10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-28190

CAMDEN NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

MAINE	01-04132282
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2 ELM STREET, CAMDEN, ME	04843
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (207) 236-8821

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x     No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x     No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:

Outstanding at August 2, 2004: Common stock (no par value) 7,670,847 shares.

CAMDEN NATIONAL CORPORATION

Form 10-Q for the quarter ended June 30, 2004

TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT

	PAGE
PART I.
ITEM 1. FINANCIAL INFORMATION
Independent Accountants’ Report	3
Consolidated Statements of Income Six Months Ended June 30, 2004 and 2003	4
Consolidated Statements of Income Three Months Ended June 30, 2004 and 2003	5
Consolidated Statements of Comprehensive Income Six Months Ended June 30, 2004 and 2003	6
Consolidated Statements of Comprehensive (Loss) Income Three Months Ended June 30, 2004 and 2003	6
Consolidated Statements of Condition June 30, 2004 and December 31, 2003	7
Consolidated Statements of Cash Flows Six Months Ended June 30, 2004 and 2003	8
Notes to Consolidated Financial Statements Six Months Ended June 30, 2004 and 2003	9-13
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13-24
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	24-25
ITEM 4. CONTROLS AND PROCEDURES	25
PART II.
ITEM 1. LEGAL PROCEEDINGS	26
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES	26
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	26
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS	26-27
ITEM 5. OTHER INFORMATION	27
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K	28
SIGNATURES	29
EXHIBITS	30

Page 2

INDEPENDENT ACCOUNTANTS’ REPORT

The Shareholders and Board of Directors

Camden National Corporation

We have reviewed the accompanying interim consolidated financial information of Camden National Corporation and Subsidiaries as of June 30, 2004, and for the six-month and three-month periods ended June 30, 2004 and 2003. These financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is to express an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

Berry, Dunn, McNeil & Parker

Portland, Maine

July 30, 2004

Page 3

PART I.

ITEM 1. FINANCIAL STATEMENTS

Camden National Corporation and Subsidiaries

Consolidated Statements of Income

(unaudited)

(In thousands, except number of shares and per share data)	Six Months Ended June 30,
	2004		2003
Interest Income
Interest and fees on loans	$	28,047	$	27,429
Interest on securities		6,512		7,973
Interest on interest rate swap agreements, net		428		395
Interest on federal funds sold and other investments		210		297
Total interest income		35,197		36,094
Interest Expense
Interest on deposits		7,164		7,284
Interest on other borrowings		3,844		4,806
Total interest expense		11,008		12,090
Net interest income		24,189		24,004
Provision for Loan and Lease Losses		165		865
Net interest income after provision for loan and lease losses		24,024		23,139
Other Income
Service charges on deposit accounts		1,866		1,882
Trust and investment management income		1,576		1,093
Mortgage servicing income (expense), net		81		(191	)
Life insurance earnings		464		368
Gain (loss) on sale of securities		684		(48	)
Other income		1,230		1,914
Total other income		5,901		5,018
Operating Expenses
Salaries and employee benefits		8,664		8,202
Premises and fixed assets		2,200		2,197
Amortization of core deposit intangible		454		471
Other expenses		4,445		4,230
Total operating expenses		15,763		15,100
Income before income taxes		14,162		13,057
Income Taxes		4,692		4,237
Net Income	$	9,470	$	8,820
Per Share Data
Basic earnings per share	$	1.23	$	1.10
Diluted earnings per share		1.22		1.10
Cash dividends per share	$	0.40	$	0.34
Weighted average number of shares outstanding		7,724,485		8,005,919

See Independent Accountants’ Report.

The accompanying notes are an integral part of these Consolidated Financial Statements.

Page 4

Camden National Corporation and Subsidiaries

Consolidated Statements of Income

(unaudited)

(In thousands, except number of shares and per share data)	Three Months Ended June 30,
	2004		2003
Interest Income
Interest and fees on loans	$	13,922	$	13,853
Interest on securities		3,090		3,773
Interest on interest rate swap agreements, net		218		196
Interest on federal funds sold and other investments		110		136
Total interest income		17,340		17,958
Interest Expense
Interest on deposits		3,673		3,611
Interest on other borrowings		1,850		2,433
Total interest expense		5,523		6,044
Net interest income		11,817		11,914
Provision for Loan and Lease Losses		—		445
Net interest income after provision for loan and lease losses		11,817		11,469
Other Income
Service charges on deposit accounts		970		999
Trust and investment management income		811		578
Mortgage servicing income (expense), net		37		(209	)
Life insurance earnings		232		212
Gain (loss) on sale of securities		684		(48	)
Other income		625		1,097
Total other income		3,359		2,629
Operating Expenses
Salaries and employee benefits		4,221		4,143
Premises and fixed assets		1,092		1,055
Amortization of core deposit intangible		223		236
Other expenses		2,194		2,064
Total operating expenses		7,730		7,498
Income before income taxes		7,446		6,600
Income Taxes		2,496		2,105
Net Income	$	4,950	$	4,495
Per Share Data
Basic earnings per share	$	0.65	$	0.56
Diluted earnings per share		0.64		0.56
Cash dividends per share	$	0.20	$	0.17
Weighted average number of shares outstanding		7,699,523		7,985,028

See Independent Accountants’ Report.

The accompanying notes are an integral part of these Consolidated Financial Statements

Page 5

Camden National Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited)

(In thousands)	Six Months Ended June 30,
	2004			2003
Net income	$	9,470		$	8,820
Other comprehensive income, net of tax:
Change in unrealized depreciation on securities available for sale (net of tax benefit of $2,288 and $569 for 2004 and 2003, respectively)		(4,250	)		(1,057	)
Change in effective cash flow hedge component of unrealized appreciation on derivative instruments marked to market (net of tax benefit of $120 and $16 for 2004 and 2003, respectively)		(223	)		(30	)
Comprehensive income	$	4,997		$	7,733

Camden National Corporation and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income

(unaudited)

(In thousands)	Three Months Ended June 30,
	2004			2003
Net income	$	4,950		$	4,495
Other comprehensive (loss) income, net of tax:
Change in unrealized depreciation on securities available for sale (net of tax benefit of $3,313 and $224 for 2004 and 2003, respectively)		(6,154	)		(416	)
Change in effective cash flow hedge component of unrealized appreciation on derivative instruments marked to market (net of tax benefit of $120 and $16 for 2004 and 2003, respectively)		(223	)		(30	)
Comprehensive (loss) income	$	(1,427	)	$	4,049

See Independent Accountants’ Report.

The accompanying notes are an integral part of these Consolidated Financial Statements.

Page 6

Camden National Corporation and Subsidiaries

Consolidated Statements of Condition

(In thousands, except number of shares and per share data)	June 30, 2004			December 31, 2003
	(unaudited)			(audited)
Assets
Cash and due from banks	$	32,351		$	37,164
Securities available for sale, at market		265,116			302,951
Securities held to maturity		—			798
Loans, less allowance for loan and lease losses of $14,520 and $14,135 at June 30, 2004 and December 31, 2003, respectively		995,521			952,720
Premises and equipment, net		16,106			15,739
Other real estate owned		194			158
Interest receivable		5,245			5,209
Core deposit intangible, net		3,371			3,825
Goodwill		3,989			3,518
Other assets		50,462			48,281
Total assets	$	1,372,355		$	1,370,363
Liabilities
Deposits:
Demand	$	122,234		$	119,216
NOW		113,628			112,116
Money market		204,163			184,766
Savings		108,893			108,508
Certificates of deposit		299,904			297,387
Brokered certificates of deposit		115,408			79,003
Total deposits		964,230			900,996
Borrowings from Federal Home Loan Bank		213,083			277,043
Other borrowed funds		64,994			61,365
Accrued interest and other liabilities		11,281			11,253
Total liabilities		1,253,588			1,250,657
Shareholders’ Equity
Common stock, no par value; authorized 20,000,000 shares, issued 7,670,847 and 8,609,898 shares on June 30, 2004 and December 31, 2003, respectively		2,450			2,450
Surplus		4,482			5,353
Retained earnings		112,908			127,460
Accumulated other comprehensive (loss) income:
Net unrealized appreciation (depreciation) on securities available for sale, net of income tax		(1,386	)		2,864
Net unrealized appreciation on derivative instruments marked to market, net of income tax		313			536
Total accumulated other comprehensive (loss) income		(1,073	)		3,400
Less cost of 851,248 shares of treasury stock on December 31, 2003		—			18,957
Total shareholders’ equity		118,767			119,706
Total liabilities and shareholders’ equity	$	1,372,355		$	1,370,363

See Independent Accountants’ Report.

The accompanying notes are an integral part of these Consolidated Financial Statements.

Page 7

Camden National Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

	Six Months Ended June 30,
(In thousands)	2004			2003
Operating Activities
Net Income	$	9,470		$	8,820
Adjustment to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		165			865
Depreciation and amortization		1,118			779
(Gain) loss on sale of securities		(684	)		48
Decrease (increase) in interest receivable		267			(288	)
Decrease in core deposit intangible		454			471
Increase in other assets		(96	)		(1,993	)
(Decrease) increase in other liabilities		(275	)		706
Increase in residential mortgage loans held for sale		—			(337	)
Net cash provided by operating activities		10,419			9,071
Investing Activities
Proceeds from maturities of securities held to maturity		800			1,000
Proceeds from sale and maturities of securities available for sale		66,280			79,847
Purchase of securities available for sale		(35,149	)		(50,633	)
Net increase in loans		(42,966	)		(92,744	)
Net (increase) decrease in other real estate owned		(36	)		300
Purchase of premises and equipment		(1,129	)		(191	)
Net cash used in investing activities		(12,200	)		(62,421	)
Financing Activities
Net increase (decrease) in deposits		63,234			(4,993	)
Proceeds from Federal Home Loan Bank borrowings		7,528,428			7,422,314
Repayments on Federal Home Loan Bank borrowings		(7,592,388	)		(7,363,840	)
Net increase in other borrowed funds		3,629			4,054
Repurchase of issued common stock		(2,896	)		(2,618	)
Proceeds from stock issuance under option plan		69			406
Cash dividends		(3,108	)		(2,773	)
Net cash (used in) provided by financing activities		(3,032	)		52,550
Net decrease in cash and cash equivalents		(4,813	)		(800	)
Cash and cash equivalents at beginning of year		37,164			33,523
Cash and cash equivalents at end of period	$	32,351		$	32,723

See Independent Accountants’ Report.

The accompanying notes are an integral part of these Consolidated Financial Statements.

Page 8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures required by accounting principles generally accepted in the United States of America for complete presentation of financial statements. In the opinion of management, the consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated statements of condition of Camden National Corporation, as of June 30, 2004, and December 31, 2003, the consolidated statements of income for the six and three months ended June 30, 2004 and June 30, 2003, the consolidated statements of comprehensive (loss) income for the six and three months ended June 30, 2004 and June 30, 2003 and the consolidated statements of cash flows for the six months ended June 30, 2004 and June 30, 2003. All significant intercompany transactions and balances are eliminated in consolidation. The income reported for the six-month period ended June 30, 2004 is not necessarily indicative of the results that may be expected for the full year. The information in this report should be read in conjunction with the consolidated financial statements and accompanying notes included in the December 31, 2003 Annual Report on Form 10-K.

NOTE 2 – EARNINGS PER SHARE

Basic earnings per share data is computed based on the weighted average number of common shares outstanding during each period. Potential common stock is considered in the calculation of weighted average shares outstanding for diluted earnings per share, and is determined using the treasury stock method.

The following tables set forth the computation of basic and diluted earnings per share:

	Six Months Ended June 30,
(Dollars in thousands, except number of shares and per share data)	2004		2003
Net income, as reported	$	9,470	$	8,820
Weighted average shares outstanding		7,724,485		8,005,919
Effect of dilutive employee stock options		33,071		42,623
Adjusted weighted average shares and assumed conversion		7,757,556		8,048,542
Basic earnings per share	$	1.23	$	1.10
Diluted earnings per share		1.22		1.10
	Three Months Ended June 30,
	2004		2003
Net income, as reported	$	4,950	$	4,495
Weighted average shares outstanding		7,699,523		7,985,028
Effect of dilutive employee stock options		32,507		42,623
Adjusted weighted average shares and assumed conversion		7,732,030		8,027,651
Basic earnings per share	$	0.65	$	0.56
Diluted earnings per share		0.64		0.56

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NOTE 3 – DERIVATIVE FINANCIAL INSTRUMENTS

The Company has interest rate protection agreements with notional amounts of $30.0 million at June 30, 2004. Under these agreements, the Company exchanges a variable rate asset for a fixed rate asset, thus protecting certain asset yields from falling interest rates. In accordance with SFAS No. 133, management designated these swap agreements as cash-flow hedges since they convert a portion of the loan portfolio from a variable rate based upon the Prime Rate to a fixed rate. The hedge relationship is estimated to be 100% effective; therefore, there is no impact on the statement of income resulting from changes in fair value. The fair values of the swap agreements are recorded in the Statement of Condition with the offset recorded in the Statement of Comprehensive (Loss) Income.

NOTE 4 – CORE DEPOSIT INTANGIBLES

The Company has a core deposit intangible asset related to the acquisition of bank branches in 1998. The core deposit intangible is amortized on a straight-line basis over 10 years, and reviewed for possible impairment when it is determined that events or changed circumstances may affect the underlying basis of the asset. The carrying amount is as follows:

(Dollars in thousands)	June 30, 2004		December 31, 2003
Core deposit intangible, cost	$	9,424	$	9,424
Accumulated amortization		6,053		5,599
Core deposit intangible, net	$	3,371	$	3,825

Amortization expense related to the core deposit intangible for the six- and three-month periods ended June 30, 2004 amounted to $454,000 and $223,000, respectively. Amortization expense for the six- and three-month periods ended June 30, 2003 amounted to $471,000 and $236,000, respectively. The expected amortization expense for the remaining amortization period ending December 31, 2008 is estimated to be $908,000 per year through December 31, 2007 and $454,000 for the year ending December 31, 2008.

NOTE 5 – GOODWILL

The value of the Company’s goodwill balances, including the related impairment loss, is as follows:

	June 30, 2004
(Dollars in thousands)	Banking		Financial Services			Total
Goodwill, at cost	$	2,271	$	2,408		$	4,679
Transitional impairment loss		—		(690	)		(690	)
Goodwill, net	$	2,271	$	1,718		$	3,989

Page 10

	December 31, 2003
(Dollars in thousands)	Banking		Financial Services			Total
Goodwill, at cost	$	1,800	$	2,408		$	4,208
Transitional impairment loss		—		(690	)		(690	)
Goodwill, net	$	1,800	$	1,718		$	3,518

During the second quarter of 2004, the Company completed a transaction in which UnitedKingfield Bank, a wholly-owned subsidiary, purchased and assumed certain deposit liabilities and assets of the Greenville Junction, Maine branch of another institution, while simultaneously selling certain deposit liabilities and assets of its Jackman, Maine branch to that institution. As a result of the transaction, the Company recorded $471,000 of banking goodwill. As of June 30, 2004, in accordance with SFAS No. 142, the Company completed its annual review of the goodwill and determined that there has been no additional impairment.

NOTE 6 – STOCK REPURCHASE

On June 24, 2003, the Board of Directors of the Company voted to authorize the Company to purchase up to 5% or approximately 400,000 shares of its authorized and issued common stock. The authority may be exercised from time to time and in such amounts as market conditions warrant. Any repurchases are intended to make appropriate adjustments to the Company’s capital structure, including meeting share requirements related to employee benefit plans and for general corporate purposes. As of June 30, 2004, the Company has repurchased 301,958 shares of common stock and an average price of $29.61 under the current plan, of which 92,630 shares at an average price of $31.18 have been purchased during 2004. On June 25, 2002, the Board of Directors of the Company voted to authorize the Company to repurchase up to 409,500 shares or approximately 5% of its authorized and issued common stock for reasons similar to the current year plan. Under the prior year plan, the Company repurchased 143,580 shares of common stock at an average price of $24.53.

NOTE 7 – TREASURY STOCK

The State of Maine has repealed and replaced its Business Corporation Act (Title 13-C of the Maine Revised Statutes). The new Business Corporation Act eliminates the concept of “treasury stock,” instead providing that shares of its stock acquired by a corporation simply constitute “authorized but unissued” shares. Accordingly, the Company retired all treasury stock during the second quarter of 2004, which reduced surplus by $831,000 and retained earnings by $20.9 million.

NOTE 8 – SHAREHOLDERS’ EQUITY

On April 29, 2003, the shareholders of the Company approved the 2003 Stock Option and Incentive Plan (the “current Plan”). Prior to the approval, the Company had three stock option plans, which the Company accounted for under the recognition and measurement provisions of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. On August 27, 2002, the Company announced that it adopted the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” prospectively to all employee awards granted, modified, or settled. During the first six months of 2004, the Company issued, under the current plan, 7,500 stock options to employees. In general, these options vest over five-years. During the first six months of 2003, the Company issued 6,000 stock options to employees, which vested immediately and were expensed as options on the date of grant.

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NOTE 9 – MORTGAGE SERVICING RIGHTS

Residential real estate mortgages are originated by the Company with the intent to hold in portfolio or to sell in the secondary market to institutional investors such as Freddie Mac. Under loan sale and servicing agreements with the investor, the Company generally continues to service the residential real estate mortgages. A mortgage servicing right is created when the Company pays the investor an agreed-upon rate on the loan, which, including a guarantee fee paid to Freddie Mac, is less than the interest rate the Company receives from the borrower. The Company retains the difference as a fee for servicing the residential real estate mortgages. As required by SFAS No. 140, the Company capitalizes mortgage servicing rights at their fair value upon sale of the related loans and periodically assesses the asset for impairment. The balance of capitalized mortgage servicing rights, net of a valuation allowance, included in other assets at June 30, 2004 and 2003 was $780,000 and $564,000, respectively, which equaled the fair value of these rights. At December 31, 2003, the balance of capitalized mortgage servicing rights was $897,000. Amortization of the mortgage servicing rights, as well as write-offs of capitalized rights due to prepayments of the related mortgage loans, are recorded as a charge against mortgage servicing fee income. The Company’s assumptions with respect to prepayments, which are affected by the estimated average life of the loans, are adjusted periodically to reflect current circumstances. In evaluating the reasonableness of the carrying values of mortgage servicing rights, the Company obtains third party valuations based on loan level data including note rate, type and term of the underlying loans.

The following summarizes mortgage servicing rights capitalized and amortized, along with the activity in the related valuation allowance:

	Six Months Ended June 30,
(Dollars in thousands)	2004			2003
Balance of loans serviced for others	$	132,850		$	133,069
Mortgage Servicing Rights:
Balance at beginning of year	$	897		$	965
Mortgage servicing rights capitalized		—			63
Amortization charged against mortgage servicing fee income		(134	)		(392	)
Change in valuation allowance		17			(72	)
Balance at end of period	$	780		$	564
Valuation allowance:
Balance at beginning of year	$	(21	)	$	—
Increase in impairment reserve		—			(72	)
Reduction of impairment reserve		17			—
Balance at end of period	$	(4	)	$	(72	)

NOTE 10 – POST-RETIREMENT PLAN

The Company’s post-retirement plan provides medical and life insurance to certain eligible retired employees. The components of the net periodic benefit cost are:

	Three Months Ended June 30,
(Dollars in thousands)	2004			2003
Service cost	$	35		$	30
Interest cost		53			52
Transition obligation		7			7
Amortization of prior service cost		1			1
Recognized net actuarial loss		21			21
Net periodic benefit cost	$	117		$	111
Weighted-average discount rate assumption used to determine net benefit cost		6.5	%		7.0	%

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	Six Months Ended June 30,
(Dollars in thousands)	2004			2003
Service cost	$	70		$	60
Interest cost		106			104
Transition obligation		14			14
Amortization of prior service cost		2			2
Recognized net actuarial loss		42			42
Net periodic benefit cost	$	234		$	222
Weighted-average discount rate assumption used to determine net benefit cost		6.5	%		7.0	%

The Company’s expected contribution for the third quarter of 2004 is $43,875 and the expected contribution for all of 2004 is $175,500.

NOTE 11 – RECENT ACCOUNTING PRONOUNCEMENTS

In May 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) No. 106-2. The FSP supersedes FSP No. 106-1, which was issued to address the accounting impact of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act). The Act includes a prescription drug benefit under Medicare Part D and a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D.

FSP No. 106-2 applies only to sponsors of single-employer plans for which (1) the employer concludes that prescription drug benefits under the plan are actuarially equivalent to Medicare Part D and thus qualify for the subsidy, and (2) the expected amount of the subsidy will offset or reduce the employer-sponsor’s share of the plan’s prescription drug coverage. The FSP provides accounting guidance and required disclosures. For public companies, the FSP is effective for the first interim or annual period beginning after June 15, 2004. The effects of the Act on the accumulated projected benefit obligation or net periodic postretirement benefit cost are not reflected in the Financial Statements or accompanying notes.

FSP No. 106-2 is not expected to have a material effect on the Company’s consolidated financial statements or results of operations.

ITEM 2. MANAGEMENT’S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATION

FORWARD LOOKING INFORMATION

The discussions set forth below and in the documents we incorporate by reference herein contain certain statements that may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. The Company may make written or oral forward-looking statements in other documents we file with the SEC, in our annual reports to stockholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “will,” “should,” and other expressions which predict or indicate future events or trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Company. These risks, uncertainties and other factors may cause the actual results, performance or achievements of the Company to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

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Some of the factors that might cause these differences include, but are not limited to, the following:

• general, national, regional, or local economic conditions could be less favorable than anticipated adversely impacting the performance of the Company’s investment portfolio, quality of credits or the overall demand for services;

• changes in loan default and charge-off rates affecting the allowance for loan and lease losses;

• declines in the equity markets which could result in impairment of goodwill;

• reductions in deposit levels necessitating increased and/or higher cost borrowing to fund loans and investments;

• declines in mortgage loan refinancing, equity loan and line of credit activity which could reduce net interest and non-interest income;

• changes in the domestic interest rate environment;

• increases in loan repayment rates affecting the value of mortgage servicing rights and more generally affecting net interest income

• changes in the laws, regulations and policies governing financial holding companies and their subsidiaries;

• changes in industry-specific and information system technology creating operational issues or requiring significant capital investment;

• changes in the size and nature of the Company’s competition, including continued industry consolidation and financial services from non-bank entities affecting customer base and profitability;

• changes in the global geo-political environment, such as acts of terrorism and military action; and

• changes in the assumptions used in making such forward-looking statements.

You should carefully review all of these factors, and you should be aware that there might be other factors that could cause these differences, including, among others, the factors listed under “Certain Factors Affecting Future Operating Results,” beginning on page 29 of our Annual Report on Form 10-K for the year ended December 31, 2003. Readers should carefully review the factors described under “Certain Factors Affecting Future Operating Results” and should not place undue reliance on our forward-looking statements.

These forward-looking statements were based on information, plans and estimates at the date of this report, and we do not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

CRITICAL ACCOUNTING POLICIES

Management’s discussion and analysis of the Company’s financial condition are based on the consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to the allowance for loan and lease losses (“ALLL”), mortgage servicing rights and accounting for acquisitions and the related review of goodwill and intangible assets for impairment. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis in making judgments about the carrying values of assets that are not readily apparent from other sources. Actual results could differ from the amount derived from management’s estimates under different assumptions or conditions.

Allowance for Loan and Lease Losses. In preparing the consolidated financial statements, the ALLL requires the most significant amount of management estimates and assumptions. Management regularly evaluates the ALLL for adequacy by taking into consideration factors such as prior loan loss experience, the character and size of the loan portfolio, business and economic conditions and management’s estimation of probable losses. The use of different estimates or assumptions could produce different provisions for loan and lease losses, which would affect the earnings of the Company. A smaller provision for loan and lease losses results in higher net income and a greater amount of provision for loan and lease losses results in lower net income. Monthly, the Corporate Risk Management Group reviews the ALLL with the board of directors of each bank subsidiary.

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On a quarterly basis, a more in depth review of the ALLL, including the methodology for calculating and allocating the ALLL, is reviewed with the Company’s board of directors, as well as the board of directors for each subsidiary bank.

Periodically, the Company acquires property in connection with foreclosures or in satisfaction of debt previously contracted. The valuation of this property is accounted for individually at the lower of the “book value of the loan satisfied” or its net realizable value on the date of acquisition. At the time of acquisition, if the net realizable value of the property is less than the book value of the loan a reduction in the ALLL is recorded. If the value of the property becomes permanently impaired, as determined by an appraisal or an evaluation in accordance with the Company’s appraisal policy, the Company will record the decline by showing a charge against current earnings. Upon acquisition of a property valued at $25,000 or more, a current appraisal or a broker’s opinion must substantiate “market value” for the property.

Mortgage Servicing Rights. Servicing assets are recognized as separate assets when servicing rights are acquired through sale of residential mortgage loans. Capitalized servicing rights are reported in other assets and are amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying residential mortgage assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized costs. Fair value is determined based upon discounted cash flows using market-based assumptions. In periods of falling market interest rates, the rate of accelerated loan prepayment can adversely impact the fair value of these mortgage servicing rights relative to their book value. When the book value exceeds the fair value, a valuation allowance is recorded against these servicing assets. In the event that the fair value of these assets were to increase in the future, the Company can recognize the increased fair value to the extent of the impairment valuation allowance, but cannot recognize an asset in excess of its amortized book value. Future changes in fair value, as a result of changes in observable market data relating to market interest rates, the rate of loan prepayment, and other factors, could positively or adversely impact the Company’s financial condition and results of operations. Management has engaged, on a quarterly basis, a recognized third party to evaluate the valuation of the Company’s mortgage servicing rights asset.

Valuation of Acquired Assets and Liabilities. Management utilizes numerous techniques to estimate the value of various assets held by the Company. Management utilized various methods to determine the appropriate carrying value of goodwill as required under Statement of Financial Accounting Standards (“SFAS”) No. 142. In addition, goodwill from a purchase acquisition is subject to ongoing periodic impairment tests. Goodwill is evaluated for impairment using several standard valuation techniques including discounted cash flow analyses, as well as an estimation of the impact of business conditions. Different estimates or assumptions are also utilized to determine the appropriate carrying value of other assets including, but not limited to, property, plant and equipment, overall collectibility of loans and receivables. The use of different estimates or assumptions could produce different estimates of carrying value. Management prepares the valuation analyses, which are then reviewed by the Board of Directors of the Company.

Interest Income Recognition. Interest on loans is included in income as earned based upon interest rates applied to unpaid principal. Interest is not accrued on loans 90 days or more past due unless they are adequately secured and in the process of collection or on other loans when management believes collection is doubtful. All loans considered impaired are non-accruing. Interest on non-accruing loans is recognized as income when the ultimate collectibility of interest is no longer considered doubtful. When a loan is placed on non-accrual status, all interest previously accrued, but not collected, is reversed against current-period interest income, therefore, an increase in loans on non-accrual status reduces interest income. If a loan is removed from non-accrual status, all previously unrecognized interest is collected and recorded as interest income.

RESULTS OF OPERATIONS

Overview

The Company reported consolidated net income of $9.5 million, or $1.22 per diluted share, for the first six months of 2004. This is an increase of $650,000, or 7.4%, compared to net income of $8.8 million, or $1.10 per

Page 15

diluted share, for the comparable period of 2003. Annualized return on average equity (“ROE”) and return on average assets (“ROA”) for the first half of the year were 15.73% and 1.40%, respectively. Annualized ROE and ROA were 14.80% and 1.41%, respectively, for the same period in 2003.

During the first six months of 2004, the Company continued to experience a narrowing of the net interest margin as yields on earning assets continued to re-price downward faster than the cost of funding, resulting in a net interest margin of 3.81% compared to 4.13% for the same period in 2003. Although the Company has experienced a narrowing margin during a sustained low interest rate environment, the increase in average earning assets of $102.5 million contributed to an increase of $185,000 in net interest income during the first six months of 2004 compared to the same period in 2003. Another contributing factor to the improved results was a reduction of $700,000 in the provision for loan and lease losses in 2004 compared to 2003 reflecting management’s assessment of improved asset quality. In addition, during the first half of 2004 compared to the same period one year ago, the Company experienced an increase of $883,000, or 17.6%, in non-interest income and only a moderate increase of $663,000, or 4.4%, in non-interest expense.

For the second quarter of 2004, the Company reported consolidated net income of $5.0 million or $0.64 per diluted share, an increase of 14.3% over net income per diluted share of $0.56 reported for the second quarter of 2003. The major contributing factors to the improved results were the reduction of $445,000 in the provision for loan and lease losses and an increase of $730,000, or 27.8%, in non-interest income in 2004 compared to 2003.

NET INTEREST INCOME

The Company’s net interest income, on a fully taxable equivalent basis, for the six months ended June 30, 2004 was $24.4 million, a 0.8%, or $199,000, increase over the net interest income of $24,2 million for the first six months of 2003. Interest income on loans increased $659,000, or 2.4%, during the six-month period of 2004 compared to the same period of 2003. The Company experienced a decrease in interest income on investments during the first six months of 2004 compared to the same period in 2003 due to decreases in yields resulting from a declining interest rate environment. The Company’s total interest expense decreased $1.1 million during the first six months of 2004 compared to the same period in 2003. This decrease was the result of the declining interest rate environment that was somewhat offset by increased short-term borrowing volumes needed to fund loan growth. Net interest income, expressed as a percentage of average interest-earnings assets for the first half of 2004 and 2003, was 3.81% and 4.13%, respectively.

Net interest income, on a fully taxable equivalent basis, for the three months ended June 30, 2004 was $11.9 million, a 0.8%, or $95,000, decrease compared to $12.0 million in net interest income for the same period in 2003.

The following tables, which present changes in interest income and interest expense by major asset and liability category for six months ended June 30, 2004 and 2003, illustrate the impact of average volume growth and rate changes. The income from tax-exempt assets, municipal investments and loans, has been adjusted to a tax-equivalent basis, thereby allowing a uniform comparison to be made between asset yields. Changes in net interest income are the result of interest rate movements, changes in the amounts and mix of interest-earning assets and interest-bearing liabilities, and changes in the level of non-interest-earning assets and non-interest-bearing liabilities. The Company utilizes derivative financial instruments such as interest rate swap agreements that have an effect on net interest income. There was an increase in net interest income due to the derivative financial instruments of $428,000 during the first six months of 2004 compared to an increase of $395,000 in the first six months of 2003. The average amount of non-accrual loans can also affect the average yield on all outstanding loans. Average non-accrual loans for the periods ended June 30, 2004 and 2003 were $6.3 million and $7.8 million, respectively.

Page 16

ANALYSIS OF CHANGES IN NET INTEREST MARGIN

	Six Months Ended June 30, 2004					Six Months Ended June 30, 2003
Dollars in thousands	Amount of Interest			Average Yield/Cost		Amount of Interest			Average Yield/Cost
Interest-earning assets:
Investments (including federal funds sold)	$	6,800		4.49	%	$	8,341		5.20	%
Loans		28,591	*	5.86	%		27,933	*	6.58	%
Total earning assets		35,391		5.54	%		36,274		6.20	%
Interest-bearing liabilities:
Demand deposits		0		0.00	%		0		0.00	%
NOW accounts		105		0.19	%		108		0.22	%
Savings accounts		190		0.35	%		248		0.49	%
Money market accounts		880		0.89	%		819		1.00	%
Certificates of deposit		4,037		2.73	%		4,782		3.11	%
Borrowings		3,860		2.64	%		4,806		3.30	%
Brokered certificates of deposit		1,936		3.66	%		1,327		4.62	%
Total interest-bearing liabilities		11,008		1.80	%		12,090		2.16	%
Net interest income (fully-taxable equivalent)		24,383					24,184
Less: fully-taxable equivalent adjustment		(194	)				(180	)
	$	24,189				$	24,004
Net Interest Rate Spread (fully-taxable equivalent)				3.74	%				4.04	%
Net Interest Margin (fully-taxable equivalent)				3.81	%				4.13	%

* Includes net swap income figures – 2004: $428,000 and 2003: $395,000.

Notes: Nonaccrual loans are included in total loans. Tax exempt interest was calculated using a rate of 35% for fully-taxable equivalent

Page 17

AVERAGE BALANCE SHEETS

	Six Months Ended June 30,
Dollars in thousands	2004		2003
Interest-earning assets:
Investments (including federal funds sold)	$	303,626	$	323,407
Loans		978,553		856,309
Total interest-earning assets		1,282,179		1,179,716
Cash and due from banks		30,384		28,602
Other assets		62,051		65,011
Less allowance for loan and lease losses		14,437		15,452
Total assets	$	1,360,177	$	1,257,877
Sources of funds:
Demand deposits	$	115,049	$	98,862
NOW accounts		110,594		100,056
Savings accounts		108,418		102,633
Money market accounts		199,358		164,559
Certificates of deposits		296,247		310,566
Borrowings		293,482		293,369
Brokered certificates of deposit		106,028		57,874
Total sources of funds		1,229,176		1,127,919
Other liabilities		10,280		9,813
Shareholders’ equity		120,721		120,145
Total liabilities and shareholders’ equity	$	1,360,177	$	1,257,877

ANALYSIS OF VOLUME AND RATE CHANGES ON

NET INTEREST INCOME AND EXPENSES

	June 30, 2004 Over June 30, 2003
Dollar in thousands	Change Due to Volume			Change Due to Rate			Total Change
Interest-earning assets:
Investments (including federal funds sold)	$	(510	)	$	(1,031	)	$	(1,541	)
Loans		3,988			(3,329	)		659
Total interest income		3,478			(4,360	)		(882	)
Interest-bearing liabilities:
NOW accounts		11			(14	)		(3	)
Savings accounts		14			(72	)		(58	)
Money market accounts		173			(112	)		61
Certificates of deposit		(220	)		(524	)		(744	)
Borrowings		2			(948	)		(946	)
Brokered certificates of deposit		1,104			(495	)		609
Total interest expense		1,084			(2,165	)		(1,081	)
Net interest income (fully taxable equivalent)	$	2,394		$	(2,195	)	$	199

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NON-INTEREST INCOME

Total non-interest income increased by $883,000, or 17.6%, in the six months ended June 30, 2004 compared to the six months ended June 30, 2003. Income from trust and investment management activities increased $483,000, or 44.2%, principally due to an increase in assets under management at Acadia Trust, N.A. resulting, in part, from increases in the market value of these assets during the later part of 2003 and first quarter of 2004. Residential mortgage servicing rights associated with the sale of residential real estate loans increased $272,000 during the first six months of 2004 compared to 2003, due to decreased amortization of the mortgage servicing asset associated with a decline of loan prepayments during the first half of 2004 compared to the same period in 2003. Earnings on bank-owned life insurance increased $96,000 in the first six months of 2004 compared to the first six months of 2003 due to an increase in yields. The Company recorded a gain of $684,000 on the sale of securities for the first half of 2004 compared to a loss of $48,000 on similar transactions during the same period of 2003. Other non-interest income decreased $684,000, or 35.7%, for the first half of 2004 compared to the same period in 2003 due to decreases in gains on the sale of loans, credit card income due to the sale of the credit card portfolio in October of 2003, and a reduction of retirement plan administration income as Acadia Trust, N.A. began to outsource this function on January 1, 2004.

Total non-interest income increased by $730,000, or 27.8%, during the second quarter of 2004 compared to the second quarter of 2003. Service charges on deposit accounts decreased $29,000, or 2.9%, for the second quarter of 2004 compared to 2003. Trust and investment management income increased $233,000, or 40.3%, primarily due to an increase in assets under management at Acadia Trust, N.A. Residential mortgage servicing rights associated with sales of residential real estate loans increased $246,000 due to a decrease in the amortization of the mortgage servicing asset as a result of decreased prepayments during the second quarter of 2004 compared to 2003. The Company recorded a gain of $684,000 on the sale of securities for the second quarter of 2004 compared to a loss of $48,000 on similar transactions during the same period of 2003. Other non-interest income decreased $472,000, or 43.0%, during the second quarter of 2004 compared to 2003 primarily due decreases in gains on the sale of loans, credit card income due to the sale of the credit card portfolio in October 2003, and a reduction of retirement plan administration income as Acadia Trust, N.A. began to outsource this function on January 1, 2004.

NON-INTEREST EXPENSE

Total non-interest expense increased by $663,000, or 4.4%, in the six-month period ended June 30, 2004 compared to the six months ended June 30, 2003. Salaries and employee benefit costs increased $462,000, or 5.6%, during the first six months of 2004 compared to 2003, primarily due to normal annual salary and benefit cost increases and an increase in employee incentive expense of $150,000. Other operating expenses increased by $215,000, or 5.1%, in the first six months of 2004 compared to the first six months of 2003, primarily due to increased hiring and training costs, increased consulting fees at Acadia Trust, N.A. related to the outsourcing of its retirement plan administrative services, and increased brokered deposits fees as the Company has increased its use of brokered certificates of deposit as a funding source. Offsetting some of these increases in other operating expenses were lower postage, legal and collections costs in 2004 compared to 2003.

Total non-interest expense increased by $232,000, or 3.1%, in the quarter ended June 30, 2004 compared to the quarter ended June 30, 2003. Salaries and employee benefit costs increased by $78,000, or 1.9%, during the second quarter of 2004 compared to 2003, primarily due to normal annual salary increases and higher healthcare costs, which was somewhat offset by a decrease in employee incentive expense of $80,000. Expenses related to premises and fixed assets increased $37,000, or 3.5%, during the second quarter of 2004 compared to 2003, due to increased maintenance and depreciation costs. Other operating expenses increased $130,000, or 6.3%, in the second quarter of 2004 compared to the second quarter of 2003. The largest contributing factors to this increase were consulting fees at Acadia Trust, N.A. associated with the outsourcing of its retirement plan administrative services and increased brokered deposits fees related to the Company’s increased use of brokered certificates of deposit as a funding source.

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FINANCIAL CONDITION

During the six months of 2004, average assets of $1.4 billion increased by $102.3 million, or 8.1%, compared to the same period in 2003. This increase was the result of an increase in the loan portfolio, which averaged $978.6 million during the first six months of 2004, an increase of $122.2 million, or 14.3%, as compared to $856.3 million during the first six months of 2003. The largest increase in average loan balances was in commercial real estate loans, which increased $55.1 million, or 17.5%, during the first six months of 2004 compared to the first six months of 2003. In addition, average consumer loans increased $33.3 million, or 31.5%, reflecting increased home equity loan activity, and residential real estate loans increased $27.6 million, or 10.4%, reflecting high levels of refinance activity during the later part of 2003 due to historical low interest rates. Average investment balances declined $19.8 million, or 6.1%, to $303.6 million for the first half of 2004 from $323.4 million for the first half of 2003, as the Company did not reinvest all cash flows from the investment portfolio during the first half of 2004.

Liquidity is defined as the ability to meet current and future financial obligations. The primary objective of liquidity management is to maintain a balance between sources and uses of funds to meet the cash flow needs of the Company in the most economical and expedient manner. The liquidity needs of the Company require the availability of cash to meet the withdrawal demands of depositors and credit commitments to borrowers. Due to the potential for unexpected fluctuations in both deposits and loans, active management of the Company’s liquidity is necessary. The Company maintains various sources of funding and levels of liquid assets in excess of regulatory guidelines in order to satisfy its varied liquidity demands. The Company monitors its liquidity in accordance with its internal guidelines and all applicable regulatory requirements. As of June 30, 2004 and 2003, the Company’s level of liquidity exceeded its target levels. Management believes that the Company currently has appropriate liquidity available to respond to liquidity demands. Sources of funds utilized by the Company consist of deposits, borrowings from the Federal Home Loan Bank of Boston (“FHLBB”) and other sources, cash flows from operations, prepayments and maturities of outstanding loans, investments and mortgage-backed securities, and the sales of mortgage loans.

Deposits continue to represent the Company’s primary source of funds. For the first six months of 2004 average deposits of $935.7 million increased $101.1 million, or 12.1%, from $834.6 million reported during the first six months of 2003. The Company experienced growth in all deposit categories during this period. Comparing average deposits for the first six months of 2004 to 2003, transaction accounts (demand deposits and NOW accounts) increased $26.7 million, savings accounts increased $5.8 million, money market accounts increased $34.8 million, and certificates of deposit increased $33.8 million. Included in the money market deposit category are deposits from Acadia Trust, N.A., representing client funds. The balance in the Acadia Trust, N.A. client money market account, which was $38.5 million on June 30, 2004, could increase or decrease depending upon changes in the portfolios of the clients of Acadia Trust, N.A. The increase in certificates of deposit during the first half of 2004 was the result of the Company utilizing brokered certificates of deposit as a funding source when the market for these funds was more favorable compared to other alternatives. Borrowings supplement deposits as a source of liquidity. In addition to borrowings from the FHLBB, the Company purchases federal funds, sells securities under agreements to repurchase and utilizes treasury tax and loan accounts. Average borrowings for the first six months of 2004 were $293.5 million, an increase of $113,000, from $293.4 million during the first six months of 2003. The majority of the borrowings were from the FHLBB, whose advances remained the largest non-deposit-related, interest-bearing funding source for the Company. The Company secures these borrowings with qualified residential real estate loans, certain investment securities and certain other assets available to be pledged. The carrying value of loans pledged as collateral at the FHLBB was $289.6 million and $277.9 million at June 30, 2004 and 2003, respectively. The Company also pledges securities as collateral at the FHLBB depending on its borrowing needs. The Company, through its bank subsidiaries, has an available line of credit with FHLBB of $13.0 million at June 30, 2004 and 2003. The Company had no outstanding balance on its line of credit with the FHLBB at June 30, 2004 and 2003.

In addition to the liquidity sources discussed above, the Company believes its investment portfolio and residential loan portfolio provide a significant amount of contingent liquidity that could be accessed in a reasonable time period through sales. The Company also believes that it has significant untapped access to the national brokered deposit market. These sources are considered as liquidity alternatives in the Company’s contingent liquidity plan. The Company believes that the level of liquidity is sufficient to meet current and future

Page 20

funding requirements. However, changes in economic conditions, including consumer saving habits and availability or access to the national brokered deposit market could significantly impact the Company’s liquidity position.

Another aspect of the Company’s financial condition is its ALLL. In determining the adequacy of the ALLL, management reviews the loan portfolio to ascertain whether there are specific loans, which require additional reserves, and to assess the collectibility of the loan portfolio in the aggregate. Non-performing loans are examined on an individual basis to determine the estimated probable loss on these loans. In addition, the ongoing evaluation process includes a formal analysis of the ALLL each quarter, which considers, among other factors, the current loan mix and loan volumes, loan growth, management’s ongoing review of individual loans, trends in the level of criticized or classified assets, an evaluation of results of examinations by regulatory authorities, analyses of historical trends in charge-off and delinquencies, and business and economic conditions affecting each loan category. The use of different estimates or assumptions could produce different provisions for loan and lease losses. Although management uses available information to establish the appropriate level of the ALLL, no assurance can be given, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio. The Company continues to monitor and modify its ALLL as conditions dictate.

The methodology for calculating the ALLL involves significant judgment. First and foremost, it involves the early identification of credits that are deteriorating. Second, it involves management judgment to derive loss factors. The Company uses a risk rating system to determine the credit quality of its loans. Loans are reviewed for information affecting the obligor’s ability to fulfill its obligations. In assessing the risk rating of a particular loan, management makes certain assumptions, including the obligor’s debt capacity and financial flexibility, the level of the obligor’s earnings, the amount and sources of repayment, the level and nature of contingencies, and with commercial loans consideration has to be given to management strength, and the industry and geography in which the obligor operates. These factors are based on an evaluation of historical information, as well as subjective assessment and interpretation. Emphasizing one factor over another or considering additional factors that may be relevant in determining the risk rating of a particular loan, but which are not currently an explicit part of the Company’s methodology, could impact the risk rating assigned by the Company to that loan. Wherever possible, the Company uses independent, verifiable data or the Company’s own historical loss experience in its models for estimating these loss factors. Many factors can affect management’s estimates of specific loss and expected loss, including volatility of default probabilities, rating migrations and loss severity. There are judgments as to which external data should be used, and when it should be used. Choosing data that is not reflective of the Company’s specific loan portfolio characteristics could affect loss estimates.

During the first six months of 2004, the Company provided $165,000 to the ALLL compared to $865,000 in the first six months of 2003. Provisions are made to the ALLL in order to maintain the ALLL at a level which management believes is reasonable and reflective of the overall risk of loss inherent in the loan portfolio. The Company’s Corporate Risk Management Group actively addresses existing and anticipated asset quality issues. The efforts of the Risk Management Group resulted in net recoveries of $220,000 during the first six months of 2004, compared to net charge-offs of $2.0 million during the first six months of 2003. At the same time, non-performing assets as a percent of total loans improved to 0.59% at June 30, 2004, compared to 0.76% at June 30, 2003. The determination of an appropriate level of ALLL, and subsequent provision for loan and lease losses, which would affect earnings, is based on management’s judgment of the adequacy of the reserve based on analysis of various economic factors and review of the Company’s loan portfolio, which may change due to numerous factors including loan growth, payoffs of lower quality loans, recoveries on previously charged-off loans, improvement in the financial condition of the borrowers, risk rating downgrades/upgrades and charge-offs. Management believes that the ALLL at June 30, 2004, of $14.5 million, or 1.44% of total loans outstanding, was appropriate based on the economic conditions in the Company’s service area and management’s estimation of the quality of the Company’s loan portfolio at June 30, 2004. Several factors, as explained above, may materially affect the level of future provisions for loan and lease losses, which could impact earnings. As a percentage of total loans outstanding, the ALLL, of $14.1 million, was 1.57% as of June 30, 2003.

Under Federal Reserve Board (“FRB”) guidelines, bank holding companies such as the Company are required to maintain capital based on risk-adjusted assets. These capital requirements represent quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.

Page 21

The Company’s capital classification is also subject qualitative judgments by its regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average assets (as defined). These guidelines apply to the Company on a consolidated basis. Under the current guidelines, banking organizations must maintain a risk-based capital ratio of 8%, of which at least 4% must be in the form of core capital (as defined). The Company and its subsidiaries exceeded regulatory guidelines for well-capitalized holding companies at June 30, 2004 and June 30, 2003, respectively. The Company’s Tier 1 to risk-weighted assets was 11.58% and 12.33% at June 30, 2004 and 2003. In addition to risk-based capital requirements, the FRB requires bank holding companies to maintain a minimum leverage capital ratio of core capital to total assets of 4.0%. Total assets for this purpose do not include goodwill and any other intangible assets and investments that the FRB determines should be deducted. The Company’s leverage ratio at June 30, 2004 and 2003 was 7.91% and 8.37%, respectively.

The principal cash requirement of the Company is the payment of dividends on the Company’s common stock as and when declared by the Board of Directors. The Company is primarily dependent upon the payment of cash dividends by its subsidiaries to service its commitments. The Company, as the sole shareholder of its subsidiaries, is entitled to dividends when and as declared by each subsidiary’s Board of Directors from legally available funds. The Company declared dividends in the aggregate amount of $3.1 million and $2.8 million in the first six months of 2004 and 2003, respectively.

IMPACT OF INFLATION AND CHANGING PRICES

The interim Consolidated Financial Statements and the Notes to the interim Consolidated Financial Statements thereto presented elsewhere herein have been prepared in accordance with accounting principles generally accepted in the United States, which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation.

Unlike many industrial companies, substantially all of the assets and virtually all of the liabilities of the Company are monetary in nature. As a result, interest rates have a more significant impact on the Company’s performance than the general level of inflation. Over short periods of time, interest rates and yield curve may not necessarily move in the same direction or in the same magnitude as inflation.

OFF-BALANCE SHEET ITEMS

In the normal course of business, the Company is a party to credit related financial instruments with off-balance sheet risk, which are not reflected in the Consolidated Statements of Condition. These financial instruments include lending commitments and letters of credit. Those instruments involve varying degrees of credit risk in excess of the amount recognized in the Consolidated Statements of Condition.

The Company follows the same credit policies in making commitments to extend credit and conditional obligations as it does for on-balance sheet instruments, including requiring similar collateral or other security to support financial instruments with credit risk. The Company’s exposure to credit loss in the event of nonperformance by the customer is represented by the contractual amount of those instruments. Since many of the commitments are expected to expire without being drawn upon, the total amount does not necessarily represent future cash requirements. At June 30, 2004, the Company had the following levels of commitments to extend credit:

	Total Amount Committed		Commitment Expires in:
(Dollars in thousand)			<1 year		1-3 years		4-5 years		>5 years
Letters of Credit	$	1,158	$	389	$	629	$	—	$	140
Other Commitments to Extend Credit		130,661		40,622		25,733		5,837		58,469
Total	$	131,819	$	41,011	$	26,362	$	5,837	$	58,609

Page 22

The Company is a party to several off-balance sheet contractual obligations through lease agreements on a number of branch facilities. The Company has an obligation and commitment to make future payments under these contracts. These commitments and the related payments were made during the normal course of business. At June 30, 2004 the Company had the following levels of contractual obligations for the remainder of 2004 and the fiscal years thereafter:

	Total Amount of Obligations		Payments Due Per Period
(Dollars in thousand)			<1 year		1-3 years		4-5 years		>5 years
Operating Leases	$	2,101	$	388	$	680	$	282	$	751
Capital Leases		—		—		—		—		—
Long-Term Debt		213,083		68,970		51,069		46,678		46,366
Other Long-Term Obligations		—		—		—		—		—
Total	$	215,184	$	69,358	$	51,749	$	46,960	$	47,117

The Company uses derivative instruments as partial hedges against large fluctuations in interest rates. The Company uses interest rate swap and floor instruments to partially hedge against potentially lower yields on the variable prime rate loan category in a declining rate environment. If rates were to decline, resulting in reduced income on the adjustable rate loans, there would be an increase income flow from the interest rate swap and floor instruments. The Company also uses cap instruments to partially hedge against increases in short-term borrowing rates. If rates were to rise, resulting in an increased interest cost, there would be an increased income flow from the cap instruments. These financial instruments are factored into the Company’s overall interest rate risk position. The Company regularly reviews the credit quality of the counterparty from which the instruments have been purchased. At June 30, 2004, the Company had two three-year swap agreements with a notional amount of $30.0 million due to mature February 1, 2005 with cash flows for the following periods:

Payments Due Per Period

(Dollars in thousand)	<1 year		1-3 years		4-5 years		>5 years
Fixed Payments from Counterparty	$	1,207	$	—	$	—	$	—
Payments based on Prime Rate		744		—		—		—
Net Cash Flow	$	463	$	—	$	—	$	—

The net cash flow reflected on the table above is based on the current rate environment. The Company receives a fixed 6.9% on the notional amount during the contract period from the counterparty on the swap agreements and pays a variable rate based on the prime rate that is currently at 4.25%. The cash flow will remain positive for the Company as long as the prime rate remains below 6.9%. This derivative instrument was put into place to partially hedge against potential lower yields on the variable prime rate loan category in a declining rate environment. If the prime rate increases the Company will experience a reduction of cash flow from this derivative instrument that will be offset by an increase in cash flow for the variable prime rate loans.

Page 23

OTHER MATTERS

UnitedKingfield Bank Branch Transaction

On May 28, 2004, the Company’s subsidiary, UnitedKingfield Bank, completed a transaction in which UnitedKingfield Bank purchased and assumed certain deposit liabilities and assets associated with the Greenville Junction, Maine branch of Border Trust Company, and Border Trust Company simultaneously purchased and assumed certain deposit liabilities and assets associated with the Jackman, Maine branch of UnitedKingfield Bank. The completion of the transaction resulted in the Company recording $471,000 of goodwill.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

MARKET RISK

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates/prices, such as interest rates, foreign currency exchange rates, commodity prices and equity prices. The Company’s primary market risk exposure is interest rate risk. The ongoing monitoring and management of this risk is an important component of the Company’s asset/liability management process, which is governed by policies established by the subsidiaries’ Boards of Directors and are reviewed and approved annually. Each bank subsidiary’s Board of Directors’ Asset/Liability Committee (“Board ALCO”) delegates responsibility for carrying out the asset/liability management policies to the Company’s Management Asset/Liability Committee (“Management ALCO”). In this capacity, Management ALCO develops guidelines and strategies impacting the Company’s asset/liability management-related activities based upon estimated market risk sensitivity, policy limits and overall market interest rate levels/trends. The Management ALCO and Board ALCO jointly meet on a quarterly basis to review strategies, policies, economic conditions and various activities as part of the management of these risks.

INTEREST RATE RISK

Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change, the interest income and expense streams associated with the Company’s financial instruments also change, thereby impacting net interest income (“NII”), the primary component of the Company’s earnings. Board and Management ALCO utilize the results of a detailed and dynamic simulation model to quantify the estimated exposure of NII to sustained interest rate changes. While Board and Management ALCO routinely monitor simulated NII sensitivity over a rolling 2-year horizon, they also utilize additional tools to monitor potential longer-term interest rate risk.

The simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all interest-earning assets and liabilities reflected on the Company’s balance sheet as well as for derivative financial instruments. None of the assets used in the simulation were held for trading purposes. This sensitivity analysis is compared to ALCO policy limits which specify a maximum tolerance level for NII exposure over a 1-year horizon, assuming no balance sheet growth, given both a 200 basis point (bp) upward and 100 bp downward shift in interest rates. A parallel and pro rata shift in rates over a 12-month period is assumed. The following reflects the Company’s NII sensitivity analysis as measured during the second quarter of 2004.

Rate Change	Estimated Changes in NII
+200bp	2.32	%
-100bp	(1.66	%)

Page 24

The preceding sensitivity analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions including, among others, the nature and timing of interest rate levels, yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, and reinvestment/replacement of asset and liability cash flows. While assumptions are developed based upon current economic and local market conditions, the Company cannot make any assurances as to the predictive nature of these assumptions, including how customer preferences or competitor influences might change.

The most significant factors affecting the changes in market risk exposures during the first six months of 2004 were the continued low interest rate environment, the slow down of loan activity at both subsidiary banks, and the level of short-term overnight FHLBB borrowings. Short-term borrowings result in the Company’s being able to keep funding costs lower in a declining rate environment. However, the Company increases its exposure in a rising rate environment by keeping its borrowings short. The risk in a rising interest rate environment is well within the Company’s policy limits.

When appropriate, the Company may utilize derivative financial instruments, such as interest rate floors, caps and swaps to hedge its interest rate risk position. The Board of Directors’ approved hedging policy statements govern the use of these instruments by the bank subsidiaries. As of June 30, 2004, the Company had a notional principal of $30 million in interest rate swap agreements. Board and Management ALCO monitor derivative activities relative to its expectation and the Company’s hedging policy. These instruments are more fully described in Note 3 – Derivative Financial Instruments within the “Notes to Consolidated Financial Statements” section.

The Company acquired interest rate swap agreements to convert a portion of the loan portfolio from a variable rate based upon the Prime rate to a fixed rate. The $30 million of interest rate swap agreements mature in 2005. In a purchased interest rate swap agreement, cash interest payments are exchanged between the Company and counterparty. The estimated effects of these derivative financial instruments on the Company’s earnings are included in the sensitivity analysis presented above. The risks associated with entering into in this transaction are the risk of default from the counterparty from whom the Company has entered into agreement and poor correlation between the rate being swapped and the liability cost of the Company. The Company’s risk from default of a counterparty is limited to the expected cash flow anticipated from the counterparty, not the notional value.

ITEM 4. CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company’s management conducted an evaluation with the participation of the Company’s Chief Executive Officer and Chief Banking Officer (Principal Financial & Accounting Officer), regarding the effectiveness of the Company’s disclosure controls and procedures, as of the end of the last fiscal quarter. In designing and evaluating the Company’s disclosure controls and procedures, the Company and its management recognize that any controls and procedures, no matter how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Banking Officer (Principal Financial & Accounting Officer) concluded that they believe the Company’s disclosure controls and procedures are reasonably effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. We intend to continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and we may from time to time make changes to the disclosure controls and procedures to enhance their effectiveness and to ensure that our systems evolve with our business.

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Page 25

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is a party to litigation and claims arising in the normal course of business. In addition to routine litigation incidental to its business, the Company’s subsidiary, Camden National Bank, is a party to an arbitration proceeding with respect to a claim for damages allegedly suffered by a borrower based upon the Bank’s failure to extend credit. A hearing date has been set for September 2004. The Bank believes the claim is without merit and plans to vigorously defend this matter.

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

(e) Furnish the information required by Item 703 of Regulation S-K for any repurchase made in the quarter covered by the report. Provide disclosures covering repurchases made on a monthly basis.

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
4/1/04 – 4/30/04	10,000	$	30.90	10,000	180,672
5/1/04 – 5/31/04	60,000	$	30.24	60,000	120,672
6/1/04 – 6/30/04	—		—	—	120,672
Total	70,000	$	30.34	70,000	120,672

On June 24, 2003, the Board of Directors of the Company voted to authorize the Company to purchase up to 5%, or approximately 400,000 shares, of its outstanding common stock. The authority may be exercised from time to time and in such amounts as market conditions warrant. Any purchases are intended to make appropriate adjustments to the Company’s capital structure, including meeting share requirements related to employee benefit plans and for general corporate purposes.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The annual meeting of shareholders was held on May 4, 2004.

(b) Theodore C. Johanson and Richard N. Simoneau were elected as directors at the annual meeting. Ann W. Bresnahan, Robert J. Campbell, Robert W. Daigle, Ward I. Graffam, John W. Holmes, Rendle A. Jones, Winfield F. Robinson, and Arthur E. Strout continued in office as directors after the meeting.

(c) Matters voted upon at the meeting. 1) To elect as director nominees – Theodore C. Johanson (Total votes cast: 6,292,247 with 6,243,213 for, 49,034 withhold authority) and Richard N. Simoneau (Total votes cast: 6,292,247, with 6,215,071 for, 77,176 withhold authority) to serve a three-year term to expire at the annual meeting in 2007. 2) To ratify the selection of Berry, Dunn, McNeil & Parker as the Company’s independent

Page 26

public accountants for 2004 (Total votes cast: 6,292,247, with 6,219,735 for, 39,254 against, and 33,258 abstain).

ITEM 5. OTHER INFORMATION

Statement regarding extension of credit and loans to individuals of the Company

The Company’s banking subsidiaries, operating under the supervision of the Federal Reserve Board (the “Fed”) and the Office of the Comptroller of the Currency (the “OCC”) are allowed to extend credit, or make loans, to officers and employees of the Company and its subsidiaries. Loans to executive officers and members of the boards of directors (“Reg. O officers”) of the Company and its banking subsidiaries are regulated by the Fed and the OCC in accordance with Regulation O, which requires that all extensions of credit to Reg. O officers are structured and made at interest rates and other terms that are offered to all customers of the banking subsidiaries. Additional disclosures of Reg. O extensions of credit are publicly available through each bank’s submission of its Call Report with the Federal Depository Insurance Company (“FDIC”). Extension of credit and loans that comply with “Reg. O” are permitted under the Sarbanes-Oxley Act of 2002.

Explanation of regulation and oversight of the Company and its subsidiaries

The Company and its subsidiaries operate in a highly regulated environment, which is primarily designed to protect depositors and loan customers of its banking subsidiaries as well as investment customers of its financial services subsidiaries and business lines. As a bank holding company, Camden National Corporation undergoes periodic reviews by the Federal Reserve Bank of Boston. The Company’s Camden National Bank subsidiary, a nationally chartered bank, is regulated by the OCC while its UnitedKingfield Bank subsidiary, a state chartered bank, undergoes periodic reviews by the State of Maine – Bureau of Financial Institutions and the FDIC. Acadia Trust, N.A., a nationally chartered non-depository trust company undergoes periodic exams by the OCC. Both Camden National Bank and UnitedKingfield Bank have previously entered into an agreement with Linsco Private Ledger, a provider of third party brokerage services. Representatives of Acadia Financial Consultants, a division of Camden National Bank and UnitedKingfield Bank, and Linsco Private Ledger are required to meet numerous banking and securities regulatory requirements as determined by the State of Maine, OCC, and the Fed and other applicable securities regulatory bodies.

The Company’s Audit Committee Membership

The Audit Committee of Camden National Corporation consists of three independent directors including:

Richard N. Simoneau, CPA, Chairman, Camden National Corporation Audit Committee

Mr. Simoneau has been a director of the Company and Camden National Bank since 1984 and 1979, respectively. Mr. Simoneau was a partner in Simoneau & Norton, Masters & Alex, CPA, PA of Rockland, Maine, from 1999 until he retired January 1, 2004, and was previously a partner in Simoneau & Norton, CPA, P.A., from 1983 to 1998. Mr. Simoneau’s experience also includes various positions held with the Internal Revenue Service.

Mr. Robert J. Campbell

Mr. Campbell joined the Company’s Board of Directors in November 1999. He has been a partner in the investment management firm of Beck, Mack & Oliver in New York, New York since 1991. Mr. Campbell resides in Rockport, Maine and New York City.

Mr. John W. Holmes

Mr. Holmes has been a director of the Company and Camden National Bank since 1989. Mr. Holmes is also President and majority owner of Consumers Fuel Company in Belfast, Maine, a position he has held since 1977.

Page 27

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

(2.1) Agreement and Plan of Merger, dated as of July 27, 1999, by and among the Company, Camden Acquisition Subsidiary,
Inc., KSB and Kingfield Bank *

(3.1) The Articles of Incorporation of Camden National Corporation (incorporated by reference to Exhibit 3.i to the Company’s
Form 10-Q filed with the Commission on August 10, 2001)

(3.2) Articles of Amendment to the Articles of Incorporation of Camden National Corporation, as amended to date (incorporated
by reference to Exhibit 3.3 to the Company’s Form 10-Q filed with the Commission on May 9, 2003)

(3.3) The Bylaws of Camden National Corporation, as amended to date (incorporated by reference to Exhibit 3.ii to the
Company’s Form 10-Q filed with the Commission on November 14, 2001)

(10.1) Employment agreement, dated as of May 4, 2004, by and between the Company and its Chief Executive Officer *

(10.2) Lease agreement for the Farmington location of UnitedKingfield Bank *

(23.1) Consent of Berry, Dunn, McNeil & Parker relating to the financial statements of Camden National Corporation *

(31.1) Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*

(31.2) Certification of Principal Financial & Accounting Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of
1934)*

(32.1) Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*

(32.2) Certification of Principal Financial & Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*

* Filed herewith

(b) Reports on Form 8-K.

Current report dated April 27, 2004 containing a press release announcing the earnings for the 1^st quarter of 2004.

Current report dated June 29, 2004 containing the declaration of a dividend payable on July 30, 2004 for shareholders of record on July 15, 2004.

Page 28

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CAMDEN NATIONAL CORPORATION (Registrant)
/s/ Robert W. Daigle	August 6, 2004
Robert W. Daigle President and Chief Executive Officer	Date
/s/ Gregory A. Dufour	August 6, 2004
Gregory A. Dufour Chief Banking Officer and Principal Financial & Accounting Officer	Date

Page 29

EX-2.1

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

by and among

CAMDEN NATIONAL CORPORATION,

CAMDEN ACQUISITION SUBSIDIARY, INC.,

KSB BANCORP, INC.,

and

KINGFIELD SAVINGS BANK

Dated as of July 27, 1999

TABLE OF CONTENTS

ARTICLE I - CERTAIN DEFINITIONS		2
1.1	Certain Definitions	2
ARTICLE II - THE MERGER; EFFECTS OF THE MERGER		9
2.1	The Merger	9
2.2	Charter and Bylaws	9
2.3	Closing	9
2.4	Effectiveness and Effects of the Merger	9
2.5	Tax Consequences	10
2.6	Accounting Treatment	10
2.7	Board of Directors	10
ARTICLE III - MERGER CONSIDERATION; EXCHANGE PROCEDURES		11
3.1	Merger Consideration	11
3.2	Rights as Stockholders; Stock Transfers	11
3.3	Fractional Shares	11
3.4	Exchange Procedures	12
3.5	Anti-Dilution Provisions	13
3.6	Treasury Shares	13
3.7	Options	13
ARTICLE IV - THE SUBSEQUENT MERGER; EFFECTS OF THE SUBSEQUENT MERGER		14
4.1	Subsequent Merger	14
4.2	Charter	14
4.3	Bylaws	15
4.4	Board of Directors	15
4.5	Cancellation of Shares	15
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF KSB AND THE BANK		15
5.1	Organization and Qualification; Subsidiaries	15
5.2	Certificate of Incorporation; By-Laws; Corporate Records	16
5.3	Capitalization	16
5.4	Authority	17
5.5	No Conflict	18
5.6	Consents and Approvals	18
5.7	Compliance	19
5.8	SEC Reports and Bank Reports	19
5.9	Financial Statements	20
5.10	Absence of Certain Changes or Events	21
5.11	Absence of Litigation	23
5.12	Employee Benefit Plans	23

5.13	Labor Matters	24
5.14	Property and Leases	25
5.15	Taxes	25
5.16	Certain Contracts	27
5.17	Loan Portfolio	28
5.18	Investment Securities	28
5.19	Derivative Transactions	29
5.20	Insurance	29
5.21	Environmental Matters	30
5.22	Intellectual Property	31
5.23	Administration of Fiduciary Accounts	31
5.24	Agreements with Bank Regulators	32
5.25	Material Interests of Certain Persons	32
5.26	Brokers Fees; Opinions	32
5.27	Joint Proxy Statement	32
5.28	State Takeover Laws	33
5.29	Year 2000	33
5.30	Disclosure	34
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF CAMDEN AND CASI		34
6.1	Corporate Organization	34
6.2	Authority	34
6.3	No Conflict	35
6.4	Capitalization	35
6.5	Consents and Approvals	36
6.6	Joint Proxy Statement	36
6.7	SEC Reports and Bank Reports	36
6.8	Financial Statements	37
6.9	Compliance	37
6.10	Absence of Certain Changes or Events	38
6.11	Employee Benefit Plans	38
6.12	Environmental	39
6.13	Agreements with Bank Regulators	40
6.14	Year 2000	41
6.15	Brokers Fees	41
6.16	Disclosure	41
ARTICLE VII - CONDUCT OF BUSINESS PENDING THE MERGER		42
7.1	Covenants of KSB and the Bank	42
7.2	Camden Products and Services	46
7.3	System Conversions	46
7.4	Certain Changes and Adjustments	46
7.5	ALCO Management	47
7.6	Covenants of Camden	47

7.7	Affiliate Agreements	47
7.8	Takeover Laws	48
7.9	No Rights Triggered	48
7.10	Shares Listed	48
ARTICLE VIII - ADDITIONAL AGREEMENTS		48
8.1	Stockholder Approvals	48
8.2	Registration Statement	49
8.3	Regulatory Matters	50
8.4	Access to Information	51
8.5	No Solicitation	52
8.6	Employee Benefits Matters	53
8.7	Directors’ and Officers’ Insurance	54
8.8	Financial and Other Statements	54
8.9	Further Action	55
8.10	Public Announcements	55
8.11	Additional Agreements	55
8.12	Update of Disclosure Schedules	56
8.13	Current Information	56
8.14	Bank Merger	57
8.15	Post-Closing Governance	57
ARTICLE IX - CONDITIONS TO THE MERGER		58
9.1	Conditions to Each Party’s Obligations to Effect the Merger	58
9.2	Conditions to Obligations of Camden and CASI	59
ARTICLE X - TERMINATION, AMENDMENT AND WAIVER		61
10.1	Termination	61
10.2	Effect of Termination	64
10.3	Amendment	65
10.4	Waiver	65
ARTICLE XI - GENERAL PROVISIONS		66
11.1	Alternative Structure	66
11.2	Non-Survival of Representations, Warranties and Agreements	66
11.3	Notices	67
11.4	Severability	67
11.5	Entire Agreement	68
11.6	Assignment	68
11.7	Parties in Interest	68
11.8	Specific Performance	68
11.9	Governing Law	68
11.10	Headings	68
11.11	Interpretation	69
11.12	Counterparts	69

EXHIBIT A-1	Form of Affiliate Letter to Camden
EXHIBIT A-2	Form of Affiliate Letter to KSB
EXHIBIT B	Bank Holding Companies Index Group
EXHIBIT C	Form of Bank Merger Agreement
EXHIBIT D	Form of Voting Agreement

AGREEMENT AND PLAN OF MERGER, dated as of July 27, 1999 ( this Agreement ), by and between CAMDEN NATIONAL CORPORATION, a Maine corporation ( Camden ), CAMDEN ACQUISITION SUBSIDIARY, INC., a Delaware corporation and wholly owned subsidiary of Camden ( CASI ), which has been formed for the specific and sole purpose of consummating the Merger (as such term is defined below), KSB BANCORP, INC., a Delaware corporation ( KSB ), and KINGFIELD SAVINGS BANK, a Maine-chartered savings bank and wholly owned subsidiary of KSB (the Bank ).

WITNESSETH:

WHEREAS, the Boards of Directors of Camden, CASI and KSB have determined that it is in the best interests of their respective corporations and their stockholders to consummate the strategic business merger transactions provided for herein, in which (i) CASI will, subject to the terms and conditions set forth herein, merge (the Merger) with and into KSB such that KSB is the surviving corporation in the Merger and continues its corporate existence under the laws of the State of Delaware as a wholly owned subsidiary of Camden, and (ii) KSB (as the surviving corporation from the Merger) will, subject to the terms and conditions set forth herein, merge (the Subsequent Merger, and together with the Merger, the Mergers) with and into Camden such that Camden is the surviving corporation in the Subsequent Merger and continues its corporate existence under the laws of the State of Maine;

WHEREAS, in connection with the execution of this Agreement, KSB and Camden are entering into a stock option agreement, with KSB as issuer and Camden as grantee (the KSB Option Agreement); and

WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the Mergers and also to prescribe certain conditions to the Mergers;

1

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I - CERTAIN DEFINITIONS

1.1 Certain Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

Affiliate shall have the meaning set forth in Section 7.7(a).

Agreement shall have the meaning set forth in the preamble to this Agreement.

AMEX shall mean The American Stock Exchange.

Bank Board shall have the meaning set forth in Section 5.4(b).

Bank Common Stock shall have the meaning set forth in Section 5.3(b).

Bank Examinations shall have the meaning set forth in Section 5.8(b).

Bank Meeting shall have the meaning set forth in Section 8.1.

Bank Merger shall have the meaning set forth in Section 8.14.

Bank Merger Agreements shall have the same meaning set forth in Section 8.14.

Bank Regulators shall have the meaning set forth in Section 5.8(b).

Bank Shares shall have the meaning set forth in Section 5.3(b).

BHCA shall have the meaning set forth in Section 5.1(a).

Burdensome Condition shall have the meaning set forth in Section 9.2(d).

Business Day shall mean any day on which the principal offices of the SEC in Washington, D.C. is open to accept filings, or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in the City of Augusta, Maine.

Camden shall have the meaning set forth in the preamble to this Agreement.

Camden Common Stock shall have the meaning set forth in Section 3.1(a).

Camden ERISA Affiliate shall have the meaning set forth in Section 6.11.

Camden Floor Price shall have the meaning set forth in Section 10.1(i).

Camden Index Ratio shall have the meaning set forth in Section 10.1(i).

2

Camden Meeting shall have the meaning set forth in Section 8.1.

Camden National Bank shall mean Camden National Bank, a wholly-owned subsidiary of Camden and a bank organized under the laws of the United States.

Camden Plans shall have the meaning set forth in Section 6.11(a).

Camden Ratio shall have the meaning set forth in Section 10.1(i).

Camden SEC Reports shall have the meaning set forth in Section 6.7.

CASI shall have the meaning set forth in the preamble to this Agreement.

CASI Common Stock shall have the meaning set forth in Section 3.1(b).

CASI Meeting shall have the meaning set forth in the Section 8.1.

Certificate of Merger shall have the meaning set forth in Section 2.1.

Closing shall have the meaning set forth in Section 2.3.

Closing Date shall have the meaning set forth in Section 2.3.

COBRA shall have the meaning set forth in Section 5.12(d).

Code shall have the meaning set forth in Section 5.15(b).

Confidentiality Agreement shall have the meaning set forth in Section 8.4(a).

Control (including the terms controlled by and under common control with) shall mean the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise;

CRA shall have the meaning set forth in Section 5.7.

DGCL shall mean the Delaware General Corporation Law.

Disclosure Schedule shall mean a schedule prepared by KSB and the Bank or Camden and CASI, as applicable, setting forth, among other things, items the disclosure of which is necessary or appropriate in relation to any or all of their respective representations and warranties.

Effective Date shall have the meaning set forth in Section 2.4.

3

Effective Time shall have the meaning set forth in Section 2.4.

Environment shall have the meaning set forth in Section 5.21(f).

EPA shall have the meaning set forth in Section 5.21(a).

ERISA shall have the meaning set forth in Section 5.12(a).

ESOP shall have the meaning set forth in Section 5.12(c).

Exchange Act shall have the meaning set forth in Section 5.6(a).

Exchange Agent shall have the meaning set forth in Section 3.4(a).

Exchange Fund shall have the meaning set forth in Section 3.4(a).

Exchange Ratio shall have the meaning set forth in Section 3.1(a).

Expense Fee shall have the meaning set forth in Section 10.2(c).

Expenses shall have the meaning set forth in Section 10.2(b).

FDIA shall mean the Federal Deposit Insurance Act, as amended.

FDIC shall have the meaning set forth in Section 5.1(a).

FRB shall have the meaning set forth in Section 5.1(a).

GAAP shall have the meaning set forth in Section 2.6.

Governmental Entity shall have the meaning set forth in Section 5.6(a).

Hazardous Material shall have the meaning set forth in Section 5.21(f).

HSR Act shall have the meaning set forth in Section 5.6(a).

Information Technology means all computer software, computer hardware (whether general or specific purpose) and other similar or related items of automated, computerized, or software systems that are used or relied on by KSB or the Bank in the conduct of their respective businesses.

Injunction shall have the meaning set forth in Section 9.1(c).

IRS shall have the meaning set forth in Section 5.15(a).

Joint Proxy Statement shall have the meaning set forth in Section 8.2(a).

4

Knowledge shall mean actual knowledge of all of the directors, executive officers of KSB or the Bank who knew or should know as to the matters referenced herein, and includes any facts, matters or circumstances set forth in any written notice from any Governmental Entity or any other material written notice received by KSB or the Bank, and also includes any matter of which Camden informs KSB or the Bank in writing prior to the date hereof or to which KSB or the Bank acknowledges or agrees.

KSB shall have the meaning set forth in the preamble to this Agreement.

KSB Board shall have the meaning set forth in Section 5.4(a).

KSB Common Stock shall have the meaning set forth in Section 3.1(a).

KSB Compensation and Benefit Plans shall mean the Compensation and Benefit Plans of KSB.

KSB Contract shall have the meaning set forth in Section 5.16(a).

KSB Employees shall have the meaning set forth in Section 8.6(a).

KSB ERISA Affiliate shall have the meaning set forth in Section 5.12(a).

KSB Meeting shall have the meaning set forth in Section 8.1.

KSB Option Agreement shall have the meaning set forth in the preamble to this Agreement.

KSB Preferred Stock shall have the meaning set forth in Section 5.3(a).

KSB SEC Reports shall have the meaning set forth in Section 5.8(a).

KSB Stock Option shall have the meaning set forth in Section 3.7(a).

KSB Stock Option Plans shall have the meaning set forth in Section 3.7(a).

Liaison Committee shall have the meaning set forth in Section 8.13(a).

Liens shall have the meaning set forth in Section 5.14(a).

Loan Property shall have the meaning set forth in Section 5.21(f).

Loans shall have the meaning set forth in Section 5.17.

Maine Superintendent shall have the meaning set forth in Section 5.6(a).

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Material Adverse Effect shall mean with respect to Camden or KSB, respectively, any effect that (i) is material and adverse to the financial position, results of operations, assets or business of Camden and its Subsidiaries taken as a whole, or KSB and its Subsidiaries taken as a whole, respectively, or (ii) would materially impair the ability of Camden or KSB, respectively, to perform its obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the Mergers, the Bank Merger and the other transactions contemplated by this Agreement; provided, however, that Material Adverse Effect shall not be deemed to include the impact of (a) changes in banking, corporate and similar laws of general applicability or interpretations thereof by courts or governmental authorities, (b) changes in generally accepted accounting principles or regulatory accounting requirements applicable to banks or savings associations and their holding companies generally, (c) actions or omissions of Camden or its Subsidiaries or KSB or its Subsidiaries taken with the prior written consent of Camden or KSB, as applicable, in contemplation of the transactions contemplated hereby, and (d) the effects of the Mergers and compliance by either party with the provisions of this Agreement on the financial position, results of operations, assets or business of such party and its Subsidiaries, or the other party and its Subsidiaries, as the case may be.

MBCA shall have the meaning set forth in Section 4.1.

Meeting shall have the meaning set forth in Section 8.1.

Merger shall have the meaning set forth in the recitals to this Agreement.

Merger Consideration shall have the meaning set forth in Section 2.1.

Mergers shall have the meaning set forth in the recitals to this Agreement.

New Certificates shall have the meaning set forth in Section 3.4(a).

OCC shall mean the Office of the Comptroller of the Currency.

Oil shall have the meaning set forth in Section 5.21(f).

Old Certificates shall have the meaning set forth in Section 3.4(a).

OREO shall have the meaning set forth in Section 5.9(a).

Participation Facility shall have the meaning set forth in Section 5.21(a).

Permitted Liens shall have the meaning set forth in Section 5.14(a).

Person or person shall mean any individual, bank, corporation, partnership, limited liability company, association, joint-stock company, business trust or unincorporated organization.

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Plans shall have the meaning set forth in Section 5.12(a).

Registration Statement shall have the meaning set forth in Section 8.2(a).

Requisite Regulatory Approvals shall have the meaning set forth in Section 9.1(b).

Rights shall mean, with respect to any person, securities or obligations convertible into or exchangeable for, or giving any person any right to subscribe for or acquire, or any options, calls or commitments relating to, shares of stock of such person.

SEC shall have the meaning set forth in Section 5.8(a).

Securities Act shall have the meaning set forth in Section 5.8(a).

Starting Date shall have the meaning set forth in Section 10.1(i).

Subsequent Effective Time shall have the meaning set forth in Section 4.1.

Subsequent Merger shall have the meaning set forth in the recitals to this Agreement.

Subsidiary and Significant Subsidiary shall have the respective meanings set forth in Rule 1-02 of Regulation S-X of the SEC.

Subsidiaries shall mean all of a party s Subsidiaries and Significant Subsidiaries.

Surviving Corporation shall have the meaning set forth in Section 2.1.

Takeover Laws shall have the meaning set forth in Section 5.28.

Taxes shall have the meaning set forth in Section 5.15(c)

Treasury Shares shall have the meaning set forth in Section 3.1(a).

United Bank shall mean United Bank, a banking organization chartered under the laws at the State of Maine and a wholly-owned Subsidiary of Camden.

Year 2000 Compliant means that the Information Technology is designed to be used prior to, during and after the calendar year 2000 A.D., and the Information Technology used during each such time period will accurately receive, provide and process date/time data (including calculating, comparing and sequencing) from, into and between the 20th and 21st centuries, including the years 1999 and 2000 and leap-year calculations, and will not malfunction, cease to function, or provide invalid or incorrect results as a result of date/time data, to the extent that any other information technology,

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used in combination with the Information Technology, properly exchanges date/time data with it.

Year 2000 Plan shall have the meaning set forth in Section 5.29.

Year 2000 Regulatory Requirements shall have the meaning set forth in Section 5.29.

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ARTICLE II - THE MERGER; EFFECTS OF THE MERGER

2.1 The Merger. At the Effective Time, upon the terms and subject to the conditions of this Agreement, CASI shall merge with and into KSB, the separate corporate existence of CASI shall cease and KSB shall survive and continue its corporate existence under the laws of the State of Delaware as a wholly owned subsidiary of Camden (KSB, as the surviving corporation in the Merger, being sometimes referred to herein as the Surviving Corporation). The parties shall prepare and execute a certificate of merger (the Certificate of Merger) in order to comply in all respects with the requirements of the DGCL and with the provisions of this Agreement. Camden may at any time change the method of effecting the strategic business merger transactions with KSB and CASI provided for herein (including without limitation the provisions of this Article II) if and to the extent it deems such change to be desirable, including without limitation to provide for a merger of KSB into Camden or a wholly owned subsidiary of Camden; provided, however, that no such change shall (A) alter or change the amount or kind of consideration to be issued to holders of KSB Common Stock as provided for in this Agreement (the Merger Consideration), (B) adversely affect the tax treatment of KSB s stockholders as a result of receiving the Merger Consideration or (C) materially impede or delay consummation of the Merger. KSB and CASI agree to, and to cause their Subsidiaries to, appropriately amend this Agreement and any related documents in order to reflect such revised method of effecting the strategic business merger transactions with KSB and CASI provided for herein to the extent deemed necessary or desirable by Camden in its reasonable judgment.

2.2 Charter and Bylaws. The Certificate of Merger shall provide that, at the Effective Time, the charter of the Surviving Corporation shall be the charter of CASI, as such charter may be amended, and set forth in the Certificate of Merger or any certificate of amendment filed prior to the Effective Time. The bylaws of the Surviving Corporation shall be the bylaws of CASI at the Effective Time.

2.3 Closing. The closing of the Merger (the Closing ) will occur at 10:00 a.m., Boston time, on the date to be specified by the parties in accordance with the terms of this Agreement (the Closing Date ), at the offices of Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts 02109, unless another date or place is agreed to in writing by the parties.

2.4 Effectiveness and Effects of the Merger. On the Closing Date, or at such time as may otherwise be agreed by the parties, CASI and KSB shall execute and file with the Secretary of State of the State of Delaware the Certificate of Merger in accordance with the DGCL. Subject to the satisfaction or waiver of the conditions set forth in Article VIII, the Merger shall become effective (the Effective Time ) upon the occurrence of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware pursuant to Section 252 of the DGCL, or such other time, if any, as may be specified in the Certificate of Merger. The Merger shall have the effects prescribed in Sections 259 and 261 of the DGCL. The date on which the Effective Time occurs is referred to herein as the Effective Date.

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2.5 Tax Consequences. It is intended that both the Merger and the Subsequent Merger be consummated pursuant to one integrated plan which qualifies as a reorganization under Section 368(a)(1)(A) of the Code. This Agreement shall constitute a plan of reorganization for purposes of Section 368 of the Code.

2.6 Accounting Treatment. It is intended that the Merger be accounted for as a pooling of interests under generally accepted accounting principles ( GAAP ). The parties acknowledge and agree that (i) Camden intends to take all measures it deems necessary to cause the transaction to be accounted for as a pooling of interests transaction and (ii) neither such measures nor any consequence or result thereof shall be deemed to have a Material Adverse Effect for the purposes of this Agreement. It is further understood that in the event that Camden determines in its sole discretion not to take such measures as to achieve pooling of interests accounting treatment, accounting for the transaction on a purchase accounting basis shall not be deemed to have a Material Adverse Effect.

2.7 Board of Directors. At the Effective Time, the Board of Directors of the Surviving Corporation shall be those persons serving as directors of CASI immediately prior to the Effective Time, such persons to serve until the earlier of their resignation or removal or until their respective successors are duly appointed or elected and qualified, as the case may be.

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ARTICLE III - MERGER CONSIDERATION; EXCHANGE PROCEDURES

3.1 Merger Consideration. Subject to the provisions of this Agreement, at the Effective Time, automatically by virtue of the Merger and without any action on the part of any party or stockholder:

(a) Outstanding KSB Common Stock. Each share (excluding shares held by KSB or by Camden, other than in a fiduciary capacity ( Treasury Shares )) of the common stock, par value $.01 per share, of KSB (the KSB Common Stock ) issued and outstanding immediately prior to the Effective Time shall be converted into and become the right to receive 1.136 shares (subject to adjustment as set forth herein, the Exchange Ratio ) of common stock, no par value, of Camden (the Camden Common Stock ).

(b) Outstanding CASI Common Stock. Each share of the common stock, par value $.01 per share, of CASI ( CASI Common Stock ) issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of the KSB Common Stock.

(c) Outstanding Camden Common Stock. Each share of Camden Common Stock issued and outstanding immediately prior to the Effective Time shall remain outstanding following the Effective Time.

3.2 Rights as Stockholders; Stock Transfers. At the Effective Time, holders of KSB Common Stock shall cease to be, and shall have no rights as, stockholders of KSB, other than to receive any dividend or other distribution with respect to such KSB Common Stock with a record date occurring prior to the Effective Time and to receive the Merger Consideration provided under this Article III. After the Effective Time, there shall be no transfers on the stock transfer books of KSB of shares of KSB Common Stock, other than transfers of KSB Common Stock that have occurred prior to the Effective Time.

3.3 Fractional Shares. Notwithstanding any other provision hereof, no fractional shares of Camden Common Stock and no certificates or scrip therefore, or other evidence of ownership thereof, will be issued in the Merger; instead, Camden shall pay to each holder of KSB Common Stock who would otherwise be entitled to a fractional share of Camden Common Stock (after aggregating all Old Certificates delivered by such holder) an amount in cash to be paid in lieu of fractional shares (without interest) determined by multiplying such fraction by the average of the last sale prices of Camden Common Stock, as reported by the AMEX Composite Transactions reporting system (as reported in The Wall Street Journal or, if not reported therein, in another authoritative source), for the five AMEX trading days immediately preceding the Effective Date.

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3.4 Exchange Procedures.

(a) Prior to the Effective Time, Camden shall deposit, or shall cause to be deposited, with a bank or trust company selected by Camden and reasonably acceptable to KSB (the Exchange Agent ), for the benefit of the holders of certificates representing shares of KSB Common Stock immediately prior to the Effective Time ( Old Certificates ), for exchange in accordance with this Article III, certificates representing the shares of Camden Common Stock ( New Certificates ) and an estimated amount of cash to be paid in lieu of fractional shares (such cash and New Certificates, together with any dividends or distributions with respect thereto (without any interest thereon), being hereinafter referred to as the Exchange Fund ) to be paid pursuant to this Article III in exchange for outstanding shares of KSB Common Stock.

(b) As promptly as practicable after the Effective Time, and in any event within seven business days thereafter, Camden shall send or cause to be sent to each holder of record of shares (other than Treasury Shares) of KSB Common Stock immediately prior to the Effective Time transmittal materials for use in exchanging such stockholder’s Old Certificates for the consideration set forth in this Article III. Camden shall cause the New Certificates, into which shares of a stockholder s KSB Common Stock are convertible from and after the Effective Time, and/or any check in respect of any fractional share interests or dividends or distributions which such person shall be entitled to receive, to be delivered to such stockholder upon delivery to the Exchange Agent of Old Certificates representing such shares of KSB Common Stock (or indemnity reasonably satisfactory to Camden and the Exchange Agent, if any of such certificates are lost, stolen or destroyed) owned by such stockholder. No interest will be paid on any such cash to be paid pursuant to this Article III upon such delivery.

(c) Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto or any affiliate thereof shall be liable to any former holder of KSB Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.

(d) No dividends or other distributions with respect to Camden 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 KSB Common Stock converted in the Merger into the right to receive shares of such Camden Common Stock until the holder thereof shall surrender such Old Certificate, together with the necessary transmittal materials, in accordance with this Article III. Subject to applicable law, after the surrender of an Old Certificate in accordance with this Article III, the record holder thereof 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 Camden Common Stock for which such Old Certificate was exchangeable.

(e) Any portion of the Exchange Fund that remains unclaimed by the stockholders of KSB for twelve (12) months after the Effective Time shall be paid to Camden, subject to the rights of such stockholders to receive payments from any such

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portion of the Exchange Fund in accordance with the terms of this Article III. Any stockholders of KSB who have not theretofore complied with this Article III shall thereafter look only to Camden for payment of the shares of Camden Common Stock, cash in lieu of any fractional shares and unpaid dividends and distributions on the Camden Common Stock deliverable in respect of each share of KSB Common Stock such stockholder holds as determined pursuant to this Agreement, in each case, without any interest thereon.

3.5 Anti-Dilution Provisions. In the event Camden or KSB changes (or establishes a record date for changing) the number of, or provides for the exchange of, shares of Camden Common Stock or KSB Common Stock issued and outstanding prior to the Effective Date as a result of a stock split, stock dividend, recapitalization, reclassification, reorganization or similar transaction with respect to the outstanding Camden Common Stock or KSB Common Stock and the record date therefore shall be prior to the Effective Date, the Exchange Ratio shall be proportionately and appropriately adjusted.

By way of illustration, if Camden shall declare a stock dividend of 10% payable with respect to a record date on or prior to the Effective Date, the Exchange Ratio shall be adjusted upward by 10% and shall be equal to 1.250.

3.6 Treasury Shares. Each of the shares of KSB Common Stock constituting Treasury Shares immediately prior to the Effective Time shall be canceled and retired at the Effective Time and no consideration shall be issued in exchange therefore.

3.7 Options.

(a) At the Effective Time, all employee and director stock options to purchase shares of KSB Common Stock (each, a KSB Stock Option ), which are then outstanding and unexercised, shall cease to represent a right to acquire shares of KSB Common Stock, and shall be converted automatically into options to purchase shares of Camden Common Stock, and Camden shall assume each such KSB Stock Option subject to the terms of any of the stock option plans listed under Stock Plans in Section 3.7 of KSB s Disclosure Schedule (collectively, the KSB Stock Option Plans ), and the agreements evidencing grants thereunder; provided, however, that from and after the Effective Time, (i) the number of shares of Camden Common Stock purchasable upon exercise of any such KSB Stock Option shall be equal to the number of shares of KSB Common Stock that were purchasable under such KSB Stock Option immediately prior to the Effective Time multiplied by the Exchange Ratio, rounding to the nearest whole share (with .5 being rounded up), and (ii) the per share exercise price under each such KSB Stock Option shall be adjusted by dividing the per share exercise price of each such KSB Stock Option by the Exchange Ratio, rounding to the nearest cent. The terms of each KSB Stock Option shall, in accordance with its terms, be subject to further adjustment as appropriate to reflect any stock split, stock dividend, recapitalization or other similar transaction with respect to Camden Common Stock on or subsequent to the Effective Date. Notwithstanding the foregoing, the number of shares and the per share exercise

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price of each KSB Stock Option which is intended to be an incentive stock option (as defined in Section 422 of the Code) shall be adjusted in accordance with the requirements of Section 424(a) of the Code. Accordingly, with respect to any incentive stock options, fractional shares shall be rounded down to the nearest whole number of shares and where necessary the per share exercise price shall be rounded up to the nearest cent.

(b) At or prior to the Effective Time, Camden shall reserve for issuance the number of shares of Camden Common Stock necessary to satisfy Camden s obligations under Section 3.7(a). At the Effective Time, or as soon as practicable thereafter, and in any event within fifteen business days thereafter, Camden shall file with the SEC a registration statement on Form S-8 or other appropriate form under the Securities Act with respect to the shares of Camden Common Stock subject to options to acquire Camden Common Stock issued pursuant to Section 3.7(a) hereof, and shall use its best efforts to maintain the current status of the prospectus contained therein, as well as comply with any applicable state securities or blue sky laws, for so long as such options remain outstanding.

ARTICLE IV - THE SUBSEQUENT MERGER; EFFECTS OF THE

SUBSEQUENT MERGER

4.1 Subsequent Merger. As soon as practicable following the Effective Time, Camden shall, and it shall cause KSB (as the Surviving Corporation in the Merger) to, effect the Subsequent Merger by executing and filing (i) articles of merger with the Secretary of State of the State of Maine pursuant to the Maine Business Corporation Act (Title 13-A) (the MBCA ) and (ii) a certificate of merger with the Secretary of State of the State of Delaware pursuant to the DGCL. The Subsequent Merger shall become effective at the time (the Subsequent Effective Time ) specified in both (i) the articles of merger filed with the Secretary of State of the State of Maine pursuant to Section 904 of the MBCA and (ii) the certificate of merger filed with the Secretary of State of the State of Delaware pursuant to Section 252 of the DGCL. As a result of the Subsequent Merger, the separate corporate existence of KSB shall cease and Camden shall be the surviving corporation and continue its corporate existence under the laws of the State of Maine. The Subsequent Merger shall have the effects prescribed in Section 905 of the MBCA and Sections 259 and 261 of the DGCL.

4.2 Charter. The charter of the surviving corporation from the Subsequent Merger shall be the charter of Camden immediately prior to the Subsequent Effective Time.

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4.3 Bylaws. The bylaws of the surviving corporation from the Subsequent Merger shall be the bylaws of Camden immediately prior to the Subsequent Effective Time.

4.4 Board of Directors. At the Subsequent Effective Time, the Board of Directors of the surviving corporation shall be those persons serving as directors of Camden immediately prior to the Subsequent Effective Time, as constituted in accordance with Section 8.15 hereof, such persons to serve until the earlier of their resignation or removal or until their respective successors are duly appointed or elected and qualified, as the case may be.

4.5 Cancellation of Shares. Each share of KSB Common Stock issued and outstanding immediately prior to the Subsequent Effective Time shall, by virtue of the Subsequent Merger and without any action on the part of Camden, be canceled without receipt of any consideration thereof by Camden.

ARTICLE V - REPRESENTATIONS AND WARRANTIES

OF KSB AND THE BANK

KSB and the Bank hereby jointly and severally represent and warrant to Camden and CASI that:

5.1 Organization and Qualification; Subsidiaries.

(a) KSB is a corporation duly organized, validly existing and in good standing under the DGCL and a bank holding company registered with the Board of Governors of the Federal Reserve System (the “FRB”) under the Bank Holding Company Act of 1956, as amended (the “BHCA”). The Bank is a state chartered savings bank duly organized, validly existing and in good standing under the laws of the State of Maine. The deposit accounts of the Bank are insured by the Federal Deposit Insurance Corporation (the “FDIC”) to the fullest extent permitted by law and all premiums and assessments required in connection therewith have been paid by the Bank. Each of KSB and the Bank has the requisite power and authority and all necessary governmental approvals to own, lease and operate all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business and is in good standing in each jurisdiction where the nature of the business conducted by it or the character or location of the properties and assets owned, leased or operated by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified and be in good standing would not, either individually or in the aggregate, have a Material Adverse Effect.

(b) Except for the Bank, KSB does not have any Subsidiaries or directly or indirectly own five percent or more of the capital stock or other equity or similar interest

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in, or any interest convertible into or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity.

5.2 Certificate of Incorporation; By-Laws; Corporate Records. KSB and the Bank each has heretofore made available to Camden a complete and correct copy of the Certificate of Incorporation and the By-Laws or equivalent organizational documents, each as amended to date, of KSB and the Bank. Such Certificate of Incorporation, By-Laws and equivalent organizational documents are in full force and effect. Neither KSB nor the Bank is in violation of any provision of its Certificate of Incorporation or equivalent organizational documents or of its By-Laws. The minute books of KSB and the Bank contain in all material respects true and complete records of all meetings held and true and complete records of all corporate actions taken of their respective stockholders and boards of directors (including committees of their respective boards of directors).

5.3 Capitalization.

(a) The authorized capital stock of KSB consists of 2,400,000 shares of KSB Common Stock and 200,000 shares of authorized but unissued preferred stock, $.01 par value per share (the “KSB Preferred Stock”). As of the date hereof, (a) 1,321,265 shares of KSB Common Stock are issued and outstanding, all of which are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof, (b) 20,404 shares of KSB Common Stock are held in the treasury of KSB, (c) no shares of KSB Common Stock are held by any of its subsidiaries, (d) 94,108 shares of KSB Common Stock are reserved for future issuance pursuant to KSB Stock Option Plans, and (e) 262,932 shares of KSB Common Stock are reserved for future issuance pursuant to the KSB Option Agreement. As of the date hereof, no shares of KSB Preferred Stock are issued and outstanding. All shares of KSB Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof.

(b) The authorized capital stock of the Bank consists of 1,000 shares of Common Stock, par value $1.00 per share (“Bank Common Stock”) (shares of Bank Common Stock being hereinafter collectively referred to as “Bank Shares”). As of the date hereof, (a) 1,000 Bank Shares are issued and outstanding and owned by KSB, all of which are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof and (b) no Bank Shares are held in the treasury of the Bank, and (c) no Bank Shares are held by any other person.

(c) Except for KSB Stock Option Plans and the KSB Option Agreement, there are no outstanding subscriptions, options, warrants, calls or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of KSB or the Bank or obligating KSB or the Bank to issue or sell any shares of

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capital stock of, or other equity interests in, KSB or the Bank. There are no outstanding contractual obligations of KSB or the Bank to repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity interests in, KSB or the Bank. The names of the optionees, the date of each option to purchase shares of KSB Common Stock granted, the number of shares subject to each such option, the expiration date of each such option, and the price at which each such optionmay be exercised under KSB Stock Option Plans are set forth in Section 5.3 of the Disclosure Schedule

5.4 Authority.

(a) KSB has full corporate power and authority to execute and deliver this Agreement and the KSB Option Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the KSB Option Agreement, the performance of its obligations hereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of KSB are necessary to authorize this Agreement and the KSB Option Agreement or the performance of its obligations hereunder and thereunder or to consummate the transactions contemplated hereby (other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of the then outstanding shares of KSB Common Stock) and thereby. The Board of Directors of KSB (the KSB Board ) has approved this Agreement by unanimous vote and has directed that this Agreement and the transactions contemplated hereby, including the Merger, be submitted to KSB stockholders for approval at a meeting of such stockholders. This Agreement has been duly and validly executed and delivered by KSB and constitutes a legal, valid and binding obligation of KSB, enforceable against KSB in accordance with its terms.

(b) The Bank has full corporate power and authority to execute and deliver this Agreement and the Bank Merger Agreements, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Bank Merger Agreements, the performance of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Bank are necessary to authorize this Agreement or the Bank Merger Agreements or the performance of its obligations hereunder or thereunder or to consummate the transactions contemplated hereby or thereby (other than, with respect to the Bank Merger, the approval and adoption of the Bank Merger Agreements by the Surviving Corporation as the sole stockholder of the Bank). The Board of Directors of the Bank (the Bank Board) has approved this Agreement by unanimous vote and has directed that the Bank Merger Agreements and the transactions contemplated thereby, including the Bank Merger, be submitted to KSB as the sole stockholder of the Bank for its approval. This Agreement has been duly and validly executed and delivered by the Bank and constitutes a legal, valid and binding obligation of the Bank, enforceable against the Bank in accordance with its terms. The Bank Merger Agreements, upon execution and delivery by the Bank,

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will be duly and validly executed and delivered by the Bank and will constitute a legal, valid and binding obligation of the Bank, enforceable against the Bank in accordance with its terms.

5.5 No Conflict. Neither the execution, delivery and performance of this Agreement or the KSB Option agreement by KSB, nor the consummation by KSB of the transactions contemplated hereby or thereby, nor the execution, delivery and performance of this Agreement or the Bank Merger Agreements by the Bank, nor the consummation by the Bank of the transactions contemplated hereby or thereby, nor compliance by KSB or the Bank with any of the terms or provisions hereof or thereof, will, (i) conflict with, violate or result in a breach of the Certificate of Incorporation or By-Laws or equivalent organizational documents of KSB, the Bank or any of their subsidiaries, (ii) conflict with, violate or result in a breach of any material provision of any statute, code, ordinance, law, rule, regulation, order, writ, judgment, injunction or decree applicable to KSB or the Bank or by which any property or asset of KSB or the Bank is bound or affected, or (iii) conflict with, violate or result in a breach of any provisions of or the loss of any benefit under, constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien, pledge, security interest, charge or other encumbrance on any property or asset of KSB or the Bank pursuant to, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which KSB or the Bank is a party or by which KSB or the Bank or any property or asset of KSB or the Bank is bound or affected, except, in the case of clause (iii) above, for any such conflicts, violations, breaches, defaults or other occurrences which would not be deemed material.

5.6 Consents and Approvals.

(a) The execution, delivery and performance of this Agreement and the KSB Option Agreement by KSB, and the execution, delivery and performance of this Agreement and the Bank Merger Agreements by the Bank, does not require any consent, approval, authorization or permit of, or filing with or notification to, any court, administrative agency or commission or other governmental or regulatory authority or instrumentally, domestic or foreign, including, without limitation, any Bank Regulator (as hereinafter defined) (each a “Governmental Entity”), except (i) for applicable requirements, if any, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), state takeover laws, the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the “HSR Act”), and filing and recordation of appropriate merger documents as required by the DGCL, (ii) for consents and approvals of or filings, registrations or negotiations with the FRB, the FDIC and the Superintendent of the Bureau of Banking of the State of Maine (the “Maine Superintendent”), and (iii) the filings required by the Bank Merger Agreements. KSB and the Bank are not aware of

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any reason why the approvals, consents and waivers of Governmental Entities referred to herein and in Section 8.3 should not be obtained.

(b) The execution, delivery and performance of this Agreement and the KSB Option Agreement by KSB, and the execution, delivery and performance of this Agreement and the Bank Merger Agreements by the Bank, does not require any consent, approval, authorization or permit of, or filing with or notification to, any third party, except where failure to obtain any such consent, approval, authorization or permit, or to make any such filing or notification, would not prevent or significantly delay consummation of the Merger or the Bank Merger, or otherwise prevent KSB or the Bank from performing its obligations under this Agreement and the KSB Option Agreement or the Bank from performing its obligations under the Bank Merger Agreements, or would not, either individually or in the aggregate, be material.

5.7 Compliance. KSB and the Bank hold, and have at all times held, all material licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to all, and, except as disclosed in Section 5.7 of the Disclosure Schedule, have complied with and are not in conflict with, or in default or violation of, (a) any statute, code, ordinance, law, rule, regulation, order, writ, judgment, injunction or decree, published policies and guidelines of any Governmental Entity, applicable to KSB or the Bank or by which any property or asset of KSB or the Bank is bound or affected or (b) any note, bond, mortgage, indenture, deed of trust, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which KSB or the Bank is a party or by which KSB or the Bank or any property or asset of KSB or the Bank is bound or affected, except for any such non-compliance, conflicts, defaults or violations that would not, individually or in the aggregate, be material; and neither KSB nor the Bank knows of, or has received notice of, any material violation of any of the above. Without limiting the generality of the foregoing, neither KSB nor the Bank has been advised of the existence of any facts or circumstances which would cause the Bank to be deemed not to be in satisfactory compliance with the applicable provisions of the MBCA and, as applicable to the Bank, the Community Reinvestment Act of 1977, as amended (the CRA ), and the regulations promulgated thereunder.

5.8 SEC Reports and Bank Reports.

(a) KSB has filed, and made available to Camden, true and complete copies of all forms, reports and documents required to be filed by it with the Securities and Exchange Commission (the SEC ) since January 1, 1996, and has heretofore delivered to Camden, in the form filed with the SEC, true and complete copies of (i) its Annual Reports on Form 10-KSB for the fiscal years ended December 31, 1996, December 31, 1997 and December 31, 1998, respectively, (ii) its Quarterly Reports on Form 10-QSB since January 1, 1996, (iii) all proxy statements relating to KSB’s meetings of stockholders (whether annual or special) held since January 1, 1996, (iv) all other forms, reports and other registration statements (other than Quarterly Reports on Form 10-QSB not referred to in clause (ii) above) filed by KSB with the SEC since January 1, 1996, and (v) all communications mailed by KSB to its stockholders since January 1, 1996 (the forms,

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reports and other documents referred to in clauses (i), (ii), (iii), (iv) and (v) above being referred to herein, collectively, as the “SEC Reports”). As of their respective dates, the SEC Reports (A) complied in all material respects as to form with the requirements of the Securities Act of 1933, as amended (the Securities Act ) and the Exchange Act, as the case may be, and the rules and regulations thereunder and (B) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. KSB has timely filed all SEC Reports and other documents required to be filed by it under the Securities Act and the Exchange Act. Neither the Bank nor any of their other subsidiaries is required to file any form, report or other document with the SEC. KSB has made available to Camden true and complete copies of all amendments and modifications that have not been filed by KSB with the SEC to all agreements, documents and other instruments that previously had been filed by KSB with the SEC and are currently in effect.

(b) KSB, the Bank and their subsidiaries each has timely filed and made available to Camden true and complete copies of all forms, reports and documents required to be filed by each of them with all appropriate federal or state governmental or regulatory authorities charged with the supervision of banks or bank holding companies or engaged in the insurance of bank deposits, including without limitation, the FRB, the FDIC and the Maine Superintendent (“Bank Regulators”) since January 1, 1996, and has paid all fees and assessments due and payable in connection therewith. Such reports as of their respective date of filing complied in all material respects with the requirements of all laws, rules and regulations enforced or promulgated by such Bank Regulators. Except for normal periodic examinations conducted by the FRB, the FDIC, the Maine Superintendent or any other Bank Regulator in the regular course of the business of KSB and the Bank (the Bank Examinations), no Bank Regulator has initiated any proceeding or, to the knowledge of KSB and the Bank, investigation into the business or operations of KSB or the Bank since December 31, 1995. Except as disclosed on Section 5.8(b) of the Disclosure Schedule, KSB and the Bank have resolved all violations, criticisms or exceptions by any Bank Regulator with respect to any Bank Examination.

5.9 Financial Statements.

(a) Each of the consolidated financial statements of KSB and the Bank, including, in each case, the notes thereto, contained in the SEC Reports was prepared, and the financial statements referred to in Section 8.8 hereof will be prepared, in accordance with GAAP (except as may be indicated in the notes thereto) and each fairly presents, and the financial statements referred to in Section 8.8 hereof each will fairly present, the consolidated financial position, results of operations and changes in financial position of KSB and the Bank as at the respective dates thereof and for the respective periods indicated therein, subject, in the case of unaudited statements, to normal and recurring year-end adjustments normal in nature and not material in amount. Each of the consolidated financial statements of KSB and the Bank, including, in each case, the notes thereto, contained in the SEC Reports comply, and the financial statements referred to in Section 8.8 hereof will comply, with applicable accounting requirements and with the

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published rules and regulations of the SEC with respect thereto. Without limiting the generality of the foregoing, (x) the allowance for possible loan losses included in the consolidated financial statements of KSB and the Bank contained in the SEC Reports was, and the allowance for possible loan losses to be included in the financial statements referred to in Section 8.8 hereof will be, determined in accordance with GAAP and is, and will be, adequate to provide for losses relating to or inherent in the loan and lease portfolios of KSB and the Bank as of the balance sheet date reflected in each such KSB SEC Report (including without limitation commitments to extend credit), and (y) the Other Real Estate Owned (“OREO”) included in the consolidated financial statements of KSB and the Bank contained in the SEC Reports was, and the OREO included in the financial statements referred to in Section 8.8 hereof will be, carried net of reserves at the lower of cost or market value in accordance with GAAP or the regulations or other requirements of the SEC, the FDIC and the Maine Superintendent. The books and records of KSB and the Bank are true and complete in all material respects and have been, and are being, maintained in all material respects in accordance with applicable legal and accounting requirements.

(b) The consolidated balance sheets of KSB and the Bank as at December 31, 1998, contained in the SEC Reports, including the notes thereto, each makes, and the consolidated balance sheets contained in the financial statements referred to in Section 8.8 will make, adequate provision for, reflect or disclose all material liabilities and obligations of every nature (whether accrued, absolute, contingent or otherwise and whether due or to become due) of KSB and the Bank as of December 31, 1998, and except as and to the extent set forth on such consolidated balance sheets or as set forth in Section 5.9(b) of the Disclosure Schedule, neither KSB nor the Bank has any material liability or obligation of any nature (whether accrued, absolute, contingent or otherwise and whether due or to become due) which would be required to be provided for, reflected or disclosed on a balance sheet, or in the notes thereto, prepared in accordance with GAAP. To the knowledge of KSB and the Bank, no facts or circumstances exist which would give either KSB or the Bank reason to believe that a material liability or obligation that, in accordance with GAAP applied on a consistent basis, should have been reflected or disclosed on such balance sheet, was not so reflected or disclosed.

5.10 Absence of Certain Changes or Events. Except as disclosed in Section 5.10 of the Disclosure Schedule, since December 31, 1998, except as contemplated by this Agreement or as disclosed in any SEC Report filed since December 31, 1998 and prior to the date of this Agreement, KSB and the Bank have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since December 31, 1998, there has not been (a) either individually or in the aggregate, any Material Adverse Effect, and to the knowledge of KSB and the Bank, no fact or condition exists which is reasonably likely to cause such a Material Adverse Effect in the future, (b) any material damage, destruction or loss with respect to any property or asset of KSB or the Bank, (c) any change by KSB or the Bank in its accounting methods, principles or practices, other than changes required by applicable law or GAAP or regulatory accounting as concurred in by KSB’s independent accountants, (d) any revaluation by KSB or the Bank of any asset, including, without limitation, any writing down of the

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value of inventory or writing off of notes or accounts receivable, other than in the ordinary course of business consistent with past practice, (e) any entry into, or renewal of, by KSB or the Bank into any contract or commitment of more than $50,000 or with a term of more than one year, (f) any declaration, setting aside or payment of any dividend or distribution in respect of any capital stock of KSB or the Bank or any redemption, purchase or other acquisition of any of its securities, (g) any increase in or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards, or restricted stock awards pursuant to the KSB Stock Option Plan or otherwise), stock purchase or other employee benefit plan, or any other increase in the compensation payable or to become payable to any directors, officers or employees of KSB or the Bank, or any grant of severance or termination pay, or any contract or arrangement entered into to make or grant any severance or termination pay, any payment of any bonus, or the taking of any action not in the ordinary course of business with respect to the compensation or employment of directors, officers or employees of KSB or the Bank, (h) any strike, work stoppage, slowdown or other labor disturbance, (i) any material election made by KSB or the Bank for federal or state income tax purposes, (j) any change in the credit policies or procedures of KSB or the Bank, the effect of which was or is to make any such policy or procedure less restrictive in any material respect, (k) any material liability or obligation of any nature (whether accrued, absolute, contingent or otherwise and whether due or to become due), including without limiting the generality of the foregoing, liabilities as guarantor under any guarantees or liabilities for taxes, (l) any forgiveness or cancellation of any indebtedness or contractual obligation other than in the ordinary course of business consistent with past practice, (m) any mortgage, pledge, lien or lease of any assets, tangible or intangible, of KSB or the Bank other than in the ordinary course of business consistent with past practice, (n) any acquisition or disposition of any assets or properties, or any contract for any such acquisition or disposition entered into; provided that (A) no single acquisition or disposition of an asset or property shall exceed $100,000, and (B) all acquisitions and dispositions of assets or properties by KSB and the Bank shall in no event exceed $300,000 in the aggregate, or (o) any lease of real or personal property entered into, other than in connection with foreclosed property or in the ordinary course of business consistent with past practice.

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5.11 Absence of Litigation. Except as set forth in Section 5.11 of the Disclosure Schedule, neither KSB nor the Bank is a party to any, and there are no pending, or to the knowledge of KSB and the Bank, threatened legal, administrative, arbitral or other claims, actions, proceedings or investigations of any nature, against KSB or the Bank or any property or asset of KSB or the Bank, before any court, arbitrator or administrative, governmental or regulatory authority or body, domestic or foreign, and no facts or circumstances have come to KSB s or the Bank s attention which have caused either of them to believe that a material claim, action, proceeding or investigation against or affecting KSB or the Bank could reasonably be expected to occur. Neither KSB nor the Bank, nor any property or asset of KSB or the Bank, is subject to any order, writ, judgment, injunction, decree, determination or award which restricts its ability to conduct business in any area.

5.12 Employee Benefit Plans.

(a) Section 5.12 of the Disclosure Schedule sets forth a true and complete list of all Plans maintained or contributed to by the Bank during the six years preceding this Agreement. The term “Plans” means all employee benefit plans, arrangements or agreements that are maintained or contributed to, or that were maintained or contributed to at any time during the six years preceding the date of this Agreement, by KSB or the Bank or by any trade or business, whether or not incorporated (a “KSB ERISA Affiliate”), all of which together with KSB or the Bank would be deemed a “single employer” within the meaning of Section 4001 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

(b) KSB and the Bank have heretofore delivered to Camden true and complete copies of each of the Plans and all related documents, including but not limited to (i) all required Forms 5500 and all related schedules for such Plans (if applicable) for each of the last two years, (ii) the actuarial report for such Plan (if applicable) for each of the last two years, and (iii) the most recent determination letter from the IRS (if applicable) for such Plan.

(c) (i) Each of the Plans has been operated and administered in all material respects in accordance with applicable laws, including but not limited to ERISA and the Code, (ii) each of the Plans intended to be “qualified” within the meaning of Section 401(a) of the Code has been maintained so as to qualify from the effective date of such Plan to the Effective Time, (iii) with respect to each Plan which is subject to Title IV of ERISA, the present value of “benefit liabilities” (within the meaning of Section 4001(a)(16) of ERISA) under such Plan, based upon the actuarial assumptions currently prescribed by the Pension Benefit Guaranty Corporation for plan termination, did not, as of its latest valuation date, exceed by a material amount the then current value of the assets of such Plan allocable to such accrued benefits, and there has been no “accumulated funding deficiency” (whether or not waived), (iv) no Plan provides benefits, including without limitation death, medical or other benefits (whether or not insured), with respect to current or former employees of KSB, the Bank or any KSB ERISA Affiliate beyond their retirement or other termination of service, other than (u)

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coverage mandated by applicable law, (v) life insurance death benefits payable in the event of the death of a covered employee, (w) disability benefits payable to disabled former employees, (x) death benefits or retirement benefits under any “employee pension plan,” as that term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities on the books of KSB, the Bank or any KSB ERISA Affiliate or (z) benefits the full cost of which is borne by the current or former employee (or his beneficiary), (v) with respect to each Plan subject to Title IV of ERISA, no liability under Title IV of ERISA has been incurred by KSB, the Bank or any KSB ERISA Affiliate that has not been satisfied in full, no condition exists that presents a material risk to KSB, the Bank or any KSB ERISA Affiliate of incurring a material liability to or on account of such Plan, and there has been no “reportable event” (within the meaning of Section 4043 of ERISA and the regulations thereunder), (vi) neither KSB, the Bank, nor any KSB ERISA Affiliate has ever maintained or contributed to a “multiemployer pension plan,” as such term is defined in Section 3(37) of ERISA, (vii) all contributions or other amounts payable by KSB or the Bank as of the Effective Time with respect to each Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP and Section 412 of the Code, (viii) neither KSB, the Bank nor any KSB ERISA Affiliate has engaged in a transaction in connection with which KSB, the Bank or any KSB ERISA Affiliate has any material liability for either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code, (ix) consummation of the transactions contemplated hereby will not cause any amounts payable under any of the Plans to fail to be deductible for federal income tax purposes under Section 280G of the Code, (x) there are no pending or, to the knowledge of KSB and the Bank, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Plans or any trusts related thereto, and (xi) with respect to any Plan intended to be an employee stock ownership plan within the meaning of Section 409 of the Code (the ESOP), the outstanding indebtedness of the Plan does not exceed $41,000.00.

(d) With respect to any Plan that is a welfare plan (within the meaning of Section 3(1) of ERISA) (i) no such Plan is funded through a “welfare benefit fund,” as such term is defined in Section 419(e) of the Code, and (ii) each such Plan complies in all material respects with the applicable requirements of Section 4980B(f) of the Code, Part 6 of Subtitle B of Title I of ERISA and any applicable state continuation coverage requirements (“COBRA”).

(e) Except as prohibited by law (including Section 411(d)(6) of the Code), each Plan may be amended, terminated, modified or otherwise revised by KSB, the Bank or any KSB ERISA Affiliate as of the Effective Time to eliminate without material effect, any and all future benefit accruals under any Plan (except claims incurred under any welfare plan).

5.13 Labor Matters. Neither KSB nor the Bank is a party to any collective bargaining or other labor union or guild contract. There is no pending or, to the knowledge of KSB and the Bank, threatened, labor dispute, strike or work stoppage against KSB or the Bank which may interfere with the respective business activities of

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KSB or the Bank. Neither KSB nor Bank, nor, to the knowledge of KSB and the Bank, their respective representatives or employees, has committed any unfair labor practices in connection with the operation of the respective businesses of KSB or the Bank, and there is no pending or, to the knowledge of KSB and the Bank, threatened, charge or complaint against KSB or the Bank by the National Labor Relations Board or any comparable state agency.

5.14 Property and Leases.

(a) All of the real property owned or leased by KSB or the Bank is listed on Section 5.14 of the Disclosure Schedule. Each of KSB and the Bank has good and marketable title to all the real property referred to in Section 5.14 of the Disclosure Schedule and all other property owned by it and included in the consolidated balance sheet of KSB and the Bank included in its Annual Report on Form 10-KSB for the period ended December 31, 1998. Each parcel of real property, and each item of personal property, owned or leased by KSB or the Bank (i) is owned or leased free and clear of all mortgages, pledges, liens, security interests, conditional and installment sale agreements, encumbrances, charges or other claims of third parties of any kind (collectively, “Liens”), other than (A) Liens for current taxes and assessments not yet past due or which are being contested in good faith, (B) inchoate mechanics’ and materialmen’s Liens for construction in progress, (C) workmen’s, repairmen’s, warehousemen’s and carriers’ Liens arising in the ordinary course of business of KSB or the Bank consistent with past practice, (D) all matters of record, Liens and other imperfections of title and encumbrances which, either individually or in the aggregate, would not be material, and (E) those items that secure public or statutory obligations or any discount with, borrowing from, or obligations to any Federal Reserve Bank or Federal Home Loan Bank, interbank credit facilities, or any transaction by the Bank acting in a fiduciary capacity (collectively, “Permitted Liens”), and (ii) is neither subject to any governmental decree or order to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefore, nor, to the knowledge of KSB or the Bank, has any such condemnation, expropriation or taking been proposed. Neither KSB nor the Bank has received any notice of violation of any applicable zoning regulation, ordinance or other law, order, regulation or requirement relating to its properties.

(b) All leases of real property leased for the use or benefit of KSB or the Bank to which KSB or the Bank is a party and all amendments and modifications thereto, are in full force and effect, and there exists no default under any such lease by KSB or the Bank, nor, to the knowledge of KSB and the Bank, any event which with notice or lapse of time or both would constitute a material default thereunder by KSB or the Bank. The consummation of the transactions contemplated by this Agreement do not require the consent of any landlord nor do they cause an event of default under any such leases.

5.15 Taxes.

(a) Each of KSB and the Bank has duly filed in correct form all Federal, state, county and local information returns and tax returns required to be filed by it on or prior

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to the date hereof (all such returns being true and complete in all material respects) and has duly paid, discharged or made provisions for the payment of all material Taxes (as hereinafter defined) and other governmental charges which have been incurred or are due or claimed to be due from it by Federal, state, county or local taxing authorities on or prior to the date hereof (including without limitation, if and to the extent applicable, those due in respect of its properties, income, business, capital stock, deposits, franchises, licenses, sales and payrolls, and any net worth tax), other than Taxes or other charges that are not yet delinquent or are being contested in good faith and have not been finally determined. The amounts set up as reserves for Taxes on the consolidated balance sheet of KSB and the Bank included in its Annual Report on Form 10-KSB for the period ended December 31, 1998 are sufficient in the aggregate for the payment of all material unpaid Federal, state, county and local Taxes (including any interest or penalties thereon), whether or not disputed, accrued or applicable, for the period ended December 31, 1998 and all prior periods covered by such returns, and for which KSB or the Bank is liable in its own right or as transferee of the assets of, or successor to, any corporation, person, association, partnership, joint venture or other entity. The federal income tax returns of KSB or the Bank have been examined by the Internal Revenue Service ( IRS ) for all years through 1995 and any liability with respect thereto has been satisfied, and no deficiencies were asserted as a result of such examination or all such deficiencies were satisfied. The State of Maine tax returns of KSB and the Bank have not, in the ten years prior to the date of this Agreement, been examined or audited by the State of Maine. There are no material disputes pending or claims asserted for Taxes or assessments upon KSB or the Bank, nor has KSB or the Bank has been requested to give any currently effective waivers extending the statutory period of limitation applicable to any Federal, state, county or local income tax return for any period. In addition, (a) proper and accurate amounts have been withheld by KSB or the Bank from their employees for all prior periods in compliance in all material respects with the tax withholding provisions of applicable Federal, state, county and local laws; (b) Federal, state, county and local returns which are accurate and complete in all material respects have been filed by KSB and the Bank for all periods for which returns were due with respect to income tax withholding, Social Security and unemployment taxes; and (c) the amounts shown on such returns to be due and payable have been paid in full or adequate provision therefore has been included by KSB in its consolidated financial statements included in its Annual Report on Form 10-KSB for the period ended December 31, 1998.

(b) No property of KSB or the Bank is property that is or will be required to be treated as being owned by another person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code (as in effect prior to its amendment by the Tax Reform Act of 1986) or is “tax-exempt use property” within the meaning of Section 168(h) of the Internal Revenue Code of 1986, as amended (the “Code”). Neither KSB nor the Bank has been required to include in income any adjustment pursuant to Section 481 of the Code by reason of a voluntary change in accounting method initiated by KSB or the Bank, and the IRS has not initiated or proposed any such adjustment or change in accounting method. Neither KSB nor the Bank is a party to any agreement, contract or arrangement that would, individually or in the aggregate, result in the payment of an “excess parachute payment” within the meaning of Section 280G of the Code or that

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would result in payments that would be nondeductible pursuant to Section 162(m) of the Code.

(c) As used in this Agreement, the term “Taxes” means all Federal, state, county, local and foreign income, excise, gross receipts, ad valorem, profits, gains, property, sales, transfer, use, payroll, employment, severance, withholding, duties, intangibles, franchise and other taxes, charges, levies or like assessments, including any net worth tax, together with all penalties and additions to tax and interest thereon.

5.16 Certain Contracts.

(a) Except as set forth in Section 5.16 of the Disclosure Schedule and in the SEC Reports filed prior to the date of this Agreement, neither KSB nor the Bank is a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral): (i) with respect to the employment of any director, officer, employee or consultant, (ii) which, upon the consummation of the transactions contemplated by this Agreement or the Bank Merger Agreements, will result in any payment (whether of severance pay or otherwise) becoming due from KSB or the Bank to any officer or employee thereof, (iii) which is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed or incorporated by reference in the SEC Reports, (iv) which is a consulting or other agreement (including agreements entered into in the ordinary course and data processing, software programming and licensing contracts) not terminable on 60 days or less notice involving the payment of more than $50,000 per annum, (v) which materially restricts the conduct of any line of business by KSB or the Bank, (vi) with or to a labor union or guild (including any collective bargaining agreement), or (vii) (including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan) any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. KSB has previously delivered to Camden true and complete copies of all employment, consulting and deferred compensation agreements which are in writing and to which KSB or the Bank is a party. Each contract, arrangement, commitment or understanding of the type described in this Section, whether or not set forth in Section 5.16 of the Disclosure Schedule, is referred to herein as a “KSB Contract”.

(b) (i) To the knowledge of KSB and the Bank, each KSB Contract listed on such Disclosure Schedule is legal, valid and binding upon KSB or the Bank, as the case may be, and in full force and effect, (ii) KSB and the Bank have in all material respects performed all obligations required to be performed by it to date under each such KSB Contract, and (iii) no event or condition exists which constitutes or, after notice or lapse of time or both, would constitute, a material default on the part of KSB or the Bank under any such KSB Contract.

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5.17 Loan Portfolio. Except as set forth in Section 5.17 of the Disclosure Schedule, neither KSB nor the Bank is a party to any written or oral (a) loan agreement, note or borrowing arrangement (including, without limitation, leases and credit enhancements) (collectively, “Loans”) the unpaid principal balance of which exceeds $75,000 and as to which the obligor is, as of the date of this Agreement, over 90 days delinquent in payment of principal or interest, or (b) Loan with any director, executive officer or, to the knowledge of KSB and the Bank, five percent stockholder of KSB or the Bank, or to the knowledge of KSB and the Bank, any person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing. To the knowledge of KSB and the Bank, all of the Loans originated and held currently and at the Effective Time by KSB or the Bank, and any other Loans purchased and held currently and at the Effective Time by KSB or the Bank, were solicited, originated and exist, and will exist at the Effective Time, in material compliance with all applicable loan policies and procedures of KSB and the Bank. Section 5.17 of the Disclosure Schedule sets forth as of June 30, 1999, (i) all of the Loans in original principal amount in excess of $75,000 of KSB or the Bank that as of the date of this Agreement are classified by the Bank as “Other Loans Specially Mentioned”, “Special Mention”, “Substandard”, “Doubtful”, “Loss”, “Classified”, “Criticized”, “Watch list” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the obligor thereunder, and (ii) by category of Loan (i.e., commercial, consumer, etc.), all of the other Loans of KSB and the Bank that as of the date of this Agreement are classified as such, together with the aggregate principal amount of such Loans by category, it being understood that no representation is being made that the FDIC or the Maine Superintendent would agree with the loan classifications contained in Section 5.17 of the Disclosure Schedule. KSB shall promptly inform Camden in writing of any Loan the original principal balance of which exceeds $75,000 that becomes classified in the manner described in this Section 5.17, or any Loan the classification of which is materially and adversely changed at any time after the date of this Agreement. The information (including electronic information and information contained on tapes and computer disks) with respect to the Loans furnished to Camden by KSB and the Bank is true and complete in all material respects.

5.18 Investment Securities. Section 5.18(a) of the Disclosure Schedule sets forth the book and market value as of June 30, 1999 of the investment securities, mortgage backed securities, bank-owned life insurance policies and securities held by KSB and the Bank. Section 5.18(b) of the Disclosure Schedule sets forth the names of all the joint ventures in which KSB or the Bank has an investment (whether or not such joint ventures remain active). Except for pledges to secure public and trust deposits, FRB and Federal Home Loan Bank of Boston borrowings, repurchase agreements and reverse repurchase agreements entered into in arms’-length transactions pursuant to normal commercial terms and conditions and other pledges required by law, none of the investments reflected in the consolidated balance sheet of KSB and the Bank included in its Annual Report on Form 10-KSB for the period ended December 31, 1998, and none of the material investments made by KSB or the Bank since December 31, 1998, is subject to any restriction (contractual, statutory or otherwise) that would materially impair the ability of the entity holding such investment freely to dispose of such investment at any time. KSB

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has (i) properly reported as such any investment securities which are required under GAAP to be classified as “available for sale” at the lower of cost or market, and (ii) accounted for any decline in the market value of its marketable equity securities portfolio in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 12 and Staff Accounting Bulletin No. 59, including without limitation the recognition through KSB’s consolidated statement of operations of any unrealized loss with respect to any individual marketable equity security as a realized loss in the accounting period in which a decline in the market value of such security is determined to be “other than temporary.”

5.19 Derivative Transactions. Except pursuant to those agreements referenced in Section 5.19 of the Disclosure Schedule, neither KSB nor the Bank is engaged in transactions in or involving forwards, futures, options on futures, swaps or other derivative instruments except as agent on the order and for the account of others other than Federal Home Loan Bank advances or in connection with mortgage loan secondary market activities in the ordinary course of business consistent with the Bank’s past practices. To the extent that KSB or the Bank is engaged in such transactions, to the knowledge of KSB and the Bank, none of the counterparties to any contract or agreement with respect to any such instrument is in default with respect to such contract or agreement and no such contract or agreement, were it to be a Loan held by KSB or the Bank, would be classified as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List”, “Impaired”, “Non-accrual Status” or words of similar import. The financial position of KSB and the Bank on a consolidated basis under or with respect to each such instrument has been reflected in the books and records of KSB and the Bank in accordance with GAAP consistently applied, and no open exposure of KSB or the Bank with respect to any such instrument (or with respect to multiple instruments with any single counterparty) exceeds $50,000.

5.20 Insurance. KSB and the Bank each has made available to Camden true and complete copies of all material policies of insurance of KSB and the Bank currently in effect. All of the policies relating to insurance maintained by KSB or the Bank with respect to its material properties and the conduct of its business in any material respect (or any comparable policies entered into as a replacement therefore) are in full force and effect and neither KSB nor the Bank has received any notice of cancellation with respect thereto. All life insurance policies on the lives of any of the current and former officers and directors of KSB and the Bank which are maintained by KSB and the Bank or which are otherwise included as assets on the books of KSB or the Bank (i) are, or will at the Effective Time be, owned by KSB or the Bank, as the case may be, free and clear of any claims thereon by the officers or members of their families, except with respect to the death benefits thereunder, as to which KSB and the Bank agree that there will not be an amendment prior to the Effective Time without the consent of Camden, and (ii) are accounted for properly as assets on the books of the Bank in accordance with GAAP in all material respects. Neither KSB nor the Bank has any material liability for unpaid premiums or premium adjustments not properly reflected on KSB’s consolidated financial statements contained in the SEC Reports.

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5.21 Environmental Matters.

(a) Each of KSB and the Bank and, to the knowledge of KSB and the Bank, any property in which it participates or has participated in the management and, where required by the context, said term means the owner or operator of such property (the Participation Facilities ) and any property in which KSB or the Bank holds a security interest, and where required by the context, said term means the owner or operator of such property (the Loan Properties ), are, and have been, in material compliance with all applicable environmental laws and with all rules, regulations, standards and requirements of the United States Environmental Protection Agency (the “EPA”) and of state and local agencies with jurisdiction over pollution or protection of the environment.

(b) There is no suit, claim, action or proceeding pending or, to the knowledge of KSB or the Bank, threatened, before any Governmental Entity or other forum in which KSB or the Bank or any Participation Facility has been or, with respect to threatened proceedings, may be, named as a defendant, responsible party or potentially responsible party (i) for alleged noncompliance (including by any predecessor), with any environmental law, rule, regulation, standard or requirement or (ii) relating to the release into or presence in the soil, surface waters, groundwaters, stream sediments, surface or subsurface strata, and ambient air, and any other environmental medium (the Environment ) of any pollutant, contaminant, or hazardous substance or hazardous material as defined in or pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., or any other federal, state, or local environmental law, regulation, or requirement ( Hazardous Materials ) or petroleum of any kind or origin or in any form, as defined in or pursuant to the Federal Clean Water Act, 33 U.S.C. Section 1251 et seq., or any other federal, state, or local environmental law, regulation, or requirement ( Oil ) whether or not occurring at or on a site owned, leased or operated by KSB or the Bank or any Participation Facility, except as have not been or would not be material.

(c) There is no suit, claim, action or proceeding pending or, to the knowledge of KSB or the Bank, threatened, before any Governmental Entity or other forum in which any Loan Property has been or, with respect to threatened proceedings, may be, named as a defendant, responsible party or potentially responsible party (i) for alleged noncompliance (including by any predecessor) with any environmental law, rule, regulation, standard or requirement or (ii) relating to the release into or presence in the Environment of any Hazardous Material or Oil whether or not occurring at or on a site owned, leased or operated by a Loan Property, except as have not been or would not be material.

(d) Neither KSB, the Bank, nor to their knowledge any Participation Facility or any Loan Property, has received any notice regarding a matter on which a suit, claim, action or proceeding as described in subsection (b) or (c) of this Section 5.21 could reasonably be based. No facts or circumstances have come to KSB s or the Bank s attention which have caused it to believe that a material suit, claim, action or proceeding

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as described in subsection (b) or (c) of this Section 5.21 could reasonably be expected to occur.

(e) During the period of (i) KSB s or the Bank’s ownership or operation of any of their respective current properties, (ii) KSB s or the Bank’s participation in the management of any Participation Facility, or (iii) KSB s or the Bank’s holding of a security interest in a Loan Property, there has been no release or presence of Hazardous Material or Oil in, on, under or affecting such property or, to the knowledge of KSB or the Bank, such Participation Facility or Loan Property, except where such release or presence is not or would not, either individually or in the aggregate, be material. To the knowledge of KSB and the Bank, prior to the period of (x) KSB s or the Bank’s ownership or operation of any of their respective current properties or any previously owned or operated properties, (y) KSB s or the Bank’s participation in the management of any Participation Facility, or (z) KSB s or the Bank’s holding of a security interest in a Loan Property, there was no release or presence of Hazardous Material or Oil in, on, under or affecting any such property, Participation Facility or Loan Property, except where such release or presence is not or would not, either individually or in the aggregate, be material.

5.22 Intellectual Property. Each of KSB and the Bank owns or possesses valid and binding licenses and other rights to use without payment of any material amount all material patents, copyrights, trade secrets, trade names, service marks and trademarks used in its businesses, and neither KSB nor the Bank has received any notice of conflict with respect thereto that asserts the right of others. Each of KSB and the Bank has performed in all material respects all the obligations required to be performed by them and are not in material default under any contract, agreement, arrangement or commitment relating to any of the foregoing.

5.23 Administration of Fiduciary Accounts. Each of KSB and the Bank has properly administered in all material respects all accounts for which it acts as a fiduciary, including, but not limited to, 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 law. Neither KSB nor the Bank nor their respective officers, directors or employees has committed any breach of trust with respect to any fiduciary account. The accountings for each such fiduciary account are true and correct in all material respects and accurately reflects the assets of such fiduciary account.

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5.24 Agreements with Bank Regulators. Except as disclosed on Section 5.24 of the Disclosure Schedule, neither KSB nor the Bank is a party to any written agreement or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or is a recipient of any extraordinary supervisory letter from, any Bank Regulator which restricts materially the conduct of its business, or in any manner relates to its capital adequacy, its loan loss allowances or reserves, its credit policies or its management, nor has KSB or the Bank been informed by any Bank Regulator that it is contemplating issuing or requesting any such order, directive, agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter or similar submission. Neither KSB nor the Bank is a party to any agreement or arrangement entered into in connection with the consummation of a federally assisted acquisition of a depository institution pursuant to which KSB or the Bank is entitled to receive financial assistance or indemnification from any governmental agency.

5.25 Material Interests of Certain Persons. No officer or director of KSB or the Bank or any “associate” (as such term is defined in Rule 14a-1 under the Exchange Act) of any such officer or director, has any material interest in any material contract or property (real or personal), tangible or intangible, used in or pertaining to the business of KSB or the Bank that would be required to be disclosed in a proxy statement to stockholders under Regulation 14A of the Exchange Act.

5.26 Brokers Fees; Opinions. No broker, finder or investment banker, other than Keefe, Bruyette & Woods, is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement, the Bank Merger Agreements or the KSB Option Agreement based upon arrangements made by or on behalf of KSB or the Bank. The fee payable to Keefe, Bruyette & Woods in connection with the transactions contemplated by this Agreement is as described in an engagement letter between KSB and Keefe, Bruyette & Woods, a true and complete copy of which has heretofore been furnished to Camden. On or prior to the execution of this Agreement, KSB has received the opinion of Keefe, Bruyette & Woods to the effect that, as of the date of such opinion, the Merger Consideration to be received by the stockholders of KSB pursuant to the Merger is fair to such stockholders, and such opinion has not been amended or rescinded as of the date of this Agreement.

5.27 Joint Proxy Statement. The information contained in the Joint Proxy Statement to be sent to the stockholders of KSB in connection with the KSB Meeting will not, on the date the Joint Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of KSB or at the time of the KSB Meeting, contain any statement which, at such time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the KSB Meeting which shall have become false or misleading. The Joint Proxy Statement will comply in all

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material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder.

5.28 State Takeover Laws. The Board of Directors of KSB has taken all necessary action prior to the date of this Agreement in connection with the approval of the execution, delivery and performance of this Agreement, the Bank Merger Agreements and the KSB Option Agreement, any purchase or other transaction respecting KSB Common Stock provided for herein or therein, and the other transactions contemplated hereby and thereby, including without limitation approval by the affirmative vote of at least a majority of the members of KSB Board and a majority of the non-employee directors of KSB Board, to exempt Camden and CASI from the requirements of any moratorium, business combination, control share, fair price or other takeover defense laws and regulations (collectively, Takeover Laws ), if any, of the State of Delaware and the State of Maine.

5.29 Year 2000.

(a) Each of KSB and the Bank has adopted a plan (in each case, a Year 2000 Plan ) requiring testing, information-gathering and other procedures to conform to the deadlines and material requirements and guidelines applicable to it as a provider of services using Information Technology and imposed by any Bank Regulator or the FFIEC, to cause such Information Technology to be Year 2000 Compliant (such deadlines, material requirements and guidelines, as they may be in effect from time to time, being referred to in this Agreement as the Year 2000 Regulatory Requirements ).

(b) Each of KSB and the Bank has taken appropriate actions and has committed the resources reasonably necessary or otherwise appropriate to comply with its Year 2000 Plan in a timely manner. Such actions (including the testing and information-gathering procedures) have not produced any preliminary findings or other results which would indicate that the Information Technology will not be Year 2000 Compliant or that it will not be in compliance with the Year 2000 Regulatory Requirements; and it has not received any written notice or preliminary oral notice from a Governmental Entity to one of its officers or senior executive employees with respect to any adverse action against it relating to Year 2000 Compliance.

(c) Each of KSB and the Bank has taken appropriate actions to assure that the Bank has, and will continue to have at all relevant points in time, adequate funds to meet loan and deposit customer demand in connection with the Year 2000 date change and related circumstances.

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5.30 Disclosure. No representation or warranty contained in this Agreement, and no statement contained in any Schedule, certificate, list or other writing furnished to Camden pursuant to the provisions hereof, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements herein or therein, in the light of the circumstances in which they are made, not misleading. No information believed by KSB or the Bank to be material to the Merger or the Bank Merger and which is necessary to make the representations and warranties herein contained, taken as a whole, not misleading, to the knowledge of KSB and the Bank, has been withheld from, or has not been delivered in writing to, Camden.

ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF CAMDEN AND CASI

Camden, and as applicable CASI, hereby represents and warrants to KSB that:

6.1 Corporate Organization. Camden is a corporation duly organized, validly existing and in good standing under the laws of the State of Maine. CASI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and all of the outstanding shares of capital stock of CASI are owned, directly or indirectly, by Camden. Since the date of its incorporation, CASI has not engaged in any activities other than in connection with or as contemplated by this Agreement. United Bank is a banking organization, duly organized, validly existing and in good standing under the laws of the State of Maine, and all of the outstanding shares of capital stock of United Bank are owned, directly or indirectly, by Camden. Each of Camden, CASI and United Bank has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals would not, either individually or in the aggregate, have a material adverse effect on the business, assets, liabilities, financial condition or results of operations of Camden and its subsidiaries taken as a whole.

6.2 Authority. Each of Camden and CASI has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. Each of Camden and United Bank has full corporate power and authority to execute and deliver the Bank Merger Agreements, to perform its obligations thereunder and to consummate the transactions contemplated thereby. The execution and delivery of this Agreement and the Bank Merger Agreements, the performance by Camden and CASI of its obligations hereunder, the performance by Camden and United Bank of its obligations thereunder, the consummation by Camden and CASI of the transactions contemplated hereby, and the consummation by Camden and United Bank of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action and no other

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corporate proceedings on the part of Camden and CASI are necessary to authorize this Agreement, or on the part of Camden and United Bank are necessary to execute the Bank Merger Agreements, or the performance of any of their respective obligations hereunder or thereunder, as applicable, or to consummate the transactions contemplated hereby or thereby, other than the approval of each of their respective stockholders, if required. This Agreement has been duly and validly executed and delivered by each of Camden and CASI and constitutes a legal, valid and binding obligation of Camden and CASI, enforceable against each such party in accordance with its terms. On the date executed and delivered by Camden and United Bank, the Bank Merger Agreements will be duly and validly executed and delivered by Camden and United Bank and will constitute a legal, valid and binding obligation of Camden and United Bank, enforceable against each such party in accordance with its terms.

6.3 No Conflict. Neither the execution, delivery and performance of this Agreement by Camden or CASI, or the Bank Merger Agreements by Camden and United Bank, nor the consummation by Camden and CASI of the transactions contemplated hereby, nor the consummation by Camden and United Bank of the transactions contemplated thereby, will (i) conflict with, violate or result in a breach of the Certificate of Incorporation or By-Laws or equivalent organizational documents of Camden, CASI or United Bank, as applicable, (ii) conflict with, violate or result in a breach of any material provision of any statute, code, ordinance, law, rule, regulation, order, writ, judgment, injunction or decree applicable to Camden, CASI or United Bank, as applicable or by which any property or asset of Camden, CASI or United Bank, as applicable, is bound or affected, or (iii) conflict with, violate or result in a breach of any provisions of or the loss of any benefit under, constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien, pledge, security interest, charge or other encumbrance on any property or asset of Camden, CASI or United Bank, as applicable, pursuant to, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Camden, CASI or United Bank, as applicable is a party or by which Camden, CASI or United Bank, as applicable, or any property or asset of such party is bound or affected, except, in the case of clause (iii) above, for any such conflicts, violations, breaches, defaults or other occurrences which would not, individually or in the aggregate, have a material adverse effect on the business, assets, liabilities, financial condition or results of operations of Camden and its subsidiaries taken as a whole.

6.4 Capitalization. As of the date hereof, the authorized stock of Camden consists solely of 10,000,000 shares of Camden Common Stock, of which, as of the date hereof, 6,557,650 shares were outstanding; 570,590 shares of Camden Common Stock are directly or indirectly held by Camden as treasury stock; and there are no shares of preferred stock outstanding as of the date hereof. As of the date hereof, the authorized stock of CASI consists solely of 1,000 shares of CASI Common Stock, par value $0.01 per share, of which, as of the date hereof, 1,000 shares were outstanding. The outstanding shares of Camden and CASI’s capital stock are validly issued, fully paid and

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nonassessable, and subject to no preemptive rights (and were not issued in violation of any preemptive rights). As of the date hereof, there are no shares of Camden or CASI capital stock authorized and reserved for issuance, Camden and CASI do not have any Rights issued and outstanding, and Camden and CASI do not have any commitment to authorize, issue or sell any such shares or Rights, except pursuant to this Agreement or Compensation and Benefit Plans. Since March 31, 1999, neither Camden nor CASI has issued any shares of its stock or Rights in respect thereof or reserved any shares for such purposes, other than pursuant to Compensation and Benefit Plans.

6.5 Consents and Approvals. The execution, delivery and performance of this Agreement by Camden and CASI, and the Bank Merger Agreements by Camden and United Bank, does not require any consent, approval, authorization or permit of, or filing with or notification to any Governmental Entity, (i) except for those referred to in Section 5.6 hereof, and (ii) except for any consent, approval, authorization, permit of, or filing with, or notification to, any Governmental Entity where failure to obtain any such consent, approval, authorization or permit, or to make any such filing or notification, would not prevent or significantly delay consummation of the Merger, or otherwise prevent Camden or CASI from performing the obligations contemplated under this Agreement to be performed by them or Camden or United Bank from performing its obligations under the Bank Merger Agreements, or which, either individually or in the aggregate, would not, in the reasonable judgment of the parties hereto, have a material adverse effect on the business, assets, liabilities, financial condition or results of operation of Camden and its subsidiaries taken as a whole.

6.6 Joint Proxy Statement. The information supplied by Camden and CASI for inclusion in the Joint Proxy Statement will not, on the date the Joint Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of KSB or at the time of the KSB Meeting, contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the KSB Meeting which shall have become false or misleading.

6.7 SEC Reports and Bank Reports.

(a) Camden has filed, and made available to KSB, true and complete copies of all forms, reports and documents required to be filed by it with the SEC since January 1, 1996, and has heretofore delivered to KSB, in the form filed with the SEC, true and complete copies of (i) its Annual Reports on Form 10-K for the fiscal years ended December 31, 1996, December 31, 1997 and December 31, 1998, respectively, (ii) its Quarterly Report on Form 10-Q since January 1, 1996, (iii) all proxy statements relating to Camden’s meetings of stockholders (whether annual or special) held since January 1, 1996, (iv) all other forms, reports and other registration statements (other than Quarterly Reports on Form 10-Q not referred to in clause (ii) above) filed by Camden with the SEC since January 1, 1996, and (v) all communications mailed by Camden to its stockholders

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since January 1, 1996 (the forms, reports and other documents referred to in clauses (i), (ii), (iii), (iv) and (v) above being referred to herein, collectively, as the “Camden SEC Reports”). As of their respective dates, the Camden SEC Reports (A) complied in all material respects as to form with the requirements of the Securities Act and the Exchange Act, as the case may be, and the rules and regulations thereunder and (B) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Camden has timely filed all SEC Reports and other documents required to be filed by it under the Securities Act and the Exchange Act. Neither the Camden nor any of its subsidiaries is required to file any form, report or other document with the SEC. Camden has made available to KSB true and complete copies of all amendments and modifications that have not been filed by Camden with the SEC to all agreements, documents and other instruments that previously had been filed by Camden with the SEC and are currently in effect.

(b) Camden and its subsidiaries each have timely filed and made available to KSB true and complete copies of all forms, reports and documents required to be filed by each of them with all appropriate Bank Regulators since January 1, 1996, and has paid all fees and assessments due and payable in connection therewith. Such reports as of their respective date of filing complied in all material respects with the requirements of all laws, rules and regulations enforced or promulgated by such Bank Regulators. Except for Bank Examinations no Bank Regulator has initiated any proceeding or, to the knowledge of Camden, investigation into the business or operations of Camden, Camden National Bank or United Bank since December 31, 1995. Camden has resolved all violations, criticisms or exceptions by any Bank Regulator with respect to any Bank Examination.

6.8 Financial Statements Each of the consolidated financial statements of Camden and its subsidiaries, including, in each case, the notes thereto, contained in the Camden SEC Reports was prepared in accordance with GAAP (except as may be indicated in the notes thereto) and each fairly presents the consolidated financial position, results of operations and changes in financial position of Camden and its subsidiaries as at the respective dates thereof and for the respective periods indicated therein, subject, in the case of unaudited statements, to normal and recurring year-end adjustments normal in nature and not material in amount.

6.9 Compliance. Each of Camden, CASI, Camden National Bank and United Bank hold, and at all relevant times have held, all material licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to all, and have complied with and are not in conflict with, or in default or violation of, (a) any statute, code, ordinance, law, rule, regulation, order, writ, judgment, injunction or decree, published policies and guidelines of any Governmental Entity, applicable to it or by which any of its properties or assets is bound or affected, or (b) any note, bond, mortgage, indenture, deed of trust, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which it is a party or by which any of its properties or assets is bound or affected, except, in each case, for the failure to obtain or

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maintain any required license, permit or authorization or any such non-compliance, conflict, default or violation that would not, individually or in the aggregate, prevent or significantly delay consummation of the Merger. Camden has made available to KSB a true and correct copy of the most recent CRA report pertaining to Camden.

6.10 Absence of Certain Changes or Events. Since December 31, 1998, except as contemplated by this Agreement or as disclosed in any Camden SEC Report filed since December 31, 1998 and prior to the date of this Agreement, Camden and its subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since December 31, 1998, there has not been either individually or in the aggregate, any Material Adverse Effect, and to the knowledge of Camden and its subsidiaries, no fact or condition exists which is reasonably likely to cause such a Material Adverse Effect in the future.

6.11 Employee Benefit Plans.

(a) The term Camden Plans means all employee benefit plans, arrangements or agreements that are maintained or contributed to, or that were maintained or contributed to at any time during the six years preceding the date of this Agreement, by Camden or by any trade or business, whether or not incorporated (a Camden ERISA Affiliate ), all of which together with Camden would be deemed a single employer within the meaning of Section 4001 of ERISA.

(b) (i) Each of the Camden Plans has been operated and administered in all material respects in accordance with applicable laws, including but not limited to ERISA and the Code, (ii) each of the Camden Plans intended to be qualified within the meaning of Section 401(a) of the Code has been maintained so as to qualify from the effective date of such Camden Plan to the Effective Time, (iii) with respect to each Camden Plan which is subject to Title IV of ERISA, there has been no accumulated funding deficiency (whether or not waived), (iv) with respect to each Camden Plan subject to Title IV of ERISA, no liability under Title IV of ERISA has been incurred by Camden or any Camden ERISA Affiliate that has not been satisfied in full, no condition exists that presents a material risk to Camden or any Camden ERISA Affiliate of incurring a material liability to or on account of such Camden Plan, and there has been no reportable event (within the meaning of Section 4043 of ERISA and the regulations thereunder) other than those events as to which the 30 day notice requirement is waived under Pension Benefit Guaranty Corporation Regulations Section 4043, (v) neither Camden, nor any Camden ERISA Affiliate has ever maintained or contributed to a multiemployer pension plan, as such term is defined in Section 3(37) of ERISA, (vi) all contributions or other amounts payable by Camden as of the Effective Time with respect to each Camden Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP and Section 412 of the Code, (vii) neither Camden nor any Camden ERISA Affiliate has engaged in a transaction in connection with which Camden or any Camden ERISA Affiliate has any material liability for either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code, and (viii) there are no pending or, to the knowledge of Camden, threatened or

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anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Camden Plans or any trusts related thereto.

(c) With respect to any Camden Plan that is a welfare plan (within the meaning of Section 3(1) of ERISA) (i) no such Camden Plan is funded through a welfare benefit fund, as such term is defined in Section 419(e) of the Code, and (ii) each such Camden Plan complies in all material respects with the applicable requirements of COBRA.

6.12 Environmental. Except as disclosed in any Camden SEC Report, any Phase I Environmental Site Assessment prepared by or for the benefit of Camden, or in Section 6.12 of the Disclosure Schedule:

(a) To the knowledge of Camden, each of Camden and its subsidiaries, any Participation Facilities and any property in which Camden or any of its subsidiaries holds a security interest, and where required by the context, the Loan Properties, are, and have been, in material compliance with all applicable environmental laws and with all rules, regulations, standards and requirements of the EPA and of state and local agencies with jurisdiction over pollution or protection of the environment.

(b) There is no suit, claim, action or proceeding pending or, to the knowledge of Camden and its subsidiaries, threatened, before any Governmental Entity or other forum in which Camden or any of its subsidiaries or, to the knowledge of Camden, any Participation Facility has been or, with respect to threatened proceedings, may be, named as a defendant, responsible party or potentially responsible party (i) for alleged noncompliance (including by any predecessor), with any environmental law, rule, regulation, standard or requirement or (ii) relating to the release into or presence in the Environment of any Hazardous Materials or Oil whether or not occurring at or on a site owned, leased or operated by Camden or any of its subsidiaries or any Participation Facility, except as have not been or would not be material.

(c) To the knowledge of Camden, there is no suit, claim, action or proceeding pending or threatened, before any Governmental Entity or other forum in which any Loan Property has been or, with respect to threatened proceedings, may be, named as a defendant, responsible party or potentially responsible party (i) for alleged noncompliance (including by any predecessor) with any environmental law, rule, regulation, standard or requirement or (ii) relating to the release into or presence in the Environment of any Hazardous Material or Oil whether or not occurring at or on a site owned, leased or operated by a Loan Property, except as have not been or would not be material.

(d) Neither Camden nor any of its subsidiaries, nor to their knowledge any Participation Facility or any Loan Property, has received any notice regarding a matter on which a suit, claim, action or proceeding as described in subsection (b) or (c) of this Section 6.12 could reasonably be based. No facts or circumstances have come to Camden s nor any of its subsidiaries attention which have caused it to believe that a material suit, claim, action or proceeding as described in subsection (b) or (c) of this Section 6.12 could reasonably be expected to occur.

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(e) To the knowledge of Camden, during the period of (i) Camden s and its subsidiaries ownership or operation of any of their respective current properties, (ii) Camden s and its subsidiaries participation in the management of any Participation Facility, or (iii) Camden s and its subsidiaries holding of a security interest in a Loan Property, there has been no release or presence of Hazardous Material or Oil in, on, under or affecting such property of Camden or such Participation Facility or Loan Property, except where such release or presence is not or would not, either individually or in the aggregate, be material. To the knowledge of Camden and its subsidiaries, prior to the period of (Camden s and its subsidiaries ownership or operation of any of their respective current properties or any previously owned or operated properties, (y) Camden s and its subsidiaries participation in the management of any Participation Facility, or (z) Camden s and its subsidiaries holding of a security interest in a Loan Property, there was no release or presence of Hazardous Material or Oil in, on, under or affecting any such property, Participation Facility or Loan Property, except where such release or presence is not or would not, either individually or in the aggregate, be material.

6.13 Agreements with Bank Regulators. Neither Camden nor any of its subsidiaries is a party to any written agreement or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or is a recipient of any extraordinary supervisory letter from, any Bank Regulator which restricts materially the conduct of its business, or in any manner relates to its capital adequacy, its loan loss allowances or reserves, its credit policies or its management, nor has Camden or any of its subsidiaries been informed by any Bank Regulator that it is contemplating issuing or requesting any such order, directive, agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter or similar submission. Neither Camden nor any of its subsidiaries is a party to any agreement or arrangement entered into in connection with the consummation of a federally assisted acquisition of a depository institution pursuant to which Camden or any of its subsidiaries is entitled to receive financial assistance or indemnification from any governmental agency.

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6.14 Year 2000.

(a) Each of Camden and its subsidiaries (other than CASI) has adopted a Year 2000 Plan requiring testing, information-gathering and other procedures to conform to the Year 2000 Regulatory Requirements.

(b) Each of Camden and its subsidiaries (other than CASI) has taken appropriate actions and has committed the resources reasonably necessary or otherwise appropriate to comply with its Year 2000 Plan in a timely manner. Such actions (including the testing and information-gathering procedures) have not produced any preliminary findings or other results which would indicate that the Information Technology will not be Year 2000 Compliant or that it will not be in compliance with the Year 2000 Regulatory Requirements; and it has not received any written notice or preliminary oral notice from a Governmental Entity to one of its officers or senior executive employees with respect to any adverse action against it relating to Year 2000 Compliance.

(c) Each of Camden and its subsidiaries (other than CASI) has taken appropriate actions to assure that each of United Bank and Camden National Bank has, and will continue to have at all relevant points in time, adequate funds to meet loan and deposit customer demand in connection with the Year 2000 date change and related circumstances.

6.15 Brokers Fees. Except for the fees payable to Ryan, Beck & Co., no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Camden or CASI.

6.16 Disclosure. No representation or warranty contained in this Agreement, and no statement contained in any Schedule, certificate, list or other writing furnished to KSB pursuant to the provisions hereof, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements herein or therein, in the light of the circumstances in which they are made, not misleading. No information believed by Camden or its subsidiaries to be material to the Merger or the Bank Merger and which is necessary to make the representations and warranties herein contained, taken as a whole, not misleading, to the knowledge of Camden and its subsidiaries, has been withheld from, or has not been delivered in writing to, KSB.

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ARTICLE VII - CONDUCT OF BUSINESS PENDING THE MERGER

7.1 Covenants of KSB and the Bank.

(a) KSB and the Bank each covenants and agrees that, between the date of this Agreement and the Effective Time, unless Camden shall otherwise agree in writing, the business of KSB and the Bank shall be conducted only in, and KSB and the Bank shall not take any action except in, the usual, regular and ordinary course of business and in a manner consistent with prudent banking practice and generally to conduct their business in substantially the same way as heretofore conducted, and without limiting the foregoing, to continue to operate in the same geographic markets serving the same market segments and without significant increase in the rate of growth of the Bank’s loan portfolio. KSB and the Bank shall use their reasonable best efforts to preserve substantially intact the business organization of KSB and the Bank, to keep available the present services of the officers, employees and consultants of KSB and the Bank and to preserve the current relationships and goodwill of KSB and the Bank with customers, suppliers and other persons with which KSB or the Bank have business relationships, including without limitation, implementing a deposit retention program in furtherance thereof.

(b) By way of amplification and not limitation of clause (a) above, except as contemplated by this Agreement, the Bank Merger Agreements and the KSB Option Agreement, KSB and the Bank shall not, between the date of this Agreement and the Effective Time, directly or indirectly to do, or publicly announce an intention to do, any of the following without the prior written consent of Camden:

(i) amend or otherwise change its Certificate of Incorporation or By-laws or equivalent organizational documents;

(ii) issue, deliver, sell, pledge, dispose of, grant, encumber, or authorize the issuance, delivery, sale, pledge, disposition, grant or encumbrance of, any shares of capital stock of any class of KSB or the Bank (other than the issuance of shares of KSB Common Stock upon the exercise of KSB Stock Options issued in accordance with the provisions of the KSB Stock Option Plan and outstanding prior to the date of this Agreement), or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest, of KSB or the Bank, or enter into any agreement with respect to any of the foregoing;

(iii) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock, except for (A) the declaration and payment by KSB of a regular quarterly cash dividend, in a per share amount not to exceed $0.04, and (B) the declaration and payment of a regular quarterly cash dividend by the Bank to KSB provided that after the declaration and payment of such dividend, the Bank will remain well capitalized under the applicable capital adequacy regulations of the FDIC;

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(iv) split, combine or reclassify any shares of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, except upon the exercise or fulfillment of rights or options issued or existing pursuant to employee benefit plans, programs or arrangements, all to the extent outstanding and in existence on the date of this Agreement;

(v) repurchase, redeem or otherwise acquire any shares of the capital stock of KSB or the Bank, or any securities convertible into or exercisable for any shares of the capital stock of KSB or the Bank;

(vi) enter into any new line of business or materially expand the business currently conducted by KSB and the Bank or file any application to relocate or terminate the operations of any banking office of KSB or the Bank;

(vii) acquire or agree to acquire, by merging or consolidating with, or by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, other business organization or any division thereof or any material amount of assets, other than subject to Section 7.5 hereof;

(viii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any individual, corporation or other entity, or make any loan or advance, other than in the ordinary course of business consistent with past practice;

(ix) enter into any contract or agreement other than in the ordinary course of business consistent with past practice and, in any event, regardless of whether consistent with past practice, undertake or enter into (i) any contract or other commitment (other than contracts or commitments related to Loans) involving an aggregate payment by or to KSB or the Bank under any such contract or commitment of more than $50,000 or having a term of one year or more from the time of execution, (ii) any contract or commitment, or related contracts or commitments, for Loans having an original principal amount of $400,000;

(x) authorize any single capital expenditure which is in excess of $25,000 or capital expenditures which are, in the aggregate, in excess of $50,000 for KSB and the Bank taken as a whole, except for written contractual commitments entered into prior to the date of this Agreement as disclosed in the Disclosure Schedule;

(xi) (i) except as required by applicable law or as specified in Section 7.1(b)(xi) of the Disclosure Schedule, (x) adopt, amend, renew or terminate any Plan or any agreement, arrangement, plan or policy between KSB or the Bank and one or more of its current or former directors, officers or employees, or (y) increase in any manner the compensation or fringe benefits of any director, officer or employee or pay any benefit not required by any plan or agreement as in effect as of the date hereof (including,

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without limitation, the granting of stock options, stock appreciation rights, restricted stock, restricted stock units or performance units or shares pursuant to the KSB Stock Option Plans or otherwise); provided, however, that KSB and the Bank may, in consultation with Camden, grant salary increases to its employees (other than those employees who are officers) at the regular review date of such employees in an aggregate amount for all employees not to exceed four percent (4%) of the aggregate current annualized base salaries of such employees or constitute more than a 10% increase with respect to any one employee; or (ii) enter into, modify or renew any employment, severance or other agreement with any director, officer or employee of KSB or the Bank, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement providing for any benefit to any director, officer or employee;

(xii) take any action with respect to changes in accounting methods, principles or practices, other than changes required by applicable law or GAAP or regulatory accounting as concurred in by KSB’s independent accountants;

(xiii) make any tax election or settle or compromise any Federal, state, local or foreign tax liability;

(xiv) pay, discharge or satisfy any claim, liability or obligation, other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in the consolidated balance sheet of KSB and the Bank included in Annual Report on Form 10-KSB for the period ended December 31, 1998, or subsequently incurred in the ordinary course of business and consistent with past practice or in connection with this Agreement;

(xv) enter into any investment in real estate or in any real estate development project, other than in connection with foreclosures, settlements in lieu of foreclosure or troubled loan or debt restructurings which, in each case, do not require the advance of any new funds and are in the ordinary course of business consistent with past practice;

(xvi) sell any securities in its investment portfolio, except in the ordinary course of business, or engage in transactions in or involving forwards, futures, options on futures, swaps or similar derivative instruments;

(xvii) sell, lease, encumber, assign or otherwise dispose of, or agree to sell, lease, encumber, assign or otherwise dispose of, any of its material assets, properties or other rights or agreements or purchase or sell any loans in bulk;

(xviii) take any action that is intended or reasonably can be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect, or any of the conditions to the consummation of the Merger, the Bank Merger and the other transactions contemplated by this Agreement

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set forth in Article IX not being satisfied in any material respect, or in any material violation of any provision of this Agreement, the Bank Merger Agreements or the KSB Option Agreement, except, in every case, as may be required by applicable law;

(xix) commit any act or omission which constitutes a material breach or default by KSB or the Bank under any agreement or understanding with Bank Regulators or under any material contract or material license to which any of them is a party or by which any of them or their respective properties is bound;

(xx) foreclose upon or take a deed or title to any commercial real estate without first conducting a Phase I environmental assessment of the property or foreclose upon any commercial real estate if such environmental assessment indicates the presence of Hazardous Material in amounts which, if such foreclosure were to occur, would be material;

(xxi) enter into or renew, amend or terminate, or give notice of a proposed renewal, amendment or termination of or make any commitment with respect to, (i) any contract, agreement or lease for office space, operations space or branch space to which KSB or the Bank is a party or by which KSB or the Bank or their respective properties is bound; (ii) any lease, contract or agreement other than in the ordinary course of business consistent with past practice including renewals of leases to existing tenants of KSB or the Bank; (iii) regardless of whether consistent with past practices, any lease, contract, agreement or commitment involving an aggregate payment by or to KSB or the Bank of more than $50,000 or having a term of one year or more from the time of execution;

(xxii) change in any material respect its loan policies or procedures, except as required by regulatory authorities; or

(xxiii) agree to do any of the foregoing.

(c) To the extent that KSB or the Bank is at any time prior to Closing subject to any memorandum of understanding, cease and desist order, injunction, order, judgment, decree or other regulatory restriction, KSB and the Bank shall comply with all requirements of such regulatory restriction and take all steps that are necessary to satisfy and discharge all of their respective obligations thereunder.

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7.2 Camden Products and Services. From and after the date hereof, Camden, KSB and the Bank shall consult with each other on the introduction of products and services not currently offered by KSB or the Bank which Camden would expect to make available to customers following the Merger and the Bank Merger, and KSB and the Bank shall consider offering such products and services to its customers prior to the Effective Date, on terms and conditions mutually acceptable to Camden, KSB and the Bank; provided, however, that nothing herein shall obligate KSB or the Bank to offer any such products or services prior to the Effective Time.

7.3 System Conversions. From and after the date hereof, Camden and the Bank shall meet on a regular basis to discuss and plan for the conversion of the Bank’s data processing and related electronic informational systems to those used by Camden and its Subsidiaries, which planning shall include, but not be limited to, discussion of the possible termination by the Bank of third-party service provider arrangements effective at the Effective Time or at a date thereafter, non-renewal of personal property leases and software licenses used by the Bank in connection with its systems operations and outsourcing, as appropriate, of proprietary or self-provided system services, it being understood that the Bank shall not be obligated to take any such action prior to the Effective Time and, unless the Bank otherwise agrees, no conversion shall take place prior to the Effective Time. In the event that the Bank takes, at the request of Camden, any action relative to third parties to facilitate the conversion that results in the imposition of any termination fees or charges, Camden shall indemnify the Bank on terms reasonably satisfactory to the Bank for any such fees and expenses, and the costs of reversing the conversion process, if either Camden or CASI has failed to fulfill any material obligation under this Agreement and such failure has been the cause of, or resulted in, the termination or this Agreement pursuant to Section 10.1.

7.4 Certain Changes and Adjustments. Prior to the Closing, Camden, KSB and the Bank shall consult and cooperate with each other concerning the Bank’s loan, litigation and real estate valuation policies and practices (including loan classifications and levels of reserves) to reflect Camden’s plans with respect to the conduct of the Surviving Corporation’s business and the then anticipated post-closing disposition of certain assets of the Surviving Corporation following the Bank Merger; provided, however, that neither KSB nor the Bank shall be obligated to take any action pursuant to this Section which is inconsistent with GAAP and unless and until Camden acknowledges, and KSB and the Bank are satisfied, that all conditions to its obligation to consummate the Merger have been satisfied; and provided further, that neither KSB nor the Bank shall be obligated to take any action pursuant to this Section 7.4 earlier than five (5) business days prior to the Effective Date. No action taken by KSB or the Bank pursuant to this Section or the consequences resulting therefrom shall be deemed to be a breach of any representation, warranty, agreement or covenant herein or constitute a Material Adverse Effect.

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7.5 ALCO Management. KSB and the Bank agree that during the period from the date of this Agreement through the Effective Time, they will consult with Camden in the development of a reasonable program to manage the Bank’s interest sensitive assets and liabilities (including its fixed-rate mortgage portfolio and its investment portfolio), which program will include a policy not to acquire securities for the investment portfolio of the Bank other than securities which were issued by the United States of America and have a maturityn date that is not more than two years after the date of acquisition thereof, unless otherwise agreed by the parties. KSB, the Bank and Camden agree to consult on investment programs to be administered by the Bank.

7.6 Covenants of Camden. During the period from the date of this Agreement and continuing until the Effective Time, Camden shall not, and shall not permit any of its subsidiaries to, take any action that is intended or which reasonably can be expected to result in any of its representations and warranties set forth in this Agreement being untrue in any material respect, or in any of the conditions to the Merger, the Bank Merger or other transactions contemplated in this Agreement as set forth in Article IX not being satisfied in any material respect, or in a material violation of any provision of this Agreement, the Bank Merger Agreements or the KSB Option Agreement, except, in every case, as may be required by applicable law.

7.7 Affiliate Agreements.

(a) Not later than the 15th day prior to the mailing of the Joint Proxy Statement, each party shall deliver to the other, a schedule of each person that, to its knowledge, is or is reasonably likely to be, as of the date of the relevant Meeting, deemed to be an affiliate of it (each, an Affiliate) as that term is used in SEC Accounting Series Releases 130 and 135 and, in the case of KSB only, in Rule 145 under the Securities Act.

(b) Each party shall use its reasonable best efforts to cause each person who may be deemed to be an Affiliate of it to execute and deliver to the other party on or before the date of mailing of the Joint Proxy Statement an agreement to comply with SEC Accounting Releases 130 and 135 and, in the case of KSB only, with Rule 145 under the Securities Act, in the forms attached hereto as Exhibits A-1 ( Camden Affiliates Agreement ) and A-2 ( KSB Affiliates Agreement ), respectively.

(c) Within thirty (30) days after the end of the first complete calendar month ending at least thirty (30) days after the Closing Date, Camden will publish results including at least thirty (30) days of combined operations of Camden and KSB as referred to in the KSB Affiliates Agreement and as contemplated by and in accordance with SEC Accounting Release No. 135.

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7.8 Takeover Laws. No party shall take any action that would cause the transactions contemplated by this Agreement and the KSB Option Agreement (in the case of KSB) to be subject to requirements imposed by any Takeover Law and each party shall take all necessary steps within its control to exempt (or ensure the continued exemption of) the transactions contemplated by this Agreement and the KSB Option Agreement (in the case of KSB) from, or if necessary challenge the validity or applicability of, any applicable Takeover Law, as now or hereafter in effect, that purports to apply to this Agreement, the KSB Option Agreement (in the case of KSB) or the transactions contemplated hereby or thereby.

7.9 No Rights Triggered. Each of Camden, CASI and KSB shall take all steps necessary to ensure that the entering into of this Agreement and the consummation of the transactions contemplated hereby and any other action or combination of actions, or any other transactions contemplated hereby, do not and will not result in the grant of any rights to any person (i) under its charter or bylaws, or (ii) under any material agreement to which it or any of its Subsidiaries is a party.

7.10 Shares Listed. In the case of Camden, Camden shall use its reasonable best efforts to list, prior to the Effective Date, on the AMEX, upon official notice of issuance, the shares of Camden Common Stock to be issued to the holders of KSB Common Stock in the Merger.

ARTICLE VIII - ADDITIONAL AGREEMENTS

8.1 Stockholder Approvals. Each of Camden, CASI, KSB and the Bank shall take, in accordance with applicable law, applicable stock exchange or NASDAQ Stock Market rules and its charter and bylaws, all action necessary to convene, respectively: an appropriate meeting of the stockholders of Camden to consider and vote upon any matters required to be approved by Camden stockholders for consummation of the Mergers (including any adjournment or postponement, the Camden Meeting ); an appropriate meeting of the sole stockholder of CASI to consider and vote upon the approval of this Agreement and any other matters required to be approved by CASI s stockholder for consummation of the Mergers (including any adjournment or postponement, the CASI Meeting); an appropriate meeting of the stockholders of KSB to consider and vote upon the approval of this Agreement and any other matters required to be approved by KSB’s stockholders for consummation of the Mergers (including any adjournment or postponement, the KSB Meeting; ); an appropriate meeting of the sole stockholder of the Bank to consider and vote upon the approval of this Agreement and any other matters required to be approved by the Bank s stockholder for consummation of the Mergers (including any adjournment or postponement, the Bank Meeting; and each of the Camden Meeting, the CASI Meeting, the KSB Meeting and the Bank Meeting, a Meeting ), as promptly as practicable after the date hereof. The Board of Directors of each of Camden, CASI, KSB and the Bank shall (subject to compliance with its fiduciary duties as advised by its regular outside counsel, subsequently confirmed in writing)

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recommend such approval by its respective stockholders, and each of Camden, CASI, KSB and the Bank shall use its reasonable best efforts to solicit such approval from its stockholders.

8.2 Registration Statement.

(a) Camden and KSB agree to cooperate in the preparation of a registration statement on Form S-4 (the Registration Statement ) to be filed by Camden with the SEC in connection with the issuance of Camden Common Stock in the Merger (including the joint proxy statement and prospectus and other proxy solicitation materials of Camden and KSB constituting a part thereof (the Joint Proxy Statement ) and all related documents). Camden and KSB agree to file a draft of the Joint Proxy Statement with the SEC as promptly as practicable. Each of Camden and KSB agrees to use all reasonable efforts to cause the Registration Statement to be filed and declared effective under the Securities Act as promptly as reasonably practicable after the SEC has cleared the Joint Proxy Statement. Camden also agrees to use all reasonable efforts to obtain all necessary state securities law or blue sky permits and approvals required to carry out the transactions contemplated by this Agreement.

(b) Each of Camden and KSB agrees, upon request, to furnish promptly the other party with all information concerning itself, its Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with the Registration Statement, the Joint Proxy Statement or any filing, notice or application made by or on behalf of such other party or any of its Subsidiaries to any regulatory authority in connection with the transactions contemplated hereby. Each of Camden and KSB agrees, as to itself and its Subsidiaries, that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in (i) the Registration Statement will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Joint Proxy Statement and any amendment or supplement thereto will, at the date of mailing to stockholders and at the times of the Camden Meeting and the KSB Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or any statement which, in the light of the circumstances under which such statement is made, will be false or misleading with respect to any material fact, or which will omit to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier statement in the Joint Proxy Statement or any amendment or supplement thereto. Each of Camden and KSB further agrees that if it shall become aware prior to the Effective Date of any information that would cause any of the statements in the Joint Proxy Statement to be false or misleading with respect to any material fact, or to omit to state any material fact necessary to make the statements therein not false or misleading, it shall promptly inform the other party thereof and shall take the necessary steps to correct the Joint Proxy Statement.

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(c) In the case of Camden, Camden will advise KSB, promptly after Camden receives notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order or the suspension of the qualification of the Camden Common Stock for offering or sale in any jurisdiction, of the initiation or threat of any proceeding for any such purpose, or of any request by the SEC for the amendment or supplement of the Registration Statement or for additional information.

8.3 Regulatory Matters.

(a) The parties hereto shall cooperate with each other and use their reasonable best efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, and to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Governmental Entities which are necessary or advisable to consummate the transactions contemplated by this Agreement and the Bank Merger Agreements (including without limitation the Merger and the Bank Merger). Camden, KSB and the Bank shall have the right to review in advance, and to the extent practicable, each will consult the other on, in each case subject to applicable laws relating to the exchange of information, all the information relating to either of them, as the case may be, and any of their respective subsidiaries, which appear in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the Merger, the Bank Merger and the other transactions contemplated by this Agreement and by the Bank Merger Agreements. In exercising the foregoing right, each of the parties hereto shall act reasonably and as promptly as practicable. The parties hereto agree that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the Merger, the Bank Merger and other transactions contemplated by this Agreement and the Bank Merger Agreements and each party will keep the other apprised of the status of matters relating to the completion of all of the transactions contemplated hereby.

(b) Camden, KSB, CASI and the Bank shall, upon request, furnish each other with all information concerning themselves, their respective subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with any statement, filing, notice or application made by or on behalf of Camden, KSB, CASI, the Bank or any of their respective subsidiaries to any Governmental Entity in connection with the Merger, the Bank Merger or the other transactions contemplated by this Agreement and the Bank Merger Agreements.

(c) Camden, KSB, CASI and the Bank shall promptly furnish each other with copies of written communications received by Camden or KSB, as the case may be, or any of their respective subsidiaries, affiliates or associates (as such terms are defined in Rule 12b-2 under the Exchange Act as in effect on the date of this Agreement) from, or delivered by any of the foregoing to, any Governmental Entity in respect of the Merger,

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the Bank Merger and the other transactions contemplated by this Agreement and the Bank Merger Agreement.

8.4 Access to Information.

(a) Upon reasonable notice and subject to applicable laws relating to the disclosure or exchange of information, KSB and the Bank shall afford to the officers, employees, accountants, counsel and other representatives of Camden, access, during normal business hours during the period prior to the Effective Time, to all its officers, employees, agents, properties, books, loan documentation and files, contracts, commitments and records and, during such period, KSB and the Bank shall make available to Camden (i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws or federal or state banking laws (other than reports or documents which KSB or the Bank is not permitted to disclose under applicable law), (ii) copies of all periodic reports to senior management, including, without limitation, reports on non-performing loans and other asset quality matters and all materials furnished to the KSB Board or the Bank Board relating to asset quality generally, and (iii) all other information concerning the business, properties, assets and personnel of KSB and the Bank as Camden may reasonably request. Neither KSB nor the Bank shall be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of customers, jeopardize the attorney-client privilege of the institution in possession or control of such information or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement or, in the event of any litigation or threatened litigation between KSB, the Bank and Camden over the terms of this Agreement where access to information will be adverse to the interests of KSB and the Bank. The parties hereto will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. Camden will hold all such information in confidence to the extent required by, and in accordance with, the provisions of the confidentiality agreements, dated July 1, 1999, among Camden, KSB and the Bank (the “Confidentiality Agreement”).

(b) Upon reasonable notice and subject to applicable laws relating to the disclosure or exchange of information, Camden shall afford to the officers, employees, accountants, counsel and other representatives of KSB, reasonable access, during normal business hours during the period prior to the Effective Time, to the senior executive officers of Camden and all other available documentation reasonably requested by KSB pertaining to the transactions contemplated hereby. It is understood, however, that Camden shall not be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of customers, jeopardize the attorney-client privilege of the institution in possession or control of such information or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement or, in the event of any litigation or threatened litigation between Camden, KSB and/or the Bank over the terms of this Agreement where access to information will be adverse to the interests of

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Camden. The parties hereto will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. KSB will hold all such information in confidence to the extent required by, and in accordance with, the provisions of the Confidentiality Agreement.

(c) All information furnished by Camden to KSB, the Bank or its representatives pursuant hereto shall be treated as the sole property of Camden and, if the Merger shall not occur, KSB, the Bank and its representatives shall return to Camden all of such written information and all documents, notes, summaries or other materials containing, reflecting or referring to, or derived from, such information. KSB and the Bank shall, and shall use their reasonable best efforts to cause their representatives to, keep confidential all such information, and shall not directly or indirectly use such information for any competitive or other commercial purpose. The obligation to keep such information confidential shall continue for five years from the date the proposed Merger is abandoned and shall not apply to (i) any information which (x) was already in KSB s or the Bank’s possession prior to the disclosure thereof by Camden; (y) was then generally known to the public; or (z) was disclosed to KSB or the Bank by a third party not bound by an obligation of confidentiality, or (ii) disclosures made as required by law.

(d) No investigation by any of the parties or their respective representatives shall affect the representations and warranties of the other set forth herein or any condition to the obligations of the parties hereto.

8.5 No Solicitation. Neither KSB nor the Bank shall, directly or indirectly, through any officer, director, agent or otherwise, solicit or initiate the submission of any proposal or offer from any person relating to any acquisition or purchase of all or (other than in the ordinary course of business) any material portion of the assets of, or any equity interest in, KSB or the Bank or any business combination with KSB or the Bank or, except to the extent determined by the KSB Board, upon the written opinion of its regular outside counsel, to be required by fiduciary obligations under applicable law, participate in any negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate, any effort or attempt by any other person to do or seek any of the foregoing. KSB and the Bank immediately shall cease and cause to be terminated all existing discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. KSB and the Bank shall notify Camden promptly if any such proposal or offer, or any inquiry or contact with any person with respect thereto, is made and shall, in any such notice to Camden, indicate in reasonable detail the identity of the person making such proposal, offer, inquiry or contact and the terms and conditions of such proposal, offer, inquiry or contact. KSB and the Bank agree not to release any third party from, or waive any provision of, any confidentiality or standstill agreement to which KSB or the Bank is a party.

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8.6 Employee Benefits Matters.

(a) Provision of Benefits. At the Effective Time, until December 31, 2000, and subject to applicable law, Camden shall either (i) maintain the existing KSB Compensation and Benefit Plans (other than long-term care benefits, the ESOP and other stock-based benefits), or (ii) provide the employees of KSB and the Bank (“KSB Employees”) with substantially equivalent health, life insurance, disability, retirement and other benefits (other than long-term care benefits, the ESOP and other stock-based benefits), if any, as presently provided by KSB to its own employees. After December 31, 2000, and subject to applicable law, Camden shall provide the KSB Employees with the same health, dental, pension, life insurance, disability, 401(k) plan and other benefits, if any, as Camden then provides generally to its similarly situated employees. With respect to the provision of such benefits to KSB Employees pursuant hereto, to the extent KSB Employees participate after the Effective Time in employee benefit plans other than KSB Compensation and Benefit Plans, all prior service of such employees with KSB or the Bank shall be recognized under such plans for all benefit plan for purposes of eligibility and vesting, but excluding benefit accrual under any qualified defined benefit pension plan. Camden shall not treat any KSB Employee as a “new” employee for purposes of any exclusion under any health plan or dental plan of Camden or any of its affiliates for a preexisting medical condition. Nothing herein is intended or should be construed to provide a commitment for continued employment or to confer any rights on any officer or employee of the Bank except as herein expressly provided.

(b) Parachute Payments. Notwithstanding anything to the contrary contained in this Agreement, in no event shall KSB or the Bank take any action or make any payments that would result, either individually or in the aggregate, in the payment of an “excess parachute payment” within the meaning of Section 280G of the Code or that would result, either individually or in the aggregate, in payments that would be nondeductible pursuant to Section 162(m) of the Code.

(c) Employment Agreement. The Chief Executive Officer of KSB shall enter into an employment agreement with Camden or a Camden Affiliate on terms mutually agreeable to both parties, with such employment agreement to take effect at the Effective Time. The employment agreement to which the Chief Executive Officer of KSB is a party as of the date hereof will terminate upon the earlier of (i) execution of the employment agreement with Camden or a Camden Affiliate, and (ii) the Effective Time.

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8.7 Directors’ and Officers’ Insurance. Camden shall use its reasonable best efforts to maintain in effect for three years from the Effective Time, if available, the current directors’ and officers’ liability insurance policy maintained by KSB (provided that Camden may substitute therefore policies of at least the same coverage containing terms and conditions which are not materially less favorable) with respect to matters occurring prior to the Effective Time; provided, however, that in no event shall Camden be required to expend pursuant to this Section 8.7 more than the amount equal to 125% of the current annual amount expended by KSB to maintain or procure insurance coverage pursuant hereto. In connection with the foregoing, KSB and the Bank each agrees to provide such insurer or substitute insurer with such representations as such insurer may request with respect to the reporting of any prior claims.

In addition, Camden acknowledges that the obligations of KSB to indemnify its directors and officers (who are made a party or threatened to be made a party or otherwise involved with respect to any action, suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she was a director of KSB at or prior to the Effective Date) under its Certificate of Incorporation and Bylaws, as they exist as of the date of this Agreement, including the obligation to advance expenses, shall be assumed by Camden by reason of the Merger.

8.8 Financial and Other Statements. Notwithstanding anything to the contrary in Section 8.4, during the term of this Agreement, KSB, and when required by subsection (f) hereof, Camden, shall provide to each other, in the manner provided herein, the following documents and information:

(a) As soon as reasonably available, but in no event more than 45 days after the end of each fiscal quarter ending after the date of this Agreement, KSB will deliver to Camden its Quarterly Report on Form 10-QSB as filed under the Exchange Act and the Bank’s Quarterly Call Report as filed with the FDIC. As soon as reasonably available, but in no event more than 90 days after the end of each fiscal year ending after the date of this Agreement, KSB will deliver to Camden its Annual Report on Form 10-KSB, as filed under the Exchange Act. KSB will also deliver to Camden, contemporaneously with its being filed with the SEC, a copy of all Current Reports on Form 8-KSB.

(b) Promptly upon receipt thereof, KSB will furnish to Camden copies of all internal control reports submitted to KSB or the Bank by independent auditors in connection with each annual, interim or special audit of the books of KSB or the Bank made by such auditors.

(c) As soon as practicable, KSB and the Bank will furnish to Camden copies of all such financial statements and reports as they shall send to its stockholders, the SEC or any other Governmental Entity, to the extent any such reports furnished to any such Governmental Entity are not confidential and except as legally prohibited thereby.

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(d) Promptly upon receipt thereof KSB will notify Camden promptly after its receipt of each examination report of any federal or state regulatory or examination authority with respect to the condition or activities of KSB or the Bank.

(e) With reasonable promptness, KSB and the Bank will furnish to Camden such additional financial data as Camden may reasonably request.

(f) As soon as reasonably available, but in no event more than 45 days after the end of each fiscal quarter ending after the date of this Agreement, Camden will deliver to KSB its Quarterly Report on Form 10-Q as filed under the Exchange Act and United Bank’s Quarterly Call Report as filed with the FDIC. As soon as reasonably available, but in no event more than 90 days after the end of each fiscal year ending after the date of this Agreement, Camden will deliver to KSB its Annual Report on Form 10-K, as filed under the Exchange Act. Camden will also deliver to KSB, contemporaneously with its being filed with the SEC, a copy of all Current Reports on Form 8-K.

8.9 Further Action. Camden, KSB, CASI and the Bank each shall, and shall cause its subsidiaries to, use its reasonable best efforts (a) to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements which may be imposed on such party or its subsidiaries with respect to the Merger or the Bank Merger and, subject to the conditions set forth in Article IX hereof, to consummate the transactions contemplated by this Agreement and the Bank Merger Agreements and (b) to obtain (and to cooperate with the other party to obtain) any consent, authorization, order or approval of, or any exemption by, any Governmental Entity and any other third party which is required to be obtained by KSB, the Bank, Camden or CASI or any of their respective subsidiaries in connection with the Merger or the Bank Merger and any of the other transactions contemplated by this Agreement.

8.10 Public Announcements. Camden, KSB, CASI and the Bank shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement, the Bank Merger Agreements or any transaction contemplated hereby or thereby and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or any listing agreement with a national or regional securities exchange to which Camden or KSB is a party or any requirement of agreement with any automated interdealer quotation system.

8.11 Additional Agreements. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement or the Bank Merger Agreement, or to vest the Surviving Corporation or the Bank, as applicable, with full title to all properties, assets, rights, approvals, immunities and franchises of any of the parties to the Merger or the Bank Merger, the proper officers and directors of each party to this Agreement and their respective subsidiaries shall take all such necessary action as may be reasonably requested by Camden.

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8.12 Update of Disclosure Schedules. From time to time prior to the Effective Time, KSB and Camden will promptly supplement or amend the Disclosure Schedules to reflect any matter which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in the Disclosure Schedules or which is necessary to correct any information in the Disclosure Schedules which has been rendered inaccurate thereby. No supplement or amendment to the Disclosure Schedules shall have any effect for the purpose of determining satisfaction of the conditions set forth in Sections 9.1(a), 9.2(a) or 9.3(a) hereof, as the case may be, or the compliance by KSB or the Bank with the covenants set forth in Article VII hereof, or Camden or CASI with the covenants set forth in Section 7.6 and Section 8.8 hereof.

8.13 Current Information.

(a) During the period from the date of this Agreement to the Effective Time, KSB and the Bank will cause one or more of its designated representatives (i) to confer on a regular and frequent basis (not less than monthly) with representatives of Camden to report on (x) the general status of the ongoing operations of KSB and the Bank, (y) the status of, and the action proposed to be taken with respect to, those Loans held by KSB, the Bank or any of their subsidiaries which, either individually or in combination with one or more other Loans to the same borrower thereunder, have an aggregate original principal amount of $75,000 or more and are classified or non-performing assets, and (z) the status of, and the action proposed to be taken with respect to, foreclosed property and other real estate owned, and (ii) to cooperate and communicate with respect to the manner in which the business of KSB and the Bank are conducted and the disposition of certain assets after the Effective Time, the type and mix of products and services, personnel matters, branch alignment, the granting of credit, and problem loan management, reserve adequacy and accounting. In addition, KSB and the Bank will promptly make available to Camden the reports of any independent or third-party loan review consultant received by either KSB or the Bank. In order to facilitate the foregoing, KSB, the Bank and Camden shall promptly establish a liaison committee (the Liaison Committee ) which will be chaired by an officer designated by Camden and which will meet on a regular basis to discuss these matters and may establish sub-committees from time-to-time to pursue various issues. During the period from the date of this Agreement to the Effective Time, KSB and the Bank shall provide Camden prior to such extensions with sufficient information to review new extensions of credit and renewals having an original principal amount of more than $400,000 and restructurings of loans having an original principal amount of more than $75,000 and information detailing overall asset quality. The Bank shall also allow Camden to designate one of its officers to attend the Bank s credit committee meetings and be a non-voting attendee thereof.

(b) KSB and the Bank will promptly notify Camden of any material change in the normal course of business or in the operation of the properties of KSB or the Bank and of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or the threat of material litigation involving KSB or the Bank, and will keep Camden reasonably informed of such events.

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(c) To the extent not covered by paragraphs (a) and (b) above, KSB and the Bank shall give prompt notice to Camden, and Camden shall give prompt notice to KSB, of (i) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which would be reasonably likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect and (ii) any failure of KSB, the Bank, Camden or CASI, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement or the Bank Merger Agreements; provided, however, that the delivery of any notice pursuant to this paragraph (c) shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice.

8.14 Bank Merger.

(a) Camden and KSB shall take all actions necessary and appropriate, including causing the entering into of appropriate merger agreements (the Bank Merger Agreements ), to cause United Bank to merge with and into the Bank (individually, a Bank Merger and collectively, the Bank Mergers ), as Camden deems advisable, in each case in accordance with applicable laws and regulations and the terms of the applicable Bank Merger Agreement at the Effective Time or as soon as practicable after consummation of the Mergers.

(b) Unless otherwise determined by Camden prior to the Closing, at the effective time of the Bank Merger the Articles of Organization and By-laws of the Bank, as amended prior to the consummation of the Bank Merger, shall be the Articles of Organization and By-laws of the surviving corporation until thereafter amended as provided by law and such Articles of Organization and By-laws;

(c) KSB shall be entitled to appoint the individuals listed on Section 8.14 of the Disclosure Schedule as directors and officers of the Bank after the effective time, each to hold office in accordance with the Articles of Organization and By-Laws of the Bank and until their respective successors are duly elected or appointed and qualified. The remainder of the directors and officers of the Bank shall be appointed by Camden.

8.15 Post-Closing Governance. Camden shall take all necessary actions to cause the size of its Board of Directors to be increased by two members, effective as of the Subsequent Effective Time, and to cause the two members of KSB s current Board of Directors listed on Section 8.15 of the Disclosure Schedule to be elected to Camden s Board of Directors, such election to be effective as of the Subsequent Effective Time.

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ARTICLE IX - CONDITIONS TO THE MERGER

9.1 Conditions to Each Party’s Obligations to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions:

(a) Stockholder Approval. This Agreement and the transactions contemplated hereby shall have been approved and adopted by the affirmative vote of the stockholders of KSB, the Bank, Camden and CASI, as required;

(b) Regulatory Approvals. All necessary approvals, authorizations and consents of all Governmental Entities required to consummate the Mergers and the Bank Merger shall have been obtained and remain in full force and effect, and all waiting periods relating to such approvals, authorizations and consents shall have expired or been terminated (all such approvals and the expiration of all such waiting periods being referred to herein as the “Requisite Regulatory Approvals”).

(c) No Orders, Injunctions or Restraints; Illegality. No order, injunction or decree (whether temporary, preliminary or permanent) issued by federal or state governmental authority or other agency or commission or federal or state court of competent jurisdiction or other legal restraint or prohibition (an “Injunction”) preventing the consummation of the Merger, the Bank Merger or any of the other transactions contemplated by this Agreement or the Bank Merger Agreements shall be in effect and no proceeding initiated by any governmental entity seeking an Injunction shall be pending. No statute, rule, regulation, order, injunction or decree (whether temporary, preliminary or permanent) shall have been enacted, entered, promulgated or enforced by any Governmental Authority or other agency or commission or federal or state court of competent jurisdiction, which prohibits, restricts or makes illegal the consummation of the Merger, the Bank Merger or any of the other transactions contemplated by this Agreement or the Bank Merger Agreements.

(d) Effective Registration Statement. The Registration Statement shall have become effective and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC or any other Governmental Entity.

(e) Tax Opinion Relating to the Merger. Camden shall have received an opinion from Berry, Dunn, McNeil & Parker, and KSB shall have received an opinion from Luse, Lehman, Gorman, Pomerenk & Schick, dated in each case as of the Closing Date, substantially to the effect that, on the basis of the facts, representations and assumptions set forth in such opinions which are consistent with the state of facts existing at the Closing Date, the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code.

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In rendering such opinions, such counsel may require and rely upon representations and covenants including those contained in certificates of officers of Camden, KSB and others, reasonably satisfactory in form and substance to such counsel.

(f) AMEX Listing. The shares of Camden Common Stock issuable pursuant to this Agreement shall have been approved for listing on the AMEX, subject to official notice of issuance.

(g) Accounting Treatment. Camden shall have received from Berry, Dunn, McNeil & Parker, independent public accountants for Camden, a letter, dated as of or shortly before the Effective Date, stating its opinion that the Merger shall qualify for pooling of interests accounting treatment. KSB shall have received from Berry, Dunn, McNeil & Parker, independent public accountants for KSB, a letter, dated as of or shortly before the Effective Date, stating its opinion that KSB is a poolable entity.

9.2 Conditions to Obligations of Camden and CASI. The obligations of Camden and CASI to effect the Merger are also subject to the following conditions:

(a) Representations and Warranties. Each of the representations and warranties of KSB and the Bank in this Agreement which is qualified as to materiality shall be true and correct and each such representation or warranty that is not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement, as applicable, and (except to the extent such representations and warranties speak as of an earlier date) as of the Effective Time, and Camden shall have received a certificate to such effect signed by the Chief Executive Officer and the Chief Financial Officer of KSB and the Bank dated as of the Effective Date.

(b) Agreements and Covenants. KSB and the Bank shall have performed in all material respects all obligations and complied in all material respects with all agreements or covenants of KSB and the Bank to be performed or complied with by it at or prior to the Effective Date under the this Agreement and the Bank Merger Agreements, and Camden shall have received a certificate to such effect signed by the Chief Executive Officer and Chief Financial Officer of KSB and the Bank dated as of the Effective Date.

(c) Consents Under Agreements. The consent, approval or waiver of each person (other than Requisite Regulatory Approvals contemplated in Section 9.1(b)) whose consent or approval shall be required in order to permit the lawful succession by the Surviving Corporation pursuant to the Merger or the Bank as survivor to the Bank Merger, as the case may be, to any material obligation, right or interest of KSB or the Bank under agreement or instrument shall have been obtained, and none of such permits, consents, waivers, clearances, approvals and authorizations shall contain any term or condition which would materially impair the value of KSB and the Bank to Camden.

(d) No Burdensome Condition. None of the Requisite Regulatory Approvals shall impose any term, condition or restriction upon Camden, KSB, the Surviving

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Corporation or the Bank or any of their respective subsidiaries that Camden reasonably determines would materially and adversely affect the business, operations, financial condition, property or assets of the Surviving Corporation or the Bank as survivor to the Bank Merger or otherwise materially impair the value of KSB or the Bank to Camden (a “Burdensome Condition”).

(e) Agreements with Officers. Agreements, substantially in the form attached as Exhibit D hereto, shall have been executed and delivered by all directors and officers of KSB or the Bank who own, or for purposes of Rule 13d-3 under the Exchange Act would be deemed to beneficially own, as of the date of this Agreement, shares of KSB Common Stock.

(f) Legal Opinion. Camden shall have received the opinion of counsel to KSB and the Bank, dated the Closing Date, in customary form and mutually agreeable to the parties.

9.3 Conditions to Obligations of KSB and the Bank. The obligations of KSB and the Bank to effect the Merger are also subject to the following conditions:

(a) Representations and Warranties. Each of the representations and warranties of Camden and CASI in this Agreement which is qualified as to materiality shall be true and correct and each such representation or warranty that is not so qualified shall be true and correct in all material respects, 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 Effective Date and KSB shall have received a certificate signed by the Chief Executive or Chief Financial Officer of Camden to such effect dated as of the Effective Date.

(b) Agreements and Covenants. Camden and CASI shall have performed in all material respects all obligations and complied in all material respects with all of the respective agreements or covenants to be performed or complied by such party under this Agreement and KSB shall have received a certificate signed by the Chief Executive or Chief Financial Officer of Camden to such effect dated as of the Effective Date.

(c) Legal Opinion. KSB shall have received the opinion of counsel to Camden and CASI, dated the Closing Date, in customary form and mutually agreeable to the parties.

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ARTICLE X - TERMINATION, AMENDMENT AND WAIVER

10.1 Termination. This Agreement may be terminated and the Merger, the Bank Merger and the other transactions contemplated by this Agreement or the Bank Merger Agreements may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the transactions contemplated in this Agreement by the stockholders of KSB:

(a) by mutual written consent duly authorized by the Boards of Directors of Camden, CASI, KSB and the Bank;

(b) by either Camden and CASI or KSB and the Bank if (i) the Effective Time shall not have occurred on or before July 1, 2000; provided, however, that the right to terminate this Agreement under this Section 10.1(b) shall not be available to any party whose failure to fulfill any material obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date;

(c) by either Camden and CASI or KSB and the Bank (i) forty-five days after the date on which any request or application for a regulatory approval required to consummate the Merger or the Bank Merger shall have been denied or withdrawn at the request or recommendation of the Governmental Entity which must grant such requisite regulatory approval, unless within the forty-five day period following such denial or withdrawal a petition for rehearing or an amended application has been filed with such Governmental Entity; provided, however, that no party shall have the right to terminate this Agreement pursuant to this Section 10.1(c) (i) if such denial or request or recommendation for withdrawal shall be due to the failure of the party seeking to terminate this Agreement to perform or observe the covenants and agreements of such party set forth herein or (ii) if any court of competent jurisdiction or other Governmental Entity shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger or the Bank Merger and such order, decree, ruling or other action shall have become final and nonappealable;

(d) by either Camden and CASI or KSB and the Bank (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach of any of the representations or warranties set forth in this Agreement on the part of the other party, which breach by its nature cannot be cured prior to the Effective Time or within thirty business days following receipt by the breaching party of written notice of such breach from the other party hereto;

(e) by either Camden and CASI or KSB and the Bank (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach of any of the covenants or agreements set forth in this Agreement on the part of the other party, which breach shall not have been cured within thirty business days following receipt by the breaching party of written notice of such breach from the other party hereto;

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(f) by Camden and CASI or KSB and the Bank (provided, that if the terminating party is KSB or the Bank, KSB and the Bank shall not be in material breach of any of their obligations under Section 8.1) if any approval of the stockholders of KSB required for the consummation of the Merger shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of stockholders or at any adjournment or postponement thereof;

(g) by Camden, if KSB Board shall not have publicly recommended to the stockholders of KSB that such stockholders vote in favor of the approval of this Agreement, the Merger and the other transactions contemplated hereby or shall have withdrawn, modified or amended such recommendation in a manner adverse to Camden;

(h) by KSB, if the Board of Directors of Camden shall not have publicly recommended to the stockholders of Camden that such stockholders vote in favor of the approval of this Agreement, the Merger and the other transactions contemplated hereby or shall have withdrawn, modified or amended such recommendation in a manner adverse to KSB;

(i) by the Board of Directors of KSB, upon written notice to Camden, at any time during the five day period commencing two days after the Determination Date (as defined below), if both the following conditions are satisfied:

(i) the Average Closing Price of Camden Common Stock on the Determination Date is less than $15.75 (such amount is referred to herein, as the Camden Floor Price ); and

(ii) (A) the quotient obtained by dividing the Average Closing Price of Camden Common Stock on the Determination Date by Camden’s Starting Date Closing Price (the Camden Ratio ) is less than (B) the quotient obtained by dividing the Index Price as of the Determination Date by the Index Price as of the Starting Date and subtracting 0.15 from the quotient in this clause (ii)(B) (such number being referred to herein as the Camden Index Ratio ).

Notwithstanding the foregoing provisions of this Section 10.1(i), if KSB elects to exercise its termination right pursuant to this Section 10.1(i) it shall give prompt written notice to Camden; provided, however, that such notice of election to terminate may be withdrawn by KSB at any time within the above-referenced five-day period. In the event that KSB gives notice of its intention to exercise the termination provisions of this Section 10.1(i), Camden shall have the option, exercisable within five (5) business days receipt thereof, to increase the Exchange Ratio to equal the lesser of (i) a number (rounded to four decimals) equal to a quotient, the numerator of which the Camden Floor Price multiplied by the Exchange Ratio (as then in effect) and the denominator of which is the Average Closing Price of Camden Common Stock, and (ii) a number (rounded to four decimals) equal to a quotient, the numerator of which is the Camden Index Ratio multiplied by the Exchange Ratio (as then in effect) and the denominator of which is the

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Camden Ratio. If Camden elects to exercise its option to increase the consideration in accordance with the terms of the previous sentence within the aforementioned five business day period, it shall give prompt written notice to KSB of such election and the revised Exchange Ratio, whereupon no termination shall have occurred pursuant to this Section 10.1(i), and this Agreement shall remain in effect in accordance with its terms (except the Exchange Ratio shall have been modified), and any references in this Agreement to Exchange Ratio shall thereafter be deemed to refer to the Exchange Ratio as so adjusted.

For purposes of this Section 10.1, the following terms shall have the meanings indicated:

Average Closing Price means the average of the daily last sale prices of Camden Common Stock as reported on the AMEX (as reported in The Wall Street Journal or, if not reported therein, in another mutually agreed upon authoritative source) for the fifteen consecutive full trading days in which such shares are traded on the AMEX ending at the close of trading on the Determination Date.

Determination Date means the date on which the last Requisite Regulatory Approval required for consummation of the Merger shall be received.

Index Group means the bank holding companies listed below, the common stock of all of which shall be publicly traded as to which there shall not have been, since the Starting Date and before the Determination Date, an announcement of a proposal for such company to be merged with another unaffiliated company, acquired by an unaffiliated company or for such company to acquire another unaffiliated company or companies in transactions with an aggregate value exceeding 10% of the acquiror s market capitalization as of the Starting Date. In the event that the common stock of any such company ceases to be publicly traded or any such announcement is made with respect to any such company, such company will be removed from the Index Group, and the weights (which have been determined based on the number of outstanding shares of common stock) redistributed proportionately for purposes of determining the Index Price. The bank holding companies and the weights attributed to them are set forth on Exhibit B hereto.

Index Price on a given date means the weighted average (weighted in accordance with the factors listed above) of the closing prices on such date of the companies comprising the Index Group.

Starting Date means the last full day on which the AMEX was open for trading prior to the execution of this Agreement.

If Camden or any company belonging to the Index Group declares or effects a stock dividend, reclassification, recapitalization, split-up, combination, exchange of shares or similar transaction between the Starting Date and the Determination Date, the

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prices for the common stock of such company shall be appropriately adjusted for the purposes of applying this Section 10.1(i).

10.2 Effect of Termination; Expenses.

(a) In the event of the termination of this Agreement pursuant to Section 10.1, this Agreement shall forthwith become void, and there shall be no liability on the part of any party hereto, except (i) as set forth in Section 7.3, this Section 10.2 or Section 11.2 and (ii) nothing herein shall relieve any party from any liabilities or damages arising out of its gross negligence or willful breach of any provision of this Agreement.

(b) If this Agreement is terminated as a result of any breach of a representation, warranty, covenant or other agreement which is caused by the gross negligence or willful breach of a party hereto, such party shall be liable to the other party for all out-of-pocket costs and expenses, including, without limitation, the reasonable fees and expenses of lawyers, accountants and investment bankers, incurred by such other party in connection with the entering into of this Agreement and the carrying out of any and all acts contemplated hereunder (“Expenses”). The payment of Expenses is not an exclusive remedy, but is in addition to any other rights or remedies available to the parties hereto at law or in equity.

(c) As a condition of Camden’s willingness, and in order to induce Camden, to enter into this Agreement and to reimburse Camden for incurring the costs and expenses related to entering into this Agreement and consummating the transactions contemplated by this Agreement, the Bank will make a cash payment to Camden of $1,000,000 (the “Expense Fee”), which shall be subject to reduction at the election of Camden (as described below), if (i) Camden has terminated this Agreement pursuant to Section 10.1(g), (ii) Camden has terminated this Agreement pursuant to Section 10.1(d) or Section 10.1(e), and the breach of the representation, warranty, covenant or other agreement was caused by the gross negligence or willful misconduct of KSB or the Bank, or (iii) KSB or the Bank has breached any of the provisions of Section 8.5; provided, however, that Camden shall not be entitled to receive the Expense Fee if either Camden or CASI has failed to fulfill any material obligation under this Agreement and such failure has been the cause of, or resulted in, the termination of this Agreement pursuant to Section 10.1. Notwithstanding anything herein or in the KSB Option Agreement to the contrary, in no event shall the aggregate amount of the Expense Fee actually paid to Camden and the Total Profit (as defined in the KSB Option Agreement) actually received by Camden upon exercise or waiver of any of its rights under the KSB Option Agreement exceed $1,400,000 (the Maximum Fee ). In the event that Camden would be entitled to receive, pursuant to the terms of the preceding sentence and/or the KSB Option Agreement, an aggregate amount that exceeds the Maximum Fee, Camden may elect, in its sole discretion, to (y) reduce the Expense Fee payable by KSB to Camden, or (z) relinquish a portion of the Option or Option Shares (as such terms are defined in the KSB Option Agreement), or elect to effect any combination of clause y or clause z above, such that the aggregate of the Expense Fee payable to Camden and the Total Profit receivable by Camden would not exceed the Maximum Fee.

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Any payment required under this Section 10.2(c) will be (i) payable by KSB and the Bank to Camden (by wire transfer of immediately available funds to an account designated by Camden) within five business days after demand by Camden and (ii) net of any other payments made by KSB and the Bank to Camden pursuant to the provisions of Section 10.2(b).

(d) Except as otherwise provided in this Section 10.2, all costs and expenses incurred in connection with this Agreement, the Bank Merger Agreements and the transactions contemplated hereby and thereby shall be paid by the party incurring such expenses, whether or not any of the transactions contemplated by this Agreement is consummated.

10.3 Amendment. This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, that, after the approval and adoption of this Agreement and the transactions contemplated hereby, no amendment may be made which would reduce the amount or change the type of consideration into which each share of KSB Common Stock shall be converted upon consummation of the Merger. This Agreement, including the provisions of this Section 10.3, may not be amended except by an instrument in writing signed by the parties hereto.

10.4 Waiver. At any time prior to the Effective Time, any party hereto may (i) extend the time for the performance of any obligation or other act of any other party hereto, (ii) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein; provided, however, that after the approval and adoption of this Agreement and the approval of the transactions contemplated hereby by the stockholders of KSB there may not be, without further approval of such stockholders, any extension or waiver of this Agreement or any portion thereof which would reduce the amount or change the form of the consideration into which each share of KSB Common Stock shall be converted upon consummation of the Merger delivered to KSB’s stockholders hereunder other than as contemplated by this Agreement. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

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ARTICLE XI - GENERAL PROVISIONS

11.1 Alternative Structure. Notwithstanding anything to the contrary contained in this Agreement, prior to the Effective Time, Camden shall be entitled to revise the structure of the Merger, the Bank Merger and the other transactions contemplated hereby and thereby, provided, that (i) there are no material adverse federal or state income tax consequences to KSB, the Bank and its stockholders as a result of the modification; (ii) the consideration to be paid to the holders of the shares of KSB Common Stock under this Agreement is not thereby changed in kind or reduced in amount; (iii) there are no material adverse changes to the benefits and other arrangements provided to or on behalf of KSB s and the Bank s directors, officers and other employees; and (iv) such modification will not be likely to delay materially or jeopardize receipt of any required regulatory approvals or other consents and approvals relating to the consummation of the Merger and the Bank Merger. This Agreement and any related documents shall be appropriately amended in order to reflect any such revised structure.

11.2 Non-Survival of Representations, Warranties and Agreements. The representations, warranties and agreements in this Agreement shall terminate at the Effective Time or upon the termination of this Agreement pursuant to Section 10.1, as the case may be, except that the agreements set forth in Articles II and III and Sections 8.6, 8.7, 8.14(c) and 8.15 shall survive the Effective Time indefinitely and those set forth in the last sentence of Section 8.4(a) and in Sections 8.4(b), Article X and Article XI hereof shall survive termination indefinitely.

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11.3 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, telegram or telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11.3):

if to Camden or CASI:

Camden National Corporation

2 Elm Street

Camden, ME 04843

Facsimile:

Attention: Robert W. Daigle

with a copy to:

Goodwin, Procter & Hoar LLP

One Exchange Place

Boston, MA 02109

Facsimile: (617) 523-1231

Attention: William P. Mayer, Esq.

Stephen A. Boyko, Esq.

if to KSB or the Bank:

KSB Bancorp, Inc.

Main Street

Kingfield, Maine 04947

Facsimile:

Attention: John C. Witherspoon

with a copy to:

John J. Gorman, Esq.

Luse, Lehman, Gorman, Pomerenk & Schick

5335 Wisconsin Avenue, N.W.

Washington, D.C. 20015

Facsimile: (202) 362-2902

11.4 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner adverse to any party. Upon such determination

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that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the fullest extent possible.

11.5 Entire Agreement. This Agreement (including the Disclosure Schedule and the Exhibits) and the KSB Option Agreement constitute, and the Bank Merger Agreements when the same are executed by Camden and the Bank will constitute, the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof except for the Confidentiality Agreement.

11.6 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.

11.7 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person (other than the directors and director nominees referenced in Sections 8.7, 8.14(c) and 8.15) any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

11.8 Specific Performance. The parties hereto agree that irreparable damage would occur in the event that the provisions contained in this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions thereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.

11.9 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Maine applicable to contracts executed in and to be performed in that State. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined in any state or federal court sitting in Augusta, Maine.

11.10 Headings. The table of contents and descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

68

11.11 Interpretation. When a reference is made in this Agreement to Sections, Exhibits, Annexes or Schedules, such reference shall be to a Section of or Exhibit, Annex or Schedule to this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The phrases “the date of this Agreement,” “the date hereof” and terms of similar import, unless the context otherwise requires, shall be deemed to be July 27, 1999.

11.12 Counterparts. This Agreement may be executed (including by facsimile) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

IN WITNESS WHEREOF, Camden, CASI, KSB and the Bank have caused this Agreement to be executed as a sealed instrument as of the date first written above by their respective officers thereunto duly authorized.

Attest:	CAMDEN NATIONAL CORPORATION
/s/    SUSAN M. WESTFALL	By:	/s/    ROBERT W. DAIGLE
Secretary	Title:	President

Attest:	CAMDEN ACQUISITION SUBSIDIARY, INC.
/s/    SUSAN M. WESTFALL	By:	/s/    ROBERT W. DAIGLE
Secretary	Title:	President

Attest:	KSB BANCORP, INC.
/s/    JOHN E. THIEN	By:	/s/    JOHN C. WITHERSPOON
Chief Financial Officer	Title:	President

Attest:	KINGFIELD SAVINGS BANK
/s/    JOHN E. THIEN	By:	/s/    JOHN C. WITHERSPOON
Chief Financial Officer	Title:	President

69

Exhibit A-1

Form of Affiliate Letter to Camden

Camden National Corporation

2 Elm Street

Camden, Maine 04843

Ladies and Gentlemen:

I have been advised that as of the date hereof I may be deemed to be an affiliate of KSB Bancorp, Inc., a Delaware corporation ( KSB ), as the term affiliate is (i) defined for purposes of paragraphs (c) and (d) of Rule 145 of the Rules and Regulations (the Rules and Regulations ) promulgated by the Securities and Exchange Commission (the Commission ) under the Securities Act of 1933, as amended (the Act ), and/or (ii) used in and for purposes of Accounting Series Releases 130 and 135, as amended, of the Commission. I have been further advised that pursuant to the terms of the Agreement and Plan of Merger dated as of July 27, 1999 (the Merger Agreement ), between Camden National Corporation, ( Camden ), Camden Acquisition Subsidiary, Inc. ( CASI ), KSB and Kingfield Savings Bank (the Bank ), KSB will be merged with and into Camden (the Merger ) and, that as a result of the Merger, I may receive shares of Camden Common Stock (as defined in the Merger Agreement) in exchange for shares of KSB Common Stock (as defined in the Merger Agreement) owned by me.

Accordingly, I hereby represent, warrant and covenant to Camden that in the event I receive any Camden Common Stock as a result of the Merger:

a. I shall not make any sale, transfer or other disposition of the Camden Common Stock in violation of the Act or the Rules and Regulations.

b. I have carefully read this letter and the Merger Agreement and discussed its requirements and other applicable limitations upon my ability to sell, transfer or otherwise dispose of Camden Common Stock to the extent I believed necessary with my counsel or counsel for KSB.

c. I have been advised that the issuance of Camden Common Stock to me pursuant to the Merger will be registered with the Commission under the Act pursuant to a Registration Statement on Form S-4. However, I have also been advised that, since at the time the Merger will be submitted for a vote of the stockholders of KSB, I may be deemed to have been an affiliate of KSB and the distribution by me of the Camden Common Stock has not been registered under the Act, I may not sell, transfer or otherwise dispose of Camden Common Stock issued to me in the Merger unless (i) such sale, transfer or other

disposition has been registered under the Act, (ii) such sale, transfer or other disposition is made in conformity with the volume and other limitations of Rule 145 promulgated by the Commission under the Act, or (iii) in the opinion of counsel reasonably acceptable to Camden and its counsel, such sale, transfer or other disposition is otherwise exempt from registration under the Act.

d. I understand that Camden is under no obligation to register the sale, transfer or other disposition of the Camden Common Stock by me or on my behalf under the Act or to take any other action necessary in order to make compliance with an exemption from such registration available.

e. I also understand that stop transfer instructions will be given to Camden’s transfer agent(s) with respect to the Camden Common Stock and that there will be placed on the certificates for the Camden Common Stock issued to me, or any substitutions therefor, a legend in substantially the following form:

The securities represented by this certificate have been issued in a transaction to which Rule 145 promulgated under the Securities Act of 1933 applies and may only be sold or otherwise transferred in compliance with the requirements of Rule 145 or pursuant to a registration statement under said act or an exemption from such registration.

f. I also understand that unless the transfer by me of my Camden Common Stock has been registered under the Act or is a sale made in conformity with the provisions of Rule 145, Camden reserves the right to place a legend on the certificates issued to my transferee in substantially the following form:

The shares represented by this certificate have not been registered under the Securities Act of 1933 and were acquired from a person who received such shares in a transaction to which Rule 145 promulgated under the Securities Act of 1933 applies. The shares have been acquired by the holder not with a view to, or for resale in connection with, any distribution thereof within the meaning of Securities Act of 1933 and may not be sold, pledged or otherwise transferred except in accordance with an exemption from the registration requirements of the Securities Act of 1933.

It is understood and agreed that this letter agreement shall terminate and be of no further force or effect and the legends set forth in paragraphs (e) and (f) above shall be removed by delivery of substitute certificates without such legend and the related stop

transfer restrictions shall be lifted forthwith, if (i) any such shares of Camden Common Stock shall have been registered under the Act for sale, transfer or other disposition by me or on my behalf and are sold, transferred or otherwise disposed of, or (ii) any such shares of Camden Common Stock are sold in accordance with the provisions of paragraphs (c), (e), (f) and (g) of Rule 144 promulgated under the Act, or (iii) I am not at the time an affiliate of Camden and have been the beneficial owner of the Camden Common Stock for at least one year (or such other period as may be prescribed by the Act and the rules and regulations promulgated thereunder), and Camden has filed with the Commission all of the reports it is required to file under the Securities Exchange Act of 1934, as amended, during the preceding twelve months, or (iv) I am not and have not been for at least three months an affiliate of Camden and have been the beneficial owner of Camden Common Stock for at least two years (or such period as may be prescribed by the Act and the rules and regulations promulgated thereunder), or (v) Camden shall have received a letter from the staff of the Commission, or an opinion of counsel reasonably acceptable to Camden, to the effect that the stock transfer restrictions and the legend are not required.

I further represent to and covenant with Camden that from the date that is thirty (30) days prior to the Effective Time (as defined in the Merger Agreement) I will not sell, transfer or otherwise dispose of, or reduce the risk of ownership with respect to, shares of KSB Common Stock or Camden Common Stock held by me and that I will not sell, transfer or otherwise dispose of, or reduce the risk of ownership with respect to, any shares of Camden Common Stock received by me in the Merger or other shares of Camden Common Stock until after such time as financial results covering at least thirty (30) days of combined operations of Camden and KSB have been published by Camden, in the form of a quarterly earnings report, an effective registration statement filed with the Commission, a report to the Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or announcement which includes the financial results of at least thirty (30) days of combined operations; provided, however, that excluded from the foregoing undertaking shall be such sales, pledges, transfers or other dispositions of shares of KSB Common Stock or shares of Camden Common Stock which are individually and in the aggregate de minimis within the meaning of Topic 2-E of the Commission s Staff Accounting Bulletin Series.

In addition, I represent to and covenant with Camden that from and after the date hereof until such time as financial results covering at least thirty (30) days of combined operations of Camden and KSB have been published by Camden as provided above, I shall not purchase or otherwise acquire, nor sell, transfer or otherwise dispose of, any shares of Camden Common Stock or KSB Common Stock without the prior written consent of Robert W. Daigle, of Camden, which consent shall only be withheld to preserve pooling of interests accounting treatment of the Merger or in accordance with applicable laws.

Very truly yours,

Name:

Accepted this          day of                     , 199     by

CAMDEN NATIONAL CORPORATION

By:

Name:

Title:

Exhibit A-2

Form of Affiliate Letter to KSB

KSB Bancorp, Inc.

Main Street

Kingfield, Maine 04947

Ladies and Gentlemen:

I have been advised that as of the date hereof I may be deemed to be an affiliate of Camden National Corporation, a Maine corporation ( Camden ), as the term affiliate is used in and for purposes of Accounting Series Releases 130 and 135, as amended, of the Securities and Exchange Commission (the Commission ). I have been further advised that pursuant to the terms of the Agreement and Plan of Merger dated as of July 27, 1999 (the Merger Agreement ), by and among Camden, Camden Acquisition Subsidiary, Inc., a Delaware corporation and wholly owned subsidiary of Camden ( CASI ), KSB Bancorp., a Delaware corporation ( KSB ) and Kingfield Savings Bank (the Bank ), KSB will be, through a series of transactions, merged with and into Camden (the Merger).

I represent to and covenant with KSB that from the date that is thirty (30) days prior to the Effective Time (as defined in the Merger Agreement) until such time as financial results covering at least thirty (30) days of combined operations of Camden and KSB have been published by Camden, in the form of a quarterly earnings report, an effective registration statement filed with the Commission, a report to the Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or announcement which includes the financial results of at least thirty (30) days of combined operations, I will not sell, transfer or otherwise dispose of, or reduce the risk of ownership with respect to, shares of Camden Common Stock (as defined in the Merger Agreement) or KSB Common Stock (as defined in the Merger Agreement) held by me; provided, however, that excluded from the foregoing undertaking shall be such sales, pledges, transfers or other dispositions of shares of Camden Common Stock or shares of KSB Common Stock which are individually and in the aggregate deminimis within the meaning of Topic 2-E of the Commission s Staff Accounting Bulletin Series.

In addition, I represent to and covenant with KSB that from and after the date hereof until such time as financial results covering at least thirty (30) days of combined operations of Camden and KSB have been published by Camden as provided above, I shall not purchase or otherwise acquire, nor sell, transfer or otherwise dispose of, any shares of Camden Common Stock or KSB Common Stock without the prior written consent of Robert W. Daigle, of Camden, which consent shall only be withheld to preserve pooling of interests accounting treatment of the Merger or in accordance with applicable laws.

Very truly yours,

Name:

Accepted this          day of                     , 199     by

KSB BANCORP, INC.

By:

Name:

Title:

EXHIBIT B

CAMDEN NATIONAL CORPORATION COMPARABLE INSTITUTIONS

Market Value as of 7/21 or

Shares Holding Company

Tickler Most recent

Outstanding prior close (# mil)

1 ACNB CORPORATION	ACNB	$	18.500	5.783
2 ARROW FINANCIAL CORPORATION	AROW	$	25.875	6.149
3 ATLANTIC BANK & TRUST COMPANY	ATLB	$	16.500	4.139
4 BAR HARBOR BANKSHARES	BHB	$	20.375	3.444
5 BOSTON PRIVATE FINANCIAL HOLDINGS, INC.	BPFH	$	8.000	10.813
6 CCBT BANCORP, INC.	CCBT	$	18.250	8.971
7 CENTURY BANCORP, INC.	CNBKA	$	18.750	5.822
8 CITIZENS & NORHTERN CORPORATION	CZNC	$	30.875	5.272
9 COMMUNITY BANKS, INC.	CTY	$	21.250	6.846
10 DROVERS BANCSHARES CORPORATION	DROV	$	22.875	4.696
11 FIRST NATIONAL LINCOLN CORP	FNLC	$	20.500	2.470
12 FIRST OF LONG ISLAND CORPORATION (THE)	FLIC	$	36.875	3.093
13 GRANITE STATE BANKSHARES, INC.	GSBI	$	24.000	5.870
14 INTERCHANGE FINANCIAL SERVICES CORPORATION	ISB	$	19.375	7.214
15 MERCHANTS BANCSHARES, INC.	MBVT	$	23.500	4.239
16 PENNROCK FINANCIAL SERVICES CORP.	PRFS	$	22.250	5.998
17 WASHINGTON TRUST BANCOPR, INC.	WASH	$	17.375	10.119

INDEX	Weighted Average	$	20.149
Camden National Corporation	CAC	$	20.000

Information obtained from Bloomberg 7/22/99

EXHIBIT C

BANK MERGER AGREEMENT

AGREEMENT AND PLAN OF MERGER, dated as of February             , 2000 (the Agreement ), pursuant to Section 352 of Title 9-B of the Maine Revised Statutes by and between UNITED BANK, a banking corporation duly organized under the laws of the State of Maine ( United Bank ), and KINGFIELD SAVINGS BANK, a Maine-chartered stock savings bank (the Bank ).

WHEREAS, Camden National Corporation ( Camden ), Camden Acquisition Subsidiary, Inc., KSB Bancorp, Inc. ( KSB ) and the Bank are parties to an Agreement and Plan of Merger, dated as of July             , 1999, as such agreement may be subsequently amended or modified (the Acquisition Agreement ), providing for, among other things, the merger of KSB with and into Camden (the Merger ) and the subsequent merger of United Bank with and into the Bank (the Bank Merger );

WHEREAS, United Bank and the Bank desire that as promptly as practicable following the consummation of the Merger, United Bank be merged with and into the Bank upon the terms and conditions contained in this Agreement so that, upon consummation of the Bank Merger, the separate corporate existence of United Bank shall cease and the Bank shall continue as the surviving bank of the Bank Merger;

NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, United Bank and the Bank hereby agree as follows:

ARTICLE I

The Bank Merger

1.01 The Bank Merger. The constituent corporations to the Bank Merger shall be United Bank and the Bank. As promptly as practicable following consummation of the Merger, receipt of the required approval of the Superintendent of the Maine Bureau of Banking (the Maine Superintendent ), approval of the stockholders of each of United Bank and the Bank, receipt of all of the required regulatory approvals and the expiration of all waiting periods related to such approvals, the Bank Merger shall be effected pursuant to which United Bank shall merge with and into the Bank. As a result of the Bank Merger, the separate corporate existence of United Bank shall cease and the Bank

shall continue as the surviving bank of the Bank Merger (the Surviving Bank ). At the Effective Time (as defined in Section 1.04), all of the rights, privileges, powers, franchises, properties and assets of United Bank and the Bank shall be vested in the Surviving Bank, and all debts, liabilities, obligations, restrictions, disabilities and duties of United Bank and the Bank shall become the debts, liabilities, obligations, restrictions and duties of the Surviving Bank.

1.02 Name of Surviving Bank. The name of the Surviving Bank shall be [                    ].

1.03 Capital Stock. Unless otherwise determined by Camden prior to the Effective Time by delivery to the Bank of an addendum to this Agreement, from and after the Effective Time, the total number of shares of all classes of capital stock that the Surviving Bank is authorized to issue is [            ] million shares of common stock, par value $0.01 per share (the Common Stock). The outstanding capital stock of the Surviving Bank shall be $[            ] represented by [            ] shares of Common Stock.

1.04 Effective Time. The Bank Merger shall be effected by (i) the filing of this executed Agreement, together with the certified resolutions of the constituent stockholders approving it, with the Maine Superintendent, and (ii) the granting of approval of the Agreement and Bank Merger by the Maine Superintendent. The term Effective Time shall mean 11:59 p.m. on February             , 2000, and shall be evidenced by the Maine Superintendent’s issuance of a certificate to the Surviving Bank reflecting the Bank Merger.

1.05 Articles. The articles of incorporation of the Bank, as amended in the manner set forth in Section 1.05 of Annex A hereto, shall be the articles of incorporation of the Surviving Bank (the Articles ) until further amended as provided therein and by applicable law.

1.06 By-laws. The by-laws of the Bank, as amended in the manner set forth in Section 1.06 of Annex A hereto, shall be the by-laws of the Surviving Bank until thereafter amended as provided therein or in the Articles of the Surviving Bank, as amended from time to time, or by applicable law.

1.07 Locations. The main office and established and authorized branches of United Bank shall become the established and authorized branches of the Surviving Bank and the main office and established and authorized branches of the Bank shall become the main office and established and authorized branches of the Surviving Bank, all as set forth in Section 1.07 of Annex A hereto.

1.08 Directors and Officers.

(a) At the Effective Time, the initial directors of the Surviving Bank shall be those persons whose respective names, addresses and occupations are set forth in Section 1.08(a) of Annex A hereto, each to hold office in accordance with, and the service of

such director shall be subject to the provisions of, the Articles and by-laws of the Surviving Bank, as amended from time to time.

(b) At the Effective Time, the initial officers of the Surviving Bank shall be those persons whose respective names and addresses are set forth in Section 1.08(b) of Annex A hereto, each to hold office in accordance with, and the service of such officer shall be subject to the provisions of, the Articles and by-laws of the Surviving Bank, as amended from time to time.

1.09 Committees of Board of Directors of Surviving Bank. The Committees of the Board of Directors of the Surviving Bank and the persons who shall serve on such committees shall be determined by the Board of Directors of the Surviving Bank in accordance with its by-laws.

1.10 Additional Actions. If, at any time after the Effective Time, the Surviving Bank shall consider or be advised that any further assignments or assurances in law or any other acts are necessary or desirable (a) to vest, perfect or confirm, of record or otherwise, in the Surviving Bank, title to and possession of any property or right of United Bank acquired or to be acquired by reason of, or as a result of, the Bank Merger, or (b) otherwise to carry out the purposes of this Agreement, United Bank and its proper officers and directors shall be deemed to have granted to the Surviving Bank an irrevocable power of attorney to execute and deliver all such proper deeds, assignments and assurances in law and to do all acts necessary or proper to vest, perfect or confirm title to and possession of such property or rights in the Surviving Bank and otherwise to carry out the purposes of this Agreement; and the proper officers and directors of the Surviving Bank are fully authorized in the name of United Bank or otherwise to take any and all such action.

ARTICLE II

Cancellation of Shares

Each share of common stock, par value $0.01 per share, of United Bank issued and outstanding immediately prior to the Effective Time shall, by virtue of the Bank Merger and without any action on the part of the holder thereof be canceled without receipt of any consideration thereof by United Bank.

ARTICLE III

Representations

Each of United Bank and the Bank represents that this Agreement has been duly authorized, executed and delivered by such party and constitutes a legal, valid and binding obligation of such party, enforceable against it in accordance with the terms hereof.

ARTICLE IV

Termination

Consummation of the Bank Merger contemplated hereunder is conditioned upon the consummation of the Merger as provided in the Merger Agreement. This Agreement shall terminate and forthwith become void automatically and without any action on the part of United Bank or the Bank immediately upon the termination of the Merger Agreement in accordance with Article X thereof, and there shall be no further liability on the part of United Bank or the Bank upon such termination.

IN WITNESS WHEREOF, United Bank and the Bank have each caused this Agreement to be executed by their duly authorized officers, as under seal, as of the day and year first above written.

Attest:	UNITED BANK
	By:
	Name:
	Title:
	By:
	Name:
	Title:

Attest:	KINGFIELD SAVINGS BANK
	By:
:	Name
	Title:
	By:
	Name
	Title:

EXHIBIT D

VOTING AGREEMENT

Date: July 27, 1999

Camden National Corporation

Camden Acquisition Subsidiary, Inc.

2 Elm Street

Camden, Maine 04843

Ladies and Gentlemen:

The undersigned (the “Stockholder”) beneficially owns and has sole or shared voting power with respect to the number of shares of the common stock, par value $.01 per share (the “Shares”), of KSB Bancorp, Inc., a Delaware corporation (the Company ), indicated opposite the Stockholder’s name on Schedule 1 attached hereto.

Simultaneously with the execution of this letter agreement, Camden Acquisition Subsidiary, Inc. (“Purchaser”), Camden National Corporation, a Maine corporation ( Parent ), the Company and Kingfield Savings Bank, a Maine chartered savings bank and a wholly-owned subsidiary of the Company (the Bank), are entering into an Agreement and Plan of Merger (the “Merger Agreement”) providing, among other things, for the merger (the Merger ) of the Company with and into Parent, which, as of a date immediately preceding the Merger, will own all of the issued and outstanding stock of Purchaser. The undersigned understands that Purchaser and Parent have undertaken and will continue to undertake substantial expenses in connection with the negotiation and execution of the Merger Agreement and the subsequent actions necessary to consummate the Merger and the other transactions contemplated by the Merger Agreement.

In consideration of, and as a condition to, Purchaser’s and Parent’s entering into the Merger Agreement, and in consideration of the expenses incurred and to be incurred by Purchaser and Parent in connection therewith, the Stockholder, Purchaser and Parent agree as follows:

1. Agreement to Vote in Favor of Merger. The Stockholder (a) shall vote or cause to be voted all of the Shares that such Stockholder shall be entitled to so vote, whether such Shares are beneficially owned by such Stockholder on the date of this letter agreement or are subsequently acquired, at the special or any other meeting of the Company’s stockholders to be called and held following the date hereof, in favor of the approval of the Merger Agreement and the Merger and (b) shall vote or cause to be voted all such Shares, at such special meeting or any other meeting of the Company’s stockholders following the date hereof, against the approval of any other agreement providing for a merger, acquisition, consolidation, sale of a material amount of assets or other business combination of the Company or the Bank with any person or entity other

than Purchaser, Parent or their respective affiliates; except, in the case of either (a) or (b), to the extent required by applicable law relating to fiduciary obligations of directors upon the advice of its regular outside counsel, subsequently confirmed in writing.

2. Restrictions on Sale or Other Disposition of Shares. The Stockholder will not sell, assign, transfer or otherwise dispose of (including, without limitation, by the creation of a Lien (as defined in paragraph 3 below)), or permit to be sold, assigned, transferred or otherwise disposed of, any Shares owned by the Stockholder, whether such Shares are held by the Stockholder on the date of this letter agreement or are subsequently acquired, except (a) transfers by will or by operation of law, in which case this letter agreement shall bind the transferee, (b) transfers pursuant to any pledge agreement, subject to the pledgee agreeing in writing to be bound by the terms of this letter agreement, (c) transfers in connection with estate planning purposes, including transfers to relatives, trusts and charitable organizations, subject to the transferee agreeing in writing to be bound by the terms of this letter agreement, and (d) transfers to any other stockholder of the Company who has executed a copy of this letter agreement on the date hereof with respect to some or all of the Shares held by such stockholder.

The Stockholder shall cause the Company to cause its transfer agent to note on its records for the Company (in whatever form maintained) that such Shares are subject to the restrictions on voting and transfer set forth herein, and at Parent s reasonable request, the Stockholder shall have any existing certificates subject to this Agreement canceled and reissued bearing the following legend:

“THIS CERTIFICATE, AND THE SHARES REPRESENTED HEREBY, ARE SUBJECT TO CERTAIN VOTING AND TRANSFER RESTRICTIONS CONTAINED IN A VOTING AGREEMENT BY AND AMONG KSB BANCORP, INC., CAMDEN NATIONAL CORPORATION AND CAMDEN ACQUISITION SUBSIDIARY, INC. AND THE BENEFICIAL OWNER OF THESE SHARES AND MAY BE TRANSFERRED ONLY IN COMPLIANCE THEREWITH. COPIES OF THE ABOVE-REFERENCED AGREEMENT ARE ON FILE AT THE OFFICES OF KSB BANCORP, INC.”

3. Representations. The Stockholder represents that the Stockholder has the complete and unrestricted power and the unqualified right to enter into and perform the terms of this letter agreement. The Stockholder further represents that this letter agreement constitutes a valid and binding agreement with respect to the Stockholder, enforceable against the Stockholder in accordance with its terms. Except as set forth on Schedule 1, the Stockholder represents that the Stockholder beneficially owns the number of Shares indicated opposite such Stockholder’s name on said Schedule 1, free and clear of any liens, claims, charges or other encumbrances or restrictions of any kind whatsoever (“Liens”), and has sole or shared, and otherwise unrestricted, voting power with respect to such Shares.

4. Term. Notwithstanding anything herein to the contrary, the agreements contained herein shall remain in full force and effect until the earlier of (i) the consummation of the Merger or (ii) the termination of the Merger Agreement in accordance with Article X thereof.

5. Equitable Remedies. The Stockholder has signed this letter agreement intending to be bound thereby. The Stockholder expressly agrees that this letter agreement shall be specifically enforceable in any court of competent jurisdiction in accordance with its terms against the Stockholder. All of the covenants and agreements contained in this letter agreement shall be binding upon, and inure to the benefit of, the respective parties and their permitted successors, assigns, heirs, executors, administrators and other legal representatives, as the case may be.

6. Miscellaneous. This letter agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same instrument. No waivers of any breach of this letter agreement extended by Purchaser and Parent to the Stockholder shall be construed as a waiver of any rights or remedies of Purchaser and Parent with respect to any other stockholder of the Company who has executed a copy of this letter agreement with respect to Shares held by such stockholder or with respect to any subsequent breach of the Stockholder or any other such stockholder of the Company. This letter agreement is deemed to be signed as a sealed instrument and is to be governed by the laws of the State of Maine, without giving effect to the principles of conflicts of laws thereof. If any provision hereof is deemed unenforceable, the enforceability of the other provisions hereof shall not be affected.

Please confirm our agreement by signing a copy of this letter.

Very truly yours,

Name:

AGREED TO AND ACCEPTED

AS OF JULY         , 1999

CAMDEN NATIONAL CORPORATION

CAMDEN ACQUISITION SUBSIDIARY, INC.

By:

	Schedule 1
	Name of
	Stockholder
Number of Shares
Beneficially Owned
	Shares
	Subject to Pledge

THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO

CERTAIN PROVISIONS CONTAINED HEREIN AND TO

RESALE RESTRICTIONS UNDER THE

SECURITIES ACT OF 1933, AS AMENDED

STOCK OPTION AGREEMENT, dated as of July 27, 1999, by and between KSB

Bancorp, Inc., a Delaware corporation ( Issuer ), and Camden National

Corporation, a Maine corporation ( Grantee ).

WITNESSETH:

WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of Merger dated as of the date hereof (as amended from time to time, the Merger Agreement), which agreement has been executed by the parties hereto immediately prior to the execution of this Stock Option Agreement (this Agreement ); and

WHEREAS, as a condition to Grantee s entering into the Merger Agreement and in consideration therefor, Issuer has agreed to grant Grantee the Option (as hereinafter defined);

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein and in the Merger Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option (the Option ) to purchase, subject to the terms hereof, up to 262,932 fully-paid and nonassessable shares of Issuer s Common Stock, par value $.01 per share ( KSB Common Stock ), at a price per share equal to $13.50 (the Option Price ); provided, however, that in no event shall the number of shares of KSB Common Stock for which this Option is exercisable exceed 19.9% of the Issuer’s issued and outstanding shares of KSB Common Stock without giving effect to any shares subject to or issued pursuant to the Option. The number of shares of KSB Common Stock that may be received upon the exercise of the Option and the Option Price are subject to adjustment as herein set forth.

(b) In the event that any additional shares of KSB Common Stock are either (i) issued or otherwise become outstanding after the date of this Agreement (other than pursuant to this Agreement), or (ii) redeemed, repurchased, retired or otherwise cease to be outstanding after the date of this Agreement, the number of shares of KSB Common Stock subject to the Option shall be increased or decreased, as appropriate, so that, after such issuance, such number equals 19.9% of the number of shares of KSB Common Stock then issued and outstanding without giving effect to any shares subject or issued pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to breach any provision of the Merger Agreement.

2. (a) Holder (as hereinafter defined) may exercise the Option, in whole or part, and from time to time, if, but only if, both an Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined) shall have occurred prior to the occurrence of an Exercise Termination Event (as hereinafter defined), provided that Holder shall have sent to Issuer written notice of such exercise (as provided in subsection (e) of this Section 2) within 90 days following such Subsequent Triggering Event. Each of the following shall be an Exercise Termination Event : (i) the Effective Time (as defined in the Merger Agreement) of the Merger; (ii) termination of the Merger Agreement in accordance with the provisions thereof if such termination occurs prior to the occurrence of an Initial Triggering Event, except a termination by Grantee pursuant to Section 10.1(d) or Section 10.1 (e) of the Merger Agreement (unless the breach by Issuer giving rise to such right of termination is nonvolitional); or (iii) the passage of 12 months after termination of the Merger Agreement if such termination follows the occurrence of an Initial Triggering Event or is a termination by Grantee pursuant to Section 10.1(d) or Section 10.1(e) of the Merger Agreement (unless the breach by Issuer giving rise to such right of termination is nonvolitional). The term Holder shall mean the holder or holders of the Option from time to time, and which is initially Grantee.

(b) The term Initial Triggering Event shall mean any of the following events or transactions occurring after the date hereof:

(i) Issuer or any of its Subsidiaries (each, an Issuer Subsidiary ), without having received Grantee s prior written consent, shall have entered into an agreement to engage in an Acquisition Transaction (as hereinafter defined) with any person (the term person for purposes of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the 1934 Act ), and the rules and regulations thereunder) other than Grantee or any of its Subsidiaries (each a Grantee Subsidiary ), or the Board of Directors of Issuer shall have recommended that the stockholders of Issuer approve or accept any Acquisition Transaction. For purposes of this Agreement, Acquisition Transaction shall mean (w) a merger, consolidation or similar transaction, involving Issuer or any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange Commission (the SEC )) of Issuer, (x) a purchase, lease or other acquisition or assumption of all or a substantial portion of the consolidated assets or consolidated deposits of Issuer or any Significant Subsidiary of Issuer, (y) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 10% or more of the voting power of Issuer, or (z) any substantially similar transaction; provided, however, that in no event shall (A) the transactions contemplated by the Merger Agreement or the entering into of the Merger Agreement constitute an Acquisition Transaction or (B) any merger, consolidation, purchase or similar transaction involving only the Issuer and one or more of its Subsidiaries or involving only any two or more of such Subsidiaries be deemed to be an Acquisition Transaction, provided such transaction is not entered into in violation of the terms of the Merger Agreement;

(ii) Issuer or any Issuer Subsidiary, without having received Grantee’s prior written consent, shall have authorized, recommended, proposed, or publicly announced its intention to authorize, recommend or propose, an Acquisition Transaction with any person other than Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly withdrawn or modified, or publicly announced its intention to withdraw or modify, in any manner adverse to Grantee, its recommendation that the stockholders of Issuer approve the transactions contemplated by the Merger Agreement in anticipation of engaging in an Acquisition Transaction with any person other than Grantee or Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly announced its intention not to recommend that the stockholders of Issuer approve the transactions contemplated by the Merger Agreement because of or in connection with an actual or proposed Acquisition Transaction involving any person other than Grantee or Grantee Subsidiary;

(iii) Any person other than Grantee, any Grantee Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of its business shall have acquired beneficial ownership or the right to acquire beneficial ownership of 10% or more of the outstanding shares of KSB Common Stock (the term beneficial ownership for purposes of this Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and regulations thereunder);

(iv) Any person other than Grantee or any Grantee Subsidiary shall have made a bona fide proposal to Issuer or its stockholders by public announcement or written communication that is or becomes the subject of public disclosure to engage in an Acquisition Transaction;

(v) After an overture is made by any person other than Grantee or any Grantee Subsidiary to Issuer or its stockholders to engage in an Acquisition Transaction, Issuer shall have breached any covenant or obligation contained in the Merger Agreement and such breach (x) would entitle Grantee to terminate the Merger Agreement and (y) shall not have been cured prior to the Notice Date (as defined below); or

(vi) Any person other than Grantee or any Grantee Subsidiary, other than in connection with a transaction to which Grantee has given its prior written consent, shall have filed an application or notice with [the Board of Governors of the Federal Reserve System (the Federal Reserve Board )], or other federal or state bank regulatory authority, which application or notice has been accepted for processing, for approval to engage in an Acquisition Transaction.

(c) The term Subsequent Triggering Event shall mean either of the following events or transactions occurring after the date hereof:

(i) The acquisition by any person of beneficial ownership of 20% or more of the then outstanding KSB Common Stock; or

(ii) The occurrence of the Initial Triggering Event described in paragraph (i) of subsection (b) of this Section 2, except that the percentage referred to in clause (y) thereof shall be 20%.

(d) Issuer shall notify Grantee promptly in writing of the occurrence of any Initial Triggering Event or Subsequent Triggering Event of which Issuer has notice (together, a Triggering Event ), it being understood and agreed that the giving of such notice by Issuer shall not be a condition to the right of Holder to exercise the Option.

(e) In the event Holder is entitled to and wishes to exercise the Option, it shall send to Issuer a written notice (the date of which being herein referred to as the Notice Date ) specifying (i) the total number of shares of KSB Common Stock it will purchase pursuant to such exercise and (ii) a place and date not earlier than five business days nor later than 60 business days from the Notice Date for the closing of such purchase (the Closing Date ); provided that if prior notification to or approval of the Federal Reserve Board or any other governmental authority or regulatory agency is required in connection with such purchase, Holder and Issuer shall promptly file the required notice, form or application for approval and shall expeditiously process the same and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which any required notification periods have expired or been terminated or such approvals have been obtained and any requisite waiting period or periods shall have

passed. Any exercise of the Option shall be deemed to occur on the Notice Date relating thereto.

(f) At the closing referred to in subsection (e) of this Section 2, Holder shall pay to Issuer the aggregate purchase price for the shares of KSB Common Stock purchased pursuant to the exercise of the Option in immediately available funds by wire transfer to a bank account designated by Issuer, provided that failure or refusal of Issuer to designate such a bank account shall not preclude Holder from exercising the Option.

(g) At such closing, simultaneously with the delivery of the purchase price as provided in subsection (f) of this Section 2, Issuer shall deliver to Holder a certificate or certificates representing the number of shares of KSB Common Stock purchased by Holder and, if the Option shall have been exercised in part only, a new Option evidencing the rights of Holder thereof to purchase the balance of the shares of KSB Common Stock purchasable hereunder, and Holder shall deliver to Issuer a copy of this Agreement. By receipt of any shares of KSB Common Stock issuable hereunder Holder will agree, and does hereby agree, not to offer to sell or otherwise dispose of such shares in violation of the Securities Act of 1933, as amended (the 1933 Act ), other applicable law or the provisions of this Agreement.

(h) In addition to any other legend that may be required by applicable law, certificates for shares of KSB Common Stock delivered at a closing hereunder may be endorsed with a restrictive legend that shall read substantially as follows:

The transfer of the shares represented by this certificate is subject to certain provisions of an agreement between the registered holder hereof and Issuer and to resale restrictions arising under the Securities Act of 1933, as amended. A copy of such agreement is on file at the principal office of Issuer and will be provided to the holder hereof without charge upon receipt by Issuer of a written request therefor.

It is understood and agreed that (i) the reference to the resale restrictions of the 1933 Act, in the above legend shall be removed by delivery of substitute certificate(s) without such reference if Holder shall have delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel, in form and substance reasonably satisfactory to Issuer and its counsel, to the effect that such legend is not required for purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the shares have been sold or transferred in compliance with the provisions of this Agreement and under circumstances that do not require the retention of such reference; and (iii) the legend shall be removed in its entirety if the conditions in the preceding clauses (i) and (ii) are both satisfied.

(i) Upon the giving by Holder to Issuer of the written notice of exercise of the Option provided for under subsection (e) of this Section 2 and the tender of the applicable purchase price under subsection (f) of this Section 2, Holder shall be deemed to be the holder of record of the shares of KSB Common Stock issuable upon such exercise,

notwithstanding that the stock transfer books of Issuer shall then be closed or that certificates representing such shares of KSB Common Stock shall not then be actually delivered to Holder. Issuer shall pay all expenses, and any and all United States federal, state and local taxes and other charges that may be payable in connection with the preparation, issue and delivery of stock certificates under this Section 2 in the name of Holder or its assignee, transferee or designee.

3. Issuer agrees: (i) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of KSB Common Stock so that the Option may be exercised without additional authorization of KSB Common Stock after giving effect to all other options, warrants, convertible securities and other rights to purchase KSB Common Stock; (ii) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by Issuer; (iii) that it shall promptly take all action as may from time to time be required (including (x) complying with all premerger notification, reporting and waiting period requirements specified in 15 U.S.C. Section 18a and regulations promulgated thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as amended (the BHCA ), or the Change in Bank Control Act of 1978, as amended, or any state banking law, prior approval of or notice to the Federal Reserve Board or to any state regulatory authority is necessary before the Option may be exercised, cooperating fully with the Holder in preparing such applications or notices and providing such information to the Federal Reserve Board or such state regulatory authority as they may require) in order to permit Holder to exercise the Option and Issuer duly and effectively to issue shares of KSB Common Stock pursuant hereto; and (iv) that it shall promptly take all action provided herein to protect the rights of Holder against dilution and otherwise hereunder.

4. This Agreement and the Option granted hereby are exchangeable, without expense, at the option of Holder, upon presentation and surrender of this Agreement at the principal office of Issuer, for other Agreements providing for Options of different denominations entitling the holder thereof to purchase, on the same terms and subject to the same conditions as are set forth herein, in the aggregate the same number of shares of KSB Common Stock purchasable hereunder. The terms Agreement and Option as used herein include any Stock Option Agreements and related Options for which this Agreement (and the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered shall constitute an additional contractual obligation on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone.

5. In addition to the adjustment in the number of shares of KSB Common Stock that are purchasable upon exercise of the Option pursuant to Section 1 of this Agreement,

the number of shares of KSB Common Stock purchasable upon the exercise of the Option and the Option Price shall be subject to adjustment from time to time as provided in this Section 5. In the event of any change in, or distributions in respect of, the KSB Common Stock by reason of stock dividends, split-ups, mergers, recapitalizations, combinations, subdivisions, conversions, exchanges of shares, distributions on or in respect of the KSB Common Stock that would be prohibited under the terms of the Merger Agreement, or the like, the type and number of securities purchasable upon exercise hereof and the Option Price shall be appropriately adjusted in such manner as shall fully preserve the economic benefits provided hereunder and proper provision shall be made in any agreement governing any such transaction to provide for, and the inclusion and validity of such provision shall be a condition to, the validity and consummation of any such transaction, such proper adjustment and the full satisfaction of the Issuer s obligations hereunder.

6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an Exercise Termination Event, Issuer shall, at the request of Grantee delivered within 90 days of such Subsequent Triggering Event (whether on its own behalf or on behalf of any subsequent holder of this Option (or part thereof) or any of the shares of KSB Common Stock issued pursuant hereto), promptly prepare, file and keep current a shelf registration statement under the 1933 Act covering any shares issued and issuable pursuant to this Option and shall use its reasonable best efforts to cause such registration statement to become effective and remain current in order to permit the sale or other disposition of any shares of KSB Common Stock issued upon total or partial exercise of this Option ( Option Shares ) in accordance with any plan of disposition requested by Grantee. Issuer will use its reasonable best efforts to cause such registration statement promptly to become effective and then to remain effective for a period of 180 days from the day such registration statement first becomes effective or such shorter time as may be reasonably necessary to effect such sales or other dispositions. Grantee shall have the right to demand two such registrations. The foregoing notwithstanding, if, at the time of any request by Grantee for registration of the Option or Option Shares as provided above, Issuer is in registration with respect to an underwritten public offering of shares of KSB Common Stock, and if in the good faith judgment of the managing underwriter or managing underwriters, or, if none, the sole underwriter or underwriters, of such offering the inclusion of Holder s Option or Option Shares would interfere with the successful marketing of the shares of KSB Common Stock offered by Issuer, the number of Option Shares otherwise to be covered in the registration statement contemplated hereby may be reduced; provided, however, that after any such required reduction the number of Option Shares to be included in such offering for the account of Holder shall constitute at least 25% of the total number of shares to be sold by Holder and Issuer in the aggregate; and provided further, however, that if such reduction occurs, then the Issuer shall file a registration statement for the balance as promptly as practical and no reduction shall thereafter occur. Each such Holder shall provide all information reasonably requested by Issuer for inclusion in any registration statement to be filed hereunder. If requested by any such Holder in connection with such registration, Issuer shall become a party to any underwriting agreement relating to the sale of such shares, but only to the extent of obligating itself in respect of representations, warranties, indemnities and other

agreements customarily included in secondary offering underwriting agreements for the Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer agrees to send a copy thereof to any other person known to Issuer to be entitled to registration rights under this Section 6, in each case by promptly mailing the same, postage prepaid, to the address of record of the persons entitled to receive such copies. Notwithstanding anything to the contrary contained herein, in no event shall Issuer be obligated to effect more than two registrations pursuant to this Section 6 by reason of the fact that there shall be more than one Grantee as a result of any assignment or division of this Agreement.

7. (a) Immediately prior to the occurrence of a Repurchase Event (as defined below), (i) following a request of Holder, delivered prior to an Exercise Termination Event, Issuer (or any successor thereto) shall repurchase the Option from Holder at a price (the Option Repurchase Price ) equal to the amount by which (A) the Market/Offer Price (as defined below) exceeds (B) the Option Price, multiplied by the number of shares for which this Option may then be exercised and (ii) at the request of the owner of Option Shares from time to time (the Owner ), delivered within 90 days of such occurrence (or such later period as provided in Section 11), Issuer shall repurchase such number of Option Shares from the Owner as the Owner shall designate at a price (the Option Share Repurchase Price ) equal to the Market/Offer Price multiplied by the number of Option Shares so designated. The term Market/Offer Price shall mean the highest of (i) the price per share of KSB Common Stock at which a tender offer or exchange offer therefor has been made, (ii) the price per share of KSB Common Stock to be paid by any third party pursuant to an agreement with Issuer, (iii) the highest closing price for shares of KSB Common Stock within the six-month period immediately preceding the date Holder gives notice of the required repurchase of this Option or the Owner gives notice of the required repurchase of Option Shares, as the case may be, and (iv) in the event of a sale of all or a substantial portion of Issuer s assets, the sum of the price paid in such sale for such assets and the current market value of the remaining assets of Issuer as determined by a nationally recognized investment banking firm selected by Holder or the Owner, as the case may be, and reasonably acceptable to the Issuer, divided by the number of shares of KSB Common Stock of Issuer outstanding at the time of such sale. In determining the Market/Offer Price, the value of consideration other than cash shall be determined by a nationally recognized investment banking firm selected by Holder or Owner, as the case may be, and reasonably acceptable to the Issuer.

(b) Holder and the Owner, as the case may be, may exercise its right to require Issuer to repurchase the Option and any Option Shares pursuant to this Section 7 by surrendering for such purpose to Issuer, at its principal office, a copy of this Agreement or certificates for Option Shares, as applicable, accompanied by a written notice or notices stating that Holder or the Owner, as the case may be, elects to require Issuer to repurchase this Option and/or the Option Shares in accordance with the provisions of this Section 7. Prior to the later to occur of (x) five business days after the surrender of the Option and/or certificates representing Option Shares and the receipt of such notice or notices relating thereto and (y) the time that is immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered to Holder the Option Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor or the

portion thereof, if any, that Issuer is not then prohibited under applicable law and regulations from so delivering.

(c) To the extent that Issuer is prohibited under applicable law or regulation from repurchasing the Option and/or the Option Shares in full, Issuer shall immediately so notify Holder and/or the Owner and thereafter deliver or cause to be delivered, from time to time, to Holder and/or the Owner, as appropriate, the portion of the Option Repurchase Price and the Option Share Repurchase Price, respectively, that it is no longer prohibited from delivering, within five business days after the date on which Issuer is no longer so prohibited; provided, however, that if Issuer at any time after delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited under applicable law or regulation from delivering, to Holder and/or the Owner, as appropriate, the Option Repurchase Price and the Option Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its best efforts to obtain all required regulatory and legal approvals and to file any required notices, in each case as promptly as practicable in order to accomplish such repurchase), Holder or Owner may revoke its notice of repurchase of the Option or the Option Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver to Holder and/or the Owner, as appropriate, that portion of the Option Repurchase Price or the Option Share Repurchase Price that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to Holder, a new Stock Option Agreement evidencing the right of Holder to purchase that number of shares of KSB Common Stock obtained by multiplying the number of shares of KSB Common Stock for which the surrendered Agreement was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Option Repurchase Price less the portion thereof theretofore delivered to Holder and the denominator of which is the Option Repurchase Price, or (B) to the Owner, a certificate for the Option Shares it is then so prohibited from repurchasing.

(d) For purposes of this Section 7, a Repurchase Event shall be deemed to have occurred upon either (i) the consummation of any merger, consolidation or similar transaction involving Issuer or any purchase, lease or other acquisition of all or a substantial portion of the assets of Issuer, other than any such transaction which would not constitute an Acquisition Transaction pursuant to the provisos to Section 2(b)(i), or (ii) the acquisition by any person of beneficial ownership of 50% or more of the then outstanding shares of KSB Common Stock, provided that no such event shall constitute a Repurchase Event unless a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event. The parties hereto agree that Issuer s obligations to repurchase the Option or Option Shares under this Section 7 shall not terminate upon the occurrence of an Exercise Termination Event unless no Subsequent Triggering Event shall have occurred prior to the occurrence of an Exercise Termination Event. Prior to the occurrence of any Repurchase Event, the Issuer shall notify in writing the Holder and each Owner of such Repurchase Event.

8. (a) In the event that prior to an Exercise Termination Event, Issuer shall enter into an agreement (i) to consolidate with or merge into any person, other than Grantee or

one of its Subsidiaries, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Grantee or one of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of KSB Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property or the then outstanding shares of KSB Common Stock shall after such merger represent less than 50% of the outstanding voting shares and voting share equivalents of the merged company, or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Grantee or one of its Subsidiaries, then, and in each such cases the agreement governing such transaction shall make proper provision so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option (the Substitute Option ), at the election of Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or (y) any person that controls the Acquiring Corporation.

(b) The following terms have the meanings indicated:

(i) Acquiring Corporation shall mean (i) the continuing or surviving corporation of a consolidation or merger with Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving person, and (iii) the transferee of all or substantially all of Issuer s assets.

(ii) Substitute KSB Common Stock shall mean the KSB Common Stock issued by the issuer of the Substitute Option upon exercise of the Substitute Option.

(iii) Assigned Value shall mean the Market/Offer Price, as defined in Section 7.

(iv) Average Price shall mean the average closing price of a share of the Substitute KSB Common Stock for the one year immediately preceding the consolidation, merger or sale in question, but in no event higher than the closing price of the shares of Substitute KSB Common Stock on the day preceding such consolidation, merger or sale; provided that if Issuer is the issuer of the Substitute Option, the Average Price shall be computed with respect to a share of KSB Common Stock issued by the person merging into Issuer or by any company which controls or is controlled by such person, as Holder may elect.

(c) The Substitute Option shall have the same terms as the Option; provided, that if the terms of the Substitute Option cannot, for legal reasons, be the same as the Option, such terms shall be as similar as possible to those of the Option and in no event less advantageous to Holder of the Option. The issuer of the Substitute Option shall also enter into an agreement with the then Holder or Holders of the Substitute Option in substantially the same form as this Agreement, which shall be applicable to the Substitute Option.

(d) The Substitute Option shall be exercisable for such number of shares of Substitute KSB Common Stock as is equal to the Assigned Value multiplied by the number of shares of KSB Common Stock for which the Option is then exercisable, divided by the Average Price. The exercise price of the Substitute Option per share of Substitute KSB Common Stock shall be equal to the Option Price multiplied by a fraction, the numerator of which shall be the number of shares of KSB Common Stock for which the Option is then exercisable and the denominator of which shall be the number of shares of Substitute KSB Common Stock for which the Substitute Option is exercisable.

(e) In no event, pursuant to any of the foregoing paragraphs, shall the Substitute Option be exercisable for more than 19.9% of the shares of Substitute KSB Common Stock outstanding prior to exercise of the Substitute Option. In the event that the Substitute Option would be exercisable for more than 19.9% of the shares of Substitute KSB Common Stock outstanding prior to exercise but for this clause (e), the issuer of the Substitute Option (the Substitute Option Issuer ) shall make a cash payment to Holder equal to the excess of (i) the value of the Substitute Option without giving effect to the limitation in this clause (e) over (ii) the value of the Substitute Option after giving effect to the limitation in this clause (e). This difference in value shall be determined by a nationally recognized investment banking firm selected by Holder or the Owner, as the case may be, and reasonably acceptable to the Acquiring Corporation.

(f) Issuer shall not enter into any transaction described in subsection (a) of this Section 8 unless the Acquiring Corporation and any person that controls the Acquiring Corporation assume in writing all the obligations of Issuer hereunder.

9. (a) At the request of the holder of the Substitute Option (the Substitute Option Holder ), the Substitute Option Issuer shall repurchase the Substitute Option from the Substitute Option Holder at a price (the Substitute Option Repurchase Price ) equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by the number of shares of Substitute KSB Common Stock for which the Substitute Option may then be exercised plus (y) Grantee s reasonable out-of-pocket expenses (to the extent not previously reimbursed), and at the request of the owner (the Substitute Share Owner ) of shares of Substitute KSB Common Stock (the Substitute Shares), the Substitute Option Issuer shall repurchase the Substitute Shares at a price (the Substitute Share Repurchase Price ) equal to (x) the Highest Closing Price multiplied by the number of Substitute Shares so designated plus (y) Grantee s reasonable out-of-pocket expenses (to the extent not previously reimbursed). The term Highest Closing Price shall mean the highest closing price for shares of Substitute KSB Common Stock within the six-month period immediately preceding the date the Substitute Option Holder gives notice of the required repurchase of the Substitute Option or the Substitute Share Owner gives notice of the required repurchase of the Substitute Shares, as applicable.

(b) The Substitute Option Holder and the Substitute Share Owner, as the case may be, may exercise its respective right to require the Substitute Option Issuer to

repurchase the Substitute Option and the Substitute Shares pursuant to this Section 9 by surrendering for such purpose to the Substitute Option Issuer, at its principal office, the agreement for such Substitute Option (or, in the absence of such an agreement, a copy of this Agreement) and certificates for Substitute Shares accompanied by a written notice or notices stating that the Substitute Option Holder or the Substitute Share Owner, as the case may be, elects to require the Substitute Option Issuer to repurchase the Substitute Option and/or the Substitute Shares in accordance with the provisions of this Section 9. As promptly as practicable, and in any event within five business days after the surrender of the Substitute Option and/or certificates representing Substitute Shares and the receipt of such notice or notices relating thereto, the Substitute Option Issuer shall deliver or cause to be delivered to the Substitute Option Holder the Substitute Option Repurchase Price and/or to the Substitute Share Owner the Substitute Share Repurchase Price therefor or, in either case, the portion thereof which the Substitute Option Issuer is not then prohibited under applicable law and regulation from so delivering.

(c) To the extent that the Substitute Option Issuer is prohibited under applicable law or regulation from repurchasing the Substitute Option and/or the Substitute Shares in part or in full, the Substitute Option Issuer following a request for repurchase pursuant to this Section 9 shall immediately so notify the Substitute Option Holder and/or the Substitute Share Owner and thereafter deliver or cause to be delivered, from time to time, to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the portion of the Substitute Share Repurchase Price, respectively, which it is no longer prohibited from delivering, within five business days after the date on which the Substitute Option Issuer is no longer so prohibited; provided, however, that if the Substitute Option Issuer is at any time after delivery of a notice of repurchase pursuant to subsection (b) of this Section 9 prohibited under applicable law or regulation from delivering to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option Repurchase Price and the Substitute Share Repurchase Price, respectively, in full (and the Substitute Option Issuer shall use its best efforts to obtain all required regulatory and legal approvals, in each case as promptly as practicable, in order to accomplish such repurchase), the Substitute Option Holder or Substitute Share Owner may revoke its notice of repurchase of the Substitute Option or the Substitute Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner, as appropriate, that portion of the Substitute Option Repurchase Price or the Substitute Share Repurchase Price that the Substitute Option Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new Substitute Option evidencing the right of the Substitute Option Holder to purchase that number of shares of the Substitute KSB Common Stock obtained by multiplying the number of shares of the Substitute KSB Common Stock for which the surrendered Substitute Option was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Substitute Option Repurchase Price less the portion thereof theretofore delivered to the Substitute Option Holder and the denominator of which is the Substitute Option Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the Substitute Common Shares it is then so prohibited from repurchasing.

10. (a) Notwithstanding any other provision of this Agreement, this Option may not be exercised for a number of shares as would, as of the date of exercise, result in a Notional Total Profit (as defined below) of more than $1.4 million less the amount of any Expense Fee actually paid to Camden pursuant to Section 10.2(c) of the Merger Agreement; provided that nothing in this sentence shall restrict any exercise of the Option permitted hereby on any subsequent date.

(b) As used herein, the term Notional Total Profit with respect to any number of shares as to which Grantee may propose to exercise this Option shall be the Total Profit (as defined below) determined as of the date of such proposed exercise assuming that this Option were exercised on such date for such number of shares and assuming that such shares, together with all other Option Shares held by Grantee and its affiliates as of such date, were sold for cash at the closing market price for the KSB Common Stock as of the close of business on the preceding trading day (less customary brokerage commissions).

(c) As used herein, the term Total Profit shall mean the aggregate amount (before taxes) of the following: (i) the amount received by Grantee pursuant to Issuer’s repurchase of the Option (or any portion thereof) pursuant to Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer’s repurchase of Option Shares (or any portion thereof) pursuant to Section 7, less (y) the Grantee s purchase price for such Option Shares, (iii) the net cash amounts received by Grantee pursuant to the sale of Option Shares (or any other securities into which such Option Shares are converted or exchanged) to any unaffiliated party, less (y) the Grantee’s purchase price of such Option Shares, (iv) any amounts received by Grantee on the transfer of the Option (or any portion thereof) to any unaffiliated party, and (v) any amount equivalent to the foregoing with respect to the Substitute Option.

11. The 90-day period for exercise of certain rights under Sections 2, 6, 7 and 14 shall be extended: (i) to the extent necessary to obtain all legal and regulatory approvals for the exercise of such rights, for the expiration of all statutory waiting periods; (ii) to the extent necessary to avoid liability under Section 16(b) of the 1934 Act by reason of such exercise, and (iii) during any period in which Grantee is precluded from exercising such rights due to an injunction or other legal restriction, plus in each case such additional period as is reasonably necessary for the exercise of such rights promptly following the obtaining of such approvals or the expiration of such periods.

12. Issuer hereby represents and warrants to Grantee as follows:

(a) Issuer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Issuer and no other corporate proceedings on the part of Issuer are necessary to authorize this

Agreement or to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by Issuer.

(b) Issuer has taken all necessary corporate and other action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms will have reserved for issuance upon the exercise of the Option, that number of shares of KSB Common Stock equal to the maximum number of shares of KSB Common Stock at any time and from time to time issuable hereunder, and all such shares, upon issuance pursuant hereto, will be duly authorized, validly issued, fully paid, nonassessable, and will be delivered free and clear of all claims, liens, charges, encumbrance and security interests of any kind or nature whatsoever and not subject to any preemptive rights.

(c) The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and compliance by Issuer with any of the provisions hereof will not (i) conflict with or result in a breach of any provision of its charter or bylaws or a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, debenture, mortgage, indenture, license, material agreement or other material instrument or obligation to which Issuer is a party, or by which it or any of its properties or assets may be bound, or (ii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Issuer or any of its properties or assets.

13. Grantee hereby represents and warrants to Issuer that:

(a) Grantee has all requisite corporate power and authority to enter into this Agreement and, subject to any approvals or consents referred to herein, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Grantee. This Agreement has been duly executed and delivered by Grantee.

(b) The Option is not being, and any shares of KSB Common Stock or other securities acquired by Grantee upon exercise of the Option will not be, acquired with a view to the public distribution thereof and will not be transferred or otherwise disposed of except in a transaction registered or exempt from registration under the 1933 Act.

14. Neither of the parties hereto may assign any of its rights or obligations under this Agreement or the Option created hereunder to any other person, without the express written consent of the other party, except that in the event a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event, Grantee, subject to the express provisions hereof, may assign in whole or in part its rights and obligations under this Agreement or the Option created hereunder within 90 days following such Subsequent Triggering Event (or such later period as provided in Section 11); provided, however, that until the date 15 days following the date on which the Federal Reserve

Board approves an application by Grantee under the BHCA to acquire the shares of KSB Common Stock subject to the Option, Grantee may not assign its rights under the Option except in (i) a widely dispersed public distribution, (ii) a private placement in which no one party acquires the right to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker or investment banker) for the purpose of conducting a widely dispersed public distribution on Grantee’s behalf or (iv) any other manner approved by the Federal ReserveBoard.

15. Each of Grantee and Issuer will use its best efforts to make all filings with, and to obtain consents of, all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement, including without limitation making application to list the shares of KSB Common Stock issuable hereunder on the NASDAQ National Market system upon official notice of issuance and applying to the Federal Reserve Board under the BHCA for approval to acquire the shares issuable hereunder, but Grantee shall not be obligated to apply to state banking authorities for approval to acquire the shares of KSB Common Stock issuable hereunder until such time, if ever, as it deems appropriate to do so.

16. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement by either party hereto, that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof or was otherwise breached, and that the parties will be entitled to equitable relief hereunder, including, without limitation, an injunction or injunctions to prevent and enjoin breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy at law or in equity to which they may be entitled at law or in equity. Any requirements for the securing or posting of any bond with respect to any such remedy are hereby waived.

17. If any term, provision, covenant or restriction contained in this Agreement is held by a court or other governmental authority of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions and covenants and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. If for any reason such court or governmental authority determines that Holder is not permitted to acquire, or Issuer or Substitute Option Issuer, as the case may be, is not permitted to repurchase pursuant to Section 7 or Section 9, as the case may be, the full number of shares of KSB Common Stock provided in Section 1(a) (as adjusted pursuant to Section 1(b) or 5), it is the express intention of Issuer (which shall be binding on the Substitute Option Issuer) to allow Holder to acquire or to require Issuer or Substitute Option Issuer, as the case may be, to repurchase such lesser number of shares as may be permissible, without any amendment or modification hereof.

18. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by cable, telegram, telecopy or telex, or by registered or certified mail (postage prepaid, return receipt requested) at the respective addresses of the parties set forth in the Merger Agreement.

19. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

20. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement.

21. Except as otherwise expressly provided herein, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel.

22. Except as otherwise expressly provided herein or in the Merger Agreement, this Agreement contains the entire agreement between the parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereof, written or oral. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

23. Capitalized terms used in this Agreement and not defined herein shall have the respective meanings assigned thereto in the Merger Agreement.

[Remainder of page left blank intentionally.]

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the date first above written.

CAMDEN NATIONAL CORPORATION
By:	/s/    ROBERT W. DAIGLE
Name:	Robert W. Daigle
Title:

KSB BANCORP, INC.
By:	/s/    JOHN C. WITHERSPOON
Name:	John C. Witherspoon
Title:	President and
	Chief Executive Officer

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT made as of this 4^th day of May 2004 by and between CAMDEN NATIONAL CORPORATION, a Maine Corporation (the “Company”), and Robert Daigle (the “Executive”).

W I T N E S S E T H:

WHEREAS, the Executive is currently employed by the Company and the Company wishes to ensure the continued employment of the Executive, and the Executive wishes to accept such continued employment, upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:

Article I - Terms of Employment

1.1 Employment

The Company agrees to employ the Executive during the Term specified in paragraph 1.2, and the Executive agrees to accept such employment, upon the terms and conditions hereinafter set forth.

1.2. Employment Term

Subject to the provisions contained in paragraph 2.1, the Executive’s employment by the Company shall be for a term commencing on the date above and expiring on the close of business on May 5, 2006 (the “Initial Employment Term”); provided, however, the term of the Executive’s employment by the Company shall continue for an indefinite period thereafter unless and until either party shall give to the other party 90 days advance written notice of expiration of the term (a “Notice of Termination”) (the Initial Employment Term and the period, if any, thereafter, during which the Executive’s employment shall continue are collectively referred to as the “Employment Term”). Any Notice of Termination given under this paragraph 1.2 shall specify the date of expiration (which may not be earlier than the close of business on May 5, 2006) and may be given at any time on or after February 4, 2006. The effective date of the termination of the Executive’s employment by the Company as an employee, regardless of the reason therefore, is referred to in this Agreement as the “Date of Termination” and the calendar year in which the Date of Termination occurs, is referred to in this Agreement as the “Termination Year”.

1.3. Duties and Responsibilities During the Employment Term

(a) Title. During the Employment Term, the Executive shall have the position of President and Chief Executive Officer of the Company. The Executive shall report directly to the Chairman of the Board of the Company (referred to herein as the “Designated Officer”), at such times and in such detail, as he shall reasonably require.

(b) Employment Duties. The Executive shall perform such executive and managerial duties and responsibilities customary to his office and as are reasonably necessary to the operations of the Company and as may be assigned to him from time to time by or under authority of the Board of Directors of the Company (the “Board”) and/or the Designated Officer, consistent with his position as designated in paragraph 1.3(a).

(c) Employment Responsibilities. The Executive (i) will use his best efforts to ensure that the members of the Company comply on a timely basis with all budgetary and reporting requirements reasonably requested by the Board and/or the Designated Officer), (ii) will, at all times use his best efforts to perform his duties and responsibilities in a manner consistent with the policies and strategic plans of the Company, and (iii) except as permitted by the scope of authority or authorized by the Designated Officer will not incur obligations on behalf of the Company other than in the ordinary course of business or enter into any transaction on behalf of the Company not in the ordinary course of business.

(d) Scope of Employment. The Executive’s employment by the Company shall be full-time and exclusive, and during the Employment Term, the Executive agrees that he will (i) devote all of his business time and attention, his best efforts, and all his skill and ability to promote the interests of the Company, (ii) carry out his duties in a competent and professional manner and serve the Company faithfully and diligently under the direction of the Board and the Designated Officer; and (iii) work with other employees of the Company in a competent and professional manner. Notwithstanding the foregoing, the Executive shall be permitted to engage in charitable and civic activities and manage his personal passive investments, provided that such passive investments are not in a company which transacts business with the Company or engages in business competitive with that conducted by the Company (or, if such company does transact business with the Company, or does engage in a competitive business, it is a publicly held corporation and the Executive’s participation is limited to owning less than 1/4 of 1% of its outstanding shares), and further provided that such activities (individually or collectively) do not materially interfere with the performance of his duties or responsibilities under this Agreement (“Permitted Activities”).

(e) Office Location. During the Employment Term, the Executive’s services hereunder shall be performed at the principal offices of the Company in Camden, Maine, subject to necessary travel requirements of his position and duties hereunder.

1.4. Compensation During Employment Term

(a) Base Salary During Employment Term. As compensation for his services hereunder, during the Employment Term the Company shall pay the Executive in accordance with its normal payroll practices, an annualized base salary of $310,000 during calendar year 2004; $325,000 during calendar year 2005; $340,000 during calendar year 2006.

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(b) Bonus Compensation During Employment Term. During the Employment Term, the Executive shall be eligible for bonus compensation as determined by the Designated Officer.

1.5. Expenses; Benefits and Perquisites During Employment Term

(a) Expenses During Employment Term. The Company agrees to pay or to reimburse the Executive for all reasonable, ordinary, necessary and documented business or entertainment expenses incurred during the Employment Term in the performance of his services hereunder in accordance with the policy of the Company as from time to time in effect. The Executive, as a condition precedent to obtaining such payment or reimbursement, shall provide to the Company any and all statements, bills or receipts evidencing the travel or out-of-pocket expenses for which the Executive seeks payment or reimbursement, and any other information or materials, as the Company may from time to time reasonably require.

(b) Benefit Plans During Employment Term. During the Employment Term, the Executive and, to the extent eligible, his dependents, shall be eligible to participate in and receive all benefits under any welfare benefit plans and programs provided by the Company to its senior executives and, without duplication, its employees generally, subject, however, to the generally applicable eligibility and other provisions of the various plans and programs in effect from time to time.

(c) Retirement Plans and Perquisites During Employment Term. During the Employment Term, the Executive shall be entitled to participate in all retirement plans and programs provided by the Company to its senior executives and, without duplication, its employees generally, subject, however, to the generally applicable eligibility and other provisions of the various plans and programs in effect from time to time. In addition, during the Employment Term, the Executive shall be entitled to receive fringe benefits and perquisites in accordance with the plans, practices, programs and policies of the Company from time to time in effect which are made available to its senior executives and, without duplication, its employees generally.

(d) Vacation During Employment Term. The Executive shall be entitled to five weeks paid vacation annually with right of carry over to be taken at such times as shall not, in the reasonable judgment of the Designated Officer, materially interfere with the Executive’s fulfillment of his duties hereunder, and shall be entitled to as many holidays, sick days and personal days as are in accordance with the Company’s policy then in effect generally for senior executives and, without duplication, its employees generally.

Article II - Terms Related to Employment

2.1 Termination

(a) Termination for Cause. The Company, by direction of the Board or the Designated Officer, shall be entitled to terminate the Employment Term and to discharge the

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Executive for “Cause” effective upon the giving of written notice. The term “Cause” shall be limited to the following grounds:

(i) the Executive’s intentional failure or refusal to materially perform his duties and responsibilities as set forth in paragraph 1.3 above or abide by the reasonable directives of the Designated Officer, in each case if such failure or refusal is not cured (if curable) within 30 days after written notice thereof to the Executive by the Company;

(ii) willful misappropriation of the funds or property of the Company;

(iii) use of alcohol or illegal drugs, interfering with the performance of the Executive’s obligations under this Agreement;

(iv) conviction in a court of law of, or entering a plea of guilty or no contest to, any felony or any crime involving moral turpitude, dishonesty or theft;

(v) material nonconformance with the Company’s standard business practices and policies, including without limitation, policies against any form of discrimination or harassment, which nonconformance is not cured (if curable) within 30 days after written notice to the Executive by the Company;

(vi) commission in bad faith by the Executive of any act which materially injures or could reasonably be expected to materially injure the reputation, business or business relationships of the Company;

(vii) gross or habitual misconduct or gross or habitual negligence by the Executive in the performance of his duties;

(viii) resignation by the Executive on his own initiative other than (A) pursuant to a termination by the Executive for “Good Reason” (as defined in paragraph 2.1(b) below), or (B) pursuant to a Notice of Termination given by the Executive under paragraph 1.2; and

(ix) any breach (not covered by any of the clauses (i) through (viii) above) of any material provision of this Agreement, if such breach is not cured (if curable) within 30 days after written notice thereof to the Executive by the Company.

Any notice required to be given by the Company pursuant to clause (i), (v) or (ix) above shall specify the nature of the claimed breach and the manner in which the Company requires such breach to be cured (if curable). In the event that the Executive is purportedly terminated for Cause and the arbitrator appointed pursuant to paragraph 2.14 determines that “Cause” as defined herein was not present, then such purported termination for Cause shall be deemed a termination “Without Cause” (as defined herein) pursuant to paragraph 2.1(c) below and the Executive’s

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rights and remedies will be governed by paragraph 2.2(c), in full satisfaction and in lieu of any and all other or further remedies the Executive may have.

(b) Termination for Good Reason. Provided that the Executive is not then otherwise in breach of this Agreement, the Executive shall be entitled to terminate this Agreement and the Employment Term hereunder for “Good Reason” at any time during the Employment Term by written notice to the Company not more than 30 days after the occurrence of the event constituting such Good Reason. “Good Reason” shall be limited to a breach by the Company of a material provision of this Agreement, which breach remains uncured (if curable) for a period of 30 days after written notice of such breach from the Executive to the Company (such notice to specify the nature of the claimed breach and the manner in which the Executive requires such breach to be cured) or a change in control which shall mean the sale, transfer or acquisition, whether by purchase, merger or otherwise, by which any person, firm or corporation directly or indirectly acquires substantially all the assets or a voting majority of the stock of the Company. In the event that the Executive purportedly terminates his employment for “Good Reason” and the arbitrator appointed pursuant to paragraph 2.14 determines that “Good Reason” as defined herein was not present, then such purported termination for “Good Reason” shall be deemed a termination for “Cause” pursuant to clause (a) above and the Executive’s rights and remedies will be governed by paragraph 2.2(a), in full satisfaction and in lieu of any and all other or further remedies the Executive may have.

(c) Termination Without Cause. The Company, by direction of the Board or the Designated Officer, shall have the right at any time during the Employment Term to terminate the employment of the Executive without Cause (referred to herein as “Without Cause”) by giving written notice to the Executive setting forth a Date of Termination.

(d) Termination for Death or Disability. In the event of the Executive’s death, the Date of Termination shall be the date of the Executive’s death. In the event the Executive shall be unable to perform his duties hereunder by virtue of illness or physical or mental incapacity or disability (from any cause or causes whatsoever) in substantially the manner and to the extent required hereunder prior to the commencement of such disability (all such causes being herein referred to as “Disability”) and the Executive shall fail to perform such duties for periods aggregating 180 days, whether or not continuous, in any continuous period of 270 days, the Company shall have the right to terminate the Executive’s employment or engagement hereunder as at the end of any calendar month during the continuance of such disability upon at least 30 days’ prior written notice to him.

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2.2. Effect of Termination of Employment.

(a) Termination for Cause During the Employment Term. In the event of the termination of the employment of the Executive by the Company for Cause, the Executive shall be entitled to the following payments and benefits, subject to any appropriate offsets, as permitted by applicable law, for debts or money due to the Company or an affiliate thereof (collectively, “Offsets”):

(i) unpaid salary through, and any unpaid reimbursable expenses outstanding as of, the Date of Termination; and

(ii) all benefits, if any, that had accrued to the Executive through the Date of Termination under the plans and programs described in paragraphs 1.5(b) and (c) above, or any other applicable plans and programs in which he participated as an employee of the Company, in the manner and in accordance with the terms of such plans and programs; it being understood that any and all rights that the Executive may have to severance payments by the Company shall be determined and solely based on the terms and conditions of this Agreement and not based on the Company’s severance policy then in effect; and

(iii) unless the Executive was terminated by the Company for Cause, subject to any eligibility requirements of the applicable plan, continued participation by the Executive on the same basis (including without limitation, cost contributions) as the other senior executives of the Company in all, medical and dental insurance coverage in which the Executive was participating on the Date of Termination in accordance with the terms of the applicable plan as from time to time in effect at the Company.

In any such event, except as provided in this paragraph 2.2(a), the Company shall have no further liability to the Executive or the Executive’s heirs, beneficiaries or estate for damages, compensation, benefits, indemnities or other amounts of whatever nature, directly or indirectly, arising out of or otherwise related to the Executive’s employment or cessation of employment with the Company.

(b) Termination upon Death or Disability During the Employment Term. In the event of the termination of the employment of the Executive in connection with the Executive’s Death or Disability during the Employment Term, the Executive (or his estate) shall be entitled to the following payments and benefits, subject to any appropriate offsets, as permitted by applicable law, for debts or money due to the Company or an affiliate thereof (collectively, “Offsets”):

(i) his applicable salary compensation when otherwise payable through the Date of Termination; and

(ii) any unpaid reimbursable expenses outstanding as of, the Date of Termination; and

(iii) all benefits, if any, that had accrued to the Executive through the Date of Termination under the plans and programs described in paragraphs 1.5(b) and (c) above, or any other applicable plans and programs in which he participated as an employee of the Company, in the manner and in accordance with the terms of such plans and programs; it being understood that any and all rights that the Executive may have to severance payments by the Company shall be determined and solely based on the terms and conditions of this Agreement and not based on the Company’s severance policy then in effect; and

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(iv) subject to any eligibility requirements of the applicable plan, continued participation by the Executive on the same basis (including without limitation, cost contributions) as the other senior executives of the Company in all, medical and dental insurance coverage in which the Executive was participating on the Date of Termination in accordance with the terms of the applicable plan as from time to time in effect at the Company.

In either such event, except as provided in this paragraph 2.2(b), the Company shall have no further liability to the Executive or the Executive’s heirs, beneficiaries or estate for damages, compensation, benefits, severance, indemnities or other amounts of whatever nature, directly or indirectly, arising out of or otherwise related to this Agreement and the Executive’s employment or cessation of employment with the Company.

(c) Termination by the Company Without Cause, or by expiration of the Employment Term pursuant to a Notice of Termination, or by the Executive for Good Reason During the Employment Term. In the event of (1) a termination by the Company Without Cause, or (2) by expiration of the Employment Term pursuant to a Notice of Termination during the Employment Term, or (3) a termination by the Executive for Good Reason, during the Employment Term, the Executive shall be entitled to the following payments and benefits, subject to any Offsets:

(i) as liquidated damages, payable according to Company’s regular payroll schedule, less standard withholding and authorized deductions, his applicable salary compensation when otherwise payable for two (2) years from the Date of Termination, payable according to the annualized base salary specified in paragraph 1.4(a) above or, for any portion of said two-year period extending beyond the Initial Employment Term, payable at the annualized base salary specified for calendar year 2006; and

(ii) any unpaid reimbursable expenses outstanding as of the Date of Termination; and

(iii) all benefits, if any, that had accrued to the Executive through the Date of Termination under the plans and programs described in paragraphs 1.5(b) and (c) above, or any other applicable benefit plans and programs in which he participated as an employee of the Company, in the manner and in accordance with the terms of such plans and programs, except that Executive shall have credited to his years of service under the Company’s Senior Executive Retirement Plan (SERP) two (2) years of additional creditable service measured from the Date of Termination; it being understood that any and all rights that the Executive may have to severance payments by the Company shall be determined and solely based on the terms and conditions of this Agreement and not based on the Company’s severance policy then in effect; and

(vi) subject to any eligibility requirements of the applicable plan, continued participation on the same basis (including without limitation, cost

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contributions) as the other senior executives of the Company in medical, dental, disability and life insurance coverage (such benefits collectively called the “Continued Plans”) in which he was participating on the Date of Termination (as such Continued Plans are from time to time in effect at the Company). However, such continued participation shall not extend beyond the date, or dates, he is eligible to receive coverage and benefits under the same type of plan of a subsequent employer.

In connection with (1) a termination by the Company Without Cause, or (2) a termination by the Executive for Good Reason, except as provided in this paragraph 2.2(c), the Company shall have no further liability to the Executive or the Executive’s heirs, beneficiaries or estate for damages, compensation, benefits, severance, indemnities or other amounts of whatever nature, directly or indirectly, arising out of or otherwise related to this Agreement and the Executive’s employment or cessation of employment with the Company. The making of any severance payments and providing the other benefits as provided in this paragraph 2.2(c) is conditioned upon the Executive signing and not revoking a separation agreement prepared by the Company, which shall include, inter alia, a general release of the Company and its affiliates, and its and their respective successors and assigns, officers, managers, employees, agents, attorneys and representatives, of any claims (including claims of discrimination) relating to the Executive’s employment with the Company or the termination thereof (the “Separation Agreement”). In the event the Executive breaches any provisions of the Separation Agreement or the provisions of paragraph 2.3 of this Agreement, in addition to any other remedies at law or in equity available to it, the Company may cease making any further payments and providing the other benefits provided for in this paragraph 2.2(c), without affecting its rights under this Agreement or the Separation Agreement.

2.3 Non-Solicitation/Non-Servicing Agreement and Protection of Confidential Information

(a) Non-Solicitation/Non-Servicing. The Executive acknowledges (i) that the business and the industry in which the Company competes is highly competitive; (ii) that as one of the most senior executive of the Company he has participated in and will continue to participate in the servicing of current clients and/or the solicitation of prospective clients, through which, among other things, the Executive has obtained and will continue to obtain knowledge of the “know-how” and business practices of the Company, in which matters the Company has a substantial proprietary interest; (iii) that his employment hereunder requires the performance of services which are special, unique, extraordinary and intellectual in character, and his position with the Company places and placed him in a position of confidence and trust with the clients and employees of the Company; and (iv) that his rendering of services to the clients of the Company necessarily requires the disclosure to the Executive of confidential information (as defined in paragraph 2.3(b) below) of the Company. In the course of the Executive’s employment with the Company, the Executive has and will continue to develop a personal relationship with the clients of the Company and a knowledge of those clients’ affairs and requirements, and the relationship of the Company with their established clientele will therefore be placed in the Executive’s hands in confidence and trust. The Executive

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consequently agrees that it is a legitimate interest of the Company, and reasonable and necessary for the protection of the confidential information, goodwill and business of the Company, which is valuable to the Company, that the Executive make the covenants contained herein and that the Company would not have entered into this Agreement unless the covenants set forth in this paragraph 2.3 were contained in this Agreement. Accordingly, the Executive agrees that during the Employment Term and for the two year period thereafter (such period being referred to as the “Restricted Period”), he shall not, as an individual, employee, consultant, independent contractor, partner, shareholder, or in association with any other person, business or enterprise, except on behalf the Company, directly or indirectly, and regardless of the reason for his ceasing to be employed by the Company:

(i) attempt in any manner to solicit or accept from any client business of the type performed by the Company or to persuade any client of the Company to cease to do business or to reduce the amount of business which any such client has customarily done or is reasonably expected to do with the Company, whether or not the relationship between the Company and such client was originally established in whole or in part through the Executive’s efforts; or

(ii) employ as an employee or retain as a consultant any person, firm or entity who is then or at any time during the preceding twelve months was an employee of or exclusive consultant to the Company, or persuade or attempt to persuade any employee of or exclusive consultant to the Company to leave the employ of the Company or to become employed as an employee or retained as a consultant by anyone other than the Company; or

(iii) render to or for any client of the Company any services of the type which are rendered by the Company; or

(iv) start or materially participate in the operation of any bank, credit union or financial institution having any branch or other operation in any Maine county in which Company or any entity, division or operating unit maintain or have maintained a branch or other operation.

As used in this paragraph 2.3, the term “client” shall mean (1) anyone who is a client of the Company on the Date of Termination, or if the Executive’s employment shall not have terminated, at the time of the alleged prohibited conduct (any such applicable date being called the “Determination Date”); (2) anyone who was a client of the Company at any time during the one year period immediately preceding the Determination Date; (3) any prospective client to whom the Company had made a new business presentation (or similar offering of services) at any time during the one year period immediately preceding the Date of Termination; and (4) any prospective client to whom the Company made a new business presentation (or similar offering of services) at any time within six months after the Date of Termination (but only if initial discussions between the Company and such prospective client relating to the rendering of services occurred prior to the Date of Termination, and only if the Executive participated in or supervised such discussions). For purposes of this clause, it is agreed that a general mailing or an incidental contact shall not be deemed a “new business presentation or similar offering of

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services” or a “discussion”. In addition, “client” shall also include any clients of any entity, division or operating unit of the Company to whom the Executive rendered services (including supervisory services) at any time during the one-year period prior to the Determination Date. In addition, if the client is part of a group of companies which conducts business through more than one entity, division or operating unit, whether or not separately incorporated (a “Client Group”), the term “client” as used herein shall also include each entity, division and operating unit of the Client Group where the same management group of the Client Group has the decision making authority or significant influence with respect to contracting for services of the type rendered by the Company.

(b) Confidential Information. In the course of the Executive’s employment with the Company he will acquire and have access to confidential or proprietary information about the Company and/or its clients, including but not limited to, trade secrets, methods, models, passwords, access to computer files, financial information and records, computer software programs, agreements and/or contracts between the Company and its clients, client contacts, budgets, practices, concepts, strategies, methods of operation, financial or business projections of the Company, and information about or received from clients and other companies with which the Company does business. The foregoing shall be collectively referred to as “confidential information”. The Executive is aware that the confidential information is not readily available to the public and accordingly, the Executive also agrees that he will not at any time (whether during the Employment Term or after termination of this Agreement), disclose to anyone (other than his counsel in the course of a dispute arising from the alleged disclosure of confidential information or as required by law) any confidential information, or utilize such confidential information for his own benefit, or for the benefit of third parties. The Executive agrees that the foregoing restrictions shall apply whether or not any such information is marked “confidential” and regardless of the form of the information. The term “confidential information” does not include information which (i) is or becomes generally available to the public other than by breach of this provision or (ii) the Executive learns from a third party who is not under an obligation of confidence to the Company or a client of the Company. In the event that the Executive becomes legally required to disclose any confidential information, he will provide the Company with prompt notice thereof so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this paragraph 2.3(b) to permit a particular disclosure. In the event that such protective order or other remedy is not obtained, or that the Company waives compliance with the provisions of this paragraph 2.3(b) to permit a particular disclosure, the Executive will furnish only that portion of the confidential information which he is legally required to disclose and, at the Company’s expense, will cooperate with the efforts of the Company to obtain a protective order or other reliable assurance that confidential treatment will be accorded the confidential information. The Executive further agrees that all memoranda, disks, files, notes, records or other documents, whether in electronic form or hard copy (collectively, the “material”) compiled by him or made available to him during his employment with the Company (whether or not the material constitutes or contains confidential information), and in connection with the performance of his duties hereunder, shall be the property of the Company and shall be delivered to the Company on the termination of the Executive’s employment or engagement with the Company or at any other time upon request. Except in connection with the Executive’s employment or engagement with the Company, the Executive agrees that he will not make or retain copies or excerpts of the material.

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(c) Remedies. If the Executive commits a breach or is about to commit a breach, of any of the provisions of paragraphs 2.3(a) or (b), the Company shall have the right to have the provisions of this Agreement specifically enforced by the arbitrator appointed under paragraph 2.14 or by any court having equity jurisdiction without being required to post bond or other security and without having to prove the inadequacy of the available remedies at law, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. In addition, the Company may take all such other actions and remedies available to it under law or in equity and shall be entitled to such damages as it can show it has sustained by reason of such breach.

(d) Acknowledgements. The parties acknowledge that (i) the type and periods of restriction imposed in the provisions of paragraphs 2.3(a) and (b) are fair and reasonable and are reasonably required in order to protect and maintain the proprietary interests of the Company described above, other legitimate business interests and the goodwill associated with the business of the Company; (ii) the time, scope, geographic area and other provisions of this paragraph 2.3 have been specifically negotiated by sophisticated commercial parties, represented by legal counsel, and (iii) because of the nature of the business engaged in by the Company and the fact that clients can be and are serviced by the Company wherever they are located, it is impractical and unreasonable to place a geographic limitation on the agreements made by the Executive herein. The Executive specifically acknowledges that his being restricted from soliciting and servicing clients and prospective clients as contemplated by this Agreement will not prevent him from being employed or earning a livelihood in the type of business conducted by the Company. If any of the covenants contained in paragraphs 2.3(a) or (b), or any part thereof, is held to be unenforceable by reason of it extending for too great a period of time or over too great a geographic area or by reason of it being too extensive in any other respect, the parties agree (x) such covenant shall be interpreted to extend only over the maximum period of time for which it may be enforceable and/or over the maximum geographic areas as to which it may be enforceable and/or over the maximum extent in all other respects as to which it may be enforceable, all as determined by the court or arbitration panel making such determination and (y) in its reduced form, such covenant shall then be enforceable, but such reduced form of covenant shall only apply with respect to the operation of such covenant in the particular jurisdiction in or for which such adjudication is made. Each of the covenants and agreements contained in this paragraph 2.3 (collectively, the “Protective Covenants”) is separate, distinct and severable. All rights, remedies and benefits expressly provided for in this Agreement are cumulative and are not exclusive of any rights, remedies or benefits provided for by law or in this Agreement, and the exercise of any remedy by a party hereto shall not be deemed an election to the exclusion of any other remedy (any such claim by the other party being hereby waived). The existence of any claim, demand, action or cause of action of the Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of each Protective Covenant. The unenforceability of any Protective Covenant shall not affect the validity or enforceability of any other Protective Covenant or any other provision or provisions of this Agreement. The temporal duration of the non-solicitation/non-servicing covenants set forth in this paragraph 2.3 shall not expire, and shall be tolled, during any period in which Executive is in violation of any of the non-solicitation/non-servicing

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covenants set forth in this paragraph 2.3; and all restrictions shall automatically be extended by the period of Executive’s violation of any such restrictions.

(e) Notification of Restrictive Covenants. Prior to accepting employment with any person, firm or entity during the Restricted Period, the Executive shall notify the prospective employer in writing of his obligations pursuant to this paragraph 2.3 and shall simultaneously provide a copy of such notification to the Company. The Executive further authorizes the Company to notify any prospective employer of the Executive’s obligations pursuant to this paragraph 2.3 and releases the Company from any liability for doing so.

(f) Tolling. The temporal duration of the non-solicitation/non-servicing covenants set forth in this Agreement shall not expire, and shall be tolled, during any period in which the Executive is in violation of any of the non-solicitation/non-servicing covenants set forth herein, and all restrictions shall automatically be extended by the period of the Executive’s violation of any such restrictions

2.4 Intellectual Property

During the Term, the Executive will disclose to the Company all ideas, inventions and business plans developed by him during such period which relate directly or indirectly to the business of the Company, including without limitation, any process, operation, product or improvement which may be patentable or copyrightable. The Executive agrees that all patents, licenses, copyrights, tradenames, trademarks, service marks, budgets, practices, concepts, strategies, methods of operation, financial or business projections, and business plans developed or created by the Executive in the course of his employment hereunder, either individually or in collaboration with others, will be deemed works for hire and the sole and absolute property of the Company. The Executive agrees, that at the Company’s request and expense, he will take all steps necessary to secure the rights thereto to the Company by patent, copyright or otherwise.

2.5 Enforceability

The Executive acknowledges that certain of the provisions contained in this Agreement, including but not limited to those contained in paragraph 2.3 above, are intended to protect any entity, division or operating unit of the Company, and accordingly, each such entity, division or operating unit of the Company shall be deemed a third party beneficiary with respect to such provisions and shall have the right to enforce such provisions as appropriate. The failure of any party at any time to require performance by another party of any provision hereunder shall in no way affect the right of that party thereafter to enforce the same, nor shall it affect any other party’s right to enforce the same, or to enforce any of the other provisions in this Agreement; nor shall the waiver by any party of the breach of any provision hereof be taken or held to be a waiver of any subsequent breach of such provision or as a waiver of the provision itself.

2.6 Assignment

The Company and the Executive agree that the Company shall have the right to assign this Agreement, and, accordingly, this Agreement shall inure to the benefit of, and may be

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enforced by, any and all successors and assigns of the Company, including, without limitation, by asset assignment, stock sale, merger, consolidation or other corporate reorganization. The Company and Executive agree that Executive’s rights and obligations under this Agreement are personal to the Executive, and the Executive shall not have the right to assign or otherwise transfer his rights or obligations under this Agreement, and any purported assignment or transfer shall be void and ineffective. The rights and obligations of the Company hereunder shall be binding upon and run in favor of the successors and assigns of the Company.

2.7 Modification

This Agreement may not be orally canceled, changed, modified or amended, and no cancellation, change, modification or amendment shall be effective or binding, unless in writing and signed by the parties to this Agreement.

2.8 Severability; Survival

In the event any provision or portion of this Agreement is determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall nevertheless be binding upon the parties with the same effect as though the invalid or unenforceable part had been severed and deleted or reformed to be enforceable. The respective rights and obligations of the parties hereunder shall survive the termination of the Executive’s employment to the extent necessary to the intended preservation of such rights and obligations.

2.9 Life Insurance

The Executive agrees that the Company shall have the right to obtain life insurance on the Executive’s life, at the sole expense of the Company, as the case may be, and with the Company as the sole beneficiary thereof. The Executive shall (a) cooperate fully in obtaining such life insurance, (b) sign any necessary consents, applications and other related forms or documents and (c) at the Company’s expense, take any reasonably required medical examinations.

2.10 Notice

Any notice, request, instruction or other document to be given hereunder by any party hereto to another party shall be in writing and shall be deemed effective (a) upon personal delivery, if delivered by hand, or (b) three days after the date of deposit in the mails, postage prepaid if mailed by certified or registered mail, or (c) on the next business day, if sent by prepaid overnight courier service or facsimile transmission (if electronically confirmed), and in each case, addressed as follows:

If to the Executive:

Robert W. Daigle

P.O. Box 1391

Camden, ME 04843

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If to the Company:

Camden National Corporation

Attention: Chairman of the Board

P. O. Box 310

Camden, ME 04843

Any party may change the address to which notices are to be sent by giving notice of such change of address to the other party in the manner herein provided for giving notice.

2.11 Applicable Law

This Agreement shall be governed by, enforced under, and construed in accordance with the laws of the State of Maine without regard to any conflicts or conflict of laws principles in the State of Maine that would result in the application of the law of any other jurisdiction.

2.12 No Conflict

The Executive represents and warrants that he is not subject to any agreement, instrument, order, judgment or decree of any kind, or any other restrictive agreement of any character, which would prevent him from entering into this Agreement or which would be breached by the Executive upon his performance of his duties pursuant to this Agreement.

2.13 Entire Agreement

This Agreement hereto represents the entire agreement between the Company and the Executive with respect to the employment of the Executive by the Company, and all prior agreements, plans and arrangements relating to the employment of the Executive by the Company are nullified and superseded hereby.

2.14 Arbitration

(a) The parties hereto agree that any dispute, controversy or claim arising out of, relating to, or in connection with this Agreement (including, without limitation, any claim regarding or related to the interpretation, scope, effect, enforcement, termination, extension, breach, legality, remedies and other aspects of this Agreement or the conduct and communications of the parties regarding this Agreement and the subject matter of this Agreement) shall be settled by arbitration in Camden or Portland, Maine, in accordance with the then governing form of the American Arbitration Association, National Rules for the Resolution of Employment Disputes. All awards of the arbitrator shall be binding and non-appealable. Judgment upon the award of the arbitrator may be entered in any court having jurisdiction. The arbitrator shall apply Maine law to the merits of any dispute or claims, without reference to the rules of conflicts of law applicable therein. Suits to compel or enjoin arbitration or to determine the applicability or legality of arbitration shall be brought in the United States District Court for the District of Maine or if that court lacks jurisdiction, in a state court located within the

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geographic boundaries thereof. Notwithstanding the foregoing, no party to this Agreement shall be precluded from applying to a proper court for injunctive relief by reason of the prior or subsequent commencement of an arbitration proceeding as herein provided. No party or arbitrator shall disclose in whole or in part to any other person, firm or entity any confidential information submitted in connection with the arbitration proceedings, except to the extent reasonably necessary to assist counsel in the arbitration or preparation for arbitration of the dispute. Confidential Information may be disclosed to (i) attorneys, (ii) parties, and (iii) outside experts requested by either party’s counsel to furnish technical or expert services or to give testimony at the arbitration proceedings, subject, in the case of such experts, to execution of a legally binding written statement that such expert is fully familiar with the terms of this provision, agree to comply with the confidentiality terms of this provision, and will not use any confidential information disclosed to such expert for personal or business advantage.

(b) The Executive has read and understands this paragraph 2.14. The Executive understands that by signing this Agreement, the Executive agrees to submit any claims arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach or termination thereof, or his employment or the termination thereof, to binding arbitration, and that this arbitration provision constitutes a waiver of the Executive’s right to a jury trial and relates to the resolution of all disputes relating to all aspects of the employer/employee relationship, including but not limited to the following:

(i) Any and all claims for wrongful discharge of employment, breach of contract, both express and implied; breach of the covenant of good faith and fair dealing, both express and implied; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; and defamation;

(ii) Any and all claims for violation of any federal, state or municipal statute, including, without limitation, Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Equal Pay Act, the Employee Retirement Income Security Act, as amended, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Fair Labor Standards Act, and the Maine Human Rights Act; and

(iii) Any and all claims arising out of any other federal, state or local laws or regulations relating to employment or employment discrimination.

2.15 Headings

The headings contained in this Agreement are for reference purposes only, and shall not affect the meaning or interpretation of this Agreement.

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2.16 Withholdings

The Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

2.17 Counterparts

This Agreement may be executed in two counterparts, both of which taken together shall constitute one instrument.

2.18 No Strict Construction

The language used in this Agreement will be deemed to be the language chosen by the Company and the Executive to express their mutual intent, and no rule of law or contract interpretation that provides that in the case of ambiguity or uncertainty a provision should be construed against the draftsman will be applied against any party hereto.

IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written.

	CAMDEN NATIONAL CORPORATION
	By:
Witness		Rendle A. Jones
		Chairman of the Board

Witness Robert W. Daigle

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EX-10.2

EXHIBIT 10.2

FIRST RESTATED AND AMENDED

LEASE AGREEMENT

THIS LEASE is made as of the 1^st day of March, 2004, by and between HANNAFORD BROS., CO. a Maine Corporation having its principal offices in Portland, County of Cumberland and State of Maine, successor in interest to The Sampson Supermarkets, Inc. (hereinafter referred to as “Landlord”) and UNITEDKINGFIELD BANK, successor in interest to Kingfield Savings Bank, a Maine financial institution having its principal offices in Bangor, County of Penobscot and State of Maine (hereinafter referred to as “Tenant”).

Recitals

Landlord and Tenant were parties to a certain Lease Agreement dated February 4, 1993 (the “Original Lease), concerning the premises located within the shopping center known as Shop ‘n Save Plaza, situated on the northwesterly side of U.S. Routes 2 and 4 in the Town of Farmington, County of Franklin and State of Maine (further described herein).

Pursuant to Section Three of the Original Lease, the initial term was ten years, with, at Tenant’s option, two additional five year renewal periods. Prior to expiration of the initial term of the Original Lease, Landlord and Tenant began negotiations concerning Tenant’s potential purchase of the Premises, which negotiations did not come to fruition. Tenant then exercised its right under the Original Lease for a five-year extension. Landlord and Tenant negotiated the terms of that extension and therefore desire to amend the Original Lease to reflect the terms agreed upon by both parties.

Terms

In consideration of the rents and covenants to be paid and performed by Tenant, Landlord does hereby lease to Tenant, and Tenant does hereby hire from Landlord, upon the terms and conditions hereinafter set forth:

SECTION 1. Definitions. In addition to other terms which are elsewhere defined in this Lease, the following terms, as used in this Lease and all agreements supplemental to this Lease, shall have the meanings hereinafter set forth:

(a) “Additional Rent” means the charges and expenses specifically designated as Additional Rent in this Lease, and any other sums, charges and expenses payable by Tenant under this Lease.

(b) “Commencement Date” means the date of this Lease as set forth above.

(c) “Common Areas” means all portions of the Shopping Center which have, at the time in question, been designated and improved for common use by, or for the benefit of, more than one tenant or occupant of the Shopping Center, but excluding all portions of the Shopping Center which are designated to be used by a single tenant or occupant. Any portion of the Shopping

Center so included within the Common Areas shall be excluded therefrom when designated by Landlord for a non-common use, and any portion thereof not theretofore included within the Common Areas. shall be included when so designated and improved for common use.

(d) “Gross Leasable Area” means, with regard to the Premises occupied by Tenant, 2540 square feet of floor space and, with regard to the premises occupied by any tenant of the Shopping Center other than Tenant, the actual number of square feet of floor space on all floors (including the selling areas of any basements, mezzanines and platforms) demised to any such tenant measured to. the, exterior faces of exterior walls and to the center lines of interior dividing walls.

(e) “Landlord” means only the owner of the Landlord’s interest in this Lease for the time being so that in the event of any transfer or assignment of Landlord’s interest in this Lease, Landlord shall be and hereby is entirely released and discharged from any and all further liability and obligations of Landlord hereunder. Notwithstanding anything to the contrary provided in this Lease, if Landlord or any successor in interest of Landlord shall be a mortgagee, or individual, joint venture, tenancy in common, corporation, firm or partnership (general or limited), it is specifically understood and agreed that there shall be absolutely no personal liability on the part of such mortgagee, corporation or such individual or on the part of the members of such firm, partnership or joint venture, or any stockholder, officer,. director or trustee of such corporation with respect to any of the terms, covenants and conditions of this Lease, and that Tenant shall look solely to the equity of Landlord or such successor in interest in the Premises for the satisfaction of each and every remedy of Tenant in the event of any breach by Landlord or by such successor in interest of any of the terms, covenants and conditions of this Lease to be performed by Landlord, such exculpation of personal liability to be absolute and without any exception whatsoever. . .

(f) “Lease Year” means each successive twelve months’ period during the Term, with the first such twelve months’ period to begin on the Commencement Date, except that in the event of the expiration or termination of this Lease on a day other than the last day of a Lease Year, the last Lease Year of the Term shall be the period from the end of the preceding Lease Year to such date of expiration or termination.

(g) “Parking Areas” means those portions of the Common Areas which have, at the time in question, been designated by Landlord for use for the parking of motor vehicles.

(h) “Rent” means, collectively, the Minimum Rent and Additional Rent required to be paid under the terms and conditions of this Lease.

(i) “Shopping Center” means (1) the parcels of land and the improvements thereon as generally represented on Exhibit A, plus (2) any other parcel or parcels of land at any time designated by Landlord to be part of the Shopping Center (only as long as any such designation remains unrevoked) which are, or are to be, used for Shopping Center or related purposes, together with all present or future buildings and improvements thereon, plus (3). any plant or other facility, serving any portion of the Shopping Center, whether or not such plant or facility shall be located within the Shopping Center, including the facilities connecting any such plant or facility to the Shopping Center; Landlord reserving the right at any time, and from time to time, to enlarge the Shopping Center, to construct other buildings and improvements within the Shopping Center, to make alterations or additions to any building, and to construct additional stores adjoining any building or buildings within the Shopping Center. Exhibit A hereto sets

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forth the general layout of the Shopping Center as it is currently existing or proposed, and certain existing or proposed stores,. but shall not be. deemed a warranty, representation or agreement by Landlord that the configuration of the Shopping Center or the identity of any tenant will be exactly as indicated, on Exhibit A or that any other merchant shall open or remain open for business or occupy or continue to occupy any premises in or adjoining the Shopping Center during the Term of this Lease or any part thereof. Any portion of the Shopping Center which is condemned or dedicated to public use or ceded or conveyed to any governmental authority for street or related purposes shall thereafter be excluded from the Shopping Center. .

(j) “Tenant” and the pronouns referring thereto means the persons, firm or corporation named herein as Tenant and their respective heirs,’ legal representatives, successors and permitted assigns. If Tenant shall be more than one (1) person or entity, or shall be or include a partnership, the obligations and liabilities of Tenant, under ‘this Lease shall be the joint and several obligations of all such persons and/or entities and/or the general partners of such partnership.

(k) “Tenant’s Fraction” means a fraction, the numerator of which is the Gross Leasable Area of the Premises, and the denominator of which is. the total Gross Leasable Area within the Shopping Center.

(l) “Term” means the Term of this Lease as set forth in Section 3(c) of this Lease.

SECTION 2. Premises. Landlord hereby Leases and lets to Tenant, and Tenant hereby takes and hires from Landlord, for the Term and upon and subject to the terms and conditions set forth in this Lease, and subject to all liens, encumbrances, easements, agreements, covenants, restrictions, zoning laws and governmental or any other regulations now or hereafter affecting or governing the Shopping Center, the following described premises (the “Premises”):

All of that certain tract, piece or parcel of land together with any and all improvements thereto (except as provided herein below), including, without limitation a certain building (the “Building”) containing approximately 2,540 square feet of area on the first and second floors, all as shown in heavy outline on the site plan annexed hereto as Exhibit A.

together with the appurtenant right, as provided in Section 6(c) (1) of this Lease, to use in common with Landlord and others to whom Landlord shall grant such rights, the Parking Areas and other Common Areas within the Shopping Center. The Premises are leased to Tenant subject to (1) the right of Landlord, its customers, tenants, employees, licensees and invitees to use, in common with Tenant, the roadways, walkways and drives located on the Premises, and (2) the right of Landlord, its agents, employees and contractors, to install, maintain, repair and replace from time to time above ground and underground sewer, drainage and other utility pipes, lines and conduits across the Premises to serve other portions of the Shopping Center (any such utilities serving other portions of the Shopping Center, including any existing on the Commencement Date, being deemed “Common Facilities” and not part of the Premises demised to Tenant), and to enter upon the Premises for such purposes, provided that (i) Landlord shall make reasonable efforts to expedite any such installation, maintenance, repair or replacement requiring entry upon the Premises, (ii) any new installation shall not unreasonably interfere with Tenant’s use of the Premises, and (iii) following each such entry, Landlord shall restore the surface of the Premises to the condition prevailing immediately prior to such entry. The Building is leased to Tenant “as is” without warranty or representation, either express or implied, as to its condition or repair, and all responsibility to place the Building in a tenantable condition suitable

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for Tenant’s business purposes shall be Tenant’s, as provided in Section 9 hereof and elsewhere in this Lease.

SECTION 3. Term.

(a) The term shall commence as of March 1, 2003, and, unless sooner terminated or extended as expressly provided in this Lease, shall end on February 29, 2008.

(b) Provided that this Lease is in full force and effect and Tenant is not in default of any provision of this Lease, Tenant shall have the right, at the expiration of the original term, to extend the original term for one (1) additional period of five (5) years, such extension period to be exercised in the manner herein provided, and to be upon all of the other terms, covenants, and conditions of this Lease except for the Minimum Rent, which shall be determined in accordance with the provisions of Section-5(b) below, and except that Tenant shall have no further extension rights at the end of the five (5) year extension period. Such right to extend shall be exercised by written notice to Landlord given at least twelve (12) months prior to the expiration date of the original term, or said term as previously extended, time being of the essence hereto, and upon the giving of such notice and without any further instrument, lease, or agreement, this Lease shall be so extended.

(c) As used in this Lease, the word “Term” shall mean the original term and, if the Lease shall have been extended in accordance with Section 3(c), the original term together with the extension term or terms, as the case may be. The “Expiration Date” shall mean the date of expiration of the Term.

SECTION 4. Holding Over. In the event that Tenant shall continue in occupancy of the Premises after the expiration of the Term hereof, such occupancy shall not be deemed to extend or renew the terms of this Lease, but such occupancy shall continue, at the option of Landlord, as a tenancy at will from month to month upon the covenants, provisions and conditions herein contained and twice the rental in effect during the last Lease Year of the Term, prorated and payable for the .period of such occupancy. This Section 4 shall not be construed as giving Tenant any right to hold over after the expiration of the Term hereof.

SECTION 5. Rent. (a) Tenant shall pay all Rent (Minimum Rent and Additional Rent) to Landlord in lawful money of the United States, without offset or deduction and without previous demand therefore, at the address set forth in Section 25 in regard to notices or at such other place as Landlord may by notice in writing to Tenant from time to time direct.

(b) Tenant shall pay the Minimum Rent, as hereinafter defined, in advance, on the first day of each month of the Lease Year.

(1) During the original term, the Minimum Rent per month for the Premises (including land and buildings and improvements) shall be $291.67 for the months of March and April of 2003 and thereafter shall be $2083.33 per month. The first rental payment shall be due July 1, 2004, in addition to the payment required under Section 5(d) of this Agreement.

(2) During the five (5) year extension period (if such period shall have been elected by Tenant), the Minimum Rent shall be $2,500.00 per month for such period, to be paid monthly and in the same manner as during the original term.

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(c) In addition to the Minimum Rent, and as part of the total Rent to be paid by Tenant to Landlord, Tenant shall pay to Landlord, for each calendar year, or portion thereof during the Term, as Additional Rent, (i) Tenant’s proportionate share of Common Area Costs as set forth in Section 6, and (ii) Tenant’s proportionate share of Real Estate Taxes as set forth in Section 8.

Payment on account of the Additional Rent for each calendar year shall be made in monthly installments, as part of Tenant’s total Rent, at the times and in the manner herein provided for the payment of the Minimum Rent. Initially, the amount so to be paid each month shall be Two Hundred Seventy-Four Dollars and Seventy-Eight Cents ($274.78). Promptly after the end of the first calendar year during the Term and promptly after the end of each calendar year thereafter, Landlord shall make a determination of the Additional Rent for the immediately preceding calendar year and shall furnish to Tenant a statement in reasonable detail showing the computation of such Additional Rent; and if the aforesaid monthly installments paid by Tenant during such calendar year shall exceed the Additional Rent owed by Tenant for such calendar year, the overpayment shall be credited against the payments thereafter, to be made by Tenant pursuant to this paragraph (c); and if the Additional Rent owed by Tenant for such calendar year is greater than the installments theretofore paid on account of such calendar year, Tenant shall immediately pay the difference to Landlord. The Initial Monthly Assessment shall be replaced after the first calendar year,’ and after each subsequent calendar year, following Landlord’s determination of the Additional Rent, by a new monthly assessment which is based on the Additional Rent for the immediately preceding calendar year. Landlord shall have the right, at its election and upon notice to Tenant, to (i) compute and charge the Additional Rent on a Lease Year basis rather than a calendar year basis and/or (ii) to compute and adjust the Additional Rent that is due hereunder more frequently than once each year.

(d) In addition to Rent payment due on July 1, 2004, Tenant shall pay to Landlord Twenty-Five Thousand Eighty-Three and 24/100 Dollars ($25,083.24) with the first Rent installment due July 1, 2004, which constitutes all amounts currently due and owing from Tenant to Landlord pursuant to Sections 4, 5 or 6 of this Lease, including, but not limited to, any Additional Rent due thereunder and the difference between the rent paid by Tenant to Landlord for the period since March 1, 2003, and Rent payable under this Lease.

(e) It is the intention of the parties that the Rent payable hereunder shall be net to Landlord so that this Lease shall yield to Landlord the net Rent specified herein during the Term, and that all costs, expenses and obligations of every kind and nature whatsoever relating to the Premises shall be paid by Tenant. Tenant shall not be entitled to any abatement, reduction, setoff, counterclaim, defense or deduction with respect to any Rent or other sum payable hereunder. Notwithstanding the foregoing, Landlord agrees that when Tenant makes the payment required by Section 5(d) above, Tenant shall have satisfied its obligations under this Section 5(e) with regard to any payments arising under the Original Lease and arising between termination of the Original Lease and the Commencement Date of this Lease.

SECTION 6. Parking and Common Areas. (a) Tenant covenants and agrees to pay to Landlord, as Additional Rent, Tenant’s proportionate share of the Common Area Costs (as defined in paragraph (b) hereinbelow) for each calendar year during the Term. As used herein, “Tenant’s proportionate share” of the Common Area Costs shall mean the amount obtained by multiplying said Costs by the Tenant’s Fraction. Payment on account of Tenant’s proportionate share of the Common Area Costs shall be made monthly, as part of Tenant’s total Rent, at the times and in the manner provided in Section 5 of this Lease. Landlord shall keep good and accurate records of

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the Common Area Costs in accordance with sound accounting practices arid shall allow Tenant (after reasonable notice to Landlord) to inspect said records at the principal business office of Landlord in order to verify. Landlord’s, annual statements of said costs. Landlord shall keep said records for a period of at least two (2) years after the end of the year to which they relate.

(b) For the purposes hereof, the term “Common Area Costs” with respect to any year shall mean the total costs and expenses incurred by Landlord or its agents during such year for operating, maintaining, repairing and/or replacing all or any part of the Parking Areas and other Common Areas (and any installations thereon, thereunder or thereover), and any Common Facilities (as hereinafter defined, including any Common Facilities located upon or under the Premises), which costs and expenses shall include, but shall not be limited to, the following: the total costs and expenses incurred in cleaning, mowing, trimming, replanting and maintaining the lawns and landscaping within the Shopping Center; the costs of all Landlord’s insurance (other than Landlord’s fire and casualty insurance), including, but not limited to, bodily injury, public liability, property damage liability, automobile parking lot liability, workmen’s compensation, and any other insurance carried by Landlord with respect to the Common Areas or any part thereof; all costs for repairs, repaving, line repainting, exterior repainting, rental and maintenance of signs’ and equipment, lighting, sanitary control, removal of snow and ice, trash, rubbish, garbage and other refuse, repair and/or replacement of water lines, electrical lines, gas lines, sanitary sewer lines and storm water lines; all costs for repairs, replacements, alterations or improvements to the Parking Areas and other Common Areas and Common Facilities required by governmental statutes, ordinances, regulations or other requirements, including without limitation those relating to accessibility and usability; all electrical, water, sewer or other utility charges for serving the Common Areas (including any off-site sanitary treatment plants serving the Shopping Center and all pipes leading to and from the same); the cost of personnel to implement such services; wages and salaries (including employee benefits) of any personnel; personal property taxes, sales and use taxes on material, equipment, supplies and services; fees for required licenses and permits; fire, security and police protection; supplies, materials and labor. In addition there shall be include a charge equal to fifteen percent (15%) of all such costs and expenses incurred by Landlord to cover Landlord’s administrative overhead.

(c) (1) Tenant, for itself, its customers and invitees, shall have the non—exclusive right during the Term of this Lease to use in common with Landlord, and others to whom Landlord shall grant similar rights, for purposes of ingress, egress and parking, the Parking Areas and other Common Areas, subject to such rules and regulations as may now be in force or as Landlord may establish from time to time with respect to the Parking Areas and other Common Areas.

(2) Tenant shall have no right to construct or install any roadway, driveway, curb cut or other means of ingress and egress connecting the Premises directly with U.S. Routes 2 and 4.

(3) Except for any existing connections of utility lines or equipment as of the Commencement Date, Tenant shall not have the right to connect with or tie into the electrical, storm and sanitary sewer, drainage, water, gas and other utility pipes, lines and conduits (the “Common Facilities”) situated within the Shopping Center or to extend any utility lines or equipment across any portion of the Shopping Center or alter any portion of the Common Areas without Landlord’s prior written consent. With respect to existing utility lines and equipment within the Shopping Center serving only the Premises, if any, and with respect to any utility lines and equipment within the Shopping Center subsequently installed with Landlord’s consent to

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serve only the Premises, Tenant shall install, maintain, repair and, if necessary, replace such lines and equipment at its. sole expense, provided, however, that Tenant shall on each occasion notify Landlord of the work to be performed and shall perform such work in. accordance with such regulations and restrictions as Landlord may impose for the safety and convenience of the Shopping Center and in accordance with all other provisions of this Lease; provided, however, that Landlord shall have the right to perform any such installation, maintenance, repair or replacement on Tenant’s behalf and charge Tenant therefore (Tenant agreeing to promptly reimburse Landlord upon demand) . Landlord shall have the right, at Landlord’s expense and upon notice to Tenant, to relocate any utility pipe, line, conduit or other equipment crossing the Premises or the Shopping Center whether or not serving only the Premises.

(d) Landlord reserves the right at any time and from time to time to change the arrangement and/or size of the Common Areas, or any part or parts thereof, to change the location of any of the Common Facilities, and to construct additional improvements and buildings within the Shopping Center; provided, however, that reasonable access to and from the Premises and the adjacent public streets shall be maintained.

(e) Landlord shall have the right (i) to close temporarily, if necessary, all or any portion of the Common Areas to such extent as may, in the opinion of Landlord, be reasonably necessary to prevent a dedication thereof or the accrual of any rights of any person or the public therein, (ii) to close temporarily all or any portion of the Common Areas to discourage non—customer use, (iii) to use temporarily portions of the Common Areas while engaged in making additional improvements or repairs or alterations to the Shopping Center, (iv) to transfer in whole .or in part any of Landlord’s rights and/or obligations under this Section to any other tenant or tenants or other occupants of the Shopping Center or to such other party or designee as Landlord may from time to time determine, and (v) to do or perform such other acts in, to or with respect to the Common Areas as in the use of good business judgment Landlord shall determine to be appropriate for the Shopping Center

SECTION 7. Use of Premises. (a) The Premises may be used only as a bank and/or for a loan production office and for other banking-related purposes, and for no other purpose.

(b) Tenant acknowledges the potentially harmful effects that a vacant business at the Premises might have upon the economic vitality of the Shopping Center and the other businesses therein; therefore, Tenant covenants and agrees that it will use best efforts to open the Premises for business with the public on or before the Outside Date (as such term is defined in Section 9(a)(3)) and that thereafter it will remain open for business with the public on a continuous basis, without interruption, during normal business hours throughout the Term.

(c) In the event that Tenant (1) fails to open the Premises for business with the public as provided above, or (ii) vacates, abandons or deserts the Premises, or (iii) ceases operating its business at the Premises for six (6) consecutive months or more, except for the making of necessary renovations or repairs following a fire or other casualty, Landlord may, at its option, and provided Tenant shall not have opened or reopened, as the case may be, for business at the Premises, terminate this Lease by giving written notice of such termination and of the effective date thereof to Tenant, and upon the giving of such notice this Lease shall cease and come to an end as of the date set forth in said notice with the same force and effect as if such date had originally been set forth herein as the Expiration Date of this Lease, but Tenant shall remain

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liable under any indemnities and other provisions designated herein to survive the expiration or termination of the Lease.

SECTION 8. Taxes and Assessments. (a) Tenant shall pay to Landlord, as Additional Rent for each calendar year during the Term, its proportionate share of all Real Estate Taxes (as herein defined) imposed or assessed upon, or with respect to the Shopping Center and/or Landlord’s interest therein for such calendar year. For the purposes hereof, the Tenant’s proportionate share of the Real Estate Taxes shall be equal to the sum of Real Estate Taxes for such year imposed on or levied against the Premises and the buildings and improvements thereon, including, without limitation, the Building and the parking areas within the Premises, provided, that if the Premises and/or the buildings or other improvements thereon shall not be separately assessed, and if the Real Estate Taxes upon the Premises and the buildings and other improvements thereon cannot otherwise be separ3tely determined, then the Real Estate Taxes imposed on or levied against the Premises and the buildings and other improvements thereon for such year shall be deemed to be equal to the sum of (i) the Real Estate Taxes for such year imposed on or levied with respect to the land (and any improvements thereon assessed as part of the land) within the Shopping Center multiplied by a fraction having as its numerator the total area of the Premises and having as its denominator the total square land foot area of the Shopping Center and (ii) the Real Estate Taxes for such year imposed on or levied against all of the buildings and improvements within the Shopping Center (including the Premises) multiplied by a fraction having as its numerator twice the Gross Leasable Area of the Building and having as its denominator the total Gross Leasable Area within the Shopping Center, in other words a fraction that is twice the usual “Tenant’s Fraction” defined in Section 1(k). Payment on account of Tenant’s proportionate share of said Real Estate Taxes shall be made monthly, as part of Tenant’s total rent, at the times and in the manner provided in Section 5 of this Lease. Real Estate Taxes for each calendar year shall be calculated based upon the portions of the tax years that are included within each calendar year or portion thereof during the Term. Payment on account of Tenant’s proportionate share of said Real Estate Taxes shall be made monthly, as part of Tenant’s total Rent, at the times and in the manner provided in Section 5 of this Lease.

(b) The expression “Real Estate Taxes” used herein shall mean all impositions, taxes, assessments (special or otherwise) and other governmental levies and charges of any and every kind, nature and sort whatsoever, ordinary and extraordinary, foreseen and unforeseen, and substitutes therefore, including all taxes whatsoever (except any inheritance, estate, succession, transfer or gift tax imposed upon Landlord or any income tax specifically payable by Landlord as a separate taxpaying entity without regard to Landlord’s income source as arising from out of the Shopping Center), attributable in any manner to the Shopping Center, or the rents receivable therefrom, or any part thereof or any use thereon or any facility located therein or used in conjunction therewith, or any charge or other payment required to be paid to any governmental authority, whether or not any of the foregoing shall be a so—called “real estate tax.”

(c) Tenant shall pay all taxes upon its signs, equipment and other personal property in or upon the Premises. For the purposes of this Section such taxes shall not be included within Real Estate Taxes upon the Shopping Center.

(d) Tenant shall furnish Landlord, promptly after receipt. thereof, copies of any notices received from any taxing authority. Tenant shall also furnish Landlord with satisfactory proof of payment of all items referred to in this Section 8 which are payable by Tenant, together with copies of any tax bills received by Tenant, relating thereto.

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SECTION 9. Tenant’s Work, Rent Additions, Replacements; Restrictions (a)(1) Within thirty (30) days after the Commencement Date, Tenant shall prepare at its own expense and submit to Landlord, for Landlord’s approval, three (3) sets of working drawings and specifications covering the Tenant’s Work (as hereinafter defined). Within fifteen (15) days after receipt of said working drawings and specifications, Landlord shall give Tenant notice in writing of approval thereof or of its reasons for disapproval thereof. In the event of any disapproval, ‘Tenant shall revise the working drawings and specifications to the extent necessary to satisfy Landlord’s objections and shall resubmit the same, as revised, to Landlord within fifteen (15) days after. receipt of the notice of disapproval. Landlord shall give Tenant notice in Writing of approval or disapproval of the revised working drawings and specifications within fifteen (15) days of the receipt of any resubmission or resubmissions. The working drawings and specifications as finally approved are hereinafter referred to as the “Approved Plans”. In the event the Tenant’s working drawings and specifications have not been submitted in a form satisfactory to Landlord within one hundred twenty (120) day after the date of this Lease, Landlord shall have the right at any time thereafter to cancel this Lease upon written notice to Tenant if at the time of such notice Tenant has not submitted satisfactory working drawings and specifications. Without limiting Landlord’s general right of review and approval, any plans and specifications submitted by Tenant hereunder shall be consistent, as to the location, dimensions and configuration of the buildings and improvements on the Premises, with the site plan annexed hereto as Exhibit A. Notwithstanding any review or approval of Tenant’s working drawings and specifications, or any changes therein required by Landlord, Tenant shall have full responsibility for all defects in design, construction, workmanship and materials with respect to the Tenant’s Work.

(2) On or before the date which is thirty (30) days after the Commencement Date, Tenant shall, at its sole expense, apply for (through Landlord, as provided hereinbelow), and shall thereafter diligently seek to obtain, all zoning changes and variances, environmental and land use permits or amendments thereto, and all other governmental]. licenses, permits and approvals that shall be necessary in order to enable Tenant to perform the Tenant’s Work (as hereinafter defined) and to use the Premises for the purposes contemplated by this Lease, excepting only that Landlord shall diligently seek to obtain, at its expense, any necessary amendment to the Landlord’s Site Location of Development permit for the Shopping Center issued to Landlord pursuant to 38 M.R.S.A. seq (all of said zoning variances, environmental and land use permits or amendments thereto, and other governmental licenses, permits and approvals to be obtained by Tenant and Landlord hereunder being hereinafter referred to as “Permits”). Landlord agrees to cooperate in executing, if necessary, any submissions relating to any Permits being sought by Tenant, subject to Landlord’s right to approve all submissions as provided hereinbelow. All plans and submissions relating to the Permits obtained by Tenant shall be subject to Landlord’s prior review and approval, in Landlord’s sole discretion, and must be approved in writing by Landlord prior to submission to any reviewing authority. Without limiting the generality of the foregoing, any modifications or improvements to the exterior of the building and all landscaping are subject to Landlord’s prior written approval in Landlord’s sole discretion. Tenant shall provide Landlord a copy of each Permit obtained by. Tenant upon issuance of the same. The Permits shall be deemed to have been obtained only if (a) all necessary Permits shall have been obtained by Landlord and Tenant, they are not subject to any challenge or appeal and all periods within which any such challenge or appeal may be made have expired and (b) said Permits contain no conditions or requirements unacceptable to Landlord in Landlord’s sole discretion. Tenant shall give to Landlord at least ten (10) days’ prior written notice of any hearings or

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proceedings relating to the Permits being obtained by Tenant, and Landlord shall have the right, but not the obligation, by its agents or representatives, to accompany Tenant to such hearing or proceeding and to participate therein.

(3) Within thirty (30) days after ‘the later of (A) the date on which all Permits shall have been obtained, and (B) the date on which Landlord shall have notified Tenant of Landlord’s approval of the Approved Plans, or as soon thereafter as weather and seasonal conditions shall allow, Tenant shall commence and thereafter diligently prosecute to completion by June 1, 1993 (the “Outside Date”), at Tenant’s sole cost and expense, the Tenant’s Work. As used herein, the “Tenant’s Work” shall mean any and all work, including architectural, engineering, consulting, contract administration, and similar work as well as construction work, except for the Landlord’s Work (as defined below), necessary for Tenant to open the Premises for business in the normal manner for the use contemplated by Section 7, including without’ limitation’ rehabilitation and restoration of the interior and exterior’ of the Building, connection of the Premises with any necessary water systems, sewerage systems, and public utility lines (subject to Landlord’s rights under Section 6(c)), construction and renovation of all stairways, walkways, driveways, and parking areas on the Premises, all landscaping work, and any other necessary electrical, mechanical, architectural, plumbing, fixtures and site work. Tenant ‘shall perform the Tenant’s Work in a good and workmanlike manner, in accordance with all applicable laws, zoning and building codes, ordinances and regulations, and all other applicable requirements of governmental authorities, and in accordance with the Approved Plans. Prior to commencing Tenant’s Work, Tenant shall submit to Landlord (1) a list of the names of each contractor, subcontractor, and any other party supplying labor or materials in connection with Tenant’s Work, and (2) evidence satisfactory to Landlord that each of the parties referred to in the preceding clause (1) has obtained policies of insurance of the following types, in forms, amounts and with endorsements satisfactory to Landlord naming Landlord as an additional insured: comprehensive general liability insurance; builders’ risk insurance; automobile liability insurance; and workers’ compensation (including employers liability) insurance. Promptly upon completion of any Tenant’s Work, Tenant shall deliver to Landlord the certificate of a licensed architect or engineer stating that such Work has been completed in accordance with the Approved Plans and in accordance with all applicable governmental statutes, codes, regulations, standards and requirements, including without limitation those relating to the accessibility and usability of the accommodations, facilities and services located on the Premises and those relating to Hazardous Materials and storage Tanks. In addition, Tenant shall promptly deliver to Landlord lien waivers, prepared on a form to be provided to Tenant by Landlord, executed by all contractors, subcontractors and other parties supplying labor or materials in connection with the Tenant’s Work.

(b) During the Term of this Lease, Tenant shall not make any alterations, changes, replacements, improvements or additions in or to the Premises or the buildings and improvements (including any utility pipes, lines, conduits or equipment) now or hereafter situated thereon, except in accordance with the standards and procedures set forth in paragraph (a) above and elsewhere in the Lease; provided, however, that Tenant shall have the right, at its expense, from time to time to redecorate the interior of the building upon the Premises and to make such non-structural alterations and changes in the interior thereof as it shall deem necessary or expedient for its purposes, provided that such alterations or changes shall not injure the safety of the structure, nor diminish its value, shall be done in a good and workmanlike manner and shall comply with all governmental laws, ordinances and requirements, including,

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without limitation, those relating to historical restoration or preservation, such as, by way of example, those issued or imposed by the Maine Historic Preservation Commission.

(c) Tenant shall, at all times during the Term, and at its own cost and expense, keep and maintain, or cause to be kept and maintained, in good order, repair and condition (ordinary wear and tear excepted), the entire Premises, including all buildings and improvements at any time situated on the Premises, and including those improvements constructed by Landlord pursuant to Section 10. Without implying any obligations on the part of Landlord, Tenant shall maintain the Premises, including the buildings and improvements thereon, in at least as good order, repair and condition as the remainder of the Shopping Center.’ Such maintenance shall include, without limitation snow—plowing and lawn and landscaping maintenance. Landlord shall not be required to furnish any services or facilities or to make any improvements, repairs, replacements or alterations of any kind in or to the Premises or the buildings and improvements thereon or to any equipment, fixtures or facilities of any kind located on the Premises or in the Building during the Term, except as specifically provided herein. The provisions of this paragraph (c) shall be subject to the provisions of Section 19 of this Lease.

(d) (1) Until the expiration or termination of this Lease, title to any improvements made by or at the expense of Ten during the Term, to the Premises and the Building, and the permanent fixtures and other property installed by Tenant thereon and thereunder (such fixtures, property and improvements, hereinafter referred to as the “Tenant’s Improvements”) shall, during the Term hereof, be solely in Tenant; and, during the Term of this Lease, Tenant alone shall be entitled to deduct all depreciation on its income tax returns for any Tenant’s Improvements. Upon the expiration or termination of this Lease for any reason, all of the Tenant’s Improvements (except for any “Tenant’s fixtures and personal property” as hereinafter defined) shall automatically become the property of Landlord, and Tenant shall have no rights in or claim to such Improvements.

(2) All counters, shelving and other operating equipment and trade fixtures installed by or at the expense of Tenant (“Tenant’s fixtures and personal property”) shall remain the property of Tenant, and Tenant may, provided that, Tenant is not in default in the performance or observance of any of the terms, covenants, conditions or agreements in this Lease contained on •the part of the Tenant to be performed or observed, remove the same or any part thereof at any time or times during the Term, and Tenant shall repair all damages resulting from such removal. Any Tenant’s fixtures and personal property not removed at the end of the Term shall be deemed abandoned by the Tenant and shall, at the option of Landlord, become the property of Landlord, and Tenant hereby waives any claim to such Tenant’s fixtures and personal property and agrees to indemnify Landlord against all costs and expenses incurred by Landlord in storing, removing and disposing of any such Tenant’s fixtures and personal property. As used herein, the phrase “Tenant’s fixtures and personal property” shall not include any plumbing, wiring, heating, ventilation and air—conditioning equipment, lighting fixtures and equipment, bathroom sinks and’ fixtures, finished walls applied, to demised walls, moldings, doors, windows,’ trim, ceilings, carpeting, flooring, any outdoor improvements such as utilities, landscaping, lighting, curbing and the like, and any similar property, equipment and fixtures installed by Tenant in the Premises or the buildings thereon, and any such property equipment .and fixtures shall be deemed to be Tenant’s Improvements which shall become the property of Landlord upon the expiration or termination of the Lease as provided in subparagraph (1) immediately above.

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SECTION 10. Omitted

SECTION 11. Requirements of Public Authority. (a) During the Term of this Lease, Tenant shall, at its own cost and expense, promptly observe and comply (including the making of any necessary repairs, replacements, removals, alterations or improvements to the Premises (including the Building) or the equipment or fixtures located thereon) with all present and future laws, ordinances, requirements, orders, directives, rules and regulations (including without limitation those relating to the accessibility and usability of the accommodations, services and facilities on the Premises, those relating to the restoration and preservation of historical sites or structures and those relating to Hazardous Materials and Storage Tanks) of the federal, state, county and city governments and of all other governmental authorities affecting the Premises or appurtenances thereto or any part thereof whether the same are in force on the Commencement Date or may in the future be passed, enacted or directed, and, without limiting Tenant’s liability under the indemnities contained elsewhere in this Lease, Tenant shall pay all costs, expenses, liabilities, losses, damages, fines, penalties, c1 and demands, including reasonable counsel fees that may in any manner arise out of or be imposed because, of the failure of Tenant to comply with the covenants of this Section 11.

(b) Without limiting the generality of the foregoing, Tenant shall at its expense (1) conduct and complete all investigations, studies, sampling, and testing and all remedial, repair, removal, reporting and other actions necessary to clean up and remove, or to identify and manage all Hazardous Materials and Storage Tanks on, from or affecting the Premises (including those originating, from the Premises and migrating to or otherwise affecting other portions of the Shopping Center or other property) (a) in accordance with all applicable’ federal, state, and local laws, regulations, rules, ordinances and policies, (b) to the satisfaction of Landlord, including, without limitation, within a time frame and in a manner satisfactory to Landlord, and (c) in accordance with the. orders and directives of all federal, state, and local governmental authorities, and (2) defend, indemnify, and hold harmless Landlord and its affiliates, and the employees, agents, officers, and directors of any of them, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs, or expenses (including, without limit, attorney and consultant fees, investigation and laboratory fees, court costs, and litigation expenses) of whatever kind or nature, known or unknown, contingent or otherwise, arising out of or in any way related to (a) the presence, disposal, release, or threatened release of any Hazardous Materials or Storage Tanks which are on, from, or affecting the Premises; (b) any personal injury (including wrongful death) or property damage (real or personal) arising out of .or related to Hazardous Materials or Storage Tanks on, from or affecting the Premises; (C) any lawsuit brought or threatened, settlement reached, or government order relating to Hazardous Materials or Storage Tanks on, from or affecting the Premises, and/or (c) any violation of laws, orders, regulations, requirements, or demands of government authorities, or any policies or requirements of Landlord which are based upon or in any way related to Hazardous Materials or Storage Tanks on, from or affecting the Premises. The indemnities described in this subparagraph (b) shall also apply to Hazardous Materials and Storage Tanks originating or present on the Premises and migrating to or otherwise affecting the other portions of the Shopping Center or other property.

(c) For purposes of this provision, the term “Hazardous Materials” includes, without limit, any flammable explosives, radioactive materials, hazardous materials, hazardous waste, hazardous or toxic substances, oil or petroleum products, asbestos, or related materials; including as the same are defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. § 9601, seq.), the Hazardous Materials Transportation Act, as

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amended (49 U.S.C. § 1801,’ seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. § .6901, seq.), applicable Maine Statutes (including 38 M.R.S.A. § 561, seq., 38 M.RS.A. § 1361, se 38 M.R.S.A. § 1301, seq.; and 38 M.R.S.A. § 1317, seq.) and in the regulations adopted and publications promulgated pursuant thereto. As used herein, the term “Storage Tank” shall mean any container, tank or facility of whatever kind, nature or description, together with associated piping and fixtures, including any underground oil storage tank or facility as defined in 38 M.R.S.A. § 561 seq., previously or presently used or capable of being used to hold any type of Hazardous Materials, including but not limited’ to oil or other petroleum products, and which is located above ground or wholly or partly below ground. Notwithstanding the foregoing, Tenant shall not be liable to Landlord for any Hazardous Materials to the extent that such Hazardous Materials were on, from or• affecting the Premises prior to the Commencement Date or were generated, stored, handled, transported, dispose4 of, discharged or released by Landlord or its agents, employees, licensees or contractors except to the extent of any negligence or willful misconduct with respect to the foregoing by Tenant, its agents, employees, licensees or contractors. In addition to the foregoing, Tenant shall immediately provide Landlord with copies of any notices, correspondence, warnings, guidance or other written materials received from or given to any governmental authority or other person or entity in connection with Hazardous Materials or Storage Tanks and the Premises and shall give Landlord written notice of its discovery or release of any Hazardous Materials on, upon, under, from or into the Premises. Landlord shall have the right to communicate, verbally or in writing, with any governmental authority on any matter relating to Hazardous Materials and their relationship to the Premises and the Shopping Center. . The provisions of this Section 11 shall be in addition to any other obligations and liabilities Tenant may have under this Lease, at common law or otherwise, and shall survive the termination or expiration of this Lease.

(d) Tenant acknowledges Landlord’s concern that the Shopping Center be and remain in compliance with applicable environmental laws, regulations, rules, ordinances and policies and that Landlord has a direct interest in such matters and, therefore, without limiting Tenant’s obligations under this Section 11, or otherwise, or Landlord’s rights under Section 22, or otherwise, Tenant agrees that Landlord may, but shall be under no obligation to, undertake some or all of the matters referred to in this Section 11 on behalf of Tenant, upon giving Tenant written notice, and thereupon Tenant shall have no. further right, to undertake such matters itself, but shall continue to be liable to Landlord pursuant to Tenant’s indemnities.

SECTION 12. Covenant Against Liens. Tenant covenants and agrees that if any mechanics’ lien or claim or other lien of any kind whatsoever shall be filed or maintained against the Premises or the Shopping Center by any contractors, subcontractor, material man or laborer employed by Tenant or Tenant’s contractor or subcontractors for work done or material furnished in connection with the Premises, Tenant shall, within thirty (30) days after the filing of such claim or lien, either (1) pursuant to any applicable statute, bond against the same and remove such claim or lien of record, or (2) furnish a waiver and release from the party originating such claim or lien as to the Premises. if Tenant fails to discharge any claim or lien, Landlord shall have the right to discharge any such claims or lien by payment or otherwise, and Tenant shall reimburse Landlord therefore and for all costs and expenses as Additional Rent. Tenant further agrees that all contractors, subcontractors, material men and laborers performing such work or providing such labor or materials shall look to and hold Tenant solely liable for all labor and materials furnished and work done for Tenant so that there shall not be any legal or lawful claim of any kind whatsoever against Landlord for any work done or labor or materials furnished in

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connection therewith. Tenant shall indemnify and save harmless Landlord against and from all costs, damages, liabilities, suits, penalties, claims and demands, including reasonable counsel fees, resulting from any such lien.

SECTION 13. Access to Premises. (a) Landlord or Landlord’s agents and designees shall have the right to enter upon the Premises at reasonable times to examine and inspect the Premises arid, during the last six (6) months of the Term of this Lease, at reasonable times to exhibit the Premises to prospective purchasers and prospective tenants.

(b) Landlord recognizes that it is one of the prior functions of the banking business to provide security for items of value. Therefore, Landlord agrees that whenever in this Lease there is reserved to Landlord the right to enter and inspect or exhibit the Premises, including, without limitation, pursuant to this Section, such rights shall be subject to the Tenant’s right to restrict access to those areas involving bank security, such as security vaults, and to impose reasonable conditions upon any access to such areas.

SECTION 14. Assignment and Subletting. (a) Tenant shall not assign, mortgage or sublet this Lease or the Premises without on each, occasion obtaining the prior written consent of Landlord thereto, Landlord covenanting and agreeing not to delay or withhold such consent unreasonably; provided, however, that Tenant shall have no right under any circumstances to make any partial sublease, mortgage or assignment of this Lease or the Premises.

(b) For purposes of this Section 14, an assignment shall be deemed to include a transaction in which (if Tenant is a corporation (‘other than a corporation the outstanding voting stock of which is listed on a, “national securities exchange,” as defined in the Securities Exchange Act of 1934)) at any time after execution of this Lease any -part or all of the corporate shares shall be transferred by sale, assignment, bequest, inheritance, operation of law or other disposition (including, but not limited to, such a transfer to or by a receiver or trustee in federal or state bankruptcy, insolvency, or other proceedings) so as to result in a change in the present control of said corporation by the person ‘or persons now owning a majority of said corporate shares.

(c) Notwithstanding any assignment of Tenant’s interest in this Lease or any subletting of the Premises, Tenant shall remain primarily liable for performance and observance of the covenants and agreements herein contained on the part of Tenant to be performed and observed, such liability to be (in the case of any assignment) joint and several with that Of such assignee, and any assignment or sublease shall be only for the use permitted by Section 7 hereof. It is expressly understood and agreed that no assignment of Tenant’s interest in this Lease or sublease of the Premises shall be permitted or be effective until such time as Tenant shall deliver to Landlord a copy thereof, which shall include, in the case of an assignment, an agreement from the assignee, which agreement shall be reasonably satisfactory to Landlord in form and substance and shall provide that ‘the assignee agrees with Landlord to be primarily liable for the performance and observance of the covenants and agreements herein contained on the part of Tenant to be performed and observed, such liability to be joint and several with that of Tenant; any sublease shall contain a provision that it is subject to all of the terms, ‘covenants and conditions of this Lease. If Landlord shall consent to any assignment of this Lease by Tenant or a subletting of the Premises by Tenant at a rent which exceeds the Rent payable hereunder by Tenant, then Tenant shall pay to Landlord, as additional rent, forthwith upon Tenant’s receipt of each installment of any such excess rent (or upon receipt of a lump sum payment, as the case

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may be), the full amount of any such excess rent. Each request by Tenant for permission to assign this Lease or to sublet the Premises shall be accompanied by warranty by Tenant as to the amount of rent to be paid to Tenant by the proposed assignee or sublessee. For purposes of this Section, the Term “rent” shall mean all fixed rent, additional rent or other payments and/or consideration payable by one party to another pursuant to or as consideration for the sublease or assignment, whether payable as a lump sum or in installments.

(d) Notwithstanding any assignment of this Lease, or any subletting of the Premises as provided herein, the provisions of this Section 14 shall apply to any further subletting or assignment. The acceptance by Landlord of the payment of Rent following any assignment or other transfer prohibited by this Article shall not be deemed to be a consent by Landlord to any such assignment or other transfer nor shall the same be deemed to be a waiver of any right or remedy of Landlord hereunder.

SECTION 15. Signs. Tenant shall not place, install or maintain upon the Premises any sign, symbol, advertisement or similar device which is intended to be visible to public view, from outside the Premises without first obtaining Landlord’s written approval as to the size, location, design and appearance of each thereof. Without limiting the foregoing, Landlord hereby approves the configuration, dimensions and appearance of the sign shown on the sign plan attached hereto as Exhibit C. Any sign or other similar device erected or installed without the prior written approval of Landlord may be removed by Landlord without notice or liability. In addition to and without limiting the foregoing, Tenant shall insure that any sign to be erected in accordance with the provisions of this Section complies with all governmental laws, regulations and requirements applicable thereto, and Tenant shall, at its expense, obtain any and all necessary permits, licenses and approvals therefore before erecting such sign.

SECTION 16. Indemnity and Public Liability Insurance. Tenant shall save Landlord harmless and indemnified from and against all injury (including death) to any person and loss of, or damage to, any property while on the Premises or arising (directly or indirectly) out of or in connection with the possession, use, occupation or control of the Premises, and from and against all injury (including death) to any person, or loss of, or damage to, any property anywhere occasioned, or claimed to have been occasioned, by any act, neglect or default of Tenant, its agents, employees, licensees or contractors. This hold harmless and indemnity agreement shall include indemnity against all costs, expenses and liabilities incurred in connection with any such injury, loss or damage or in defense of any claim or claims on account thereof, and shall include without limitation indemnity against claims, suits, or proceedings brought by or on behalf of employees of Tenant, Tenant hereby waiving for purposes of this indemnity any immunity under the Workers’ Compensation Acts. Tenant shall maintain with respect to the Premises public liability insurance with combined single limit coverage of not less than Three Million Dollars ($3,000,000.00) for injury to, or death of, one or more persons, in a single accident or occurrence, and property damage insurance in an amount not less than Five Hundred Thousand Dollars ($500,000.00) in companies qualified to do business in the State of Maine, insuring Landlord and any designee of Landlord as well as Tenant against all injury to persons or damage to property as herein provided, all of said policies to .be written on an occurrence basis. in no event shall the limits of said policies be considered as limiting the liability of Tenant under this Lease. Tenant shall deposit with Landlord certificates of such insurance and certificates of the fire and casualty insurance required by Section 17 below on or before the Commencement Date, and thereafter within ten (10) days prior to the expiration of the applicable insurance policies.

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Such policies shall provide that the policies may not be cancelled or materially changed without at least ten (10) days’ prior written notice to each assured.

SECTION 17. Fire and Casualty Insurance. (a) Tenant shall, throughout the Term, keep the buildings and improvements situated from time to time upon the Premises insured against loss or damage by fire or other casualty under a so—called “all risk” insurance policy with replacement cost, demolition cost and increased cost of construction endorsements. Tenant shall insure said buildings and improvements in an amount which is equal to the full replacement cost of said buildings arid improvements, exclusive of foundations and footings. Such insurance policy shall be written with a good and solvent insurance company licensed to do business in the State of Maine selected by Tenant and satisfactory to Landlord. Such insurance policy shall name Landlord as the insured and Tenant as an additional insured, and shall provide that it will not be cancelled or amended except after ten (10) days’ written notice to Landlord and shall further provide (either expressly or by reason of the absence of re that the interests of and recovery by Landlord shall not be invalidated or affected by any act or negligence of Tenant or Landlord or any other person or entity having an interest in the Premises. All insurance proceeds paid under said policies shall be paid as follows: If this Lease shall be terminated pursuant to Section 19 hereof by reason of such damage or destruction, there shall be paid directly to Landlord the entire amount of such proceeds (including any proceeds attributable to loss or damage to any Tenant’s Improvements). If this Lease shall not be terminated by reason of such damage or destruction, the entire proceeds shall be paid to Landlord and made available to Tenant to be applied to the cost of repair and restoration of the buildings and improvements upon the Premises as provided in Section 19 of this Lease.

(b) Each of Landlord and Tenant hereby releases the other, to the extent of any insurance recovery by the release from any and all liability or responsibility (to the other or anyone claiming through or under them by way of subrogation or otherwise) for any loss or damage to property caused by fire or any of the insured casualties, even if such fire or other casualty shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible; provided, however, that this release shall be applicable and in force and effect only with respect to loss or damage occurring during such time as the releasor’s policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said policies or prejudice the’ right of the releasor to recover thereunder. Each of Landlord and Tenant agrees that its policies will include such a clause or endorsement so long as the same shall be obtainable without extra cost, or if extra cost shall be charged therefore, so long as the other party pays such extra cost. If extra cost shall be chargeable therefore, each party shall advise the other thereof and of the amount of the extra cost, and the other party, at its election, may pay the same, but shall riot be obligated so to do.

SECTION 18. Eminent Domain. (a) If the whole of the Premises shall be taken for any public or quasi-public use under any statute or by right of eminent domain or by purchase. in lieu thereof, then this Lease shall automatically terminate as of the date that possession has been taken. In the event of any other taking (or purchase) which renders the remaining portion of the Premises not so taken (or so purchased) not reasonably usable for the purposes for which the Premises were being used by Tenant just prior to such taking (or purchase), then either party shall have the right to terminate this Lease by giving written notice of such termination to the other on or prior to the date sixty (60) days after the date of such taking (or purchase), and upon the giving of such notice of termination, the Term of this Lease shall expire and come to an end on the last day of

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the calendar month in which such notice shall be given with the same force and effect as if said day had been originally fixed, herein as the expiration date of the Term of this Lease. In the event the Lease shall terminate or be terminated, the Rent shall, if Sand. when necessary, be adjusted to the effective date of the taking ‘ purchase) and neither party shall have any further rights or liabilities hereunder, whether for the unexpired portion of this Lease or otherwise, except with respect to obligations and liabilities of Tenant hereunder, actual or contingent, which have’ arisen on or prior to such date of termination, or which are designated to survive the expiration or termination of the Lease.

(b) In the event of a taking (or purchase) resulting in the termination of this Lease pursuant to the provisions of paragraph (a) of this Section 18, the parties hereto agree to cooperate in applying for, prosecuting and securing any claim for such taking and further agree that the aggregate net award (which term for the purposes hereof shall include any purchase price received in lieu of a taking) made in consideration of the Premises, after deducting all expenses therewith, payable to either Landlord or Tenant, shall belong entirely to Landlord without any deduction therefrom for any leasehold estate or interest or improvements now or hereafter vested in Tenant.

(c) In the event of a partial taking (or purchase) not resulting in the termination of this Lease pursuant to the provisions of paragraph (a) of this Section 18, Tenant shall, at its own cost and expense, make all repairs to the buildings and improvements on the Premises affected by such taking (or purchase) to the extent necessary to restore the same to complete architectural units (taking into consideration, however, the amount of land remaining after any such taking or purchase) and in accordance with Section 9. Any compensation available or paid to Landlord and Tenant upon such a partial taking (or purchase) shall be made available to Tenant to the extent necessary to defray the cost of such restoration (with any remaining funds to be the property of Landlord) and there shall be no abatement in Rent by reason of any such partial taking (or purchase).

(d) In the event of a taking for .a temporary use, this Lease shall continue unaffected and Tenant shall continue to pay in full all Rent due Landlord hereunder. Tenant shall be entitled to receive the entire proceeds from such taking unless the period of the taking shall extend beyond the termination of this Lease in which case. the proceeds shall be apportioned between Landlord and Tenant as of the date of such termination.

(e) In the case of a second or any other additional partial taking or takings from time to time, the provisions, hereinabove contained shall apply to each partial taking.

SECTION 19. Fire and Casualty. If during the Term of this Lease the buildings or improvements upon the Premises are damaged or destroyed by fire, flood or other casualty, this Lease shall continue in full force and effect and Tenant shall, at its cost and expense, rebuild, replace and/or repair said buildings and improvements so as to restore the same (as nearly as practicable) to the condition and fair market value thereof as existed immediately prior to such damage or destruction; provided however that if such destruction or damage (1) shall occur at any time prior to the third year next preceding the expiration of the original term hereof, or any extension thereof, and shall amount to fifty percent (50%) or more of the estimated replacement cost of said buildings and improvements (exclusive of foundations), or (2) shall occur during or after the third year next preceding the expiration of the original term hereof, or any extension thereof, and shall amount to thirty percent (30%) or more of such estimated replacement cost

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(exclusive of foundations), this Lease may be terminated and ended at the election of Tenant, provided that notice in writing of such election shall be sent by Tenant to Landlord within sixty (60) days after such destruction or damage as aforesaid. Upon termination as aforesaid by Tenant, the insurance proceeds payable as a result of such damage or destruction shall be paid to Landlord as provided in Section 17 of this Lease, and this Lease and the Term hereof shall cease and come to an end. If such destruction or damage to the buildings or improvements upon the Premises is such that Tenant shall not have the right to terminate this Lease under any of the provisions in this Section 19 contained, or in the event that Tenant, having such right, shall elect not to terminate this Lease as aforesaid within the time provided, Tenant shall .proceed forthwith to repair and restore the Premises as aforesaid. All such work shall be performed in a good and workmanlike manner and in accordance with the standards and procedures set forth in Section 9 hereof.

SECTION 20. Quiet Enjoyment. Tenant, upon paying the Rent and Additional Rent and all other sums and charges to be paid by it as herein provided, and observing and keeping all covenants, warranties, agreements and conditions of this Lease on its part to be kept, shall quietly have and enjoy the Premises during the Term of this Lease, without hindrance or molestation by anyone claiming by, through or under Landlord.

SECTION 21. Defaults. (a) If any one or more of the following events (herein sometimes called “events of default”). shall occur:

(1) if default shall be made in the due and punctual payment of any installment of Minimum Rent, Additional Rent or other charges due hereunder, when and as the same shall become due and payable, and such default shall continue for a period of five (5) days after written notice from Landlord to Tenant specifying the items in default (provided that Tenant shall be entitled to only one (1). such notice in any Lease Year); or

(2) if default shall be made by Tenant in the performance or compliance with any of the agreements, terms, covenants or conditions in this Lease provided, other than those referred to in the foregoing subparagraph (1), and such default shall continue for a period of fifteen (15) days after written notice from Landlord to Tenant specifying the items in default (provided that Tenant shall be entitled to only one (1) such notice in any Lease Year with respect to the same or similar default), or in case of a default or contingency which cannot with due diligence be cured within said fifteen (15) day period, Tenant rails to proceed within said fifteen (15) day period to commence to cure the same and thereafter to prosecute the curing of such default with due diligence and within a period of time which under all prevailing circumstances shall be reasonable; or

(3) if Tenant shall file a voluntary petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall file any petition or. answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future state or federal bankruptcy or insolvency statute or law, or shall seek or consent to the appointment of. any bankruptcy or insolvency trustee, receiver or liquidator of Tenant or of all or any substantial part of its properties or of the Premises; or

(4) if within sixty (60) days after the commencement of any proceeding against the Tenant seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future state or federal bankruptcy act or any other present or future state or federal bankruptcy or insolvency statute or law, such proceeding

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shall not have been dismissed, or, if, within sixty (60) days after the appointment, without the consent or acquiescence of Tenant, of any trustee, receiver or liquidator of Tenant or of all or substantially all of its properties or of the Premises, such appointment shall not have been vacated or stayed on appeal or otherwise, or if within sixty (60) days after the expiration of any such stay, such appointment shall not have been vacated; or

(5) if Tenant shall (i) forfeit the right, as declared by competent authority under any state or federal law to make loans or hold deposits; (ii) be dissolved, go into liquidation or be closed, whether by vote of shareholders or otherwise, with the exception of mergers and consolidations; (iii) become insolvent, as declared by competent authority in that its assets are less than its obligations to its creditors and others, including its members, or shareholders, however designated; (iv) refuse to pay its circulating notes; (v) willfully violate any cease-and-desist order that has become final, issued by, or at the behest of, any competent banking authority; (vi) conceal its books, papers, records or assets, or refuse to submit books, papers, records, assets or other affairs for the inspection of any state or federal agency authorized to inspect them; (vii) have its status, as an institution the accounts of which are insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation terminated, except where such termination occurs in conjunction with the inception of such status with another comparable insurer; or (viii) if a conservator or receiver for Tenant is appointed by or at the behest of any competent banking authority; then and in any such event Landlord, at any time thereafter, may give written notice to Tenant specifying such event of default or events of default and stating that this Lease and the Term shall expire and terminate on the date specified •in such notice which shall be at least ten (10) days after the giving of such notice, and upon the date specified in such notice this Lease and the Term and all rights of Tenant under this Lease, shall expire and terminate, and Tenant shall remain liable as hereinafter provided.

(b) Upon any such expiration or termination of this Lease, Tenant shall quit and peacefully surrender the Premises to Landlord, and Landlord, upon or at any such expiration or termination, may without further notice, enter upon and reenter the PL and possess and repossess itself thereof, by force, summary proceedings or otherwise, and may dispossess Tenant and remove Tenant and all other persons and property from the Premises without being liable to prosecution therefore, and may have, hold and enjoy the Premises and the rights to receive all rental income of and from the same.

(c) No such expiration or termination of this Lease, or summary proceedings, abandonment or vacancy, shall relieve Tenant of its liability and obligation under this Lease, whether or not the Premises shall be relent, and Tenant covenants and agrees, in the event of any such expiration or termination of this Lease, or summary proceedings, abandonment or vacancy, to pay and be liable for, on the days originally fixed herein for the payment thereof, amounts equal to the several installments of Rent and other charges reserved as would, under the term of this Lease, become due and payable if this Lease had not so expired or been terminated, or if Landlord had not entered or reentered as aforesaid, and whether the Premises be relent or remain vacant ‘in whole or in part or for a period less than the remainder of the Term, and for the whole thereof, up to but not exceeding the amount of any deficiency then existing after giving due credit for any net proceeds of any reletting after deducting all of Landlord’s reasonable expenses in connection with such reletting, including reasonable attorneys’ fees; and any suit brought to collect the amount of the deficiency for any month or other period shall not prejudice in any way

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the rights of Landlord to collect the amount of the deficiency for any subsequent month or other period by similar proceeding.

(d) In the event of an assignment by operation of law under the federal Bankruptcy Code, or any state or federal bankruptcy or insolvency law (including as a result of any of the events described in paragraph (a) (5) of this Section 21) and Landlord elects not to terminate this Lease under this Section 21, the assignee shall provide Landlord with. adequate assurance of future performance of all of the terms, conditions and covenants of this Lease, which shall include, but which shall not be limited to, assumption of all the terms, covenants and conditions of this Lease by the assignee and the making by the assignee of the following express covenants to Landlord:

(i) That assignee has sufficient capital to pay the Rent and other payments and charges due under this Lease for the entire Term, and that assignee is not in default under any’ other lease or other agreement with Landlord; and

(ii) That assumption of this Lease by the assignee will not cause Landlord to be in violation or breach of any provision in any other lease, financing agreement or operating agreement relating to the Shopping Center; and

(iii) That such assignment and assumption by the assignee will not substantially disrupt or impair any existing tenant mix in the Shopping Center.

SECTION 22. Landlord’s Remedies. (a) If Tenant shall default in the performance or observance of any agreement, condition or other provision in this Lease contained on its part to be performed or observed, and shall not cure such default within thirty (30) days after notice in writing from Landlord specifying the default (or shall not within said period commence to cure such default and thereafter prosecute the curing of such default to completion with due diligence), Landlord may, at its option (but shall he under no obligation to), without waiving any claims for breach of agreement, at any time thereafter, cure such default for the account of• Tenant, and may enter upon the Premises for such purpose and take all such action thereon as, in Landlord’s opinion, maybe necessary or appropriate .thereof or. No such entry shall be deemed an eviction of Tenant. Tenant shall reimburse Landlord for any amount paid and any expense or contractual liability so incurred, and any amounts due from Tenant shall be deemed .to be Additional Rent due and payable with the next installment of Rent. Landlord may cure any such default as aforesaid prior to the expiration of said waiting period, but after notice to Tenant, if it is necessary to protect the real estate or its interest therein, or to prevent injury or damage to persons or property.

(b) Any and all rights and remedies which Landlord may have under this Lease upon any breach or default by Tenant shall be distinct, separate and cumulative and shall not be deemed inconsistent with each other; and or one of them, whether exercised by Landlord or not, shall he deemed to be in exclusion of any other; and any two or more or all of such rights and. remedies may be exercised at the same time.

SECTION 23. Waivers. The receipt of Rent, Additional Rent or any other amount by Landlord with knowledge of any breach of this Lease by Tenant or of any default on the part of Tenant in the observance or performance of any of the terms, covenants or conditions of this Lease, shall not be deemed to be a waiver of any provision of this Lease. No acceptance of a lesser sum than the Rent then due shall be deemed to be other than on account of the earliest installment of such Rent due, nor shall any endorsement or statement on any check or any letter accompanying any

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check or payment as Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such installment(s) or pursue any other remedy in this Lease provided. Failure of Landlord .to complain of any act or omission on the part of Tenant no matter how long the same may continue shall not be deemed to be a waiver by Landlord of any of its rights hereunder. No waiver by Landlord at any time, express or implied, of any breach of any provision of this Lease shall be deemed a waiver of a breach of any other provision of this Lease or a consent to any subsequent breach of the same or any other provision. If any action by Tenant shall require the consent or approval of Landlord, Landlord’s consent to or approval of such action on any one occasion shall not be deemed a consent to or approval of said action on any subsequent occasion or a consent to or approval of any other action on the same or any subsequent occasion.

SECTION 24. Tenant’s Covenants. In addition to the covenants contained elsewhere in this Lease, Tenant covenants and agrees as follows:

(a) To pay when due all Rent at the times and in the manner provided in this Lease.

(b) Upon the expiration or termination of this Lease, to remove its goods and effects and those of all persons claiming under it and to yield up peaceably to Landlord the Premises and all buildings and improvements thereon, broom clean (in the case of buildings and similar structures) and in good order, repair and condition in all respects, reasonable wear and tear only excepted.

(c) To pay all sewer rents and charges for water, gas, heat, hot water, electricity, light and power, and other service or services furnished to the Premises or the occupants thereof during the Term of this Lease.

(d) To procure any licenses and permits and comply with all registration requirements required for any use made of the Premises by Tenant.

(e) To keep and maintain the Premises clean and free from rubbish, trash and garbage, and reasonably free of snow and ice; to store all trash and garbage on the Premises and arrange for regular pick-up thereof; and to maintain the Premises clean and neat in appearance.

(f) Not to burn any trash on or near the Premises or cause any offensive odors to be emitted from the Premises.

(g) Not to make any use of the Premises which is improper, offensive or illegal; nor to permit any act or thing to be done on the Premises which shall constitutes nuisance or which may make void or voidable any insurance on the Premises, and to pay any increased or extra premium payable for any such insurance resulting from any act done by Tenant; nor permit the presence, discharge, disposal, release, generation, handling, transportation or storage on, from or affecting the Premises of any Hazardous Materials.

(h) Not to permit or cause to be used on the Premises any device such as a public address system, or any excessively bright lights which change, flash or flicker, or any similar devices, the effect of which shall be visible or audible from outside of the Premises.

(i) To pay promptly when due the entire cost of any work to the Premises undertaken by Tenant so that the Premises shall at all times be free of liens for labor and materials and upon request by Landlord to provide sufficient bonds or other sureties against such liens; to procure all necessary permits before undertaking such work; to do all of such work in a good and

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workmanlike manner, employing material of good quality and complying with all governmental requirements; to maintain such insurance, in amounts approved by Landlord, as will protect it from claims under Worker’s Compensation Acts and other employee benefit acts and as will protect Landlord and Tenant from claims for damages because of bodily injury, including death, and from claims for damages to property, which may arise out of or in connection with such work whether performed by Tenant or by Tenant’s contractors or subcontractors or anyone directly or indirectly employed by any of them; and to defend Landlord and save Landlord harmless and indemnified from all injury, loss, liability claims or damage to any person or property and any lien, charge or other claim occasioned by or arising out of such work, including costs and attorneys fees incurred in any such matter or any enforcement of this indemnity. The foregoing indemnity shall include without limitation indemnity against any claims, suits or proceedings brought by or on behalf of employees of Tenant, Tenant hereby waiving for purposes of this indemnity any immunity under the Workers’ Compensation Acts.

(j) To obey and’ observe (and to cause its employees, contractors, licensees, invitees, subtenants, concessionaires arid all others doing business with Tenant to obey and observe) all reasonable rules and regulations established by Landlord at any time and from time to time with respect to the Shopping Center, and the use, safety, preservation and maintenance of the Common Areas.

(k) Not to allow trucks, trailers, vans or freight containers of any kind to remain• in the Shopping Center, except that trucks or similar vehicles, that are in the Shopping Center for the purpose of making deliveries to or pick—ups from the Premises may remain in the Shopping Center for a period of time that is reasonably necessary to accomplish any -such task.

(l) To pay all costs and expenses, including reasonable attorneys’ fees, incurred by Landlord in enforcing the provisions of this Lease in the event of’ any breach or default by Tenant and,’ in addition, to pay to Landlord a late charge equal to five percent (5%) of each payment of Rent or other amount due hereunder which is not received by Landlord within five (5) days after the same is due and, in addition, to pay interest to Landlord on any such late payments, at the rate of eighteen percent, (18%) per annum, from the date such payment was due, to and including the date such amount is received by Landlord.

SECTION 25. Landlord’s Acknowledgement Regarding Payments and Original Lease. Landlord acknowledges and agrees that:

(a) Tenant has properly extended the Term under the Original Lease, which extension commenced as of March 1, 2003 and thus, Section 4 of the Original Lease concerning “Holding Over” was not triggered, and Landlord is not entitled to any additional amount as rent as may be provided under Section 4 of the Original Lease.

(b) Upon Tenant’s payment to Landlord of Twenty-Five Thousand Eighty-Three and 24/100 Dollars ($25,083.24) pursuant to Section 5(d) of this Agreement, Landlord is not entitled to any further payments from Tenant either pursuant to (i) the Original Lease or (ii) this Lease in respect of the period beginning on the Commencement Date until the actual date of execution of this Lease.

(c) As of the date hereof, there is no existing default on the part of Tenant, nor is there any state of facts that with notice or passage of time or both would constitute a default on the part of Tenant.

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SECTION 26. Notices. Every notice, approval, consent or other communication authorized or required by this Lease shall be in writing and shall be either delivered in person or sent postage prepaid by United States registered or certified mail, return receipt requested, directed, if to Landlord, to it at P.O. Box 1000, Portland, Maine 04104, Attention: Real Estate Department and if to Tenant, to it at 145 Exchange Street, Bangor, Maine, 04402, Attention: Mr. Jeffrey D. Smith or to such other address as either party may designate by notice. given from time ‘to time in accordance with this Section 25, and any such notice-or other communication shall be deemed to have been given when so delivered or so mailed to the party to whom such notice or other communication shall be addressed. The Rent, Additional Rent or any other amount payable by Tenant hereunder shall be paid to Landlord at the same place where a notice to Landlord is herein required to be directed.

SECTION 27. Governing Law. This Lease and the performance of the terms hereof shall be governed, interpreted, construed and regulated by the laws of the State of Maine.

SECTION 28. Partial Invalidity. If any term, covenant, condition or provision of this Lease or the application thereof to any person or circumstance shall, at any time or to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant, condition and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law.

SECTION 29. Subordination. (a) This Lease shall, at the election of Landlord, be subject and subordinate to all ground or underlying leases or subleases that include the Premises, including, without limitation, sale leaseback lease or leaseback leases to which Landlord is or may become a party as a tenant or a subtenant thereunder, and to all mortgages, in all amounts and all advances thereon, which may now or hereafter lien the Premises, and to all renewals, replacements, modifications, consolidations and extensions of any thereof.

(b) The provisions of paragraph (a) immediately above shall be self-operative upon the election of Landlord and no further instrument of subordination shall be required in order to effect such subordination; provided, however, as a condition of such subordination, Landlord shall obtain for Tenant, from the holder., of the instrument to which this Lease is to be subordinated, an agreement to the effect that for so long as Tenant shall not be in default of its obligations under this Lease, Tenant’s use and occupancy of the Premises in accordance with this Lease shall not be disturbed by reason of the exercise by such holder of any of its rights under the instrument to which this Lease is to be subordinated. If Landlord or the holder of any mortgage or of any lessor’s interest in any ground or underlying leases or subleases affecting the Premises requests confirmation of the subordination provided for in paragraph (a), Tenant shall, without charge therefore, promptly execute and deliver to Landlord or to such holder, as the case may be, any certificate or instrument which Landlord or such holder may at any time request in connection therewith.

(c) The term “mortgage” as used in this Lease shall include a mortgage, a deed of trust, a deed to secure debt and any other conveyance or agreement for security purposes, which may now or hereafter affect the real property and/or the improvements thereto of which the Premises form a part. The term “mortgagee” and/or “holder of a mortgage” as used in this Lease shall include the holder of or the beneficiary under, as the case may be, a mortgage, deed of trust, deed to secure debt or any other conveyance or agreement for security purposes, which may now or

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hereafter affect the real property and/or the improvements thereto of which the Premises form a part.

SECTION 30. Interpretation. Wherever herein the singular number is used, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders, and vice versa, as the context shall require. The section headings used herein are for reference and convenience only, and shall not enter into the interpretation hereof. This Lease may be executed in several counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument.

SECTION 31. Entire Agreement. This instrument contains the entire and only agreement between the parties and no oral statements or representations or prior written matter not contained in this instrument shall have any force or effect. Tenant agrees that it is not relying on any representations or agreements other than those contained in this Lease. This Agreement shall not be modified or cancelled except by writing subscribed by all parties. The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation or an option for, the Premises, and this document shall become effective and binding only upon execution and delivery hereof by both Landlord and Tenant.

SECTION 32. Parties. Except as herein otherwise expressly provided, the covenants, conditions and agreements contained in this Lease shall bind and inure to the benefit of Landlord and Tenant and their respective heirs, successors, administrators and assigns. Nothing in this Section shall be deemed to authorize or permit any assignment or other transfer, in whole or in part, of the interest of Tenant in violation of any other provisions contained in this Lease.

SECTION 33. Exoneration of Landlord; Landlord Default. (a) Tenant agrees that Landlord shall not be liable to Tenant or anyone claiming under Tenant for any damage to property or injury. (including death) to any person on Or near the Premises that has been occasioned by or through (1) the acts or omissions of other tenants (or those claiming under such tenants) in the Shopping Center; (ii) failure of the water supply or of any other utility serving the Premises; (iii) the action, whether direct or indirect, of the elements; (iv) malicious mischief or vandalism;, or (v’) any other cause whatsoever unless the same shall be caused by or result from the affirmative acts or negligence of Landlord.

(b) Tenant agrees that Landlord shall not be in default of any of its obligations hereunder unless such default shall remain uncured for more than thirty (30) days following Landlord’s receipt of written notice from Tenant specifying the nature of such default, or for such longer period as may be reasonably required to correct such default. Furthermore, if Landlord shall contest such notice of default, in good faith, it shall not be deemed to be in default hereunder unless Landlord’s default shall have been finally determined by a court of competent jurisdiction and Landlord shall have failed to cure such default within fifteen (15) days after such final determination, or within such longer period as may be reasonably required to correct such default.

SECTION 34. Estoppel Certificates. The Tenant agrees, at any time, and from time to time,. upon not less than ten (10) days’ prior request by Landlord, to execute, acknowledge and deliver to Landlord a statement in writing certifying, if such be the case, that, this Lease is unmodified and in full force and effect (or, if there have been modifications, stating the modifications, and that the Lease as modified is in full force and effect), and that there. are no defenses or offsets thereto then accrued, or stating those claimed by Tenant, and the dates to which the Rent and

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other charges have been paid, it being intended that any such statement delivered pursuant to this Section 34 may be relied upon by any prospective purchaser of, or any prospective holder of a mortgage upon the fee of the Premises, or by any other properly interested party.

SECTION 35. Landlord’s Consent. It is agreed that in any provision of this Lease requiring the consent or approval of Landlord, unless such provision provides that such consent or approval shall not be unreasonably withheld, such consent or approval maybe granted or withheld in Landlord’s sole judgment and discretion.

SECTION 36. Jury Trial Waiver. LANDLORD AND TENANT WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS LEASE. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY TENANT AND TENANT ACKNOWLEDGES THAT NEITHER LANDLORD NOR ANY PERSON ACTING ON BEHALF OF LANDLORD HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. TENANT FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS LEASE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. TENANT FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION AND AS EVIDENCE OF THIS FACT, TENANT OR TENANT’S AUTHORIZED REPRESENTATIVE SHALL INITIAL THIS PROVISION BELOW.

Initials of Tenant’s

Authorized Representatives

SECTION 37. Memorandum of Lease. Landlord agrees, upon request by Tenant to execute a Memorandum of this Lease in recordable form containing the information required by 33 M.R.S.A. Section 201, but excluding any financial terms.

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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed as of the day and year first above written.

WITNESS:	HANNAFORD BROS. INC.
	By:
	Title:
	UNITEDKINGFIELD BANK
	By:
	Title:

EX-23.1

Exhibit #23.1

Consent of Independent Public Accountants

As the independent public accountants of Camden National Corporation, we hereby consent to the incorporation of our report included in this Form 10-Q, into the Company’s previously filed Registration Statements File Numbers 333-95157, 333-68598, 333-106403 and 333-108214.

Berry, Dunn, McNeil & Parker

Portland, Maine

August 6, 2004

Page 30

EX-31.1

Exhibit #31.1

CERTIFICATION PURSUANT TO SECTION 302(a)

OF THE SARBANES-OXLEY ACT OF 2002

I, Robert W. Daigle, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Camden National Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) [omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: August 6, 2004

/s/ Robert W. Daigle

Robert W. Daigle

President and Chief Executive Officer

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EX-31.2

Exhibit #31.2

CERTIFICATION PURSUANT TO SECTION 302(a)

OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory A. Dufour, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Camden National Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) [omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: August 6, 2004

/s/ Gregory A. Dufour

Gregory A. Dufour

Chief Banking Officer and Principal

Financial & Accounting Officer

Page 32

EX-32.1

Exhibit #32.1

Certifications

The undersigned officer of Camden National Corporation (the “Company”) hereby certifies that the Company’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2004 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be a part of the Report or “filed” for any purpose whatsoever. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ Robert W. Daigle	August 6, 2004
Robert W. Daigle President and Chief Executive Officer	Date

Page 33

EX-32.2

Exhibit #32.2

Certifications

The undersigned officer of Camden National Corporation (the “Company”) hereby certifies that the Company’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2004 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be a part of the Report or “filed” for any purpose whatsoever. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ Gregory A. Dufour	August 6, 2004
Gregory A. Dufour Chief Banking Officer and Principal Financial & Accounting Officer	Date

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