimes hereinafter referred to as the
Surviving Corporation
) and shall continue its corporate existence under the laws of the State of
Indiana pursuant to the provisions of and with the effect provided in the Indiana Business Corporation Law (the
IBCL
), as amended.
(b)
Name, Officers and Directors
. The name of the Surviving Corporation shall be Horizon Bancorp. Its principal office
shall be located at 515 Franklin Street, Michigan City, Indiana 46360. The officers of Horizon serving at the Effective Time shall continue to serve as the officers of the Surviving Corporation, until such time as their successors shall have been
duly elected and have qualified or until their earlier resignation, death or removal from office. The directors of the Surviving Corporation following the Effective Time shall be those individuals serving as directors of Horizon at the Effective
Time, until such time as their successors have been duly elected and have qualified or until their earlier resignation, death, or removal as a director;
provided, however
, that Horizon shall take all appropriate action so that, as of the
Effective Time and subject to and in accordance with the Bylaws of Horizon, Michele M. Thompson shall be appointed as a director of Horizon.
(c)
Articles of Incorporation and Bylaws
. The Articles of Incorporation and Bylaws of Horizon in existence at the Effective Time shall
remain the Articles of Incorporation and Bylaws of the Surviving Corporation following the Effective Time, until such Articles of Incorporation and Bylaws shall be further amended as provided by applicable law.
(d)
Effect of the Merger
. At the Effective Time, the title to all assets, real estate and other property owned by LPB shall vest in
Surviving Corporation as set forth in Indiana Code Section 23-1-40-6, as amended, without reversion or impairment. At the Effective Time, all liabilities of LPB shall become liabilities of the Surviving Corporation as set forth in Indiana Code
Section 23-1-40-6, as amended.
(e)
Integration
. Subject to the terms and conditions of this Agreement, the parties hereto
intend to effectuate at the Effective Time, or cause to be effectuated at the Effective Time, the Merger, pursuant to the terms of this Agreement and the IBCL, and this Agreement shall also constitute the plan of merger pursuant to
Indiana Code Section 23-1-40-1. If required, the parties agree to enter into a separate short-form plan of merger evidencing the terms required by Indiana Code Section 23-1-40-1. The parties agree to cooperate and to take all reasonable
actions prior to the Effective Time, including executing all requisite documentation, as may be reasonably necessary to effect the Merger in accordance with the terms and conditions hereof.
1.02
Reservation of Right to Revise Structure.
At Horizons election, the Merger may alternatively
be structured so that (a) LPB is merged with and into any other direct or indirect wholly-owned subsidiary of Horizon or (b) any direct or indirect wholly-owned subsidiary of Horizon is merged with and into LPB;
provided, however
,
that no such change shall: (1) alter or change the amount or kind of the Merger Consideration (as defined in
Section 2.01
) or the treatment of the holders of common stock, $0.01 par value per share, of LPB (the
LPB Common
Stock
) or the holders of options for LPB Common Stock, (2) prevent the parties from obtaining the opinions of counsel referred to in
Sections 7.01(h)
and
7.02(h)
or otherwise cause the transaction to fail to qualify for
the tax treatment described in
Section 1.03
or adversely affect the tax treatment of LPBs shareholders pursuant to this Agreement, or (3) materially impede or delay consummation of the transactions contemplated by this
Agreement. In the event of such a revision, the parties agree to execute an appropriate amendment to this Agreement (to the extent such amendment only changes the method of effecting the business combination and does not
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substantively affect this Agreement or the rights and obligations of the parties or their respective shareholders) in order to reflect such revision.
1.03
Tax Free Reorganization.
Horizon and LPB intend for the Merger to qualify as a reorganization within
the meaning of
Section 368(a)
and related sections of the Internal Revenue Code of 1986, as amended (the
Code
), and that this Agreement shall constitute a plan of reorganization for purposes of Sections 354
and 361 of the Code, and agree to cooperate and to take such actions as may be reasonably necessary to assure such result.
1.04
Absence of Control.
Subject to any specific provisions of the Agreement, it is the intent of the parties to this Agreement that neither Horizon nor LPB by reason of this Agreement shall be deemed (until consummation of the
transactions contemplated here) to control, directly or indirectly, the other party or any of its respective Subsidiaries (as defined in the introductory paragraphs to
Article III
and
Article IV
) and shall not exercise or be deemed to
exercise, directly or indirectly, a controlling influence over the management or policies of such other party or any of its respective Subsidiaries.
1.05
Bank Merger.
The parties will cooperate and use reasonable best efforts to effect the merger of LPSB
with and into Horizon Bank (the
Bank Merger
) immediately following the Effective Time pursuant to a merger agreement to be mutually agreed upon between the parties. At the effective time of the Bank Merger, the separate corporate
existence of LPSB will terminate. Horizon Bank will be the surviving bank (the
Surviving Bank
) and will continue its corporate existence under applicable law. The Articles of Association of Horizon Bank, as then in effect, will be
the Articles of Association of the Surviving Bank, the Bylaws of Horizon Bank, as then in effect, will be the Bylaws of the Surviving Bank. The directors of Horizon Bank following the effective time of the Bank Merger shall be those individuals
serving as directors of Horizon Bank at the effective time of the Bank Merger, until such time as their successors have been duly elected and have qualified or until their earlier resignation, death, or removal as a director;
provided,
however
, that Horizon Bank shall take all appropriate action so that, as of the effective time of the Bank Merger, and subject to and in accordance with the Bylaws of Horizon Bank, Michele M. Thompson shall be appointed as a director of Horizon
Bank. The officers of Horizon Bank serving at the effective time of the Bank Merger shall continue to serve as the officers of the Surviving Bank, until such time as their successors shall have been duly elected and have qualified or until their
earlier resignation, death or removal from office.
1.06
Investment Subsidiary Merger.
The parties
will cooperate and use reasonable best efforts to effect the merger of LSB Investments, Inc. (
LSBI
) with and into Horizon Investments, Inc. (
HII
and the
Investment Subsidiary Merger
,
respectively) immediately following the Effective Time pursuant to a merger agreement to be mutually agreed upon between the parties. At the effective time of the Investment Subsidiary Merger, the separate corporate existence of LSBI will terminate.
HII will be the surviving corporation and will continue its corporate existence under applicable law. The Articles of Incorporation of HII, as then in effect, will be the Articles of Incorporation of the surviving corporation, the Bylaws of HII, as
then in effect, will be the Bylaws of the surviving corporation, and the Board of Directors and officers of HII will continue as the Board of Directors and officers of the surviving corporation.
1.07
Real Estate Subsidiary Merger.
The parties will cooperate and use reasonable best efforts to effect
the merger of LSB Real Estate, Inc. (
LSBREI
) with and into Horizon Properties, Inc. (
HPI
and the
Real Estate Subsidiary Merger
, respectively) immediately following the Effective Time pursuant
to a merger agreement to be mutually agreed upon between the parties. At the effective time of the Real Estate Subsidiary Merger, the separate corporate existence of LSBREI will terminate.
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HPI will be the surviving corporation and will continue its corporate existence under applicable law. The Articles of Incorporation of HPI, as then in effect, will be the Articles of
Incorporation of the surviving corporation, the Bylaws of HPI, as then in effect, will be the Bylaws of the surviving corporation, and the Board of Directors and officers of HPI will continue as the Board of Directors and officers of the surviving
corporation.
1.08
Termination of Captive Insurance Program Participation.
Prior to the Effective
Time, LPB will use its commercially reasonable best efforts to take all steps necessary to terminate LPBs and its Subsidiaries participation in the captive insurance program through LSB Risk Management, Inc. (
LSBRMI
)
as of the Effective Time (the
LSBRMI Termination
).
1.09
No Dissenters Rights.
Shareholders of LPB are not entitled to any dissenters rights under Title 3 of the Maryland General Corporation Law, as amended. LPB shall take no action which would result in the loss of such exemption prior to the Effective Time.
ARTICLE II.
MANNER AND BASIS OF EXCHANGE OF STOCK
2.01
Merger Consideration.
Subject to the terms and conditions of this Agreement, at the Effective Time,
each share of LPB Common Stock issued and outstanding immediately prior to the Effective Time (other than shares held directly or indirectly by Horizon, except shares held in a fiduciary capacity or in satisfaction of a debt previously contracted,
if any; collectively, the
Exempt LPB Stock
) shall become and be converted into the right to receive in accordance with this
Article II
, at the election of the holder thereof, either (or a combination of): (i) 0.629
shares of Horizon common stock (the
Exchange Ratio
) (as adjusted in accordance with the terms of this Agreement), without par value (the aggregate stock consideration to be paid in the Merger is referred to herein as the
Stock Consideration
), or (ii) $17.50 in cash (the aggregate cash consideration to be paid in the Merger is referred to herein as the
Cash Consideration
) (with the Stock Consideration and the Cash
Consideration collectively referred to herein as the
Merger Consideration
);
provided, however
, that in the aggregate, sixty-five (65%) of LPBs Common Stock issued and outstanding immediately prior to the
Effective Time will be converted and exchanged for the Stock Consideration and, that in the aggregate, thirty-five (35%) of LPBs Common Stock issued and outstanding immediately prior to the Effective Time will be exchanged for the Cash
Consideration).
2.02
Election Procedures.
(a)
Cash and Stock Elections
. An election form and other appropriate and customary transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to certificates shall pass, only upon proper delivery of such certificates to Computershare, Inc., as Horizons stock transfer agent (the
Exchange Agent
)) in such form as
designated by Horizon and the Exchange Agent, and in such form as reasonably acceptable to LPB (the
Election Form
), shall be mailed prior to the anticipated Closing Date on such date as LPB and Horizon shall mutually agree upon
(the
Mailing Date
) to each holder of record of LPB Common Stock as of five (5) business days prior to the Mailing Date. Each Election Form shall permit the holder of record of LPB Common Stock (or in the case of nominee
record holders, the beneficial owner through proper instructions and documentation) to (i) elect to receive the Cash Consideration for all or a portion of such holders shares of LPB Common Stock (a
Cash Election
),
(ii) elect to receive the Stock Consideration for all or a portion of such holders shares of LPB Common Stock (a
Stock Election
), (iii) elect to receive Stock
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Consideration for a portion of such holders LPB Common Stock and Cash Consideration for the remaining portion of such holders LPB Common Stock (the
Cash/Stock
Consideration
) (an election to receive the Cash/Stock Consideration is referred to as a
Mixed Election
), or (iv) make no election with respect to the receipt of the Cash Consideration or the Stock Consideration (a
Non-Election
);
provided, however
, that, notwithstanding any other provision of this Agreement to the contrary, 65% of the outstanding shares of LPB Common Stock (the
Stock Conversion Number
) shall be
converted into the Stock Consideration and the remaining shares of LPB Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into the Cash Consideration (the
Cash Consideration Number
).
Shares of LPB Common Stock as to which a Cash Election (including as part of a Mixed Election) has been made are referred to herein as
Cash Election Shares
. Shares of LPB Common Stock as to which a Stock Election (including as
part of a Mixed Election) has been made are referred to herein as
Stock Election Shares
. Shares of LPB Common Stock as to which no election has been made (or as to which an Election Form is not properly completed and returned in a
timely fashion) are referred to herein as
Non-Election Shares
. The aggregate number of shares of LPB Common Stock with respect to which a Stock Election has been made is referred to herein as the
Stock Election
Number
.
(b)
Delivery of Election
. To be effective, a properly completed Election Form shall be received by the Exchange
Agent on or before 5:00 p.m., Eastern Time, on such date as mutually agreed upon between Horizon and LPB (which date shall be at least five (5) business days prior to the anticipated Closing Date and shall be publicly announced by Horizon as
soon as practicable prior to such date)) (the
Election Deadline
), accompanied by the certificates representing LPB Common Stock as to which such Election Form is being made or by an appropriate guarantee of delivery of such
certificates, as set forth in the Election Form, from a member of any registered national securities exchange or a commercial bank or trust company in the United States;
provided, however
, that any such guarantee shall be subject to the
condition that such certificates are in fact delivered to the Exchange Agent by the time required in such guarantee of delivery and failure to deliver the certificates covered by such guarantee of delivery within the time set forth in such guarantee
shall be deemed to invalidate any otherwise properly made election, unless otherwise determined by Horizon, in its sole discretion. For shares of LPB Common Stock (if any) held in book entry form, Horizon shall establish procedures for delivery of
such shares, which procedures shall be reasonably acceptable to LPB. If a holder of LPB Common Stock either (i) does not submit a properly completed Election Form in a timely fashion or (ii) revokes the holders Election Form prior to
the Election Deadline (without later submitting a properly completed Election Form prior to the Election Deadline), the shares of LPB Common Stock held by such holder shall be designated Non-Election Shares. All Election Forms shall automatically be
revoked, and all certificates returned, if the Exchange Agent is notified in writing by Horizon and LPB that this Agreement has been terminated. Subject to the terms of this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change has been properly or timely made and to disregard immaterial defects in any Election Form, and any good faith decisions of the Exchange Agent regarding such matters shall
be binding and conclusive. Neither Horizon nor the Exchange Agent shall be under any obligation to notify any Person of any defect in an Election Form.
(c)
Allocation
. The allocation among the holders of shares of LPB Common Stock of rights to receive the Cash Consideration and the
Stock Consideration will be made as set forth in this
Section 2.02(c)
(with the Exchange Agent to determine, consistent with
Section 2.02(a)
, whether fractions of
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Cash Election Shares, Stock Election Shares or Non-Election Shares, as applicable, shall be rounded up or down).
(i)
Aggregate Stock Consideration Oversubscribed
. If the Stock Election Number exceeds the Stock Conversion Number, then
all Cash Election Shares and all Non-Election Shares shall be converted into the right to receive the Cash Consideration, and, subject to
Section 2.05
hereof, each holder of Stock Election Shares will be entitled to receive the Stock
Consideration in respect of that number of Stock Election Shares held by such holder equal to the product obtained by multiplying (x) the number of Stock Election Shares held by such holder by (y) a fraction, the numerator of which is the
Stock Conversion Number and the denominator of which is the Stock Election Number, with the remaining number of such holders Stock Election Shares being converted into the right to receive the Cash Consideration;
(ii)
Aggregate Stock Consideration Undersubscribed
. If the Stock Election Number is less than the Stock Conversion
Number (the amount by which the Stock Conversion Number exceeds the Stock Election Number being referred to herein as the
Shortfall Number
), then all Stock Election Shares shall be converted into the right to receive the Stock
Consideration and the Non-Election Shares and the Cash Election Shares shall be treated in the following manner:
(A)
Adjustment to Non-Election Share Allocation Only.
If the Shortfall Number is less than or equal to the number of Non-Election Shares, then all Cash Election Shares shall be converted into the right to receive the Cash Consideration and,
subject to
Section 2.05
hereof, each holder of Non-Election Shares shall receive the Stock Consideration in respect of that number of Non-Election Shares held by such holder equal to the product obtained by multiplying (x) the
number of Non-Election Shares held by such holder by (y) a fraction, the numerator of which is the Shortfall Number and the denominator of which is the total number of Non-Election Shares, with the remaining number of such holders
Non-Election Shares being converted into the right to receive the Cash Consideration; or
(B)
Adjustment to Both
Non-Election Share Allocation and Cash Election Share Allocation.
If the Shortfall Number exceeds the number of Non-Election Shares, then all Non-Election Shares shall be converted into the right to receive the Stock Consideration, and, subject
to
Section 2.05
hereof, each holder of Cash Election Shares shall receive the Stock Consideration in respect of that number of Cash Election Shares equal to the product obtained by multiplying (x) the number of Cash Election Shares
held by such holder by (y) a fraction, the numerator of which is the amount by which the Shortfall Number exceeds the total number of Non-Election Shares and the denominator of which is the total number of Cash Election Shares, with the
remaining number of such holders Cash Election Shares being converted into the right to receive the Cash Consideration.
2.03
Treatment of LPB Equity Awards.
(a) All options to purchase LPB Common Stock outstanding immediately prior to the Election
Deadline, whether or not vested, shall be converted into the right to receive from Horizon, at the Effective Time, an amount in cash equal to $17.50 minus the per share exercise price for each share of LPB Common Stock subject to an option;
provided, however
, that there shall be withheld from such cash payment any taxes required to be withheld by applicable law. LPB shall use its best efforts to
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obtain from each holder of an option or agreement to the treatment of their options in the manner contemplated by this Section on or before the Election Deadline by executing and delivering to
Horizon an agreement in the same form as
Exhibit 2.03
attached hereto, and LPB shall amend any such plan accordingly (or take such other action as is necessary to cause all outstanding LPB options to terminate as of the Effective Time) prior
to the Effective Time. Each such option shall be cancelled and cease to exist by virtue of such payment. Execution by every holder of options shall not be a condition precedent to consummation of the transactions contemplated herein.
(b) At the Effective Time, each award in respect of a share of LPB Common Stock subject to vesting or other lapse restriction granted under a
LPB Plan, whether or not vested, that is outstanding immediately prior to the Effective Time (a
LPB Restricted Stock Award
) shall fully vest and be cancelled and converted automatically into the right to receive the Merger
Consideration in respect of each share of LPB Common Stock underlying such LPB Restricted Stock Award. Horizon shall issue the consideration described in this
Section 2.03(b)
, less applicable tax withholdings, within five
(5) business days following the Closing Date.
2.04
Anti-Dilution Adjustments
.
If
Horizon changes (or establishes a record date for changing) the number of shares of Horizon common stock issued and outstanding prior to the Effective Time by way of a stock split, stock dividend, or similar transaction with respect to the
outstanding Horizon common stock, and the record date therefor shall be prior to the Effective Time, the Exchange Ratio shall be adjusted so the shareholders of LPB at the Effective Time shall receive, in the aggregate, such number of shares of
Horizon common stock representing the same percentage of the outstanding shares of Horizon common stock as would have been represented by the number of shares of Horizon common stock the shareholders of LPB would have received if any of the
foregoing actions had not occurred. No adjustment shall be made under this
Section 2.04
solely as a result of Horizon changing its cash dividend levels or issuing additional shares of Horizon common stock provided it receives value for
such shares or such shares are issued in connection with a Horizon employee benefit plan or similar plan.
2.05
No Fractional Shares.
Notwithstanding any other provision in this Agreement, no fractional shares
of Horizon common stock and no certificates or scrip therefor, or other evidence of ownership thereof, will be issued in the Merger; instead, Horizon shall pay to each holder of LPB Common Stock who otherwise would be entitled to a fractional share
of Horizon common stock an amount in cash (without interest) determined by multiplying such fraction by average of the daily closing sales prices of a share of Horizons common stock, rounded to the nearest cent, during the fifteen
(15) consecutive trading days immediately preceding the second business day prior to the Closing Date;
provided, however
, that closing sales prices shall only be used for days during which such shares are actually traded on the NASDAQ
Global Select Market.
2.06
Exchange Procedures.
(a) At and after the Effective Time, each physical certificate or book entry account statement evidencing outstanding shares of LPB Common
Stock (each an
Old Certificate
) (other than the Exempt LPB Stock) shall represent only the right to receive the Merger Consideration in accordance with the terms of this Agreement. Prior to the Closing Date, Horizon shall provide
the Exchange Agent with the irrevocable authorization to issue a sufficient number of shares of Horizon common stock to be used to issue the aggregate Stock Consideration to holders of LPB Common Stock and deposit, or cause to be deposited, with the
Exchange Agent, an amount in cash sufficient to pay the aggregate Cash
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Consideration payable to holders of LPB Common Stock (together with cash for any fractional shares pursuant to
Section 2.05
).
(b) As promptly as practicable after the Effective Time, but no later than five (5) business days after the Effective Time (and provided
LPB has delivered to the Exchange Agent all information which is necessary for the Exchange Agent to perform its obligations hereunder), the Exchange Agent shall mail to each holder of LPB Common Stock who did not surrender, or who improperly
surrendered, such shareholders Old Certificates to the Exchange Agent, a letter of transmittal providing instructions to the LPB shareholder as to the transmittal to the Exchange Agent of the Old Certificates in exchange for the issuance of
the Merger Consideration applicable thereto in exchange for the Old Certificates pursuant to the terms of this Agreement.
(c) Horizon
shall cause a book entry account statement representing that number of whole shares of Horizon common stock that each holder of LPB Common Stock has the right to receive pursuant to
Section 2.01
and
2.02
and/or a check in the
amount of such holders proportionate share of the Cash Consideration, as applicable, and any cash in lieu of fractional shares or dividends or distributions which such holder shall be entitled to receive, if any, to be delivered to such
shareholder as soon as reasonably practicable after delivery to Horizon of the Old Certificates (or bond or other indemnity satisfactory to Horizon if any of such Old Certificates are lost, stolen or destroyed) owned by such shareholder accompanied
by a properly completed and executed letter of transmittal, in the form and substance satisfactory to Horizon, and any other documents required by this Agreement or reasonably requested by Horizon or the Exchange Agent. No interest will be paid on
any Merger Consideration that any such holder shall be entitled to receive pursuant to this
Article II
upon such delivery.
(d) No
dividends or other distributions on Horizon common stock with a record date occurring after the Effective Time shall be paid to the holder of any unsurrendered Old Certificate representing shares of LPB Common Stock converted in the Merger into the
right to receive shares of Horizon common stock until the holder thereof surrenders such Old Certificates in accordance with this
Article II
. After becoming so entitled in accordance with this
Section 2.06
, the record holder
thereof also shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of Horizon common stock such holder had the right to receive upon
surrender of the Old Certificate.
(e) The stock transfer books of LPB shall be closed immediately prior to the Effective Time and from
and after the Effective Time there shall be no transfers on the stock transfer records of LPB of any shares of LPB Common Stock. If, after the Effective Time, Old Certificates are presented to Horizon, 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
Article II
.
(f) Horizon shall be entitled to rely upon LPBs stock transfer books to establish the identity of those individuals, partnerships,
corporations, trusts, joint ventures, organizations or other entities (each, a
Person
) 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 Old Certificate, Horizon shall be entitled to deposit any Merger Consideration represented thereby in escrow with an independent third party selected by Horizon and thereafter be relieved from any and all
liability with respect to any claims thereto.
(g) If any Old Certificate shall have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the Person claiming such Old Certificate to be lost, stolen, or destroyed and, if
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required by Horizon, the posting by such Person of a bond or other indemnity satisfactory to Horizon as indemnity against any claim that may be made against it with respect to such Old
Certificate, Horizon will issue in exchange for such affidavit of lost, stolen, or destroyed Old Certificate, the Merger Consideration deliverable in respect thereof pursuant to, and in accordance with, the other terms and conditions of this
Article II
.
(h) Notwithstanding anything in this Agreement to the contrary, at the Effective Time, all shares of LPB Common Stock
that are owned by Horizon (other than shares held in a fiduciary capacity or in satisfaction of a debt previously contracted) shall be cancelled and shall cease to exist, and no stock of Horizon or other consideration shall be exchanged therefor.
(i) Notwithstanding the foregoing, no party hereto shall be liable to any former holder of LPB Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.
(j) If outstanding Old Certificates
are not surrendered or the payment for them is not claimed prior to the date on which the Merger Consideration payable therefor would otherwise escheat to, or become the property of any governmental unit or agency, the unclaimed Merger Consideration
shall, to the extent permitted by abandoned property and any other applicable law, become the property of Horizon (and to the extent not in its possession shall be delivered to it), free and clear of all claims or interest of any Person previously
entitled thereto. Any former shareholder of LPB who has not theretofore complied with this
Article II
shall thereafter look only to the Surviving Corporation for payment of the Merger Consideration and any unpaid dividends and distributions
on Horizons Common Stock deliverable in respect of each former share of LPB Common Stock such shareholder holds as determined pursuant to this Agreement, in each case, without any interest thereon. Neither the Exchange Agent nor any party to
this Agreement shall be liable to any holder of shares of LPB Common Stock for any Merger Consideration paid to a public official pursuant to applicable abandoned property, escheat or similar laws.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF LPB
On or prior to the date hereof, LPB has delivered to Horizon a schedule (the
LPB Disclosure Schedule
) setting forth, among
other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in this
Article III
or to one or more of its covenants contained in
Article V
. However, for purposes of the LPB Disclosure Schedule, any item disclosed on any schedule therein is deemed to be fully disclosed with respect to other sections of
this Agreement under which such item may be relevant but only to the extent that it is reasonably clear on the face of such schedule that such item applies to such other section of this Agreement, and such item is described in sufficient detail to
enable Horizon to identify the items to which it applies.
For the purpose of this Agreement, and in relation to LPB, a
Material
Adverse Effect
means any effect that (i) is material and adverse to the results of operations, properties, assets, liabilities, conditions (financial or otherwise), value or business of LPB and its Subsidiaries (as defined below in
this introduction to
Article III
) on a consolidated basis, or (ii) would materially impair the ability of LPB or any of its Subsidiaries to perform its obligations under this Agreement or any related agreement or otherwise materially
threaten or materially impede the consummation of the Merger and the other
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transactions contemplated by this Agreement;
provided, however
, that Material Adverse Effect on LPB shall not be deemed to include the impact of (a) changes in banking and similar
laws of general applicability to banks or their holding companies or interpretations thereof by courts or governmental authorities, (b) changes in United States generally accepted accounting principles (
GAAP
) or regulatory
accounting requirements applicable to banks or their holding companies generally, (c) effects of any action or omission taken with the prior written consent of Horizon or at the direction of Horizon, (d) the expenses incurred by LPB and
LPSB in negotiating, documenting, effecting and consummating the transactions contemplated by this Agreement, (e) the announcement of this Agreement and the transactions contemplated hereby, and compliance with this Agreement on the business,
financial condition or results of operations of LPB and its Subsidiaries, (f) any changes in general economic or capital market conditions affecting banks and their holding companies generally, including, without limitation, changes in interest
rates, and (g) changes in national or international political or social conditions including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any
military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, unless it uniquely affects either
or both of the parties or any of their Subsidiaries, taken as a whole.
For the purpose of this Agreement, and in relation to LPB and its
Subsidiaries,
knowledge
means those facts that are actually known by the officers of LPB and its Subsidiaries listed on
Section 3.0
of the LPB Disclosure Schedules. Additionally, for the purpose of this Agreement, and
in relation to LPB, its
Subsidiaries
shall mean any entity which is required to be consolidated with LPB for financial reporting purposes pursuant to GAAP.
Accordingly, LPB hereby represents and warrants to Horizon as follows, except as set forth in the LPB Disclosure Schedule:
3.01
Organization and Authority.
(a) LPB is a corporation duly organized and validly existing under the laws of the state of Maryland and is a registered savings and loan
holding company under the HOLA. LPB has full power and authority (corporate and otherwise) to own and lease its properties as presently owned and leased and to conduct its business in the manner and by the means utilized as of the date hereof.
Section 3.01(a)
of the LPB Disclosure Schedules sets forth a complete list of LPBs Subsidiaries. Except as provided in
Section 3.01(a)
of the LPB Disclosure Schedules, LPB owns directly no voting stock or equity
securities of any corporation, partnership, association or other entity.
(b) LPSB is an Indiana state chartered savings bank existing
under the laws of the State of Indiana. LPSB has full power and authority (corporate and otherwise) to own and lease its properties as presently owned and leased and to conduct its business in the manner and by the means utilized as of the date
hereof. Except as set forth in
Section 3.01(b)
of the LPB Disclosure Schedules, no Subsidiary owns voting stock or equity securities of any corporation, partnership, association or other entity.
3.02
Authorization.
(a) LPB has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder, subject to the
fulfillment of the conditions precedent set forth in
Sections 7.02(e)
and
(f)
hereof. This Agreement and its execution and delivery by LPB have been duly authorized and approved by the Board of Directors of LPB and, assuming the
accuracy of the
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representation contained in
Section 4.02(a)
, constitutes a valid and binding obligation of LPB, subject to the terms and conditions hereof, and is enforceable in accordance with its
terms, except to the extent limited by general principles of equity and public policy and by bankruptcy, insolvency, fraudulent transfer, reorganization, liquidation, moratorium, readjustment of debt or other laws of general application relating to
or affecting the enforcement of creditors rights.
(b) Except as set forth in
Section 3.02(b)
of the LPB Disclosure
Schedule, neither the execution of this Agreement nor consummation of the Merger contemplated hereby: (i) conflicts with or violates the Articles of Incorporation or Bylaws of LPB or the charter documents of any of LPBs Subsidiaries;
(ii) conflicts with or violates any applicable local, state, federal or foreign law, statute, ordinance, rule or regulation (provided that the approvals of or filings with applicable government regulatory agencies or authorities required for
consummation of the Merger are obtained) or any court or administrative judgment, order, injunction, writ or decree; (iii) conflicts with, results in a breach of or constitutes a default under any note, bond, indenture, mortgage, deed of trust,
license, lease, contract, agreement, arrangement, commitment or other instrument to which LPB or any of its Subsidiaries is a party or by which LPB or any of its Subsidiaries is subject or bound; (iv) results in the creation of or gives any
Person the right to create any lien, charge, claim, encumbrance or security interest, or results in the creation of any other rights or claims of any other party (other than Horizon) or any other adverse interest, upon any right, property or asset
of LPB or any of its Subsidiaries; or (v) terminates or gives any Person the right to terminate, accelerate, amend, modify or refuse to perform under any note, bond, indenture, mortgage, agreement, contract, lease, license, arrangement, deed of
trust, commitment or other instrument to which LPB or any of its Subsidiaries is bound or with respect to which LPB or any of its Subsidiaries is to perform any duties or obligations or receive any rights or benefits, except for such violations,
conflicts, breaches or defaults under clause (iii), (iv) or (v) hereof that individually or in the aggregate would reasonably be expected to have a Material Adverse Effect on LPB.
(c) Other than in connection or in compliance with the provisions of the applicable federal and state banking, securities, antitrust and
corporation statutes, all as amended, and the rules and regulations promulgated thereunder, no notice to, filing with, exemption by or consent, authorization or approval of any governmental agency or body is necessary for consummation of the Merger
by LPB.
(d) The transactions contemplated by this Agreement are not subject to the requirements of any moratorium,
control share, fair price, affiliate transactions, business combination or other antitakeover laws and regulations of the State of Maryland, including the provisions of the Maryland General Corporation
Law applicable to LPB.
3.03
Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of LPB consists of 100,000,000 shares of LPB Common Stock, $0.01 par value
per share, 5,580,115 shares of which are issued and outstanding (including 119,035.8417 allocated shares of LPB Common Stock and 359,773.3888 unallocated shares of LPB Common Stock held by the LPSB ESOP (as defined in
Section 3.15(k)
,
and 25,152 shares of restricted common stock), and 50,000,000 shares of preferred stock, $0.01 par value, none of which are issued and outstanding. As of the date of this Agreement, and as described in
Section 3.03(a)
of the LPB
Disclosure Schedule, there are options to purchase 579,934 shares of LPB Common Stock outstanding, all of which are vested (or will, as of the Effective Time, be vested) and issuable as shares of LPB Common Stock (the
Options
). As
of the date of this Agreement, the Options have a weighted average exercise price of $9.40 per share. Such issued and outstanding shares of LPB Common Stock and the Options have been duly and validly authorized by all necessary
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corporate action of LPB, are validly issued, fully paid and nonassessable and have not been issued in violation of any pre-emptive rights. LPB has no capital stock authorized, issued or
outstanding other than as described in this
Section 3.03(a)
and has no intention or obligation to authorize or issue any other capital stock or any additional shares of stock or securities convertible into stock. Each share of LPB Common
Stock is entitled to one vote per share.
(b) Except as set forth in
Section 3.03(b)
of the LPB Disclosure Schedule, all of
the issued and outstanding shares of capital stock or other equity ownership interests of each Subsidiary of LPB are owned by LPB, directly or indirectly, free and clear of all liens, pledges, charges, claims, encumbrances, restrictions, security
interests, options and pre-emptive rights and of all other rights or claims of any other Person with respect thereto.
(c) Other than the
Options and except as set forth in
Section 3.03(c)
of the LPB Disclosure Schedule, there are no options, warrants, commitments, calls, puts, plans, agreements, understandings, arrangements or subscription rights relating to any shares of
capital stock of LPB (whether outstanding or to be issued) or any shares of capital stock of LPBs Subsidiaries (whether outstanding or to be issued), or any securities convertible into or representing the right to purchase or otherwise acquire
any common stock or debt securities of LPB or its Subsidiaries, by which LPB is or may become bound or may, or is required to, issue any additional securities of LPB or any Subsidiary. LPB does not have any outstanding contractual or other
obligation to repurchase, redeem or otherwise acquire any of the issued and outstanding shares of LPB Common Stock. To LPBs knowledge, there are no voting trusts, voting arrangements, buy-sell agreements or similar arrangements affecting the
capital stock of LPB or its Subsidiaries.
(d) LPB has no knowledge of any Person which beneficially owns (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934 (the
1934 Act
)) 10% or more of the outstanding shares of LPB Common Stock.
3.04
Organizational Documents.
The Articles of Incorporation and Bylaws of LPB and any similar governing documents for each of LPBs Subsidiaries, representing true, accurate and complete copies of such corporate documents in effect
as of the date of this Agreement have been previously delivered to Horizon.
3.05
Compliance with
Law.
(a) None of LPB or any of its Subsidiaries is currently in material violation of, and since January 1, 2011, none has been
in material violation of, any applicable local, state, federal or foreign law, statute, regulation, rule, ordinance, order, restriction or requirement, and none is in violation of any order, injunction, judgment, writ or decree of any court or
government agency or body (collectively, the
Law
) except where such violation would not have a Material Adverse Effect on LPB. LPB and its Subsidiaries possess and hold all licenses, franchises, permits, certificates and other
authorizations necessary for the continued conduct of their business without interference or interruption, except where the failure to possess and hold the same would not have a Material Adverse Effect on LPB, and such licenses, franchises, permits,
certificates and authorizations are transferable (to the extent required) to Horizon at the Effective Time without any material restrictions or limitations thereon or the need to obtain any consents of government agencies or other third parties
other than as set forth in this Agreement.
(b)
Section 3.05(b)
of the LPB Disclosure Schedule sets forth, as of the date
hereof, a schedule of all officers (vice presidents and higher) and directors of LPB who have outstanding loans
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from LPB or any of its Subsidiaries, and there has been no default on, or forgiveness or waiver of, in whole or in part, any such loan during the two (2) years immediately preceding the date
hereof.
(c) Since the enactment of the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act
) and LPBs
incorporation, LPB has been and is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act.
(d)
All of the existing offices and branches of LPSB have been legally authorized and established in accordance with all applicable federal, state and local laws, statutes, regulations, rules, ordinances, orders, restrictions and requirements, except as
would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on LPB. LPSB has no approved but unopened offices or branches.
3.06
Accuracy of Information Provided to Horizon.
LPB agrees that the information concerning LPB or any
of its Subsidiaries that is provided or to be provided by LPB to Horizon for inclusion or that is included in the Registration Statement or Proxy Statement (each as defined in
Section 6.02
), and any other documents to be filed with any
regulatory authority or governmental entity in connection with the Merger and the other transactions contemplated by this Agreement will: (a) at the respective times such documents are filed and, in the case of the Registration Statement, when
it becomes effective and, with respect to the Proxy Statement, when mailed, not be false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; or (b) in the case of the Proxy Statement or any amendment thereof or supplement thereto, at the time of the LPB Shareholders Meeting, not be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the meeting in connection with which the Proxy Statement shall be mailed.
Notwithstanding the foregoing, LPB shall have no responsibility for the truth or accuracy of any information with respect to Horizon or any of its Subsidiaries or any of their affiliates contained in the Registration Statement or the Proxy Statement
or in any document submitted to, or other communication with, any regulatory agency or governmental entity.
3.07
Litigation and Pending Proceedings.
(a) Except for lawsuits described in
Section 3.07(a)
of the LPB Disclosure Schedule and lawsuits involving collection of delinquent
accounts, there are no material claims, actions, suits, proceedings, mediations, arbitrations or investigations pending or, to the knowledge of LPB, threatened against LPB or any of its Subsidiaries, and to LPBs knowledge there is no basis for
any claim, action, suit, proceeding, litigation, arbitration or investigation against LPB or any of its Subsidiaries that individually or in the aggregate would reasonably be expected to have a Material Adverse Effect on LPB.
(b) Neither LPB nor any of its Subsidiaries is: (i) subject to any outstanding judgment, order, writ, injunction or decree of any court,
arbitration panel or governmental agency or authority; (ii) presently charged with or under governmental investigation with respect to, any actual or alleged violations of any law, statute, rule, regulation or ordinance; or (iii) the
subject of any pending or, to the knowledge of LPB, threatened proceeding by any government regulatory agency or authority having jurisdiction over their respective business, assets, capital, properties or operations.
3.08
Financial Statements and Reports.
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(a) LPB has previously delivered to Horizon copies of the following financial statements and
reports of LPB and its Subsidiaries, including the notes thereto (collectively, the
LPB Financial Statements
):
(i) Consolidated balance sheets and the related consolidated statements of earnings, consolidated statements of cash flows, and
consolidated statements of changes in shareholders equity of LPB as of and for the fiscal years ended December 31, 2012, 2013, and 2014;
(ii) the unaudited interim consolidated financial statements of LPB for the nine months ended September 30, 2015; and
(iii) Call Reports (
Call Reports
) for LPSB for the periods ending on December 31, 2012, 2013, 2014, and
for the three months ended September 30, 2015.
(b) The LPB Financial Statements described in clauses (i) and (ii) above
present fairly in all material respects the consolidated financial position of LPB as of and at the dates shown and the consolidated results of operations, (if presented) cash flows and (if presented) changes in shareholders equity for the
periods covered thereby and are complete, correct, represent bona fide transactions, and have been prepared from the books and records of LPB and its Subsidiaries. The LPB Financial Statements described in clause (i) above are audited financial
statements and have been prepared in conformance with GAAP, except as may otherwise be indicated in any accountants notes or reports with respect to such financial statements.
3.09
Material Contracts.
(a) As of the date of this Agreement, and except as disclosed by
Section 3.09(a)
of the LPB Disclosure Schedule, neither LPB nor
any of its Subsidiaries, nor any of their respective assets, businesses, or operations, is a party to, or is bound or affected by, or receives benefits under (collectively, the
Material Contracts
):
(i) any contract relating to the borrowing of money in excess of $100,000 by LPB or any of its Subsidiaries or the guarantee by
LPB or any of its Subsidiaries of any such obligation (other than FHLB of Indianapolis advances, contracts pertaining to fully-secured securities repurchase agreements, trade payables, bankers acceptances and contracts relating to borrowings
or guarantees made in the ordinary course of business),
(ii) any contract containing covenants that limit the ability of
LPB or any of its Subsidiaries to compete in any line of business or with any Person, or to hire or engage the services of any Person, or that involve any restriction of the geographic area in which, or method by which, LPB or any of its
Subsidiaries may carry on its business (other than as may be required by Law (as defined in
Section 3.05(a)
) or any Governmental Authority (as defined in
Section 5.13)
), or any contract that requires it or any of its
Subsidiaries to deal exclusively or on a sole source basis with another party to such contract with respect to the subject matter of such contract,
(iii) any contract for, with respect to, or that contemplates, a possible merger, consolidation, reorganization,
recapitalization, joint venture, or other business combination, or asset sale or sale of equity securities not in the ordinary course of business consistent with past practice, with respect to LPB or any of its Subsidiaries,
(iv) any lease of real or personal property providing for total aggregate lease payments by or to LPB or its Subsidiaries
during the remaining term of the agreement in excess of $50,000
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or having a remaining term in excess of two years, other than financing leases entered into in the ordinary course of business in which LPB or any of its Subsidiaries is the lessor,
(v) any contract that involves total aggregate expenditures or receipts by LPB or any of its Subsidiaries in excess of $100,000
during the remaining term of the agreement or having a remaining term in excess of two years, excluding agreements relating to loans and deposits with LPSB customers;
(vi) each material licensing agreement or other contract with respect to patents, trademarks, copyrights, or other intellectual
property, including software agreements (other than off the shelf and similar software generally available to the public) and including agreements with current or former employees, consultants or contractors regarding the appropriation or the
nondisclosure of any of its intellectual property;
(vii) all Warehouse Agreements (as defined in
Section 3.09(c)
below); or
(viii) any other document, instrument or agreement that is required to be filed as
an exhibit to any LPB SEC Report (as defined in
Section 3.36
) (pursuant to Items 601(b)(4) or 601(b)(10) of Regulation S K under the 1933 Act) that has not been filed as an exhibit to, or incorporated by reference in, LPBs SEC
Reports filed prior to the date of this Agreement. For purposes of this
Section 3.09
, any document, instrument or agreement that has been, or is required to be, filed as an exhibit to any LPB SEC Report (as described above) shall be
deemed a Material Contract.
(b) With respect to each of LPBs Material Contracts: (i) each such Material Contract
is in full force and effect; (ii) neither LPB nor any of its Subsidiaries is in material default thereunder, as such term or concept is defined in each such Material Contract; (iii) neither LPB nor any of its Subsidiaries has repudiated or
waived any material provision of any such Material Contract; (iv) to LPBs knowledge, no other party to any such Material Contract is in default or otherwise not in compliance with any material term or condition of any such Material
Contract; and (v) a true and complete copy of each such Material Contract has been previously delivered to Horizon.
(c) With respect
to each of LPBs Material Contracts under which LPB provides a revolving credit facility to a borrower for the purpose of originating one to four family residential mortgage loans (each, a
Mortgage Loan
), including but not
limited to, each mortgage loan warehouse agreement, mortgage loan participation purchase and sale agreement, mortgage loan repurchase agreement, and any similar agreement (each, a
Warehouse Agreement
):
(i) to LPBs knowledge, the borrower has not committed fraud in the origination of any Mortgage Loan financed with an
advance made pursuant thereto;
(ii) to LPBs knowledge, each Mortgage Loan funded pursuant thereto is subject to a
valid and enforceable purchase commitment issued by a secondary market purchaser and was originated in accordance with the underwriting standards and investor guidelines of such purchaser, and is otherwise saleable on the secondary market; and
(iii) to LPBs knowledge, the borrower holds a perfected first-lien security interest in the note, mortgage and mortgage
file relating to each Mortgage Loan funded pursuant thereto, subject only to the security interest of LPB in such collateral.
(d) Except
as disclosed in
Section 3.11(a)
of the LPB Disclosure Schedule, neither LPB nor any of its Subsidiaries have entered into any interest rate swaps, caps, floors, option agreements, futures
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and forward contracts, or other similar risk management arrangements, whether entered into for LPBs own account or for the account of one or more of its Subsidiaries or their respective
customers.
3.10
Absence of Undisclosed Liabilities.
Except (i) as provided in the LPB
Financial Statements or LPB SEC Reports (as defined in
Section 3.36), (ii)
for unfunded loan commitments and obligations on letters of credit to customers of LPBs Subsidiaries made in the ordinary course of business,
(iii) for trade payables incurred in the ordinary course of business, (iv) for the transactions contemplated by this Agreement, and (v) any other transactions which would not result in a material liability or have a material impact on
LPB; none of LPB or any of its Subsidiaries has any obligation, agreement, contract, commitment, liability, lease or license made outside of the ordinary course of business, nor, to LPBs knowledge, does there exist any circumstances resulting
from transactions effected or events occurring on or prior to the date of this Agreement or from any action omitted to be taken during such period which could reasonably be expected to result in any such material obligation, agreement, contract,
commitment, liability, lease or license. None of LPB or any of its Subsidiaries is delinquent in the payment of any material amount due pursuant to any trade payable, and each has properly accrued for such payables in accordance with GAAP.
3.11
Title to Properties and Environmental Laws.
(a)
Section 3.11(a)
of the LPB Disclosure Schedule includes a list of all real property owned (including other real estate owned
(
OREO
)) and leased by LPB or any Subsidiary. LPB or one of its Subsidiaries, as the case may be, has marketable title in fee simple to all owned real property (including, without limitation, all real property used as bank premises
and all OREO); marketable title to all material personal property reflected in the LPB Financial Statements as of September 30, 2015, other than personal property disposed of in the ordinary course of business since September 30, 2015; the
right to use by valid and enforceable written lease or contract all other real property which LPB or any of its Subsidiaries uses in its respective business; marketable title to, or right to use by terms of a valid and enforceable written lease or
contract, all other tangible and intangible property used in its respective business to the extent material thereto; and marketable title to all material property and assets acquired (and not disposed of) or leased since September 30, 2015. All
of such owned real estate properties and all other non-real estate assets are owned by LPB or its Subsidiaries free and clear of all land or conditional sales contracts, mortgages, liens, pledges, restrictions, options, security, interests, charges,
claims, rights of third parties or encumbrances of any nature except: (i) as set forth in
Section 3.11(a)
of the LPB Disclosure Schedule; (ii) as specifically noted in reasonable detail in the LPB Financial Statements;
(iii) statutory liens for taxes not yet delinquent or being contested in good faith by appropriate proceedings; (iv) pledges or liens required to be granted in connection with the acceptance of government deposits or granted in connection
with repurchase or reverse repurchase agreements; and (v) easements, encumbrances and liens and other matters of record, imperfections of title and other limitations which are not material in amount and which do not detract from the value or
materially interfere with the present or contemplated use of any of the properties subject thereto or otherwise materially impair the use thereof for the purposes for which they are held or used. To the knowledge of LPB, all real property owned or
leased by LPB or its Subsidiaries is in compliance in all material respects with all applicable zoning and land use laws and there are no encroachments or other violations of law with respect to any such property. To the knowledge of LPB, all such
properties also comply in all material respects with all applicable private agreements, zoning requirements and other governmental laws and regulations relating thereto, and there are no condemnation proceedings pending or threatened with respect to
such properties. To the knowledge of LPB, all real property, machinery, equipment, furniture and fixtures owned or leased by LPB or its Subsidiaries that is material to their respective
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businesses is in good operating condition for its intended purpose (ordinary wear and tear excepted) and has been and is being maintained and repaired in the ordinary condition of business.
(b) After the date hereof, Horizon shall be entitled, at its own cost, to obtain new commitments for, and policies of title insurance or
surveys in respect of, any real property owned or leased by LPB or its Subsidiaries, and LPB and LPSB agree to reasonably cooperate in connection therewith.
(c) With respect to all real property presently or formerly owned, leased or used by LPB or any of its Subsidiaries, LPB, its Subsidiaries and
to LPBs knowledge, each of the prior owners, have conducted their respective business in material compliance with all applicable federal, state, county and municipal laws, statutes, regulations, rules, ordinances, orders, directives,
restrictions and requirements relating to, without limitation, responsible property transfer, underground storage tanks, petroleum products, air pollutants, water pollutants or storm water or process waste water or otherwise relating to the
environment, air, water, soil or toxic or hazardous substances or to the manufacturing, recycling, handling, processing, distribution, use, generation, treatment, storage, disposal or transport of any hazardous or toxic substances or petroleum
products (including polychlorinated biphenyls, whether contained or uncontained, and asbestos-containing materials, whether friable or not), including, without limitation, the Federal Solid Waste Disposal Act, the Hazardous and Solid Waste
Amendments, the Federal Clean Air Act, the Federal Clean Water Act, the Occupational Health and Safety Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and the Superfund Amendments and Reauthorization Act of 1986, all as amended, and regulations of the Environmental Protection Agency, the Nuclear Regulatory Agency, the Army Corps of Engineers, the Department
of Interior, the United States Fish and Wildlife Service and any state department of natural resources or state environmental protection agency now or at any time thereafter in effect (collectively, Environmental Laws). There are no
pending or, to the knowledge of LPB, threatened claims, actions or proceedings by any local municipality, sewage district or other governmental entity against LPB or any of its Subsidiaries with respect to the Environmental Laws, and, to LPBs
knowledge, there is no reasonable basis or grounds for any such claim, action or proceeding. No environmental clearances are required for the conduct of the business of LPB or any of its Subsidiaries as currently conducted or the consummation of the
Merger or any of the other transactions contemplated hereby. Except as disclosed in
Section 3.11(c)
of the LPB Disclosure Schedule, neither LPB nor any of its Subsidiaries is the owner, or has been in the chain of title or the operator
or lessee, of any property on which any substances have been used, stored, deposited, treated, recycled or disposed of, other than in compliance with Environmental Laws and which substances, if known to be present on, at or under such property,
would require clean-up, removal, treatment, abatement, response costs, or any other remedial action under any Environmental Law. Neither LPB nor any of its Subsidiaries has any liability for any clean-up or remediation under any of the Environmental
Laws with respect to any real property.
3.12
Loans and Investments.
(a)
Section 3.12(a)
of the LPB Disclosure Schedule contains (i) a list of each loan by LPSB that has been classified by
regulatory examiners or management as Special Mention, Substandard, Doubtful or Loss or that has been identified by accountants or auditors (internal or external) as having a significant risk of
uncollectability as of September 30, 2015, (ii) the most recent loan watch list of LPSB and a list of all loans which have been determined to be thirty (30) days or more past due with respect to principal or interest payments, have
been placed on nonaccrual status, or have been designated as Troubled Debt Restructuring (
TDR
) loans, (iii) a description of all unfunded loan commitments
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(and loans currently under consideration) of the types and amounts described in
Section 5.03(b)(iv)
of this Agreement, and (iv) a list of each outstanding advance made pursuant
to a Warehouse Agreement that remains unpaid at least 90 days after the funding date of the Mortgage Loan originated with such advance. LPB and LPSB have not sold, purchased or entered into any loan participation arrangement which was outstanding at
September 30, 2015, except where such participation is on a pro rata basis according to the respective contributions of the participants to such loan amount.
Section 3.12(a)
of the LPB Disclosure Schedule also contains a true,
accurate and complete list of all loans in which LPSB has any participation interest or which have been made with or through another financial institution on a recourse basis against LPSB.
(b) All loans originated by LPSB, and to the knowledge of LPSB, all loans purchased by LPSB pursuant to the Warehouse Agreements, and
reflected in the LPB Financial Statements as of September 30, 2015 and which have been made, extended, renewed, restructured, approved, amended or acquired since September 30, 2015: (i) have been made for good, valuable and adequate
consideration in the ordinary course of business; (ii) constitute the legal, valid and binding obligation of the obligor and any guarantor named therein, except to the extent limited by general principles of equity and public policy or by
bankruptcy, insolvency, fraudulent transfer, reorganization, liquidation, moratorium, readjustment of debt or other laws of general application relative to or affecting the enforcement of creditors rights; (iii) are evidenced by notes,
instruments or other evidences of indebtedness which are true, genuine and what they purport to be; and (iv) are secured by perfected security interests or recorded mortgages naming LPSB as the secured party or mortgagee (unless by written
agreement to the contrary).
(c) The allowance for loan and lease losses and the carrying value for OREO which are shown on the LPB
Financial Statements are, in the judgment of management of LPB, adequate in all material respects under the requirements of GAAP as of the respective dates.
(d) None of the investments reflected in the LPB Financial Statements as of and for the nine months ended September 30, 2015, and none of
the investments made by any Subsidiary of LPB since September 30, 2015 are subject to any restriction, whether contractual or statutory, which materially impairs the ability of such Subsidiary to dispose freely of such investment at any time.
Neither LPB nor any of its Subsidiaries is a party to any repurchase agreements with respect to securities. All United States Treasury securities, obligations of other United States Government agencies and corporations, obligations of states of the
United States and their political subdivisions, and other investment securities classified as held to maturity held by LPB and LPSB, as reflected in the latest balance sheet in the LPB Financial Statements, are carried in the aggregate
at no more than cost adjusted for amortization of premiums and accretion of discounts. All United States Treasury securities, obligations of other United States Government agencies and corporations, obligations of states of the United States and
their political subdivisions, and other investment securities classified as available for sale held by LPB and LPSB, as reflected in the latest balance sheet in the LPB Financial Statements, are carried in the aggregate at market value.
Provisions for losses have been made on all such securities that have had a decline in value deemed other than temporary as defined in SEC Staff Accounting Bulletin No. 59.
3.13
Indebtedness.
Except as set forth in
Section 3.13
of the LPB Disclosure Schedule and
except for customer deposits and ordinary trade payables and FHLB advances, neither LPB nor any of its Subsidiaries has any indebtedness for borrowed money.
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3.14
No Shareholder Rights Plan.
LPB has no outstanding
shareholder rights plan or any other plan, program or agreement involving, restricting, prohibiting or discouraging a change in control or merger of LPB or which reasonably could be considered an anti-takeover mechanism.
3.15
Employee Benefit Plans.
(a) With respect to the employee benefit plans, as defined in
Section 3(3)
of the Employee Retirement Income Security Act of 1974,
as amended (
ERISA
), sponsored or otherwise maintained by any member of a controlled group of corporations under Code Section 414(b) of which LPB is or was a member, and any trade or business (whether or not incorporated)
which is or was under common control with LPB under Code Section 414(c), and all other entities which together with LPB are or were prior to the date hereof treated as a single employer under Code Section 414(m) or 414(o) (an
ERISA Affiliate
), whether written or oral, in which LPB or any ERISA Affiliate participates as a participating employer, or to which LPB or any ERISA Affiliate contributes, or any nonqualified employee benefit plans or deferred
compensation, bonus, stock, performance share, phantom stock or incentive plans or arrangements, or other employee benefit or fringe benefit programs for the benefit of former or current employees or directors (or their beneficiaries or dependents)
of LPB or any ERISA Affiliate, and including any such plans which have been terminated, merged into another plan, frozen or discontinued since January 1, 2009 (individually,
LPB Plan
and collectively,
LPB
Plans
), LPB represents and warrants, except as set forth in
Section 3.15(a)
of the LPB Disclosure Schedule:
(i) All such LPB Plans have, on a continuous basis since their adoption, been, in all material respects, maintained in
compliance with their respective terms and with the requirements prescribed by all applicable statutes, orders and governmental rules or regulations, including without limitation, ERISA and the Department of Labor (
Department
)
Regulations promulgated thereunder and the Code and Treasury Regulations promulgated thereunder.
(ii) All LPB Plans
intended to constitute tax-qualified plans under Code Section 401(a) have complied in form since their adoption and have been timely amended to comply in all material respects with all applicable requirements of the Code and the Treasury
Regulations and each such Plan either (A) has received a determination letter from the Internal Revenue Service upon which LPB may rely regarding such plans tax qualified status under the Code, or (B) is a pre-approved volume
submitter or prototype plan that is the subject of an opinion letter issued by the Internal Revenue Service.
(iii) All LPB
Plans that provide for payments of nonqualified deferred compensation (as defined in Code Section 409A(d)(1)) have, in all material respects, been (A) operated in good faith compliance with the applicable requirements of Code
Section 409A and applicable guidance thereunder since January 1, 2005, and (B) amended to comply in written form with Code Section 409A and the Treasury Regulations promulgated thereunder.
(iv) All options to purchase shares of LPB Common Stock were granted with a per share exercise price that was not less than the
fair market value of LPB Common Stock on the date of such grant, as determined in accordance with the terms of the applicable LPB Plan. All LPB stock options, restricted stock units, and shares of restricted stock have, been properly
accounted for in accordance with GAAP, and no change is expected in respect of any prior financial statements relating to expenses for stock-based compensation. There is no pending audit, investigation or inquiry by any governmental agency or
authority or by LPB (directly or indirectly) with respect to LPBs stock option or restricted stock granting practices or other equity compensation practices.
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(v) No LPB Plan (or its related trust) holds any stock or other securities of LPB
and no LPB Plan allows for the granting of any awards over or with respect to any stock or other securities of LPB.
(vi)
Neither LPB, an ERISA Affiliate nor to LPBs knowledge, any other fiduciary as defined in ERISA Section 3(21)(A) of an LPB Plan has engaged in any transaction that may subject LPB, any ERISA Affiliate or any LPB Plan to a civil penalty
imposed by ERISA Section 502 or any other provision of ERISA or excise taxes under Code Section 4971, 4975, 4976, 4977, 4979 or 4980B.
(vii) All obligations required to be performed by LPB or any ERISA Affiliate under any provision of any LPB Plan have been
performed by it in all material respects and, neither LPB nor any ERISA Affiliate is, in any material respect, in default under or in violation of any provision of any LPB Plan.
(viii) All required reports and descriptions for the LPB Plans have, in all material respects, been timely filed and
distributed to participants and beneficiaries, and all notices required by ERISA or the Code with respect to all LPB Plans have been proper as to form and timely given.
(ix) No event has occurred which would reasonably constitute grounds for an enforcement action by any party under Part 5 of
Title I of ERISA with respect to any LPB Plan.
(x) There are no examinations, audits, enforcement actions or proceedings,
or any other investigations, pending or, to LPBs knowledge, threatened by any governmental agency involving any LPB Plan.
(xi) There are no actions, suits, proceedings or claims pending (other than routine claims for benefits) or, to LPBs
knowledge, threatened against LPB or any ERISA Affiliate in connection with any LPB Plan or the assets of any LPB Plan.
(xii) Any LPB Plan may be amended and terminated at any time without any material liability and these rights have always been
maintained by LPB and its ERISA Affiliates.
(b) LPB has provided or made available to Horizon true, accurate and complete copies and, in
the case of any plan or program which has not been reduced to writing, a materially complete summary, of all of the following LPB Plans, as applicable:
(i) All current pension, retirement, profit-sharing, savings, stock purchase, stock bonus, stock ownership, stock option,
restricted stock, restricted stock unit, phantom stock, performance share and stock appreciation right plans, all amendments thereto, and, if required under the reporting and disclosure requirements of ERISA, all current summary plan descriptions
thereof (including any modifications thereto);
(ii) All current employment, deferred compensation (whether funded or
unfunded), salary continuation, change in control, consulting, bonus, severance, and collective bargaining, agreements, arrangements or understandings;
(iii) All current executive and other incentive compensation plans, programs and agreements;
(iv) All current group insurance, medical, and prescription drug arrangements, policies or plans;
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(v) All other current incentive, welfare or employee benefit plans,
understandings, arrangements or agreements, maintained or sponsored, participated in, or contributed to by LPB for its current or former directors, officers or employees;
(vi) All reports filed with the Internal Revenue Service or the Department within the preceding three (3) years by LPB or
any ERISA Affiliate with respect to any LPB Plan;
(vii) All current participants (based on the most current census or
similar report) in the LPSB ESOP, LPB 401(k), or the health and welfare benefit plans; and
(viii) Valuations or allocation
reports for any defined contribution and defined benefit plans as of the most recent allocation and valuation dates.
(c) Except as
disclosed in
Section 3.15(c)
of the LPB Disclosure Schedule, no current or former director, officer or employee of LPB or any ERISA Affiliate (i) is entitled to or may become entitled to any benefit under any LPB Plans that are
welfare benefit plans (as defined in ERISA Section 3(1)) after termination of employment with LPB or any ERISA Affiliate, except to the extent such individuals may be entitled to continue their group health care coverage pursuant to Code
Section 4980B, or (ii) is currently receiving, or entitled to commence receiving, a disability benefit under a long-term or short-term disability plan that is a LPB Plan maintained by LPB or an ERISA Affiliate.
(d) With respect to all LPB Plans that are group health plans as defined in ERISA Section 607(1), sponsored or maintained by LPB or any
ERISA Affiliate, to LPBs knowledge, no director, officer, employee or agent of LPB or any ERISA Affiliate has engaged in any action or failed to act in such a manner that, as a result of such action or failure to act, would cause a tax to be
imposed on LPB or any ERISA Affiliate under Code Section 4980B(a), or would cause a penalty to be imposed under ERISA and the regulations promulgated thereunder. With respect to all such plans, all applicable provisions of Code
Section 4980B and ERISA Sections 601-606 have been complied with by LPB or any ERISA Affiliate, and all other provisions of ERISA and the regulations promulgated thereunder have been complied with in all material respects.
(e) Except as disclosed in
Section 3.15(e)
of the LPB Disclosure Schedule, there are no collective bargaining, employment,
management, consulting, deferred compensation, change in control, reimbursement, indemnity, retirement, early retirement, severance or similar plans or agreements, commitments or understandings, or any employee benefit or retirement plan or
agreement, binding upon LPB or any ERISA Affiliate, and no such agreement, commitment, understanding or plan is under discussion or negotiation by management with any employee or group of employees, any member of management or any other Person.
(f) No Voluntary Employees Beneficiary Association (
VEBA
), as defined in Code Section 501(c)(9), is sponsored or
maintained by LPB or any ERISA Affiliate.
(g) Except as contemplated in this Agreement or as disclosed in
Section 3.15(g)
of
the LPB Disclosure Schedule, there are no material benefits or material liabilities under any employee benefit plan or program that will be accelerated or otherwise come due as a result of the transactions contemplated by the terms of this
Agreement.
(h) Neither LPB nor any of its ERISA Affiliates has ever sponsored, maintained, participated in, contributed to or had any
obligation with respect to any plan that is subject to Code Section 412 or Title IV of ERISA, that is or has been subject to Sections 4063 or 4064 of ERISA or that is a multiple employer welfare arrangement, as defined in
Section 3(40) of ERISA. Neither LPB nor any of its
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ERISA Affiliates has ever participated in or had any obligation to contribute to a multiemployer plan, as defined in Section 3(37) of ERISA.
(i) Except as disclosed in
Section 3.15(i)
of the LPB Disclosure Schedule, as a result, directly or indirectly, of the
transactions contemplated by this Agreement (including without limitation any termination of employment relating thereto and occurring prior to, at or following the Effective Time), LPB, its ERISA Affiliates and their respective successors will not
be obligated to make a payment that would be characterized as an excess parachute payment to an individual who is a disqualified individual, as such terms are defined in Code Section 280G.
(j) Except as contemplated by this Agreement, neither LPB nor any ERISA Affiliate has made any promises or commitments, whether legally
binding or not, to create any new plan, agreement or arrangement, or to modify or change in any material way LPB Plans.
(k) With respect
to the LaPorte Savings Bank Employee Stock Ownership Plan (the
LPSB ESOP
):
(i) The LaPorte Savings
Bank Employee Stock Ownership Plan Committee (the
ESOP Committee
) has been duly appointed in accordance with
Section 12.2
of the LPSB ESOP and has the authority to take the actions under
Section 5.25(d)(iii)
and
Section 5.25(d)(iv)
.
(ii) No event of default has occurred or presently
exists under the ESOP Term Loan Agreement dated October 4, 2012, by and between the LPSB ESOP and LPB (the
ESOP Loan Agreement
), the Term Note dated October 4, 2012 issued by the LPSB ESOP (the
Exempt
Note
) or the Pledge and Security Agreement dated October 4, 2012, by and between the LPSB ESOP and LPB (the
ESOP Pledge Agreement
) (the ESOP Loan Agreement, Exempt Note and ESOP Pledge Agreement referred to
collectively as the
ESOP Loan Documents
).
(iii) The LPSB ESOP has the right under the ESOP Loan
Agreement to prepay at any time the principal amount of the Exempt Note without penalty and subject only to payment of accrued interest through the date of prepayment.
(iv) The LPSB ESOP is now and has been at all times since its inception a qualified employee stock ownership plan within the
meaning of Code Section 4975(e)(7).
(v) All shares of LPB Stock owned by the LPSB ESOP are and have at all times
constituted employer securities as that term is defined in Section 409(l) of the Code and qualifying employer securities as defined in Section 407(d)(5) of ERISA.
(vi) Except for the Indebtedness under the ESOP Loan Documents, there is no existing Indebtedness of the LPSB ESOP, LPB or LPSB
relating to the ESOP.
(vii) The ESOP Trustee has been duly and properly appointed and granted full authority to act as
trustee of the LPSB ESOP and exercise trust powers thereunder.
(viii) With respect to the LaPorte Savings Bank 401(k)
Retirement Plan (the
LPB 401(k) Plan
), Deborah S. Varnak and Joyce Fabisiak have been duly appointed pursuant to the terms of the LPB 401(k) Plan as the sole trustees of the LPB 401(k) Plan (the
401(k) Trustees
)
and have the authority to take the actions necessary under
Section 5.16(f)(iii)
and
Section
5.16(f)(iv)
.
3.16
Labor and Employment Matters.
LPB is and has been in material compliance with
all applicable Laws relating to labor and employment, including those relating to wages, hours, collective
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bargaining, unemployment compensation, workers compensation, equal employment opportunity, age and disability discrimination, immigration control, employee classification, information
privacy and security, payment and withholding of taxes. To the knowledge of LPB, no employee with annual compensation of $75,000 or more plans to terminate his or her employment with LPB or any Subsidiary. Since January 1, 2013, there has not
been, and as of the date of this Agreement there is not pending or, to the knowledge of LPB, threatened, any labor dispute, work stoppage, labor strike or lockout against LPB. No employee of LPB or any of its Subsidiaries is covered by an effective
or pending collective bargaining agreement or similar labor agreement. To LPBs knowledge, there has not been any activity on behalf of any labor organization or employee group to organize any such employees. Except as set forth on
Section 3.16
of the LPB Disclosure Schedule, no employee or independent contractor of LPB or any of its Subsidiaries is a party to any employment agreement, confidentiality, non-disclosure or proprietary information agreement,
non-compete agreement, non-solicitation agreement or any similar agreement with LPB or any of its Subsidiaries (the
Employee Agreements
), and neither LPB, any Subsidiary or any employee or independent contractor is in violation of
any such Employee Agreement. LPB is in material compliance with all notice and other requirements under the Worker Adjustment and Retraining Notification Act of 1988, and any other similar applicable foreign, state, or local laws relating to
facility closings and layoffs.
3.17
Obligations to Employees.
All material obligations and
liabilities of and all payments by LPB or any ERISA Affiliate and all LPB Plans, whether arising by operation of law, by contract or by past custom, for payments to trusts or other funds, to any government agency or authority or to any present or
former director, officer, employee or agent (or his or her heirs, legatees or legal representatives) have been and are being paid to the extent required by applicable law or by the plan, trust, contract or past custom or practice, and adequate
actuarial accruals and reserves for such payments have been and are being made by LPB or an ERISA Affiliate in accordance with GAAP and applicable law applied on a consistent basis and sound actuarial methods with respect to the following:
(a) withholding taxes or unemployment compensation; (b) LPB Plans; (c) employment, salary continuation, change in control, consulting, retirement, early retirement, severance or reimbursement; and (d) collective bargaining plans
and agreements. All accruals and reserves referred to in this
Section 3.17
are correctly and accurately reflected and accounted for in the LPB Financial Statements and the books, statements and records of LPB.
3.18
Taxes, Returns and Reports.
Each of LPB and its Subsidiaries has since January 1, 2012
(a) duly and timely filed or extended (before its due date) all material federal, state, local and foreign tax returns of every type and kind required to be filed, and each such return is true, accurate and complete in all material respects;
(b) paid or otherwise adequately reserved in accordance with GAAP for all taxes, assessments and other governmental charges due or claimed to be due upon it or any of its income, properties or assets, unless being contested in good faith; and
(c) not requested an extension of time for any such payments (which extension is still in force). LPB has established, and shall establish in the Subsequent LPB Financial Statements (as defined in
Section 5.11
), in accordance with
GAAP, a reserve for taxes in the LPB Financial Statements adequate to cover all of LPBs and its Subsidiaries tax liabilities (including, without limitation, income taxes, payroll taxes and withholding, and franchise fees) for the periods then
ending. Neither LPB nor any of its Subsidiaries has, to LPBs knowledge, nor will any of them have, any liability for material taxes of any nature for or with respect to the operation of its business, from the date hereof up to and including
the Effective Time, except to the extent set forth in the Subsequent LPB Financial Statements (as defined in
Section 5.11
) or as accrued or reserved for on the books and records of LPB or its Subsidiaries. Except as set forth in
Section 3.18
of the LPB
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Disclosure Schedule, neither LPB nor any of its Subsidiaries is currently under audit by any state or federal taxing authority. Except as set forth in
Section 3.18
of the LPB
Disclosure Schedule, no federal, state or local tax returns of LPB or any of its Subsidiaries have been audited by any taxing authority since January 1, 2011.
3.19
Deposit Insurance.
The deposits of LPSB are insured by the Federal Deposit Insurance Corporation in
accordance with the Federal Deposit Insurance Act, as amended, to the fullest extent provided by applicable law, and LPB or LPSB has paid, prepaid or properly reserved or accrued for all current premiums and assessments with respect to such deposit
insurance.
3.20
Insurance.
Section 3.20
of the LPB Disclosure Schedule contains a true,
accurate and complete list of all policies of insurance, self-insured arrangements and pooled or shared risk arrangements (including, without limitation, bankers blanket bond, directors and officers liability insurance,
bankers blanket bond for third party mortgage brokers, property and casualty insurance, group health or hospitalization insurance and insurance providing benefits for employees) owned, held or participated in by LPB or any of its Subsidiaries
on the date hereof or with respect to which LPB or any of its Subsidiaries pays any premiums. Each bankers bond for third party brokers satisfies the applicable requirements of
Section 5.04(b)
of this Agreement. LPB has also caused
each borrower under a Warehouse Agreement to maintain in place errors and omissions coverage and fidelity bond coverage that satisfies the applicable requirements of
Section 5.04(b)
of this Agreement. All of the aforementioned policies
and arrangements, and to LPBs knowledge, all policies and arrangements relating to Warehouse Agreements which are required to be maintained by third parties, are in full force and effect and all premiums due thereon have been paid when due.
3.21
Books and Records.
The books of account, minute books, stock record books and other records of
LPB and its Subsidiaries are complete and correct in all material respects and have been maintained in accordance with the LPBs business practices and all applicable Laws, including the maintenance of an adequate system of internal controls
required by such Laws. The minute books of LPB and each of its Subsidiaries contain accurate and complete records in all material respects of all meetings held, and corporate action taken by, its respective shareholders, boards of directors and
committees of the boards of directors. At the Closing, all of those books and records will be in the possession of LPB and its Subsidiaries.
3.22
Brokers, Finders or Other Fees.
Except for reasonable fees and expenses of LPBs
attorneys and accountants and the contractually-agreed fees and expenses of Raymond James & Associates, Inc. (
Raymond James
), LPBs investment banker under the agreement identified on
Section 3.22
of the
LPB Disclosure Schedule, all of which shall be paid or accrued by LPB at or prior to the Effective Time, no agent, broker or other Person acting on behalf of LPB or any of its Subsidiaries or under any authority of LPB or any of its Subsidiaries is
or shall be entitled to any commission, brokers or finders fee or any other form of compensation or payment from any of the parties hereto relating to this Agreement or the Merger or other transactions contemplated hereby.
3.23
Interim Events.
Except as otherwise permitted hereunder or disclosed on
Section 3.23
of
the LPB Disclosure Schedule, since September 30, 2015, neither LPB nor any of its Subsidiaries has:
(a) Experienced any events,
changes, developments or occurrences which have had, or are reasonably likely to have, a Material Adverse Effect on LPB;
(b) Suffered any
damage, destruction or loss to any of its properties, not fully paid by insurance proceeds, in excess of $100,000 individually or $250,000 in the aggregate;
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(c) Declared, distributed or paid any dividend or other distribution to its shareholders, except
for payment of dividends as permitted by
Section 5.03(b)(ii)
hereof;
(d) Repurchased, redeemed or otherwise acquired shares
of its common stock, issued any shares of its common stock or stock appreciation rights or sold or agreed to issue or sell any shares of its common stock (excluding the exercise of any stock options), including the issuance of stock options, or any
right to purchase or acquire any such stock or any security convertible into such stock or taken any action to reclassify, recapitalize or split its stock;
(e) Granted or agreed to grant any increase in benefits payable or to become payable under any pension, retirement, profit sharing, change in
control, health, bonus, insurance or other welfare benefit plan or agreement to employees, officers or directors of LPB or a Subsidiary, except in the ordinary course of business;
(f) Increased the salary of (or granted any bonus to) any director, officer or employee, except for normal increases (and bonuses) in the
ordinary course of business and in accordance with past practices, or entered into any employment contract, indemnity agreement or understanding with any officer or employee or installed or amended any existing employee welfare, pension, retirement,
change in control, stock option, stock appreciation, stock dividend, profit sharing or other similar plan or arrangement;
(g) Leased,
sold or otherwise disposed of any of its assets except in the ordinary course of business or leased, purchased or otherwise acquired from third parties any assets except in the ordinary course of business;
(h) Except for the Merger and other transactions contemplated by this Agreement, merged, consolidated or sold shares of its (or any of its
Subsidiaries) common stock, agreed to merge or consolidate LPB or any of its Subsidiaries with or into any third party, agreed to sell any shares of its (or any of its Subsidiaries) common stock or acquired or agreed to acquire any
stock, equity interest, assets or business of any third party;
(i) Incurred, assumed or guaranteed any material obligation or liability
(fixed or contingent) other than obligations and liabilities incurred in the ordinary course of business;
(j) Mortgaged, pledged or
subjected to a lien, security interest, option or other encumbrance any of its assets except for tax and other liens which arise by operation of law and with respect to which payment is not past due and except for pledges or liens: (i) required
to be granted in connection with acceptance by LPSB of government deposits; or (ii) granted in connection with repurchase or reverse repurchase agreements;
(k) Canceled, released or compromised any material loan, debt, obligation, claim or receivable other than in the ordinary course of business;
(l) Except for this Agreement, entered into any transaction, contract or commitment other than in the ordinary course of business;
(m) Agreed to enter into any transaction for the borrowing or loaning of monies, other than in the ordinary course of its lending business;
(n) Amended their articles of incorporation, charter or bylaws (or other similar governance documents) or adopted any resolutions by
their board of directors or shareholders with respect to the same; or
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(o) Conducted its business in any manner other than substantially as it was being conducted prior
to September 30, 2015.
3.24
Insider Transactions.
Except as set forth in
Section 3.24
of the LPB Disclosure Schedule, since January 1, 2013, no executive officer or director of LPB or any of its Subsidiaries or member of the immediate family or related interests (as such terms are
defined in Regulation O) of any such executive officer or director has currently, or has had during such time period, any direct or indirect interest in any property, assets, business or right which is owned, leased, held or used by LPB or any
Subsidiary or in any liability, obligation or indebtedness of LPB or any Subsidiary, except for deposits of LPSB, securities issued by LPB, and interests in compensatory arrangements.
3.25
Indemnification Agreements.
(a) Except as set forth in
Section 3.25(a)
of the LPB Disclosure Schedule, neither LPB nor any of its Subsidiaries is a party to
any indemnification, indemnity or reimbursement agreement, contract, commitment or understanding to indemnify any present or former director, officer, employee or shareholder against liability or hold the same harmless from liability other than as
expressly provided in the Articles of Incorporation or Bylaws of LPB or the charter documents of a Subsidiary.
(b) Since January 1,
2011, no claims have been made against or filed with LPB or any of its Subsidiaries nor have any claims been, to LPBs knowledge, threatened against LPB or a Subsidiary, for indemnification against liability or for reimbursement of any costs or
expenses incurred in connection with any legal or regulatory proceeding by any present or former director, officer, shareholder, employee or agent of LPB or any of its Subsidiaries.
3.26
Shareholder Approval.
The affirmative vote of the holders of a majority of the LPB Common Stock
(which are issued and outstanding on the record date relating to the meeting of shareholders contemplated by
Section 5.01
of this Agreement) and entitled to vote on this Agreement and the Merger is required for shareholder approval of
this Agreement and the Merger.
3.27
Intellectual Property.
(a) LPB and its Subsidiaries own, or are licensed or otherwise possess sufficient legally enforceable rights to use, all material Intellectual
Property (as defined in
Section 3.27(e)
) that is used by LPB or its Subsidiaries in their respective businesses as currently conducted. Neither LPB nor any of its Subsidiaries has (A) licensed any Intellectual Property owned by it
or its Subsidiaries in source code form to any third party or (B) entered into any exclusive agreements relating to Intellectual Property owned by it.
(b) To LPBs knowledge, LPB and its Subsidiaries have not infringed or otherwise violated any material Intellectual Property rights of
any third party since January 1, 2013. There is no claim asserted or, to LPBs knowledge, threatened against LPB and/or its Subsidiaries or any indemnitee thereof concerning the ownership, validity, registerability, enforceability,
infringement, use or licensed right to use any Intellectual Property.
(c) Since January 1, 2013, to LPBs knowledge, no third
party has infringed, misappropriated or otherwise violated LPB or its Subsidiaries Intellectual Property rights. There are no claims asserted or threatened by LPB or its Subsidiaries, nor has LPB or its Subsidiaries decided to assert or
threaten a claim, that (i) a third party infringed or otherwise violated any of their Intellectual Property rights; or (ii) a third partys owned or claimed Intellectual Property interferes with, infringes, dilutes or otherwise harms
any of their Intellectual Property rights.
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(d) To the extent LPB has designated any of its information, materials or processes a trade
secret, LPB and its Subsidiaries have taken commercially reasonable measures to protect the confidentiality of all trade secrets that are owned, used or held by them.
(e) For purposes of this Agreement,
Intellectual Property
shall mean all patents, trademarks, trade names, service marks,
domain names, database rights, copyrights, and any applications therefor, mask works, technology, know-how, trade secrets, inventory, ideas, algorithms, processes, computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material and all other intellectual property or proprietary rights.
3.28
Information Security.
No Person has gained unauthorized access to any of the LPB IT Assets which has caused, or is reasonably likely to cause, a Material Adverse Effect for LPB or LPSB. LPB and its Subsidiaries have implemented
reasonable backup and disaster recovery technology consistent with industry practices and as required by Law or any Governmental Authority and are compliant in all material respects with all data protection and privacy laws and regulations as well
as their own policies relating to data protection and the privacy and security of personal data and the non-public personal information of their respective customers and employees, and with their own privacy policies and commitments to their
respective customers and employees relating to the foregoing, except for immaterial failures to comply or immaterial violations. No claims are pending or, to LPBs knowledge, threatened in writing against LPB or any Subsidiary alleging a
violation of any Persons privacy rights or rights regarding the protection of personally identifiable information or other non-public information. For purposes of this Agreement,
LPB IT Assets
means computers, computer
software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, and all other information technology equipment, and all associated documentation owned by LPB or its Subsidiaries or licensed or leased by LPB
or its Subsidiaries (excluding any public networks).
3.29
Community Reinvestment Act.
LPSB received
a rating of satisfactory or better in its most recent examination or interim review with respect to the Community Reinvestment Act.
3.30
Bank Secrecy and Anti-Money Laundering Compliance.
Neither LPB nor any of its Subsidiaries has
received any notice or communication from any regulatory authority alleging violation of, or noncompliance with, any legal requirement concerning bank secrecy or anti-money laundering, including the Currency and Foreign Transactions Reporting Act,
the Money Laundering Control Act of 1986, Annunzio-Wylie Anti-Money Laundering Act, the Money Laundering Suppression Act of 1994, and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
Act of 2001 (also known as the USA PATRIOT Act) (each such legal requirement and the rules promulgated thereunder, a
BSA/AML Law
). LPB and its Subsidiaries have not been cited, fined or otherwise notified of any failure by it to
comply with a BSA/AML Law which has not been cured. To the knowledge of LPB and its Subsidiaries, there are no facts or circumstances that could form the basis for assertion of any proceeding against LPB or its Subsidiaries under any BSA/AML Law
that, if determined adversely to LPB or its Subsidiaries, would reasonably be likely, either individually or in the aggregate, to have a Material Adverse Effect on LPB.
3.31
Agreements with Regulatory Agencies.
Neither LPB nor any of its Subsidiaries is subject to any
cease-and-desist, consent order or other order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been since January 1, 2013, a recipient of any supervisory letter from, or, since January 1, 2013, has adopted any policies, procedures or
board
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resolutions at the request or suggestion of any regulatory agency or other governmental entity that currently restricts in any material respect the conduct of its business or that in any material
manner relates to its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business, other than those of general application that apply to similarly situated holding companies or their
subsidiaries, whether or not set forth in
Section 3.31
of the LPB Disclosure Schedule (a
LPB Regulatory Agreement
), nor has LPB or any of its Subsidiaries been advised, since January 1, 2013, by any regulatory
agency or other governmental entity that it is considering issuing, initiating, ordering, or requesting any such LPB Regulatory Agreement. There are no refunds or restitutions required to be paid as a result of any criticism of any regulatory agency
or body cited in any examination report of LPB or any of its Subsidiaries as a result of an examination by any regulatory agency or body, or set forth in any accountants or auditors report to LPB or any of its Subsidiaries.
3.32
Approval Delays.
To LPBs knowledge, as of the date hereof, there is no reason why the
granting of any of the Regulatory Approvals (as defined in
Section
7.01(e)
) would be denied or unduly delayed.
3.33
Internal Controls.
LPB and its Subsidiaries
have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
GAAP. Since January 1, 2013, (i) through the date hereof, neither LPB nor any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral,
regarding the accounting or auditing practices, procedures, methodologies or methods of LPB or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that LPB or any
of its Subsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing LPB or any of its Subsidiaries, whether or not employed by LPB or any of its Subsidiaries, has reported evidence of a violation
of securities laws, breach of fiduciary duty or similar violation by LPB or any of its officers, directors, employees or agents to the Board of Directors of LPB or any committee thereof or to any director or officer of LPB.
3.34
Fiduciary Accounts.
LPB and each of its Subsidiaries has properly administered all accounts for
which it acts as a fiduciary, including, without limitation, accounts for which it serves 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. Neither LPB nor any of its Subsidiaries, nor any of their respective directors, officers or employees, has committed any breach of trust, to LPBs knowledge, 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.
3.35
Fairness Opinion.
LPB has received an opinion from Raymond James to the effect that, as of the date of this Agreement, the Merger Consideration to be received by the common stockholders of LPB pursuant to this Agreement is fair for
such common stockholders from a financial point of view. Such opinion has not been amended or rescinded as of the date of this Agreement.
3.36
LPB Securities and Exchange Commission Filings.
LPB has filed all material reports and other
filings with the Securities and Exchange Commission (the
SEC
) required to be filed by it (
LPB SEC Reports
). All such LPB SEC Reports were true, accurate and complete in all material respects as of the dates of
the LPB SEC Reports, and no such filings contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements, at the time and
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in the light of the circumstances under which they were made, not false or misleading. As of the date of this Agreement, there are no outstanding or unresolved comments in any comment letters
received by LPB, and to the knowledge of LPB, none of the LPB SEC Reports is the subject of any ongoing review by the SEC.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF HORIZON
On or prior to the date hereof, Horizon has delivered to LPB a schedule (the
Horizon Disclosure Schedule
) setting forth,
among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in this
Article IV
or to one or more of its covenants contained in
Article V
or
Article VI
. However, for purposes of the Horizon Disclosure Schedule, any item disclosed on any schedule therein is deemed to be fully disclosed with
respect to other sections of this Agreement under which such item may be relevant but only to the extent that it is reasonably clear on the face of such schedule that such item applies to such other section of this Agreement, and such item is
described in sufficient detail to enable LPB to identify the items to which it applies.
For the purpose of this Agreement, and in
relation to Horizon and its Subsidiaries (as defined in this introduction to
Article IV
), a
Material Adverse Effect on Horizon
means any effect that (i) is material and adverse to the results of operations, properties,
assets, liabilities, conditions (financial or otherwise), value or business of Horizon and its Subsidiaries on a consolidated basis, or (ii) would materially impair the ability of Horizon or any of its Subsidiaries to perform its obligations
under this Agreement or any related agreement or otherwise materially threaten or materially impede the consummation of the Merger and the other transactions contemplated by this Agreement;
provided, however
, that Material Adverse Effect on
Horizon shall not be deemed to include the impact of (a) changes in banking and similar laws of general applicability to banks or savings associations or their holding companies or interpretations thereof by courts or governmental authorities,
(b) changes in GAAP or regulatory accounting requirements applicable to banks, savings associations, or their holding companies generally, (c) effects of any action or omission taken with the prior written consent of LPB or at the
direction of LPB, (d) the announcement of this Agreement and the transactions contemplated hereby, and compliance with this Agreement on the business, financial condition or results of operations of Horizon and its Subsidiaries, (e) the
expenses incurred by Horizon or Horizon Bank in negotiating, documenting, effecting and consummating the transactions contemplated by this Agreement, (f) any changes in general economic or capital market conditions affecting banks and their
holding companies generally, including, without limitation, changes in interest rates, and (g) changes in national or international political or social conditions including the engagement by the United States in hostilities, whether or not
pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military
installation, equipment or personnel of the United States, unless it uniquely affects either or both of the parties or any of their Subsidiaries, taken as a whole.
For the purpose of this Agreement, and in relation to Horizon and its Subsidiaries,
knowledge
means those facts that are
actually known by the officers of Horizon listed on
Section 4.0
of the Horizon
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Disclosure Schedules. Additionally, for the purpose of this Agreement, and in relation to Horizon, its
Subsidiaries
shall mean any entity which is required to be consolidated
with Horizon for financial reporting purposes pursuant to GAAP.
Accordingly, Horizon represents and warrants to LPB as follows, except as
set forth in the Horizon Disclosure Schedule:
4.01
Organization and Authority.
(a) Horizon is a corporation duly organized and validly existing under the laws of the State of Indiana and is a registered bank holding
company under the BHC Act. Horizon has full power and authority (corporate and otherwise) to own and lease its properties as presently owned and leased and to conduct its business in the manner and by the means utilized as of the date hereof.
(b) Horizon Bank is a national bank chartered and existing under the laws of the United States. Horizon Bank has full power and authority
(corporate and otherwise) to own and lease its properties as presently owned and leased and to conduct its business in the manner and by the means utilized as of the date hereof.
(c) Each of Horizons Subsidiaries other than Horizon Bank is duly organized and validly existing under the laws of its jurisdiction of
organization, and has full power and authority (corporate and otherwise) to own and lease its properties as presently owned and leased and to conduct its business in the manner and by the means utilized as of the date hereof.
(d) The Articles of Incorporation and Bylaws of Horizon and Horizon Bank, representing true, accurate and complete copies of such corporate
documents in effect as of the date of this Agreement have been previously delivered to LPB.
4.
02
Authorization.
(a) Horizon has the requisite corporate power and authority to enter into this Agreement and to perform its
obligations hereunder, subject to the fulfillment of the conditions precedent set forth in
Sections 7.01(d)
,
(e)
and
(f)
hereof. This Agreement and its execution and delivery by Horizon have been duly authorized and
approved by the Board of Directors of Horizon and, assuming the accuracy of the representation contained in
Section 3.02(a)
, constitutes a valid and binding obligation of Horizon, subject to the terms and conditions hereof, and is
enforceable in accordance with its terms, except to the extent limited by general principles of equity and public policy and by bankruptcy, insolvency, fraudulent transfer, reorganization, liquidation, moratorium, readjustment of debt or other laws
of general application relating to or affecting the enforcement of creditors rights.
(b) Neither the execution of this Agreement
nor consummation of the Merger contemplated hereby: (i) conflicts with or violates the Articles of Incorporation or Bylaws of Horizon or the charter documents of any of Horizons Subsidiaries; (ii) conflicts with or violates any
local, state, federal or foreign law, statute, ordinance, rule or regulation (provided that the approvals of or filings with applicable government regulatory agencies or authorities required for consummation of the Merger are obtained) or any court
or administrative judgment, order, injunction, writ or decree; (iii) conflicts with, results in a breach of or constitutes a default under any note, bond, indenture, mortgage, deed of trust, license, lease, contract, agreement, arrangement,
commitment or other instrument to which Horizon or any of its Subsidiaries is a party or by which Horizon or any of its Subsidiaries is subject or bound; (iv) results in the creation of or gives any Person the right to create any lien, charge,
claim, encumbrance or security interest, or results in the creation of any other rights or claims of any other party (other than
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LPB) or any other adverse interest, upon any right, property or asset of Horizon or any of its Subsidiaries; or (v) terminates or gives any Person the right to terminate, accelerate, amend,
modify or refuse to perform under any note, bond, indenture, mortgage, agreement, contract, lease, license, arrangement, deed of trust, commitment or other instrument to which Horizon or any of its Subsidiaries is bound or with respect to which
Horizon or any of its Subsidiaries is to perform any duties or obligations or receive any rights or benefits, except for such violations, conflicts, breaches or defaults under clause (iii), (iv) or (v) hereof that individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect on LPB.
(c) Other than in connection or in compliance with the
provisions of the applicable federal and state banking, securities, antitrust and corporation statutes, all as amended, and the rules and regulations promulgated thereunder, no notice to, filing with, exemption by or consent, authorization or
approval of any governmental agency or body is necessary for consummation of the Merger by Horizon.
4.03
Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of Horizon consists of (i) 22,500,000
shares of Horizon common stock, 12,003,564 shares of which are issued and outstanding (and which includes shares of restricted stock), (ii) 1,000,000 shares of preferred stock, none of which are issued and outstanding, and (iii) options to
purchase 165,091 shares of Horizon common stock. Such issued and outstanding shares have been duly and validly authorized by all necessary corporate action of Horizon, are validly issued, fully paid and nonassessable and have not been issued in
violation of any pre-emptive rights. Each share of Horizon common stock is entitled to one vote per share.
(b) Except as set forth in
Section 4.03(b)
of the Horizon Disclosure Schedule, all of the issued and outstanding shares of capital stock or other equity ownership interests of each Subsidiary of Horizon are owned by Horizon, directly or indirectly, free and clear
of all liens, pledges, charges, claims, encumbrances, restrictions, security interests, options and pre-emptive rights and of all other rights or claims of any other Person with respect thereto.
4.04
Compliance with Law.
(a) None of Horizon or any of its Subsidiaries is currently in violation of, and since January 1, 2011, none has been in violation of any
Law, except where such violation would not have a Material Adverse Effect on Horizon. Horizon and its Subsidiaries possess and hold all licenses, franchises, permits, certificates and other authorizations necessary for the continued conduct of their
business without interference or interruption, except where the failure to possess and hold the same would not have a Material Adverse Effect on Horizon.
(b) Horizon is not subject to any understandings or commitments with, and there are no orders or directives of, any government regulatory
agencies or authorities with respect to the financial condition, results of operations, business, assets or capital of Horizon or its Subsidiaries. There are no refunds or restitutions required to be paid as a result of any criticism of any
regulatory agency or body cited in any examination report of Horizon or any of its Subsidiaries as a result of an examination by any regulatory agency or body, or set forth in any accountants or auditors report to Horizon or any of its
Subsidiaries.
(c) Since the enactment of the Sarbanes-Oxley Act, Horizon, to its knowledge, has been and is in compliance in all material
respects with the applicable provisions of the Sarbanes-Oxley Act.
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(d) All of the existing offices and branches of Horizon Bank have been legally authorized and
established in accordance with all applicable federal, state and local laws, statutes, regulations, rules, ordinances, orders, restrictions and requirements, except such as would not have a Material Adverse Effect on Horizon.
4.05
Absence of Undisclosed Liabilities.
Except (i) as provided in the Horizon financial statements
included in its SEC Reports (as defined in
Section 4.15
), (ii) for unfunded loan commitments and obligations on letters of credit to customers of Horizons Subsidiaries made in the ordinary course of business, (iii) for
trade payables incurred in the ordinary course of business, (iv) for the transactions contemplated by this Agreement, and (v) any other transactions which would not result in a material liability or have a material impact on Horizon; none
of Horizon or any of its Subsidiaries has any obligation, agreement, contract, commitment, liability, lease or license made outside of the ordinary course of business nor, to Horizons knowledge, does there exist any circumstances resulting
from transactions effected or events occurring on or prior to the date of this Agreement or from any action omitted to be taken during such period which could reasonably be expected to result in any such material obligation, agreement, contract,
commitment, liability, lease or license. None of Horizon or any of its Subsidiaries is delinquent in the payment of any material amount due pursuant to any trade payable, and each has properly accrued for such payables in accordance with GAAP,
except where the failure to so accrue would not constitute a Material Adverse Effect on Horizon.
4.06
Accuracy of Information Provided to LPB.
Horizon agrees that the information concerning Horizon or any of its Subsidiaries that is provided or to be provided by Horizon to LPB for inclusion or that is included in the Registration Statement or
Proxy Statement (each as defined in
Section 6.02
) and any other documents to be filed with any regulatory authority or governmental entity in connection with the Merger and the other transactions contemplated by this Agreement will:
(a) at the respective times such documents are filed and, in the case of the Registration Statement, when it becomes effective and, with respect to the Proxy Statement, when mailed, not be false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; or (b) in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the LPB Shareholders Meeting, not be false or misleading with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the
solicitation of any proxy for the meeting in connection with which the Proxy Statement shall be mailed. Notwithstanding the foregoing, Horizon shall have no responsibility for the truth or accuracy of any information with respect to LPB or any of
its Subsidiaries or any of their affiliates contained in the Registration Statement or the Proxy Statement or in any document submitted to, or other communication with, any regulatory agency or governmental entity.
4.07
Financial Statements and Reports.
(a) The following financial statements and reports of Horizon and its Subsidiaries, including the notes thereto (collectively, the
Horizon Financial Statements
) are publicly available:
(i) consolidated balance sheets and the related
consolidated statements of income, consolidated statements of cash flows, and consolidated statements of changes in shareholders equity of Horizon as of and for the fiscal years ended December 31, 2013, 2014 and 2015; and
(ii) Call Reports for Horizon Bank as of the close of business on December 31, 2013, 2014, and 2015.
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(b) The Horizon Financial Statements described in clause (i) present fairly, in all material
respects, the consolidated financial position of Horizon as of and at the dates shown and the consolidated results of operations for the periods covered thereby and are complete, correct, represent bona fide transactions, and have been prepared from
the books and records of Horizon and its Subsidiaries. The Horizon Financial Statements described in clause (i) above are audited financial statements and have been prepared in conformance with GAAP, except as may otherwise be indicated in any
accountants notes or reports with respect to such financial statements.
(c) Since December 31, 2015, on a consolidated basis,
Horizon and its Subsidiaries have not incurred any material liability other than in the ordinary course of business consistent with past practice.
4.08
Adequacy of Reserves.
The reserves, the allowance for loan and lease losses and the carrying value
for real estate owned which are shown on the Horizon Financial Statements are, in the judgment of management of Horizon, adequate, in all material respects, under the requirements of GAAP to provide for possible losses on items for which reserves
were made, on loans and leases outstanding and real estate owned as of the respective dates.
4.09
Litigation and Pending Proceedings.
(a) There are no material claims, actions, suits, proceedings, mediations, arbitrations or
investigations pending or, to the knowledge of Horizon, threatened against Horizon or any of its Subsidiaries, and to Horizons knowledge there is no basis for any claim, action, suit, proceeding, litigation, arbitration or investigation
against Horizon or any of its Subsidiaries that individually or in the aggregate would reasonably be expected to have a Material Adverse Effect on Horizon.
(b) Neither Horizon nor any of its Subsidiaries is: (i) subject to any outstanding judgment, order, writ, injunction or decree of any
court, arbitration panel or governmental agency or authority; (ii) presently charged with or under governmental investigation with respect to, any actual or alleged violations of any law, statute, rule, regulation or ordinance; or
(iii) the subject of any pending or, to the knowledge of Horizon, threatened proceeding by any government regulatory agency or authority having jurisdiction over their respective business, assets, capital, properties or operations.
4.10
Taxes, Returns and Reports.
Each of Horizon and its Subsidiaries has since January 1, 2012
(a) duty and timely filed all material federal, state, local and foreign tax returns of every type and kind required to be filed, and each such return is true, accurate and complete in all material respects; (b) paid or otherwise
adequately reserved in accordance with GAAP for all taxes, assessments and other governmental charges due or claimed to be due upon it or any of its income, properties or assets, unless being contested in good faith; and (c) not requested an
extension of time for any such payments (which extension is still in force). Horizon has established, and shall establish in future publicly-filed financial statements, in accordance with GAAP, a reserve for taxes in the Horizon Financial Statements
adequate to cover all of Horizons and its Subsidiaries tax liabilities (including, without limitation, income taxes, payroll taxes and withholding, and franchise fees) for the periods then ending. Neither Horizon nor any of its Subsidiaries,
to their knowledge, has, nor will any of them have, any liability for material taxes of any nature for or with respect to the operation of its business, from the date hereof up to and including the Effective Time, except to the extent set forth in
Horizons future publicly-filed financial statements and as accrued or reserved for on the books and records of Horizon or its Subsidiaries. Neither Horizon nor any of its Subsidiaries is currently under audit by any state or federal taxing
authority. Except as disclosed in
Section 4.10
of the Horizon Disclosure Schedule, no federal, state or local tax returns of Horizon or any of its Subsidiaries have been audited by any taxing authority since January 1, 2011.
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4.11
Deposit Insurance.
The deposits of Horizon Bank are
insured by the Federal Deposit Insurance Corporation in accordance with the Federal Deposit Insurance Act, as amended, to the fullest extent provided by applicable law, and Horizon or Horizon Bank has paid or properly reserved or accrued for all
current premiums and assessments with respect to such deposit insurance.
4.12
Bank Secrecy and Anti
Money Laundering Compliance.
Neither Horizon nor any of its Subsidiaries has received any notice or communication from any regulatory authority alleging violation of, or noncompliance with, any BSA/AML Law. Horizon and its Subsidiaries have not
been cited, fined or otherwise notified of any failure by it to comply with a BSA/AML Law which has not been cured. To the knowledge of Horizon and its Subsidiaries, there are no facts or circumstances that could form the basis for assertion of any
proceeding against Horizon or its Subsidiaries under any BSA/AML Law that, if determined adversely to Horizon or its Subsidiaries, would reasonably be likely, either individually or in the aggregate, to have a Material Adverse Effect on Horizon.
4.13
Community Reinvestment Act.
Horizon Bank received a rating of satisfactory or
better in its most recent examination or interim review with respect to the Community Reinvestment Act.
4.14
Approval Delays.
To the knowledge of Horizon, as of the date hereof, there is no reason why the
granting of any of the Regulatory Approvals would be denied or unduly delayed.
4.15
Horizon Securities
and Exchange Commission Filings.
Horizon has filed all material reports and other filings with the Securities and Exchange Commission (the
SEC
) required to be filed by it (
SEC Reports
). All such SEC Reports
were true, accurate and complete in all material respects as of the dates of the SEC Reports, and no such filings contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements, at the
time and in the light of the circumstances under which they were made, not false or misleading. As of the date of this Agreement, there are no outstanding or unresolved comments in any comment letters received by Horizon, and to the knowledge of
Horizon, none of the SEC Reports is the subject of any ongoing review by the SEC.
4.16
No Shareholder
Approval.
No vote or consent of any of the holders of Horizons capital stock is required by law, agreement, or NASDAQ Global Select Market listing requirements for Horizon to enter into this Agreement and to consummate the Merger.
4.17
Antitakeover Provisions Inapplicable.
The transactions contemplated by this Agreement are not
subject to the requirements of any moratorium, control share, fair price, affiliate transactions, business combination or other antitakeover laws and regulations of the State of Indiana,
including the provisions of the IBCL applicable to Horizon.
4.18
Books and Records.
The books of
account, minute books, stock record books and other records of Horizon and its Subsidiaries are complete and correct in all material respects and have been maintained in accordance with the Horizons business practices and all applicable Laws,
including the maintenance of an adequate system of internal controls required by such Laws. The minute books of Horizon and each of its Subsidiaries contain accurate and complete records, in all material respects, of all meetings held, and corporate
action taken by, its respective shareholders, boards of directors and committees of the boards of directors.
4.19
Environmental Matters.
Horizon and its Subsidiaries are in material compliance with all
Environmental Laws. There are no legal, administrative, arbitral or other proceedings, claims or actions, or to the knowledge of Horizon, any private environmental investigations or remediation
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activities or governmental investigations of any nature seeking to impose, on Horizon or any of its Subsidiaries, any material liability or material obligation arising under any Environmental
Law, pending or to Horizons knowledge, threatened against Horizon. To the knowledge of Horizon, there is no reasonable basis for any such proceeding, claim, action or governmental investigation on Horizon or any of its Subsidiaries of any
material liability or material obligation arising under any Environmental Law.
4.20
Interim Events.
Since December 31, 2015, neither Horizon nor any of its Subsidiaries has experienced any events, changes, developments or occurrences which have had, or are reasonably likely to have, a Material Adverse Effect on Horizon.
4.21
Well-Capitalized.
Horizon Bank is well capitalized (as that term is defined in 12
C.F.R. Section 6.4(c)(1)). Horizon Bank has not been informed that its status as well capitalized will change and has no basis for believing that its status will change due to this Merger.
4.22
Internal Controls.
Horizon and its Subsidiaries have devised and maintain a system of internal
accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Since January 1, 2013, (i) through
the date hereof, neither Horizon nor any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of Horizon or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that Horizon or any of its Subsidiaries has engaged in
questionable accounting or auditing practices, and (ii) no attorney representing Horizon or any of its Subsidiaries, whether or not employed by Horizon or any of its Subsidiaries, has reported evidence of a violation of securities laws, breach
of fiduciary duty or similar violation by Horizon or any of its officers, directors, employees or agents to the Board of Directors of Horizon or any committee thereof or to any director or officer of Horizon.
4.23
Information Security.
No Person has gained unauthorized access to any of the Horizon IT Assets
which has caused, or is reasonably likely to cause, a Material Adverse Effect, for Horizon or Horizon Bank. Horizon and its Subsidiaries have implemented reasonable backup and disaster recovery technology consistent with industry practices and as
required by Law or any Governmental Authority and are compliant in all material respects with all data protection and privacy laws and regulations as well as their own policies relating to data protection and the privacy and security of personal
data and the non-public personal information of their respective customers and employees, and with their own privacy policies and commitments to their respective customers and employees relating to the foregoing, except for immaterial failures to
comply or immaterial violations. No claims are pending or to Horizons knowledge, threatened in writing against Horizon or any Subsidiary alleging a violation of any Persons privacy rights or rights regarding the protection of personally
identifiable information or other non-public information. For purposes of this Agreement,
Horizon IT Assets
means computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data
communications lines, and all other information technology equipment, and all associated documentation owned by Horizon or its Subsidiaries or licensed or leased by Horizon or its Subsidiaries (excluding any public networks).
4.24
Employee Benefit Plans.
(a) With respect to the employee benefit plans, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended (
ERISA
), sponsored or otherwise maintained by any member of a controlled group of corporations under Code Section 414(b) of which Horizon is or
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was a member, and any trade or business (whether or not incorporated) which is or was under common control with Horizon under Code Section 414(c), and all other entities which together with
Horizon are or were prior to the date hereof treated as a single employer under Code Section 414(m) or 414(o) (an
ERISA Affiliate
), whether written or oral, in which Horizon or any ERISA Affiliate participates as a
participating employer, or to which Horizon or any ERISA Affiliate contributes, or any nonqualified employee benefit plans or deferred compensation, bonus, stock, performance share, phantom stock or incentive plans or arrangements, or other employee
benefit or fringe benefit programs for the benefit of former or current employees or directors (or their beneficiaries or dependents) of Horizon or any ERISA Affiliate, and including any such plans which have been terminated, merged into another
plan, frozen or discontinued since January 1, 2009 (individually,
Horizon Plan
and collectively,
Horizon Plans
), Horizon represents and warrants:
(i) All such Horizon Plans have, on a continuous basis since their adoption, been, in all material respects, maintained in
compliance with their respective terms and with the requirements prescribed by all applicable statutes, orders and governmental rules or regulations, including without limitation, ERISA and the Department of Labor (
Department
)
Regulations promulgated thereunder and the Code and Treasury Regulations promulgated thereunder.
(ii) All Horizon Plans
intended to constitute tax-qualified plans under Code Section 401(a) have complied in form since their adoption and have been timely amended to comply in all material respects with all applicable requirements of the Code and the Treasury
Regulations and each such Plan either (A) has received a determination letter from the Internal Revenue Service upon which Horizon may rely regarding such plans tax qualified status under the Code, or (B) is a pre-approved volume
submitter or prototype plan that is the subject of an opinion letter issued by the Internal Revenue Service.
(iii) All
Horizon Plans that provide for payments of nonqualified deferred compensation (as defined in Code Section 409A(d)(1)) have, in all material respects, been (A) operated in good faith compliance with the applicable requirements
of Code Section 409A and applicable guidance thereunder since January 1, 2005, and (B) amended to comply in written form with Code Section 409A and the Treasury Regulations promulgated thereunder.
(iv) All options to purchase shares of Horizon Common Stock were granted with a per share exercise price that was not less than
the fair market value of Horizon Common Stock on the date of such grant, as determined in accordance with the terms of the applicable Horizon Plan. All Horizon stock options, restricted stock units, and shares of restricted stock have,
been properly accounted for in accordance with GAAP, and no change is expected in respect of any prior financial statements relating to expenses for stock-based compensation. There is no pending audit, investigation or inquiry by any governmental
agency or authority or by Horizon (directly or indirectly) with respect to Horizons stock option or restricted stock granting practices or other equity compensation practices.
(v) No Horizon Plan (or its related trust) holds any stock or other securities of Horizon and no Horizon Plan allows for the
granting of any awards over or with respect to any stock or other securities of Horizon.
(vi) Neither Horizon, an ERISA
Affiliate nor to Horizons knowledge, any other fiduciary as defined in ERISA Section 3(21)(A) of a Horizon Plan has engaged in any transaction that may subject Horizon, any ERISA Affiliate or any Horizon Plan to a civil penalty
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imposed by ERISA Section 502 or any other provision of ERISA or excise taxes under Code Section 4971, 4975, 4976, 4977, 4979 or 4980B.
(vii) All obligations required to be performed by Horizon or any ERISA Affiliate under any provision of any Horizon Plan have
been performed by it in all material respects and, neither Horizon nor any ERISA Affiliate is, in any material respect, in default under or in violation of any provision of any Horizon Plan.
(viii) All required reports and descriptions for the Horizon Plans have, in all material respects, been timely filed and
distributed to participants and beneficiaries, and all notices required by ERISA or the Code with respect to all Horizon Plans have been proper as to form and timely given.
(ix) No event has occurred which would reasonably constitute grounds for an enforcement action by any party under Part 5 of
Title I of ERISA with respect to any Horizon Plan.
(x) There are no examinations, audits, enforcement actions or
proceedings, or any other investigations, pending or, to Horizons knowledge, threatened by any governmental agency involving any Horizon Plan.
(xi) There are no actions, suits, proceedings or claims pending (other than routine claims for benefits) or, to Horizons
knowledge, threatened against Horizon or any ERISA Affiliate in connection with any Horizon Plan or the assets of any Horizon Plan.
(b)
Horizon has provided or made available to LPB true, accurate and complete copies and, in the case of any plan or program which has not been reduced to writing, a materially complete summary, of all of the following Horizon Plans, as applicable:
(i) All current pension, retirement, profit-sharing, savings, stock purchase, stock bonus, stock ownership, stock option,
restricted stock, restricted stock unit, phantom stock, performance share and stock appreciation right plans, all amendments thereto, and, if required under the reporting and disclosure requirements of ERISA, all current summary plan descriptions
thereof (including any modifications thereto);
(ii) All current employment, deferred compensation (whether funded or
unfunded), salary continuation, change in control, consulting, bonus, severance, and collective bargaining, agreements, arrangements or understandings;
(iii) All current executive and other incentive compensation plans, programs and agreements;
(iv) All current group insurance, medical, and prescription drug arrangements, policies or plans;
(v) All other current incentive, welfare or employee benefit plans, understandings, arrangements or agreements, maintained or
sponsored, participated in, or contributed to by Horizon for its current or former directors, officers or employees;
(vi)
All reports filed with the Internal Revenue Service or the Department within the preceding three (3) years by Horizon or any ERISA Affiliate with respect to any Horizon Plan; and
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(vii) Valuations or allocation reports for any defined contribution and defined
benefit plans as of the most recent allocation and valuation dates.
(c) Except as contemplated in this Agreement, there are no material
benefits or material liabilities under any employee benefit plan or program that will be accelerated or otherwise come due as a result of the transactions contemplated by the terms of this Agreement.
ARTICLE V.
CERTAIN COVENANTS
LPB covenants and agrees with Horizon and covenants and agrees to cause its Subsidiaries to act as follows (and Horizon covenants and agrees
with LPB as follows):
5.01
Shareholder Approval.
Unless this Agreement has been terminated in
accordance with its terms, LPB shall submit this Agreement to its shareholders for approval (
Stockholder Approval
) and adoption at a meeting to be called and held in accordance with applicable law and the Articles of Incorporation
and Bylaws of LPB (the
LPB Shareholders Meeting
) as soon as reasonably practicable after the effectiveness of the Registration Statement. Subject to
Section 5.06
hereof, the Board of Directors of LPB shall
recommend to LPBs shareholders that such shareholders approve and adopt this Agreement and the Merger contemplated hereby and will solicit proxies voting in favor of this Agreement from LPBs shareholders.
5.02
Other Approvals.
(a) LPB and Horizon shall cooperate fully and use commercially reasonable efforts to procure, upon terms and conditions consistent with the
condition set forth in
Section 7.01(e)
hereof, all consents, authorizations, approvals, registrations and certificates, in completing all filings and applications and in satisfying all other requirements prescribed by law which are
necessary for consummation of the Merger on the terms and conditions provided in this Agreement at the earliest possible reasonable date.
(b) LPB will use commercially reasonable efforts to obtain any required third party consents to agreements, contracts, commitments, leases,
instruments and documents described in the LPB Disclosure Schedule and to which LPB and Horizon agree are material.
(c) Any written
materials or information provided by LPB or Horizon for use in any filing with any state or federal regulatory agency or authority shall not contain any untrue or misleading statement of material fact or shall omit to state a material fact necessary
to make the statements contained therein, in light of the circumstances in which they are made, not false or misleading.
5.03
Conduct of Business.
(a) After the date of this Agreement and until the Effective Time or until this Agreement is
terminated as herein provided, each of LPB and its Subsidiaries shall: (1) carry on its business diligently, substantially in the manner as is presently being conducted and in the ordinary course of business; (2) use commercially
reasonable efforts to preserve its business organization intact in all material respects, keep available the services of the present officers and employees and preserve its present relationships with material customers and Persons having business
dealings with it; (3) use commercially reasonable efforts to maintain all of the properties and assets that it owns or utilizes, and which are material to the operation of its business, in the operation of its business as currently conducted in
good operating
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condition and repair, reasonable wear and tear excepted; (4) maintain its books, records and accounts in the usual, regular and ordinary manner, on a basis consistent with past practice and
in compliance in all material respects with all statutes, laws, rules and regulations applicable to them and to the conduct of its business; and (5) not knowingly do or fail to do anything which will cause a breach of, or default in, any
material contract, agreement, commitment, obligation, understanding, arrangement, lease or license to which it is a party or by which it is or may be subject or bound.
(b) From the date hereof until the Effective Time or until this Agreement is terminated as herein provided, except as expressly contemplated
or permitted by this Agreement or as set forth in
Section 5.03(b)
of the LPB Disclosure Schedule, without the prior written consent (including consent delivered by email) of Horizon which consent shall not be unreasonably withheld (which
prior written consent shall be deemed to have been given, if Horizon has not objected to a proposed action by LPB on or before five (5) business days after written notice thereof by LPB has been received by Horizon), LPB will not and will cause
its Subsidiaries to not:
(i) make any changes in its capital stock (including, without limitation, any stock issuance,
stock split, stock dividend, recapitalization or reclassification), authorize a class of stock, or issue any stock (other than pursuant to the exercise of any Options outstanding as of the date hereof), issue or grant any warrant, option, right, or
other agreement of any character relating to its authorized or issued capital stock or any securities convertible into shares of such stock, or redeem any of its outstanding shares of common stock or other securities;
(ii) distribute or pay any dividends on its shares of common stock, or authorize a stock split, or make any other distribution
to its shareholders;
provided, however
, each of the Subsidiaries may pay cash dividends to LPB or LPSB in the ordinary course of business for payment of reasonable and necessary business and operating expenses of LPB or LPSB and expenses of
the Merger; provided further, to provide funds for LPBs dividends to its shareholders in accordance with this Agreement;
provided further
, LPB may pay its normal quarterly cash dividend of $0.04 per share to its shareholders which shall
not be increased in per share amount;
provided further
, at Horizons request and except to the extent prohibited by Law or any bank regulatory agency, following receipt of Stockholder Approval and all Regulatory Approvals, LPSB shall pay
dividends to LPB;
provided further
, no dividend may be paid by LPB to its shareholders for the quarterly period in which the Merger is scheduled to be consummated or consummated if during such period LPBs shareholders will become
entitled to receive dividends on their shares of Horizon common stock received pursuant to this Agreement;
(iii) except as
consistent with past practice, purchase or otherwise acquire any investment security for their own account that exceeds $2,000,000 individually or purchase or otherwise acquire any security other than U.S. Treasury or other governmental obligations
or asset-backed securities issued or guaranteed by United States governmental or other governmental agencies, in either case having an average remaining life of three (3) years or less, or sell any investment security owned by them other than
sales made in the ordinary course of business as previously conducted during the past three (3) years and in accordance with applicable laws and regulations or engage in any activity that would be inconsistent with the classification of
investment securities as either held to maturity or available for sale;
(iv) except for binding
commitments in effect as of the date of this Agreement, make, renew or otherwise modify any loan, loan commitment, letter of credit or other extension of credit (individually, a
Loan
and collectively,
Loans
) to
any Person if the Loan is an existing
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credit on the books of LPB or any Subsidiary and classified as Other Loans Especially Mentioned, Substandard, Doubtful or Loss in an amount in
excess of $500,000. LPSB also shall not make, purchase, renew, modify, amend, or extend the maturity of (1) any new commercial Loan in excess of $1,250,000;
provided
, that LPSB may, without the consent of Horizon, renew, modify, amend or
extend the maturity of existing performing commercial loans (which are not classified or non-accrual) with existing principal balances of $1,500,000 or less, (2) unless such Mortgage Loan is saleable in the secondary market, any Mortgage Loan
with a loan to value in excess of 80% (unless private mortgage insurance is obtained) or any other Mortgage Loan in excess of $417,000 (excluding any purchase from a borrower under a Warehouse Agreement of a Mortgage Loan originated thereunder in an
amount less than $1,300,000), (3) any consumer Loan in excess of $75,000, (4) any home equity Loan or line of credit in excess of $100,000, (5) any Loan participation, (6) any agreement to purchase Mortgage Loans from any third
party originator, or (7) any Warehouse Agreement with an existing or new borrower, including any amendment to the types of Mortgage Loans that may be originated and funded under any existing Warehouse Agreement;
provided
, that LPB may
take any such action in respect of any such Loan or Loans if the Chief Credit Officer of Horizon shall be provided with notice of the proposed action in writing and Horizon shall not provide written objection to the taking of such proposed action
within three (3) business days of being provided with such notice (except for requests for approval of mortgage warehouse loans, which response shall be provided within four (4) hours of being provided with such notice) (the lack of such
objection being deemed prior written consent of Horizon for purposes of this Section);
(v) acquire any personal property
assets of any other Person by any means (other than personal property acquired in foreclosure or in the ordinary course of business, including through the collection of indebtedness owed to LPSB). Foreclose upon or otherwise acquire, take title to
or take possession or control of, any real property without first obtaining a Phase I environmental report thereon, prepared by a reliable and qualified Person acceptable to Horizon, which indicates that the real property is free of pollutants,
contaminants or hazardous materials;
provided, however
, that neither LPB nor LPSB shall be required to obtain such a report with respect to single family, non-agricultural residential property to be foreclosed upon unless LPB has reason to
believe that such property might contain such hazardous materials or otherwise might be contaminated;
(vi) except
(1) as contemplated by this Agreement (including severance and change in control payments anticipated to be paid as described in
Section 5.22
and
Section 6.03(h)
hereof), (2) as may be required pursuant to
commitments existing on the date hereof or pursuant to any LPB employee benefit plan or arrangement described on
Section 3.15(e)
of the LPB Disclosure Schedules, (3) as to non-executive employees, pay increases in the ordinary
course of business and consistent with past practice, which do not involve increases of more than 4% in connection therewith, and which are typically given on an employees anniversary date of hire or the anniversary date in the current
position, (4) the payment of bonuses for the year ended December 31, 2015, to the extent such bonuses have been accrued in accordance with GAAP through the date hereof and provided that such bonuses are consistent, as to amount and persons
covered, with past practice, all of which are set forth in
Section 5.03(b)(vi)
of the LPB Disclosure Schedule, and (5) the payment of bonuses for the partial year commencing January 1, 2016 and ending on the date of the
Effective Time, to the extent such bonuses have been accrued in accordance with GAAP through the Effective Time and provided that such bonuses are
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consistent, as to amount and persons covered, with past practice, all of which are set forth in
Section 5.03(b)(vi)
of the LPB Disclosure Schedule; pay or agree to pay, conditionally
or otherwise, any additional compensation (including bonuses) or severance benefit, take any action that would give rise to an acceleration of the right to payment, or otherwise make any changes with respect to the fees or compensation payable (or
to become payable) to consultants, directors, officers or salaried employees or, except as required by law and except as contemplated by this Agreement, adopt or make any change in any LPB Plan or other arrangement (including any agreement for
indemnification) or payment made to, for or with any of such consultants, directors, officers or employees;
(vii) fail to
accrue, pay, discharge and satisfy all debts, liabilities, obligations and expenses, including, without limitation, trade payables, incurred in the regular and ordinary course of business as such debts, liabilities, obligations and expenses become
due, unless the same are being contested in good faith;
(viii) except for obligations disclosed in this Agreement and
actions consistent with past practice in the ordinary course of business, incur short-term FHLB advances, federal funds purchased by LPSB, trade payables and similar liabilities and obligations and the payment, discharge or satisfaction of
liabilities reflected in the LPB Financial Statements or the Subsequent LPB Financial Statements, or borrow any money or incur any similar indebtedness in an aggregate amount exceeding $100,000;
(ix) change in its accounting methods, except as may be necessary and appropriate to conform to (1) changes in law and
regulation, (2) changes in GAAP or regulatory accounting principles, (3) changes required by LPBs independent auditors or its regulatory authorities, or (4) changes requested by Horizon pursuant to this Agreement;
(x) make, change or revoke any material tax election, enter into any closing agreement with respect to a material amount of
taxes, settle any material tax claim or assessment or surrender any right to claim a refund of a material amount of taxes;
(xi) make application for the opening or closing of any, or open or close any, branch or automated banking facility, except as
contemplated by any application filed with any bank regulatory authority in connection with the Merger;
(xii) waive,
release, grant or transfer any material rights of value or enter into, amend, or terminate any contract, agreement, lease, commitment, understanding, arrangement or transaction or incur any liability or obligation (other than as contemplated by this
Agreement and legal, accounting and investment banking or financial advisory fees related to the Merger) requiring payments by LPB or any of its Subsidiaries which exceed $100,000, whether individually or in the aggregate (other than trade payables
or otherwise incurred in the ordinary course of business) or which contain any financial commitment extending more than twelve (12) months following the date of this Agreement;
(xiii) except as already committed in writing as of the date of this Agreement and other than expenditures necessary to
maintain existing assets in good repair, make any capital expenditures in excess of $100,000 individually or $250,000 in the aggregate;
(xiv) except as required by applicable law, regulation or its regulatory authorities: (1) implement or adopt any material
change in its interest rate risk management or hedging policies, procedures or practices; (2) fail to follow its existing policies or practices with respect to
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managing its exposure to interest rate risk; or (3) fail to use commercially reasonable means to avoid any material increase in its aggregate exposure to interest rate risk;
(xv) take any action that would change LPSBs loan loss reserves that is not in compliance with LPSBs policy and
past practices consistently applied and in material compliance with GAAP;
(xvi) except as already committed in writing as
of the date of this Agreement, cancel, release or compromise any indebtedness in excess of $100,000 owing to LPB or any Subsidiary or any claims which LPB or any Subsidiary may possess, or voluntarily waive any material rights with respect thereto;
(xvii) pay, discharge, settle or compromise any litigation, claim, action, arbitration or other proceeding against LPB or
any Subsidiary other than (1) any such payment, discharge, settlement or compromise in the ordinary course of business consistent with past practice that involves solely money damages in the amount not in excess of $50,000 individually or
$100,000 in the aggregate, or (2) with regard to a settlement exceeding $50,000 individually or $100,000 in the aggregate, where such settlement is fully covered by insurance; and in all such cases contemplated by (1) and (2) above:
(A) does not create precedent for other pending or potential claims, actions, litigation, arbitration or proceedings, (B) neither LPB nor LPSB consents to the issuance of any injunction, decree, order or judgment restricting or otherwise
affecting its business or operations, and (C) involves a complete and unconditional release from liability with respect to LPB and/or LPSB, as applicable, with no admission of fault;
(xviii) take any action that is intended or is reasonably likely to result in (A) any of its representations or warranties
set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time, (B) any of the conditions to the Merger set forth in this Agreement not being satisfied in any material respect, or
(C) a material breach of any provision of this Agreement; except, in each case, as may be required by applicable law;
(xix) maintain the rate of interest paid by LPSB on any deposit product, including without limitation on certificates of
deposit, in a manner and pursuant to policies inconsistent with past practices;
(xx) amend the Articles of Incorporation
or Bylaws of LPB, or similar governing documents of any of its Subsidiaries;
(xxi) maintain an allowance for loan and
lease losses which is not adequate in all material respects under the requirements of GAAP to provide for possible losses, net of recoveries, relating to Loans previously charged off, on Loans and leases outstanding;
(xxii) knowingly take any action or fail to take any action that would, or would be likely to, prevent, impede or delay the
Merger from qualifying as a reorganization as defined by Section 368(a) of the Code; or
(xxiii) agree or commit to
do, or enter into any contract regarding, anything that would be precluded by this Section.
5.04
Insurance.
(a) LPB and its Subsidiaries shall maintain, or cause to be maintained, in full force and effect, insurance on its
assets, properties and operations, fidelity coverage and directors and officers
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liability insurance in such amounts and with regard to such liabilities and hazards as are currently insured by LPB or its Subsidiaries as of the date of this Agreement.
(b) LPB and its Subsidiaries shall (i) maintain in full force and effect blanket bond insurance coverage against loss or damage relating
to or resulting from any breach of fidelity by any third-party mortgage broker compensated by LPB or any of its Subsidiaries in connection with the origination of any Mortgage Loan, such policy to have a single loss coverage limit of no less than
$5,000,000 and a deductible of no more than $1,000,000, and (ii) cause each borrower who originates a Mortgage Loan with an advance under a Warehouse Agreement to maintain in full force and effect an insurance policy covering against loss or
damage relating to or resulting from any breach of fidelity by such borrower, or any officer, director, employee or agent of such borrower, any loss or destruction of documents (whether written or electronic), fraud, theft, misappropriation and
errors and omissions, which policy shall name LPB as a loss payee with a right of action, and which shall provide coverage in an amount of at least $275,000, and which shall have a deductible that does not exceed $25,000.
5.05
Accruals for Loan Loss Reserve and Expenses.
(a) Prior to the Effective Time, LPB shall and shall cause its Subsidiaries to make, consistent with GAAP and applicable banking laws and
regulations, such appropriate accounting entries in its books and records and use commercially reasonable efforts to take such other actions as LPB and its Subsidiaries shall deem to be necessary or desirable in anticipation of the Merger including,
without limitation, accruals or the creation of reserves for employee benefits and Merger-related expenses.
(b) LPB recognizes that
Horizon may have adopted different loan and accounting policies and practices (including loan classifications and levels of loan loss allowances). Subject to applicable law (including without limitation applicable banking laws and regulations and
GAAP), from and after the date hereof LPB shall consult and cooperate in good faith with Horizon with respect to conforming the loan and accounting policies and practices of LPB to those policies and practices of Horizon for financial accounting
and/or income tax reporting purposes, as reasonably specified in each case in writing from Horizon to LPB, based upon such consultation and subject to the conditions in
Section 5.05(d)
.
(c) Subject to applicable law (including without limitation applicable banking laws and regulations and GAAP), LPB shall consult and cooperate
in good faith with Horizon with respect to determining, as reasonably specified in a written notice from Horizon to LPB, based upon such consultation and subject to the conditions in
Section 5.05(d)
, the amount and the timing for
recognizing for financial accounting and/or income tax reporting purposes of LPBs expenses of the Merger.
(d) Subject to applicable
law (including without limitation applicable banking laws and regulations and GAAP), LPB and LPSB shall make such conforming changes and entries as contemplated in
Section 5.05(a)
,
Section 5.05(b)
and
Section 5.05(c)
above, but in no event prior to the 5th day next preceding the Closing Date and only after Horizon acknowledges that all conditions to its obligation to consummate the Merger have been satisfied and certifies to LPB that
Horizon will at the Effective Time deliver to LPB the certificate contemplated in
Section 7.02(g)
.
(e) LPBs
representations, warranties and covenants contained in this Agreement shall not be deemed to be untrue or breached in any respect for any purpose as a consequence of any modifications or changes undertaken at Horizons request in compliance
with
Section 5.05(d)
.
5.06
Acquisition Proposals.
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(a) LPB will, and will cause each of its Subsidiaries to, and its and their respective officers,
directors and representatives (including Raymond James) to, immediately cease and cause to be terminated any existing solicitations, discussions or negotiations with any Person concerning an Acquisition Proposal (as defined in
Section 5.06(e)
). During the period from the date of this Agreement through the Effective Time, LPB shall not terminate, amend, modify or waive any material provision of any confidentiality or similar agreement to which LPB or any of its
Subsidiaries is a party (other than any involving Horizon).
(b) Except as permitted in this
Section 5.06
, LPB shall not, and
shall cause its Subsidiaries and any of their respective directors, officers and representatives (including Raymond James) not to, (i) solicit, initiate or knowingly encourage or facilitate, or take any other action designed to, or that could
reasonably be expected to facilitate (including by way of furnishing non-public information) any inquiries with respect to an Acquisition Proposal, or (ii) initiate, participate in or knowingly encourage any discussions or negotiations or
otherwise knowingly cooperate in any way with any Person regarding an Acquisition Proposal;
provided, however
, that, at any time prior to obtaining the approval of the Merger by LPBs shareholders, if LPB receives a bona fide Acquisition
Proposal that the LPB Board of Directors determines in good faith constitutes or is reasonably likely to lead to a Superior Proposal (as defined in
Section 5.06(f)
) that was not solicited after the date hereof and did not otherwise
result from a breach of LPBs obligations under this
Section 5.06
, LPB may furnish, or cause to be furnished, non-public information with respect to LPB and its Subsidiaries to the Person who made such proposal (provided that all
such information has been provided to Horizon prior to or at the same time it is provided to such Person) and may participate in discussions and negotiations regarding such proposal if (A) the LPB Board of Directors determines in good faith,
and following consultation with financial advisors and outside legal counsel, that failure to do so would be reasonably likely to result in a breach of its fiduciary duties to LPBs shareholders under applicable law and (B) prior to taking
such action, LPB has used its reasonable best efforts to enter into a confidentiality agreement with such Person containing terms no less favorable to LPB than those contained the Confidentiality Agreement (as defined in
Section 11.08
)
and which confidentiality agreement shall not provide such Person with any exclusive right to negotiate with LPB. Without limiting the foregoing, it is agreed that any violation of the restrictions contained in the first sentence of this
Section 5.06(b)
by any representative (including Raymond James) of LPB or its Subsidiaries shall be a breach of this
Section 5.06
by LPB.
(c) Neither the LPB Board of Directors nor any committee thereof shall (or shall agree or resolve to) (i) fail to make, withdraw or
modify in a manner adverse to Horizon or propose to withdraw or modify in a manner adverse to Horizon (or take any action inconsistent with) the recommendation by such LPB Board of Directors or any such committee of this Agreement or the Merger, or
approve or recommend, or propose to recommend, the approval or recommendation of any Acquisition Proposal (any of the foregoing being referred to herein as an
Adverse Recommendation Change
), or (ii) cause or permit LPB or
LPSB to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other agreement (each, an
Acquisition
Agreement
) constituting or related to, or which is intended to or would be reasonably likely to lead to, any Acquisition Proposal (other than a confidentiality agreement referred to in
Section 5.06(b)
). Notwithstanding the
foregoing, at any time prior to the special meeting of LPBs shareholders to approve the Merger, the LPB Board of Directors may, in response to a Superior Proposal, effect an Adverse Recommendation Change,
provided
, that the LPB Board of
Directors determines in good faith, after consultation with its outside legal counsel and financial advisors, that the failure to do so would be reasonably likely to result in a breach of its
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fiduciary duties to the shareholders of LPB under applicable Law, and
provided, further
, that the LPB Board of Directors may not effect such an Adverse Recommendation Change unless
(A) the LPB Board shall have first provided prior written notice to Horizon (an
Adverse Recommendation Change Notice
) that it is prepared to effect an Adverse Recommendation Change in response to a Superior Proposal, which
notice shall, in the case of a Superior Proposal, attach the most current version of any proposed written agreement or letter of intent relating to the transaction that constitutes such Superior Proposal (it being understood that any amendment to
the financial terms or any other material term of such Superior Proposal shall require a new notice and a new five (5) business day period) and (B) Horizon does not make, within five (5) business days after receipt of such notice, a
proposal that would, in the reasonable good faith judgment of the LPB Board of Directors (after consultation with financial advisors and outside legal counsel), cause the offer previously constituting a Superior Proposal to no longer constitute a
Superior Proposal or that the Adverse Recommendation Change is no longer required to comply with the LPB Boards fiduciary duties to the shareholders of LPB under applicable law. LPB agrees that, during the five (5) business day period
prior to its effecting an Adverse Recommendation Change, LPB and its officers, directors and representatives shall negotiate in good faith with Horizon and its officers, directors, and representatives regarding any revisions to the terms of the
transactions contemplated by this Agreement proposed by Horizon.
(d) In addition to the obligations of LPB set forth in paragraphs (a),
(b) and (c) of this
Section 5.06
, LPB shall as promptly as possible, and in any event within two (2) business days after LPB first obtains knowledge of the receipt thereof, advise Horizon orally and in writing of
(i) any Acquisition Proposal or any request for information that LPB reasonably believes could lead to or contemplates an Acquisition Proposal or (ii) any inquiry LPB reasonably believes could lead to any Acquisition Proposal, the terms
and conditions of such Acquisition Proposal, request or inquiry (including any subsequent amendment or other modification to such terms and conditions) and the identity of the Person making any such Acquisition Proposal or request or inquiry. In
connection with any such Acquisition Proposal, request or inquiry, if there occurs or is presented to LPB any offer, material change, modification or development to a previously made offer, letter of intent or any other material development, LPB (or
its outside counsel) shall (A) advise and confer with Horizon (or its outside counsel) regarding the progress of negotiations concerning any Acquisition Proposal, the material resolved and unresolved issues related thereto and the material
terms (including material amendments or proposed amendments as to price and other material terms) of any such Acquisition Proposal, request or inquiry, and (B) promptly upon receipt or delivery thereof provide Horizon with true, correct and
complete copies of any document or communication related thereto.
(e) For purposes of this Agreement,
Acquisition
Proposal
shall mean (i) any inquiry, proposal or offer from any Person or group of Persons (other than as contemplated by this Agreement) relating to, or that could reasonably be expected to lead to, any direct or indirect acquisition
or purchase, in one transaction or a series of transactions, of (A) assets or businesses that constitute 25% or more of the revenues, net income or assets of LPB and its Subsidiaries, taken as a whole, or (B) 25% or more of any class of
equity securities of LPB or any of its Subsidiaries; (ii) any tender offer or exchange offer that, if consummated, would result in any Person beneficially owning 25% or more of any class of equity securities of LPB or any of its Subsidiaries;
(iii) any merger, consolidation, business combination, recapitalization, liquidation, dissolution, joint venture, binding share exchange or similar transaction involving LPB, LPSB or any of its other Subsidiaries pursuant to which any Person or
the shareholders of any Person would own 25% or more of any class of equity securities of LPB, LPSB, or any of LPBs other Subsidiaries or of any resulting parent company of LPB or LPSB; or (iv) any other transaction the
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consummation of which could reasonably be expected to impede, interfere with, prevent or materially delay the Merger or that could reasonably be expected to dilute materially the benefits to
Horizon of the transactions contemplated hereby, other than the transactions contemplated hereby. For purposes of this
Section 5.06
, a
Person
shall include a natural Person, or any legal, commercial, or Governmental
Authority, including, a corporation, general partnership, joint venture, limited partnership, limited liability company, trust, business association, group acting in concert, or any Person acting in a representative capacity.
(f) For purposes of this Agreement,
Superior Proposal
shall mean any Acquisition Proposal (but changing the references to
25% or more in the definition of
Acquisition Proposal
to 50% or more) that the LPB Board determines in good faith (after having received the advice of its financial advisors), to be (i) more favorable
to the shareholders of LPB from a financial point of view and its other constituencies than the Merger (taking into account all the terms and conditions of such proposal and this Agreement (including any break-up fees, expense reimbursement
provisions and conditions to consummation and any changes to the financial terms of this Agreement proposed by Horizon in response to such offer or otherwise)) and (ii) reasonably capable of being completed without undue delay taking into
account all financial, legal, regulatory and other aspects of such proposal.
5.07
Press Releases.
Horizon and LPB shall use reasonable efforts (i) to develop a joint communications plan with respect to this Agreement and the transactions contemplated hereby, (ii) to ensure that all press releases and other public statements with
respect to this Agreement and the transactions contemplated hereby shall be consistent with such joint communications plan, and (iii) except where (and to the extent that) such prior consultation is not reasonably possible due to time
considerations in respect of any announcement required by applicable law or by obligations pursuant to any listing agreement with or rules of the NASDAQ Global Select Market, to consult with each other before issuing any press release or otherwise
making any public statement with respect to this Agreement or the transactions contemplated hereby.
5.08
Changes and Supplements to Disclosure Schedules.
LPB shall promptly supplement, amend and update, upon the occurrence of any change prior to the Effective Time, and as of the Effective Time, the LPB Disclosure
Schedule with respect to any matters or events hereafter arising which, if in existence or having occurred as of the date of this Agreement, would have been required to be set forth or described in the LPB Disclosure Schedule or this Agreement and
including, without limitation, any fact which, if existing or known as of the date hereof, would have made any of the representations or warranties of LPB contained herein materially incorrect, untrue or misleading. No such supplement, amendment or
update shall have any effect for the purposes of determining satisfaction of the conditions set forth in
Article VII
.
5.09
Failure to Fulfill Conditions.
In the event LPB determines that a condition to its obligation to complete the Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify Horizon.
5.10
Access; Information.
(a) Horizon and LPB, and their representatives and agents, shall, upon reasonable notice to the other party, at all times during normal
business hours prior to the Effective Time, have reasonable access to the properties, facilities, operations, books and records of the other party (other than minutes that discuss any of the transactions contemplated by this Agreement). Horizon and
LPB, and their representatives and agents may, prior to the Effective Time, make or cause to be made such reasonable investigation of the operations, books, records and properties of the other party and their Subsidiaries
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and of their financial and legal condition as deemed necessary or advisable to familiarize themselves with such operations, books, records, properties and other matters;
provided, however
,
that such access or investigation shall not interfere unnecessarily with the normal business operations of LPB or Horizon or either of their Subsidiaries;
provided further
, neither LPB, Horizon nor any of their Subsidiaries shall be required
to take any action that would provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of any customer or other person or would result in the waiver by any of them of the privilege protecting
communications between any of them and any of their counsel. In addition, after receipt of all Regulatory Approvals and Stockholder Approval, LPB shall cooperate with Horizon to facilitate introductions to LPSBs customers and key business
partners and referral sources.
(b) No investigation by Horizon or LPB shall affect the representations and warranties made by LPB or
Horizon herein.
(c) Any confidential information or trade secrets received by Horizon, LPB or their representatives or agents in the
course of such examination will be treated confidentially, and any correspondence, memoranda, records, copies, documents and electronic or other media of any kind containing such confidential information or trade secrets or both shall be destroyed
by Horizon or LPB, as applicable, or at Horizons or LPBs request, returned to Horizon or LPB, as applicable, in the event this Agreement is terminated as provided in
Article VIII
hereof;
provided, however
, that the parties
may retain such received confidential information to comply with applicable law or regulation or professional standard or bona fide internal compliance policy requirements and any such retained information must be treated confidentially.
Additionally, any confidential information or trade secrets received by Horizon or LPB, or either of their agents or representatives in the course of their examinations (whether conducted prior to or after the date of this Agreement) shall be
treated confidentially and in accordance with the Confidentiality Agreement (as defined in
Section 11.08
). This
Section 5.10
will not require the disclosure of any information to Horizon or LPB which would be prohibited by
law.
(d) LPB shall also provide Horizon with copies of minutes and consents from all such Board and committee meetings no later than
fourteen (14)
days thereafter (other than minutes that discuss any of the transactions contemplated by this Agreement).
5.11
Financial Statements.
As soon as internally available after the date of this Agreement, LPB will deliver to Horizon any additional audited consolidated financial statements which are prepared on its behalf or at its direction, the monthly
consolidated unaudited balance sheets and profit and loss statements of LPB prepared for its internal use, LPSBs Call Reports for each quarterly period completed prior to the Effective Time, all other financial reports or statements submitted
to regulatory authorities after the date hereof, and all other financial statements and financial information reasonably requested by Horizon (collectively,
Subsequent LPB Financial Statements
). The Subsequent LPB Financial
Statements will be prepared on a basis consistent with past accounting practices and GAAP (to the extent applicable) and shall present fairly the financial condition and results of operations as of the dates and for the periods presented (except in
the case of unaudited financial statements or Call Report information for the absence of notes and/or year-end adjustments).
5.12
Environmental.
(a) If requested by Horizon, LPB will cooperate with an environmental consulting firm designated by Horizon (the
Designated Environmental Consultant
) in connection with the conduct, at any time after the date hereof (the
Investigation Period
), by the Designated Environmental Consultant of Phase I environmental site
assessments and any other investigation reasonably requested
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by Horizon on all real property (except single family, non-agricultural residential property of one acre or less) owned or leased by LPB or any of its Subsidiaries as of the date of this
Agreement or acquired thereafter, including OREO, to the extent not prohibited by any lease governing LPSBs lease of any property. Horizon shall furnish true and complete copies of any reports of the Designated Environmental Consultant that it
receives with respect to any LPB property, promptly upon Horizons receipt of such reports. Horizon shall be responsible for the costs of the Phase I environmental site assessments, and Horizon and LPB shall each bear 50% of the costs of any
additional environmental investigation or testing as determined to be advisable or recommended by the Designated Environmental Consultant as a result of an actual or suspected Recognized Environmental Condition (as such term is defined
by the American Society for Testing Materials).
5.13
Governmental Reports and Shareholder
Information.
Promptly upon its becoming available, LPB shall furnish to Horizon one (1) copy of each financial statement, report, notice, or proxy statement sent by LPB to any Governmental Authority or to LPBs shareholders, and of any
order issued by any Governmental Authority in any proceeding to which LPB is a party. For purposes of this Agreement,
Governmental Authority
shall mean any government (or any political subdivision or jurisdiction thereof), court,
bureau, agency or other governmental entity having or asserting jurisdiction over the applicable party or its business, operations or properties.
5.14
Adverse Actions.
During the period from the date of this Agreement to the Effective Time, except
with the written consent of Horizon, which consent will not be unreasonably withheld, LPB will, and it will cause each of its Subsidiaries to, use commercially reasonable efforts to preserve intact its business organization and assets and maintain
its rights and franchises; and voluntarily take no action that would: (i) adversely affect the ability of the parties to obtain the regulatory approvals or materially increase the period of time necessary to obtain such approvals;
(ii) adversely affect its ability to perform its covenants and agreements under this Agreement in any material respect; or (iii) result in the representations and warranties contained in
Article III
of this Agreement not being true
and correct on the date of this Agreement or at any future date on or prior to the Closing Date (subject to the standards set forth in
Section 7.01(a)
hereof) or in any of the conditions set forth in
Article VII
hereof not being
satisfied;
provided, however
, that the forgoing shall not be deemed to require LPB to take any action which would otherwise violate any other provision of this Agreement.
5.15
Employee Benefits and Employees.
(a) Neither the terms of
Section 6.03
hereof nor the provision of any employee benefits by Horizon or any of its Subsidiaries to
employees of LPB or any of its Subsidiaries shall: (a) create any employment contract, agreement or understanding with or employment rights for, or constitute a commitment or obligation of employment to, any of the officers or employees of LPB
or any of its Subsidiaries; or (b) prohibit or restrict Horizon or its Subsidiaries, whether before or after the Effective Time, from changing, amending or terminating any employee benefits provided to its employees from time to time.
(b) Before the date that is sixty (60) days prior to Closing, Horizon will use its best efforts to notify LPB of the employees Horizon
intends to retain after the Effective Time. Prior to the Closing Date, LPB shall be responsible for timely giving any notices to, and terminating, any employees whose employment will not be continued by Horizon, and LPB shall pay any and all amounts
which are then due and payable to such employees in connection with the termination of their employment, including, without limitation, all accrued paid-time off and the severance amounts contemplated by
Section 6.03(h)
of this
Agreement.
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(c) Before Closing, with LPBs prior consent (which consent shall not be unreasonably
withheld), Horizon may conduct such training and other programs as it may, in its reasonable discretion and at its sole expense, elect to provide for those employees who will be continuing employment with Horizon;
provided, however
, that such
training and other programs shall not materially interfere with or prevent the performance of the normal business operations of LPB.
5.16
Termination of LPB 401(k) Plan.
(a) LPB maintains the LPB 401(k) Plan. LPB shall make contributions to the LPB 401(k) Plan
between the date hereof and the Effective Time consistent with the terms of the LPB 401(k) Plan and past practices, including, without limitation, elective deferral contributions of those LPB 401(k) Plan participants who are employed by LPB or its
Subsidiaries.
(b) As soon as practicable following the execution of this Agreement, LPB, pursuant to the provisions of the LPB 401(k)
Plan, shall, subject to review and approval by Horizon: (i) adopt resolutions to terminate, subject to the consummation of the Merger, the LPB 401(k) Plan effective as of a date that is not later than the day before the Effective Time (the
Plan Termination Date
) and (ii) amend the LPB 401(k) Plan effective as of a date not later than the Plan Termination Date to freeze participation in and benefit accruals under the LPB 401(k) Plan and to provide that no
distributions of accrued benefits shall be made from the LPB 401(k) Plan, or its related employee benefit trust, subsequent to the Plan Termination Date until such time as the Internal Revenue Service issues a favorable determination letter to the
effect that the plan termination does not adversely affect the LPB 401(k) Plans qualification for favorable income tax treatment under the Code, except distributions may be made earlier if required by the terms of the LPB 401(k) Plan upon the
occurrence of retirement, death, disability, or termination of employment, or any other event, other than the plan termination, that requires a distribution from the LPB 401(k) Plan. Notwithstanding the preceding provisions, participants with
outstanding plan loans under the LPB 401(k) Plan as of the Effective Time shall be permitted to continue repaying such outstanding loans (subject to the terms and conditions of such plan and the related loan procedures) on and after the Effective
Time and until such time as plan termination distributions are paid pursuant to the preceding sentence. At such time as the loans are required to be repaid or will be taxed to the borrower if not repaid (the
401(k) Loan Repayment
Date
), Horizon, if any, shall cause loans to be made, outside of any tax qualified retirement plan, to those LPSB employees who had loans outstanding under the 401(k) Plan as of the 401(k) Loan Repayment Date, in an amount not to exceed
the outstanding loan balance as of the 401(k) Loan Repayment Date, provided that any such LPSB employee completes any necessary documentation and is determined to qualify for such loan under applicable loan policies and underwriting standards of
Horizon. Each such refinancing loan shall have a fixed rate of interest not to exceed four percent (4.0%) per annum and shall have an amortization period not to exceed the remaining term of the loan granted under the 401(k) Plan. Horizon agrees
to: (1) maintain the LPB 401(k) Plan employer stock fund (but which shall be frozen to additional investments after the Effective Time) until all assets are distributed from the LPB 401(k) Plan in order to preserve potential net unrealized
appreciation tax treatment, unless and until Horizon ceases offering Horizon stock as an investment option under all qualified retirement plans maintained by Horizon, (2) permit the LPB 401(k) Plan participants to self-direct their investments
after the Plan Termination Date, and (3) not change any of the investment options under the 401(k) Plan unless required by the Code, ERISA or applicable law.
(c) As soon as practicable following the execution of this Agreement, LPB will file, or cause to be filed, with the Internal Revenue Service
an application for a favorable determination letter upon termination of the LPB 401(k) Plan (IRS Form 5310 and related attachments) requesting the issuance to
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LPB of the favorable determination letter described in the preceding subsection (b). A copy of the competed and filed IRS Form 5310 shall be provided to Horizon at least five (5) business
days prior to the Effective Time. Following the Effective Time, Horizon shall use its reasonable best efforts in good faith to obtain the IRS favorable determination letter as promptly as possible, including adopting any amendments to the LPB 401(k)
Plan that may be required by the IRS. As soon as practicable following the receipt of a favorable determination letter from the IRS regarding the tax-qualified status of the LPB 401(k) Plan upon its termination, the remaining account balances in the
LPB 401(k) Plan shall either be distributed to participants and beneficiaries or transferred to an eligible tax-qualified retirement plan or individual retirement account as a participant or beneficiary may direct.
(d) Any contributions due to the LPB 401(k) Plan for the period prior to the Plan Termination Date, and not yet paid on the Plan Termination
Date, will be contributed by LPB as soon as administratively feasible following the Plan Termination Date.
(e) LPB shall continue in full
force and effect, until the Effective Time: (i) the fidelity bond, if any, issued to LPB as described in ERISA Section 412; and (ii) the ERISA fiduciary liability insurance policy currently in effect, if any, for the benefit of the
covered fiduciaries of the LPB 401(k) Plan.
(f) On or before the Effective Time, LPSB shall have directed the 401(k) Trustees to
(i) provide to the LPB 401(k) Plan participants similar notices and materials provided to other LPB shareholders with respect to those matters requiring a vote of the shareholders under this Agreement; (ii) obtain direction from the LPB
401(k) Plan participants as to how to vote those shares of LPB Stock allocated to the accounts of the LPB 401(k) Plan participants with respect to those matters for which shareholder vote is required under this Agreement; (iii) vote those
shares of LPB Stock in accordance with the direction of the LPB 401(k) Plan participants and in accordance with Section 9.06 of the Basic Plan Document for the LPB 401(k) Plan; and (iv) vote the shares of LPB Stock for which no participant
investment direction has been timely received by the Trustee in accordance with Section 9.06 of the Basic Plan Document for the LPB 401(k) Plan and in a manner determined by the Trustees to be for the exclusive benefit of the LPB 401(k)
Plans participants and their beneficiaries.
(g) As soon as practicable following the execution of this Agreement, Horizon will
amend the Horizon Employees Thrift Plan (
Horizon 401(k) Plan
) to permit Continuing Employees to enter the Horizon 401(k) Plan as of the Effective Time, and Continuing Employees will be credited with prior years of service
with LPB for purposes of eligibility and vesting (but not benefit accruals). Horizon agrees to permit LPB 401(k) Plan participants who become employees of Horizon to roll over their account balances in the LPB 401(k) Plan to the Horizon 401(k) Plan.
5.17
Disposition of Welfare Benefit and Sec. 125 Plans.
(a) All fully insured welfare benefit (health, dental, vision, prescription drug, EAP, life/AD&D, LTD), and Internal Revenue Code
Section 125, or cafeteria, plans currently sponsored by LPB or LPSB shall be terminated as of the Effective Time or as soon as administratively practicable after the Effective Time, if directed in writing by Horizon. LPB shall take,
or cause to be taken, all actions necessary to terminate all of LPBs and any Subsidiarys group insurance policies as of the Effective Time, if instructed in writing by Horizon.
(b) As of the Effective Time, and to the extent not prohibited by applicable law, LPB shall take, or cause to be taken, all actions necessary
to assign any and all applicable group insurance policies to Horizon and to provide Horizon all necessary financial, enrollment, eligibility, contractual and other
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information related to its welfare benefit and cafeteria plans to assist Horizon in the administration of such plans, if directed in writing by Horizon.
(c) From the date of this Agreement through the Effective Time, LPB shall continue to: (i) pay the applicable insurance premiums
necessary to continue the benefits under LPBs fully insured welfare benefit plans; (ii) contribute to the cafeteria plan the pre-tax amounts which the cafeteria plan participants elect to defer from compensation; and (iii) pay all
eligible claims incurred, in accordance with the terms and conditions of such plan, under the cafeteria plans health and dependent care flexible spending accounts prior to the Effective Time.
(d) As of the date of the termination of the LPB cafeteria plan, if any, and if directed by Horizon, the balances in the health flexible
spending accounts of Continuing Employees thereunder shall be transferred to the applicable components of the Horizon cafeteria plan. Benefit and compensation deferral elections in effect at that time shall be continued under the Horizon cafeteria
plan, subject to subsequent changes as provided in the Horizon plan. All benefit payments related to the transferred balances shall be made in accordance with the Horizon cafeteria plan.
5.18
Subsidiary Mergers and LSBRMI Termination.
Following receipt of Stockholder Approval and all
Regulatory Approvals, LPB shall, and shall cause each Subsidiary to, use its reasonable best efforts to take such action as necessary to (i) effectuate the LSBRMI Termination as contemplated in
Section 1.08
hereof; and
(ii) effectuate the Subsidiary Mergers.
5.19
Cooperation on Conversion of Systems.
LPB agrees
to commence immediately after the date of this Agreement (and continue until Closing or completed) using its commercially reasonable best efforts to ensure an orderly transfer of information, processes, systems and data to Horizon and to otherwise
assist Horizon in facilitating the conversion of all of LPBs systems into, or to conform with, Horizons systems (including cooperating with Horizon in the training of LPBs and its Subsidiaries employees on Horizons
systems), so that, as of the Closing, the systems of LPB are readily convertible to Horizons systems to the fullest extent possible without actually converting them prior to the Closing. LPB and Horizon shall meet on a regular basis to discuss
and plan for the conversion of LPBs data processing and related electronic informational systems to those used by Horizon, which planning shall include, without limitation: (i) discussion of possible termination by LPB of third-party
service provider arrangements effective at or following the Effective Time; (ii) non-renewal of personal property leases and software licenses used by LPB in connection with its systems operations; and (iii) retention of outside
consultants and additional employees to assist with the conversion and outsourcing, as appropriate, of proprietary or self-provided system services.
5.20
Installation/Conversion of Equipment.
Prior to Closing and after the receipt of Regulatory
Approvals, at times mutually agreeable to Horizon and LPB, Horizon may, at Horizons sole expense, install teller equipment, platform equipment, security equipment, and computers, at the LPB and LPSB offices, branches and ATM locations, and LPB
shall cooperate with Horizon in connection with such installation;
provided, however
, that such installations shall not interfere with the normal business activities and operations of LPB or LPSB or require material alterations to LPBs
or LPSBs facilities.
5.21
Supplemental Life Insurance Agreements (BOLI).
Prior to the
Effective Time, LPB shall, or shall cause LPSB to, take any and all action necessary to terminate in accordance with the terms and conditions thereof and without resulting liability to Horizon or any of its affiliates, The LaPorte Savings Bank Split
Dollar Agreements with each of Michele M. Thompson and Daniel P. Carroll.
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5.22
Employment Agreements and Change of Control Payments.
LPB will pay out all amounts payable upon a change in control pursuant to the employment agreements between LPSB and (i) Lee A. Brady dated February 26, 2008, as amended, and (ii) Michele M. Thompson dated February 26, 2008, as
amended (collectively, the
Employment Agreements
), as identified in the LPB Disclosure Schedule, as if the change in control payments contemplated by the Employment Agreements had been triggered by the Merger, provided that, if
required, all such agreements shall be amended with the written consent of the affected parties prior to the Effective Time to ensure and expressly provide that no payment shall be made under such agreements or under any other plan, arrangement or
agreement applicable to the individual that would constitute an excess parachute payment (as such term is defined in Section 280G of the Code), and to the extent any such payment would constitute an excess parachute
payment, the payment will be reduced to $1.00 less than the amount that would be considered an excess parachute payment. The payment of such amounts shall be contingent upon Ms. Thompson and Mr. Brady entering into a
mutual termination of employment agreement in a form reasonably acceptable to Horizon and executed concurrent with the execution of this Agreement (the
Mutual Termination of Employment Agreements
), and each of them also entering
into the Noncompetition Agreements. Such payments will be made in a lump sum no later than the Effective Time.
5.23
SERP Agreements and Deferred Compensation Agreement.
At the Effective Time, Horizon shall assume those certain Supplemental Executive Retirement Agreements with Lee A. Brady, Michele M. Thompson, Patrick W. Collins, Bruce Fisher, and
Russ Klosinksi and the Deferred Compensation Agreement with Lee A. Brady (the
Brady DCA
and together with the other agreements, collectively, the
SERPs
) and the timing and amount of the payments thereunder will
be made in accordance with the SERP plan documents and which are detailed in
Section 5.23
of the LPB Disclosure Schedule. For purposes of clarity, it is understood that neither Horizon nor LPB will terminate the SERPs and the parties
will not accelerate the timing of the payments thereunder. Horizon and LPB agree that all amounts payable under the SERPs and DCA on behalf of Lee A. Brady, Bruce Fisher and Russ Klosinksi will be deposited into a separate account within
Horizons existing irrevocable grantor trust (which shall meet the requirements of Internal Revenue Service Revenue Procedure 92-65 (as amended or superseded from time to time)) at the Effective Time, and all payments due under such SERPs will
be made by such trust and from such separate account.
5.24
Mortgage Loan Operations.
(a) At the earlier of five days prior to the Effective Time or after receipt of Stockholder Approval and all Regulatory Approvals, LPB will
work to conform its mortgage warehouse operations to Horizons standards, including, but not limited to, adopting and/or adhering to Horizons mortgage warehouse (i) underwriting standards, which may result in the need for LPSB to
exit certain existing relationships; (ii) loan documentation processes and procedures; and (iii) credit underwriting and monitoring processes and procedures.
(b) After Stockholder Approval and all Regulatory Approvals, LPB shall immediately give notice to each mortgage warehouse customer who offers
construction loans terminating such product type;
provided, however
, that if LPB determines that any prior commitments by any such customer commits LPB to make such an advance, LPB shall submit to Horizon for review and approval any such
request at least two (2) business days prior to the contemplated funding date.
(c) At the earlier of five days prior to the
Effective Time or after receipt of Stockholder Approval and all Regulatory Approvals, LPB shall immediately give notice to each mortgage warehouse
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customer to discontinue any future purchases of correspondent Mortgage Loans. After the date of this Agreement and until the Effective Time (or until this Agreement is terminated as herein
provided), LPB will not, and will cause its Subsidiaries to not, enter into any new agreement allowing any correspondent Mortgage Loans to be placed on a mortgage warehouse line.
(d) At the earlier of five days prior to the Effective Time or after receipt of Stockholder Approval and all Regulatory Approvals, LPB shall
give notice to each participant in a mortgage warehouse loan arrangement with LPSB that such participation arrangement will be terminated as of the Effective Time and shall take all steps necessary to terminate all agreements evidencing the same
effective as of the Effective Time.
5.25
Amendment and Termination of LPSB ESOP.
(a) LPB shall make contributions to the LPSB ESOP between the date hereof and the Effective Time consistent with the terms of the LPSB ESOP and
past practices, including, without limitation, any contributions required pursuant to the terms and conditions of the ESOP Loan Documents.
(b) No later than ten (10) days prior to the Closing Date, LPB, pursuant to the provisions of the LPSB ESOP, shall, subject to review and
approval by Horizon: (i) adopt resolutions to terminate, subject to the consummation of the Merger, the LPSB ESOP, effective as of the Closing Date (the
ESOP Termination Date
); (ii) amend the LPSB ESOP effective as of a
date not later than the ESOP Termination Date to freeze participation under the LPSB ESOP and to provide that no distributions of accrued benefits shall be made from the LPSB ESOP, or its related employee benefit trust, subsequent to the ESOP
Termination Date until such time as the Internal Revenue Service issues a favorable determination letter to the effect that the plan termination does not adversely affect the LPSB ESOPs qualification for favorable income tax treatment under
the Code, except distributions may be made earlier if required by the terms of the LPSB ESOP upon the occurrence of retirement, death, disability, or termination of employment, or any other event, other than the plan termination, that requires a
distribution from the LPSB ESOP; (iii) amend the LPSB ESOP to provide that the excess of the proceeds from the sale of shares of LPB Common Stock held by the LPSB ESOP in the ESOPs unallocated suspense account (
Suspense
Shares
) over the unpaid principal and accrued interest of the Exempt Note attributable to the Suspense Shares shall (after repayment of the Exempt Note as contemplated in
Section 5.25
of this Agreement) be allocated to the
accounts of the ESOPs participants according to each participants proportionate ESOP account balance as of the day before the ESOP Termination Date. Except as provided in this
Section 5.25(b)
or except to the extent that
Horizon ceases offering Horizon stock as an investment option under all qualified plans maintained by Horizon, Horizon agrees that the LPSB ESOP will not dispose of the Horizon common stock received by the LPSB ESOP at the Closing Date in order to
preserve potential net unrealized appreciation tax treatment upon the distribution of the Horizon common stock to the LPSB ESOP participants. LPB will file, or cause to be filed, with the Internal Revenue Service an application for a favorable
determination letter upon termination of the LPSB ESOP requesting the issuance to LPB of the favorable determination letter described in this
Section 5.25(b)
. A copy of the competed and filed application shall be provided to Horizon at
least five (5) business days prior to the Effective Time. On or before the Effective Time, LPB shall direct the Trustee of the LPSB ESOP to cause the unpaid principal balance and accrued interest through the Closing Date of the Exempt Note
(such unpaid principal and accrued interest shall be referred to as the
ESOP Loan Balance
) to be repaid to Horizon, as successor in interest to LPB, as of the Closing Date. Repayment of the ESOP Loan Balance shall be made by
transferring to Horizon, as successor in interest to LPB, the sum of (i) cash received by the ESOP for the Suspense Shares equal to
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thirty five percent (35%) of the ESOP Loan Balance, and (ii) a number of shares of Horizon common stock equal to (A) sixty five percent (65%) of the ESOP Loan Balance divided
by (B) the fair market value of Horizon common stock as of the Closing Date.
(c) Following the Effective Time, Horizon shall use its
best efforts in good faith to obtain the IRS favorable determination letter as promptly as possible, including adopting any amendments to the LPSB ESOP that may be required by the IRS. As soon as practicable following the receipt of a favorable
determination letter from the IRS regarding the tax-qualified status of the LPSB ESOP upon its termination, the remaining account balances in the LPSB ESOP shall either be distributed to participants and beneficiaries or transferred to an eligible
tax-qualified retirement plan or individual retirement account as a participant or beneficiary may direct.
(d) On or before the Effective
Time, the ESOP Committee shall have directed Delaware Charter Guarantee & Trust Company (the
ESOP Trustee
), as directed trustee of the ESOP to (i) provide to the ESOP participants similar notices and materials
provided to other LPB shareholders with respect to those matters requiring a vote of the shareholders under this Agreement; (ii) obtain direction from the ESOPs participants as to how to vote those shares of LPB Stock allocated to the
accounts of the ESOPs participants with respect to those matters for which shareholder vote is required under this Agreement; (iii) vote those shares of LPB Stock in accordance with the direction of the ESOPs participants and in
accordance with Section 7.1-1 of the ESOP; and (iv) vote the Suspense Shares and allocated shares of LPB Stock for which no participant investment direction has been timely received by the Trustee in accordance with Section 7.1-1 of
the ESOP.
(e) LPB shall continue in full force and effect, until the Effective Time: (i) the fidelity bond, if any, issued to LPB as
described in ERISA Section 412; and (ii) the ERISA fiduciary liability insurance policy currently in effect, if any, for the benefit of the covered fiduciaries of the LPSB ESOP.
(f) As soon as practicable following the execution of this Agreement, Horizon will amend the Horizon Employee Stock Ownership Plan (the
Horizon ESOP
) to permit Continuing Employees to enter the Horizon ESOP as of the Effective Time, and Continuing Employees will be credited with prior years of service with LPB for purposes of eligibility and vesting (but not
benefit accruals).
5.26
280G Opinion.
Prior to the Effective Time, LPB shall use its reasonable
best efforts to cause LPB and Horizon to receive confirmation, in a form reasonably satisfactory to LPB and Horizon, from an accounting firm, to the effect that as a result, directly or indirectly, of the transactions contemplated by this Agreement
(including without limitation any termination of employment relating thereto and occurring prior to, at or following the Effective Time), LPB, its Subsidiaries and their respective successors will not be obligated to make a payment that would be
characterized as an excess parachute payment to an individual who is a disqualified individual, as such terms are defined in Section 280G of the Code.
ARTICLE VI.
COVENANTS OF HORIZON
Horizon covenants and agrees with LPB and covenants and agrees to cause its Subsidiaries to act as follows (and, where applicable, LPB
covenants and agrees with Horizon as follows):
6.01
Approvals.
Horizon shall have primary
responsibility of the preparation, filing and costs of all bank regulatory applications required for consummation of the Merger (except those only
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applicable to LPB or LPSB, if any), and all parties shall file such applications as promptly as practicable after the execution of this Agreement (provided that each party has timely provided all
information requested in writing by the other party or its counsel), and in no event later than forty five (45) days after the execution of this Agreement. Horizon shall provide LPB and its counsel appropriate opportunity to review and comment
on such bank regulatory applications, including any supplements or amendments to such filings and all responses for additional information and replies to comments, prior to such filings being filed with a bank regulatory agency. Horizon and LPB
shall cooperate fully and use commercially reasonable efforts to procure, upon terms and conditions reasonably acceptable to each of them, all consents, authorizations, approvals, registrations and certificates, to complete all filings and
applications and to satisfy all other requirements prescribed by law which are necessary for consummation of the Merger on the terms and conditions provided in this Agreement. Horizon shall provide to LPBs counsel copies of all applications
filed and copies of all material written communications with all state and federal bank regulatory agencies relating to such applications and agrees that it will consult with LPB with respect to such consents, authorizations, approvals,
registrations and certificates, and agrees that it will keep LPB apprised of the status of matters relating to completion of the transactions contemplated hereby.
6.02
SEC Registration.
(a) For the purposes (x) of registering the Horizon Common Stock to be offered to holders of LPB Common Stock in connection with the
Merger with the SEC under the Securities Act and (y) of holding the LPB shareholders meeting, as soon as practicable following the date of this Agreement, LPB (with the assistance of Horizon as appropriate) shall prepare the required proxy
disclosures, in accordance with the rules and regulations of the SEC, to be used in connection with the LPB shareholders meeting to obtain approval for the Merger (the
Proxy Statement
), and Horizon shall use its reasonable best
efforts to prepare and file with the SEC, no later than 45 days after the date of this Agreement (provided that each party has timely provided all information requested in writing by the other party or its counsel), a registration statement on Form
S-4 under the Securities Act of 1933, as amended (the
1933 Act
) covering the shares of Horizon common stock to be issued pursuant to this Agreement, in which the Proxy Statement will be included as a prospectus. Such registration
statement and any amendments and supplements thereto are referred to in this Agreement as the
Registration Statement
. Horizon shall provide LPB and its counsel with appropriate opportunity to review and comment on the Registration
Statement, and shall incorporate all appropriate comments thereto prior to the time it is initially filed with the SEC or any amendments are filed with the SEC. Horizon shall use its best reasonable efforts to cause the same to become effective and
thereafter, until the Effective Time or termination of this Agreement, to keep the same effective and, if necessary, amend and supplement the same. Horizon shall, as soon as practicable after filing the Registration Statement, make all filings
required to obtain all blue sky exemptions, authorizations, consents or approvals required for the issuance of Horizon common stock.
(b)
The parties shall use reasonable best efforts to respond (with the assistance of the other party) as promptly as practicable to any comments of the SEC with respect thereto. Horizon shall provide LPB and its counsel with appropriate opportunity to
review and comment on such response and shall incorporate all appropriate comments thereto prior to filing its response with the SEC. If prior to the Effective Time any event occurs with respect to LPB, Horizon or any Subsidiary of LPB or Horizon,
respectively, or any change occurs with respect to information supplied by or on behalf of LPB or Horizon, respectively, for inclusion in the Proxy Statement or the Registration Statement that, in each case, is required to be described in an
amendment of, or a supplement to, the Proxy Statement or the
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Registration Statement, LPB or Horizon, as applicable, shall promptly notify the other of such event, and LPB or, Horizon, as applicable, shall cooperate in the prompt filing with the SEC of any
necessary amendment or supplement to the Proxy Statement and the Registration Statement and, as required by applicable Law, in disseminating the information contained in such amendment or supplement to LPBs shareholders and to Horizons
shareholders.
(c) Horizon shall cause the shares of Horizon Common Stock to be issued in the Merger to be approved for listing on the
NASDAQ Global Select Market (subject to official notice of issuance) prior to the Effective Time.
6.03
Employee Benefit Plans and Employee Payments.
(a) Horizon shall make available to the officers and employees of LPB or any
Subsidiary who continue as employees of Horizon or any Subsidiary after the Effective Time (
Continuing Employees
), substantially the same employee benefits as are generally available to all Horizon employees.
(b) Horizon and LPB agree to treat the differences between the vacation and paid time off policies of LPB and any Subsidiary (including,
without limitation, any banked paid time) and the vacation and paid time off policies of Horizon as provided in
Section 6.03(b)
of the LPB Disclosure Schedule, and communicate the proposed reconciliation of the policies to the Continuing
Employees prior to the Effective Time. Effective as of the later of the Effective Time or the date on which the Horizon vacation and paid time off policies are made available to the Continuing Employees, such Continuing Employees will be subject to
the terms and conditions of the Horizon vacation/paid time off policy in place for similarly situated employees of Horizon, with credit given for all prior years of service with LPB or any Subsidiary for purposes of determining vacation pay
eligibility and the amount of such vacation pay.
(c) Continuing Employees will receive credit for prior service with LPB or its
Subsidiaries, or their predecessors, for purposes of eligibility and vesting (but not benefit accrual) under the employee benefit plans of Horizon and its Subsidiaries. The Horizon 401(k) Plan will be amended as provided in
Section 5.16(f)
of this Agreement and the Horizon ESOP will be amended as provided in
Section 5.25(f)
of this Agreement.
(d) To the extent a LPB employee benefit plan is terminated at or prior to the Effective Time, Continuing Employees shall become eligible to
participate in Horizons similar employee benefit plans as of the Effective Time. To the extent a LPB employee benefit plan is terminated after the Effective Time, Continuing Employees shall become eligible to participate in Horizons
similar employee benefit plans on the date of such plan termination. Horizon will: (i) avoid subjecting Continuing Employees to any waiting periods or additional pre-existing condition limitations under the health and dental plans of Horizon or
its Subsidiaries in which they are eligible to participate than they otherwise would have been subject to under the health and dental plans of LPB; and (ii) give credit under the applicable plan for any deductibles and co-insurance payments
made by such Continuing Employees under the corresponding LPB plan during the balance of the then current 12-month period of coverage.
(e) To the extent permitted under the terms of any tax-qualified retirement plan maintained by Horizon after the Effective Time and subject to
the terms and conditions thereof, such plan shall accept eligible rollover distributions (within the meaning of Code Section 402(c)(4)) of cash amounts received from the LPB 401(k) Plan with respect to any Continuing Employees.
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(f) Horizon may elect to continue to maintain all fully insured employee welfare benefit and
cafeteria plans currently in effect at the Effective Time until such time as Horizon determines, in its sole discretion, to modify or terminate any or all of those plans. Claims incurred under the employee welfare benefit and cafeteria plans prior
to plan termination shall be paid in accordance with the applicable plans claim submission procedures and deadlines.
(g) Until the
Effective Time, LPB or a Subsidiary of LPB, whichever is applicable, shall be liable for all obligations for continued health coverage pursuant to Section 4980B of the Code and Sections 601 through 609 of ERISA (
COBRA
) for
eligible employees who incur a qualifying event before the Effective Time. Horizon or a Horizon Subsidiary, whichever is applicable, shall, after the Effective Time, be liable for (i) all obligations for continued health coverage under COBRA
with respect to each qualified beneficiary of LPB or a Subsidiary of LPB who incurs a termination on and after the Effective Time, and (ii) for continued health coverage under COBRA from and after the Effective Time for each qualified
beneficiary of LPB or a Subsidiary of LPB who incurs a qualifying event before the Effective Time.
(h) Except for Lee A Brady, Michele M.
Thompson, Patrick W. Collins, Kevin N. Beres, and Daniel P. Carroll, and any other employee receiving a separate change in control, severance or similar payment in connection with the Closing of the Merger, those employees of LPSB as of the
Effective Time (i) who are still employed by LPSB and who Horizon or its Subsidiaries elect not to employ after the Effective Time or who are terminated other than for cause within twelve (12) months after the Effective Date; and
(ii) who sign and deliver a termination and release agreement in a form substantially similar to the agreement provided in
Section 6.03(h)
of the Horizon Disclosure Schedule, shall be entitled to severance pay equal to one
(1) week of pay, at their base rate of pay in effect at the time of termination, for each full year of continuous service with LPSB with a minimum of four (4) weeks and a maximum of twenty-six (26) weeks. Such employees will receive
their severance in a lump-sum payment. Furthermore, any of such terminated employees shall be entitled to continuation coverage under Horizon Banks group health plans as required by COBRA, subject to timely election and payment of the
applicable COBRA premium by such terminated employees. In addition, Horizon, at its expense will provide group career counseling for the LPSB employees who will not be continuing with Horizon and will make professional career counseling services
available through its internal employee assistance program of up to four (4) visits per employee. Nothing in this Section shall be deemed to limit or modify Horizons or Horizon Banks at-will employment policy or any employees
at will employment status.
6.04
Adverse Actions.
During the period from the date of this Agreement
to the Effective Time, except with the written consent of LPB, which consent will not be unreasonably withheld, Horizon will, and it will cause each of its Subsidiaries to, use commercially reasonable efforts to preserve intact its business
organization and assets and maintain its rights and franchises; and voluntarily take no action that would: (i) reasonably be expected to materially adversely affect the ability of the parties to obtain the regulatory approvals or materially
increase the period of time necessary to obtain such approvals; (ii) adversely affect its ability to perform its covenants and agreements under this Agreement in any material respect; or (iii) result in the representations and warranties
contained in
Article IV
of this Agreement not being true and correct on the date of this Agreement or at any future date on or prior to the Closing Date (subject to the standards set forth in
Section 7.02(a)
hereof) or in any of
the conditions set forth in
Article VII
hereof not being satisfied;
provided, however
, that the forgoing shall not be deemed to require Horizon to take any action which would otherwise violate any other provision of this Agreement.
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6.05
D&O Insurance and Indemnification.
(a) Subject to the limits of applicable federal banking law and regulations, Horizon shall indemnify and hold harmless (including the
advancement of expenses as incurred) each present and former director and officer of LPB and its Subsidiaries, including LPSB (each, an
Indemnified Party
) for a period of six (6) years following the Effective Time, against
any costs or expenses (including reasonable attorneys fees), 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 or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the same extent (and subject to the making of the same findings
as to eligibility for such indemnification and/or advancement of expenses) that such Indemnified Party would have been indemnified (or entitled to advancement of expenses) as a director or officer of LPB or any of its Subsidiaries under applicable
law or LPBs, or any such Subsidiaries, articles of incorporation or bylaws as in effect as of the date of this Agreement.
(b)
Subject to the terms and conditions of this
Section 6.05(b)
, Horizon shall cause the persons serving as officers and directors of LPB and LPSB immediately prior to the Effective Time to be covered for a period of six (6) years after
the Effective Time by the directors and officers liability insurance policy currently maintained by LPB (the
Existing Policy
) or by a policy of at least the same coverage containing terms and conditions which are not
materially less favorable (the
Replacement Policy
). Prior to the Effective Time, as instructed by Horizon, LPB shall cause the applicable broker of record for its Existing Policy and its existing Crime (Bond) Policy to be assigned
to Horizons designee. Such assignments in favor of Horizons designee shall be executed by LPB with sufficient time to allow Horizon and its designee to place the insurance required by this Section. The Existing Policy or Replacement
Policy, subject to policy terms and conditions, shall provide coverage with respect to covered acts or omissions occurring prior to the Effective Time;
provided, however
, that Horizon shall not be required to pay annual premiums for the
Existing Policy (or for any Replacement Policy) in excess of 150% of the annual premium for the current annual term of the Existing Policy (the
Maximum Amount
); and,
provided, further, however
, that, if notwithstanding the
use of commercially reasonable best efforts to do so, Horizon is unable to maintain or obtain the insurance required by this
Section 6.05(b)
, Horizon shall obtain the most advantageous policy of directors and officers
insurance that is available for the Maximum Amount.
(c) The provisions of this
Section 6.05
shall survive the Effective Time
and the obligations of Horizon provided under this
Section 6.05
are intended to be enforceable against Horizon directly by the Indemnified Parties and his or her heirs and personal representatives. Horizon shall pay all reasonable costs,
including attorneys fees, upon the final disposition of any claim, action, suit, proceeding or investigation by any Indemnified Party in successfully enforcing the indemnity and other obligations provided for in this
Section 6.05
to the fullest extent permitted under applicable law, the articles of incorporation of LPB or the bylaws of LPB;
provided, however
, such payment of costs shall be paid by Horizon in advance of the final disposition of such claim, action,
suit, proceeding or investigation upon receipt of: (i) written affirmation of an Indemnified Partys good faith belief that the Indemnified Party is eligible to receive the indemnification provided for in this
Section 6.05
; and
(ii) an unconditional written undertaking by or on behalf of the Indemnified Party to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by Horizon as authorized in this
Section 6.05
.
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(d) In the event that either Horizon or any of its successors or assigns (i) consolidates
with or merges into any other Person and shall not be the continuing or surviving entity of such consolidation or merger, or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Horizon shall assume the obligations set forth in this
Section 6.05
.
6.06
Changes and Supplements to Horizon Disclosure Schedules.
Horizon shall promptly supplement, amend
and update, upon the occurrence of any change prior to the Effective Time, and as of the Effective Time, the Horizon Disclosure Schedule with respect to any matters or events after the date of this Agreement arising which, if in existence or having
occurred as of the date of this Agreement, would have been required to be set forth or described in the Horizon Disclosure Schedule or this Agreement and including, without limitation, any fact which, if existing or known as of the date hereof,
would have made any of the representations or warranties of Horizon contained herein materially incorrect, untrue or misleading. No such supplement, amendment or update shall have any effect for the purposes of determining satisfaction of the
conditions set forth in
Article VII
.
6.07
La Porte County Advisory Board.
Horizon agrees to
add, as of the Effective Time, two (2) representatives to Horizons La Porte County Advisory Board from the LPB or LPSB Board and/or from the communities served by LPSB, as mutually agreed upon.
6.08
Horizon and Horizon Bank Board.
Horizon and Horizon Bank shall take all appropriate action so
that, as of the Effective Time and subject to and in accordance with the Bylaws of Horizon and Horizon Bank, Michele M. Thompson shall be appointed as a director of Horizon and Horizon Bank. If the term of the class of directors to which
Ms. Thompson is appointed shall expire less than three (3) years of the Effective Time, Horizon and Horizon Bank agree to cause her to be nominated and recommended for election by the shareholders at the next election of directors as long
as she continues to meet all of Horizons and Horizon Banks director qualifications as set forth in their organizational documents, charters, and/or written policies, is otherwise qualified to serve as a director of Horizon and Horizon
Bank under all applicable laws and regulations, and is not prohibited from serving in such a capacity by any bank or securities regulatory authority or similar self-governing body with jurisdiction over Horizon or Horizon Bank.
6.09
Issuance of Horizon Common Stock
.
The Horizon Common Stock to be issued by Horizon to the
shareholders of LPB pursuant to this Agreement will, on the issuance and delivery to such shareholders pursuant to this Agreement, be duly authorized, validly issued, fully paid and nonassessable. The Horizon common stock to be issued to the
shareholders of LPB pursuant to this Agreement are and will be free of any preemptive rights of the shareholders of Horizon or any other person, firm or entity. The Horizon common stock to be issued to the shareholders of LPB pursuant to this
Agreement will not be subject to any restrictions on transfer arising under the 1933 Act, except for Horizon common stock issued to any shareholder of LPB who may be deemed to be an affiliate (under the Securities Act) of Horizon after
completion of the Merger pursuant to Rule 145 of the Securities Act.
6.10
Community Investment.
Horizon agrees that, for a period of five (5) years following the Effective Time, it shall cause Horizon Bank to donate $50,000 annually to nonprofit organizations and/or community schools in the markets served by LPSB. The continuation of
these annual donations will be dependent upon Horizons continued financial performance, and their permissibility under applicable law, including all banking regulations. These donations shall be administered by Horizons La Porte
Countys Advisory Board, subject to oversight by the Horizon Bank Board of Directors and/or Horizons CEO.
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6.11
Commercially Reasonable Efforts.
Subject to the terms
and conditions herein provided, Horizon agrees to use commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement. Horizon shall not, and shall not permit any of its Subsidiaries to, knowingly take any action or knowingly fail to take any reasonable action that would, or would be
reasonably likely to, prevent, impede, or delay the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
6.12
Merger Consideration Availability.
Horizon agrees at all times from the date of this Agreement
until the Merger Consideration has been paid in full to reserve a sufficient number of shares of Horizon Common Stock to fulfill its obligations under this Agreement. Horizon has no reason to believe it will not have a sufficient amount of cash, or
have access to a sufficient amount of cash, to fulfill its obligations under this Agreement.
6.13
Short-Swing Trading Exemption.
Horizon shall take all steps, as may be necessary or appropriate, to cause the transactions contemplated by
Article II
and any other dispositions of equity securities of LPB (including derivative
securities) or acquisitions of equity securities of Horizon in connection with the consummation of the transactions contemplated by this Agreement to be exempt under Rule 16b-3(d) promulgated under the Exchange Act.
6.14
Conduct of Business.
After the date of this Agreement and until the Effective Time or until this
Agreement is terminated as herein provided, each of Horizon and its Subsidiaries shall: (1) use commercially reasonable efforts to preserve its business organization intact in all material respects and preserve its present relationships with
material customers; (2) use commercially reasonable efforts to maintain all of the properties and assets that it owns or utilizes and which are material to the operation of its business in good operating condition and repair, reasonable wear
and tear excepted; (3) maintain its books, records and accounts in the usual, regular and ordinary manner, on a basis consistent with prior years and in compliance, in all material respects, with all statutes, laws, rules and regulations
applicable to them and to the conduct of its business; and (4) not knowingly do or knowingly fail to do anything which will cause a breach of, or default in, any material contract, agreement, commitment, obligation, understanding, arrangement,
lease or license to which it is a party or by which it is or may be subject or bound.
6.15
Failure to
Fulfill Conditions.
In the event Horizon determines that a condition to its obligation to complete the Merger cannot be fulfilled, and that it will not waive that condition, it will promptly notify LPB.
ARTICLE VII.
CONDITIONS PRECEDENT TO THE MERGER
7.01
Conditions Precedent to Horizons Obligations.
The obligation of Horizon to consummate the
Merger is subject to the satisfaction and fulfillment of each of the following conditions on or prior to the Effective Time, unless waived in writing by Horizon,
provided, however
, that the conditions set forth in
Sections 7.01(d)
,
(e)
,
(f)
,
(i)
and
(j)
cannot be waived by Horizon:
(a)
Representations and Warranties
. The
representations and warranties of LPB set forth in
Sections 3.03(a)
,
3.23(a)
and
3.23(o)
(in each case, after giving effect to the first paragraph of
Article III
) shall be true, accurate and correct (other than, in the
case of
Section 3.03(a)
, such failures to be true,
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accurate and correct as are
de minimis
) in each case as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, and the representations and warranties of LPB set forth in
Sections 3.01
,
3.02(a)
,
3.02(b)(i)
and
(ii)
,
3.03(c)
,
3.08
,
3.22
and
3.35
(in each case, after giving effect to the first paragraph of
Article III
) shall be true, accurate and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of
an earlier date) as of the Closing Date as though made on and as of the Closing Date. All other representations and warranties of LPB set forth in this Agreement (read without giving effect to any qualification as to materiality or Material Adverse
Effect set forth in such representations or warranties but, in each case, after giving effect to the first paragraph of
Article III
) shall be true, accurate and correct in all respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date,
provided
, that for purposes of this sentence, such representations and warranties shall be deemed to
be true, accurate and correct unless the failure or failures of such representations and warranties to be so true, accurate and correct, either individually or in the aggregate, and without giving effect to any qualification as to materiality or
Material Adverse Effect set forth in such representations or warranties, has had or would reasonably be expected to have a Material Adverse Effect on LPB.
(b)
Covenants
. Each of the covenants and agreements of LPB shall have been fulfilled or complied with, in all material respects, at or
prior to the Effective Time.
(c)
Deliveries at Closing
. Horizon shall have received from LPB at the Closing (as defined in
Section 10.01
) the items and documents, in form and content reasonably satisfactory to Horizon, set forth in
Section 10.02(b)
.
(d)
Registration Statement Effective
. Horizon shall have registered its shares of Horizon common stock to be issued to shareholders of
LPB in accordance with this Agreement with the SEC pursuant to the 1933 Act, and all state securities and blue sky approvals, authorizations and exemptions required to offer and sell such shares shall have been received by Horizon. The Registration
Statement with respect thereto shall have been declared effective by the SEC and no stop order shall have been issued or threatened.
(e)
Regulatory Approvals
. All regulatory approvals required to consummate the transactions contemplated hereby (
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 and no such approvals shall contain any conditions, restrictions or requirements which would (i) following the Effective Time, have a Material Adverse Effect on Horizon or (ii) reduce the
benefits of the transactions contemplated hereby to such a degree that Horizon would not have entered into this Agreement had such conditions, restrictions or requirements been known at the date hereof.
(f)
Shareholder Approval
. The shareholders of LPB shall have approved and adopted this Agreement as required by applicable law and the
terms of this Agreement.
(g)
Officers Certificate
. LPB shall have delivered to Horizon a certificate signed by its President
and its Secretary, dated as of the Effective Time, certifying that: (i) the representations and warranties of LPB contained in
Article III
are true, accurate and correct subject to the standard specified in
Section 7.01(a)
;
(ii) all the covenants of LPB have been complied with in all material respects at or prior to the Effective Time; and (iii) LPB has satisfied and fully complied with all conditions necessary to make this Agreement effective as to it.
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(h)
Tax Opinion
. The Board of Directors of Horizon shall have received a written opinion
of the law firm of Barnes & Thornburg LLP, dated as of the Closing Date, in form and content reasonably satisfactory to Horizon, to the effect that the Merger to be effected pursuant to this Agreement will constitute a tax-free
reorganization under the Code (as described in
Section 1.03
hereof) to each party hereto and to the shareholders of LPB, except with respect to the Cash Consideration and the cash received by the shareholders of LPB for fractional shares
resulting from application of the Exchange Ratio and pursuant to
Section 2.05
hereof. In rendering such opinion, counsel may require and rely upon customary representation letters of the parties hereto and rely upon customary
assumptions.
(i)
Material Proceedings
. None of Horizon, LPB, or any of their Subsidiaries, shall be subject to any statute, rule,
regulation, injunction, order or decree, which shall have been enacted, entered, promulgated or enforced, which prohibits, prevents or makes illegal the completion of the Merger.
(j)
Listing
. The shares of Horizon common stock to be issued in the Merger shall have been approved for listing on the NASDAQ Global
Select Market, subject to official notice of issuance.
(k)
Notice of Termination of Data Processing Agreement
. LPSB shall have
provided notice of termination to Jack Henry & Associates, Inc. (
JHA
) under that certain Master Software License Maintenance and Services Agreement, dated February 28, 2008 (including related exhibits and schedules),
as amended, between LPSB and JHA.
(l)
LPB Consolidated Shareholders Equity
. As of the end of the month prior to the
Effective Time, the LPB Consolidated Shareholders Equity (as defined in this
Section 7.01(l)
), shall not be less than $84.4 million.
LPB Consolidated Shareholders Equity
shall be the consolidated
shareholders equity of LPB and all of its Subsidiaries determined in accordance with GAAP consistently applied for prior periods;
provided, however
, that (A) any accruals established by LPB or any Subsidiary of LPB pursuant to
Section 5.05(b)
; (B) any changes to the valuation of the LPSB investment portfolio attributed to ASC 320, whether upward or downward, from September 30, 2015 until the measurement date; (C) the aggregate expenses of
attorneys, accountants, consultants, financial advisors and other professional advisors incurred by LPB or any Subsidiary of LPB in connection with this Agreement or the transactions contemplated hereby; (D) any amounts paid or payable to any
director, officer or employee of LPB or any Subsidiary of LPB under any contract, severance arrangement, benefit plan or employment practice of LPB or any Subsidiary of LPB and all other payroll and non-payroll related costs and expenses;
(E) costs associated with the termination of the 401(k) Plan, the ESOP and any other employee benefit plan, except as otherwise expressly provided herein; and, (F) costs associated with the termination of the JHA data processing agreement,
(G) cash dividends permitted to be paid to shareholders of LPB pursuant to
Section 5.03(a)(ii)
and the dividends payable by LSB Real Estate, Inc. on the outstanding 125 shares of 12.5% Series A preferred stock held by investors
other than LSB Investments, Inc.; and (H) any other expenses incurred in connection with the transactions contemplated hereby; in each case incurred or to be incurred by LPB or any LPB Subsidiary through the Effective Time in connection with
this Agreement and the transactions contemplated hereby, will not reduce or impact the calculation of the LPB Consolidated Shareholders Equity for purposes of this Section.
(m)
Consents
. LPB shall have obtained or caused to be obtained (a) all written consents, if any, required under the Material
Contracts, and (b) all permits, authorizations, other written consents, permissions and approvals as required for the lawful consummation of this Merger and as required under
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all agreements, contracts, appointments, indentures, plans, trusts or other arrangements with third parties required to effect the transactions contemplated by this Agreement.
7.02
Conditions Precedent to LPBs Obligations.
The obligation of LPB to consummate the Merger is
subject to the satisfaction and fulfillment of each of the following conditions on or prior to the Effective Time, unless waived in writing by LPB
provided, however
, that the conditions set forth in
Sections 7.02(d)
,
(e)
,
(f)
,
(i)
and
(j)
cannot be waived by LPB:
(a)
Representations and Warranties
. The representations
and warranties of Horizon set forth in
Sections 4.03(a)
and
4.20
(in each case, after giving effect to the first paragraph of
Article IV
) shall be true, accurate and correct (other than, in the case of
Section 4.03(a)
, such failures to be true, accurate and correct as are de minimis) in each case as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, and the representations and warranties of Horizon set forth in
Sections 4.01
,
4.02(a)
,
4.02(b)(i)
and
(ii)
, and
4.07
(in each case, after giving effect to the
first paragraph of
Article IV
) shall be true, accurate and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date. All other representations and warranties of Horizon set forth in this Agreement (read without giving effect to any qualification as to materiality or Material Adverse Effect set forth in such
representations or warranties but, in each case, after giving effect to the first paragraph of
Article IV
) shall be true, accurate and correct in all respects as of the date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date,
provided
, that for purposes of this sentence, such representations and warranties shall be deemed to be true, accurate and correct
unless the failure or failures of such representations and warranties to be so true, accurate and correct, either individually or in the aggregate, and without giving effect to any qualification as to materiality or Material Adverse Effect set forth
in such representations or warranties, has had or would reasonably be expected to have a Material Adverse Effect on Horizon.
(b)
Covenants
. Each of the covenants and agreements of Horizon shall have been fulfilled or complied with, in all material respects, at or prior to the Effective Time.
(c)
Deliveries at Closing
. LPB shall have received from Horizon at the Closing the items and documents, in form and content reasonably
satisfactory to LPB, listed in
Section 10.02(a)
hereof.
(d)
Registration Statement Effective
. Horizon shall have
registered its shares of Horizon common stock to be issued to shareholders of LPB in accordance with this Agreement with the SEC pursuant to the 1933 Act, and all state securities and blue sky approvals, authorizations and exemptions required to
offer and sell such shares shall have been received by Horizon. The Registration Statement with respect thereto shall have been declared effective by the SEC and no stop order shall have been issued or threatened.
(e)
Regulatory Approvals
. All 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.
(f)
Shareholder Approval
. The shareholders of LPB shall have approved and
adopted this Agreement as required by applicable law and the terms of this Agreement.
(g)
Officers Certificate
. Horizon
shall have delivered to LPB a certificate signed by its Chief Executive Officer and its Secretary, dated as of the Closing Date, certifying that: (i) the representations and warranties of Horizon contained in
Article IV
are true,
accurate and correct subject
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to the standard specified in
Section 7.02(a)
above;
(ii)
all the covenants of Horizon have been complied with in all material respects at or prior to the Effective Time;
and (iii) Horizon has satisfied and fully complied with all conditions necessary to make this Agreement effective as of the Closing Date.
(h)
Tax Opinion
. The Board of Directors of LPB shall have received a written opinion of the law firm of Barnes & Thornburg
LLP, dated as of the Effective Time, in form and content reasonably satisfactory to LPB, to the effect that the Merger to be effected pursuant to this Agreement will constitute a tax-free reorganization under the Code (as described in
Section 1.03
hereof) to each party hereto and to the shareholders of LPB, except with respect to the Cash Consideration and the cash received by the shareholders of LPB for fractional shares resulting from application of the Exchange
Ratio and pursuant to
Section 2.05
hereof. In rendering such opinion, counsel may require and rely upon customary representation letters of the parties hereto and rely upon customary assumptions.
(i)
Listing
. The shares of Horizon common stock to be issued in the Merger shall have been approved for listing on the NASDAQ Global
Select Market, subject to official notice of issuance.
(j)
Material Proceedings
. None of Horizon, LPB, or any Subsidiary of
Horizon or LPB, shall be subject to any statute, rule, regulation, injunction, order or decree, which shall have been enacted, entered, promulgated or enforced, which prohibits, prevents or makes illegal the completion of the Merger.
ARTICLE VIII.
TERMINATION OF MERGER
8.01
Termination.
This Agreement may be terminated and abandoned at any time prior to the Closing Date,
only as follows:
(a) by the mutual written consent of Horizon and LPB;
(b) by either of LPB or Horizon by written notice to the other:
(i) if this Agreement and the Merger are not approved by the requisite vote of the shareholders of LPB at the meeting of
shareholders of LPB contemplated in
Section 5.01
;
(ii) (x) if any Governmental Authority of competent
jurisdiction shall have issued an order, decree, judgment or injunction or taken any other action that permanently restrains, enjoins or otherwise prohibits or makes illegal the consummation of the Merger, and such order, decree, judgment,
injunction or other action shall have become final and non-appealable, or (y) if any consent or approval of any Governmental Authority whose consent or approval is required to consummate the Merger has been denied and such denial (despite the
reasonable best efforts of the parties hereto to appeal or reverse such denial) has become final and non-appealable; or (z) any application, filing or notice for a regulatory approval has been withdrawn at the request or recommendation of the
applicable Governmental Authority;
provided, however
, that the right to terminate this Agreement under this
Section 8.01(b)(ii)
shall not be available to a party whose failure (or the failure of any of its affiliates) to fulfill
any of its obligations (excluding warranties and representations) under this Agreement has been the cause of or resulted in the occurrence of any event described in clauses (x), (y) and (z) above;
(iii) if the consummation of the Merger shall not have occurred on or before February 28, 2017 (the
Outside
Date
);
provided
that the right to terminate this Agreement under this
Section 8.01(b)(iii)
shall not be available to any party whose material breach of any
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representation, warranty, covenant or other agreement contained in this Agreement causes the failure of the Merger to occur on or before the Outside Date; or
(c) by written notice from Horizon to LPB, if:
(i) any event shall have occurred which is not capable of being cured prior to or on the Outside Date and would result in any
condition set forth in
Section 7.01
not being satisfied prior to or on the Outside Date (
provided
, that Horizon is not then in material breach of any representation, warranty, covenant or other agreement contained herein);
(ii) LPB breaches or fails to perform any of its representations, warranties or covenants contained in this Agreement, which
breach or failure to perform would give rise to the failure of a condition set forth in
Section 7.01
, and such condition is incapable of being satisfied prior to or on the Outside Date or such breach has not been cured by LPB within
twenty (20) business days after LPBs receipt of written notice of such breach from Horizon (
provided
, that Horizon is not then in material breach of any representation, warranty, covenant or other agreement contained herein); or
(iii) there shall have occurred after the date of this Agreement any event, change, condition, circumstance or state of
facts, or aggregation of events, changes, conditions, circumstance or state of facts, that has had, individually or in the aggregate, a Material Adverse Effect on LPB.
(d) by written notice from LPB to Horizon if:
(i) any event shall have occurred which is not capable of being cured prior to or on the Outside Date and would result in any
condition set forth in
Section 7.02
not being satisfied prior to or on the Outside Date (
provided,
that LPB is not then in material breach of any representation, warranty, covenant or other agreement contained herein);
(ii) Horizon breaches or fails to perform any of its representations, warranties or covenants contained in this Agreement,
which breach or failure to perform would give rise to the failure of a condition set forth in
Section 7.02
and such condition is incapable of being satisfied prior to or on the Outside Date or such breach has not been cured by Horizon
within twenty (20) business days after Horizons receipt of written notice of such breach from LPB (
provided
, that LPB is not then in material breach of any representation, warranty, covenant or other agreement contained herein); or
(iii) there shall have occurred after the date of this Agreement any event, change, condition, circumstance or state of
facts, or aggregation of events, changes, conditions, circumstances or state of facts that has had, individually or in the aggregate, a Material Adverse Effect on Horizon.
(e) by written notice from Horizon to LPB:
(i) if the LPB Board of Directors shall fail to include its recommendation to approve the Merger in the Proxy Statement;
(ii) in the event of an Adverse Recommendation Change;
(iii) if the LPB Board shall approve any Acquisition Proposal or publicly recommend that the holders of LPB Common Stock accept
or approve any Acquisition Proposal; or
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(iv) if LPB shall have entered into, or publicly announced its intention to enter
into, a definitive agreement, agreement in principle or letter of intent with respect to any Acquisition Proposal.
(f) by written notice
by Horizon to LPB if a quorum could not be convened at the meeting of shareholders of LPB contemplated in
Section 5.01
or at a reconvened meeting held at any time prior to or on the Outside Date.
(g) by written notice by LPB to Horizon at any time during the five (5) day period commencing on the Determination Date if, and only if,
both of the following conditions are satisfied, such termination to be effective on the fifth (5th) business day following the date LPB provides notice to Horizon after the Determination Date as set forth below:
(i) the Horizon Market Value on the Determination Date is less than $20.58; and
(ii) the number obtained by dividing the Horizon Market Value by the Initial Horizon Market Value shall be less than the number
obtained by dividing (A) the Final Index Price by (B) the Initial Index Price minus 0.15;
subject, however
, to the following three
sentences. If LPB elects to exercise its termination right pursuant to this
Section 8.01(g)
, it shall give prompt written notice thereof to Horizon. During the five (5) business day period commencing with its receipt of such notice,
Horizon shall have the option to increase the Exchange Ratio to equal the lesser of (i) a quotient, the numerator of which is equal to the product of the Initial Horizon Market Value, the Exchange Ratio (as then in effect), and the Index Ratio
minus 0.15 and the denominator of which is equal to the Horizon Market Value on the Determination Date; or (ii) the quotient determined by dividing the Initial Horizon Market Value by the Horizon Market Value on the Determination Date, and
multiplying the quotient by the product of the Exchange Ratio (as then in effect) and 0.85. If within such five (5) business day period, Horizon delivers written notice to LPB that it intends to proceed with the Merger by paying such additional
consideration as contemplated by the preceding sentence, and notifies LPB of the revised Exchange Ratio, then no termination shall have occurred pursuant to this
Section 8.01(g)
, and this Agreement shall remain in full force and effect
in accordance with its terms (except that the Exchange Ratio shall have been so modified).
For purposes of this
Section 8.01(g)
, the following terms shall have the meanings indicated below:
Determination Date
shall
mean the first date on which all Regulatory Approvals (and waivers, if applicable) and all other approvals and consents necessary for consummation of the Merger have been received (disregarding any waiting period).
Final Index Price
means the average of the daily closing value of the Index for the fifteen (15) consecutive trading
days immediately preceding the Determination Date.
Index
means the SNL Small Cap U.S. Bank and Thrift Index or, if
such Index is not available, such substitute or similar Index as substantially replicates the SNL Small Cap U.S. Bank and Thrift Index.
Index Ratio
means the Final Index Price divided by the Initial Index Price.
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Initial Horizon Market Value
means $24.21, adjusted as indicated in the last
sentence of this
Section 8.01(g)
.
Initial Index Price
means the closing value of the Index on the date
immediately prior to the date of this Agreement.
Horizon Market Value
means the average of the daily closing sales
prices of a share of Horizons common stock, rounded to the nearest cent, during the fifteen (15) consecutive trading days immediately preceding the Determination Date;
provided, however
, that closing sales prices shall only be used
for days during which Horizons shares are actually traded on the NASDAQ Global Select Market.
If Horizon or any company belonging
to the Index declares or effects a stock dividend, split-up, combination, exchange of shares or similar transaction between the date of this Agreement and the Determination Date, the prices for the common stock of such company shall be appropriately
adjusted for the purposes of applying this
Section 8.01(g)
.
8.02
Effect of
Termination.
(a) Subject to the remainder of this
Section 8.02
, in the event of the termination of this Agreement pursuant
to
Section 8.01
, this Agreement shall forthwith become null and void and have no effect, without any liability on the part of Horizon or LPB and each of their respective subsidiaries, directors, officers, employees, advisors, agents, or
shareholders and all rights and obligations of any party under this Agreement shall cease, except for the agreements contained in
Section 5.06
, this
Section 8.02
and
Article XI
, which shall remain in full force and
effect and survive any termination of this Agreement;
provided, however
, that nothing contained in this Agreement, including this
Section 8.02
, except for the amounts payable pursuant to subsections (b), (c) or (d), shall
relieve any party hereto from liabilities or damages arising out of any fraud or intentional breach by such party of any of its representations, warranties, covenants or other agreements contained in this Agreement or any related agreement.
(b) LPB shall pay to Horizon an amount in cash equal to $3,764,000 (the
Termination Fee
) if:
(i) this Agreement is terminated by Horizon pursuant to
Section 8.01(
e); or
(ii) after the occurrence of an Acquisition Proposal, this Agreement is terminated by either party pursuant to
Section 8.01(b)(i)
as a result of the failure of LPBs shareholders to approve the Agreement and the Merger by the requisite vote or by Horizon pursuant to
Section 8.01(f)
; in each case, prior to the date that is twelve
(12) months after such termination, LPB or any of its Subsidiaries enters into any Acquisition Agreement or any Acquisition Proposal is consummated (regardless of whether such Acquisition Proposal is consummated before or after the termination
of this Agreement); or
(iii) this Agreement is terminated by either LPB or Horizon pursuant to
Section 8.01(b)(iii)
and
(A)
prior to the date of such termination, an Acquisition Proposal was made, and (B) prior to the date that is twelve (12) months after such termination LPB or any of its Subsidiaries enters
into any Acquisition Agreement or any Acquisition Proposal is consummated.
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(iv) this Agreement is terminated by Horizon pursuant to
Section 8.01(c)(ii)
after the occurrence of an Acquisition Proposal, and prior to the date that is twelve (12) months after such termination, LPB or any of its Subsidiaries enters into any Acquisition Agreement or such Acquisition
Proposal is consummated.
(c) Any fee due under
Section 8.02(b)
shall be paid by LPB by wire transfer of same day funds within
three business days after written demand for payment is made by Horizon.
(d) In the event Horizon would be entitled to the Termination
Fee pursuant to
Section 8.02(b)
, then Horizon may elect, in its sole discretion, to terminate this Agreement and require the payment of such Termination Fee, in which event the Termination Fee shall be the sole and exclusive remedy for
such termination event and such fee shall constitute liquidated damages;
provided, however
, this Agreement shall not be terminated until the Termination Fee is paid in full. LPB acknowledges that the agreements contained in this
Section 8.02
are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Horizon would not have entered into this Agreement. Accordingly, if LPB fails promptly to pay the Termination Fee,
and, in order to obtain such payment, Horizon commences a suit that results in a judgment against LPB for the Termination Fee, LPB shall also pay to Horizon its reasonable costs and expenses (including attorneys and accountants fees and
expenses) in connection with such suit and any appeal relating thereto, together with interest at the national prime rate in effect on the date such payment was required to be made.
ARTICLE IX.
EFFECTIVE TIME OF THE MERGER
Upon the terms and subject to the conditions specified in this Agreement, the Merger shall become effective on the day and at the time
specified in the Articles of Merger of Horizon and LPB as filed with the Indiana Secretary of State and the Maryland Department of Assessments and Taxation (the
Effective Time
). Unless otherwise mutually agreed to by the parties
hereto, the parties shall cause the Effective Time to occur on the first day of the month after the later to occur of (a) all conditions precedent to the Merger set forth in this Agreement have been fulfilled, and (b) all waiting periods
in connection with the bank regulatory applications filed for the approval of the Merger have expired.
ARTICLE X.
CLOSING
10.01
Closing Date and Place.
So long as all conditions precedent set forth in
Article VII
hereof have been satisfied and fulfilled, the closing of the Merger (the
Closing
) will take place on the date determined
to be the date of the Effective Time by
Article IX
hereof (the
Closing Date
) at a location to be reasonably determined by Horizon.
10.02
Deliveries.
(a) At the Closing, Horizon will deliver to LPB the following:
(i) the officers certificate contemplated by
Section 7.02(g)
hereof;
(ii) copies of all Regulatory Approvals necessary to consummate the Merger;
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(iii) copies of the resolutions adopted by the Board of Directors of Horizon,
certified by the Secretary of Horizon relative to the approval of this Agreement and the Merger;
(iv) the tax opinion
required by
Section 7.02(h)
hereof;
(v) evidence of the purchase of director and officer liability insurance
for the benefit of the Indemnified Parties in accordance with
Section 6.05
; and
(vi) such other documents and
information as LPB or its legal counsel may reasonably request.
(b) At the Closing, LPB will deliver to Horizon the following:
(i) the officers certificate contemplated by
Section 7.01(g)
hereof;
(ii) copies of the resolutions adopted by the Board of Directors and shareholders of LPB certified by the Secretary of LPB
relative to the approval of this Agreement and the Merger;
(iii) the tax opinion required by
Section 7.01(h)
hereof;
(iv) the 280G opinion required by
Section 5.26
hereof; and
(v) such other documents and information as Horizon or its legal counsel may reasonably request.
ARTICLE XI.
MISCELLANEOUS
11.01
No Assignment.
This Agreement and the recitals hereof shall be binding upon and inure to the benefit of and be enforceable by the respective parties hereto and their respective successors and assigns;
provided, however
, that
neither this Agreement nor any of the rights, interests or obligations of the respective parties hereto under this Agreement may be assigned by any party hereto without the prior written consent of the other parties hereto. Except as provided by
Section 6.05
(dealing with rights to indemnification and advancements of expenses, and the rights to insurance coverage, provided to certain persons), the representations, warranties, covenants and agreements contained in this Agreement,
as well as the documents and instruments referred to herein, are for the sole benefit of the parties hereto and their successors and assigns, and they will not be construed as conferring any rights on any other Persons, other than the right of LPB,
on behalf of its shareholders, to pursue damages in the event of fraud or an intentional breach of this Agreement as provided in
Section 8.02(a)
hereof.
11.02
Waiver; Amendment.
(a) The parties hereto may by an instrument in writing: (i) extend the time for the performance of or otherwise amend any of the
covenants, conditions or agreements of the other parties under this Agreement; (ii) waive any inaccuracies in the representations or warranties of the other parties contained in this Agreement or in any document delivered pursuant hereto or
thereto; (iii) waive the performance by the other parties of any of the covenants or agreements to be performed by it or them under this Agreement; or (iv) waive the satisfaction or fulfillment of any permitted condition, the
nonsatisfaction or nonfulfillment of which is a condition to the right of the party so waiving to consummate the Merger. The waiver by any party hereto of a breach of or noncompliance with any provision of this Agreement will not operate or be
construed as a continuing waiver or a waiver of any other or subsequent breach or noncompliance hereunder.
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(b) This Agreement may be amended, modified or supplemented only by a written agreement executed
by the parties hereto.
11.03
Notices.
All notices, requests and other communications hereunder
will be in writing and will be deemed to have been duly given if delivered by hand and receipted for, delivered by certified United States Mail, return receipt requested, first class postage pre-paid, or delivered by overnight express receipted
delivery service as follows:
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If to Horizon:
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with a copy (which shall not constitute notice) to:
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Horizon Bancorp
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Barnes & Thornburg LLP
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515 Franklin Street
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11 South Meridian Street
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Michigan City, IN 46360
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Indianapolis, IN 46204-3535
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Attn: Craig M. Dwight
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Attn: Curt W. Hidde
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CEO and Chairman
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And
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If to LPB:
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with a copy (which shall not constitute notice) to:
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LaPorte Bancorp, Inc.
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710 Indiana Avenue
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Luse Gorman, PC
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La Porte, IN 46350
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5335 Wisconsin Avenue, NW Suite 780
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Attn: Michele Thompson,
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Washington, DC 20015
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President and Chief Financial
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Attn: Kip A. Weissman
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Officer
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Benjamin M. Azoff
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or such substituted address or Person as any of them has given to the other in writing. All such notices, requests or other
communications shall be effective: (a) if delivered by hand, when delivered; (b) if mailed in the manner provided herein, five (5) business days after deposit with the United States Postal Service; or (c) if delivered by
overnight express delivery service, on the next business day after deposit with such service.
11.04
Headings.
The headings in this Agreement have been inserted solely for ease of reference and should not be considered in the interpretation or construction of this Agreement.
11.05
Severability.
In case any one or more of the provisions contained herein shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision or provisions had never been contained herein.
11.06
Counterparts;
Facsimile.
This Agreement may be executed in any number of counterparts and by facsimile, each of which will be an original, but such counterparts shall together constitute one and the same instrument.
11.07
Governing Law; Enforcement; Specific Performance; Jury Trial.
This Agreement (and any and all
other documents, agreements and instruments entered into in connection with the Merger and any related transaction; collectively, the
Related Agreements
) shall be governed by and
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construed in accordance with the laws of the State of Indiana and applicable federal laws, without regard to principles of conflicts of law. The parties hereto hereby agree that all claims,
actions, suits and proceedings between the parties hereto relating to this Agreement or any Related Agreement shall be filed, tried and litigated only in the Circuit or Superior Courts of La Porte County, Indiana or the United States District Court
for the Northern District of Indiana. In connection with the foregoing, the parties hereto consent to the jurisdiction and venue of such courts and expressly waive any claims or defenses of lack of personal jurisdiction of or proper venue by such
courts. The parties agree that irreparable damage would occur in the event that any provision of this Agreement or any Related Agreement was not performed in accordance with its specific terms on a timely basis or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or other equitable relief to prevent breaches of this Agreement or any Related Agreement and to enforce specifically the terms and provisions of this Agreement or any Related
Agreement in any court identified above, this being in addition to any other remedy to which they are entitled at law or in equity.
WAIVER OF JURY TRIAL
. EACH OF THE PARTIES HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY, IN ANY MATTERS (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY RELATED AGREEMENT.
11.08
Entire Agreement.
This Agreement and the Exhibits hereto supersede all other prior or
contemporaneous understandings, commitments, representations, negotiations or agreements, whether oral or written, among the parties hereto relating to the Merger or matters contemplated herein and constitute the entire agreement between the parties
hereto, except as otherwise provided herein and except for the confidentiality letter agreement dated November 23, 2015, by and between the parties (the
Confidentiality Agreement
). Upon the execution of this Agreement by all
the parties hereto, any and all other prior writings of either party relating to the Merger, will terminate and will be rendered of no further force or effect. The parties hereto agree that each party and its counsel reviewed and revised this
Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this Agreement or any amendments or exhibits hereto.
11.09
Survival of Representations, Warranties or Covenants.
Except as set forth in the following
sentence, none of the representations, warranties or covenants of the parties will survive the Effective Time or the earlier termination of this Agreement, and thereafter the parties will have no further liability with respect thereto. The covenants
contained in
Section 8.02
and this
Article XI
shall survive termination of this Agreement and remain in full force and effect. The covenants contained in
Sections 1.01
,
1.05
,
2.06
,
5.16
,
5.17
,
5.18
,
5.21
,
5.22
,
5.23
,
6.03
,
6.05
,
6.07
, 6.08 and all of the provisions of this
Article XI
shall survive the Effective Time.
11.10
Expenses.
Except as provided elsewhere in this Agreement, each party to this Agreement shall pay
its own expenses incidental to the Merger contemplated hereby.
11.11
Certain References.
Whenever
in this Agreement a singular word is used, it also will include the plural wherever required by the context and vice versa, and the masculine or neuter gender shall include the masculine, feminine and neuter genders. Except expressly stated
otherwise, all references in this Agreement to periods of days shall be construed to refer to calendar, not business, days. The term
business day
will mean any day except Saturday and Sunday when Horizon Bank, in Michigan City,
Indiana, is open for the transaction of business.
[Signature Page Follows]
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I
N
W
ITNESS
W
HEREOF
, Horizon and LPB have made and
entered into this Agreement as of the day and year first above written and have caused this Agreement to be executed, attested in counterparts and delivered by their duly authorized officers.
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H
ORIZON
B
ANCORP
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By:
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/s/ Craig M. Dwight
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Craig M. Dwight
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CEO & Chairman
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L
A
P
ORTE
B
ANCORP
, I
NC
.
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By:
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/s/ Lee A. Brady
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Lee A. Brady
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Chief Executive Officer
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