Business Context and Reporting Period
This Form 8-K, dated April 29, 2016, reports the completion of a merger between Nicolet Bankshares, Inc. ("Nicolet") and Baylake Corp. ("Baylake"). At 11:58 p.m. Central Time on April 29, 2016, Baylake merged into Nicolet, and Baylake Bank merged into Nicolet National Bank. Nicolet is the surviving entity.
Key Financial Metrics and Transaction Details
- Exchange Ratio: Baylake shareholders received 0.4517 shares of Nicolet common stock for each share of Baylake common stock, plus cash for fractional shares.
- Shares Issued: Approximately 4,335,000 shares of Nicolet common stock were issued to former Baylake shareholders.
- Debt Assumption: Nicolet assumed Baylake's $16,598,000 Floating Rate Junior Subordinated Notes due 2036 via a First Supplemental Indenture.
- Executive Compensation:
- Base Salary: $360,000 annually for Robert B. Atwell, Robert J. Cera, and Michael E. Daniels.
- Mr. Cera Bonuses: $250,000 signing bonus and $250,000 retention bonus.
- Mr. Cera Equity: Restricted stock grant valued at $1,000,000 (based on April 29, 2016 closing price), vesting over five years.
Note: This filing does not provide consolidated revenue, profit, cash flow, or margin data for the combined entity. Pro forma financial information is scheduled for filing by July 15, 2016.
Material Changes Versus Prior Period
- Corporate Structure: Baylake ceased to exist as a separate public entity; its operations are now integrated into Nicolet.
- Leadership Structure: Nicolet adopted a dual leadership model with Robert B. Atwell and Robert J. Cera serving as Co-Chairmen, Co-Presidents, and Co-CEOs. Michael E. Daniels was appointed President and CEO of the Bank.
- Board Composition: Five former Nicolet directors resigned. Eight former Baylake directors were elected to the Nicolet Board, increasing the board size by three members.
- Bylaws: Nicolet amended its Bylaws to permit the election of Co-Chairmen and Co-CEOs.
Outlook, Risks, and Contingencies
Management Commentary: The merger was executed pursuant to an Agreement and Plan of Merger dated September 8, 2015. The transaction was structured to integrate Baylake's operations and shareholder base into Nicolet.
Compensatory Arrangements and Risks:
- Severance Obligations: Significant severance liabilities exist for key executives. Mr. Cera is entitled to a $2,000,000 lump sum upon involuntary termination without Cause or resignation for Good Reason. Messrs. Atwell and Daniels are entitled to 12 months of base salary, or 2x base salary plus target bonus in the event of a Change of Control within six months of termination.
- Clawback Provisions: Employment agreements include clawback provisions for incentive compensation under certain circumstances.
- Non-Compete: Executives are subject to 24-month non-compete and non-solicitation restrictions.
Financial Reporting: Required financial statements and pro forma information are not included in this report and will be filed by amendment no later than July 15, 2016.
Investor Verification Checklist
- Verify the final pro forma financial statements and combined capitalization upon the filing of the amendment by July 15, 2016.
- Review the full text of the Employment Agreements (Exhibits 10.2, 10.3, 10.4) to understand specific "Cause" and "Good Reason" definitions triggering severance.
- Confirm the integration progress of Baylake Bank into Nicolet National Bank and any associated operational costs not detailed in this 8-K.
- Monitor the vesting schedule and potential acceleration triggers for the $1,000,000 restricted stock grant to Mr. Cera.