ONBPP Old National Bancorp

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) 
of the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): November 25, 2024

 

 

OLD NATIONAL BANCORP

(Exact name of Registrant as specified in its charter)

 

 

Indiana (State or other jurisdiction of incorporation)

001-15817 (Commission File Number)

35-1539838 (IRS Employer Identification No.)

 

One Main Street
Evansville, Indiana	47708
(Address of Principal Executive Offices)	(Zip Code)

 

Registrant’s telephone number, including area code: (773) 765-7675

 

(Former name or former address if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

x	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol		Name of each exchange on which registered
Common stock, no par value		ONB		NASDAQ Stock Market LLC
Depositary Shares, each representing a 1/40th interest in a share of Non-Cumulative Perpetual Preferred Stock, Series A		ONBPP		NASDAQ Stock Market LLC
Depositary Shares, each representing a 1/40th interest in a share of Non-Cumulative Perpetual Preferred Stock, Series C		ONBPO		NASDAQ Stock Market LLC

 

Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (s230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (s240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

Item 1.01. Entry into a Material Definitive Agreement.

 

Agreement and Plan of Merger

 

Overview

 

On November 25, 2024 (the “Signing Date”), Old National Bancorp (the “Company” or “Old National”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Bremer Financial Corporation, a Minnesota corporation (“Bremer”), and ONB Merger Sub, Inc., an Indiana corporation and wholly owned subsidiary of the Company (“Merger Sub”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, (i) Merger Sub will merge with and into Bremer (the “First Step Merger”), with Bremer surviving the First Step Merger as a wholly owned subsidiary of the Company (the “Surviving Corporation”), and (ii) immediately following the First Step Merger, and as part of a single, integrated transaction, the Surviving Corporation will merge with and into the Company (the “Second Step Merger” and together with the First Step Merger, the “Mergers”), with the Company continuing as the surviving corporation in the Second Step Merger (the “Surviving Entity”). Immediately following the Second Step Merger, or at such later time as the Company may determine in its sole discretion, the Company will cause Bremer’s wholly owned banking subsidiary, Bremer Bank, National Association, a national banking association duly organized and existing under the laws of the United States, to merge with and into the Company’s wholly owned banking subsidiary, Old National Bank, a national banking association duly organized and existing under the laws of the United States (the “Bank Merger”), with Old National Bank continuing as the surviving bank in the Bank Merger. The Merger Agreement was unanimously approved by the Board of Directors of each of the Company and Bremer.

 

Merger Consideration

 

Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the First Step Merger (the “Effective Time”), each share of Class A common stock, no par value per share, of Bremer (“Class A Common Stock”), and each share of Class B common stock, no par value per share, of Bremer (“Class B Common Stock” and together with the Class A Common Stock, the “Bremer Common Stock”), issued and outstanding immediately prior to the Effective Time, will be converted into the right to receive (i) $26.22 in cash without interest, (ii) 4.182 shares of common stock, no par value, of the Company (“Company Common Stock”), and (iii) cash in lieu of fractional shares.

 

Representations and Warranties; Covenants

 

The Merger Agreement contains customary representations and warranties from the Company, Merger Sub, and Bremer, and each party has agreed to customary covenants, including, among others, relating to (i) the conduct of its business during the interim period between the execution of the Merger Agreement and the Effective Time, (ii) maintenance of its business organization, employees and advantageous business relationships, and (iii) taking no actions that would reasonably be expected to adversely affect or materially delay the ability to obtain any necessary regulatory or other approvals required to consummate the Mergers on a timely basis without the other party’s consent. Bremer has also agreed to call a meeting of its shareholders to approve the Merger Agreement and to certain non-solicitation obligations related to alternative business combination proposals.

 

Under the Merger Agreement, each of the Company and Bremer has agreed to use its reasonable best efforts to obtain as promptly as reasonably practicable all consents required to be obtained from any governmental authority or other third party that are necessary to consummate the transactions contemplated by the Merger Agreement (including the Mergers and the Bank Merger). Notwithstanding such general obligation to obtain such consents of governmental authorities, neither the Company nor Bremer is required to take any action that would reasonably be expected to have a material adverse effect on the Surviving Entity and its subsidiaries, taken as a whole, after giving effect to the Mergers (a “Materially Burdensome Regulatory Condition”).

 

 

Closing Conditions

 

The completion of the Mergers is subject to customary conditions, including (i) approval of the Merger Agreement by Bremer’s shareholders, (ii) authorization for listing on the NASDAQ Stock Market LLC of the shares of Company Common Stock to be issued in the First Step Merger, subject to official notice of issuance, (iii) effectiveness of the Registration Statement on Form S-4 for Company Common Stock to be issued in the First Step Merger, (iv) the receipt of specified governmental consents and approvals that are necessary to consummate the transactions contemplated by the Merger Agreement, including from the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System, and termination or expiration of all applicable waiting periods in respect thereof, in each case without the imposition of a Materially Burdensome Regulatory Condition, and (v) the absence of any order, injunction, decree or other legal restraint preventing the completion of the Mergers or the Bank Merger or making the completion of the Mergers or the Bank Mergers illegal. Each party’s obligation to complete the Mergers is also subject to certain additional customary conditions, including (a) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (b) performance in all material respects by the other party of its obligations under the Merger Agreement, and (c) receipt by such party of an opinion from counsel to the effect that the Mergers will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). In addition, the Company’s obligation to complete the Mergers is subject to Bremer having Adjusted Tangible Shareholders’ Equity (as defined in the Merger Agreement) as of the Measuring Date (as defined in the Merger Agreement) of greater than or equal to $1,300,000,000.

 

Termination; Termination Fee

 

The Merger Agreement provides certain termination rights for both the Company and Bremer and further provides that a termination fee, in an amount specified in the Merger Agreement, will be payable by Bremer following termination of the Merger Agreement under certain circumstances.

 

Important Statement Regarding Merger Agreement

 

The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.

 

The representations, warranties and covenants of each party set forth in the Merger Agreement have been made only for the purposes of, and were and are solely for the benefit of the parties to, the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the parties that differ from those applicable to investors. Accordingly, the representations and warranties may not describe the actual state of affairs at the date they were made or at any other time, and investors should not rely on them as statements of fact. In addition, such representations and warranties (i) will not survive consummation of the Mergers, and (ii) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any factual information regarding the Company or Bremer, their respective affiliates or their respective businesses. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the Company, Bremer, their respective affiliates or their respective businesses, the Merger Agreement and the Mergers that will be contained in, or incorporated by reference into, the registration statement on Form S-4 that also constitutes a prospectus of the Company, as well as in the annual reports on Form 10-K, quarterly reports on Form 10-Q and other filings that the Company makes with the Securities and Exchange Commission (the “SEC”).

 

Trustee Voting Agreement

 

Concurrently with the execution and delivery of the Merger Agreement, each of the trustees (in such capacities, the “Trustees”) of the Otto Bremer Trust (the “Trust”), a shareholder of Bremer, has entered into a voting agreement (the “Trustee Voting Agreement”) pursuant to which, among other things, the Trustees have agreed, subject to the terms of the Trustee Voting Agreement, to (i) vote the shares of Bremer Common Stock over which they have the sole power to vote or direct the voting thereof, which represents approximately 86% of the outstanding shares of Bremer Common Stock in the aggregate (collectively, the “Bremer Trust Shares”), in favor of the approval and adoption of the Merger Agreement and (ii) from the Signing Date until the Effective Time, refrain from transferring the Bremer Trust Shares, in each case with certain limited exceptions.

 

 

The foregoing description of the Trustee Voting Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Trustee Voting Agreement, which is attached hereto as Exhibit 10.1, and incorporated herein by reference.

 

Director Voting Agreement

 

Concurrently with the execution and delivery of the Merger Agreement, each of the directors of Bremer (other than the Trustees that are members of the board of directors of Bremer (each of whom is a party to the Trustee Voting Agreement)) (the “Director Voting Agreement Holders”) has entered into a voting agreement (the “Director Voting Agreement”) pursuant to which, among other things, each Director Voting Agreement Holder has agreed, subject to the terms of the Director Voting Agreement, to (i) vote the shares of Bremer Common Stock over which he or she has the sole power to vote or direct the voting thereof, which represents less than 1% of the outstanding shares of Bremer Common Stock in the aggregate (collectively, the “Bremer Director Shares”), in favor of the approval and adoption of the Merger Agreement, and (ii) from the Signing Date until the Effective Time, refrain from transferring the Bremer Director Shares, with certain limited exceptions.

 

The foregoing description of the Director Voting Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Director Voting Agreement, a form of which is attached hereto as Exhibit 10.2, and incorporated herein by reference.

 

Investor Agreement

 

Concurrently with the execution and delivery of the Merger Agreement, the Company and each of the Trustees has entered into an investor agreement (the “Investor Agreement”), which includes the matters set forth below, among others. The Investor Agreement will become effective as of the Effective Time.

 

Restrictions on Transfer

 

Under the Investor Agreement, subject to certain exceptions, the Trustees agreed not to transfer any shares of the Company Common Stock acquired in the Mergers during the 180-day period (the “Initial Lock-Up Period”) beginning on the closing date of the Mergers without the consent of the Company. Thereafter, subject to certain customary exceptions, for an additional 180-day period (the “Extended Lock-Up Period” and together with the Initial Lock-Up Period, the “Lock-Up Period”), the Trustees may not transfer any shares of the Company Common Stock acquired in the Mergers in an amount in excess of 12.5% of the total number of shares of such Company Common Stock received as part of the merger consideration in each of the consecutive 90-day periods. Notwithstanding the foregoing restrictions, during the Lock-Up Period, the Trustees may request that the Company purchase the Company Common Stock from the Trustees on mutual agreed upon terms, but the Company shall have no obligation to purchase the Trustee’s shares of the Company Common Stock. In addition, until such time as the Trustees collectively beneficially own less than 1% of the outstanding shares of the Company Common Stock and subject to certain exceptions, (i) if the Company determines to repurchase shares of the Company Common Stock, the Company will first offer to repurchase such shares of the Company Common Stock from the Trustees, and (ii) following the Lock-Up Period, if the Trustees determine to sell any shares of the Company Common Stock, the Trustees will first offer to sell such shares of the Company Common Stock to the Company.

 

Director Appointment

 

Pursuant to the Merger Agreement and the Investor Agreement and effective as of the Effective Time, the board of directors of the Company will be increased by one director and one of the Trustees serving as a trustee of the Trust immediately prior to the Effective Time (such person to be determined by the Trustees in their sole discretion) will be appointed to the board of directors of the Company and will serve in accordance with the corporate governance guidelines and standards applicable to all directors of the Company.

 

 

Registration Rights

 

The Investor Agreement further provides that the Trustees are entitled to certain customary demand registration, shelf takedown and piggyback registration rights with respect to their Registrable Securities (as defined in the Investor Agreement), subject to customary limitations (including with respect to minimum offering size and maximum number of demands and underwritten shelf takedowns within certain periods). The registration rights provisions shall terminate when the Trustees, in the aggregate, own less than 10% of the outstanding shares of the Company Common Stock.

 

The foregoing description of the Investor Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Investor Agreement, which is attached hereto as Exhibit 10.3, and incorporated herein by reference.

 

Forward Sale Agreement

 

In connection with the pricing of the Company’s public offering of Common Stock described below, on November 25, 2024, the Company entered into a forward sale agreement (the “Forward Sale Agreement”) with Citibank, N.A. (the “Forward Purchaser”), relating to an aggregate of 19,047,619 shares of Company Common Stock.

 

The Company will not initially receive any proceeds from the sale of Company Common Stock sold by the Forward Seller to the Underwriters (as defined below). The Company expects to physically settle the Forward Sale Agreement (by the delivery of shares of Company Common Stock) and receive proceeds from the sale of those shares of Company Common Stock upon one or more forward settlement dates within approximately 12 months from the date of the Forward Sale Agreement at the then applicable forward sale price. The Company may also elect cash settlement or net share settlement for all or a portion of its obligations under the Forward Sale Agreement. The forward sale price will initially be $20.16 per share, which is the price at which the Underwriters have agreed to buy the shares of Company Common Stock pursuant to the Underwriting Agreement (as defined below).

 

The Forward Sale Agreement provides that the forward sale price will be subject to adjustment on a daily basis based on a floating interest rate factor equal to the specified rate less a spread and will be decreased on each of the dates specified in the Forward Sale Agreement by amounts related to expected dividends on shares of Company Common Stock during its term. The forward sale price will also be subject to decrease if the cost to the Forward Purchaser (or its affiliate) of borrowing a number of shares of Company Common Stock underlying the Forward Sale Agreement exceeds a specified amount. If the specified rate is less than the spread on any day, the interest rate factor will result in a daily reduction of the forward sale price.

 

In certain circumstances, the Forward Purchaser will have the right to accelerate the Forward Sale Agreement and require the Company to physically settle the Forward Sale Agreement on a date specified by the Forward Purchaser. These circumstances include:

 

•

the Forward Purchaser (or its affiliate) (i) is unable to borrow a number of shares of Company Common Stock equal to the number of shares of Company Common Stock underlying the Forward Sale Agreement because of the lack of sufficient shares being made available for share borrowing by lenders or (ii) would incur a stock loan rate greater than the rate specified in the Forward Sale Agreement to continue to borrow such shares;

 

•

certain ownership thresholds applicable to the Forward Purchaser, its affiliates and other persons who may form a beneficial share ownership group or whose ownership positions would be aggregated with the Forward Purchaser are exceeded;

 

•

the Company declares any dividend or distribution on Company Common Stock that constitutes an extraordinary dividend or is payable in (i) cash in excess of a specified amount (other than extraordinary dividends), (ii) securities of another company owned (directly or indirectly) by the Company as a result of a spin-off or similar transaction or (iii) any other type of securities (other than Company Common Stock), rights, warrants or other assets for payment at less than the prevailing market price, as reasonably determined by the Forward Purchaser;

 

 

•

the announcement of any event or transaction that, if consummated, would result in certain extraordinary events (as such term is defined in the Forward Sale Agreement and which includes certain mergers and tender offers and the delisting of Company Common Stock); or

 

•

certain other events of default, termination events or other specified events occur, including, among other things, any material misrepresentation made by the Company in connection with entering into the Forward Sale Agreement or the occurrence of a hedging disruption or a change in law (as such terms are defined in the Forward Sale Agreement).

 

The foregoing description of the Forward Sale Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Forward Sale Agreement, which is filed as Exhibit 10.4 hereto and incorporated herein by reference.

 

Item 7.01. Regulation FD Disclosure.

 

On November 25, 2024, the Company and Bremer issued a joint press release announcing the execution of the Merger Agreement. A copy of the joint press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

 

In connection with the announcement of the Merger Agreement, the Company and Bremer intend to provide supplemental information regarding the proposed transaction in presentations to analysts and investors. The slides that will be available in connection with the presentations are attached hereto as Exhibit 99.2 and are incorporated by reference herein.

 

The information provided under Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2, is being furnished and is not deemed to be “filed” with the SEC for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section and is not incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference to this Current Report on Form 8-K in such a filing. The Company does not incorporate by reference to this Current Report on Form 8-K information presented at any website referenced in this report or in any of the Exhibits attached hereto.

 

Item 8.01. Other Events.

 

Underwriting Agreement

 

On November 25, 2024, the Company priced the public offering of shares of Company Common Stock in connection with the Forward Sale Agreement and entered into an underwriting agreement (the “Underwriting Agreement”) with Citigroup Global Markets Inc., as representative for the underwriters named therein (collectively, the “Underwriters”), the Forward Purchaser and Citigroup Global Markets Inc., as forward seller (the “Forward Seller”), relating to the registered public offering and sale of 19,047,619 shares of Company Common Stock. The Underwriters have been granted a 30-day option to purchase up to an additional 2,857,143 shares of Company Common Stock. If such option is exercised, then the Company plans to enter into an additional forward sale agreement with the Forward Purchaser in respect of the number of shares of Company Common Stock that is subject to the exercise of such option.

 

Pursuant to the Underwriting Agreement, the Forward Seller will sell to the Underwriters at the closing on November 26, 2024, an aggregate of 19,047,619 shares of Company Common Stock, subject to the conditions set forth in the Underwriting Agreement, which shares are expected to be borrowed by the Forward Purchaser or its affiliate from third parties.

 

 

The description of the Underwriting Agreement set forth above does not purport to be complete and is qualified in its entirety by reference to the terms and conditions of the Underwriting Agreement, which is filed as Exhibit 1.1 hereto and incorporated herein by reference. A copy of a press release related to the offering is filed as Exhibit 99.3 hereto and incorporated herein by reference.

 

In connection with the offering, Company Common Stock was registered under the Securities Act pursuant to a registration statement on Form S-3 (Registration No. 333-272312) (the “Registration Statement”), and a prospectus supplement, dated November 25, 2024, which will be filed with the SEC pursuant to Rule 424(b) of the Securities Act no later than the second business day following the date it was first used in connection with the public offering.

 

In connection with the sale of the shares of Company Common Stock, the Company is also filing a legal opinion regarding the validity of the shares of Company Common Stock as Exhibit 5.1 for the purpose of incorporating the opinion into the Registration Statement.

 

Pro Forma Financial Information

 

In connection with the public offering of shares of Company Common Stock in connection with the Forward Sale Agreement, the related preliminary prospectus, dated November 25, 2024, by which the Company Common Stock is being offered, includes (i) the unaudited pro forma condensed combined balance sheet as of September 30, 2024, giving effect to the Mergers and the Forward Sale Agreement as if the Mergers had been consummated and the Forward Sale Agreement had been fully physically settled on September 30, 2024; (ii) the unaudited pro forma condensed combined statement of income for the year ended December 31, 2023, giving effect to the Mergers and the Forward Sale Agreement as if the Mergers had been consummated and the Forward Sale Agreement had been fully physically settled on January 1, 2023; and (iii) the unaudited pro forma condensed combined statement of income for the nine months ended September 30, 2024, giving effect to the Mergers and the Forward Sale Agreement as if the Mergers had been consummated and the Forward Sale Agreement had been fully physically settled on January 1, 2023.

 

This pro forma information is filed as Exhibit 99.4 hereto and is incorporated herein by reference.

 

The pro forma financial statements are derived primarily from the historical financial statements of the Company and Bremer as of and for the nine months ended September 30, 2024 and as of and for the year ended December 31, 2023, giving pro forma effect to the Mergers and the full physical settlement of the Forward Sale Agreement. The pro forma financial statements are preliminary and reflect a number of assumptions, including, among others, that the Mergers will be consummated and the Forward Sale Agreement will be fully physically settled. There can be no assurance that any of such transactions will be consummated or that such physical settlement will occur.

 

Financial Statements of Bremer

 

The audited consolidated financial statements of Bremer dated as of December 31, 2023 and 2022, and for each of the years in the two-year period ended December 31, 2023, together with the report of the independent auditors, are filed as Exhibit 99.5 hereto and incorporated herein by reference. The audited consolidated financial statements of Bremer are included in the Registration Statement and related prospectus supplement, and the Company is therefore also filing a consent from Ernst & Young LLP as Exhibit 23.2 for the purpose of incorporating such consent into the Registration Statement.

 

The interim unaudited balance sheet as of September 30, 2024 and 2023, and interim unaudited income statement for the three months and nine months ended September 30, 2024 and 2023, of Bremer are filed as Exhibit 99.6 hereto and incorporated herein by reference. The interim unaudited financial statements of Bremer set forth in Exhibit 99.6 were obtained from Bremer management and have not been prepared in accordance with Regulation S-X of the Securities Act or under Public Company Accounting Oversight Board guidelines or been subject to a SAS 100 review by Bremer’s auditors in accordance with Statement of Auditing Standards No. 100, “Interim Financial Information.”

 

 

Item 9.01. Financial Statements and Exhibits.

 

(d)            Exhibits

 

Exhibit No.	Description
1.1	Underwriting Agreement, dated as of November 25, 2024, among Old National Bancorp, Citigroup Global Markets Inc., as representative of the underwriters named therein, Citigroup Global Markets Inc., as forward seller, and Citibank, N.A., as forward purchaser.
2.1	Agreement and Plan of Merger, dated as of November 25, 2024, among Old National Bancorp, Bremer Financial Corporation, and ONB Merger Sub, Inc.*
5.1	Opinion of Nicholas J. Chulos, Executive Vice President, Chief Legal Officer and Corporate Secretary, Old National Bancorp.
10.1	Trustee Voting Agreement, dated as of November 25, 2024, among Old National Bancorp and each of the trustees of Otto Bremer Trust listed on the signature pages therein.*
10.2	Form of Director Voting Agreement, dated as of November 25, 2024, among Old National Bancorp and each of the directors of Bremer Financial Corporation listed on the signature pages therein.
10.3	Investor Agreement, dated as of November 25, 2024, among Old National Bancorp and each of the trustees of Otto Bremer Trust listed on the signature pages therein.
10.4	Forward Sale Agreement, dated as of November 25, 2024, between Old National Bancorp and Citibank, N.A.
23.1	Consent of Nicholas J. Chulos (included in Exhibit 5.1).
23.2	Consent of Ernst & Young LLP.
99.1	Joint press release announcing the execution of the Merger Agreement, dated November 25, 2024.
99.2	Investor Presentation Materials, dated November 25, 2024.
99.3	Press release dated November 25, 2024 announcing the pricing of the offering of shares of common stock.
99.4	Unaudited pro forma financial information.
99.5	Audited consolidated financial statements of Bremer Financial Corporation.
99.6	Unaudited consolidated financial statements of Bremer Financial Corporation as of September 30, 2023 and 2024 and for the three- and nine-month periods ended September 30, 2024.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

*Pursuant to Item 601(a)(5) of Regulation S-K, certain schedules and similar attachments have been omitted. The registrant hereby agrees to furnish supplementally a copy of any omitted schedule or similar attachment to the SEC upon request.

 

 

Cautionary Note Regarding Forward-Looking Statements

 

Certain statements in this Current Report on Form 8-K constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Rule 175 promulgated thereunder, and Section 21E of the Exchange Act, and Rule 3b-6 promulgated thereunder, which statements involve inherent risks and uncertainties. Examples of forward-looking statements include, but are not limited to, statements regarding the outlook and expectations of Old National and Bremer, respectively, with respect to the proposed transaction, the strategic benefits and financial benefits of the proposed transaction, including the expected impact of the proposed transaction on the combined company’s future financial performance (including anticipated accretion to earnings per share, the tangible book value earn-back period and other operating and return metrics), the timing of the closing of the proposed transaction, and the ability to successfully integrate the combined businesses. Such statements are often characterized by the use of qualified words (and their derivatives) such as “may,” “will,” “anticipate,” “could,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “project” and “intend,” as well as words of similar meaning or other statements concerning opinions or judgment of Old National or Bremer or their respective management about future events. Forward-looking statements are based on assumptions as of the time they are made and are subject to risks, uncertainties and other factors that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated results expressed or implied by such forward-looking statements. Such risks, uncertainties and assumptions include, among others, the following:

 

•

the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement;

 

•

the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction) and the possibility that the proposed transaction does not close when expected or at all because required regulatory approvals, the approval by Bremer’s shareholders, or other approvals and the other conditions to closing are not received or satisfied on a timely basis or at all;

 

•

the outcome of any legal proceedings that may be instituted against Old National or Bremer;

 

•

the possibility that the anticipated benefits of the proposed transaction, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of changes in, or problems arising from, general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which Old National and Bremer operate;

 

•

the possibility that the integration of the two companies may be more difficult, time-consuming or costly than expected;

 

•

the impact of purchase accounting with respect to the proposed transaction, or any change in the assumptions used regarding the assets acquired and liabilities assumed to determine their fair value and credit marks;

 

•

the possibility that the proposed transaction may be more expensive or take longer to complete than anticipated, including as a result of unexpected factors or events;

 

•

the diversion of management’s attention from ongoing business operations and opportunities;

 

•

potential adverse reactions of Old National’s or Bremer’s customers or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction;

 

•

a material adverse change in the financial condition of Old National or Bremer;

 

•

changes in Old National’s share price before closing;

 

 

•

risks relating to the potential dilutive effect of shares of Old National’s common stock to be issued in the proposed transaction;

 

•

general competitive, economic, political and market conditions;

 

•

major catastrophes such as earthquakes, floods or other natural or human disasters, including infectious disease outbreaks; and

 

•

other factors that may affect future results of Old National or Bremer, including, among others, changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates; deposit flows; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; and other actions of the Federal Reserve Board, the Office of the Comptroller of the Currency and legislative and regulatory actions and reforms.

 

These factors are not necessarily all of the factors that could cause Old National, Bremer, or the combined company’s actual results, performance or achievements to differ materially from those expressed in or implied by any of the forward-looking statements. Other factors, including unknown or unpredictable factors, also could harm Old National’s, Bremer’s, or the combined company’s results.

 

Although each of Old National and Bremer believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results of Old National or Bremer will not differ materially from any projected future results expressed or implied by such forward-looking statements. Additional factors that could cause results to differ materially from those described above can be found in Old National’s most recent annual report on Form 10-K for the fiscal year ended December 31, 2023 (and which is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/707179/000070717924000006/onb-20231231.htm), quarterly reports on Form 10-Q, and other documents subsequently filed by Old National with the Securities Exchange Commission (“SEC”). The actual results anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on Old National, Bremer or each of their respective businesses or operations. Investors are cautioned not to rely too heavily on any such forward-looking statements. Old National and Bremer urge you to consider all of these risks, uncertainties and other factors carefully in evaluating all such forward-looking statements made by Old National and Bremer. Forward-looking statements speak only as of the date they are made, and Old National and Bremer undertake no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.

 

No Offer or Solicitation

 

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or the solicitation of any vote or approval with respect to the proposed transaction between Old National and Bremer. No offer of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act, and no offer to sell or solicitation of an offer to buy shall be made in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

 

Important Additional Information about the Transaction and Where to Find It

 

In connection with the proposed transaction, Old National intends to file with the SEC a Registration Statement on Form S-4 (the “Registration Statement”) to register the shares of Old National capital stock to be issued in connection with the proposed transaction. The Registration Statement will include a proxy statement of Bremer and a prospectus of Old National (the “Proxy Statement/Prospectus”), and Old National may file with the SEC other relevant documents concerning the proposed transaction. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION WHEN THEY BECOME AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT OLD NATIONAL, BREMER AND THE PROPOSED TRANSACTION AND RELATED MATTERS.

 

 

A copy of the Registration Statement, Proxy Statement/Prospectus, as well as other filings containing information about Old National, may be obtained, free of charge, at the SEC’s website (http://www.sec.gov) when they are filed. You will also be able to obtain these documents, when they are filed, free of charge, from Old National by accessing Old National’s website at https://ir.oldnational.com. Copies of the Registration Statement, the Proxy Statement/Prospectus and the filings with the SEC that will be incorporated by reference therein can also be obtained, without charge, by directing a request to Old National’s Investor Relations, Old National Bancorp, One Main Street, Evansville, Indiana, 47708, or by calling (812) 464-1366. The information on Old National’s website is not, and shall not be deemed to be, a part of this communication or incorporated into other filings either company makes with the SEC.

 

 

SIGNATURE

 

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

 

Date: November 25, 2024

 

	OLD NATIONAL BANCORP
	By:	/s/ Nicholas J. Chulos
		Nicholas J. Chulos
		Executive Vice President, Chief Legal Officer and Corporate Secretary

 

 

Exhibit 1.1

 

OLD NATIONAL BANCORP

 

(an Indiana corporation)

 

19,047,619 shares of Common Stock

 

UNDERWRITING AGREEMENT

 

Dated: November 25, 2024

 

 

Old National Bancorp

 

(an Indiana corporation)

 

19,047,619 shares of Common Stock

 

UNDERWRITING AGREEMENT

 

November 25, 2024

 

Citigroup Global Markets Inc.

as Representative of the several Underwriters

 

Citigroup Global Markets Inc.

as Forward Seller

 

Citibank, N.A.

as Forward Purchaser

 

	c/o:	Citigroup Global Markets Inc.
		388 Greenwich Street
		New York, New York 10013

 

Ladies and Gentlemen:

 

Old National Bancorp, an Indiana corporation (the “Company”), and Citigroup Global Markets Inc. (in its capacity as seller of Borrowed Securities (as defined below), the “Forward Seller”), in connection with the letter agreement dated the date hereof (the “Initial Forward Sale Agreement”) between the Company and Citibank, N.A. (in such capacity, the “Forward Purchaser”) relating to the forward sale by the Company, subject to the Company’s right to elect Cash Settlement or Net Share Settlement (as such terms are defined in the Initial Forward Sale Agreement) of a number of shares of its common stock, no par value per share (the “Common Stock”), initially equal to the number of Borrowed Initial Securities (as defined below) sold by the Forward Seller pursuant to this Underwriting Agreement (this “Agreement”), confirm their respective agreements with each of the Underwriters named in Schedule A hereto (collectively, the “Underwriters,” which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Citigroup Global Markets Inc. is acting as representative (in such capacity, the “Representative”) and the Forward Purchaser, with respect to (i) the sale by the Forward Seller (with respect to an aggregate of 19,047,619 shares of Common Stock (the “Borrowed Initial Securities”)) and the Company (with respect to any Company Top-Up Initial Securities (as defined below)), and the purchase by each Underwriter, severally and not jointly, of the respective number of Initial Securities set forth in Schedule A hereto opposite such Underwriter’s name and (ii) the grant by the Forward Seller (with respect to an aggregate of up to 2,857,143 shares of Common Stock (the “Borrowed Option Securities”)) and the Company (with respect to any Company Top-Up Option Securities (as defined below)) of an option to purchase by each Underwriter, severally and not jointly, such Option Securities (as defined below), if and to the extent that the Representative shall have determined to exercise such option on behalf of the Underwriters.

 

The Borrowed Initial Securities and the Company Top-Up Initial Securities are herein referred to collectively as the “Initial Securities.” The Borrowed Option Securities and the Company Top-Up Option Securities are herein referred to collectively as the “Option Securities.” The Company Top-Up Initial Securities and the Company Top-Up Option Securities are herein referred to collectively as the “Company Securities.” The Borrowed Initial Securities and the Borrowed Option Securities are herein referred to collectively as the “Borrowed Securities.” The Initial Securities and the Option Securities are herein referred to collectively as the “Securities.” References herein to the “Forward Sale Agreements” are to the Initial Forward Sale Agreement and/or any Additional Forward Sale Agreement (as defined below) as the context requires.

 

 

The Company understands that the Underwriters propose to make a public offering of the Securities as soon as the Representative deems advisable after this Agreement has been executed and delivered.

 

The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) an automatic shelf registration statement on Form S-3 (File No. 333-272312) covering the public offering and sale of certain securities, including the Securities, under the Securities Act of 1933, as amended (the “1933 Act”), and the rules and regulations promulgated thereunder (the “1933 Act Regulations”), which automatic shelf registration statement became effective under Rule 462(e) under the 1933 Act Regulations (“Rule 462(e)”). Such registration statement, as of any time, means such registration statement as amended by any post-effective amendments thereto at such time, including the exhibits and any schedules thereto at such time, the documents incorporated or deemed to be incorporated by reference therein at such time pursuant to Item 12 of Form S-3 under the 1933 Act and the documents otherwise deemed to be a part thereof as of such time pursuant to Rule 430B under the 1933 Act Regulations (“Rule 430B”), is referred to herein as the “Registration Statement;” provided, however, that the “Registration Statement” without reference to a time means such registration statement as amended by any post-effective amendments thereto as of the time of the first contract of sale for the Securities, which time shall be considered the “new effective date” of such registration statement with respect to the Securities within the meaning of paragraph (f)(2) of Rule 430B, including the exhibits and schedules thereto as of such time, the documents incorporated or deemed to be incorporated by reference therein at such time pursuant to Item 12 of Form S-3 under the 1933 Act and the documents otherwise deemed to be a part thereof as of such time pursuant to Rule 430B. Each preliminary prospectus supplement and base prospectus used in connection with the offering of the Securities, including the documents incorporated or deemed to be incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act immediately prior to the Applicable Time (as defined below), are collectively referred to herein as a “preliminary prospectus.” Promptly after execution and delivery of this Agreement, the Company will prepare and file a final prospectus relating to the Securities in accordance with the provisions of Rule 424(b) under the 1933 Act Regulations (“Rule 424(b)”). The final prospectus supplement and the base prospectus, in the form first furnished or made available to the Underwriters for use in connection with the offering of the Securities, including the documents incorporated or deemed to be incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act immediately prior to the Applicable Time, are collectively referred to herein as the “Prospectus.” For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus or the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system (or any successor system) (“EDGAR”).

 

As more fully described in the General Disclosure Package (as defined below), the Company, Bremer Financial Corporation, a bank holding company formed as a Minnesota corporation (“Bremer Financial”) and ONB Merger Sub, Inc., an Indiana corporation and a wholly owned subsidiary of the Company (“merger sub”), expect to enter into an agreement, dated the date hereof (the “Merger Agreement”), pursuant to which, subject to the terms and conditions set forth therein, among other things, (i) merger sub will merge with and into Bremer Financial (the “First Merger”), with Bremer Financial continuing as the surviving entity in the First Merger (the “surviving corporation”). Immediately following the closing of the First Merger and as a part of a single, integrated transaction, the surviving corporation will merge with and into the Company (the “Second Merger” and, together with the First Merger, the “Merger”). Immediately following the closing of the Second Merger or at such later time as the Company may determine in its sole discretion, Bremer Financial’s subsidiary bank, Bremer Bank, will be merged with and into Old National Bank (the “Bank”), with the Bank as the surviving entity and a wholly owned subsidiary of the Company.

 

 

As used in this Agreement:

 

“Applicable Time” means 6:00 A.M., New York City time, on November 25, 2024 or such other time as agreed by the Company and the Representative.

 

“General Disclosure Package” means any Issuer General Use Free Writing Prospectuses issued at or prior to the Applicable Time, the most recent preliminary prospectus (including any documents incorporated therein by reference) that is distributed to investors prior to the Applicable Time and the information included on Schedule B-1 hereto, all considered together.

 

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the 1933 Act Regulations (“Rule 433”), including, without limitation, any “free writing prospectus” (as defined in Rule 405 of the 1933 Act Regulations (“Rule 405”)) relating to the Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Securities or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).

 

“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “bona fide electronic road show,” as defined in Rule 433), as evidenced by its being specified in Schedule B-2 hereto.

 

“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.

 

“Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Rule 163B of the 1933 Act.

 

“Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the 1933 Act.

 

All references in this Agreement to financial statements and schedules and other information which is “contained,” “included” or “stated” (or other references of like import) in the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to include all such financial statements and schedules and other information incorporated or deemed to be incorporated by reference in the Registration Statement, any preliminary prospectus or the Prospectus, as the case may be, prior to the execution and delivery of this Agreement; and all references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to include the filing of any document under the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the rules and regulations promulgated thereunder, incorporated or deemed to be incorporated by reference in the Registration Statement, such preliminary prospectus or the Prospectus, as the case may be, at or after the execution and delivery of this Agreement.

 

 

SECTION 1.          Representations and Warranties.

 

(a)           Representations and Warranties by the Company. The Company represents and warrants to each Underwriter, the Forward Seller and the Forward Purchaser as of the date hereof, the Applicable Time, the Closing Time (as defined below) and any Date of Delivery (as defined below), and agrees with each Underwriter, the Forward Seller and the Forward Purchaser, as follows:

 

(i)            Registration Statement and Prospectuses. The Company meets the requirements for use of Form S-3 under the 1933 Act. The Registration Statement is an “automatic shelf registration statement” (as defined in Rule 405) and the Securities have been and remain eligible for registration by the Company on such automatic shelf registration statement. Each of the Registration Statement and any post-effective amendment thereto has become effective under the 1933 Act. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the 1933 Act, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated. The Commission has not notified the Company of any objection to the use of the form of the Registration Statement.

 

Each of the Registration Statement and any post-effective amendment thereto, at the time of its effectiveness and as of each deemed effective date with respect to the Underwriters pursuant to Rule 430B(f)(2) under the 1933 Act Regulations, the Applicable Time, the Closing Time and any Date of Delivery, complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. Each preliminary prospectus and the Prospectus and any amendment or supplement thereto, at the time each was filed with the Commission, and, in each case, at the Applicable Time, the Closing Time and any Date of Delivery complied and will comply in all material respects with the requirements of the 1933 Act Regulations and each preliminary prospectus and the Prospectus delivered to the Underwriters for use in connection with this offering was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

 

The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, when they became effective or at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission under the 1934 Act (the “1934 Act Regulations”).

 

The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement (or any amendment thereto), the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) made in reliance upon and in conformity with written information furnished to the Company by any of the Underwriters through the Representative expressly for use therein. For purposes of this Agreement, the only information so furnished shall be the information concerning discounts and commissions in the table under the fifteenth paragraph and the first, second, sixth, ninth and eleventh sentences of the twenty-first paragraph under the caption “Underwriting (Conflicts of Interest)” in the Prospectus (the “Underwriter Information”).

 

(ii)           Accurate Disclosure. Neither the Registration Statement nor any amendment thereto, at its effective time, on the date hereof, at the Closing Time or at any Date of Delivery, contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. At the Applicable Time and any Date of Delivery, none of (A) the General Disclosure Package, (B) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the General Disclosure Package and (C) any individual Written Testing-the-Waters Communication, when considered together with the General Disclosure Package, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Neither the Prospectus nor any amendment or supplement thereto, as of the date thereof, at the time of its filing with the Commission pursuant to Rule 424(b), at the Closing Time or at any Date of Delivery, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The documents incorporated or deemed to be incorporated by reference in the Registration Statement, the General Disclosure Package and the Prospectus, at the time the Registration Statement became effective or when such documents incorporated by reference were filed with the Commission, as the case may be, when read together with the other information in the Registration Statement, the General Disclosure Package or the Prospectus, as the case may be, did not and will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

 

 

The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement (or any amendment thereto), the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representative expressly for use therein. For purposes of this Agreement, the only information so furnished shall be the Underwriter Information.

 

(iii)          Issuer Free Writing Prospectuses. No Issuer Free Writing Prospectus conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, including any document incorporated by reference therein, and any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified. Any offer that is a written communication relating to the Securities made prior to the initial filing of the Registration Statement by the Company or any person acting on its behalf (within the meaning, for this paragraph only, of Rule 163(c) of the 1933 Act Regulations) has been filed with the Commission in accordance with the exemption provided by Rule 163 under the 1933 Act Regulations (“Rule 163”) and otherwise complied with the requirements of Rule 163, including, without limitation, the legending requirement, to qualify such offer for the exemption from Section 5(c) of the 1933 Act provided by Rule 163.

 

(iv)          Well-Known Seasoned Issuer. (A) At the original effectiveness of the Registration Statement, (B) at the time of the most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the 1933 Act (whether such amendment was by post-effective amendment, incorporated report filed pursuant to Sections 13 or 15(d) of the 1934 Act or form of prospectus), (C) at the time the Company or any person acting on its behalf (within the meaning, for this clause only, of Rule 163(c) under the 1933 Act) made any offer relating to the Securities in reliance on the exemption of Rule 163 under the 1933 Act, and (D) as of the Applicable Time, the Company was and is a “well-known seasoned issuer” (as defined in Rule 405).

 

(v)           Company Not Ineligible Issuer. At the time of filing the Registration Statement and any post-effective amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the 1933 Act Regulations) of the Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.

 

 

(vi)          Independent Accountants. (i) (a) Deloitte & Touche LLP (“Deloitte”), the accountants who certified the financial statements and supporting schedules with respect to the Company as of December 31, 2023 and for the year ended December 31, 2023 included in the Registration Statement, the General Disclosure Package and the Prospectus, are independent public accountants as required by the 1933 Act, the 1933 Act Regulations, the 1934 Act, the 1934 Act Regulations and the Public Company Accounting Oversight Board and (b) Crowe LLP (“Crowe”), the accountants who certified the financial statements and supporting schedules with respect to the Company as of December 31, 2022 and for each of the two years in the period ended December 31, 2022 included in the Registration Statement, the General Disclosure Package and the Prospectus, are independent public accountants as required by the 1933 Act, the 1933 Act Regulations, the 1934 Act, the 1934 Act Regulations and the Public Company Accounting Oversight Board and (ii) to the knowledge of the Company, Ernst & Young LLP (“EY”), the accountants who certified the audited financial statements and supporting schedules with respect to Bremer Financial included in the General Disclosure Package and the Prospectus, are independent public accountants under the American Institute of Certified Public Accountants’ Code of Professional Conduct and its interpretations and rulings thereunder.

 

(vii)         Financial Statements; Non-GAAP Financial Measures. The financial statements of the Company included or incorporated by reference in the Registration Statement, the General Disclosure Package and the Prospectus, together with the related schedules and notes, present fairly in all material respects the financial position of the Company and its consolidated subsidiaries at the dates indicated and the income, comprehensive income, changes in shareholders’ equity, and cash flows of the Company and its consolidated subsidiaries for the periods specified; said financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved. To the knowledge of the Company, any financial statements of businesses or properties acquired or proposed to be acquired, if any, included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly the information set forth therein, have been prepared in conformity with GAAP applied on a consistent basis and otherwise have been prepared in accordance with the financial statement requirements of Rule 3-05 or Rule 3-14 of Regulation S-X, as applicable, including, without limitation, the financial statements of Bremer Financial, together with the related notes thereto and related schedules included in the Registration Statement, the Preliminary Prospectus and the Prospectus. The supporting schedules, if any, present fairly in all material respects and in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly in all material respects the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included therein. The pro forma financial statements and the related notes thereto included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission’s rules and guidelines with respect to pro forma financial statements and have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. Except as included therein, no historical or pro forma financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement, the General Disclosure Package or the Prospectus under the 1933 Act or the 1933 Act Regulations. All disclosures contained in the Registration Statement, the General Disclosure Package or the Prospectus, or incorporated by reference therein, regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G of the 1934 Act and Item 10 of Regulation S-K of the 1933 Act, to the extent applicable. The interactive data in eXtensible Business Reporting Language incorporated by reference in the Registration Statement, the General Disclosure Package and the Prospectus fairly present in all material respects the required information and have been prepared in accordance with the Commission’s rules and guidelines applicable thereto.

 

 

(viii)        No Material Adverse Change in Business. Except as otherwise stated therein, since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a “Material Adverse Effect”), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) except for regular quarterly dividends on the Common Stock and any shares of the Company’s outstanding preferred stock, in amounts per share that are consistent with past practice, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock.

 

(ix)           Merger; Merger Agreement. Except as otherwise disclosed in the General Disclosure Package and the Prospectus, the Company is not aware of any fact that will prevent the Company and its subsidiaries from consummating the Merger in all material respects as contemplated by the Merger Agreement. To the knowledge of the Company, all of the representations and warranties made by the parties to the Merger Agreement are true and correct (without giving effect to any limitation as to “materiality” or similar limitation as set forth therein), except that any representations and warranties that expressly speak as of a particular date were true and correct (without giving effect to any limitation as to “materiality” or similar limitation as set forth therein) as of such particular date, except in each case where the failure to be so true and correct would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect assuming the consummation of the transactions contemplated by the Merger Agreement.

 

(x)           Good Standing of the Company; Bank Holding and Financial Holding Company Status of the Company. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Indiana and has all requisite power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus and to enter into and perform its obligations under this Agreement and the Forward Sale Agreements; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. The Company is duly registered as a bank holding company and is qualified as a financial holding company, in each case as such terms are interpreted under the Bank Holding Company Act of 1956, as amended (the “BHCA”).

 

 

(xi)          Good Standing of Subsidiaries. The Bank, 1834 Investment Advisors Co. and Old National Realty Company, Inc. are the only “significant subsidiaries” of the Company (as such term is defined in Rule 1-02 of Regulation S-X), have been duly organized and are validly existing and in good standing under the laws of the jurisdiction of their respective incorporation or other organization, have all requisite power and authority to own, lease and operate their respective properties and to conduct their respective business as described in the Registration Statement, the General Disclosure Package and the Prospectus and are duly qualified to transact business and are in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect. The Bank is a national bank chartered under the laws of the United States and its charter is in full force and effect. Except as otherwise disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, all of the issued and outstanding shares of capital stock of or other equity interests in the Bank, 1834 Investment Advisors Co. and Old National Realty Company, Inc. have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. None of the outstanding shares of capital stock of or other equity interests in the Bank or in 1834 Investment Advisors Co. or Old National Realty Company, Inc. were issued in violation of the preemptive or similar rights of any securityholder of the Bank, any securityholder of the Bank, 1834 Investment Advisors Co., Old National Realty Company, Inc. or any other entity.

 

(xii)         Deposit Insurance. The deposit accounts of the Bank are insured by the Federal Deposit Insurance Corporation (the “FDIC”) to the fullest extent permitted by the Federal Deposit Insurance Act, as amended, and the rules and regulations of the FDIC thereunder, and all the premiums and assessments required to be paid in connection therewith have been paid when due (after giving effect to any applicable extensions), and no proceeding for the modification, termination or revocation of such insurance is pending or, to the knowledge of the Company, threatened.

 

(xiii)        Regulatory Matters. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, neither the Company nor any of its subsidiaries is subject to any cease-and-desist order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order, directive or other supervisory action by, or has been ordered to pay any civil money penalty by, or is a recipient of any supervisory letter from, or has adopted any policies, procedures or board resolutions at the request or suggestion of, any Regulatory Agency (as defined below) that currently restricts in any material respect the conduct of their business or that in any material manner relates to their capital adequacy, credit policies, management or business (each, a “Regulatory Agreement”), nor has the Company or any of its subsidiaries been advised by any Regulatory Agency that it is considering issuing or requesting any Regulatory Agreement. There is no unresolved violation or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of the Company or any of its subsidiaries which, in the reasonable judgment of the Company, is expected to result in a Material Adverse Effect. The Company and its subsidiaries have received examination reports, supervisory letters and routine correspondence from the Regulatory Agencies containing “Matters Requiring Attention” (but not “Matters Requiring Immediate Attention”) regarding requested improvements and changes in policies, procedures and other matters on the part of the Company or its subsidiaries, but none of them contain threats or statements that a Regulatory Agreement is contemplated or requested. The Company confirms that all matters reflected in all such examination reports, supervisory letter and routine correspondence (including all Matters Requiring Attention) have either been resolved or are on a satisfactory timetable to resolution. The Company and its subsidiaries are in compliance in all material respects with all laws administered by the Regulatory Agencies. As used herein, the term “Regulatory Agency” means any U.S. federal or state agency charged with the supervision or regulation of depository institutions or holding companies of depository institutions, or engaged in the insurance of depository institution deposits, or any court, governmental body, administrative agency or other authority, body or agency having supervisory or regulatory authority with respect to the Company or any of its subsidiaries.

 

 

(xiv)        Community Reinvestment Act and Privacy Requirements. The Bank has received overall Community Reinvestment Act (“CRA”) ratings of at least “Satisfactory” and has not been informed in writing by any Regulatory Authority that it may receive less than “Satisfactory” ratings for CRA purposes within one year, nor, to the Company’s knowledge, has the Bank been informed other than in writing by any Regulatory Authority that it may receive less than “Satisfactory” ratings for CRA purposes within one year. The Company is not aware of any facts or circumstances that exist that would cause the Bank not to be, (i) in compliance in any material respect with the CRA, and the regulations promulgated thereunder, or to be assigned a CRA rating by federal or state bank regulators of lower than “Satisfactory;” or (ii) in compliance in any material respect with the applicable privacy of customer information requirements contained in any federal and state privacy laws and regulations, including, without limitation, in Title V of the Gramm-Leach-Bliley Act of 1999 and regulations promulgated thereunder, as well as the provisions of the information security program adopted by the Bank, pursuant to 12 C.F.R. Part 208.

 

(xv)         Capitalization. The authorized, issued and outstanding shares of capital stock of the Company are as set forth in the Registration Statement, the General Disclosure Package and the Prospectus (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements, equity plans, incentive compensation plans or benefit plans referred to in the Registration Statement, the General Disclosure Package and the Prospectus or pursuant to the exercise of convertible securities or options referred to in the Registration Statement, the General Disclosure Package and the Prospectus). The outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable. None of the outstanding shares of capital stock of the Company were issued in violation of the preemptive or other similar rights of any securityholder of the Company.

 

(xvi)        Authorization of Agreement and Merger Agreement. This Agreement and the Merger Agreement have been duly authorized, and this Agreement has been executed and delivered, by the Company.

 

(xvii)       Authorization of Forward Sale Agreements. The Initial Forward Sale Agreement has been duly authorized, executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by (A) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws affecting the enforcement of creditors’ rights generally, (B) public policy limitations, or (C) equitable principles relating to enforceability (regardless of whether enforcement is considered in a proceeding in equity or at law) ((A), (B), and (C) collectively, the “Enforceability Exceptions”). Prior to the delivery of any Borrowed Option Securities to an Underwriter, the related Additional Forward Sale Agreement will be duly authorized, executed and delivered by the Company and will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by the Enforceability Exceptions.

 

 

(xviii)      Authorization and Description of Securities and Confirmation Securities. The Company Securities, if any, have been duly authorized for issuance and sale to the Underwriters pursuant to this Agreement and, when issued, sold and/or delivered by the Company pursuant to this Agreement against payment of the consideration set forth herein, will be validly issued and fully paid and non-assessable; and the issuance of the Company Securities, if any, is not subject to the preemptive or other similar rights of any securityholder of the Company. The shares of Common Stock that may be issued, sold and/or delivered pursuant to the Forward Sale Agreements (the “Confirmation Securities”) have been duly authorized for issuance, sale and/or delivery to the Forward Purchaser and, when issued, sold and/or delivered by the Company against payment of the consideration set forth therein, will be validly issued and fully paid and non-assessable; and the issuance of the Confirmation Securities is not and will not be subject to the preemptive or other similar rights of any securityholder of the Company. The Common Stock conforms in all material respects to all statements relating thereto contained in the Registration Statement, the General Disclosure Package and the Prospectus and such statements conform in all material respects to the rights set forth in the instruments defining the same. No holder of Securities or Confirmation Securities will be subject to personal liability by reason of being such a holder.

 

(xix)         Registration Rights. There are no persons with registration rights or other similar rights to have any securities registered for sale pursuant to the Registration Statement or otherwise registered for sale or sold by the Company under the 1933 Act pursuant to this Agreement, other than any rights that have been disclosed in the Registration Statement, the General Disclosure Package and the Prospectus and have been waived.

 

(xx)          Absence of Violations, Defaults and Conflicts. Neither the Company nor any of its subsidiaries is (A) in violation of its charter, by-laws or similar organizational document, (B) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound or to which any of the properties, assets or operations of the Company or any of its subsidiaries is subject (collectively, “Agreements and Instruments”), except for such defaults that would not, singly or in the aggregate, result in a Material Adverse Effect, or (C) in violation of any law, statute, rule, regulation, judgment, order, writ or decree of any arbitrator, court, governmental body, regulatory body, administrative agency (including, without limitation, each applicable Regulatory Agency) or other authority, body or agency having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, assets or operations (each, a “Governmental Entity”), except for such violations that would not, singly or in the aggregate, result in a Material Adverse Effect. The execution, delivery and performance by the Company of this Agreement, the Forward Sale Agreements and the consummation of the transactions contemplated herein and therein, in the Merger Agreement and in the Registration Statement, the General Disclosure Package and the Prospectus (including the issuance and sale of the Company Securities, if any, and the use of the proceeds from the sale of the Company Securities, if any, and the Confirmation Securities as described therein under the caption “Use of Proceeds”) and compliance by the Company with its obligations hereunder and thereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any properties, assets or operations of the Company or any of its subsidiaries pursuant to, the Agreements and Instruments (except for such conflicts, breaches, defaults or Repayment Events or liens, charges or encumbrances that would not, singly or in the aggregate, result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter, by-laws or similar organizational document of the Company or any of its subsidiaries or any law, statute, rule, regulation, judgment, order, writ or decree of any Governmental Entity (except for such violations of law, statute, rule, regulation, judgment, order, writ or decree of any Governmental Entity that would not, singly or in the aggregate, result in a Material Adverse Effect). As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other financing instrument (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of the related financing by the Company or any of its subsidiaries.

 

 

(xxi)         Absence of Labor Dispute. No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any subsidiary’s principal suppliers, manufacturers, customers or contractors, which, in either case, would result in a Material Adverse Effect.

 

(xxii)        Absence of Proceedings. Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, there is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental Entity now pending or, to the knowledge of the Company, threatened, against or affecting the Company or any of its subsidiaries, which would result in a Material Adverse Effect, or which would materially and adversely affect their respective properties, assets or operations or the consummation of the transactions contemplated in this Agreement, the Forward Sale Agreements or the Merger Agreement or the performance by the Company of its obligations hereunder or thereunder; and the aggregate of all pending legal or governmental proceedings to which the Company or any such subsidiary is a party or of which any of their respective properties, assets or operations is the subject which are not described in the Registration Statement, the General Disclosure Package and the Prospectus, including ordinary routine litigation incidental to the business, would not, singly or in the aggregate, result in a Material Adverse Effect.

 

(xxiii)       Accuracy of Exhibits. There are no contracts or documents which are required to be described in the Registration Statement, the General Disclosure Package or the Prospectus or to be filed as exhibits to the Registration Statement which have not been so described and filed as required.

 

(xxiv)      Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity is necessary or required for the performance by the Company of its obligations hereunder and pursuant to the Forward Sale Agreements, in connection with the offering, issuance or sale of the Company Securities, if any, and the Confirmation Securities or the consummation of the transactions contemplated by this Agreement and the Forward Sale Agreements, except such as have been already obtained or as may be required under the 1933 Act, the 1933 Act Regulations, the rules of the Nasdaq Global Select Market, state securities laws or the rules of Financial Industry Regulatory Authority, Inc. (“FINRA”).

 

(xxv)       Possession of Licenses and Permits. The Company and its subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Entities necessary to conduct the business now operated by them, except where the failure so to possess would not, singly or in the aggregate, result in a Material Adverse Effect. The Company and its subsidiaries are in compliance with the terms and conditions of all Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, result in a Material Adverse Effect. All of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, result in a Material Adverse Effect. Neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect.

 

 

(xxvi)      Title to Property. The Company and its subsidiaries have good and marketable title to all real property owned by them and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (A) are described in the Registration Statement, the General Disclosure Package and the Prospectus, (B) are Permitted Liens (as defined below) or (C) do not, singly or in the aggregate, materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries; and all of the leases and subleases material to the business of the Company and its subsidiaries, considered as one enterprise, and under which the Company or any of its subsidiaries holds properties described in the Registration Statement, the General Disclosure Package or the Prospectus, are in full force and effect, and neither the Company nor any such subsidiary has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease. “Permitted Liens” means (i) pledges of securities to secure deposits of public funds and other depositors, (ii) repurchase agreements, reverse repurchase agreements and similar transactions and (iii) pledges of securities, loans or other assets to the Federal Reserve, federal home loan banks and similar governmental banking agencies in the ordinary course of business to secure borrowings or other extensions of credit.

 

(xxvii)     Possession of Intellectual Property. The Company and its subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, “Intellectual Property”) necessary to carry on the business now operated by them, except as would not, singly or in the aggregate, result in a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any notice or is otherwise aware of any infringement by the Company and its subsidiaries of or conflict involving the Company or any of its subsidiaries with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property owned by the Company or any of its subsidiaries invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect.

 

(xxviii)    Accounting Controls and Disclosure Controls. The Company and each of its subsidiaries maintain a system of internal control over financial reporting (as defined under Rule 13-a15 and 15d-15 under the 1934 Act Regulations) and a system of internal accounting controls that in all material respects comply with the requirements of the 1934 Act and are sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and (E) the interactive data in eXtensible Business Reporting Language incorporated by reference in the Registration Statement, the General Disclosure Package and the Prospectus fairly present in all material respects the required information and are prepared in accordance with the Commission’s rules and guidelines applicable thereto. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, since the end of the Company’s most recent audited fiscal year, there has been (1) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (2) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company and each of its subsidiaries maintain an effective system of disclosure controls and procedures (as defined in Rule 13a-15 and Rule 15d-15 under the 1934 Act Regulations) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to the Company’s management, including its principal executive officer or officers and principal financial officer or officers, as appropriate, to allow timely decisions regarding disclosure.

 

 

(xxix)       Compliance with the Sarbanes-Oxley Act. There is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith, including Section 402 related to loans and Sections 302 and 906 related to certifications.

 

(xxx)        Payment of Taxes. All United States federal income tax returns of the Company and its subsidiaries required by law to be filed have been filed and all material taxes shown by such returns or otherwise assessed, which are due and payable, have been paid, except assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided. The Company and its subsidiaries have filed all other tax returns that are required to have been filed by them pursuant to applicable foreign, state, local or other law except insofar as the failure to file such returns would not result in a Material Adverse Effect, and has paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any of its subsidiaries, except for such taxes, if any, as are being contested in good faith and as to which adequate reserves have been established by the Company or insofar as the failure to pay such taxes would not result in a Material Adverse Effect. The charges, accruals and reserves included in the financial statements of the Company included in, or incorporated by reference in, the Registration Statement, the General Disclosure Package and the Prospectus relating to any income and corporation tax liability of the Company for any years not finally determined have been recorded in accordance with GAAP applied on a consistent basis throughout the periods provided.

 

(xxxi)       Insurance. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, the Company and its subsidiaries carry or are entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such risks, which in the judgment of the executive officers of the Company, are reasonable and prudent in the businesses in which the Company and its subsidiaries are engaged, and all such insurance is in full force and effect. The Company has no reason to believe that it or any of its subsidiaries will not be able (A) to renew its existing insurance coverage as and when such policies expire or (B) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not, singly or in the aggregate, result in a Material Adverse Effect. Neither of the Company nor any of its subsidiaries has been denied any insurance coverage which it has sought or for which it has applied.

 

(xxxii)      Investment Company Act. The Company is not required, and upon the issuance and sale of the Company Securities, if any, and the Confirmation Securities and the application of the net proceeds therefrom as described in the Registration Statement, the General Disclosure Package and the Prospectus will not be required, to register as an “investment company” under the Investment Company Act of 1940, as amended.

 

 

(xxxiii)     Absence of Manipulation. Neither the Company nor any affiliate of the Company has taken, nor will the Company or any affiliate take, directly or indirectly, any action which is designed, or would be expected, to cause or result in, or which constitutes, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities or to result in a violation of Regulation M under the 1934 Act.

 

(xxxiv)     Foreign Corrupt Practices Act. In the past five (5) years, none of the Company, any of its subsidiaries or, to the Company’s knowledge, any affiliates or any director, officer, employee, agent or representative of the Company or of any of its subsidiaries or affiliates, has taken any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment, giving or receipt of money, property, gifts or anything else of value, directly or indirectly, to any person to improperly influence official action by that person for the benefit of the Company or its subsidiaries or affiliates, or to otherwise secure any improper advantage, or to any person in violation of (a) the U.S. Foreign Corrupt Practices Act of 1977, (b) the UK Bribery Act 2010, and (c) any other applicable law, regulation, order, decree or directive having the force of law and relating to bribery or corruption (collectively, the “Anti-Corruption Laws”).

 

(xxxv)      Anti-Money Laundering Laws. In the past five (5) years, the operations of the Company and each of its subsidiaries are and have been conducted at all times in material compliance with all applicable anti-money laundering laws, rules, and regulations, including the financial recordkeeping and reporting requirements contained therein, and including the Bank Secrecy Act of 1970, applicable provisions of the USA PATRIOT Act of 2001, the Money Laundering Control Act of 1986, and the Anti-Money Laundering Act of 2020, (collectively, the “Anti-Money Laundering Laws”).

 

(xxxvi)     OFAC. (1) None of the Company or any of its subsidiaries, nor, to the Company’s knowledge, any director, officer, employee, agent, affiliate, or representative of the Company or any of its subsidiaries, is an individual or entity (“Person”) that is, or is owned or controlled by one or more Persons that are:

 

(a)           the subject of any sanctions administered or enforced by the United States Government (including the U.S. Department of the Treasury’s Office of Foreign Assets Control and the U.S. Department of State), the United Nations Security Council, the European Union, or His Majesty’s Treasury (collectively, “Sanctions”), or

 

(b)           located, organized or resident in a country or territory that is the subject of comprehensive territorial Sanctions (including, without limitation, the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic, or any other Covered Region of Ukraine identified pursuant to Executive Order 14065, Crimea, Cuba, Iran, North Korea and Syria).

 

(2)           The Company and each of its subsidiaries, (a) have not, since April 24, 2019, engaged in and (b) are not now engaged in any dealings or transactions with any Person, or in any country or territory, that at the time of the dealing or transaction is or was, or whose government is or was, the subject of Sanctions.

 

 

(3)           The Company will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person:

 

(a)           to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is, the subject of Sanctions;

 

(b)           to fund or facilitate any money laundering or terrorist financing activities; or

 

(c)           in any other manner that would cause or result in a violation of any Anti-Corruption Laws, Anti-Money Laundering Laws, or Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise).

 

(4)           In the past five (5) years, the Company and its subsidiaries have conducted their businesses in compliance with the Anti-Corruption Laws, the Anti-Money Laundering Laws, and Sanctions, and no investigation, inquiry, action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Anti-Corruption Laws, the Anti-Money Laundering Laws or Sanctions is pending or, to the knowledge of the Company, threatened. The Company and its subsidiaries and affiliates have instituted and maintained and will continue to maintain policies and procedures reasonably designed to promote and achieve compliance with the Anti-Corruption Laws, the Anti-Money Laundering Laws, Sanctions, and with the representations and warranties contained herein.

 

(xxxvii)    Lending Relationship. Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company (i) does not have any material lending or other relationship with any bank or lending affiliate of any Underwriter, the Forward Seller or the Forward Purchaser and (ii) does not intend to use any of the proceeds from the sale of the Securities or the Confirmation Securities to repay any outstanding debt owed to any affiliate of any Underwriter, the Forward Seller or the Forward Purchaser.

 

(xxxviii)   Statistical and Market-Related Data. Any statistical and market-related data included in the Registration Statement, the General Disclosure Package or the Prospectus are based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate and, to the extent required, the Company has obtained the written consent to the use of such data from such sources.

 

(xxxix)     Broker-Dealer. Neither the Company nor any of its subsidiaries (i) is required to register as a “broker” or “dealer” in accordance with the provisions of the 1934 Act or the 1934 Act Regulations or (ii) directly, or indirectly through one or more intermediaries, controls or has any other association (within the meaning of Article I of the By-Laws of FINRA) with any member firm of FINRA.

 

(xl)          Prohibition on Dividends. Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, no subsidiary of the Company is currently prohibited, directly or indirectly, under any order of any Regulatory Agency (other than orders applicable to bank holding companies and their subsidiaries generally), under any applicable law (other than banking laws generally limiting the amount that may be paid by banks), or under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock or other equity interests, from repaying to the Company or any other subsidiary of the Company any loans or advances to such subsidiary or from transferring any of such subsidiary’s properties, assets or operations to the Company or any other subsidiary of the Company.

 

 

(xli)         Not a U.S. Real Property Holding Corporation. The Company is not, and has not been, a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended.

 

(xlii)        Fair Saleable Value of Assets. Each of the Company and its subsidiaries owns and, after giving effect to the transactions contemplated in this Agreement, the Forward Sale Agreements and the Merger Agreement, will own assets the fair saleable value of which are greater than (A) the total amount of its liabilities (including known contingent liabilities) and (B) the amount that will be required to pay the probable liabilities of its existing debts as they become absolute and matured considering the financing alternatives reasonably available to it. The Company has no knowledge of any facts or circumstances which lead it to believe that it or any of its subsidiaries will be required to file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction, and has no present intent to so file.

 

(xliii)       Affiliated Transactions or Relationships. No transaction has occurred or relationship exists between or among the Company or any of its subsidiaries, on the one hand, and its affiliates, officers or directors, on the other hand, that is required to be described in the Registration Statement, any preliminary prospectus or the Prospectus that is not so described therein.

 

(xliv)       Cybersecurity. Except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) to the knowledge of the Company, there has been no security breach or incident, unauthorized access or disclosure, or other compromise of or relating to the Company’s or its subsidiaries’ information technology and computer systems, networks, hardware, software, data and databases (including the data and information of their respective customers, employees, suppliers, vendors and any third-party data maintained, processed or stored by the Company and its subsidiaries, and any such data processed or stored by third parties on behalf of the Company and its subsidiaries), equipment or technology (collectively, “IT Systems and Data”): (B) neither the Company nor its subsidiaries have been notified of, and each of them have no knowledge of any event or condition that could result in, any security breach or incident, unauthorized access or disclosure or other compromise to their IT Systems and Data and (C) the Company and its subsidiaries have implemented appropriate controls, policies, procedures, and technological safeguards designed to maintain and protect the integrity, continuous operation, redundancy and security of their IT Systems and Data reasonably consistent with industry standards and practices, or as required by applicable regulatory standards and (D) to the knowledge of the Company, the Company and its subsidiaries are presently in compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification.

 

(xlv)        Testing-the-Waters Materials. The Company (A) has not alone engaged in any Testing-the-Waters Communication other than Testing-the-Waters Communications with the consent of the Representative with entities that are reasonably believed to be qualified institutional buyers within the meaning of Rule 144A under the 1933 Act or institutions that are reasonably believed to be accredited investors within the meaning of Rule 501 under the 1933 Act and (B) has not authorized anyone other than the Representative to engage in Testing-the-Waters Communications. The Company reconfirms that the Representative has been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule B-3 hereto.

 

 

(b)           Officer’s Certificates. Any certificate signed by any officer of the Company or any of its subsidiaries delivered to the Representative, the Forward Seller, the Forward Purchaser or to their counsel shall be deemed a representation and warranty by the Company to each Underwriter, the Forward Seller and the Forward Purchaser as to the matters covered thereby.

 

(c)            Representations and Warranties by the Forward Seller. The Forward Seller represents and warrants to each Underwriter, as of the date hereof, the Applicable Time, the Closing Time and any Date of Delivery, and agrees with each Underwriter, as follows:

 

(i)            This Agreement has been duly authorized, executed and delivered by the Forward Seller.

 

(ii)           The Initial Forward Sale Agreement has been duly authorized, executed and delivered by the Forward Purchaser and, assuming due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of the Forward Purchaser, enforceable against the Forward Purchaser in accordance with its terms; except as enforceability may be limited by the Enforceability Exceptions.

 

(iii)          Prior to the delivery of any Borrowed Option Securities to an Underwriter, the related Additional Forward Sale Agreement will be duly authorized, executed and delivered by the Forward Purchaser and, assuming due authorization, execution and delivery by the Company, will constitute a legal, valid and binding obligation of the Forward Purchaser, enforceable against the Forward Purchaser in accordance with its terms; except as enforceability may be limited by the Enforceability Exceptions.

 

(iv)          The Forward Seller shall, at the Closing Time or any Date of Delivery, as applicable, have the free and unqualified right to transfer any Borrowed Securities, to the extent that it is required to transfer such Borrowed Securities. Upon delivery of such Borrowed Securities and payment of the purchase price therefor as herein contemplated, assuming that each of the Underwriters has no notice of any adverse claim, each of the Underwriters shall have the free and unqualified right to transfer the Borrowed Securities purchased by it from the Forward Seller.

 

SECTION 2.          Sale and Delivery to Underwriters; Closing.

 

(a)            Initial Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Forward Seller (with respect to the Borrowed Initial Securities) and the Company (with respect to any Company Top-Up Initial Securities) agree to sell, and the Underwriters agree to purchase, severally and not jointly, in each case at the purchase price per share set forth in Schedule A hereto, the respective number of Initial Securities set forth in Schedule A hereto opposite such Underwriter’s name, plus any additional number of Initial Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof, subject, in each case, to such adjustments among the Underwriters as the Representative in its sole discretion shall make to eliminate any sales or purchases of fractional shares.

 

 

(b)           Option Securities. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Forward Seller (with respect to the Borrowed Option Securities) and the Company (with respect to any Company Top-Up Option Securities) grant an option to the Underwriters to purchase Borrowed Option Securities (in the case of the Forward Seller) and Company Top-Up Option Securities (in the case of the Company), in each case at the purchase price per share set forth in Schedule A hereto, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities. The option hereby granted may be exercised for 30 days after the date hereof and may be exercised in whole or in part at any time from time to time upon notice by the Representative to the Company, the Forward Seller and the Forward Purchaser setting forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a “Date of Delivery”) shall be determined by the Representative, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time.

 

Within one business day after such notice is given, the Company shall execute and deliver to the Forward Purchaser an additional letter agreement between the Company and the Forward Purchaser (an “Additional Forward Sale Agreement”) relating to the forward sale by the Company, subject to the Company’s right to elect Cash Settlement or Net Share Settlement (as such terms are defined in such Additional Forward Sale Agreement), of a number of shares of Common Stock equal to the aggregate number of Borrowed Option Securities being purchased by the Underwriters from the Forward Seller pursuant to the exercise of such option, on terms substantially similar to the Initial Forward Sale Agreement as agreed to by the parties. Upon the Company’s execution and delivery of such Additional Forward Sale Agreement to the Forward Purchaser, the Forward Seller will procure that the Forward Purchaser shall promptly execute and deliver such Additional Forward Sale Agreement to the Company.

 

Upon such execution by the Company and the Forward Purchaser, based upon the warranties and representations and subject to the terms and conditions herein contained, the Forward Seller and the Company agree to sell to the Underwriters, and each of the Underwriters, acting severally and not jointly, agrees to purchase, that proportion of the total number of Option Securities then being purchased which the number of Initial Securities set forth in Schedule A opposite the name of such Underwriter bears to the total number of Initial Securities, subject, in each case, to such adjustments as the Representative in its sole discretion shall make to eliminate any sales or purchases of fractional shares.

 

(c)           Payment. Payment of the purchase price for, and delivery of certificates or security entitlements for, the Initial Securities shall be made at the offices of Sidley Austin llp, 787 Seventh Avenue, New York, New York 10019, or at such other place as shall be agreed upon by the Representative and the Company or the Forward Seller, as applicable, at 9:00 A.M. (New York City time) on the business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed upon by the Representative and the Company or the Forward Seller, as applicable (such time and date of payment and delivery being herein called “Closing Time”).

 

In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment of the purchase price for, and delivery of certificates or security entitlements for, such Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Representative and the Company or the Forward Seller, as applicable, on each Date of Delivery as specified in the notice from the Representative to the Company, the Forward Seller and the Forward Purchaser.

 

Payment shall be made to the Company and the Forward Seller, as applicable, by wire transfer of immediately available funds to a bank account designated by the Company or the Forward Seller, as applicable, against delivery to the Representative for the respective accounts of the Underwriters of certificates or security entitlements for the Securities to be purchased by them. It is understood that each Underwriter has authorized the Representative, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase. The Representative, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option Securities, if any, to be purchased by any Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder.

 

 

SECTION 3.          Covenants of the Company. The Company covenants with each Underwriter, the Forward Seller and the Forward Purchaser as follows:

 

(a)           Compliance with Securities Regulations and Commission Requests. The Company, subject to Section 3(b), will comply with the requirements of Rule 430B, and will notify the Representative, the Forward Seller and the Forward Purchaser immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus, including any document incorporated by reference therein or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any preliminary prospectus or the Prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the 1933 Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the 1933 Act in connection with the offering of the Securities. The Company will effect all filings required under Rule 424(b), in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will make every reasonable effort to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment. The Company shall pay the required Commission filing fees relating to the Securities within the time required by Rule 456(b)(1)(i) under the 1933 Act Regulations without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r) under the 1933 Act Regulations (including, if applicable, by updating the “Calculation of Filing Fee Tables” table in accordance with Rule 456(b)(1)(ii) either in a post-effective amendment to the Registration Statement or in an exhibit to a prospectus filed pursuant to Rule 424(b)).

 

(b)           Continued Compliance with Securities Laws. The Company will comply with the 1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Registration Statement, the General Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172 of the 1933 Act Regulations (“Rule 172”), would be) required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters, the Forward Seller and the Forward Purchaser or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) amend or supplement the General Disclosure Package or the Prospectus in order that the General Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the General Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly (A) give the Representative, the Forward Seller and the Forward Purchaser notice of such event, (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the General Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representative, the Forward Seller and the Forward Purchaser with copies of any such amendment or supplement and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representative, the Forward Seller, the Forward Purchaser or their counsel shall object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representative notice of any filings made pursuant to the 1934 Act or 1934 Act Regulations within 48 hours prior to the Applicable Time; the Company will give the Representative, the Forward Seller and the Forward Purchaser notice of its intention to make any such filing from the Applicable Time to the Closing Time and will furnish the Representative, the Forward Seller and the Forward Purchaser with copies of any such documents a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representative, the Forward Seller, the Forward Purchaser or their counsel shall reasonably object.

 

 

(c)           Delivery of Registration Statements. The Company has furnished or will deliver to the Representative and counsel for the Underwriters, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the Representative, without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

 

(d)           Delivery of Prospectuses. The Company has delivered to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the 1933 Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

 

(e)           Blue Sky Qualifications. The Company will use its commercially reasonable efforts, in cooperation with the Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representative may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.

 

(f)            Rule 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide to the Underwriters and the Forward Seller the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act.

 

 

(g)           Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Company Securities, if any, and the Confirmation Securities in the manner specified in the Registration Statement, the General Disclosure Package and the Prospectus under “Use of Proceeds.”

 

(h)           Listing. The Company will use its best efforts to effect and maintain the listing of the Securities and the Confirmation Securities on the Nasdaq Global Select Market.

 

(i)            Reservation. A total of 43,809,524 shares of Common Stock has been or will be, prior to issuance, duly and validly authorized and reserved for issuance, sale and/or delivery under the Forward Sale Agreements.

 

(j)            Restriction on Sale of Securities. During a period of 60 days from the date of the Prospectus, the Company will not, without the prior written consent of the Representative, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Securities to be sold hereunder or the Confirmation Securities, (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and referred to in the Registration Statement, the General Disclosure Package and the Prospectus, (C) any shares of Common Stock issued or options to purchase Common Stock granted pursuant to existing equity plans, incentive compensation plans or benefit plans of the Company referred to in the Registration Statement, the General Disclosure Package and the Prospectus, (D) any shares of Common Stock issued in connection with the Merger, or (E) any shares of Common Stock issued pursuant to any non-employee director stock plan or any dividend reinvestment plan referred to in the Registration Statement, the General Disclosure Package and the Prospectus.

 

(k)            Reporting Requirements. The Company, during the period when a Prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the 1933 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and 1934 Act Regulations.

 

(l)            Issuer Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent of the Representative, the Forward Seller and the Forward Purchaser, it will not make any offer relating to the Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the Representative will be deemed to have consented to the Issuer Free Writing Prospectuses listed on Schedule B-2 hereto and any “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed by the Representative. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed consented to, by the Representative, the Forward Seller and the Forward Purchaser as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement, any preliminary prospectus or the Prospectus or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representative, the Forward Seller and the Forward Purchaser and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.

 

 

(m)           Eligibility of Automatic Shelf Registration Statement Form. If at any time when Securities remain unsold by the Underwriters, the Company receives a notice from the Commission pursuant to Rule 401(g)(2) or otherwise ceases to be eligible to use the automatic shelf registration statement form, the Company will (i) promptly notify the Representative, the Forward Seller and the Forward Purchaser in writing, (ii) promptly file a new registration statement or post-effective amendment on the proper form relating to such Securities, in a form and substance reasonably satisfactory to the Underwriters, the Forward Seller and the Forward Purchaser, (iii) use its best efforts to cause such registration statement or post-effective amendment to be declared effective as soon as practicable and (iv) promptly notify the Representative, the Forward Seller and the Forward Purchaser in writing of such effectiveness. The Company will take all other action necessary or appropriate to permit the public offering and sale of the Securities to continue as contemplated in the Registration Statement that was the subject of the Rule 401(g)(2) notice or for which the Company has otherwise become ineligible. References herein to the “Registration Statement” shall include such new registration statement or post-effective amendment, as the case may be.

 

(n)           DTC. The Company will cooperate with the Underwriters, the Forward Seller and the Forward Purchaser and use its commercially reasonable efforts to permit the Securities to be eligible for clearance, settlement and trading through the facilities of The Depository Trust Company.

 

(o)           Testing-the-Waters Materials. If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representative and will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.

 

SECTION 4.          Payment of Expenses.

 

(a)           Expenses. The Company will pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement and the Forward Sale Agreements, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of copies of each preliminary prospectus, each Issuer Free Writing Prospectus and the Prospectus and any amendments or supplements thereto and any costs associated with electronic delivery of any of the foregoing by the Underwriters to investors, (iii) the preparation, issuance and delivery of the certificates or security entitlements for the Company Securities, if any, and the Confirmation Securities, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Company Securities, if any, and the Confirmation Securities, (iv) the fees and disbursements of the Company’s counsel, accountants and other advisors, (v) the qualification of the Securities and the Confirmation Securities under securities laws in accordance with the provisions of Section 3(e) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters, the Forward Seller and the Forward Purchaser in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (vi) the fees and expenses of any transfer agent or registrar for the Securities and the Confirmation Securities, (vii) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the Securities, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations, (viii) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by FINRA, if required, of the terms of the sale of the Securities, (ix) the fees and expenses incurred in connection with the listing of the Securities and the Confirmation Securities on the Nasdaq Global Select Market and (x) the costs and expenses (including, without limitation, any damages or other amounts payable in connection with legal or contractual liability) associated with the reforming of any contracts for sale of the Securities made by the Underwriters caused by a breach of the representation contained in the third sentence of Section 1(a)(ii). Except as expressly provided in this Section 4(a) or in Section 4(b) or 6, the Underwriters will pay all of their own costs and expenses, including the fees and expenses of their counsel and other professionals, transfer taxes on the sale of any of the Securities, and advertising expenses relating to offers that they make.

 

 

(b)           Termination of Agreement. If this Agreement is terminated by the Representative, the Forward Seller or the Forward Purchaser in accordance with the provisions of Section 5, Section 9 or Section 10 hereof, the Company shall reimburse the Underwriters, the Forward Seller and the Forward Purchaser for all of their out-of-pocket expenses reasonably incurred, including the reasonable fees and disbursements of their counsel, in connection with this Agreement and the Forward Sale Agreements.

 

SECTION 5.          Conditions of the Underwriters’ and the Forward Seller’s Obligations. The obligations of the several Underwriters and the Forward Seller hereunder are subject to the accuracy of the representations and warranties of the Company contained herein or in certificates of any officer of the Company or any of its subsidiaries delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions:

 

(a)           Effectiveness of Registration Statement. The Registration Statement was filed by the Company with the Commission not earlier than three years prior to the date hereof and became effective upon filing in accordance with Rule 462(e). Each preliminary prospectus, each Issuer Free Writing Prospectus and the Prospectus have been filed to the extent required by Rule 424(b) (without reliance on Rule 424(b)(8)) and Rule 433, as applicable, prior to the earlier of (i) the Closing Time and (ii) within the time period prescribed by, and in compliance with, the 1933 Act Regulations. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the 1933 Act, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated; and the Company has complied with each request (if any) from the Commission for additional information. The Company shall have paid the required Commission filing fees relating to the Securities within the time period required by Rule 456(b)(1)(i) under the 1933 Act Regulations without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r) under the 1933 Act Regulations and, if applicable, shall have updated the “Calculation of Filing Fee Tables” table in accordance with Rule 456(b)(1)(ii) either in a post-effective amendment to the Registration Statement or in an exhibit to a prospectus filed pursuant to Rule 424(b).

 

(b)           Opinion of Counsel for Company. At the Closing Time, the Representative, the Forward Seller and the Forward Purchaser shall have received the favorable opinions, dated the Closing Time, of Squire Patton Boggs (US) LLP, counsel for the Company, and Nicholas J. Chulos, Executive Vice President, Chief Legal Officer and Corporate Secretary of the Company, each in form and substance reasonably satisfactory to counsel for the Underwriters, the Forward Seller and the Forward Purchaser.

 

 

(c)           Opinion of Counsel for Underwriters, the Forward Seller and the Forward Purchaser. At the Closing Time, the Representative, the Forward Seller and the Forward Purchaser shall have received the favorable opinion, dated the Closing Time, of Sidley Austin llp, counsel for the Underwriters, the Forward Seller and the Forward Purchaser, together with signed or reproduced copies of such letter for each of the other Underwriters with respect to the matters requested by the Representative, the Forward Seller or the Forward Purchaser.

 

(d)           Officers’ Certificate. At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the Representative, the Forward Seller and the Forward Purchaser shall have received a certificate of the chief executive officer or the president of the Company and of the chief financial or chief accounting officer of the Company, dated the Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties of the Company in this Agreement are true and correct with the same force and effect as though expressly made at and as of the Closing Time, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time, and (iv) the conditions specified in Section 5(a) hereof have been satisfied.

 

(e)           Accountants’ Comfort Letters. At the time of the execution of this Agreement, the Representative and the Forward Seller shall have received from each of (i) Deloitte and Crowe, the independent accountants to the Company and (ii) EY, the independent accountants to Bremer Financial, a letter, dated such date, in form and substance satisfactory to the Representative and the Forward Seller, together with signed or reproduced copies of such letter for each of the other Underwriters, in each case, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the General Disclosure Package and the Prospectus.

 

(f)            Bring-down Comfort Letters. At the Closing Time, the Representative and the Forward Seller shall have received from each of (i) Deloitte and Crowe, the independent accountants to the Company and (ii) EY, the independent accountants to Bremer Financial, a letter, dated as of the Closing Time, to the effect that such independent accountants reaffirm the statements made in their respective letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time.

 

(g)           Company CFO Certificate. At the time of execution of this Agreement and at the Closing Time, the Representative, the Forward Seller and the Forward Purchaser shall have received a certificate of the chief financial officer of the Company, dated the date hereof or as of the Closing Time, as applicable, with respect to certain data of the Company contained in the Registration Statement, the Prospectus, the General Disclosure Package, and any amendment or supplement thereto, and in the Written Testing-the-Waters Communications, in form and substance reasonable satisfactory to the Representative, the Forward Seller and the Forward Purchaser.

 

(h)           Bremer Financial CFO Certificate. At the time of execution of this Agreement and at the Closing Time, the Representative, the Forward Seller and the Forward Purchaser shall have received a certificate of the chief financial officer of Bremer Financial, dated the date hereof or as of the Closing Time, as applicable, with respect to certain data of Bremer Financial contained in the Registration Statement, the Prospectus and the General Disclosure Package, and any amendment or supplement thereto, and in the Written Testing-the-Waters Communications, in form and substance reasonable satisfactory to the Representative, the Forward Seller and the Forward Purchaser.

 

 

(i)            Approval of Listing. At the Closing Time, the Securities and the Confirmation Securities shall have been approved for listing on the Nasdaq Global Select Market, subject only to official notice of issuance.

 

(j)            Lock-up Agreements. At the date of this Agreement, the Representative shall have received an agreement substantially in the form of Exhibit A hereto signed by the persons listed on Schedule C hereto.

 

(k)            Maintenance of Rating. Since the execution of this Agreement, there shall not have been any decrease in or withdrawal of the rating of any securities of the Company or any of its subsidiaries by any “nationally recognized statistical rating organization” (as defined in Section 3(a)(62) of the 1934 Act) or any notice given of any intended or potential decrease in or withdrawal of any such rating or of a possible change in any such rating that does not indicate the direction of the possible change.

 

(l)            Conditions to Purchase of Option Securities. In the event that the Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Company contained herein, and the statements in any certificates furnished by the Company and any of its subsidiaries hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representative, the Forward Seller and the Forward Purchaser shall have received:

 

(i)            Officers’ Certificate. A certificate, dated such Date of Delivery, of the chief executive officer or the president of the Company and of the chief financial or chief accounting officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(d) hereof remains true and correct as of such Date of Delivery.

 

(ii)           Opinion of Counsel for Company. If requested by the Representative, the Forward Seller or the Forward Purchaser, the favorable opinions of Squire Patton Boggs (US) LLP, counsel for the Company, and Nicholas J. Chulos, Executive Vice President, Chief Legal Officer and Corporate Secretary of the Company, each in form and substance reasonably satisfactory to counsel for the Underwriters, the Forward Seller and the Forward Purchaser, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(b) hereof.

 

(iv)          Opinion of Counsel for Underwriters, the Forward Seller and the Forward Purchaser. If requested by the Representative, the Forward Seller or the Forward Purchaser, the favorable opinion of Sidley Austin llp, counsel for the Underwriters, the Forward Seller and the Forward Purchaser, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof.

 

(vi)          Bring-down Comfort Letter. If requested by the Representative or the Forward Seller, a letter from each of (i) Deloitte and Crowe, the independent accountants to the Company and (ii) EY, the independent accountants to Bremer Financial, in form and substance satisfactory to the Representative and the Forward Seller and dated such Date of Delivery, substantially in the same form and substance as their respective letter furnished to the Representative and the Forward Seller pursuant to Section 5(e) hereof, except that the “specified date” in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Date of Delivery.

 

 

(vii)         CFO Certificates. If requested by the Representative, the Forward Seller or the Forward Purchaser, a certificate from each of the chief financial officer of the Company and the chief financial officer of Bremer Financial, dated such Date of Delivery, substantially in the same form and substance as the respective certificates delivered to the Representative, the Forward Seller and the Forward Purchaser pursuant to Sections 5(g) or 5(h) hereof, as applicable.

 

(m)           Additional Documents. At the Closing Time and at each Date of Delivery (if any), counsel for the Underwriters, the Forward Seller and the Forward Purchaser shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained.

 

(n)           Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several Underwriters to purchase the relevant Option Securities, may be terminated by the Representative, the Forward Seller or the Forward Purchaser by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7, 8, 14, 15, 16 and 17 shall survive any such termination and remain in full force and effect.

 

SECTION 6.          Indemnification.

 

(a)           Indemnification of the Underwriters, the Forward Seller and the Forward Purchaser. The Company agrees to indemnify and hold harmless each Underwriter, the Forward Seller and the Forward Purchaser, their respective affiliates (as such term is defined in Rule 501(b) under the 1933 Act (each, an “Affiliate”)), their respective selling agents and employees and each person, if any, who controls any Underwriter, the Forward Seller or the Forward Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

 

(i)            against any and all loss, liability, claim, damage and expense whatsoever, as incurred, (A) arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including any information deemed to be a part thereof pursuant to Rule 430B, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or (B) arising out of any untrue statement or alleged untrue statement of a material fact included (I) in any preliminary prospectus, any Issuer Free Writing Prospectus, any Testing-the-Waters Communication, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) or (II) in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Securities (“Marketing Materials”), including any roadshow or investor presentations made to investors by the Company (whether in person or electronically), or the omission or alleged omission in any preliminary prospectus, Issuer Free Writing Prospectus, any Testing-the-Waters Communication, Prospectus or in any Marketing Materials of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(ii)           against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company;

 

 

(iii)           against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by the Representative), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;

 

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or alleged untrue statement, or omission or alleged omission made in the Registration Statement (or any amendment thereto), including any information deemed to be a part thereof pursuant to Rule 430B, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information.

 

(b)           Indemnification of Company, Directors and Officers. Each Underwriter severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or alleged untrue statements, or omissions or alleged omissions, made in the Registration Statement (or any amendment thereto), including any information deemed to be a part thereof pursuant to Rule 430B, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information.

 

(c)           Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by the Representative and be reasonably satisfactory to the Company, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company and be reasonably satisfactory to the Representative. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

 

 

(d)           Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 45 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

 

SECTION 7.          Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, the Forward Seller and the Forward Purchaser, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and of the Underwriters, the Forward Seller and the Forward Purchaser, on the other hand, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.

 

The relative benefits received by the Company, on the one hand, and the Underwriters, the Forward Seller and the Forward Purchaser, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as (x) in the case of the Company, the net proceeds from the offering of the Company Securities, if any, and the Confirmation Securities (assuming Physical Settlement at the Initial Forward Price (each as defined in the Forward Sale Agreements)) (before deducting expenses) received by the Company, (y) in the case of the Underwriters, the difference between (i) the aggregate price to the public received by the Underwriters for the Securities and (ii) the aggregate price paid by the Underwriters for the Securities and (z) in the case of the Forward Seller and the Forward Purchaser, the Spread (as defined in the Forward Sale Agreements) retained by the Forward Purchaser pursuant to the Forward Sale Agreements, net of any costs associated therewith, as reasonably determined by the Forward Purchaser.

 

The relative fault of the Company, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

 

 

Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the underwriting commissions received by such Underwriter in connection with the Securities underwritten by it and distributed to the public.

 

No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

For purposes of this Section 7, each person, if any, who controls an Underwriter, the Forward Seller or the Forward Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and each Underwriter’s, the Forward Seller’s or the Forward Purchaser’s respective Affiliates, selling agents and employees shall have the same rights to contribution as such Underwriter, the Forward Seller, the Forward Purchaser and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Underwriters’ respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial Securities set forth opposite their respective names in Schedule A hereto and not joint.

 

SECTION 8.          Representations, Warranties and Agreements to Survive. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company or any of its subsidiaries submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter, the Forward Seller, the Forward Purchaser or an Affiliate or selling agents, any person controlling any Underwriter, the Forward Seller, the Forward Purchaser, their respective officers or directors or any person controlling the Company and (ii) delivery of and payment for the Securities.

 

SECTION 9.          Termination of Agreement.

 

(a)           Termination. The Representative, the Forward Seller or the Forward Purchaser may terminate this Agreement, by notice to the other parties hereto, at any time at or prior to the Closing Time (i) if there has been, in the judgment of the Representative, the Forward Seller or the Forward Purchaser since the time of execution of this Agreement or since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representative, the Forward Seller or the Forward Purchaser impracticable or inadvisable to proceed with the completion of the offering or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the Nasdaq Global Select Market, or (iv) if trading generally on the New York Stock Exchange or in the Nasdaq Global Select Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by order of the Commission, FINRA or any other governmental authority, or (v) a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States or with respect to Clearstream or Euroclear systems in Europe, or (vi) if a banking moratorium has been declared by either Federal, New York or Indiana authorities.

 

 

(b)           Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7, 8, 14, 15, 16 and 17 shall survive such termination and remain in full force and effect.

 

SECTION 10.        Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at the Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the “Defaulted Securities”), the Representative shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters that are satisfactory to the Company, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representative shall not have completed such arrangements within such 24-hour period, then:

 

(i)            if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased on such date, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or

 

(ii)           if the number of Defaulted Securities exceeds 10% of the number of Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the Underwriters to purchase, and the Company or the Forward Seller to sell, the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non-defaulting Underwriter.

 

No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default.

 

In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the Underwriters to purchase and the Company or the Forward Seller to sell the relevant Option Securities, as the case may be, either the (i) Representative or (ii) the Company or the Forward Seller shall have the right to postpone the Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement, the General Disclosure Package or the Prospectus or in any other documents or arrangements. As used herein, the term “Underwriter” includes any person substituted for an Underwriter under this Section 10.

 

 

SECTION 11.        Issuance and Sale by the Company.

 

(a)           If (i) any of the representations and warranties of the Company contained herein or any certificate delivered by the Company pursuant hereto are not true and correct as of the Closing Time or a Date of Delivery, as if made as of the Closing Time or such Date of Delivery, as the case may be, (ii) the Company has not performed all of the obligations required to be performed by it under this Agreement or the applicable Forward Sale Agreement on or prior to the Closing Time or such Date of Delivery, (iii) any of the conditions set forth in Section 5 hereof have not been satisfied on or prior to the Closing Time or such Date of Delivery, (iv) this Agreement shall have been terminated pursuant to Section 9 hereof on or prior to the Closing Time or such Date of Delivery, or the Closing Time or such Date of Delivery shall not have occurred, (v) any of the conditions in the applicable Forward Sale Agreement shall not have been satisfied on or prior to the Closing Time or such Date of Delivery, (vi) any of the representations and warranties of the Company contained in the applicable Forward Sale Agreement are not true and correct as of the Closing Time or such Date of Delivery as if made as of the Closing Time or such Date of Delivery, or (vii) the Forward Seller determines that (A) it or its affiliate is unable through commercially reasonable efforts to borrow and deliver for sale a number of Borrowed Securities equal to the number of Borrowed Securities that it has agreed to sell and deliver in connection with establishing its hedge position or (B) in its commercially reasonable judgement, either it is impracticable to do so or it or its affiliate would incur a stock loan cost of more than a rate equal to 200 basis points per annum to do so (clauses (i) through (vii), together, the “Conditions”), then (I) in the case of the Conditions set forth in clauses (i) through (vi), the Forward Seller may elect not to deliver for sale to the Underwriters at the Closing Time or such Date of Delivery the Borrowed Initial Securities or the Borrowed Option Securities, as applicable, and (II) in the event of the Conditions set forth in clause (vii), the Forward Seller shall only be required to deliver for sale to the Underwriters at the Closing Time or such Date of Delivery, as the case may be, the aggregate number of shares of Common Stock that the Forward Seller or its affiliates is able to so borrow in connection with establishing its commercially reasonable hedge position at or below such cost. In addition, the Forward Seller and the Forward Purchaser shall have no liability whatsoever for any Borrowed Securities that the Forward Seller does not sell and deliver for sale to the Underwriters pursuant to this Section 11(a).

 

(b)           In the event that the Forward Seller, pursuant to Section 11(a), does not deliver for sale the Borrowed Securities, then the Company shall issue and sell to the Underwriters at the purchase price per share set forth in Schedule A hereto (in the case of any Company Top-Up Option Securities, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities), in whole but not in part, an aggregate number of shares of Common Stock equal to the number of Borrowed Securities that the Forward Seller does not so deliver for sale to the Underwriters. In connection with any such issuance and sale by the Company, the Company or the Representative shall have the right to postpone the Closing Time or such Date of Delivery, as the case may be, for a period not exceeding one business day in order to effect any required changes in any documents or arrangements. The Securities sold by the Company to the Underwriters pursuant to this Section 11: (i) in lieu of Borrowed Initial Securities are referred to herein as the “Company Top-Up Initial Securities” and (ii) in lieu of any Borrowed Option Securities are referred to herein as the “Company Top-Up Option Securities.”

 

If the Forward Seller elects pursuant to Section 11(a) not to, or is otherwise not required to, borrow and deliver for sale to the Underwriters at the relevant Closing Time or Date of Delivery the total number of Borrowed Securities otherwise deliverable by it hereunder, the Forward Seller will use its commercially reasonable efforts to notify the Company no later than 9:00 A.M., New York City time, on the Closing Time or such Date of Delivery of the total number of Borrowed Securities to be delivered for sale to the Underwriters by it hereunder. Notwithstanding anything to the contrary herein, in no event will the Company be required to issue or deliver any Company Securities prior to the business day following notice to the Company of the relevant number of Securities so deliverable in accordance with this Section 11.

 

SECTION 12.        Notices. All notices and other communications hereunder shall be in writing, shall be effective only upon receipt and shall be mailed, delivered by hand or overnight courier, or transmitted by fax or other electronic means (with the receipt of such fax or other electronic communication to be confirmed by telephone). Notices to the Forward Seller shall be directed to Citigroup Global Markets Inc. at 388 Greenwich Street, New York, New York 10013, Attention: General Counsel; notices to the Forward Purchaser shall be directed to Citibank, N.A. at 388 Greenwich Street, New York, New York 10013, Attention: General Counsel, Facsimile: 1-646-291-1469 and notices to the Underwriters shall be directed to the Representative at: Citigroup Global Markets Inc. 388 Greenwich Street, New York, New York 10013, Attention: General Counsel, Facsimile: 1-646-291-1469, in each case, with a copy (which shall not constitute notice) to: Sidley Austin llp, 787 Seventh Avenue, New York, New York 10019, Attention: Samir Gandhi. Notices to the Company shall be directed to it at Old National Bancorp, One Main Street, Evansville, Indiana, 47708, Attention: Nicholas J. Chulos, Executive Vice President, Chief Legal Officer and Corporate Secretary, in each case, with a copy (which shall not constitute notice) to: Squire Patton Boggs (US) LLP, 201 E. Fourth Street, Suite 1900, Cincinnati, Ohio, 45202, Attention: James J. Barresi.

 

 

SECTION 13.        No Advisory or Fiduciary Relationship. The Company acknowledges and agrees that (a) the purchase and sale of the Securities pursuant to this Agreement, including the determination of the initial public offering price of the Securities and any related discounts and commissions, is an arm’s-length commercial transaction between the Company, on the one hand, and the several Underwriters, the Forward Seller and the Forward Purchaser, on the other hand, and does not constitute a recommendation, investment advice, or solicitation of any action by the Underwriters, the Forward Seller or the Forward Purchaser, (b) in connection with the offering of the Securities and the process leading thereto, each of the Underwriters, the Forward Seller and the Forward Purchaser is and has been acting solely as a principal and is not the agent or fiduciary of the Company, any of its subsidiaries or its shareholders, creditors, employees or any other party, (c) none of the Underwriters, the Forward Seller or the Forward Purchaser has assumed or will assume an advisory or fiduciary responsibility in favor of the Company with respect to the offering of the Securities or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company or any of its subsidiaries on other matters), and none of the Underwriters, the Forward Seller or the Forward Purchaser has any obligation to the Company with respect to the offering of the Securities except the obligations expressly set forth in this Agreement, (d) the Underwriters, the Forward Seller, the Forward Purchaser and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company, (e) the Underwriters, the Forward Seller and the Forward Purchaser have not provided any legal, accounting, regulatory, investment or tax advice with respect to the offering of the Securities and the Company has consulted its own legal, accounting, financial, regulatory and tax advisors to the extent it deemed appropriate, and (f) none of the activities of the Underwriters, the Forward Seller or the Forward Purchaser in connection with the transactions contemplated herein constitutes a recommendation, investment advice or solicitation of any action by the Underwriters, the Forward Seller or the Forward Purchaser with respect to any entity or natural person.

 

SECTION 14.        Recognition of the U.S. Special Resolution Regimes.

 

(a)           In the event that any Underwriter, the Forward Seller or the Forward Purchaser that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter, the Forward Seller or the Forward Purchaser of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.

 

(b)           In the event that any Underwriter, the Forward Seller or the Forward Purchaser that is a Covered Entity or a BHC Act Affiliate of such Underwriter, the Forward Seller or the Forward Purchaser becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter, the Forward Seller or the Forward Purchaser are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.

 

For purposes of this Section 14, a “BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k). “Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b). “Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable. “U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.

 

 

SECTION 15.        Parties. This Agreement shall each inure to the benefit of and be binding upon the parties hereto and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the parties hereto and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase.

 

SECTION 16.        Trial by Jury. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its shareholders and affiliates) and each of the Underwriters and the Forward Seller hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

SECTION 17.        GOVERNING LAW. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK WITHOUT REGARD TO ITS CHOICE OF LAW PROVISIONS.

 

SECTION 18.        Consent to Jurisdiction; Waiver of Immunity. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby (“Related Proceedings”) shall be instituted in (i) the federal courts of the United States of America located in the City and County of New York, Borough of Manhattan or (ii) the courts of the State of New York located in the City and County of New York, Borough of Manhattan (collectively, the “Specified Courts”), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a “Related Judgment”), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.

 

SECTION 19.        TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

 

SECTION 20.        Counterparts and Electronic Signatures. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same agreement. Electronic signatures complying with the New York Electronic Signatures and Records Act (N.Y. State Tech. §§ 301-309), as amended from time to time, or other applicable law will be deemed original signatures for purposes of this Agreement. Transmission by telecopy, electronic mail or other transmission method of an executed counterpart of this Agreement will constitute due and sufficient delivery of such counterpart.

 

 

SECTION 21.        Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.

 

 

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the parties hereto in accordance with its terms.

 

	Very truly yours,
	OLD NATIONAL BANCORP
	By	/s/ John V. Moran, IV
		Name: John V. Moran, IV
		Title: Senior Executive Vice President and Chief Financial Officer

 

CONFIRMED AND ACCEPTED,
          as of the date first above written:

 

CITIGROUP GLOBAL MARKETS INC.
By	/s/ Patrick Mcfarlan
Authorized Signatory

 

For itself and as Representative of the other Underwriters named in Schedule A hereto.

 

[Signature Page to Underwriting Agreement]

 

 

CONFIRMED AND ACCEPTED,
          as of the date first above written:

 

CITIGROUP GLOBAL MARKETS INC.
By	/s/ Patrick Mcfarlan
Authorized Signatory

 

As Forward Seller.

 

CONFIRMED AND ACCEPTED,
          as of the date first above written:

 

Citibank, N.A.
By	/s/ Eric Natelson
Authorized Signatory

 

As Forward Purchaser, solely as the recipient and/or beneficiary of certain representations, warranties, covenants and indemnities set forth in this Agreement.

 

[Signature Page to Underwriting Agreement]

 

 

SCHEDULE A

 

The initial public offering price per share for the Securities shall be $21.00.

 

The purchase price per share for the Securities to be paid by the several Underwriters shall be $20.16, being an amount equal to the initial public offering price set forth above less $0.84 per share, subject to adjustment in accordance with Section 2(b) for dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities.

 

Name of Underwriter			Number of Initial Securities to be Purchased				Maximum Number of Option Securities to be Purchased
Citigroup Global Markets Inc.			13,333,334				2,000,001
Keefe, Bruyette, & Woods, Inc.			5,714,285				857,142
Total			19,047,619				2,857,143

 

Name of Forward Seller			Number of Borrowed Initial Securities to be Sold				Maximum Number of Borrowed Option Securities to be Sold
Citibank, N.A.			19,047,619				2,857,143
Total			19,047,619				2,857,143

 

 

SCHEDULE B-1

 

Pricing Terms

 

1.	The Company and the Forward Seller are selling 19,047,619 Initial Securities.

 

2.	The Company and the Forward Seller have granted an option to the Underwriters, severally and not jointly, to purchase up to 2,857,143 Option Securities.

 

3.	The initial public offering price per share for the Securities shall be $21.00.

 

 

SCHEDULE B-2

 

Free Writing Prospectuses

 

None.

 

 

SCHEDULE B-3

 

Permitted Written Testing-the-Waters Communications

 

Old National Bancorp, Merger Investor Presentation, dated November 2024.

 

 

SCHEDULE C

 

List of Persons and Entities Subject to Lock-up

 

Directors

 

Barbara A. Boigegrain

Thomas L. Brown

Kathryn J. Hayley

Peter J. Henseler

Daniel S. Hermann

Ryan C. Kitchell

Austin M. Ramirez

Ellen A. Rudnick

James C. Ryan, III

Thomas E. Salmon

Rebecca S. Skillman

Michael J. Small

Derrick J. Stewart

Stephen C. Van Arsdell

Katherine E. White

 

Executive officers that are not also directors

 

Chady M. AlAhmar

Nicholas J. Chulos

Caroline J. Ellspermann

Scott J. Evernham

John V. Moran, IV

Angela L. Putnam

Mark G. Sander

James A. Sandgren

Brent R. Tischler

Kendra L. Vanzo

 

 

Exhibit A

 

FORM OF LOCK-UP AGREEMENT

 

November 25, 2024

 

Citigroup Global Markets Inc.

 

as Representative of the several Underwriters

listed in Schedule A to the Underwriting

Agreement referred to below

 

c/o	Citigroup Global Markets Inc. 388 Greenwich Street New York, NY 10013

 

Ladies and Gentlemen:

 

The undersigned understands that Citigroup Global Markets Inc. (“Citigroup”) proposes to enter into an Underwriting Agreement (the “Underwriting Agreement”) with Old National Bancorp, an Indiana corporation (the “Company”), the forward seller and the forward purchaser named therein, providing for the public offering (the “Public Offering”) by the several Underwriters, including Citigroup (the “Underwriters”), of 19,047,619 shares (the “Shares”) of the common stock, no par value per share, of the Company (the “Common Stock”).

 

To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of Citigroup on behalf of the Underwriters, it will not, and will not publicly disclose an intention to, during the period commencing on the date hereof and ending 60 days after the date of the final prospectus (the “Restricted Period”) relating to the Public Offering (the “Prospectus”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock beneficially owned (as such term is used in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), by the undersigned or any other securities so owned convertible into or exercisable or exchangeable for Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer the Common Stock without the prior written consent of Citigroup, as described below, provided that (1) Citigroup receives a signed lock-up agreement in the form of this lock-up agreement for the balance of the Restricted Period from each donee, devisee, trustee, distributee, or transferee, as the case may be, (2) any such transfer shall not involve a disposition for value, (3) such transfers are not required to be reported during the Restricted Period with the U.S. Securities and Exchange Commission (the “Commission”) on Form 4 or Form 5 in accordance with Section 16(a) of the Exchange Act, or, in the case of clause (i), (ii), (iii) and (iv) below, any such required filing shall clearly indicate in the footnotes thereto that the filing relates to circumstances described in such a clause, and (4) the undersigned does not otherwise voluntarily effect any public filing or report regarding such transfers:

 

(i)

as a bona fide gift or gifts, including, without limitation, to a charitable organization or educational institution, or for bona fide estate planning purposes;

 

 

(ii)

by will, testamentary document or intestate succession to the legal representative, heir, beneficiary or a member of the immediate family of the undersigned (for purposes of this lock-up agreement, “immediate family” of the undersigned shall mean any relationship by blood, marriage, domestic partnership or adoption, not more remote than first cousin of the undersigned);

 

(iii)

by operation of law, such as pursuant to a qualified domestic order, divorce settlement, divorce decree or separation agreement;

 

(iv)

pursuant to an order of a court or regulatory agency having jurisdiction over the undersigned;

 

(v)

to any corporation, partnership, limited liability company or other entity of which the undersigned or the immediate family of the undersigned are the legal and beneficial owner of all of the outstanding equity securities or similar interests;

 

(vi)

to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (i) through (v) above;

 

(vii)

to any immediate family member or any trust, partnership, limited liability company or other entity for the direct or indirect benefit of the undersigned or one or more immediate family members of the undersigned, or if the undersigned is a trust, to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust;

 

(viii)

if the undersigned is a corporation, partnership, limited liability company, trust or other business entity, (A) to another corporation, partnership, limited liability company, trust or other business entity that is an affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned, or to any investment fund or other entity controlling, controlled by, managing or managed by or under common control with the undersigned or affiliates of the undersigned (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), or (B) as part of a distribution to limited partners, limited liability company members or stockholders of the undersigned or holders of similar equity interests in the undersigned; or

 

(ix)

to the Company upon the undersigned’s death, disability or termination of employment or other service relationship with the Company; provided that such shares of Common Stock were issued to the undersigned pursuant to an agreement or equity award granted pursuant to an employee benefit plan, option, warrant or other right disclosed in the Prospectus.

 

 

In addition, subject to the conditions below, the undersigned may transfer the Common Stock without the prior written consent of Citigroup:

 

(a)

to the Company pursuant to the vesting, settlement or exercise of restricted stock units, restricted stock, options, warrants or other rights to purchase shares of Common Stock (including, in each case, by way of “net” or “cashless” exercise), including for the payment of exercise price and tax and remittance payments due as a result of the vesting, settlement or exercise of such restricted stock units, restricted stock, options, warrants or rights, provided that (1) any such shares of Common Stock received upon such exercise, vesting or settlement shall be subject to the terms of this lock-up agreement; (2) any filing under the Exchange Act required to be made during the Restricted Period shall indicate in the footnotes thereto that the filing relates to circumstances described in this clause; (3) the undersigned does not otherwise voluntarily effect any public filing or report regarding such transfers; and (4) any such restricted stock units, restricted stock, options, warrants or rights are held by the undersigned pursuant to an agreement or equity award granted under a stock incentive plan or other equity award plan, each of which is disclosed in the Prospectus; or

 

(b)

pursuant to a 10b5-1 trading plan that complies with Rule 10b5-1 under the Exchange Act that has been entered into by the undersigned prior to the date of this lock-up agreement; provided, however, that (A) any filing under Section 16 of the Exchange Act made during the Restricted Period shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described above and (B) the undersigned does not otherwise voluntarily effect any other public filings or report regarding such sales or transfers during the Restricted Period.

 

Furthermore, the undersigned may sell shares of Common Stock purchased by the undersigned on the open market following the Public Offering if and only if (i) such sales are not required to be reported in any public report or filing with the Commission or otherwise, and (ii) the undersigned does not otherwise voluntarily effect any public filing or report regarding such sales.

 

The undersigned agrees that, without the prior written consent of Citigroup on behalf of the Underwriters, it will not, during the Restricted Period, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s shares of Common Stock except in compliance with the restrictions contained herein.

 

The undersigned understands that the Company and the Underwriters are relying upon this agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.

 

The undersigned acknowledges and agrees that the Underwriters have not provided any recommendation or investment advice nor have the Underwriters solicited any action from the undersigned with respect to the Public Offering of the Shares and the undersigned has consulted their own legal, accounting, financial, regulatory and tax advisors to the extent deemed appropriate. The undersigned further acknowledges and agrees that, although the Underwriters may provide certain Regulation Best Interest and Form CRS disclosures or other related documentation to you in connection with the Public Offering, the Underwriters are not making a recommendation to you to participate in the Public Offering or sell any Shares at the price determined in the Public Offering, and nothing set forth in such disclosures or documentation is intended to suggest that any Underwriter is making such a recommendation.

 

Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.

 

This agreement shall be governed by and construed in accordance with the laws of the State of New York.

 

 

	Very truly yours,
	Name:
	Title:

 

 

 

Exhibit 2.1

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

BREMER FINANCIAL CORPORATION,

 

OLD NATIONAL BANCORP

 

and

 

ONB MERGER SUB, INC.

 

 

Dated as of November 25, 2024

 

 

Table of Contents

 

Page

 

Article I THE MERGERS		2
1.1	The Merger	2
1.2	Closing	2
1.3	Effective Time	2
1.4	Effects of the Merger	3
1.5	Conversion of Company Common Stock	3
1.6	Dissenters’ Rights	4
1.7	Parent Common Stock	5
1.8	Merger Sub Common Stock	5
1.9	Articles of Incorporation of Surviving Corporation	5
1.10	Bylaws of Surviving Corporation	5
1.11	Officers and Directors of Surviving Corporation	5
1.12	Second Step Merger	5
1.13	Bank Merger	6
1.14	Closing Deliverable	7
1.15	Tax Consequences	7
Article II EXCHANGE OF SHARES		7
2.1	Parent to Make Merger Consideration Available	7
2.2	Exchange of Shares	7
Article III REPRESENTATIONS AND WARRANTIES OF COMPANY		10
3.1	Corporate Organization	10
3.2	Capitalization	12
3.3	Authority; No Violation	13
3.4	Consents and Approvals	14
3.5	Reports	14
3.6	Financial Statements	15
3.7	Broker’s Fees	16
3.8	Absence of Certain Changes or Events	17
3.9	Legal Proceedings	17
3.10	Taxes and Tax Returns	18
3.11	Employee Benefit Plans	18
3.12	Employees.	21
3.13	Compliance with Applicable Law	22
3.14	Certain Contracts	23
3.15	Agreements with Regulatory Agencies	24
3.16	Risk Management Instruments	24
3.17	Environmental Matters	25

 

 

3.18	Investment Securities and Commodities	25
3.19	Real Property	25
3.20	Intellectual Property	26
3.21	State Takeover Laws	26
3.22	Reorganization	27
3.23	Opinion of Financial Advisor	27
3.24	Company Information	27
3.25	Loan Portfolio	27
3.26	Insurance	28
3.27	Information Security	29
3.28	No Other Representations or Warranties	29
Article IV REPRESENTATIONS AND WARRANTIES OF PARENT and Merger Sub		30
4.1	Corporate Organization	30
4.2	Capitalization	31
4.3	Authority; No Violation	32
4.4	Consents and Approvals	33
4.5	Reports	33
4.6	Financial Statements	34
4.7	Broker’s Fees	36
4.8	Absence of Certain Changes or Events	36
4.9	Legal Proceedings	36
4.10	Taxes and Tax Returns	37
4.11	Employees and Employee Benefit Plans	37
4.12	Compliance with Applicable Law	39
4.13	Agreements with Regulatory Agencies	40
4.14	State Takeover Laws	40
4.15	Risk Management Instruments	40
4.16	Environmental Matters	41
4.17	Investment Securities and Commodities	41
4.18	Real Property	41
4.19	Reorganization	42
4.20	Parent Information	42
4.21	Information Security	42
4.22	No Other Representations or Warranties	42
Article V COVENANTS RELATING TO CONDUCT OF BUSINESS		43
5.1	Conduct of Business Prior to the Effective Time	43
5.2	Company Forbearances	43
5.3	Parent Forbearances	47

 

 

Article VI ADDITIONAL AGREEMENTS		48
6.1	Regulatory Matters	48
6.2	Access to Information	49
6.3	Shareholder Approvals	50
6.4	Legal Conditions to Mergers	51
6.5	Stock Exchange Listing	51
6.6	Employee Matters	52
6.7	Indemnification; Directors’ and Officers’ Insurance	54
6.8	Additional Agreements	55
6.9	Dividends	55
6.10	Advice of Changes	55
6.11	Acquisition Proposals	56
6.12	Public Announcements	57
6.13	Change of Method	57
6.14	Restructuring Efforts	58
6.15	Takeover Statutes	58
6.16	Exemption from Liability under Section 16(b)	58
6.17	Shareholder Litigation	59
6.18	Assumption of Company Debt	59
6.19	Conduct of Merger Sub	59
6.20	Governance	59
6.21	Additional Matters	59
Article VII CONDITIONS PRECEDENT		59
7.1	Conditions to Each Party’s Obligation to Effect the Mergers	59
7.2	Conditions to Obligations of Parent and Merger Sub	60
7.3	Conditions to Obligations of the Company	62
Article VIII TERMINATION AND AMENDMENT		63
8.1	Termination	63
8.2	Effect of Termination	64
Article IX GENERAL PROVISIONS		65
9.1	Nonsurvival of Representations, Warranties and Agreements	65
9.2	Amendment	65
9.3	Extension; Waiver	66
9.4	Expenses	66
9.5	Notices	66
9.6	Interpretation	67
9.7	Counterparts	68
9.8	Entire Agreement	68
9.9	Governing Law; Jurisdiction	68
9.10	Waiver of Jury Trial	69
9.11	Assignment; Third-Party Beneficiaries	69
9.12	Specific Performance	70
9.13	Severability	70
9.14	Confidential Supervisory Information	70
9.15	Delivery by Electronic Transmission	70
9.16	Trustees’ Capacity; No Recourse	71

 

Exhibits
Exhibit A	Bank Merger Agreement

 

 

INDEX OF DEFINED TERMS

 

Term	Section
$	9.6
Acquisition Proposal	6.11(c)
Adjusted Tangible Shareholders’ Equity	7.2(d)
affiliate	9.6
Agreement	Preamble
Appraisal Demand	1.6(c)
Audited Financial Statements	3.6(a)
Bank Merger	1.13
Bank Merger Agreement	1.13
Bank Merger Certificates	1.13
BHC Act	3.1(a)
business day	9.6
Cash Merger Consideration	1.5(a)
Certificate	1.5(b)
Chosen Courts	9.9(b)
Citigroup	4.7
Class A Company Common Stock	1.5(a)
Class B Company Common Stock	1.5(a)
Closing	1.2
Closing Date	1.2
Code	Recitals
Company	Preamble
Company 401(k) Plan	6.6(d)
Company Bank	1.13
Company Benefit Plans	3.11(a)
Company Board Recommendation	6.3
Company Bylaws	1.10
Company Charter	1.9
Company Common Stock	1.5(a)
Company Contract	3.14(a)
Company Disclosure Schedule	Article III
Company Indemnified Parties	6.7(a)
Company IT System	3.13
Company Leased Properties	3.19
Company Meeting	6.3
Company Owned Properties	3.19
Company Qualified Plan	3.11(d)
Company Real Property	3.19
Company Regulatory Agreement	3.15
Company Security Breach	3.13
Company Subsidiary	3.1(b)
Company Voting Agreement	Recitals
Confidentiality Agreement	6.2(b)
Continuing Employees	6.6(a)

 

 

Controlled Group Liability	3.11(e)
Dissenting Shares	1.6(a)
dollars	9.6
Effective Time	1.3
Enforceability Exceptions	3.3(a)
Environmental Laws	3.17
ERISA	3.11(a)
ERISA Affiliate	3.11(e)
ESOP	3.1(b)
Exchange Agent	2.1
Exchange Fund	2.1
Exchange Ratio	1.5(a)
FDIC	3.1(b)
Federal Reserve Board	3.1(a)
Financial Statements	3.6(a)
First Step Certificates of Merger	1.3
First Step Indiana Articles of Merger	1.3
First Step Minnesota Articles of Merger	1.3
GAAP	3.1(a)
GLBA	3.13
Governmental Entity	3.4
HSR Act	3.4
IBCL	1.1
Indiana Secretary	1.3
Intellectual Property	3.20
Investor Agreement	Recitals
IRS	3.11(b)
J.P. Morgan	3.6(a)
KBW	3.6(a)
Key Employee	5.2(f)
knowledge of Parent	9.6
knowledge of the Company	9.6
Liens	3.2(c)
Loans	3.25(a)
made available	9.6
Material Adverse Effect	3.1(a)
Materially Burdensome Regulatory Condition	6.1(b)
MBCA	1.1
Measuring Date	7.2(d)
Merger	1.1
Merger Consideration	1.5(a)
Merger Sub	Preamble
Merger Sub Bylaws	4.1(a)
Merger Sub Charter	4.1(a)
Merger Sub Common Stock	1.8
Mergers	1.12(a)
Minnesota Secretary	1.3

 

 

Multiemployer Plan	3.11(f)
Multiple Employer Plan	3.11(f)
NASDAQ	2.2(g)
New Certificates	2.1
New Plans	6.6(b)
Notifying Party	6.10
Parent	Preamble
Parent 401(k) Plan	6.6(d)
Parent Approval	4.3(a)
Parent Bank	1.13
Parent Benefit Plans	3.11(a)
Parent Bylaws	4.1(a)
Parent Charter	4.1(a)
Parent Common Stock	1.5(a)
Parent Disclosure Schedule	Article IV
Parent Owned Properties	4.18
Parent Preferred Stock	4.2
Parent Qualified Plans	4.11(c)
Parent Real Property	4.18
Parent Regulatory Agreement	4.13
Parent Reports	4.5(b)
Parent Stock Merger Consideration	1.5(a)
Parent Subsidiary	4.1(b)
Permitted Encumbrances	3.19
person	9.6
Personal Data	3.13
Premium Cap	6.7(b)
Proxy Statement	3.4
Recommendation Change	6.3
Regulatory Agencies	3.5
Representatives	6.11(a)
Requisite Company Vote	3.3(a)
Requisite Regulatory Approvals	6.1(d)
S-4	3.4
Sarbanes-Oxley Act	4.5(b)
SEC	3.4
Second Effective Time	1.12(a)
Second Step Articles of Merger	1.12(a)
Second Step Indiana Articles of Merger	1.12(a)
Second Step Merger	1.12(a)
Second Step Minnesota Articles of Merger	1.12(a)
Securities Act	4.5(b)
Specified Date	8.1(c)
SRO	3.5
Subsidiary	3.1(a)
Surviving Corporation	1.1
Surviving Entity	1.12(a)

 

 

Takeover Statutes	3.21
Tax	3.10(b)
Tax Return	3.10(c)
Taxes	3.10(b)
Termination Date	8.1(c)
Termination Fee	8.2(b)(i)
the date hereof	9.6
transactions contemplated by this Agreement	9.6
transactions contemplated hereby	9.6
Trust	Recitals
Trustee Voting Agreement	Recitals
Trustees	Recitals
Withholding Agent	2.2(g)

 

 

AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER, dated as of November 25, 2024 (this “Agreement”), by and among Bremer Financial Corporation, a Minnesota corporation (the “Company”), Old National Bancorp, an Indiana corporation (“Parent”) and ONB Merger Sub, Inc., an Indiana corporation and a wholly-owned subsidiary of Parent (“Merger Sub”).

 

W I T N E S S E T H:

 

WHEREAS, the Board of Directors of the Company has unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Mergers, are in the best interests of the Company and the Company’s shareholders, and declared that this Agreement is advisable, and (ii) approved the execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby, including the Mergers;

 

WHEREAS, the Board of Directors of Parent has unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Mergers, are in the best interests of Parent and Parent’s shareholders, and (ii) approved the execution, delivery and performance by Parent of this Agreement and the consummation of the transactions contemplated hereby, including the Mergers;

 

WHEREAS, the Board of Directors of Merger Sub has unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are in the best interests of Merger Sub and Merger Sub’s sole stockholder, and (ii) approved the execution, delivery and performance by Merger Sub of this Agreement and the consummation of the transactions contemplated hereby, including the Merger;

 

WHEREAS, Parent, as Merger Sub’s sole stockholder, has adopted and approved this Agreement and the transactions contemplated hereby by written consent;

 

WHEREAS, the Board of Directors of the Company, subject to the terms of this Agreement, has resolved to recommend that the Company’s shareholders approve this Agreement and to submit this Agreement to the Company’s shareholders for approval;

 

WHEREAS, for U.S. federal income tax purposes, it is intended that the Mergers shall qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and this Agreement is intended to be and is adopted as a plan of reorganization for purposes of Sections 354 and 361 of the Code;

 

WHEREAS, concurrently with the execution of this Agreement, Parent, Caroline S. Johnson, Francis M. Miley and Daniel C. Reardon, solely in their respective capacities as trustees of the Otto Bremer Trust, a trust created under trust instrument dated May 22, 1944 and governed by the laws of Minnesota (the “Trust”) (in such capacities, the “Trustees”), and not in their respective individual capacities, will execute and deliver to each other counterparts of a voting agreement in the form mutually agreed upon by the parties (the “Trustee Voting Agreement”);

 

WHEREAS, concurrently with the execution of this Agreement, Parent and each of the directors of the Company, will execute and deliver to each other counterparts of a voting agreement in the form mutually agreed upon by the parties (the “Director Voting Agreement” and together with the Trustee Voting Agreement, the “Company Voting Agreement”);

 

 

WHEREAS, concurrently with the execution of this Agreement, Parent and the Trustees will execute and deliver to each other counterparts of an investor agreement in the form mutually agreed upon by the parties (the “Investor Agreement”), which will become effective as of the Closing; and

 

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

 

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

 

Article I

 

THE MERGERS

 

1.1            The Merger. Subject to the terms and conditions of this Agreement, in accordance with the Minnesota Business Corporation Act (the “MBCA”) and the Indiana Business Corporation Law (the “IBCL”), at the Effective Time, Merger Sub shall merge with and into the Company (the “Merger”). The Company shall be the surviving corporation in the Merger (hereinafter referred to in such capacity as the “Surviving Corporation”), and shall continue its corporate existence under the laws of the State of Minnesota. Upon consummation of the Merger, the separate corporate existence of Merger Sub shall terminate.

 

1.2            Closing. Subject to the terms and conditions of this Agreement, the closing of the Merger (the “Closing”) will occur by electronic exchange of documents at 8:00 a.m. Minneapolis time, on the first business day of the month immediately following the month during which the satisfaction or waiver (subject to applicable law) of the latest to occur of the conditions set forth in Article VII hereof (other than those conditions that by their nature can be satisfied only at the Closing, but subject to the satisfaction or waiver of all conditions at the Closing), or, if such business day is not at least five (5) business days after the aforementioned satisfaction or waiver, then the first business day of the second month after satisfaction or waiver (subject to applicable law) of the latest to occur of the conditions set forth in Article VII hereof (other than those conditions that by their nature can be satisfied only at the Closing, but subject to the satisfaction or waiver of all conditions at the Closing), unless another date, time or place is agreed to in writing by the Company and Parent. The date on which the Closing occurs is referred to as the “Closing Date.”

 

1.3            Effective Time. The Merger shall become effective as set forth in the articles of merger with respect to the Merger (the “First Step Minnesota Articles of Merger”) to be filed with the Secretary of State of the State of Minnesota (the “Minnesota Secretary”) and the articles of merger with respect to the Merger (the “First Step Indiana Articles of Merger”, and together with the First Step Minnesota Articles of Merger, the “First Step Certificates of Merger”) to be filed with the Secretary of State of the State of Indiana (the “Indiana Secretary”), in each case on the Closing Date. The term “Effective Time” shall be the date and time at which the articles of merger becomes effective as set forth in the First Step Certificates of Merger.

 

 

1.4            Effects of the Merger. At and after the Effective Time, the Merger shall have the effects set forth in the applicable provisions of the MBCA and the IBCL.

 

1.5            Conversion of Company Common Stock. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, the Company, Merger Sub or any holder of securities thereof:

 

(a)            Subject to Section 2.2(e), each share of Class A common stock, no par value, of the Company (the “Class A Company Common Stock”) and each share of Class B common stock, no par value, of the Company (the “Class B Company Common Stock”, and together with the Class A Company Common Stock, the “Company Common Stock”) issued and outstanding immediately prior to the Effective Time, except for Dissenting Shares and shares of Company Common Stock owned by the Company as treasury stock or owned by the Company, Parent or Merger Sub (in each case other than shares (i) held in trust accounts, managed accounts, mutual funds and the like, or otherwise held in a fiduciary or agency capacity that are beneficially owned by third parties, or (ii) held, directly or indirectly, as a result of debts previously contracted), shall be converted into the right to receive $26.22 without interest (such consideration, the “Cash Merger Consideration”) and 4.182 shares (the “Exchange Ratio”) of common stock, no par value per share, of Parent (the “Parent Common Stock”) (such consideration, the “Parent Stock Merger Consideration”, and together with the Cash Merger Consideration, the “Merger Consideration”).

 

(b)            All of the shares of Company Common Stock converted into the right to receive the Merger Consideration pursuant to this Article I shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time, and each certificate (each, a “Certificate,” it being understood that any reference herein to “Certificate” shall be deemed to include reference to book-entry account statements relating to the ownership of shares of Company Common Stock) previously representing any such shares of Company Common Stock shall thereafter represent only the right to receive (i) the Merger Consideration, including a certificate (it being understood that any reference herein to a “certificate” representing shares of Parent Common Stock shall be deemed to include, unless the context otherwise requires, reference to book-entry account statements relating to the ownership of shares of Parent Common Stock) representing the number of whole shares of Parent Common Stock which such shares of Company Common Stock represented by such Certificate have been converted into the right to receive pursuant to Section 1.5(a), (ii) cash in lieu of fractional shares which the shares of Company Common Stock represented by such Certificate have been converted into the right to receive pursuant to Section 1.5(a) and Section 2.2(e), without any interest thereon, and (iii) any dividends or distributions which the holder thereof has the right to receive pursuant to Section 2.2. Certificates previously representing shares of Company Common Stock shall be exchanged for the Merger Consideration and the other amounts specified in the immediately preceding sentence upon the surrender of such Certificates in accordance with Section 2.2, without any interest thereon. If, prior to the Effective Time, the outstanding shares of Parent Common Stock or Company Common Stock shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, or there shall be any extraordinary dividend or distribution, an appropriate and proportionate adjustment shall be made to the Merger Consideration to give the Company and the holders of Company Common Stock the same economic effect as contemplated by this Agreement prior to such event; provided that nothing contained in this sentence shall be construed to permit the Company or Parent to take any action with respect to the outstanding shares of Parent Common Stock or Company Common Stock, as applicable, that is expressly prohibited by the terms of this Agreement.

 

 

(c)            Notwithstanding anything in this Agreement to the contrary, at the Effective Time, all shares of Company Common Stock that are owned by the Company as treasury stock or owned by the Company, Parent or Merger Sub (in each case other than shares (i) held in trust accounts, managed accounts, mutual funds and the like, or otherwise held in a fiduciary or agency capacity that are beneficially owned by third parties, or (ii) held, directly or indirectly, as a result of debts previously contracted) shall be cancelled and cease to exist and no Merger Consideration shall be delivered or exchanged therefor.

 

1.6            Dissenters’ Rights.

 

(a)            Notwithstanding any provision of this Agreement to the contrary, other than as provided in this Section 1.6, any shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and are held by a holder who (i) has duly and validly demanded appraisal of such shares in connection with the Merger in accordance with Minnesota law and (ii) as of the Effective Time, has not effectively withdrawn or lost such appraisal rights (through failure to perfect or otherwise) (such shares, “Dissenting Shares”) shall not be converted into or represent the right to receive any portion of the consideration to be paid pursuant to Section 1.5 but instead shall be converted into the right to receive only such consideration as may be determined to be due with respect to such Dissenting Shares under Minnesota law. From and after the Effective Time, the Dissenting Shares shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and a holder of Dissenting Shares shall not be entitled to exercise any of the voting rights or other rights of a shareholder of the Surviving Entity.

 

(b)            Notwithstanding the provisions of Section 1.6(a), if any holder of Company Common Stock who has duly and validly demanded appraisal of such shares in connection with the Merger in accordance with Minnesota law effectively withdraws or loses such appraisal rights (through failure to perfect or otherwise), then such shares shall no longer be Dissenting Shares and, as of the later of the Effective Time and the occurrence of such withdrawal or loss, such shares shall automatically be converted into the right to receive, without interest, the consideration to be paid pursuant to Section 1.5 hereto with respect to such shares pursuant to and in accordance with this Agreement.

 

(c)            The Company shall give Parent reasonably prompt written notice of the receipt of any written notice of any demand for appraisal for any Company Common Stock, withdrawals of such demands or any intent to demand or withdraw the foregoing, and any other instruments served pursuant to Minnesota law and received by the Company that relate to any such demand for appraisal (each, an “Appraisal Demand”), and Parent shall have the right to participate in all negotiations and proceedings with respect to any Appraisal Demand or any threatened Appraisal Demand, including those that take place prior to the Effective Time. The Company shall not voluntarily make any payment with respect to, or settle or offer to settle, any Appraisal Demand prior to the Effective Time without the prior written approval of Parent.

 

 

1.7            Parent Common Stock. At and after the Effective Time, each share of Parent Common Stock issued and outstanding immediately prior to the Effective Time shall remain an issued and outstanding share of common stock of Parent and shall not be affected by the Merger.

 

1.8            Merger Sub Common Stock. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, the Company, Merger Sub or any holder of securities thereof, each share of the common stock, par value $0.01 per share, of Merger Sub (the “Merger Sub Common Stock”) issued and outstanding immediately prior to the Effective Time shall be converted into one share of class A common stock of the Surviving Corporation and shall constitute the only outstanding capital stock of the Surviving Corporation.

 

1.9            Articles of Incorporation of Surviving Corporation. At the Effective Time, the Restated Articles of Incorporation of the Company (the “Company Charter”), as in effect at the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended in accordance with applicable law.

 

1.10          Bylaws of Surviving Corporation. At the Effective Time, the Amended and Restated Bylaws of the Company (the “Company Bylaws”), as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended in accordance with applicable law.

 

1.11          Officers and Directors of Surviving Corporation. The officers and directors of Merger Sub as of immediately prior to the Effective Time shall be the officers and directors, respectively, of the Surviving Corporation, such individuals to serve in such respective capacities until such time as their respective successors shall have been duly elected or appointed and qualified or until their earlier death, resignation or removal from office.

 

1.12          Second Step Merger.

 

(a)            The Second Step Merger. Immediately following the Effective Time and as part of a single, integrated transaction, in accordance with the MBCA and the IBCL, Parent shall cause the Surviving Corporation to be merged with and into Parent (the “Second Step Merger”, and together with the Merger, the “Mergers”). Parent shall be the surviving corporation in the Second Step Merger (hereinafter referred to in such capacity as the “Surviving Entity”), and shall continue its corporate existence under the laws of the State of Indiana. Upon consummation of the Second Step Merger, the separate corporate existence of the Surviving Corporation shall terminate. In furtherance of the foregoing, Parent shall cause to be filed with (i) the Indiana Secretary, in accordance with the IBCL, the articles of merger with respect to the Second Step Merger (the “Second Step Indiana Articles of Merger”) and (ii) the Minnesota Secretary, in accordance with the MBCA, the articles of merger with respect to the Second Step Merger (the “Second Step Minnesota Articles of Merger” and, together with the Second Step Indiana Articles of Merger, the “Second Step Articles of Merger”). The Second Step Merger shall become effective at such time specified in the Second Step Articles of Merger in accordance with the relevant provisions of the IBCL and the MBCA, or at such other time as shall be provided by applicable law (such time hereinafter referred to as the “Second Effective Time”).

 

 

(b)            Surviving Corporation Common Stock. At the Second Effective Time, by virtue of the Second Step Merger and without any action on the part of Parent, the Surviving Corporation or any holder of securities thereof, each share of common stock of the Surviving Corporation shall be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor.

 

(c)            Parent Stock. At and after the Second Effective Time, each share of Parent Common Stock issued and outstanding immediately prior to the Second Effective Time shall remain an issued and outstanding share of Parent Common Stock and shall not be affected by the Second Step Merger; it being understood that upon the Second Effective Time, Parent Common Stock, including the shares issued to former holders of Company Common Stock, shall be the common stock of the Surviving Entity.

 

(d)            Certificate of Incorporation of Surviving Entity. At the Second Effective Time, the articles of incorporation of Parent, as in effect immediately prior to the Second Effective Time, shall be the articles of incorporation of the Surviving Entity until thereafter amended in accordance with applicable law.

 

(a)            Bylaws of Surviving Entity. At the Second Effective Time, the bylaws of Parent, as in effect immediately prior to the Second Effective Time, shall be the bylaws of the Surviving Entity until thereafter amended in accordance with applicable law.

 

(b)            Officers and Directors of Surviving Entity. At the Second Effective Time, the officers and directors of Parent as of immediately prior to the Second Effective Time shall be the officers and directors, respectively, of the Surviving Entity, such individuals to serve in such respective capacities until such time as their respective successors shall have been duly elected or appointed and qualified or until their earlier death, resignation or removal from office.

 

1.13          Bank Merger. Immediately following the Second Step Merger or at such later time as Parent may determine in its sole discretion, Bremer Bank (“Company Bank”), a national banking association and a wholly owned Subsidiary of the Company, will merge (the “Bank Merger”) with and into Old National Bank, a national banking association and a wholly owned Subsidiary of Parent (“Parent Bank”). Parent Bank shall be the surviving entity in the Bank Merger and, following the Bank Merger, the separate corporate existence of Company Bank shall cease. The parties hereto agree that the Bank Merger shall become effective immediately after the Second Step Merger or at such later time as Parent may determine. The Bank Merger shall be implemented pursuant to an agreement and plan of merger in substantially the form set forth in Exhibit A (the “Bank Merger Agreement”). The Company and Parent shall cause Company Bank and Parent Bank to execute such certificates of merger and articles of merger and such other agreements, documents and certificates as are necessary to make the Bank Merger effective (“Bank Merger Certificates”) immediately following the Second Step Merger or at such later time as Parent may determine.

 

 

1.14          Closing Deliverable. At the Closing, the Company shall deliver to Parent an affidavit and notice addressed to the IRS, executed by the Company under penalties of perjury, stating that the Company is not and has not been during the relevant period specified in Section 897(c)(1)(A)(ii) of the Code, a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code, dated as of the Closing Date and in the form and substance as required under Treasury Regulations Section 1.1445-2(c) and 1.897-2(h).

 

1.15          Tax Consequences. It is intended that the Mergers, taken together, shall qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and this Agreement is intended to be and is adopted as a plan of reorganization for the purposes of Sections 354 and 361 of the Code.

 

Article II

 

EXCHANGE OF SHARES

 

2.1            Parent to Make Merger Consideration Available. At or prior to the Effective Time, Parent shall deposit, or shall cause to be deposited, with an exchange agent designated by Parent and reasonably acceptable to the Company (the “Exchange Agent”), for the benefit of the holders of Certificates, for exchange in accordance with this Article II, (i) certificates or, at Parent’s option, evidence of shares in book entry form (collectively, referred to herein as “New Certificates”), representing the shares of Parent Common Stock to be issued to holders of Company Common Stock pursuant to Article I, and (ii) an amount in cash by wire transfer of immediately available funds constituting the aggregate Cash Merger Consideration and aggregate cash in lieu of fractional shares to be paid to holders of Company Common Stock pursuant to Article I (such cash and certificates for shares of Parent Common Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as the “Exchange Fund”), to be issued pursuant to Section 1.5 and paid pursuant to Section 2.2) in exchange for outstanding shares of Company Common Stock.

 

2.2            Exchange of Shares.

 

(a)            As promptly as practicable after the Effective Time, but in no event later than five (5) business days thereafter, Parent shall cause the Exchange Agent to mail to each holder of record of one or more Certificates representing shares of Company Common Stock immediately prior to the Effective Time that have been converted at the Effective Time into the right to receive the Merger Consideration pursuant to Article I, a letter of transmittal and instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration, and any cash in lieu of fractional shares, which the shares of Company Common Stock represented by such Certificate or Certificates shall have been converted into the right to receive pursuant to this Agreement as well as any dividends or distributions to be paid pursuant to Section 2.2(b). Upon proper surrender of a Certificate or Certificates for exchange and cancellation to the Exchange Agent, together with such properly completed letter of transmittal, duly executed, the holder of such Certificate or Certificates shall be entitled to receive in exchange therefor, as applicable, (i) a New Certificate representing that number of whole shares of Parent Common Stock to which such holder of Company Common Stock shall have become entitled pursuant to the provisions of Article I and (ii) a check representing the amount of (A) the aggregate Cash Merger Consideration to which such holder of Company Common Stock shall have become entitled pursuant to the provisions of Article I, (B) any cash in lieu of fractional shares which such holder has the right to receive in respect of the shares of Company Common Stock represented by the Certificate or Certificates surrendered pursuant to the provisions of this Article II, and (C) any dividends or distributions which the holder thereof has the right to receive pursuant to this Section 2.2, and the Certificate or Certificates so surrendered shall forthwith be cancelled. No interest will be paid or accrued on any Cash Merger Consideration, cash in lieu of fractional shares or dividends or distributions payable to holders of Certificates. Until surrendered as contemplated by this Section 2.2, each Certificate (other than Certificates with respect to Dissenting Shares) shall be deemed at any time after the Effective Time to represent only the right to receive, upon surrender, the Merger Consideration and any cash in lieu of fractional shares or in respect of dividends or distributions as contemplated by this Section 2.2.

 

 

(b)            No dividends or other distributions declared with respect to Parent Common Stock shall be paid to the holder of any unsurrendered Certificate until the holder thereof shall surrender such Certificate in accordance with this Article II. After the surrender of a Certificate in accordance with this Article II, 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 the whole shares of Parent Common Stock which the shares of Company Common Stock represented by such Certificate have been converted into the right to receive.

 

(c)            If any New Certificate representing shares of Parent Common Stock is to be issued in a name other than that in which the Certificate or Certificates surrendered in exchange therefor is or are registered, it shall be a condition of the issuance thereof that the Certificate or Certificates so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer, and that the person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other similar Taxes required by reason of the issuance of a certificate representing shares of Parent Common Stock in any name other than that of the registered holder of the Certificate or Certificates surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable.

 

(d)            After the Effective Time, there shall be no transfers on the stock transfer books of the Company of the shares of Company Common Stock that were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares (other than Certificates with respect to Dissenting Shares) are presented for transfer to the Exchange Agent, they shall be cancelled and exchanged for the Merger Consideration and cash in lieu of fractional shares and dividends or distributions as provided in this Article II.

 

 

(e)            Notwithstanding anything to the contrary contained herein, no certificates or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates, no dividend or distribution with respect to Parent Common Stock shall be payable on or with respect to any fractional share, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a shareholder of Parent. In lieu of the issuance of any such fractional share, Parent shall pay to each former shareholder of the Company who otherwise would be entitled to receive such fractional share an amount in cash (rounded to the nearest cent) determined by multiplying (i) the average of the closing-sale prices of Parent Common Stock on the NASDAQ Stock Market LLC (“NASDAQ”) as reported by the Wall Street Journal for the five (5) full trading days ending on the trading day immediately preceding the Closing Date by (ii) the fraction of a share (rounded to the nearest one-thousandth when expressed in decimal form) of Parent Common Stock which such holder would otherwise be entitled to receive pursuant to Section 1.5. The parties acknowledge that payment of such cash consideration in lieu of issuing fractional shares is not separately bargained-for-consideration, but merely represents a mechanical rounding off for the purposes of avoiding the expense and inconvenience that would otherwise be caused by the issuance of such fractional shares.

 

(f)            Any portion of the Exchange Fund that remains unclaimed by the shareholders of the Company for twelve (12) months after the Effective Time shall be paid to Parent. Any former shareholder of the Company that has not theretofore complied with this Article II shall thereafter look only to Parent for payment of the Merger Consideration, cash in lieu of fractional shares and any unpaid dividends and distributions on the Parent Common Stock deliverable in respect of each former share of Company Common Stock such former shareholder holds as determined pursuant to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of Parent, the Company, the Surviving Entity, the Exchange Agent or any other person shall be liable to any former holder of shares of Company Common Stock for any amount delivered in good faith to a public official pursuant to applicable abandoned property, escheat or similar laws.

 

(g)            Each of Parent and the Exchange Agent (each, a “Withholding Agent”) shall be entitled to deduct and withhold from any consideration otherwise payable pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign Tax law; provided, that such Withholding Agent shall make commercially reasonable efforts to provide notice to the applicable payee of its intent to deduct or withhold and the basis for such deduction or withholding before any such deduction or withholding is made, and reasonably cooperate with such payee in order to eliminate or to reduce any such deduction or withholding, including providing a reasonable opportunity for such payee to provide forms or other evidence that would mitigate, reduce or eliminate such deduction or withholding. To the extent that amounts are so withheld, such withheld amounts (i) will be paid over by the applicable Withholding Agent to the appropriate governmental authority and (ii) will be treated for all purposes of this Agreement as having been paid to the person in respect of which the deduction and withholding was made.

 

(h)            In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in such amount as Parent may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration, and any cash in lieu of fractional shares and dividends or distributions deliverable in respect thereof pursuant to this Agreement.

 

 

Article III

 

REPRESENTATIONS AND WARRANTIES OF COMPANY

 

Except as disclosed in the disclosure schedule delivered by the Company to Parent concurrently herewith (the “Company Disclosure Schedule”); provided that (i) no such item is required to be set forth as an exception to a representation or warranty if its absence would not result in the related representation or warranty being deemed untrue or incorrect, (ii) the mere inclusion of an item in the Company Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by the Company that such item represents a material exception or fact, event or circumstance or that such item would reasonably be expected to result in a Material Adverse Effect and (iii) any disclosures made with respect to a section of this Article III shall be deemed to qualify (1) any other section of this Article III specifically referenced or cross-referenced and (2) other sections of this Article III to the extent it is reasonably apparent on its face (notwithstanding the absence of a specific cross-reference) from a reading of the disclosure that such disclosure applies to such other sections, the Company hereby represents and warrants to Parent as follows:

 

3.1            Corporate Organization.

 

(a)            The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota and is a bank holding company duly registered with the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The Company has the corporate power and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted. The Company is duly licensed or qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing, qualification or standing necessary, except where the failure to be so licensed or qualified or to be in good standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. As used in this Agreement, the term “Material Adverse Effect” means, with respect to Parent, the Company or the Surviving Entity, as the case may be, any effect, change, event, circumstance, condition, occurrence or development that, either individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (i) the business, assets, results of operations or financial condition of such party and its Subsidiaries taken as a whole (provided that, with respect to this clause (i), Material Adverse Effect shall not be deemed to include the impact of (A) changes, after the date hereof, in U.S. generally accepted accounting principles (“GAAP”) or applicable regulatory accounting requirements or interpretations thereof, (B) changes, after the date hereof, in laws, rules or regulations of general applicability to companies in the industries in which such party and its Subsidiaries operate, or interpretations thereof by courts or Governmental Entities, (C) changes, after the date hereof, in global, national or regional political conditions (including any outbreak, continuation or escalation of acts of war (whether or not declared), cyberattacks, sabotage, an act of terrorism, military actions) or in economic or market (including equity, credit and debt markets, as well as changes in interest rates) conditions affecting the financial services industry generally and not specifically relating to such party or its Subsidiaries, (D) changes, after the date hereof, resulting from hurricanes, earthquakes, tornados, floods or other natural disasters, man-made disasters or any outbreak of any epidemic, pandemic or other public health event or emergencies (including any law, directive or guideline issued by a Governmental Entity in response thereto), (E) public disclosure of the execution of this Agreement, public disclosure or (except in the case of the representations contained in Sections 3.3(b), 3.4, 3.11(j), 4.3(b) and 4.4) consummation of the transactions contemplated hereby (including any effect on a party’s relationships with its customers or employees), actions expressly required or prohibited by this Agreement or actions taken with the prior written consent of Parent (in the case of the Company) or the Company (in the case of Parent), (F) a decline in the trading price of a party’s common stock, in and of itself, or the failure, in and of itself, to meet internal or published projections or forecasts (it being understood that the underlying cause of such decline or failure may be taken into account in determining whether a Material Adverse Effect has occurred, except to the extent otherwise excepted by this proviso), or (G) the expenses incurred by the Company or Parent in negotiating, documenting, effecting and consummating the transactions contemplated by this Agreement; except, with respect to subclauses (A), (B), (C) and (D), to the extent that the effects of such change are materially disproportionately adverse to the business, properties, assets, liabilities, results of operations or financial condition of such party and its Subsidiaries, taken as a whole, as compared to other companies in the industry in which such party and its Subsidiaries operate) or (ii) the ability of such party to timely consummate the transactions contemplated hereby. As used in this Agreement, the word “Subsidiary” shall have the meaning ascribed to it in Section 2(d) of the BHC Act. True and complete copies of the Company Charter and Company Bylaws, as in effect as of the date of this Agreement, have previously been made available by the Company to Parent.

 

 

(b)            Each Subsidiary of the Company (a “Company Subsidiary”) (i) is duly organized and validly existing under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and, where such concept is recognized under applicable law, in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would reasonably be expected to have a Material Adverse Effect on the Company and (iii) has all requisite corporate power and authority necessary to own or lease its properties and assets and to carry on its business as now conducted. There are no restrictions on the ability of any Subsidiary of the Company to pay dividends or distributions except, in the case of a Subsidiary that is a regulated entity, for restrictions on dividends or distributions generally applicable to all such regulated entities. The deposit accounts of each Subsidiary of the Company that is an insured depository institution are insured by the Federal Deposit Insurance Corporation (the “FDIC”) through the Deposit Insurance Fund to the fullest extent permitted by law, all premiums and assessments required to be paid in connection therewith have been paid when due, and no proceedings for the termination of such insurance are pending or, to the knowledge of the Company, threatened. Section 3.1(b) of the Company Disclosure Schedule sets forth a true and complete list of all Subsidiaries of the Company as of the date hereof.

 

 

3.2            Capitalization.

 

(a)            The authorized capital stock of the Company consists of 12,000,000 shares of Class A Company Common Stock and 10,800,000 shares of Class B Company Common Stock. As of November 20, 2024, there were (i) 1,925,000 shares of Class A Company Common Stock issued and outstanding, which includes 103,356 shares of Class A Company Common Stock held by the Bremer Financial Corporation Employee Stock Ownership Plan (“ESOP”), 777,279 shares of Class A Company Common Stock held by the Company 401(k) Plan and 240,000 shares of Class A Company Common Stock held by the Trustees, (ii) 10,075,000 shares of Class B Company Common Stock issued and outstanding, which includes 10,075,000 shares of Class B Company Common Stock held by the Trustees, and (iii) no shares of Company Common Stock held in treasury. As of the date of this Agreement, except as set forth in the immediately preceding sentence and other than Class A Company Common Stock reserved for issuance upon conversion of Class B Company Common Stock, there are no outstanding subscriptions, equity or equity-based compensation awards (including stock options, stock appreciation rights, performance shares, restricted stock units, restricted shares or other equity-based awards or interests) or other shares of capital stock or other equity or voting securities of the Company issued, reserved for issuance or outstanding. All of the issued and outstanding shares of Company Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. There are no bonds, debentures, notes or other indebtedness that have the right to vote on any matters on which shareholders of the Company may vote. As of the date of this Agreement, except as set forth in the second sentence of this Section 3.2(a) and other than Class A Company Common Stock reserved for issuance upon conversion of Class B Company Common Stock, there are no outstanding subscriptions, options, warrants, puts, calls, rights, exchangeable or convertible securities or other commitments or agreements obligating the Company to issue, transfer, sell, purchase, redeem or otherwise acquire, any shares of Company Common Stock or any other securities of the Company (whether voting or nonvoting), and there are no equity based awards (including any cash awards where the amount of payment is determined in whole or in part based on the price of any capital stock of the Company or any of its Subsidiaries) outstanding.

 

(b)            Except as set forth on Section 3.2(b) of the Company Disclosure Schedule, no trust preferred or subordinated debt securities of the Company are issued or outstanding. There are no voting trusts, shareholder agreements, proxies or other agreements in effect with respect to the voting or transfer of the Company Common Stock or other equity interests of Company. No Subsidiary of the Company owns any shares of capital stock of the Company.

 

(c)            The Company owns, directly or indirectly, all of the issued and outstanding shares of capital stock or other equity ownership interests of each of the Company Subsidiaries, free and clear of any liens, pledges, charges, encumbrances and security interests whatsoever (“Liens”), and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable (except, with respect to bank Subsidiaries, as provided under 12 U.S.C. § 55 or any comparable provision of applicable federal or state law) and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Company Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary.

 

 

3.3            Authority; No Violation.

 

(a)            The Company has full corporate power and authority to execute and deliver this Agreement and, subject to the shareholder and other actions described below, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the Mergers and the Bank Merger have been duly and validly approved by the Board of Directors of the Company. The Board of Directors of the Company has determined that the Mergers, on the terms and conditions set forth in this Agreement, are in the best interests of the Company and its shareholders and has recommended adoption and approval of this Agreement and the transactions contemplated hereby by the shareholders of the Company and has adopted a resolution to the foregoing effect. Except for the approval of this Agreement by the affirmative vote of the holders of a majority of the voting power of all shares of Company Common Stock entitled to vote thereon (the “Requisite Company Vote”), and the adoption and approval of the Bank Merger Agreement by the Company as its sole shareholder, no other corporate proceedings on the part of the Company are necessary to approve this Agreement or to consummate the transactions contemplated hereby. As of the date hereof, the Trustees hold 240,000 shares of the Class A Company Common Stock and 10,075,000 shares of the Class B Company Common Stock, which represent (i) a majority of the voting power of all shares of Company Common Stock entitled to vote on the approval of this Agreement, and (ii) a sufficient number of shares of Company Common Stock required to approve this Agreement and the Merger under applicable law and the Company Charter and the Company Bylaws. This Agreement has been duly and validly executed and delivered by the Company and (assuming due authorization, execution and delivery by Parent and Merger Sub) constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (except in all cases as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies (the “Enforceability Exceptions”)).

 

(b)            Neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby, including the Mergers and the Bank Merger, nor compliance by the Company with any of the terms or provisions hereof, will (i) assuming the Requisite Company Vote is obtained, violate any provision of the Company Charter or the Company Bylaws or (ii) assuming that the consents and approvals referred to in Section 3.4 and the Requisite Company Vote are duly obtained, (A) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to the Company or any of its Subsidiaries or any of their respective properties or assets or (B) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound, except (in the case of clause (ii) above) for such violations, conflicts, breaches or defaults which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company.

 

 

3.4            Consents and Approvals. Except for (a) the filing of any required applications, filings and notices, as applicable, with the Federal Reserve Board, and approval of such applications, filings and notices, (b) the filing of any required applications, filings and notices, as applicable, with the Office of the Comptroller of the Currency, and approval of such applications, filings, and notices, (c) the filing of any required applications, filings or notices with any state banking authorities listed on Section 3.4 of the Company Disclosure Schedule or Section 4.4 of the Parent Disclosure Schedule and approval of such applications, filings and notices, (d) the filing by Parent with the Securities and Exchange Commission (the “SEC”) of a proxy statement in definitive form (including any amendments or supplements thereto, the “Proxy Statement”), and of the registration statement on Form S-4 in which the Proxy Statement will be included as a prospectus, to be filed with the SEC by Parent in connection with the transactions contemplated by this Agreement (including any amendments or supplements thereto, the “S-4”) and the declaration of effectiveness of the S-4, (e) the filing of the First Step Minnesota Articles of Merger with the Minnesota Secretary pursuant to the MBCA, the First Step Indiana Articles of Merger with the Indiana Secretary pursuant to the IBCL, the Second Step Minnesota Articles of Merger with the Minnesota Secretary pursuant to the MBCA and the Second Step Indiana Articles of Merger with the Indiana Secretary pursuant to the IBCL, and the filing of the Bank Merger Certificates, (f) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance of the shares of Parent Common Stock pursuant to this Agreement, (g) the filing of any required applications, filings and notices, as applicable, with NASDAQ and the approval of the listing of such Parent Common Stock on NASDAQ, and (h) the filing of any required notices or other filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), no consents or approvals of or filings or registrations with any court, administrative agency or commission or other governmental authority or instrumentality or SRO (each, a “Governmental Entity”) are necessary in connection with (i) the execution and delivery by the Company of this Agreement or (ii) the consummation by the Company of the Mergers and the other transactions contemplated hereby (including the Bank Merger). As of the date hereof, the Company is not aware of any reason why necessary regulatory approvals and consents will not be received on a timely basis.

 

3.5            Reports. The Company and each of its Subsidiaries have timely filed or furnished all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file or furnish since January 1, 2022 with (i) any state regulatory authority, (ii) the Federal Reserve Board, (iii) the Office of the Comptroller of the Currency, (iv) any foreign regulatory authority, and (v) any self-regulatory organization (an “SRO”) ((i) – (v), collectively, “Regulatory Agencies”), including, without limitation, any report, registration or statement required to be filed or furnished pursuant to the laws, rules or regulations of the United States, any state, any foreign entity, or any Regulatory Agency, and have paid all fees and assessments due and payable in connection therewith, except where the failure to file or furnish such report, registration or statement or to pay such fees and assessments, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. As of their respective dates, such reports, registrations and statements, and other filings, documents and instruments were complete and accurate and complied with all applicable laws, in each case, except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on the Company. Subject to Section 9.14 and except as set forth on Section 3.5 of the Company Disclosure Schedule and for normal examinations conducted by a Regulatory Agency in the ordinary course of business of the Company and its Subsidiaries, (i) no Regulatory Agency has initiated or has pending any proceeding or, to the knowledge of the Company, investigation into the business or operations of the Company or any of its Subsidiaries since January 1, 2022, (ii) there is no unresolved violation, criticism, or exception by any Regulatory Agency with respect to any report or statement relating to any examinations or inspections of the Company or any of its Subsidiaries and (iii) there has been no formal or informal inquiries by, or disagreements or disputes with, any Regulatory Agency with respect to the business, operations, policies or procedures of the Company or any of its Subsidiaries since January 1, 2022, in each case of clauses (i) through (iii), which would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on the Company.

 

 

3.6            Financial Statements.

 

(a)            The (A) audited consolidated balance sheet as of December 31, 2021, December 31, 2022 and December 31, 2023 and the related audited consolidated statements of income and cash flows for the fiscal years ended December 31, 2021, December 31, 2022 and December 31, 2023 of the Company and its Subsidiaries (the “Audited Financial Statements”) and (B) unaudited interim consolidated balance sheet as of September 30, 2024 and the related unaudited interim consolidated statements of income and cash flows for the nine months ended on September 30, 2024 of the Company and its Subsidiaries (including, in each case, the notes, if any, thereto) (the financial statements described in clauses (A) and (B) collectively, the “Financial Statements”) (i) have been prepared from, and are in accordance with, the books and records of the Company and its Subsidiaries, (ii) fairly present in all material respects the consolidated results of operations, cash flows, changes in shareholders’ equity and consolidated financial position of the Company and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to year-end audit adjustments normal in nature and amount), and (iii) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of the Company and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. Since January 1, 2020, no independent registered public accounting firm of the Company has resigned (or informed the Company that it intends to resign) or been dismissed as independent registered public accountants of the Company as a result of or in connection with any disagreements with the Company on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

 

(b)            Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on the Company, neither the Company nor any of its Subsidiaries has any liability (whether absolute, accrued, contingent or otherwise and whether due or to become due) required by GAAP to be included on a consolidated balance sheet of the Company, except for those liabilities that are reflected or reserved against on the consolidated balance sheet of the Company for the fiscal year or quarters ended December 31, 2022, December 31, 2023, March 31, 2024, June 30, 2024 or September 30, 2024, respectively, (including any notes thereto) and for liabilities incurred in the ordinary course of business since September 30, 2024, or in connection with this Agreement and the transactions contemplated hereby.

 

 

(c)            The records, systems, controls, data and information of the Company and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Company or its Subsidiaries or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. The Company (i) has implemented and maintains disclosure controls and procedures sufficient to (A) provide reasonable assurances regarding the reliability of financial reporting and the preparation of annual financial statements for external purposes in accordance with GAAP and (B) ensure that material information relating to the Company, including its Subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities, and (ii) has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s independent registered public accounting firm and the audit committee of the Company’s Board of Directors (A) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which would reasonably be expected to adversely affect the Company’s ability to record, process, summarize and report financial information, and (B) to the knowledge of the Company, any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. These disclosures were made in writing by management to the Company’s independent registered public accounting firm and audit committee.

 

(d)            Since January 1, 2022, (i) neither the Company nor any of its Subsidiaries, nor, to the knowledge of the Company, any director, officer, employee, auditor, accountant or representative of the Company or any of its Subsidiaries, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of the Company or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing or having represented the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Board of Directors of the Company or any committee thereof or to the knowledge of the Company, to any director or officer of the Company.

 

3.7            Broker’s Fees. With the exception of the engagement of J.P. Morgan Securities LLC (“J.P. Morgan”) and Keefe, Bruyette & Woods, Inc. (“KBW”), neither the Company nor any Company Subsidiary nor any of their respective officers or directors has employed any broker, finder or financial advisor or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the Mergers or related transactions contemplated by this Agreement. The Company has disclosed to Parent as of the date hereof the aggregate fees provided for in connection with the engagement by Company of J.P. Morgan and KBW, related to the Mergers and the transactions contemplated hereby.

 

 

3.8            Absence of Certain Changes or Events.

 

(a)            Since December 31, 2023, no event or events have occurred that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on the Company.

 

(b)            Except in connection with matters contemplated, required or permitted by this Agreement, since December 31, 2023 through the date hereof, the Company and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course (other than discussions and negotiations related to this Agreement or any other potential strategic transactions).

 

3.9            Legal Proceedings.

 

(a)            Neither the Company nor any of its Subsidiaries is a party to any, and there are no pending or, to the knowledge of the Company, threatened, legal, administrative, arbitral or other proceedings, claims, actions, suits or governmental or regulatory investigations of any nature (i) that is against the Company or any of its Subsidiaries, (ii) that is against any of their current or former directors or executive officers or (iii) that is of a nature challenging the validity or propriety of the transactions contemplated by this Agreement, in each case that would reasonably be expected to be material, individually or in the aggregate, to the Company and its Subsidiaries, taken as a whole.

 

(b)            There is no injunction, order, judgment, decree, or regulatory restriction imposed upon the Company, any of its Subsidiaries or the assets of the Company or any of its Subsidiaries (or that, upon consummation of the Mergers, would apply to the Surviving Entity or any of its affiliates) that would reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, or would reasonably be expected to prevent, materially delay or materially impair the ability of the Company to consummate the Mergers and the other transactions contemplated by this Agreement on a timely basis.

 

 

3.10            Taxes and Tax Returns.

 

(a)            Each of the Company and its Subsidiaries has duly and timely filed (taking into account all applicable extensions) all income and other material Tax Returns in all jurisdictions in which Tax Returns are required to be filed by it, and all such Tax Returns are true, correct and complete in all material respects. Neither the Company nor any of its Subsidiaries is the beneficiary of any extension of time within which to file any material Tax Return (other than extensions to file Tax Returns obtained in the ordinary course of business). All material Taxes of the Company and its Subsidiaries (whether or not shown on any Tax Returns) that are due have been fully and timely paid. Each of the Company and its Subsidiaries has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, shareholder, independent contractor or other third party. Neither the Company nor any of its Subsidiaries has granted any extension or waiver of the limitation period applicable to any material Tax that remains in effect. Neither the Company nor any of its Subsidiaries has received written notice of assessment or proposed assessment in connection with any material amount of Taxes, and there are no threatened (in writing) or pending disputes, claims, audits, examinations or other proceedings regarding any material Tax of the Company and its Subsidiaries or the assets of the Company and its Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among the Company and its Subsidiaries or pursuant to agreements which both (1) were not primarily related to Taxes and (2) were entered into in the ordinary course of business consistent with past practice). Neither the Company nor any of its Subsidiaries (i) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which is or was the Company) or (ii) has any liability for the Taxes of any person (other than the Company or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise. Neither the Company nor any of its Subsidiaries has been, within the past three (3) years, a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock intending to qualify for tax-free treatment under Section 355 of the Code. Neither the Company nor any of its Subsidiaries has participated in a “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(1). The Company is not and has not been during the relevant period specified in Section 897(c)(1)(A)(ii) of the Code, a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.

 

(b)            As used in this Agreement, the term “Tax” or “Taxes” means all federal, state, local, and foreign income, excise, gross receipts, ad valorem, profits, gains, property, capital, sales, transfer, use, license, payroll, employment, social security, severance, unemployment, withholding, duties, excise, windfall profits, intangibles, franchise, backup withholding, value added, alternative or add-on minimum, estimated and other taxes, charges, levies or like assessments together with all penalties and additions to tax and interest thereon.

 

(c)            As used in this Agreement, the term “Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof, supplied or required to be supplied to a Governmental Entity.

 

3.11            Employee Benefit Plans.

 

(a)            Section 3.11(a) of the Company Disclosure Schedule sets forth a true, correct and complete list of all Company Benefit Plans including all employment, change-in-control, severance, non-compete, non-solicit or other compensatory or employment-related written agreements with any officer or employees of the Company or its Subsidiaries. For purposes of this Agreement, “Company Benefit Plans” means all “employee benefit plans” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), whether or not subject to ERISA, and all Code Section 125, Code Section 501(c)(9), stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, retirement, savings, supplemental retirement, retention, bonus, employment, fringe benefit, perquisite, educational assistance, adoption assistance, employee loan, rabbi trust, change in control, termination or severance plans, programs, agreements or arrangements that are maintained, contributed to or sponsored by, or required to be contributed to, the Company or any of its Subsidiaries for the benefit of any current or former employee, officer or director of the Company or any of its Subsidiaries, or with respect to which the Company or any of its Subsidiaries have any liability, contingent or otherwise, excluding, in each case, any Multiemployer Plan.

 

 

(b)            The Company has heretofore made available to Parent true and complete copies of (i) each material Company Benefit Plan, including any amendments thereto and all related trust documents, insurance contracts or other funding vehicles, and (ii) to the extent applicable, (A) the most recent summary plan description required under ERISA with respect to such Company Benefit Plan, (B) the most recent annual report (Form 5500) filed with the Internal Revenue Service (the “IRS”), (C) the most recently received IRS determination letter relating to such Company Benefit Plan, (D) the most recently prepared actuarial report for each Company Benefit Plan, and (E) IRS confirmations of filings of IRS Forms 1094-B or 1094-C for all relevant years.

 

(c)            Each Company Benefit Plan has been established, operated and administered in accordance with its terms and the requirements of all applicable laws, including ERISA and the Code including, without limitation, the Patient Protection and Affordable Care Act of 2010, Public Law No. 111-148, enacted in conjunction with the Health Care and Education Reconciliation Act of 2010, as amended and including the guidance issued thereunder. Within the past six (6) years neither the Company or any of its Subsidiaries have engaged in any transaction that subjected it to either a civil penalty pursuant to Section 502(i) of ERISA or Tax imposed by Section 4975 of the Code.

 

(d)            The IRS has issued a favorable determination letter with respect to each Company Benefit Plan that is intended to be qualified under Section 401(a) of the Code (the “Company Qualified Plan”) and the related trust, which letter has not been revoked (nor to the knowledge of the Company has revocation been threatened), and, to the knowledge of the Company, there are no existing circumstances and no events have occurred that would reasonably be expected to adversely affect the qualified status of any Company Qualified Plan or the related trust.

 

(e)            During the immediately preceding six (6) years, no Controlled Group Liability has been incurred by the Company or its ERISA Affiliates that has not been satisfied in full, and, to the knowledge of the Company, no condition exists that presents a material risk to the Company or its ERISA Affiliates of incurring any such liability. For purposes of this Agreement, “Controlled Group Liability” means any and all liabilities (i) under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412 and 4971 of the Code, or (iv) as a result of a failure to comply with the continuing coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code. For purposes of this Agreement, “ERISA Affiliate” means, with respect to any entity, trade or business, any other entity, trade or business that is, or was at the relevant time, a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes or included the first entity, trade or business, or that is, or was at the relevant time, a member of the same “controlled group” as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA. The Bremer Retirement Plan is fully funded on a plan termination basis.

 

 

(f)             None of the Company, any of its Subsidiaries or any of their respective ERISA Affiliates has, at any time during the immediately preceding six (6) years, sponsored, maintained, contributed to or been obligated to contribute to (i) any plan that is a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA (a “Multiemployer Plan”), (ii) a plan that has two or more contributing sponsors, at least two of whom are not under common control, within the meaning of Section 4063 of ERISA (a “Multiple Employer Plan”), (iii) a plan that is subject to Section 302 or Title IV of ERISA or Section 412, 430 or 4971 of the Code, or (iv) a “multiple employer welfare arrangement” as defined in Section 3(40) of ERISA.

 

(g)            Neither the Company nor any of its Subsidiaries sponsors any employee benefit plan or has any obligation with respect to an arrangement that provides for any post-employment or post-retirement healthcare or life insurance benefits for retired or former employees or their beneficiaries or dependents, except as required by Section 4980B of the Code.

 

(h)            All contributions required to be made to any Company Benefit Plan by applicable law or by any plan document, and all premiums due or payable with respect to insurance policies funding any Company Benefit Plan, for any period through the date hereof, have been timely made or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been fully reflected on the books and records of the Company.

 

(i)             There are no pending or threatened claims (other than claims for benefits in the ordinary course of business), lawsuits or arbitrations that have been asserted or instituted, and, to the knowledge of the Company, no set of circumstances exists that would reasonably be expected to give rise to a claim or lawsuit, against the Company Benefit Plans, or the assets of any of the trusts under any of the Company Benefit Plans.

 

(j)             Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) (i) result in the vesting, exercisability or delivery of, cause the Company or any of its Subsidiaries to transfer or set aside any assets to fund any material benefits under any Company Benefit Plan, (ii) increase in the amount or value of, any payment, right or other benefit to any employee or director of the Company or any of its Subsidiaries, (iii) result in any limitation on the right of the Company or any of its Subsidiaries to amend, merge, terminate or receive a reversion of assets from any Company Benefit Plan or related trust, (iv)  result in the forgiveness of indebtedness, (v) require the funding of benefits under any Company Benefit Plan, or (vi) result in any payment or benefit that may, individually or in combination with any other such payment, be characterized as an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code.

 

(k)            Neither the Company nor any of its Subsidiaries is a party to any plan, program, agreement or arrangement that provides for the gross-up, reimbursement or other payment of Taxes imposed under Section 409A or 4999 of the Code.

 

 

(l)             The ESOP (i) is an “employee stock ownership plan” as defined in Section 4975(e)(7) of the Code covered by a favorable IRS letter which letter has not been revoked (nor to the knowledge of the Company has revocation been threatened), and, to the knowledge of the Company, there are no existing circumstances and no events have occurred that would reasonably be expected to adversely affect the qualified status of the ESOP, (ii) has not acquired Company Common Stock from a seller who made an election under Section 1042 of the Code and (iii) has a trustee that is not affiliated with the Company.

 

(m)           Neither the ESOP, nor the Company 401(k) Plan, nor any fiduciary, trustee or administrator thereof, has engaged in a breach of fiduciary responsibility or any non-exempt “prohibited transaction” (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) which could reasonably be expected to result in any material liability to the Company.

 

3.12          Employees.

 

(a)            There are no pending or, to the knowledge of the Company, threatened material labor grievances or material unfair labor practice claims or charges against the Company or any of its Subsidiaries, or any strikes or other material labor disputes against the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is party to or bound by any collective bargaining or similar agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association applicable to employees of the Company or any of its Subsidiaries and, to the knowledge of the Company, there are no organizing efforts by any union or other group seeking to represent any employees of the Company and its Subsidiaries.

 

(b)            The Company and its Subsidiaries are in compliance in all material respects with, and since December 31, 2021 have complied in all material respects with, all laws relating to the employment of labor, including any provisions relating to (i) wages, hours, bonuses, commissions, termination pay, vacation pay, sick pay, breaks and rest periods, expense reimbursements, fringe benefits, employee benefits, health insurance continuation (COBRA), and the payment and/or accrual of the same and all insurance and all other related costs and expenses; (ii) unlawful, wrongful, or retaliatory or discriminatory employment, hiring or labor practices; (iii) occupational health and safety standards; or (iv) plant closing, mass layoff, immigration, workers’ compensation, disability rights and benefits, leave requirements, unemployment compensation, whistleblower laws, worker classification, working conditions, driver regulations, privacy and other employment Laws, regulations and ordinances.

 

(c)            (i) To the knowledge of the Company, no written allegations of sexual or racial harassment or sexual or race-based misconduct have been made since December 31, 2021 against any employee of the Company at the level of E89 and above, (ii) since December 31, 2021, neither the Company nor any of its Subsidiaries has entered into any settlement agreement related to allegations of sexual or racial harassment or sexual or race-based misconduct by any employee of the Company at the level of E89 and above, and (iii) there are no proceedings currently pending or, to the knowledge of the Company, threatened related to any allegations of sexual or racial harassment or sexual or race-based misconduct by any employee of the Company at the level of E89 and above.

 

 

3.13          Compliance with Applicable Law. The Company and each of its Subsidiaries hold, and have held at all times since January 1, 2022, all licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses and ownership of their respective properties, rights and assets under and pursuant to each (and have paid all fees and assessments due and payable in connection therewith), except where neither the cost of failure to hold nor the cost of obtaining and holding such license, franchise, permit or authorization (nor the failure to pay any fees or assessments) would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, and to the knowledge of the Company, no suspension or cancellation of any such necessary license, franchise, permit or authorization that is material to the business of the Company and its Subsidiaries (taken as a whole) is pending or threatened. The Company and each of its Subsidiaries have complied in all material respects with and are not in material default or violation under any applicable law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity relating to the Company or any of its Subsidiaries, including, without limitation, all laws related to data or information that constitutes personal data or personal information under applicable law (“Personal Data”), the Gramm Leach Bliley Act (together with all rules promulgated thereunder, the “GLBA”), privacy, the USA PATRIOT Act, the Bank Secrecy Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act, the Fair Credit Reporting Act, the Truth in Lending Act and Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations promulgated by the Consumer Financial Protection Bureau, the Interagency Policy Statement on Retail Sales of Nondeposit Investment Products, the SAFE Mortgage Licensing Act of 2008, the Real Estate Settlement Procedures Act and Regulation X, and any other law relating to bank secrecy, discriminatory lending, financing or leasing practices, consumer protection, money laundering prevention, foreign assets control, U.S. sanctions laws and regulations, Sections 23A and 23B of the Federal Reserve Act, and all agency requirements relating to the origination, sale and servicing of mortgage and consumer loans. Company Bank has a Community Reinvestment Act rating of “satisfactory” or better. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, none of the Company, or its Subsidiaries, or to the knowledge of the Company, any director, officer, employee, agent or other person acting on behalf of the Company or any of its Subsidiaries has, directly or indirectly, (a) used any funds of the Company or any of its Subsidiaries for unlawful contributions, unlawful gifts, unlawful entertainment or other expenses relating to political activity, (b) made any unlawful payment to foreign or domestic governmental officials or employees or to foreign or domestic political parties or campaigns from funds of the Company or any of its Subsidiaries, (c) violated any provision that would result in the violation of the Foreign Corrupt Practices Act of 1977, as amended, or any similar law, (d) established or maintained any unlawful fund of monies or other assets of the Company or any of its Subsidiaries, (e) made any fraudulent entry on the books or records of the Company or any of its Subsidiaries, or (f) made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other unlawful payment to any person, private or public, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business to obtain special concessions for the Company or any of its Subsidiaries, to pay for favorable treatment for business secured or to pay for special concessions already obtained for the Company or any of its Subsidiaries, or is currently subject to any United States sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department. The Company maintains a written information privacy and security program that maintains reasonable measures to protect the privacy, confidentiality and security of all Personal Data against any (i) breach of security leading to the accidental or unlawful destruction, loss, alteration, unavailability, unauthorized disclosure or processing of, or access to, Personal Data transmitted, stored or otherwise processed, (ii) the unauthorized acquisition or processing of Personal Data that materially compromises the security, confidentiality, or integrity of Personal Data, (iii) ransomware, malware, or unauthorized access to Company IT Systems or (iv) any incident defined as a personal data breach, security breach, security incident, data breach or similar term in applicable laws (clauses (i) through (iv), a “Company Security Breach”). “Company IT Systems” means all information management equipment and systems necessary to or used in the business of the Company and its Subsidiaries, including all software, all databases and data systems and all computer hardware and other information and communications technology systems. To the knowledge of the Company, since January 1, 2022, the Company has not experienced any Company Security Breach that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company. To the knowledge of the Company, there are no data security or other technological vulnerabilities with respect to the Company’s information technology systems or networks that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company. Since January 1, 2022, no claims or actions have been asserted, or to the knowledge of the Company, threatened, against the Company or any of its Subsidiaries alleging a violation of such person’s privacy, personal or confidentiality rights under any applicable laws, rules, policies, procedures or contracts, that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, the Company and each of its Subsidiaries have properly administered all accounts for which it acts as a fiduciary, including 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 state, federal and foreign law. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, none of the Company, any of its Subsidiaries, or any of its or its Subsidiaries’ directors, officers or employees, has committed any breach of trust or fiduciary duty with respect to any such fiduciary account, and the accountings for each such fiduciary account are true, correct and complete and accurately reflect the assets and results of such fiduciary account.

 

 

3.14          Certain Contracts.

 

(a)            Except as set forth in Section 3.14(a) of the Company Disclosure Schedule, as of the date hereof, neither the Company nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral) (excluding any Company Benefit Plan) (i) which contains a provision that limits (or purports to limit) in any material respect the ability of the Company, its Subsidiaries or its affiliates (or, following the Closing, the Surviving Entity, its Subsidiaries or its affiliates) to engage or compete in any business (including geographic restrictions and exclusive or preferential arrangements), (ii) with or to a labor union or guild (including any collective bargaining agreement), (iii) other than extensions of credit, other customary banking products offered by the Company and its Subsidiaries or derivatives issued or entered into in the ordinary course of business, which creates future payment obligations to or from the Company or its Subsidiaries in excess of $500,000 per annum and that by its terms does not terminate or is not terminable without penalty, payment or other conditions upon notice of sixty (60) days or less, (iv) that grants any right of first refusal, right of first offer or similar right with respect to any material assets, rights or properties of the Company or its Subsidiaries, taken as a whole, (v) for any joint venture, partnership or similar agreement (however named) involving a sharing of profits, losses, costs or liabilities by it with any other person, (vi) that requires the Company or its Subsidiaries to sell or purchase goods or services on an exclusive basis or make referrals of business to any person on a priority or exclusive basis, (vii) that relates to the acquisition or disposition of any business, capital stock or assets of any person (whether by merger, sale of stock, sale of assets or otherwise) that has any remaining obligations, (viii) that relates to any real property leased, subleased, licensed or occupied by the Company or its Subsidiaries as lessee, sublessee, licensee or occupant and provides for annual payments by the Company or its Subsidiaries in excess of $500,000, (ix) (A) that relates to the incurrence of indebtedness by the Company or any of its Subsidiaries, including any sale and leaseback transactions, capitalized leases and other similar financing arrangements (other than deposit liabilities, trade payables, federal funds purchased, advances and loans from the Federal Home Loan Bank, borrowings from the Federal Reserve Bank discount window and securities sold under agreements to repurchase, in each case incurred in the ordinary course of business) or (B) that provides for the guarantee, support, assumption or endorsement by the Company or any of its Subsidiaries of, or any similar commitment by the Company or any of its Subsidiaries with respect to, the obligations, liabilities or indebtedness of any other person, in the case of each of clauses (A) and (B), in the principal amount of $1,000,000 or more, or (C) the principal purpose of which is to provide for any material indemnification or similar obligations on the part of the Company or any of its Subsidiaries, (x) that is a settlement, consent or similar agreement and contains any material continuing obligations of the Company or any of its Subsidiaries, (xi) in which the Company or any of its Subsidiaries grants or is granted a license or similar under any material Intellectual Property, where such contract is material to the businesses of the Company and its Subsidiaries, taken as a whole, excluding, in each case, (A) contracts providing rights for generally commercially available off-the-shelf software licensed or provided on non-discriminatory terms and (B) non-exclusive contracts entered into with customers or suppliers in the ordinary course of business, (xii) that contemplates the future sale or issuance of any shares of Company Common Stock or any other securities of the Company, the Company Bank or any Subsidiary or affiliate of the Company or (xiii) which is a third party contract with a registered broker-dealer or registered investment adviser pursuant to which the Company or its Subsidiaries, through their employees, have the regulatory authority and supervisory structure through networking arrangements to offer investment advisory and securities brokerage services. Each contract, arrangement, commitment or understanding of the type described in this Section 3.14(a), whether or not set forth in the Company Disclosure Schedule, is referred to herein as a “Company Contract,” and neither the Company nor any of its Subsidiaries knows of, or has received notice of, any violation of the above by any of the other parties thereto which would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. The Company has made available to Parent true, correct and complete copies of each Company Contract in effect as of the date hereof.

 

 

(b)            In each case, except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, (i) each Company Contract is valid and binding on the Company or one of its Subsidiaries, as applicable, and in full force and effect, (ii) the Company and each of its Subsidiaries has complied with and performed all obligations required to be performed by it to date under each Company Contract, (iii) to the knowledge of the Company each third-party counterparty to each Company Contract has complied with and performed all obligations required to be performed by it to date under such Company Contract, (iv) no event or condition exists which constitutes or, after notice or lapse of time or both, will constitute, a material breach or default on the part of the Company or any of its Subsidiaries, or to the knowledge of the Company, any other party thereto, of or under any such Company Contract and (v) to the knowledge of the Company, no third-party counterparty to any Company Contract has exercised or threatened in writing to exercise any force majeure (or similar) provision to excuse non-performance or performance delays in any Company Contract.

 

3.15         Agreements with Regulatory Agencies. Subject to Section 9.14, neither the Company nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been since January 1, 2022, a recipient of any supervisory letter from, or since January 1, 2022, has adopted any policies, procedures or board resolutions at the request or suggestion of any Regulatory Agency or other Governmental Entity that currently restricts in any material respect or would reasonably be expected to restrict in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business (each, whether or not set forth in the Company Disclosure Schedule, a “Company Regulatory Agreement”), nor has the Company or any of its Subsidiaries been advised in writing or, to the knowledge of the Company, otherwise since January 1, 2022, by any Regulatory Agency or other Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such Company Regulatory Agreement.

 

3.16         Risk Management Instruments. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, all interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar derivative transactions and risk management arrangements, whether entered into for the account of the Company, any of its Subsidiaries or for the account of a customer of the Company or one of its Subsidiaries, were entered into in the ordinary course of business and in accordance with applicable rules, regulations and policies of any Regulatory Agency and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations of the Company or one of its Subsidiaries enforceable in accordance with their terms (except as may be limited by the Enforceability Exceptions), and are in full force and effect. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, the Company and each of its Subsidiaries have duly performed their obligations thereunder to the extent that such obligations to perform have accrued, and, to the knowledge of the Company, there are no breaches, violations or defaults or allegations or assertions of such by any party thereunder.

 

 

3.17         Environmental Matters. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, the Company and its Subsidiaries are in compliance, and have complied since January 1, 2022, with all applicable federal, state or local laws, regulations, orders, decrees, permits, authorizations, common law or agency requirements relating to: (a) the protection or restoration of the environment, health and safety as it relates to hazardous substance exposure or natural resource damages, (b) the handling, use, presence, disposal, release or threatened release of, or exposure to, any hazardous substance, or (c) noise, odor, wetlands, indoor air, pollution, contamination or any injury to persons or property from exposure to any hazardous substance (collectively, “Environmental Laws”). There are no legal, administrative, arbitral or other proceedings, claims or actions, or to the knowledge of the Company, any private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that could reasonably be expected to result in the imposition, on the Company or any of its Subsidiaries of any liability or obligation arising under any Environmental Law, pending or threatened against the Company, which liability or obligation would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. To the knowledge of the Company, there is no reasonable basis for any such proceeding, claim, action or governmental investigation that would impose any liability or obligation that would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company.

 

3.18         Investment Securities and Commodities.

 

(a)            Except as would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, each of the Company and its Subsidiaries has good title to all securities and commodities owned by it (except those sold under repurchase agreements), free and clear of any Lien, except as set forth in the Financial Statements or to the extent such securities or commodities are pledged in the ordinary course of business to secure obligations of the Company or its Subsidiaries. Such securities and commodities are valued on the books of the Company in accordance with GAAP in all material respects.

 

(b)            The Company and its Subsidiaries and their respective businesses employ investment, securities, commodities, risk management and other policies, practices and procedures that the Company believes are prudent and reasonable in the context of such businesses, and, to the knowledge of the Company, the Company and its Subsidiaries have been in material compliance with such policies, practices and procedures in all material respects since January 1, 2022. Prior to the date of this Agreement, the Company has made available to Parent the material terms of such policies, practices and procedures.

 

3.19         Real Property. Except as would not, either individually or in the aggregate, have a Material Adverse Effect on the Company, the Company or a Company Subsidiary (a) has good and marketable title to all the real property reflected in the Audited Financial Statements as being owned by the Company or a Company Subsidiary or acquired after the date thereof (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business) (the “Company Owned Properties”), free and clear of all Liens, except (i) statutory Liens securing payments not yet due, (ii) Liens for real property Taxes not yet due and payable, (iii) easements, rights of way, and other similar encumbrances that do not materially affect the value or use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties and (iv) such imperfections or irregularities of title or Liens as do not materially affect the value or use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties (clauses (i) through (iv), collectively, “Permitted Encumbrances”), and (b) is the lessee of all leasehold estates reflected in the Audited Financial Statements or acquired after the date thereof (except for leases that have expired by their terms since the date thereof) (the “Company Leased Properties” and, collectively with the Company Owned Properties, the “Company Real Property”), free and clear of all Liens of any nature whatsoever, except for Permitted Encumbrances, and is in possession of the properties purported to be leased thereunder, and each such lease is valid and in full force and effect without default thereunder by the lessee or, to the knowledge of the Company, the lessor. The Company has provided a true and correct copy of each lease of the Company Leased Properties, together with all amendments thereto. Except as would not, either individually or in the aggregate, have a Material Adverse Effect on the Company, there are no pending or, to the knowledge of the Company, threatened condemnation proceedings against the Company Real Property.

 

 

3.20         Intellectual Property. The Company and each of its Subsidiaries owns, or is licensed or authorized to use (in each case, free and clear of any material Liens), all Intellectual Property necessary for the conduct of its business as currently conducted. Except as would not, either individually or in the aggregate, have a Material Adverse Effect on the Company, (a) (i) to the knowledge of the Company, the conduct of the Company and its Subsidiaries of their respective businesses does not infringe, misappropriate or otherwise violate the rights of any person and (ii) since January 1, 2022, no person has asserted in writing to the Company that the Company or any of its Subsidiaries has infringed, misappropriated or otherwise violated the Intellectual Property rights of such person, (b) to the knowledge of the Company, no person is challenging, infringing on or otherwise violating, any right of the Company or any of its Subsidiaries with respect to any Intellectual Property owned by the Company or its Subsidiaries, (c) since January 1, 2022, neither the Company nor any Company Subsidiary has received any written notice of any pending claim challenging the ownership, validity or enforceability of any Intellectual Property owned by the Company or any Company Subsidiary, and (d) the Company and its Subsidiaries have taken commercially reasonable actions to avoid the abandonment, cancellation or unenforceability of all Intellectual Property owned by the Company and its Subsidiaries. For purposes of this Agreement, “Intellectual Property” means trademarks, service marks, brand names, internet domain names, logos, symbols, certification marks, trade dress and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application; patents, applications for patents (including divisions, continuations, continuations in part and renewal applications), all improvements thereto, and any renewals, extensions or reissues thereof, in any jurisdiction; trade secrets; and copyrights registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof.

 

3.21         State Takeover Laws. The Board of Directors of the Company has approved this Agreement and the transactions contemplated hereby as required to render inapplicable to such agreements and transactions any “moratorium,” “control share,” “fair price,” “takeover” or “interested shareholder” law (any such laws, “Takeover Statutes”).

 

 

3.22         Reorganization. The Company has not taken any action and is not aware of the existence of any fact or circumstance that could reasonably be expected to prevent or impede the Mergers from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

 

3.23         Opinion of Financial Advisor. Prior to the execution of this Agreement, the Board of Directors of the Company has received an opinion (which, if initially rendered verbally, has been or will be confirmed by a written opinion, dated the same date) of J.P. Morgan to the effect that, as of the date of such opinion, and based upon and subject to the various assumptions, limitations, qualifications and other factors set forth in such opinion, the Merger Consideration to be paid to the holders of the Company Common Stock in the Merger is fair, from a financial point of view, to such holders. Such opinion has not been amended or rescinded as of the date of this Agreement.

 

3.24         Company Information. The information relating to the Company and its Subsidiaries which is provided by the Company or its representatives specifically for inclusion in the Proxy Statement and S-4, and the information relating to the Company and its Subsidiaries that is provided by the Company or its representatives for inclusion in any other document filed with any Regulatory Agency in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.

 

3.25         Loan Portfolio.

 

(a)            Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, each loan, loan agreement, note or borrowing arrangement (including leases, credit enhancements, commitments, letters of credit, guarantees and interest-bearing assets) (collectively, “Loans”) of the Company and its Subsidiaries (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent carried on the books and records of the Company and its Subsidiaries as secured Loans, has been secured by valid charges, mortgages, pledges, security interests, restrictions, claims, liens or encumbrances, as applicable, which have been perfected and (iii) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to the Enforceability Exceptions and (iv) to the knowledge of the Company, none of the Loans of the Company or its Subsidiaries is subject to any material offset or claim of offset and the aggregate loan balances in excess of the Company’s allowance for loan and lease losses are, based on past loan loss experience, collectible in accordance with their terms (except as limited above) and all uncollectible loans have been charged off. Neither the Company nor any of its Subsidiaries is a party to any Loan in which the Company or any Subsidiary is a creditor which as of September 30, 2024, had an outstanding balance plus unfunded commitments, if any, of $1 million or more and under the terms of which the obligor was, as of September 30, 2024, over ninety (90) days or more delinquent in payment of principal or interest. Section 3.25(a) of the Company Disclosure Schedule, is a true, correct and complete list of (A) all Loans of the Company and its Subsidiaries that, as of September 30, 2024, had an outstanding balance plus unfunded commitments, if any, of $5 million or more and were classified by the Company as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, together with the aggregate principal amount and accrued and unpaid interest on such Loans, by category of Loan (e.g., commercial, consumer, etc.), together with the aggregate principal amount of such Loans by category and (B) each asset of the Company or any of its Subsidiaries that, as of September 30, 2024, is classified as “Other Real Estate Owned” and the book value thereof.

 

 

(b)            Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, each outstanding Loan of the Company and its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards of the Company and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all applicable federal, state and local laws, regulations and rules.

 

(c)            Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, neither the Company nor any of its Subsidiaries is now nor has it ever been since January 1, 2022, subject to any fine, suspension, settlement or other contract or other administrative agreement or sanction by, or any reduction in any loan purchase commitment from, any Governmental Entity or Regulatory Agency relating to the origination, sale or servicing of mortgage or consumer Loans.

 

(d)            There are no outstanding Loans made by the Company or any of its Subsidiaries to any “executive officer” or other “insider” (as each such term is defined in Regulation O promulgated by the Federal Reserve Board) of the Company or its Subsidiaries, other than Loans that are subject to and that were made and continue to be in compliance with Regulation O or that are exempt therefrom.

 

(e)            There has been no default on, or forgiveness or waiver of, in whole or in part, any Loan made to an executive officer or director of the Company or its Subsidiaries or an entity controlled by an executive officer or director of the Company or its Subsidiaries during the three (3) years immediately preceding the date hereof.

 

(f)            The Company’s allowance for loan and lease losses reflected in the Financial Statements (including footnotes thereto) was determined on the basis of the Company’s continuing review and evaluation of the portfolio of the Loans of the Company and its Subsidiaries under the requirements of GAAP and applicable law, was established in a manner consistent with the Company’s internal policies, and, in the reasonable judgment of the Company, was adequate in all material respects under the requirements of GAAP and all applicable law to provide for possible or specific losses, net of recoveries relating to the Loans previously charged-off, on the Loans of the Company and its Subsidiaries.

 

3.26         Insurance. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company: (a) the Company and its Subsidiaries are insured with reputable insurers against such risks and in such amounts as the management of the Company reasonably has determined to be prudent and consistent with industry practice, (b) the Company and its Subsidiaries are in compliance with their insurance policies and are not in default under any of the terms thereof, (c) each such policy is outstanding and in full force and effect, (d) except for policies insuring against potential liabilities of officers, directors and employees of the Company and its Subsidiaries, the Company or the relevant Subsidiary thereof is the sole beneficiary of such policies, and (e) all premiums and other payments due under any such policy have been paid, and all claims thereunder have been filed in due and timely fashion. Section 3.26 of the Company Disclosure Schedule sets forth a true and correct list of all claims under any of the policies listed in this Section 3.26 in excess of $100,000 related to the business of the Company during the three (3) years immediately preceding the date hereof.

 

 

3.27         Information Security. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, since January 1, 2022, no third party has gained unauthorized access to any information systems or networks controlled by and material to the operation of the business of the Company and its Subsidiaries, and, there are no data security or other technological vulnerabilities with respect to its information technology systems or networks.

 

3.28         No Other Representations or Warranties.

 

(a)            Except for the representations and warranties made by the Company in this Article III, neither the Company nor any other person, including the Trustees (except as provided in the Company Voting Agreement and the Investor Agreement), makes any express or implied representation or warranty with respect to the Company, its Subsidiaries, or their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and the Company hereby disclaims any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither the Company nor any other person, including the Trustees, makes or has made any representation or warranty to Parent or any of its affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospective information relating to the Company, any of its Subsidiaries or their respective businesses, or (ii) except for the representations and warranties made by the Company in this Article III, any oral or written information presented to Parent or any of its affiliates or representatives in the course of their due diligence investigation of the Company, the negotiation of this Agreement or in the course of the transactions contemplated hereby.

 

(b)            The Company acknowledges and agrees that neither Parent, Merger Sub nor any other person on behalf of Parent or Merger Sub has made or is making, and the Company has not relied upon, any express or implied representation or warranty other than those contained in Article IV.

 

 

Article IV

 

REPRESENTATIONS AND WARRANTIES OF PARENT and Merger Sub

 

Except (a) as disclosed in the disclosure schedule delivered by Parent and Merger Sub to the Company concurrently herewith (the “Parent Disclosure Schedule”); provided that (i) no such item is required to be set forth as an exception to a representation or warranty if its absence would not result in the related representation or warranty being deemed untrue or incorrect, (ii) the mere inclusion of an item in the Parent Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by Parent that such item represents a material exception or fact, event or circumstance or that such item is reasonably likely to result in a Material Adverse Effect, and (iii) any disclosures made with respect to a section of this Article IV shall be deemed to qualify (1) any other section of this Article IV specifically referenced or cross-referenced and (2) other sections of this Article IV to the extent it is reasonably apparent on its face (notwithstanding the absence of a specific cross-reference) from a reading of the disclosure that such disclosure applies to such other sections, or (b) as disclosed in any Parent Reports publicly filed with or furnished to the SEC by Parent after January 1, 2022 and prior to the date hereof (but disregarding risk factor disclosures contained under the heading “Risk Factors,” or disclosures of risks set forth in any “forward-looking statements” disclaimer or any other statements that are similarly non-specific or cautionary, predictive or forward-looking in nature), Parent and Merger Sub hereby represents and warrants to the Company as follows:

 

4.1           Corporate Organization.

 

(a)            Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Indiana and is a bank holding company duly registered with the Federal Reserve Board under the BHC Act. Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Indiana. Each of Parent and Merger Sub has the corporate power and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted. Each of Parent and Merger Sub is duly licensed or qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing, qualification or standing necessary, except where the failure to be so licensed or qualified or to be in good standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent. True and complete copies of the Fifth Amended and Restated Articles of Incorporation of Parent (the “Parent Charter”), the Amended and Restated Bylaws of Parent (the “Parent Bylaws”), the Certificate of Incorporation of Merger Sub (the “Merger Sub Charter”), the Bylaws of Merger Sub (the “Merger Sub Bylaws”), as in effect as of the date of this Agreement, have previously been made available by Parent to the Company.

 

(b)            Each Subsidiary of Parent (a “Parent Subsidiary”) (i) is duly organized and validly existing under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and, where such concept is recognized under applicable law, in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would reasonably be expected to have a Material Adverse Effect on Parent and (iii) has all requisite corporate power and authority necessary to own or lease its properties and assets and to carry on its business as now conducted. There are no restrictions on the ability of any Subsidiary of Parent to pay dividends or distributions except, in the case of a Subsidiary that is a regulated entity, for restrictions on dividends or distributions generally applicable to all such regulated entities. The deposit accounts of each Subsidiary of Parent that is an insured depository institution are insured by the FDIC through the Deposit Insurance Fund to the fullest extent permitted by law, all premiums and assessments required to be paid in connection therewith have been paid when due, and no proceedings for the termination of such insurance are pending or, to the knowledge of Parent, threatened.

 

 

4.2           Capitalization.

 

(a)            As of the date of this Agreement, the authorized capital stock of Parent consists of 600,000,000 shares of Parent Common Stock and 2,000,000 shares of preferred stock, no par value (“Parent Preferred Stock”). As of November 20, 2024, there were (i) 318,996,685.82 shares of Parent Common Stock issued and outstanding, including approximately 3,313,389 shares granted in respect of outstanding awards of restricted Parent Common Stock, (ii) 230,500 shares of Parent Preferred Stock issued and outstanding, and (iii) approximately 4,873,932.50 shares of Parent Common Stock issued or reserved for issuance and future grants under Parent equity incentive plans. As of the date of this Agreement, except as set forth in the immediately preceding sentence, and for changes since November 20, 2024, resulting from the exercise, vesting or settlement of any Parent equity based awards described in the immediately preceding sentence, there are no other shares of capital stock or other equity or voting securities of Parent issued, reserved for issuance or outstanding. The authorized capital stock of Merger Sub consists of 1,000 shares of Merger Sub Common Stock of which, as of the date of this Agreement, 1,000 shares were issued and outstanding. All of the issued and outstanding capital stock of Merger Sub is, and as of immediately prior to the Effective Time will be, owned by Parent. Merger Sub has not conducted any business other than (1) incident to its formation for the sole purpose of carrying out the transactions contemplated by this Agreement and (2) in relation to this Agreement, the Mergers and the other transactions contemplated hereby. All of the issued and outstanding shares of Parent Common Stock and Merger Sub Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. There are no bonds, debentures, notes or other indebtedness that have the right to vote on any matters on which shareholders of Parent or Merger Sub may vote. Other than as described in clause (iii) of this Section 4.2(a) as of the date of this Agreement there are no outstanding subscriptions, options, warrants, puts, calls, rights, exchangeable or convertible securities or other commitments or agreements obligating Parent to issue, transfer, sell, purchase, redeem or otherwise acquire, any such securities.

 

(b)            There are no voting trusts, shareholder agreements, proxies or other agreements in effect with respect to the voting or transfer of the Parent Common Stock or other equity interests of Parent.

 

(c)            Parent owns, directly or indirectly, all of the issued and outstanding shares of capital stock or other equity ownership interests of each of the Parent Subsidiaries, free and clear of any Liens, and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable (except, with respect to bank Subsidiaries, as provided under 12 U.S.C. § 55 or any comparable provision of applicable federal or state law) and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Parent Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary.

 

 

4.3           Authority; No Violation.

 

(a)            Each of Parent and Merger Sub has full corporate power and authority to execute and deliver this Agreement and, subject to the shareholder and other actions described below, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the Mergers and the Bank Merger have been duly and validly approved by the Board of Directors of Parent and Merger Sub. The Board of Directors of Parent has determined that the Mergers, on the terms and conditions set forth in this Agreement, are in the best interests of Parent and its shareholders and has adopted a resolution to the foregoing effect. The Board of Directors of Merger Sub has determined that the Merger, on the terms and conditions set forth in this Agreement, is in the best interests of Merger Sub and its sole stockholder and has recommended adoption and approval of this Agreement and the transactions contemplated hereby by its sole stockholder and has adopted a resolution to the foregoing effect. Parent, as Merger Sub’s sole stockholder, has adopted and approved this Agreement and the transactions contemplated hereby by written consent. Except for the adoption and approval of the Bank Merger Agreement by Parent as Parent Bank’s sole shareholder (the “Parent Approval”), no other corporate proceedings on the part of Parent or Merger Sub (including any vote of the shareholders of Parent) are necessary to approve this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and Merger Sub and (assuming due authorization, execution and delivery by the Company) constitutes a valid and binding obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with its terms (except in all cases as such enforceability may be limited by the Enforceability Exceptions). The shares of Parent Common Stock to be issued in the Merger have been validly authorized and, when issued, will be validly issued, fully paid and nonassessable, and no current or past shareholder of Parent will have any preemptive right or similar rights in respect thereof.

 

(b)            Neither the execution and delivery of this Agreement by Parent or Merger Sub, nor the consummation by Parent of the transactions contemplated hereby, including the Mergers and the Bank Merger, nor compliance by Parent or Merger Sub with any of the terms or provisions hereof, will (i) violate any provision of the Parent Charter, the Parent Bylaws, the Merger Sub Charter or the Merger Sub Bylaws, or (ii) assuming that the consents and approvals referred to in Section 4.4 and the Parent Approval are duly obtained, (A) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Parent, any of its Subsidiaries or any of their respective properties or assets or (B) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Parent or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Parent or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound, except (in the case of clause (ii) above) for such violations, conflicts, breaches or defaults which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Parent.

 

 

4.4           Consents and Approvals. Except for (a) the filing of any required applications, filings and notices, as applicable, with the Federal Reserve Board, and approval of such applications, filings and notices, (b) the filing of any required applications, filings and notices, as applicable, with the Office of the Comptroller of the Currency, and approval of such applications, filings, and notices, (c) the filing of any required applications, filings or notices with any state banking authorities listed on Section 3.4 of the Company Disclosure Schedule or Section 4.4 of the Parent Disclosure Schedule and approval of such applications, filings and notices, (d) the filing by Parent with the SEC of the Proxy Statement and the S-4 in which the Proxy Statement will be included as a prospectus and the declaration of effectiveness of the S-4, (e) the filing of the First Step Minnesota Articles of Merger with the Minnesota Secretary pursuant to the MBCA, the First Step Indiana Articles of Merger with the Indiana Secretary pursuant to the IBCL, the Second Step Minnesota Articles of Merger with the Minnesota Secretary pursuant to the MBCA and the Bank Merger Certificates and Second Step Indiana Articles of Merger with the Indiana Secretary pursuant to the IBCL, (f) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance of the shares of Parent Common Stock pursuant to this Agreement, (g) the filing of any required applications, filings and notices, as applicable, with NASDAQ and the approval of the listing of such Parent Common Stock on NASDAQ, and (h) the filing of any required notices or other filings under the HSR Act, no consents or approvals of or filings or registrations with any Governmental Entity are necessary in connection with (i) the execution and delivery by Parent and Merger Sub of this Agreement or (ii) the consummation by Parent and Merger Sub of the Mergers and the other transactions contemplated hereby (including the Bank Merger). As of the date hereof, Parent is not aware of any reason why necessary regulatory approvals and consents will not be received on a timely basis.

 

4.5           Reports.

 

(a)            Parent and each of its Subsidiaries have timely filed or furnished all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file or furnish since January 1, 2022 with the SEC or any Regulatory Agency, including, without limitation, any report, registration or statement required to be filed or furnished pursuant to the laws, rules or regulations of the United States, any state, any foreign entity, the SEC or any Regulatory Agency, and have paid all fees and assessments due and payable in connection therewith, except where the failure to file or furnish such report, registration or statement or to pay such fees and assessments would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent. As of their respective dates, such reports, registrations and statements, and other filings, documents and instruments were complete and accurate and complied with all applicable laws, in each case, except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Parent. Subject to Section 9.14 and except as set forth on Section 4.5 of the Parent Disclosure Schedule and for normal examinations conducted by the SEC or a Regulatory Agency in the ordinary course of business of Parent and its Subsidiaries, (i) neither the SEC nor any Regulatory Agency has initiated or has pending any proceeding or, to the knowledge of Parent, investigation into the business or operations of Parent or any of its Subsidiaries since January 1, 2022, (ii) there is no unresolved violation, criticism, or exception by the SEC or any Regulatory Agency with respect to any report or statement relating to any examinations or inspections of Parent or any of its Subsidiaries, and (iii) there has been no formal or informal inquiries by, or disagreements or disputes with, the SEC or any Regulatory Agency with respect to the business, operations, policies or procedures of Parent or any of its Subsidiaries since January 1, 2022, in each case of clauses (i) through (iii), which would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent.

 

 

(b)            An accurate copy of each final registration statement, prospectus, report, schedule and definitive proxy statement filed with or furnished to the SEC since January 1, 2022 by Parent pursuant to the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act (the “Parent Reports”) has been made publicly available. No such Parent Report as of the date thereof (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of the relevant meetings, respectively), contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, except that information filed or furnished as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier date. Since January 1, 2022, as of their respective dates, all Parent Reports filed under the Securities Act and the Exchange Act complied in all material respects as to form with the published rules and regulations of the SEC with respect thereto. As of the date of this Agreement, no executive officer of Parent has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). As of the date of this Agreement, there are no outstanding comments from or unresolved issues raised by the SEC with respect to any of the Parent Reports.

 

4.6           Financial Statements.

 

(a)            The financial statements of Parent and its Subsidiaries included (or incorporated by reference) in the Parent Reports (including the related notes, where applicable) (i) have been prepared from, and are in accordance with, the books and records of Parent and its Subsidiaries, (ii) fairly present in all material respects the consolidated results of operations, cash flows, changes in shareholders’ equity and consolidated financial position of Parent and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth (or, if amended, as of the date of (and giving effect to) the filing of the last such amendment with respect to the financial statements that were amended or restated therein) (subject in the case of unaudited statements to year-end audit adjustments normal in nature and amount), (iii) complied, as of their respective dates of filing with the SEC (or, if amended, as of the date of (and giving effect to) the filing of the last such amendment with respect to the financial statements that were amended or restated therein), in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, and (iv) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of Parent and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. Since January 1, 2020, no independent registered public accounting firm of Parent has resigned (or informed Parent that it intends to resign) or been dismissed as independent registered public accountants of Parent as a result of or in connection with any disagreements with Parent on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

 

 

(b)            Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent, neither Parent nor any of its Subsidiaries has any liability (whether absolute, accrued, contingent or otherwise and whether due or to become due) required by GAAP to be included on a consolidated balance sheet of Parent, except for those liabilities that are reflected or reserved against on the consolidated balance sheet of Parent included in its Quarterly Report on Form 10-Q for the quarter year ended September 30, 2024 (including any notes thereto) and for liabilities incurred in the ordinary course of business since September 30, 2024, or in connection with this Agreement and the transactions contemplated hereby.

 

(c)            The records, systems, controls, data and information of Parent and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Parent or its Subsidiaries or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent. Parent (i) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to Parent, including its Subsidiaries, is made known to the chief executive officer and the chief financial officer of Parent by others within those entities as appropriate to allow timely decisions regarding required disclosures and to make the certifications required by the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act, and (ii) has disclosed, based on its most recent evaluation prior to the date hereof, to Parent’s independent registered public accounting firm and the audit committee of Parent’s Board of Directors (A) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which would reasonably be expected to adversely affect Parent’s ability to record, process, summarize and report financial information, and (B) to the knowledge of Parent, any fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal controls over financial reporting. These disclosures were made in writing by management to Parent’s independent registered public accounting firm and audit committee. To the knowledge of Parent, there is no reason to believe that Parent’s independent registered public accounting firm and its chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without qualification, when next due.

 

(d)            Since January 1, 2022, (i) neither Parent nor any of its Subsidiaries, nor, to the knowledge of Parent, any director, officer, auditor, employee, accountant or representative of Parent or any of its Subsidiaries, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Parent or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that Parent or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing or having represented Parent or any of its Subsidiaries, whether or not employed by Parent or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by Parent or any of its officers, directors, employees or agents to the Board of Directors of Parent or any committee thereof or to the knowledge of Parent, to any director or officer of Parent.

 

 

4.7           Broker’s Fees. With the exception of the engagement of Citigroup Inc. (“Citigroup”), neither Parent nor any Parent Subsidiary nor any of their respective officers or directors has employed any broker, finder or financial advisor or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the Mergers or related transactions contemplated by this Agreement. Parent has disclosed to the Company as of the date hereof the aggregate fees provided for in connection with the engagement by Parent of Citigroup, related to the Mergers and the transactions contemplated hereby.

 

4.8           Absence of Certain Changes or Events.

 

(a)            Since December 31, 2023, no event or events have occurred that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Parent.

 

(b)            Except in connection with matters contemplated, required or permitted by this Agreement, since December 31, 2023 through the date hereof, Parent and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course of business (other than discussions and negotiations related to this Agreement).

 

4.9           Legal Proceedings.

 

(a)            Neither Parent nor any of its Subsidiaries is a party to any, and there are no pending or, to the knowledge of Parent, threatened, legal, administrative, arbitral or other proceedings, claims, actions, suits or governmental or regulatory investigations of any nature (i) that is against Parent or any of its Subsidiaries (ii) that is against any of their current or former directors or executive officers or (iii) that is of a nature challenging the validity or propriety of the transactions contemplated by this Agreement, in each case that would reasonably be expected to be material, individually or in the aggregate, to Parent and its Subsidiaries, taken as a whole.

 

(b)            There is no injunction, order, judgment, decree, or regulatory restriction imposed upon Parent, any of its Subsidiaries or the assets of Parent or any of its Subsidiaries (or that, upon consummation of the Mergers, would apply to Parent or any of its affiliates) that would reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole, or would reasonably be expected to prevent, materially delay or materially impair the ability of Parent or the Merger Sub to consummate the Mergers and the other transactions contemplated by this Agreement on a timely basis.

 

 

4.10         Taxes and Tax Returns. Each of Parent and its Subsidiaries has duly and timely filed (taking into account all applicable extensions) all income and other material Tax Returns in all jurisdictions in which Tax Returns are required to be filed by it, and all such Tax Returns are true, correct and complete in all material respects. Neither Parent nor any of its Subsidiaries is the beneficiary of any extension of time within which to file any material Tax Return (other than extensions to file Tax Returns obtained in the ordinary course of business). All material Taxes of Parent and its Subsidiaries (whether or not shown on any Tax Returns) that are due have been fully and timely paid. Each of Parent and its Subsidiaries has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, shareholder, independent contractor or other third party. Neither Parent nor any of its Subsidiaries has granted any extension or waiver of the limitation period applicable to any material Tax that remains in effect. Neither Parent nor any of its Subsidiaries has received written notice of assessment or proposed assessment in connection with any material amount of Taxes, and there are no threatened (in writing) or pending disputes, claims, audits, examinations or other proceedings regarding any material Tax of Parent and its Subsidiaries or the assets of Parent and its Subsidiaries. Neither Parent nor any of its Subsidiaries is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among Parent and its Subsidiaries or pursuant to agreements which both (1) were not primarily related to Taxes and (2) were entered into in the ordinary course of business consistent with past practice). Neither Parent nor any of its Subsidiaries (a) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which is or was Parent) or (b) has any liability for the Taxes of any person (other than Parent or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise. Neither Parent nor any of its Subsidiaries has been, within the past three (3) years, a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock intending to qualify for tax-free treatment under Section 355 of the Code. Neither Parent nor any of its Subsidiaries has participated in a “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(1). Parent is not and has not been during the relevant period specified in Section 897(c)(1)(A)(ii) of the Code, a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.

 

4.11         Employees and Employee Benefit Plans.

 

(a)            For purposes of this Agreement, “Parent Benefit Plans” means all employee benefit plans (as defined in Section 3(3) of ERISA), whether or not subject to ERISA, and all Code Section 125, Code Section 501(c)(9), stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, retirement, savings, supplemental retirement, retention, bonus, employment, fringe benefit, perquisite, educational assistance, adoption assistance, employee loan, rabbi trust, change in control, termination or severance plans, programs, agreements or arrangements that are maintained, contributed to or sponsored by, or required to be contributed to, Parent or any of its Subsidiaries for the benefit of any current or former employee, officer or director of Parent or any of its Subsidiaries, or with respect to which Parent any of its Subsidiaries have any liability, contingent or otherwise, excluding, in each case, any Multiemployer Plan.

 

(b)            Each Parent Benefit Plan has been established, operated and administered in accordance with its terms and the requirements of all applicable laws, including ERISA and the Code, including, without limitation, the Patient Protection and Affordable Care Act of 2010, Public Law No. 111-148, enacted in conjunction with the Health Care and Education Reconciliation Act of 2010, as amended and including the guidance issued thereunder, except as would not, either individually or the aggregate, have a Material Adverse Effect on Parent. Within the past six (6) years neither Parent or any of its Subsidiaries have engaged in any transaction that subjected it to either a civil penalty pursuant to Section 502(i) of ERISA or Tax imposed by Section 4975 of the Code.

 

 

(c)            The IRS has issued a favorable determination letter with respect to each Parent Benefit Plan that is intended to be qualified under Section 401(a) of the Code (the “Parent Qualified Plans”) and the related trust, which letter has not been revoked (nor to the knowledge of Parent has revocation been threatened), and, to the knowledge of Parent, there are no existing circumstances and no events have occurred that would reasonably be expected to adversely affect the qualified status of any Parent Qualified Plan or the related trust.

 

(d)            Except as would not, either individually or in the aggregate, have a Material Adverse Effect on Parent, during the immediately preceding six (6) years, no Controlled Group Liability has been incurred by Parent or its ERISA Affiliates that has not been satisfied in full, and, to the knowledge of Parent, no condition exists that presents a material risk to Parent or its ERISA Affiliates of incurring any such liability.

 

(e)            None of Parent, any of its Subsidiaries or any of their respective ERISA Affiliates has, at any time during the immediately preceding six (6) years, sponsored, maintained, contributed to or been obligated to contribute to (i) any Multiemployer Plan, (ii) any Multiple Employer Plan, (iii) a plan that is subject to Section 302 or Title IV of ERISA or Section 412, 430 or 4971 of the Code or (iv) a “multiple employer welfare arrangement” as defined in Section 3(40) of ERISA.

 

(f)            All contributions required to be made to any Parent Benefit Plan by applicable law or by any plan document, and all premiums due or payable with respect to insurance policies funding any Parent Benefit Plan, for any period through the date hereof, have been timely made or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been fully reflected on the books and records of Parent.

 

(g)            There are no pending or threatened claims (other than claims for benefits in the ordinary course of business), lawsuits or arbitrations that have been asserted or instituted, and, to the knowledge of Parent, no set of circumstances exists that would reasonably be expected to give rise to a claim or lawsuit, against the Parent Benefit Plans, or the assets of any of the trusts under any of the Parent Benefit Plans.

 

(h)            Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) (i) result in the vesting, exercisability or delivery of, cause Parent or any of its Subsidiaries to transfer or set aside any assets to fund any material benefits under any Parent Benefit Plan, (ii) increase in the amount or value of, any payment, right or other benefit to any employee or director of Parent or any of its Subsidiaries, (iii) result in any limitation on the right of Parent or any of its Subsidiaries to amend, merge, terminate or receive a reversion of assets from any Parent Benefit Plan or related trust; (iv) result in the forgiveness of indebtedness, (v) require the funding of benefits under any Parent Benefit Plan, or (vi) result in any payment or benefit that may, individually or in combination with any other such payment, be characterized as an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code.

 

 

(i)             Neither Parent nor any of its Subsidiaries is a party to any plan, program, agreement or arrangement that provides for the gross-up, reimbursement or other payment of Taxes imposed under Section 409A or 4999 of the Code.

 

(j)             There are no pending or, to the knowledge of Parent, threatened material labor grievances or material unfair labor practice claims or charges against Parent or any of its Subsidiaries, or any strikes or other material labor disputes against Parent or any of its Subsidiaries. Neither Parent nor any of its Subsidiaries is party to or bound by any collective bargaining or similar agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association applicable to employees of Parent or any of its Subsidiaries and, to the knowledge of Parent, there are no organizing efforts by any union or other group seeking to represent any employees of Parent and its Subsidiaries.

 

4.12         Compliance with Applicable Law. Parent and each of its Subsidiaries hold, and have held at all times since January 1, 2022, all licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses and ownership of their respective properties, rights and assets under and pursuant to each (and have paid all fees and assessments due and payable in connection therewith), except where neither the cost of failure to hold nor the cost of obtaining and holding such license, franchise, permit or authorization (nor the failure to pay any fees or assessments) would, either individually or in the aggregate, have a Material Adverse Effect on Parent, and to the knowledge of Parent, no suspension or cancellation of any such necessary license, franchise, permit or authorization that is material to the business of Parent and its Subsidiaries (taken as a whole) is threatened. Parent and each of its Subsidiaries have complied in all material respects with and are not in material default or violation under any, applicable law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity relating to Parent or any of its Subsidiaries, including, without limitation, all laws related to Personal Data, the GLBA, the USA PATRIOT Act, the Bank Secrecy Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act, the Fair Credit Reporting Act, the Truth in Lending Act and Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations promulgated by the Consumer Financial Protection Bureau, the Interagency Policy Statement on Retail Sales of Nondeposit Investment Products, the SAFE Mortgage Licensing Act of 2008, the Real Estate Settlement Procedures Act and Regulation X, and any other law relating to bank secrecy, discriminatory lending, financing or leasing practices, consumer protection, money laundering prevention, foreign assets control, U.S. sanctions laws and regulations, Sections 23A and 23B of the Federal Reserve Act, the Sarbanes-Oxley Act, and all agency requirements relating to the origination, sale and servicing of mortgage and consumer loans. Each of its Subsidiaries that is an insured depository institution has a Community Reinvestment Act rating of “satisfactory” or better. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent, none of Parent, or its Subsidiaries, or to the knowledge of Parent, any director, officer, employee, agent or other person acting on behalf of Parent or any of its Subsidiaries has, directly or indirectly, (a) used any funds of Parent or any of its Subsidiaries for unlawful contributions, unlawful gifts, unlawful entertainment or other expenses relating to political activity, (b) made any unlawful payment to foreign domestic governmental officials or employees or to foreign or domestic political parties or campaigns from funds of Parent or any of its Subsidiaries, (c) violated any provision that would result in the violation of the Foreign Corrupt Practices Act of 1977, as amended, or any similar law, (d) established or maintained any unlawful fund of monies or other assets of Parent or any of its Subsidiaries, (e) made any fraudulent entry on the books or records of Parent or any of its Subsidiaries, or (f) made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other unlawful payment to any person, private or public, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business to obtain special concessions for Parent or any of its Subsidiaries, to pay for favorable treatment for business secured or to pay for special concessions already obtained for Parent or any of its Subsidiaries, or is currently subject to any United States sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department.

 

 

4.13         Agreements with Regulatory Agencies. Subject to Section 9.14, neither Parent nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been since January 1, 2022, a recipient of any supervisory letter from, or since January 1, 2022, has adopted any policies, procedures or board resolutions at the request or suggestion of any Regulatory Agency or other Governmental Entity that currently restricts in any material respect or would reasonably be expected to restrict in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business (each, whether or not set forth in the Parent Disclosure Schedule, a “Parent Regulatory Agreement”), nor has Parent or any of its Subsidiaries been advised in writing or, to the knowledge of Parent, otherwise since January 1, 2022, by any Regulatory Agency or other Governmental Entity that it is considering issuing, initiating, ordering or requesting any such Parent Regulatory Agreement.

 

4.14         State Takeover Laws. The Board of Directors of each of Parent and Merger Sub has approved this Agreement and the transactions contemplated hereby as required to render inapplicable to such agreements and transactions any Takeover Statutes.

 

4.15         Risk Management Instruments. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, all interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar derivative transactions and risk management arrangements, whether entered into for the account of Parent, any of its Subsidiaries or for the account of a customer of Parent or one of its Subsidiaries, were entered into in the ordinary course of business and in accordance with applicable rules, regulations and policies of any Regulatory Agency and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations of Parent or one of its Subsidiaries enforceable in accordance with their terms (except as may be limited by the Enforceability Exceptions), and are in full force and effect. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent, Parent and each of its Subsidiaries have duly performed their material obligations thereunder to the extent that such obligations to perform have accrued, and, to the knowledge of Parent, there are no breaches, violations or defaults or allegations or assertions of such by any party thereunder.

 

 

4.16         Environmental Matters. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent, Parent and its Subsidiaries are in compliance, and have complied since January 1, 2022, with all Environmental Laws. There are no legal, administrative, arbitral or other proceedings, claims or actions, or to the knowledge of Parent any private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that could reasonably be expected to result in the imposition, on Parent or any of its Subsidiaries of any liability or obligation arising under any Environmental Law, pending or threatened against Parent, which liability or obligation would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent. To the knowledge of Parent, there is no reasonable basis for any such proceeding, claim, action or governmental investigation that would impose any liability or obligation that would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent.

 

4.17         Investment Securities and Commodities.

 

(a)            Except as would not, either individually or in the aggregate, have a Material Adverse Effect on Parent, each of Parent and its Subsidiaries has good title to all securities and commodities owned by it (except those sold under repurchase agreements), free and clear of any Lien, except as set forth in the financial statements included in the Parent Reports or to the extent such securities or commodities are pledged in the ordinary course of business to secure obligations of Parent or its Subsidiaries. Such securities and commodities are valued on the books of Parent in accordance with GAAP in all material respects.

 

(b)            Parent and its Subsidiaries and their respective businesses employ investment, securities, commodities, risk management and other policies, practices and procedures that Parent believes are prudent and reasonable in the context of such businesses, and, to the knowledge of Parent, Parent and its Subsidiaries have been in material compliance with such policies, practices and procedures in all material respects since January 1, 2022.

 

4.18         Real Property. Except as would not, either individually or in the aggregate, have a Material Adverse Effect on Parent, Parent or a Parent Subsidiary (a) has good and marketable title to all the real property reflected in the latest audited balance sheet included in the Parent Reports as being owned by Parent or a Parent Subsidiary or acquired after the date thereof (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business) (the “Parent Owned Properties”), free and clear of all Liens, except Permitted Encumbrances, and (b) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such the Parent Reports or acquired after the date thereof (except for leases that have expired by their terms since the date thereof) (collectively with the Parent Owned Properties, the “Parent Real Property”), free and clear of all Liens of any nature whatsoever, except for Permitted Encumbrances, and is in possession of the properties purported to be leased thereunder, and each such lease is valid and in full force and effect without default thereunder by the lessee or, to the knowledge of Parent, the lessor. Except as would not, either individually or in the aggregate, have a Material Adverse Effect on Parent, there are no pending or, to the knowledge of Parent, threatened condemnation proceedings against the Parent Real Property.

 

 

4.19         Reorganization. Parent has not taken any action and is not aware of the existence of any fact or circumstance that could reasonably be expected to prevent or impede the Mergers from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

 

4.20         Parent Information. The information relating to Parent and its Subsidiaries to be contained in the Proxy Statement and the S-4, and the information relating to Parent and its Subsidiaries that is provided by Parent or its representatives for inclusion in any document filed with any other Regulatory Agency in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The S-4 (except for such portions thereof that relate only to the Company or any of its Subsidiaries) will comply in all material respects with the provisions of the Securities Act and the rules and regulations thereunder.

 

4.21         Information Security. Except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent, to the knowledge of Parent, since January 1, 2022, no third party has gained unauthorized access to any information systems or networks controlled by and material to the operation of the business of Parent and its Subsidiaries, and, to the knowledge of Parent, there are no data security or other technological vulnerabilities with respect to its information technology systems or networks.

 

4.22         No Other Representations or Warranties.

 

(a)            Except for the representations and warranties made by Parent and Merger Sub in this Article IV, the Company Voting Agreement or the Investor Agreement, neither Parent nor Merger Sub nor any other person makes any express or implied representation or warranty with respect to Parent, its Subsidiaries, Merger Sub or their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and Parent and Merger Sub hereby disclaim any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither Parent nor Merger Sub nor any other person makes or has made any representation or warranty to the Company or any of its affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospective information relating to Parent, Merger Sub, any of its Subsidiaries or their respective businesses, or (ii) except for the representations and warranties made by Parent and Merger Sub in this Article IV, the Company Voting Agreement or the Investor Agreement, any oral or written information presented to the Company or any of its affiliates or representatives in the course of their due diligence investigation of Parent, the negotiation of this Agreement or in the course of the transactions contemplated hereby.

 

(b)            Parent and Merger Sub acknowledge and agree that neither the Company nor any other person on behalf of the Company has made or is making, and Parent and Merger Sub have not relied upon, any express or implied representation or warranty other than those contained in Article III.

 

 

Article V

 

COVENANTS RELATING TO CONDUCT OF BUSINESS

 

5.1           Conduct of Business Prior to the Effective Time. During the period from the date of this Agreement to the Effective Time or earlier termination of this Agreement, except as expressly contemplated or permitted by this Agreement (including as expressly set forth in Section 5.1 or Section 5.2 of the Company Disclosure Schedule), required by law or any Governmental Entity or as consented to in writing by the other party (such consent not to be unreasonably withheld, conditioned or delayed), each party shall, and shall cause each of its Subsidiaries to, (a) conduct its respective businesses in the ordinary course consistent with past practice in all material respects, (b) use reasonable best efforts to maintain and preserve intact its business organization, employees and advantageous business relationships, and (c) take no action that would reasonably be expected to adversely affect or materially delay the ability to obtain any necessary approvals of any Regulatory Agency or other Governmental Entity required for the transactions contemplated hereby or to consummate the transactions contemplated hereby on a timely basis.

 

5.2           Company Forbearances. During the period from the date of this Agreement to the Effective Time or earlier termination of this Agreement, except as set forth in Section 5.2 of the Company Disclosure Schedule, as expressly contemplated or permitted by this Agreement or as required by law or any Governmental Entity, the Company shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed):

 

(a)            other than in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money (other than indebtedness of the Company or any of its wholly owned Subsidiaries to the Company or any of its Subsidiaries), assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other individual, corporation or other entity (it being understood and agreed that incurrence of indebtedness in the ordinary course of business consistent with past practice shall include the creation of deposit liabilities, issuance of letters of credit, purchases of federal funds, borrowings from the Federal Home Loan Bank and the Federal Reserve Bank discount window, sales of certificates of deposits, and entry into repurchase agreements);

 

(b)

 

(i)            adjust, split, combine or reclassify any capital stock;

 

(ii)            make, declare, pay or set a record date for any dividend, or any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or other equity or voting securities or any securities or obligations convertible (whether currently convertible or convertible only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock or other equity or voting securities (except (A) dividends paid by any of the Subsidiaries of the Company to the Company or any of its wholly owned Subsidiaries, (B) subject to Section 6.9, regular quarterly cash dividends on shares of Company Common Stock of $1.70 per share, (C) cash dividends on shares of Company Common Stock in an amount per share that the Board of Directors of the Company determines in good faith are required to be paid by the Company to ensure that the conditions to the conversion right set forth in Article VI, Section 6(b) of the Company Charter are not satisfied, (D) the acceptance of shares of Class B Company Common Stock upon conversion of such Class B Company Common Stock into Class A Company Common Stock in accordance with the terms of the Company Charter or (E) the purchase or repurchase of Class A Company Common Stock pursuant to the Bremer Financial Corporation Plan of Reorganization dated February 8, 1989);

 

 

(iii)            grant any stock options, stock appreciation rights, performance shares, restricted stock units, restricted shares or other equity-based awards or interests, or grant any individual, corporation or other entity any right to acquire any shares of its capital stock; or

 

(iv)            issue, sell, transfer, encumber or otherwise permit to become outstanding any additional shares of capital stock or voting securities or equity interests or securities convertible (whether currently convertible or convertible only after the passage of time of the occurrence of certain events) or exchangeable into, or exercisable for, any shares of its capital stock or other equity or voting securities, or any options, warrants, or other rights of any kind to acquire any shares of capital stock, except issuance of Class A Company Common Stock upon conversion of Class B Company Common Stock in accordance with the terms of the Company Charter or issuances to a Company Benefit Plan;

 

(c)            sell, transfer, mortgage, encumber or otherwise dispose of any of its material properties or assets or any business to any person other than a wholly owned Subsidiary, or cancel, release or assign any indebtedness of any such person or any claims against any such person, in each case other than in the ordinary course of business consistent with past practice, including any debt collection or foreclosure transactions, or pursuant to contracts or agreements in force at the date of this Agreement;

 

(d)            except for transactions in the ordinary course of business consistent with past practice (including by way of foreclosure or acquisitions of control in a fiduciary or similar capacity or in satisfaction of debts previously contracted), make any material investment either by purchase of stock, securities or other equity interests, contributions to capital, property transfers, or purchase of any property or assets of any person other than a wholly owned Subsidiary of the Company;

 

(e)            in each case except in the ordinary course of business, (i) terminate, materially amend, or waive any material provision of, or waive, release, compromise or assign any material rights or material claims under, any Company Contract (or any contract entered into after the date hereof that would be a Company Contract if it were in effect on the date of this Agreement), or make any change in any instrument or agreement governing the terms of any of its securities, or material lease or contract, other than renewals of contracts and leases in the ordinary course of business and without material adverse changes of terms with respect to the Company, or (ii) or enter into any contract that would constitute a Company Contract if it were in effect on the date of this Agreement;

 

 

(f)             except as required by the terms (in effect as of the date hereof) of this Agreement, any Company Benefit Plan or by applicable law, (i) enter into, adopt, amend or terminate any Company Benefit Plan or arrangement that would be a Company Benefit Plan if in effect on the date hereof other than renewals in the ordinary course of business consistent with past practice, (ii) increase the compensation or benefits payable to, any current or former employee, director or consultant, other than increases in base salary or wage rate (and corresponding increases in incentive compensation) in the ordinary course of business consistent with past practice up to the percentage set forth in Section 5.2(f) of the Company Disclosure Schedule, (iii) pay or award, accelerate the vesting of any equity-based awards or other compensation or benefits, (iv) enter into any new, or amend any existing, employment, severance, change in control, retention, collective bargaining agreement or similar agreement or arrangement, (v) fund the obligations under any Company Benefit Plan in a rabbi trust, (vi) terminate the employment or services of any employee at the level of E89 and above (each, a “Key Employee”), other than for cause, or (vii) hire any individual who would be a Key Employee;

 

(g)            except as set forth in Section 5.2(g) of the Company Disclosure Schedule or for debt workouts in the ordinary course of business consistent with past practice, settle any claim, suit, action or proceeding, except involving solely monetary remedies in an amount individually and in the aggregate that is not material to the Company or Parent or their Subsidiaries, as applicable, and that would not impose any material restriction on, or create any precedent that would be material to, the business of it or its Subsidiaries or, after the consummation of the Mergers, Parent and its Subsidiaries;

 

(h)            take any action or knowingly fail to take any action where such action or failure to act could reasonably be expected to prevent or impede the Mergers from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code;

 

(i)            amend the Company Charter or Company Bylaws or comparable governing documents of its material Subsidiaries;

 

(j)            merge or consolidate itself or any of its Subsidiaries with any other person, or restructure, reorganize or completely or partially liquidate or dissolve it or any such Subsidiaries;

 

(k)            other than in prior consultation with Parent, materially restructure or materially change its investment securities or derivatives portfolio or its interest rate exposure, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported or purchase any security rated below investment grade, except as may be required by GAAP or by applicable laws, regulations, guidelines or policies imposed by any Governmental Entity or requested by a Governmental Entity;

 

(l)            take any action that is intended or expected to result in any of the conditions to the Mergers set forth in Section 7.1 or Section 7.2 not being satisfied;

 

 

(m)            implement or adopt any material change in its accounting principles, practices or methods, other than as may be required by GAAP or by applicable laws, regulations, guidelines or policies imposed by any Governmental Entity;

 

(n)            enter into any material new line of business;

 

(o)            other than in the ordinary course of business consistent with past practice, make any material changes in its policies and practices with respect to (i) lending (including any change in the maximum ratio or similar limits as a percentage of its capital applicable with respect to its loan portfolio or any segment thereof), investment, underwriting, loan risk ratings, risk or asset liability management, securitization, pricing, originating, acquiring, selling, servicing, or buying or selling rights to service, Loans or (ii) its investment securities portfolio, hedging practices and policies or its policies with respect to the classification or reporting of such portfolios, in each case except as required by law or a Governmental Entity;

 

(p)            other than following consultation with Parent, make, acquire, renew or extend, or amend or modify in any material respect, any Loan or any commitment for a Loan (including a letter of credit), in each case that (i) involves or results in total credit exposure of the Company Bank of $10 million or greater to any borrower, or (ii) immediately after making such Loan, the Loan has a risk rating by the Company Bank of 5W or greater, which includes any “criticized” or “classified” Loan; provided that any such Loan shall not include any Loan for which a commitment to make or acquire was entered into prior to the date of this Agreement;

 

(q)            make, or commit to make, any capital expenditures (other than those set forth in the Company’s capital budget which has been made available to Parent) in excess of $250,000 individually or $1 million in the aggregate;

 

(r)            other than in consultation with Parent, make, change or revoke any material Tax election, change an annual Tax accounting period, adopt or change any material Tax accounting method, file any amended income or other material Tax Return, enter into any closing agreement with respect to Taxes, or settle any material Tax claim, audit, assessment or dispute or surrender any material right to claim a refund of Taxes;

 

(s)            other than in consultation with Parent, undertake any response, action, or customer or public communication with regard to (i) any event resulting in unauthorized access to or the disruption or misuse of an information system or information stored on an information system, including but not limited to such information pertaining to the Company’s or its Subsidiaries’ customers, or (ii) any ransomware event; or

 

(t)            agree to take, make any commitment to take, or adopt any resolutions of its board of directors or similar governing body in support of, any of the actions prohibited by this Section 5.2.

 

 

5.3           Parent Forbearances. During the period from the date of this Agreement to the Effective Time or earlier termination of this Agreement, except as set forth in Section 5.3 of the Parent Disclosure Schedule, as expressly contemplated or permitted by this Agreement or as required by law or any Governmental Entity, Parent shall not, and shall not permit any of its Subsidiaries (to the extent applicable below) to, without the prior written consent of Company (such consent not to be unreasonably withheld, conditioned or delayed):

 

(a)            amend the Parent Charter or the Parent Bylaws in a manner that would materially and adversely affect the holders of Company Common Stock, or adversely affect the holders of Company Common Stock relative to the other holders of Parent Common Stock;

 

(b)            (i) adjust, split, combine or reclassify any capital stock of Parent or (ii) make, declare or pay any extraordinary dividend, or make any other extraordinary distribution on, any shares of Parent Common Stock;

 

(c)            merge or consolidate itself or any of its Subsidiaries that are “significant subsidiaries” within the meaning of Rule 1-02 of Regulation S-X of the SEC with any other person, or restructure, reorganize or completely or partially liquidate or dissolve itself or any such Subsidiaries;

 

(d)            enter into agreements with respect to, or consummate, any mergers or business combinations, or any acquisition of any other person or business that would reasonably be expected to prevent, impede or materially delay the consummation of the Mergers;

 

(e)            take any action that is intended or expected to result in any of the conditions to the Mergers set forth in Section 7.1 or Section 7.3 not being satisfied;

 

(f)            take any action or knowingly fail to take any action where such action or failure to act could reasonably be expected to prevent or impede the Mergers from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code; or

 

(g)            agree to take, make any commitment to take, or adopt any resolutions of its board of directors or similar governing body in support of, any of the actions prohibited by this Section 5.3.

 

 

Article VI

 

ADDITIONAL AGREEMENTS

 

6.1           Regulatory Matters.

 

(a)            Parent and the Company shall promptly prepare, and Parent shall file with the SEC, the S-4, in which the Proxy Statement will be included as a prospectus. The parties hereto shall cooperate with each other and use reasonable best efforts to file the S-4 as promptly as reasonably practicable, and within sixty (60) days of the date of this Agreement. Each of Parent and the Company shall use its reasonable best efforts to have the S-4 declared effective under the Securities Act as promptly as practicable after such filing and to keep the S-4 effective for so long as necessary to consummate the transactions contemplated by this Agreement, and Parent and the Company shall thereafter as promptly as practicable mail or deliver the Proxy Statement to their respective shareholders. Parent shall use its reasonable best efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to carry out the transactions contemplated by this Agreement, and the Company shall furnish all information concerning the Company and the holders of Company Common Stock as may be reasonably requested in connection with any such action. The parties hereto shall cooperate with each other and use their reasonable best efforts to as promptly as reasonably practicable (and (i) in the case of any filings under the HSR Act, within ten (10) business days of the date of this Agreement, and (ii) in the case of the applications, notices, petitions and filings in respect of the Requisite Regulatory Approvals, within sixty (60) days of the date of this Agreement) prepare and file, or cause to be prepared and filed, all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Regulatory Agencies and Governmental Entities which are necessary or advisable to consummate the transactions contemplated by this Agreement (including the Mergers and the Bank Merger), and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such Regulatory Agencies and Governmental Entities. Without limiting the generality of the foregoing, as soon as practicable and in no event later than sixty (60) days after the date of this Agreement, Parent and the Company shall, and shall cause their respective Subsidiaries to, each prepare and file any applications, notices and filings required to be filed with any bank regulatory agency in order to obtain the Requisite Regulatory Approvals. Parent and the Company shall each use, and shall each cause their applicable Subsidiaries to use, reasonable best efforts to obtain each such Requisite Regulatory Approval as promptly as reasonably practicable. Parent and the Company 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 the Company or Parent, as the case may be, and any of their respective Subsidiaries, which appears in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. 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, orders, approvals, waivers, non-objections and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated hereby. Each party shall consult with the other in advance of any meeting or conference with any Governmental Entity in connection with the transactions contemplated by this Agreement and to the extent permitted by such Governmental Entity, give the other party and/or its counsel the opportunity to attend and participate in such meetings and conferences, in each case subject to applicable law; and provided that each party shall promptly advise the other party with respect to substantive matters that are addressed in any meeting or conference with any Governmental Entity which the other party does not attend or participate in, to the extent permitted by such Governmental Entity and applicable law.

 

(b)            In furtherance and not in limitation of the foregoing, each of Parent and the Company shall use its reasonable best efforts to resolve any objection that may be asserted by any Governmental Entity with respect to this Agreement or the transactions contemplated hereby. Notwithstanding the foregoing, nothing contained in this Agreement shall be deemed to require Parent or the Company or any of their respective Subsidiaries, and neither Parent nor the Company nor any of their respective Subsidiaries shall be permitted (without the written consent of the other party), to take any action, or commit to take any action, or agree to any condition or restriction that would reasonably be expected to have a Material Adverse Effect on Parent and its Subsidiaries, taken as a whole, after giving effect to the Mergers (a “Materially Burdensome Regulatory Condition”).

 

 

(c)            Parent and the Company shall, upon request, furnish each other with all information concerning themselves, their Subsidiaries, directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with the Proxy Statement, the S-4 and any other statement, filing, notice or application made by or on behalf of Parent, the Company or any of their respective Subsidiaries to any Governmental Entity in connection with the Mergers, the Bank Merger and the other transactions contemplated by this Agreement.

 

(d)            To the extent permitted by applicable law, Parent and the Company shall promptly advise each other upon receiving any communication from any Governmental Entity whose consent or approval is required for consummation of the transactions contemplated by this Agreement that causes such party to believe that there is a reasonable likelihood that any Requisite Regulatory Approval will not be obtained or that the receipt of any such approval will be materially delayed. For the avoidance of doubt, Section 9.14 shall not preclude either party from fulfilling its obligation under this Section 6.1(d) to the extent permissible under applicable law. As used in this Agreement, the “Requisite Regulatory Approvals” shall mean all regulatory authorizations, consents, orders, waivers, non-objections or approvals (and the expiration or termination of all statutory waiting periods in respect thereof) from (i) the Federal Reserve Board, (ii) the Office of the Comptroller of the Currency, and (iii) any other approvals set forth in Sections 3.4 and 4.4, in each case of (i), (ii) and (iii), that are necessary to consummate the transactions contemplated by this Agreement, including the Mergers and the Bank Merger, or those other authorizations, consents, orders, waivers, non-objections or approvals the failure of which to be obtained would, either individually or in the aggregate, have a Material Adverse Effect on Parent and its Subsidiaries, taken as a whole, after giving effect to the Mergers.

 

6.2           Access to Information.

 

(a)            Upon reasonable notice and subject to applicable laws, each party, for the purposes of verifying the representations and warranties of the other party and preparing for the Mergers, the Bank Merger and the other matters contemplated by this Agreement, shall, and shall cause each of its Subsidiaries to, afford to the Representatives of the other party, access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments, personnel, information technology systems, and records, provided that such investigation or requests shall not interfere unnecessarily with normal operations of the other party, and each party shall cooperate with the other party in preparing to execute after the Effective Time conversion or consolidation of systems, integration and business operations generally, and, during such period, each party shall, and shall cause its Subsidiaries to, make available to the other party (i) a copy of each report, schedule, registration statement, comment letter 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 that the other party is not permitted to disclose under applicable law), and (ii) all other information concerning its business, properties and personnel as the other party may reasonably request. Neither party nor any of its Subsidiaries shall be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of the party’s customers, jeopardize the attorney-client privilege of the institution in possession or control of such information (after giving due consideration to the existence of any common interest, joint defense or similar agreement between the parties) or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement. The parties hereto will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply.

 

 

(b)            Parent and the Company shall hold all information furnished by or on behalf of the other party or any of such other party’s Subsidiaries or Representatives pursuant to Section 6.2(a) in confidence to the extent required by, and in accordance with, the provisions of the confidentiality agreement, dated September 7, 2024, between Parent and the Company (the “Confidentiality Agreement”).

 

(c)            No investigation by either of the parties or their respective Representatives shall affect or be deemed to modify or waive the representations and warranties of the other set forth herein. Nothing contained in this Agreement shall give either party, directly or indirectly, the right to control or direct the operations of the other party prior to the Effective Time. Prior to the Effective Time, each party shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries’ respective operations.

 

6.3           Shareholder Approvals. The Company shall call, give notice of, establish a record date, convene and hold a meeting of its shareholders (the “Company Meeting”) as soon as reasonably practicable after the S-4 is declared effective for the purpose of obtaining the Requisite Company Vote required in connection with this Agreement and the Merger and, if so desired and mutually agreed, upon other matters of the type customarily brought before an annual or special meeting of shareholders to approve a merger agreement. Subject to the remainder of this Section 6.3, the Company shall use its reasonable best efforts to obtain from its shareholders the Requisite Company Vote, including by communicating to the shareholders of the Company its recommendation (and including such recommendation in the Proxy Statement) that, the shareholders of the Company approve this Agreement and the Merger (the “Company Board Recommendation”). Subject to the remainder of this Section 6.3, the Company and its Board of Directors shall not (a) withhold, withdraw, modify or qualify in a manner adverse to Parent the Company Board Recommendation, (b) fail to make the Company Board Recommendation in the Proxy Statement, (c) adopt, approve, recommend or endorse an Acquisition Proposal or publicly announce an intention to adopt, approve, recommend or endorse an Acquisition Proposal, (d) fail to publicly and without qualification (i) recommend against any Acquisition Proposal or (ii) reaffirm the Company Board Recommendation, within ten (10) business days (or such fewer number of days as remains prior to the Company Meeting) after an Acquisition Proposal is made public or any request by Parent to do so, or (e) publicly propose to do any of the foregoing (any of the foregoing a “Recommendation Change”). However, subject to Section 8.1 and Section 8.2, if the Board of Directors of the Company, after receiving the advice of its outside counsel, and, with respect to financial matters, its financial advisors, determines in good faith that it would be more likely than not to result in a violation of its fiduciary duties under applicable law to make or continue to make the Company Board Recommendation, the Board of Directors of the Company may (but shall not be required to), prior to the receipt of the Requisite Company Vote, submit this Agreement to its shareholders without recommendation (which, for the avoidance of doubt, shall constitute a Recommendation Change) (although the resolutions approving this Agreement as of the date hereof may not be rescinded or amended), in which event the Board of Directors of the Company may communicate the basis for its lack of a recommendation to its shareholders in the Proxy Statement or an appropriate amendment or supplement thereto to the extent required by law; provided that the Board of Directors of the Company may not take any of the actions under this sentence unless (A) it gives Parent at least three (3) business days’ prior written notice of its intention to take such action and a reasonable description of the event or circumstances giving rise to its determination to take such action (including, in the event such action is taken in response to an Acquisition Proposal, the latest material terms and conditions of, and the identity of the third party making, any such Acquisition Proposal, or any amendment or modification thereof, or describe in reasonable detail such other event or circumstances) and (B) at the end of such notice period, the Board of Directors of the Company takes into account any amendment or modification to this Agreement proposed by Parent and after receiving the advice of its outside counsel, and, with respect to financial matters, its financial advisor, determines in good faith that it would nevertheless be more likely than not to result in a violation of its fiduciary duties under applicable law to continue to make the Company Board Recommendation. Any material amendment to any Acquisition Proposal will be deemed to be a new Acquisition Proposal for purposes of this Section 6.3 and will require a new notice period as referred to in this Section 6.3. The Company shall adjourn or postpone the Company Meeting, if, as of the time for which such meeting is originally scheduled there are insufficient shares of Company Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of such meeting, or if on the date of such meeting the Company has not received proxies representing a sufficient number of shares necessary to obtain the Requisite Company Vote, and subject to the terms and conditions of this Agreement, the Company shall continue to use reasonable best efforts to solicit proxies from its shareholders in order to obtain the Requisite Company Vote. Notwithstanding anything to the contrary herein, unless this Agreement has been terminated in accordance with its terms, the Company Meeting shall be convened and this Agreement shall be submitted to the shareholders of the Company at the Company Meeting for the purpose of voting on the approval of such proposal and the other matters contemplated hereby, and nothing contained herein shall be deemed to relieve the Company of such obligation.

 

 

6.4           Legal Conditions to Mergers. Subject in all respects to Section 6.1 of this Agreement, each of Parent and the Company shall, and shall cause its Subsidiaries to, use their reasonable best efforts (a) to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal and regulatory requirements that may be imposed on such party or its Subsidiaries with respect to the Mergers and the Bank Merger and, subject to the conditions set forth in Article VII, to consummate the transactions contemplated by this Agreement, and (b) to obtain (and to cooperate with the other party to obtain) any material consent, authorization, order or approval of, or any exemption by, any Governmental Entity and any other third party that is required to be obtained by the Company or Parent or any of their respective Subsidiaries in connection with the Mergers, the Bank Merger and the other transactions contemplated by this Agreement.

 

6.5           Stock Exchange Listing. Parent shall cause the shares of Parent Common Stock to be issued in the Merger to be approved for listing on NASDAQ, subject to official notice of issuance, prior to the Effective Time.

 

 

6.6           Employee Matters.

 

(a)            During the period commencing at the Effective Time and ending on the first anniversary of the Closing Date, Parent shall provide each employee of the Company and its Subsidiaries who continues to be employed by Parent or its Subsidiaries immediately following the Effective Time (collectively, the “Continuing Employees”) with (i) a base salary or base wage rate, as applicable, that is no less favorable than the base salary or base wage rate, as applicable, provided by the Company or its Subsidiaries to such Continuing Employee immediately prior to the Effective Time; (ii) short-term, annual and long-term incentive compensation target opportunities that are no less favorable, in the aggregate, than the short-term, annual and long-term incentive compensation target opportunities provided by the Company or its Subsidiaries to such Continuing Employee immediately prior to the Effective Time; and (iii) other compensation and employee benefits that are no less favorable, in the aggregate, to the other compensation and employee benefits (excluding defined benefit pension plans benefits and ESOP benefits) provided by the Company or its Subsidiaries to such Continuing Employee immediately prior to the Effective Time. Without limiting the immediately preceding sentence, Parent shall, or shall cause one of its Subsidiaries to, provide to each Continuing Employee whose employment terminates during the one (1)-year period following the Closing Date with the same severance benefits that are provided under and pursuant to the Old National Bancorp Severance Pay Plan (as provided to the Company prior to the date hereof), including, for the avoidance of doubt, the “Additional Severance Benefits” set forth in Section 4.3 of such plan; provided that such severance benefits will be determined (A) without taking into account any reduction after the Closing in compensation paid to such Continuing Employee and (B) taking into account each Continuing Employee’s service with the Company and its Subsidiaries (and any predecessor entities) prior to the Closing (based on the Continuing Employee’s original hire date as reflected in the Company’s records), and, on or after the Closing, Parent and its Subsidiaries.

 

(b)            With respect to any employee benefit plans of Parent or its Subsidiaries in which any Continuing Employees become eligible to participate on or after the Effective Time (the “New Plans”), Parent shall: (i) waive all pre-existing conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to such employees and their eligible dependents under any New Plans, except to the extent such waiting periods would apply under the analogous Company Benefit Plan; (ii) use commercially reasonable efforts to provide each such employee and their eligible dependents with credit for any eligible expenses incurred by such employee or dependent prior to the Effective Time under a Company Benefit Plan (to the same extent that such credit was given under the analogous Company Benefit Plan prior to the Effective Time) in satisfying any applicable deductible, co-payment or out-of-pocket requirements under any New Plans that provide health care benefits; and (iii) recognize all service of such employees with the Company and its Subsidiaries for all purposes in any New Plan to the same extent that such service was taken into account under the analogous Company Benefit Plan prior to the Effective Time; provided that the foregoing service recognition shall not apply to the extent it would result in duplication of benefits for the same period of service.

 

(c)            Parent shall, or shall cause one of its Subsidiaries to, assume and honor all Company Benefit Plans in accordance with their terms. Parent hereby acknowledges that a “change in control” (or similar phrase) within the meaning of the Company Benefit Plans will occur at the Effective Time.

 

 

(d)            The Company shall cause any 401(k) plan sponsored or maintained by the Company or any of its Subsidiaries, including, without limitation, the Bremer 401(k) Plan, Plan No. 002, (a “Company 401(k) Plan”) to be terminated effective as of the day immediately prior to the Effective Time and contingent upon the occurrence of the Closing pursuant to resolutions and required amendments (if any), the form and substance of which shall be subject to review and comment by Parent, which comments will be considered by the Company in good faith to the extent timely provided. The Continuing Employees shall be eligible to participate, effective as soon as administratively practicable following the Effective Time (but no later than the second payroll period following the Closing), in a 401(k) plan sponsored or maintained by Parent or one of its Subsidiaries (a “Parent 401(k) Plan”). The Company and Parent shall take any and all actions as may be required to permit the Continuing Employees who are then actively employed to make rollover contributions to the Parent 401(k) Plan of “eligible rollover distributions” (with the meaning of Section 401(a)(31) of the Code) in the form of cash, Company Common Stock or notes (in the case of loans) or a combination thereof. Prior to the Effective Time, the Company or its Subsidiaries may make an employer contribution (at a level determined in the ordinary course of business consistent with past practice) to any Company 401(k) Plan for the year in which the Effective Time occurs or any prior year.

 

(e)            The Company shall or shall have the plan administrator of the ESOP cooperate with the trustee of the ESOP to provide the ESOP participants with the opportunity to vote on the Merger pursuant to the pass-through voting requirements of Code Section 409(e) and the provisions of the ESOP applicable to the Merger.

 

(f)            The Company shall cause the ESOP to be terminated, effective as of immediately prior to the Effective Time and contingent upon the Closing pursuant to resolutions and required amendments (if any), the form and substance of which shall be subject to review and comment of Parent, which comments shall be considered in good faith by the Company to the extent timely provided. The Company and Parent shall take any and all actions as may be required to permit the Continuing Employees who are then actively employed to make rollover contributions of “eligible rollover distributions” (within the meaning of Section 401(a)(31) of the Code) to the Parent 401(k) Plan of distributions in the form of cash, Parent Common Stock or a combination thereof from the ESOP. The Company shall provide Parent with evidence that the ESOP has been terminated in accordance with this Section 6.6(f).

 

(g)            Prior to the Effective Time, the Board of Directors of the Company or the appropriate committee thereof shall take all actions reasonably necessary, including adopting any reasonably necessary resolutions, to terminate the Bremer Financial Corporation Executive Stock Purchase Plan effective as of, and subject to, the Effective Time.

 

(h)            Nothing in this Agreement shall confer upon any employee, director or consultant of the Company or any of its Subsidiaries or affiliates any right to continue in the employ or service of Parent, the Company, or any Subsidiary or affiliate thereof, or shall interfere with or restrict in any way the rights of the Company, Parent or any Subsidiary or affiliate thereof to discharge or terminate the services of any employee, director or consultant of the Company or any of its Subsidiaries or affiliates at any time for any reason whatsoever, with or without cause. Nothing in this Agreement shall be deemed to (i) establish, amend, or modify any Company Benefit Plan, New Plan or any other benefit or employment plan, program, agreement or arrangement, or (ii) alter or limit the ability of Parent or any of its Subsidiaries or affiliates to amend, modify or terminate any particular Company Benefit Plan, New Plan or any other benefit or employment plan, program, agreement or arrangement after the Effective Time. Without limiting the generality of Section 9.11, nothing in this Agreement, express or implied, is intended to or shall confer upon any person, including, without limitation, any current or former employee, director or consultant of the Company or any of its Subsidiaries or affiliates, any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

 

6.7           Indemnification; Directors’ and Officers’ Insurance.

 

(a)            From and after the Effective Time, Parent shall indemnify and hold harmless and shall advance expenses as incurred, in each case to the extent (subject to applicable law) such persons are indemnified or entitled to advancement of expenses as of the date of this Agreement by the Company pursuant to the Company Charter, the Company Bylaws, the governing or organizational documents of any Subsidiary of the Company or any contract in existence as of the date hereof and disclosed to Parent, each present and former director and officer of the Company and its Subsidiaries (in each case, when acting in such capacity) (collectively, the “Company Indemnified Parties”) against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, damages or liabilities incurred in connection with any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, whether arising before or after the Effective Time, arising out of the fact that such person is or was a director or officer of the Company or any of its Subsidiaries and pertaining to matters, acts or omissions existing or occurring at or prior to the Effective Time, including matters, acts or omissions occurring in connection with the approval of this Agreement and the transactions contemplated by this Agreement; provided that in the case of advancement of expenses, the Company Indemnified Party to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Company Indemnified Party is not entitled to indemnification. Parent shall reasonably cooperate with the Company Indemnified Party, and the Company Indemnified Party shall reasonably cooperate with Parent, in the defense of any such claim, action, suit, proceeding or investigation.

 

(b)            For a period of six (6) years after the Effective Time, Parent shall maintain in effect the current policies of directors’ and officers’ liability insurance maintained by the Company (provided that Parent may substitute therefor policies with a substantially comparable insurer of at least the same coverage and amounts containing terms and conditions which are no less advantageous to the insured) with respect to claims against the present and former officers and directors of the Company or any of its Subsidiaries arising from facts or events which occurred at or before the Effective Time (including the transactions contemplated by this Agreement); provided that Parent shall not be obligated to expend, on an annual basis, an amount in excess of 300% of the current annual premium paid as of the date hereof by the Company for such insurance (the “Premium Cap”), and if such premiums for such insurance would at any time exceed the Premium Cap, then Parent shall cause to be maintained policies of insurance which provide the maximum coverage available at an annual premium equal to the Premium Cap. In lieu of the foregoing, the Company may, in consultation with Parent, obtain at or prior to the Effective Time a six-year “tail” policy under the Company’s existing directors and officers insurance policy providing equivalent coverage to that described in the preceding sentence if and to the extent that the same may be obtained for an amount that, in the aggregate, does not exceed the Premium Cap. If Parent or the Company purchases such a “tail policy,” Parent shall maintain in effect such “tail policy.”

 

 

(c)            The obligations of Parent and the Company under this Section 6.7 shall not be terminated or modified after the Effective Time in a manner so as to adversely affect any Company Indemnified Party or any other person entitled to the benefit of this Section 6.7 without the prior written consent of the affected Company Indemnified Party or affected person.

 

(d)            The provisions of this Section 6.7 shall survive the Effective Time and are intended to be for the benefit of, and shall be enforceable by, each Company Indemnified Party and his or her heirs and representatives. If Parent or any of its successors or assigns will consolidate with or merge into any other entity and not be the continuing or surviving entity of such consolidation or merger, transfer all or substantially all of its assets or deposits to any other entity or engage in any similar transaction, then in each case to the extent the obligations set forth in this Section 6.7 are not otherwise transferred and assumed by such successors and assigns by operation of law or otherwise, Parent will cause proper provision to be made so that the successors and assigns of Parent will expressly assume the obligations set forth in this Section 6.7.

 

6.8           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 (including any merger between a Subsidiary of Parent, on the one hand, and a Subsidiary of the Company, on the other) or to vest Parent or the Surviving Entity with full title to all properties, assets, rights, approvals, immunities and franchises of any of the parties to the Mergers, 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 Parent.

 

6.9           Dividends. After the date of this Agreement, the Company shall coordinate with Parent the declaration of any dividends in respect of Company Common Stock and the record dates and payment dates relating thereto, it being the intention of the parties hereto that holders of Company Common Stock shall not receive two dividends, or fail to receive one dividend, in any quarter with respect to their shares of Company Common Stock and any shares of Parent Common Stock any such holder receives in exchange therefor in the Merger.

 

6.10         Advice of Changes. Parent and the Company (in such capacity, the “Notifying Party”) shall each promptly advise the other party of any effect, change, event, condition, occurrence or development (i) that has had or is reasonably likely to have a Material Adverse Effect on the Notifying Party or (ii) which the Notifying Party believes would or would be reasonably likely to cause or constitute a material breach of any of the Notifying Party’s representations, warranties or covenants contained herein that reasonably could be expected to give rise, either individually or in the aggregate, to the failure of a condition set forth in, if Parent is the Notifying Party, Section 7.1 or Section 7.3, or if the Company is the Notifying Party, Section 7.1 or Section 7.2; provided that the delivery of any notice pursuant to this Section 6.10 shall not cure any breach of, or noncompliance with, any other provision of this Agreement or limit the remedies available to the party receiving such notice; provided, further, that any failure to give notice in accordance with the foregoing with respect to any breach shall not be deemed to constitute a violation of this Section 6.10 or the failure of any condition set forth in Section 7.2 or Section 7.3 to be satisfied, or otherwise constitute a breach of this Agreement by the party failing to give such notice, in each case unless the underlying breach would independently result in a failure of the conditions set forth in Section 7.2 or Section 7.3 to be satisfied.

 

 

6.11         Acquisition Proposals.

 

(a)            The Company agrees that it will not, and will cause its Subsidiaries and its and their officers, directors, employees, agents, advisors and representatives (collectively, “Representatives”) not to, directly or indirectly, (i) initiate, solicit, knowingly encourage or knowingly facilitate inquiries or proposals with respect to any Acquisition Proposal, (ii) engage or participate in any negotiations with any person concerning any Acquisition Proposal, (iii) provide any confidential or nonpublic information or data to, or have or participate in any discussions with, any person relating to any Acquisition Proposal, or (iv) unless this Agreement has been terminated in accordance with its terms, approve or enter into any term sheet, letter of intent, indication of interest, commitment, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other agreement (whether written or oral, binding or non-binding) (other than a confidentiality agreement referred to and entered into in accordance with this Section 6.11(a)) in connection with or relating to any Acquisition Proposal, except in each case to notify a person that has made or, to the knowledge of the Company, is making any inquiries with respect to, or is considering making, an Acquisition Proposal, of the existence of the provisions of this Section 6.11(a). Notwithstanding the foregoing, in the event that after the date of this Agreement and prior to the receipt of the Requisite Company Vote, the Company receives an unsolicited bona fide written Acquisition Proposal that did not result from or arise in connection with a breach of this Section 6.11(a), the Company may, and may permit its Subsidiaries and its and its Subsidiaries’ Representatives to, furnish or cause to be furnished confidential or nonpublic information or data and participate in such negotiations or discussions with the person making the Acquisition Proposal if the Board of Directors of the Company concludes in good faith (after receiving the advice of its outside counsel, and with respect to financial matters, its financial advisors) that failure to take such actions would be more likely than not to result in a violation of its fiduciary duties under applicable law; provided that, prior to furnishing any confidential or nonpublic information permitted to be provided pursuant to this sentence, the Company shall have entered into a confidentiality agreement with the person making such Acquisition Proposal on terms no less favorable to it than the Confidentiality Agreement, which confidentiality agreement shall not provide such person with any exclusive right to negotiate with such party. The Company will, and will cause its Representatives to, immediately cease and cause to be terminated any activities, discussions or negotiations conducted before the date of this Agreement with any person other than Parent with respect to any Acquisition Proposal. The Company will promptly (within twenty-four (24) hours) advise Parent following receipt of any Acquisition Proposal or any inquiry which could reasonably be expected to lead to an Acquisition Proposal (including the terms and conditions of, and the identity of the person making, such inquiry or Acquisition Proposal), will provide Parent with an unredacted copy of any such Acquisition Proposal and any draft agreements, proposals or other materials received in connection with any such inquiry or Acquisition Proposal, and will keep Parent apprised of any related developments, discussions and negotiations on a current basis, including any amendments to or revisions of the terms of such inquiry or Acquisition Proposal. The Company shall use its reasonable best efforts to enforce any existing confidentiality or standstill agreements to which it or any of its Subsidiaries is a party in accordance with the terms thereof.

 

 

(b)            Nothing contained in this Agreement shall prevent the Company or its Board of Directors from complying with Rule 14d-9 and Rule 14e-2 under the Exchange Act with respect to an Acquisition Proposal; provided that such rules will in no way eliminate or modify the effect that any action pursuant to such rules would otherwise have under this Agreement.

 

(c)            As used in this Agreement, “Acquisition Proposal” shall mean, other than the transactions contemplated by this Agreement, any offer, proposal or inquiry relating to, or any third party indication of interest in, (i) any acquisition or purchase, direct or indirect, of twenty-five percent (25%) or more of the consolidated assets of the Company and its Subsidiaries or 25% or more of any class of equity or voting or nonvoting securities of the Company or its Subsidiaries whose assets, individually or in the aggregate, constitute twenty-five percent (25%) or more of the consolidated assets of the Company, (ii) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in such third party beneficially owning twenty-five percent (25%) or more of any class of equity or voting or nonvoting securities of the Company or its Subsidiaries whose assets, individually or in the aggregate, constitute twenty-five percent (25%) or more of the consolidated assets of the Company, or (iii) a merger, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or its Subsidiaries whose assets, individually or in the aggregate, constitute twenty-five percent (25%) or more of the consolidated assets of the party.

 

6.12         Public Announcements. Parent and the Company agree that the initial press release with respect to the execution and delivery of this Agreement shall be a release that is mutually agreed to by the parties. Thereafter, each of the parties agrees that no public release or announcement or statement concerning this Agreement or the transactions contemplated hereby shall be issued by any party without the prior written consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed), except (i) as required by applicable law or the rules or regulations of any applicable Governmental Entity or stock exchange to which the relevant party is subject, in which case the party required to make the release or announcement shall consult with the other party about, and allow the other party reasonable time to comment on, such release or announcement in advance of such issuance or (ii) for such releases, announcements or statements that are consistent with other such releases, announcements or statements made after the date of this Agreement in compliance with this Section 6.12; provided that, in the case of any such public releases, announcements or statements issued by Parent, Parent shall only be required to provide the Company with the portions of such releases, announcements or statements that reference the Company or the transactions contemplated hereby.

 

6.13         Change of Method. Parent and the Company shall be empowered, upon their mutual agreement, at any time prior to the Effective Time, to change the method or structure of effecting the combination of the Company and Parent (including the provisions of Article I), if and to the extent they both deem such change to be necessary, appropriate or desirable; provided that unless this Agreement is amended by agreement of each party in accordance with Section 9.2, no such change shall (a) alter or change the Exchange Ratio or the amount of Cash Merger Consideration per share of Company Common Stock, (b) adversely affect the Tax treatment of the Company’s shareholders or Parent’s shareholders pursuant to this Agreement, (c) adversely affect the Tax treatment of the Company or Parent pursuant to this Agreement or (d) materially impede or delay the consummation of the transactions contemplated by this Agreement in a timely manner. The parties agree to reflect any such change in an appropriate amendment to this Agreement executed by both parties in accordance with Section 9.2.

 

 

6.14         Restructuring Efforts. If the Company shall have failed to obtain the Requisite Company Vote at the duly convened Company Meeting, or any adjournment or postponement thereof, each of the parties shall in good faith use its reasonable best efforts to negotiate a restructuring of the transactions contemplated by this Agreement (it being understood that neither party shall have any obligation to alter or change any material terms, including the Exchange Ratio, the amount of Cash Merger Consideration or the amount or kind of the consideration to be issued to holders of the capital stock of the Company as provided for in this Agreement or any term that would adversely affect the tax treatment of the transactions contemplated hereby in a manner adverse to such party or its shareholders) and/or resubmit this Agreement and the transactions contemplated hereby (or as restructured pursuant to this Section 6.14) to the Company’s shareholders for adoption or approval.

 

6.15         Takeover Statutes. None of the Company, Parent, Merger Sub or their respective Boards of Directors shall take any action that would cause any Takeover Statute to become applicable to this Agreement, the Mergers, or any of the other transactions contemplated hereby, and each shall take all necessary steps to exempt (or ensure the continued exemption of) the Mergers and the other transactions contemplated hereby from any applicable Takeover Statute now or hereafter in effect. If any Takeover Statute may become, or may purport to be, applicable to the transactions contemplated hereby, each party and the members of their respective Boards of Directors will grant such approvals and take such actions as are necessary so that the transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or minimize the effects of any Takeover Statute on any of the transactions contemplated by this Agreement, including, if necessary, challenging the validity or applicability of any such Takeover Statute.

 

6.16         Exemption from Liability under Section 16(b). The Board of Directors of Parent, or a committee of non-employee directors thereof (as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act), shall prior to the Effective Time take all such steps as may be required to cause any acquisitions of Parent Common Stock by any holders of Company Common Stock who, immediately following the Mergers, will be officers or directors of Parent subject to the reporting requirements of Section 16(a) of the Exchange Act pursuant to the transactions contemplated by this Agreement to be exempt from liability pursuant to Rule 16b-3 under the Exchange Act to the fullest extent permitted by applicable law.

 

 

6.17         Shareholder Litigation. Each of Parent and the Company shall promptly notify the other party in writing of any action, arbitration, audit, hearing, investigation, litigation, suit, subpoena or summons issued, commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Entity or arbitrator pending or, to the knowledge of Parent or the Company, as applicable, threatened against Parent, the Company or any of their respective Subsidiaries, directors or officers relating to the transactions contemplated by this Agreement. The Company shall give Parent the opportunity to participate at its own expense in the defense or settlement of any shareholder litigation against the Company and/or its directors or affiliates relating to the transactions contemplated by this Agreement. Each party shall give the other the right to review and comment on all filings or responses to be made by such party in connection with any such litigation and will in good faith take such comments into account. The Company shall not agree to settle any such litigation without Parent’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, that Parent shall not be obligated to consent to any settlement which does not include a full release of Parent, the Company, all Subsidiaries and affiliates of Parent and the Company and their respective directors, officers and employees, or which imposes an injunction or other equitable relief after the Effective Time upon the Surviving Entity or any of its affiliates.

 

6.18         Assumption of Company Debt. Upon the Effective Time, Parent shall assume the due and punctual performance and observance of the covenants to be performed by the Company under the indentures set forth on Section 6.18 of the Company Disclosure Schedule, and the due and punctual payment of the principal of (and premium, if any) and interest on, the notes governed thereby.  In connection therewith, (a) Parent and the Company shall cooperate and use reasonable best efforts to execute and deliver any supplemental indentures or other documents and (b) the Company shall use reasonable best efforts to execute and deliver any officer’s certificates, and to provide any opinions of counsel to the trustee thereof, in each case, required to make such assumption effective as of the Effective Time.

 

6.19         Conduct of Merger Sub. Parent shall take all actions necessary to cause Merger Sub to perform its obligations under this Agreement.

 

6.20         Governance. Pursuant to the Investor Agreement, Parent shall take all actions necessary so that, as of the Effective Time, (a) the number of directors constituting the Board of Directors of Parent shall be increased by one (1) and (b) one (1) of the Trustees serving as a trustee of the Trust immediately prior to the Effective Time (as determined by the Trustees in their sole discretion) shall be appointed to the Board of Directors of Parent.

 

6.21         Additional Matters. The parties hereto agree to the matters set forth on Section 6.21 of the Company Disclosure Schedule.

 

Article VII

 

CONDITIONS PRECEDENT

 

7.1           Conditions to Each Party’s Obligation to Effect the Mergers. The respective obligations of the parties to effect the Mergers shall be subject to the satisfaction at or prior to the Effective Time of the following conditions:

 

(a)            Shareholder Approvals. This Agreement and the Merger shall have been approved by the shareholders of the Company by the Requisite Company Vote.

 

 

(b)            Stock Exchange Listing. The shares of Parent Common Stock that shall be issuable pursuant to this Agreement shall have been admitted for listing on NASDAQ, subject to official notice of issuance.

 

(c)            Regulatory Approvals. All Requisite Regulatory Approvals shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired, and no such Requisite Regulatory Approval shall have resulted in the imposition of any Materially Burdensome Regulatory Condition.

 

(d)            S-4. The S-4 shall have become effective under the Securities Act and no stop order suspending the effectiveness of the S-4 shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC and not withdrawn.

 

(e)            No Injunctions or Restraints; Illegality. No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Mergers, the Bank Merger or any of the other transactions contemplated by this Agreement shall be in effect. No law, statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits or makes illegal consummation of the Mergers, the Bank Merger or the other transactions contemplated hereby.

 

7.2           Conditions to Obligations of Parent and Merger Sub. The obligation of Parent and Merger Sub to effect the Mergers is also subject to the satisfaction, or waiver by Parent, at or prior to the Effective Time, of the following conditions:

 

(a)            Representations and Warranties. The representations and warranties of the Company set forth in Sections 3.2(a), 3.2(b), 3.2(c) (with respect to Company Bank and Bremer Insurance Agencies, Inc. only) and 3.8(a) (in each case after giving effect to the lead-in to Article III) shall be true and correct (other than, in the case of Sections 3.2(a), 3.2(b) and 3.2(c), such failures to be true and correct as are de minimis) in each case as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, and the representations and warranties of the Company set forth in Sections 3.1(a), 3.1(b) (with respect to Company Bank and Bremer Insurance Agencies, Inc. only), 3.3(a) and 3.7 (in each case read without giving effect to any qualification as to materiality or Material Adverse Effect on the Company set forth in such representations or warranties but, in each case, after giving effect to the lead-in to Article III) shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. All other representations and warranties of the Company set forth in this Agreement (read without giving effect to any qualification as to materiality or Material Adverse Effect on the Company set forth in such representations or warranties but, in each case, after giving effect to the lead-in to Article III) shall be true and correct in all respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date; provided that, for purposes of this sentence, such representations and warranties shall be deemed to be true and correct unless the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, and without giving effect to any qualification as to materiality or Material Adverse Effect set forth in such representations or warranties, has had or would reasonably be expected to have a Material Adverse Effect on the Company or the Surviving Entity following the Closing. Parent shall have received a certificate signed on behalf of the Company by the Chief Executive Officer and the Chief Financial Officer of the Company to the foregoing effect.

 

 

(b)            Performance of Obligations and Compliance with Covenants of the Company. The Company shall have performed in all material respects the obligations required to be performed by it, and complied in all material respects with the covenants to be complied with or by it, under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of the Company by the Chief Executive Officer and the Chief Financial Officer of the Company to such effect.

 

(c)            Federal Tax Opinion. Parent shall have received a written opinion of Squire Patton Boggs (US) LLP (or, if Squire Patton Boggs (US) LLP is unwilling or unable to issue the opinion, another nationally recognized law firm), in form and substance reasonably satisfactory to Parent, dated as of the Closing Date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the Mergers shall qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In rendering such opinion, counsel may require and rely upon representations contained in certificates of officers of Parent and the Company, reasonably satisfactory in form and substance to such counsel.

 

(d)            Minimum Adjusted Tangible Shareholders’ Equity Value. The Adjusted Tangible Shareholders’ Equity of the Company shall be greater than or equal to $1,300,000,000, and Parent shall have received a certificate signed on behalf of the Company by the Chief Executive Officer and the Chief Financial Officer of the Company to such effect. “Adjusted Tangible Shareholders’ Equity” shall mean, as of the month end at least five (5) business days prior to the satisfaction or waiver (subject to applicable law) of the latest to occur of the conditions set forth in Article VII hereof (other than those conditions that by their nature can be satisfied only at the Closing) (the “Measuring Date”), the consolidated shareholders’ equity of the Company as set forth on its balance sheet on the Measuring Date calculated in accordance with GAAP, (i) minus intangible assets defined as goodwill, core deposit premiums and other intangibles (excludes mortgage servicing rights) as of the Measuring Date, and (ii) excluding (A) the change in accumulated other comprehensive income / (loss), net of Tax, since September 30, 2024, and (B) the change in the value of mortgage servicing rights, net of Tax, since September 30, 2024, and (iii) adding the sum, net of associated Tax, as of the Measuring Date of (v) all fees and expenses of all brokers, attorneys, accountants, investment bankers and other advisors and agents for the Company for services rendered in connection with the transactions contemplated by this Agreement paid or to be paid by the Company prior to the Effective Time; (w) attorneys’ fees arising from any actions, claims, suits or hearings brought by the Company’s shareholders with respect to this Agreement or the transactions contemplated hereby; (x) any costs associated with the termination of employee benefit plans or programs (inclusive of any severance compensation paid or to be paid as provided herein) or any retention or transaction bonuses paid as expressly permitted by this Agreement or as otherwise mutually agreed by the parties following the date hereof, (y) any regulatory filing fees or costs, fees and penalties incurred in connection with obtaining any third party consents in connection with the transactions contemplated by this Agreement, and (z) any other commercially reasonable costs incurred in connection with transactions contemplated by this Agreement.

 

 

7.3           Conditions to Obligations of the Company. The obligation of the Company to effect the Mergers is also subject to the satisfaction or waiver by the Company at or prior to the Effective Time of the following conditions:

 

(a)            Representations and Warranties. The representations and warranties of Parent and Merger Sub set forth in Sections 4.2(a), 4.2(b), 4.2(c) (with respect to Parent Bank only) and 4.8(a) (in each case after giving effect to the lead-in to Article IV) shall be true and correct (other than, in the case of Sections 4.2(a), 4.2(b) and 4.2(c), such failures to be true and correct as are de minimis) in each case as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, and the representations and warranties of Parent and Merger Sub set forth in Sections 4.1(a), 4.1(b) (with respect to Parent Bank only), 4.3(a) and 4.7 (in each case read without giving effect to any qualification as to materiality or Material Adverse Effect on Parent set forth in such representations or warranties but, in each case, after giving effect to the lead-in to Article IV) shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. All other representations and warranties of Parent and Merger Sub set forth in this Agreement (read without giving effect to any qualification as to materiality or Material Adverse Effect on Parent set forth in such representations or warranties but, in each case, after giving effect to the lead-in to Article IV) shall be true and correct in all respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, provided that, for purposes of this sentence, such representations and warranties shall be deemed to be true and correct unless the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, and without giving effect to any qualification as to materiality or Material Adverse Effect on Parent set forth in such representations or warranties, has had or would reasonably be expected to have a Material Adverse Effect on Parent. The Company shall have received a certificate signed on behalf of Parent by the Chief Executive Officer and the Chief Financial Officer of Parent to the foregoing effect.

 

(b)            Performance of Obligations and Compliance with Covenants of Parent and Merger Sub. Parent and Merger Sub shall have performed in all material respects the obligations required to be performed by it, and complied in all material respects with the covenants required to be complied with or by it, under this Agreement at or prior to the Closing Date, and the Company shall have received a certificate signed on behalf of Parent by the Chief Executive Officer and the Chief Financial Officer of Parent to such effect.

 

(c)            Federal Tax Opinion. The Company shall have received a written opinion of Wachtell, Lipton, Rosen & Katz (or, if Wachtell, Lipton, Rosen & Katz is unwilling or unable to issue the opinion, another nationally recognized law firm), in form and substance reasonably satisfactory to the Company, dated as of the Closing Date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the Mergers shall qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In rendering such opinion, counsel may require and rely upon representations contained in certificates of officers of Parent and the Company, reasonably satisfactory in form and substance to such counsel.

 

 

Article VIII

 

TERMINATION AND AMENDMENT

 

8.1           Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after receipt of the Requisite Company Vote:

 

(a)            by mutual consent of Parent and the Company in a written instrument;

 

(b)            by either Parent or the Company if any Governmental Entity that must grant a Requisite Regulatory Approval has denied approval of the Mergers or the Bank Merger and such denial has become final and non-appealable or any Governmental Entity of competent jurisdiction shall have issued a final non-appealable law, order, injunction, decree or other legal restraint or prohibition permanently enjoining or otherwise prohibiting or making illegal the consummation of the Mergers or the Bank Merger, unless the failure to obtain a Requisite Regulatory Approval 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;

 

(c)            by either Parent or the Company if the Mergers shall not have been consummated on or before November 25, 2025 (as it may be extended by this Section 8.1(c), the “Termination Date”), unless the failure of the Closing to occur by such date 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; provided that, if on such date, any of the conditions to the Closing set forth in (A) Section 7.1(c) or (B) Section 7.1(e) (in the case of clause (B), to the extent related to a Requisite Regulatory Approval) shall not have been satisfied or waived on or prior to such date, but all other conditions set forth in Article VII shall have been satisfied or waived (or in the case of conditions that by their nature can only be satisfied at the Closing, shall then be capable of being satisfied if the Closing were to take place on such date), then the Termination Date shall be automatically extended to February 25, 2026, and such date shall become the Termination Date for purposes of this Agreement; provided, further, that if all the conditions set forth in Article VII are satisfied (or in the case of conditions that by their nature can only be satisfied at the Closing, shall then be capable of being satisfied if the Closing were to take place on such date) on a date that occurs on or prior to the Termination Date but the Closing would thereafter occur in accordance with Section 1.2 on a date (the “Specified Date”) that occurs after such Termination Date, then the Termination Date shall automatically be extended to such Specified Date and the Specified Date shall become the Termination Date for purposes of this Agreement;

 

(d)            by either Parent or the Company (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a breach of any of the covenants, obligations, agreements or other provisions or any of the representations or warranties (or any such representation or warranty shall cease to be true) set forth in this Agreement on the part of the Company, in the case of a termination by Parent, or Parent or Merger Sub, in the case of a termination by the Company, which breach or failure to be true, either individually or in the aggregate with all other breaches by such party (or failures of such representations or warranties to be true), would constitute, if occurring or continuing on the Closing Date, the failure of a condition set forth in Section 7.2, in the case of a termination by Parent, or Section 7.3, in the case of a termination by the Company, and which is not cured within forty-five (45) days following written notice to the Company, in the case of a termination by Parent, or Parent, in the case of a termination by the Company, or by its nature or timing cannot be cured during such period (or such fewer days as remain prior to the Termination Date); or

 

 

(e)            by Parent prior to such time as the Requisite Company Vote is obtained, if (i) the Company or the Board of Directors of the Company shall have made a Recommendation Change or (ii) the Company or the Board of Directors of the Company shall have breached its obligations under Section 6.3 or 6.11 in any material respect.

 

8.2           Effect of Termination.

 

(a)            In the event of termination of this Agreement by either Parent or the Company as provided in Section 8.1, this Agreement shall forthwith become void and have no effect, and none of Parent, the Company, any of their respective Subsidiaries or any of the officers or directors of any of them shall have any liability of any nature whatsoever hereunder, or in connection with the transactions contemplated hereby, except that: (i) Section 6.2(b), Section 6.12, this Section 8.2 and Article IX (but, in the case of Section 9.12, only in respect of covenants that survive termination) shall survive any termination of this Agreement, and (ii) notwithstanding anything to the contrary contained in this Agreement, none of Parent, Merger Sub and the Company shall be relieved or released from any liabilities or damages arising out of its fraud or willful and material breach of any provision of this Agreement occurring prior to termination.

 

(b)           (i)             In the event that after the date of this Agreement and prior to the termination of this Agreement, a bona fide Acquisition Proposal shall have been communicated to or otherwise made known to the Board of Directors or senior management of the Company or shall have been made directly to the shareholders of the Company or any person shall have publicly announced (and not withdrawn at least two (2) business days prior to the Company Meeting) an Acquisition Proposal, in each case with respect to the Company and (A) (x) thereafter this Agreement is terminated by either Parent or the Company pursuant to Section 8.1(c) without the Requisite Company Vote having been obtained (and all other conditions set forth in Section 7.1 and Section 7.3 were satisfied or were capable of being satisfied prior to such termination) or (y) thereafter this Agreement is terminated by Parent pursuant to Section 8.1(d) as a result of a willful breach, and (B) prior to the date that is twelve (12) months after the date of such termination, the Company enters into a definitive agreement or consummates a transaction with respect to an Acquisition Proposal (whether or not the same Acquisition Proposal as that referred to above), then the Company shall, on the earlier of the date it enters into such definitive agreement and the date of consummation of such transaction, pay Parent, by wire transfer of same-day funds, a fee equal to $55,000,000 (the “Termination Fee”); provided, that for purposes of this Section 8.2(b)(i), all references in the definition of Acquisition Proposal to “twenty-five percent (25%)” shall instead refer to “fifty percent (50%).”

 

 

(ii)            In the event that this Agreement is terminated by Parent pursuant to Section 8.1(e), then the Company shall pay Parent, by wire transfer of same-day funds, the Termination Fee within two (2) business days of the date of termination.

 

(c)            Notwithstanding anything to the contrary herein, but without limiting the right of Parent to recover liabilities or damages arising out of the Company’s actual and intentional fraud or willful and material breach of any provision of this Agreement, the maximum aggregate amount of fees, liabilities or damages payable by the Company under this Agreement shall be equal to the Termination Fee (together with any amounts specified in Section 8.2(d)), as applicable, and in no event shall the Company be required to pay the Termination Fee on more than one occasion.

 

(d)            Each of Parent and the Company acknowledges that the agreements contained in this Section 8.2 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the other party would not enter into this Agreement; accordingly, if the Company fails promptly to pay the amount due pursuant to this Section 8.2, and, in order to obtain such payment, Parent commences a suit which results in a judgment against the Company for the Termination Fee or any portion thereof, the Company shall pay the costs and expenses of the other party (including attorneys’ fees and expenses) in connection with such suit. In addition, if the Company fails to pay the amounts payable pursuant to this Section 8.2, then the Company shall pay interest on such overdue amounts (for the period commencing as of the date that such overdue amount was originally required to be paid and ending on the date that such overdue amount is actually paid in full) at a rate per annum equal to the “prime rate” published in The Wall Street Journal on the date on which such payment was required to be made for the period commencing as of the date that such overdue amount was originally required to be paid and ending on the date that such overdue amount is actually paid in full.

 

Article IX

 

GENERAL PROVISIONS

 

9.1           Nonsurvival of Representations, Warranties and Agreements. None of the representations, warranties, covenants or agreements in this Agreement or in any instrument delivered pursuant to this Agreement (other than the Confidentiality Agreement, which shall survive in accordance with its terms) shall survive the Effective Time, except for Section 6.7, and for those other covenants and agreements contained herein and therein which by their terms apply or are to be performed in whole or in part after the Effective Time.

 

9.2           Amendment. Subject to compliance with applicable law, this Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after the receipt of the Requisite Company Vote; provided that after the receipt of the Requisite Company Vote, there may not be, without further approval of the shareholders of the Company, any amendment of this Agreement that requires further approval of such shareholders under applicable law. This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each of the parties hereto.

 

 

9.3           Extension; Waiver. At any time prior to the Effective Time, the parties hereto may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, and (c) waive compliance with any of the agreements or satisfaction of any conditions contained herein; provided that, after the receipt of the Requisite Company Vote, without further approval of the shareholders of the Company, there may not be any extension or waiver of this Agreement or any portion thereof that requires further approval of such shareholders under applicable law. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, 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.

 

9.4           Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense; provided that the costs and expenses of printing and mailing the Proxy Statement and all filing and other fees paid to the SEC or any other Governmental Entities in connection with the Mergers, the Bank Merger and the other transactions contemplated hereby shall be borne equally by Parent and the Company.

 

9.5           Notices. All notices, requests, instructions or other communications or documents to be given or made hereunder by one party to the other parties shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document if sent at or prior to 5:00 p.m. local time of the recipient, and on the next business day if sent after 5:00 p.m. local time of the recipient (in each case except in the event of any “bounceback” or similar non-transmittal message); or (d) on the day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent 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 9.5):

 

(a)            if to the Company, to:

 

Bremer Financial Corporation

380 St. Peter Street.

Suite 500.

Saint Paul, Minnesota 55102

	Attention:	Jeanne Crain
		Mitch Bleske
	Email:	jhcrain@bremer.com
		mjbleske@bremer.com

 

 

With a copy (which shall not constitute notice) to:

 

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, NY 10533

	Attention:	Matthew M. Guest
		Eric M. Feinstein
	Email:	MGuest@wlrk.com
		EMFeinstein@wlrk.com

 

and

 

(b)            if to Parent or Merger Sub, to:

 

Old National Bancorp

One Main Street 

Evansville, Indiana 47708

	Attention:	Nicholas J. Chulos, Executive Vice President, Chief Legal Officer and Corporate Secretary
	Email:	Nick.Chulos@oldnational.com

 

With a copy (which shall not constitute notice) to:

 

Squire Patton Boggs (US) LLP

201 E. Fourth Street, Suite 1900

Cincinnati, OH 45202
Attention: James J. Barresi
Email: james.barresi@squirepb.com

 

9.6           Interpretation. The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” References to “the date hereof” shall mean the date of this Agreement. As used in this Agreement, the “knowledge” of the Company means the actual knowledge after reasonable inquiry of their direct reports any of the officers of the Company listed on Section 9.6 of the Company Disclosure Schedule, and the “knowledge” of Parent means the actual knowledge after reasonable inquiry of their direct reports of the officers of Parent listed on Section 9.6 of the Parent Disclosure Schedule. As used herein, (i) “business day” means any day other than a Saturday, a Sunday or a day on which banks in Minneapolis, Minnesota or Evansville, Indiana are authorized by law or executive order to be closed, (ii) “person” means any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity or other entity of any kind or nature, (iii) an “affiliate” of a specified person is any person that directly or indirectly controls, is controlled by, or is under common control with, such specified person; provided, that the Trustees, together, shall be considered as one person for purposes of this definition, (iv) “made available” means any document or other information that was provided by one party or its representatives to the other party and its representatives prior to the date hereof, included in the virtual data room of a party prior to the date hereof or filed by a party with the SEC and publicly available on EDGAR prior to the date hereof, (v) the “transactions contemplated hereby” and “transactions contemplated by this Agreement” shall include the Mergers and the Bank Merger, (vi) the word “or” is not exclusive and (vii) the word “extent” and the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such word or phrase shall not merely mean “if”. The Company Disclosure Schedule and the Parent Disclosure Schedule, as well as all other schedules and all exhibits hereto, shall be deemed part of this Agreement and included in any reference to this Agreement. All references to “dollars” or “$” in this Agreement are to United States dollars. This Agreement shall not be interpreted or construed to require any person to take any action, or fail to take any action, if to do so would violate any applicable law. References to any statute or regulation refer to such statute or regulation, as amended, modified, supplemented or replaced from time to time (and, in the case of statutes, include any rules and regulations promulgated under the statute) and references to any section of any statute or regulation include any successor to such section.

 

 

9.7           Counterparts. This Agreement may be executed in two or more counterparts (including by electronic means, including a “.pdf” format data file) all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

 

9.8           Entire Agreement. This Agreement (including the documents and the instruments referred to herein), together with the Confidentiality Agreement, constitutes the entire agreement among the parties and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

 

9.9           Governing Law; Jurisdiction.

 

(a)            This Agreement shall be governed and construed in accordance with the laws of the State of Indiana without regard to any applicable conflicts of law, except (i) the First Step Minnesota Articles of Merger and the Second Step Minnesota Articles of Merger shall be governed by the laws of the State of Minnesota and (ii) matters relating to the fiduciary duties of the Board of Directors of the Company and the Trustees shall be subject to the laws of the State of Minnesota.

 

(b)            Each party agrees that it will bring any action or proceeding in respect of any claim arising out of or related to this Agreement or the transactions contemplated hereby exclusively in the U.S. Federal District Court for the Southern District of Indiana or, if that court does not have subject matter jurisdiction, in any state court located in Indianapolis, Indiana (the “Chosen Courts”), and, solely in connection with claims arising under this Agreement or the transactions that are the subject of this Agreement, (i) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Courts, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party and (iv) agrees that service of process upon such party in any such action or proceeding will be effective if notice is given in accordance with Section 9.5.

 

 

9.10         Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE EXTENT PERMITTED BY LAW AT THE TIME OF INSTITUTION OF THE APPLICABLE LITIGATION, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10.

 

9.11         Assignment; Third-Party Beneficiaries. 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. Any purported assignment in contravention hereof shall be null and void. 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. The representations and warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the parties. Any inaccuracies in such representations and warranties are subject to waiver by the parties hereto in accordance herewith without notice or liability to any other person. In some instances, the representations and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters regardless of the knowledge of any of the parties hereto. Consequently, persons other than the parties may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date. This Agreement (including the documents and instruments referred to herein) is not intended to, and does not, confer upon any person other than the parties hereto (and, with respect to the Investor Agreement, the Trustees) any rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein, except (i) as otherwise specifically provided in Section 6.7, which is intended to benefit each Company Indemnified Party and his or her heirs and representatives, and, (ii) if the Effective Time occurs, the right of the Company’s shareholders to receive the Merger Consideration as provided in Section 1.5.

 

 

9.12         Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with its specific terms or otherwise breached. Accordingly, the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches or threatened breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof (including the parties’ obligation to consummate the Mergers), in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security or a bond as a prerequisite to obtaining equitable relief.

 

9.13         Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction such that the invalid, illegal or unenforceable provision or portion thereof shall be interpreted to be only so broad as is enforceable.

 

9.14         Confidential Supervisory Information. Notwithstanding any other provision of this Agreement, no provision of this Agreement shall require or be interpreted to require, and no disclosure, representation or warranty shall be made (or other action taken) pursuant to this Agreement that would involve, the disclosure of confidential supervisory information (including confidential supervisory information as defined or identified in 12 C.F.R. § 261.2(b), 12 C.F.R. § 4.32(b) and 12 C.F.R. § 309.5(g)(8) or any similar state law) of a Governmental Entity by any party to this Agreement to the extent prohibited by applicable law. To the extent legally permissible, appropriate substitute disclosures or actions shall be made or taken under circumstances in which the limitations of the preceding sentence apply.

 

9.15         Delivery by Electronic Transmission. This Agreement and any signed agreement or instrument entered into in connection with this Agreement, and any amendments or waivers hereto or thereto, to the extent signed and delivered by email delivery of a “.pdf” format data file, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party hereto or to any such agreement or instrument shall raise the use of email delivery of a “.pdf” format data file to deliver a signature to this Agreement or any amendment hereto or the fact that any signature or agreement or instrument was transmitted or communicated through the email delivery of a “.pdf” format data file as a defense to the formation of a contract and each party hereto forever waives any such defense.

 

 

9.16         Trustees’ Capacity; No Recourse. Parent agrees and acknowledges that none of Parent or its affiliates has any claim or right of recovery under this Agreement, the Company Voting Agreement or the Investor Agreement against, and no personal liability shall attach to, any of the Trustees in their individual capacities, through the Trust or otherwise, whether at law or equity, in contract, in tort or otherwise. Recourse on any obligation or liability undertaken by the Trustees in their capacities as Trustees of the Trust under or in connection with or by reason of this Agreement, the Company Voting Agreement or the Investor Agreement shall be had solely against the assets comprising or payable to the Trust.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written.

 

	BREMER FINANCIAL CORPORATION
	By:	/s/ Jeanne Crain
		Jeanne Crain
		President and Chief Executive Officer

 

[Signature Page to Agreement and Plan of Merger]

 

 

	OLD NATIONAL BANCORP
	By:	/s/ James C. Ryan, III
		James C. Ryan, III
		Chief Executive Officer
	ONB MERGER SUB, INC.
	By:	/s/ John V. Moran, IV
		John V. Moran, IV
		President

 

[Signature Page to Agreement and Plan of Merger]

 

 

EXHIBIT A

 

BANK MERGER AGREEMENT

 

 

Exhibit A

Form of Bank Merger Agreement

 

AGREEMENT AND PLAN OF MERGER OF
BREMER bANK

with and into

old national bANK

 

This Agreement and Plan of Merger (this “Agreement”), dated as of [●], is made by and between Old National Bank, a national bank (the “Surviving Bank”), and Bremer Bank, National Association, a national bank (the “Merging Bank”).

 

WITNESSETH:

 

WHEREAS, Surviving Bank, a national banking association duly organized and existing under the laws of the United States, with its main office located in Evansville, Indiana, all the issued and outstanding capital stock of which is owned directly by Old National Bancorp, an Indiana corporation (“Old National”), has authorized capital stock consisting of 6,506,990 shares of common stock, par value of $10.00 per share, all of which shares of common stock are issued and outstanding as of the date hereof;

 

WHEREAS, Merging Bank, a national banking association duly organized and existing under the laws of the United States, with its main office located in Saint Paul, Minnesota, all the issued and outstanding capital stock of which is owned directly by Bremer Financial Corporation, a Minnesota corporation (“Bremer”), has authorized capital stock consisting of 1,000,000 shares of common stock, par value $20.00 per share, all of which shares of common stock are issued and outstanding as of the date hereof;

 

WHEREAS, Old National and Bremer have entered into an Agreement and Plan of Merger, dated as of November 25, 2024 (as amended and/or supplemented from time to time, the “Merger Agreement”), pursuant to which, subject to the terms and conditions thereof, (i) ONB Merger Sub, Inc., an Indiana corporation and wholly owned subsidiary of Old National, will merge with and into Bremer (the “First Step Merger”), with Bremer surviving the First Step Merger as a wholly owned subsidiary of Old National (the “Surviving Corporation”), (ii) immediately following the First Step Merger, the Surviving Corporation will merge with and into Old National (the “Second Step Merger” and, together with the First Step Merger, the “Merger”), with Old National surviving the Second Step Merger, and (iii) immediately following the Second Step Merger or at such later time as Old National may determine, the Merging Bank will merge with and into the Surviving Bank, with the Surviving Bank as the surviving entity, with Old National continuing as the direct parent of Surviving Bank and becoming the direct parent of Merging Bank;

 

WHEREAS, contingent upon the Merger, on the terms and subject to the conditions contained in this Agreement, the parties to this Agreement intend to effect the merger of Merging Bank with and into Surviving Bank, with Surviving Bank surviving the merger (the “Bank Merger”); and

 

WHEREAS, the Board of Directors of Surviving Bank and the Board of Directors of Merging Bank deem the Bank Merger desirable and in the best interests of their respective banks and have authorized and approved the execution and delivery of this Agreement and the transactions contemplated hereby.

 

 

NOW, THEREFORE, in consideration of the promises and of the mutual agreements herein contained, the parties hereto do hereby agree as follows:

 

ARTICLE I

 

Bank Merger

 

Section 1.01         The Bank Merger. Subject to the terms and conditions of this Agreement, at the Effective Time (as defined below), Merging Bank shall be merged with and into Surviving Bank in accordance with the provisions of 12 U.S.C. § 215a and 12 U.S.C. § 1828(c). At the Effective Time, the separate existence of Merging Bank shall cease, and Surviving Bank, as the surviving entity, shall continue its existence under the laws of the United States as a national banking association. All rights, franchises, and interests of Merging Bank in and to every type of property (real, personal, and mixed) and choses in action shall be transferred to and vested in the Surviving Bank by virtue of the Bank Merger without any deed or other transfer. The Surviving Bank, upon the Bank Merger and without any order or other action on the part of any court or otherwise, shall hold and enjoy all rights of property, franchises, and interests, including appointments, designations, and nominations, and all other rights and interests as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, and receiver, and in every other fiduciary capacity, in the same manner and to the same extent as such rights, franchises, and interests were held or enjoyed by Merging Bank at the time of the Bank Merger, subject to applicable provisions of 12 U.S.C. § 215a. The Surviving Bank shall be responsible for all of the liabilities of every kind and description, including liabilities arising from the operation of any trust department, of each of the merging banks existing as of the Effective Time of the Bank Merger. Immediately following the Effective Time, the Surviving Bank shall continue to operate the main or principal office and each of the branches of Merging Bank existing as of the Effective Time as branches of the Surviving Bank at the officially designated address of each such office or branch and shall continue to operate each of the branches of the Surviving Bank existing at the Effective Time.

 

Section 1.02         Closing. The closing of the Bank Merger will take place immediately following the Merger or at such other time and date as Old National may determine in its sole discretion, but in no case prior to the date on which all of the conditions precedent to the consummation of the Bank Merger specified in this Agreement shall have been satisfied or duly waived by the party entitled to satisfaction thereof, at such place as is agreed by the parties hereto.

 

Section 1.03          Effective Time. Subject to applicable law, the Bank Merger shall become effective upon the issuance of a certification of merger by the Office of the Comptroller of the Currency (“OCC”) (such date and time being herein referred to as the “Effective Time”); provided that the Effective Time shall in no event be earlier than or at the same time as the effective time of the Merger.

 

Section 1.04         Articles of Association and Bylaws. The national bank charter, articles of association and bylaws of Surviving Bank in effect immediately prior to the Effective Time shall be the national bank charter, articles of association and the bylaws of the Surviving Bank, in each case until amended in accordance with applicable law and the terms thereof.

 

 

Section 1.05         Board of Directors. At the Effective Time, the board of directors of the Surviving Bank shall consist of the existing directors of the Surviving Bank immediately prior to the Effective Time.

 

Section 1.06         Officers. At the Effective Time, the officers of Surviving Bank shall continue to serve in their respective capacity as officers of the Surviving Bank, except as may be appointed or designated by the board of directors of the Surviving Bank.

 

Section 1.07         Name and Main Office. The name of the Surviving Bank shall be “Old National Bank”, and the main office of the Surviving Bank shall be at One Main Street, Evansville, Indiana 47708.

 

Section 1.08         Tax Treatment. It is the intention of the parties that the Bank Merger be treated for U.S. federal income tax purposes as a “tax free reorganization” pursuant to Section 368(a) of the Internal Revenue Code of 1986, as amended.

 

ARTICLE II

 

Consideration

 

Section 2.01         Effect on Merging Bank Capital Stock. At the Effective Time, by virtue of the Bank Merger and without any action on the part of the holder of any capital stock of Merging Bank, all shares of Merging Bank capital stock issued and outstanding shall be automatically cancelled and retired and shall cease to exist, and no cash, new shares of common stock, or other property shall be delivered in exchange therefor.

 

Section 2.02         Effect on Surviving Bank Capital Stock. Each share of Surviving Bank capital stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and unaffected by the Bank Merger and shall immediately after the Effective Time constitute all of the issued and outstanding capital stock of the Surviving Bank.

 

ARTICLE III

 

COVENANTS

 

Section 3.01         During the period from the date of this Agreement and continuing until the Effective Time, subject to the provisions of the Merger Agreement, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement.

 

 

ARTICLE IV

 

Conditions Precedent

 

Section 4.01         The Bank Merger and the respective obligations of each party hereto to consummate the Bank Merger are subject to the fulfillment or written waiver of each of the following conditions prior to the Effective Time:

 

a.

The approval of the OCC under 12 U.S.C. § 215a and 12 U.S.C. § 1828(c) with respect to the Bank Merger shall have been obtained and shall be in full force and effect, and all related waiting periods shall have expired or been terminated; and all other material consents, approvals, permissions, and authorizations of, filings and registrations with, and notifications to, all governmental authorities required for the consummation of the Bank Merger shall have been obtained or made and shall be in full force and effect and all waiting periods required by law shall have expired or been terminated.

 

b.

The Merger shall have been consummated in accordance with the terms of the Merger Agreement.

 

c.

No order, injunction or decree issued by any court or governmental entity of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Bank Merger shall be in effect and no law, statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any governmental entity which prohibits or makes illegal consummation of the Bank Merger.

 

d.

This Agreement shall have been ratified, confirmed and approved by the sole shareholder of each of Surviving Bank and Merging Bank.

 

ARTICLE V

 

Termination and amendment

 

Section 5.01         Termination. This Agreement may be terminated at any time prior to the Effective Time by an instrument executed by each of the parties hereto. This Agreement will terminate automatically without any action by the parties hereto upon the termination of the Merger Agreement.

 

Section 5.02         Amendment. This Agreement may be amended by an instrument in writing signed on behalf of each of the parties hereto.

 

ARTICLE VI

 

GENERAL PROVISIONS

 

Section 6.01         Representations and Warranties. Each of the parties hereto represents and warrants that this Agreement has been duly authorized, executed and delivered by such party and constitutes the legal, valid and binding obligation of such party, enforceable against it in accordance with the terms hereof.

 

 

Section 6.02         Nonsurvival of Agreements. None of the agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time.

 

Section 6.03         Interpretation. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section references are to this Agreement unless otherwise specified. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” References to “the date hereof” shall mean the date of this Agreement.

 

Section 6.04         Counterparts. This Agreement may be executed in two (2) or more counterparts (including by facsimile or other electronic means), all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other party, it being understood that each party need not sign the same counterpart.

 

Section 6.05         Entire Agreement. This Agreement (including the documents and the instruments referred to herein) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement, other than the Merger Agreement.

 

Section 6.06         Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Indiana applicable to agreements made and to be performed wholly within such state, except to the extent that the federal laws of the United States shall be applicable hereto.

 

Section 6.07         Assignment. Neither this Agreement nor any of the rights, interests or obligations may be assigned by any of the parties hereto (whether by operation of law or otherwise) and any attempted assignment in contravention of this Section 6.07 shall be null and void.

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in counterparts by their duly authorized officers and attested by their officers thereunto duly authorized, all as of the day and year first above written.

 

	SURVIVING BANK:
	OLD NATIONAL BANK
	By:
	Name:
	Title:
	MERGING BANK:
	BREMER BANK, NATIONAL ASSOCIATION
	By:
	Name:
	Title:

 

[Signature Page to Bank Merger Agreement]

 

 

 

Exhibit 5.1

 

8750 West Bryn Mawr Avenue Suite 1300 Chicago, Illinois 60631 Direct Dial: 773.765.7499 Email: nick.chulos@oldnational.com

 

November 25, 2024

 

Old National Bancorp

One Main Street

Evansville, IN 47708

 

Ladies and Gentlemen:

 

I am the Executive Vice President, Chief Legal Officer and Corporate Secretary of Old National Bancorp, an Indiana corporation (the “Company”), and am providing this opinion in connection with the offering and sale by the Company of shares (the “Shares”) of common stock of the Company, no par value per share (the “Common Stock”), having an aggregate offering price to the public of up to $460,000,000 pursuant to the Company’s automatic shelf registration statement on Form S-3ASR (File No. 333-272312) filed on June 1, 2023 (the “Registration Statement”), a base prospectus dated May 31, 2023 and related prospectus supplement dated November 25, 2024 (the “Prospectus Supplement”), that certain underwriting agreement dated November 25, 2024 (the “Underwriting Agreement”), by and among the Company, the Underwriter, the Forward Seller and the Forward Purchaser named therein, the forward confirmation, entered into on November 25, 2024, between the Company and the Dealer named therein (the “Forward Confirmation”) and any additional forward confirmation entered into between the Company and the Dealer named therein in connection with the exercise by the Underwriter of its option to purchase additional Shares pursuant to the Underwriting Agreement (the “Additional Forward Confirmation” and, together with the Forward Confirmation, the “Forward Sale Agreement”).

 

For purposes of this opinion letter, I have examined originals or copies of such documents, corporate records, certificates of public officials and other instruments as I have deemed necessary or advisable for the purpose of rendering this opinion.

 

In rendering the opinion expressed herein, I have relied as to certain factual matters on information obtained from public officials, officers of the Company and other sources believed by me to be responsible, and I have assumed the legal capacity of all natural persons and the genuineness of all signatures, including electronic signatures.

 

Based on the foregoing, and subject to the additional assumptions and qualifications below, I advise you that, in my opinion:

 

1.

When the Securities (as defined in the Underwriting Agreement) have been issued, sold and/or delivered by the Company or the Forward Seller pursuant to the terms of the Underwriting Agreement against payment of the consideration set forth in the Underwriting Agreement, such Shares will be validly issued, fully paid and non-assessable; and

 

2.

When the Confirmation Securities (as defined in the Underwriting Agreement) have been issued, sold and/or delivered by the Company pursuant to the terms of the Forward Sale Agreement against payment of the consideration set forth in the Forward Sale Agreement, such Shares will be validly issued, fully paid and non-assessable.

 

In rendering the above opinion, I have assumed that: (a) the Shares will not be issued or transferred in violation of any restrictions or limitations contained in the Company’s Amended and Restated Articles of Incorporation, as amended (the “Articles”), (b) upon the issuance of such Shares, the total number of shares of Common Stock issued and outstanding will not exceed the total number of share of Common Stock that the Company is then authorized to issue under the Articles, and (c) the terms of certain sales of the Shares pursuant to the Underwriting Agreement or the Forward Sale Agreement, as the case may be, will be authorized and approved by the Board of Directors of the Company or a committee thereof established by the Board of Directors of the Company with the authority to issue and sell the Shares pursuant to the Underwriting Agreement or the Forward Sale Agreement in accordance with Indiana Business Corporation Law, the Articles, the Bylaws (as amended) of the Company and the resolutions of the Board of Directors of the Company.

 

 

Page 2

 

I am a member of the Bar of the State of Indiana and the foregoing opinion is limited to the laws of the State of Indiana. I am expressing no opinion as to the effect of the laws of any other jurisdiction.

 

I hereby consent to the filing of this opinion as an exhibit to a current report on Form 8-K to be filed by the Company on the date hereof and its incorporation by reference into the Registration Statement and further consent to the reference to me under the caption “Validity of Securities” in the Prospectus Supplement, which is part of the Registration Statement. In giving this consent, I do not thereby admit that I am in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended or the rules of regulations of the Commission promulgated thereunder.

 

Sincerely,

 

/s/ Nicholas J. Chulos

 

Nicholas J. Chulos

Executive Vice President,

Chief Legal Officer and Corporate Secretary

 

 

 

Exhibit 10.1

 

TRUSTEE VOTING AGREEMENT

 

November 25, 2024

 

Old National Bancorp

One Main Street

Evansville, Indiana 47708

 

Ladies and Gentlemen:

 

Caroline S. Johnson, Francis M. Miley, and Daniel C. Reardon, solely in their respective capacities as trustees of the Otto Bremer Trust, a trust created under trust instrument dated May 22, 1944 (the “Trust Instrument”) and governed by the laws of Minnesota (the “Trust”) (in such capacities, the “Trustees”), and not in their respective individual capacities, hereby acknowledge that Bremer Financial Corporation, a Minnesota corporation (the “Company”), Old National Bancorp, an Indiana corporation (“Parent”), and ONB Merger Sub, Inc., an Indiana corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), have entered into an Agreement and Plan of Merger, dated as of the same date hereof (as amended or modified from time to time, the “Merger Agreement”), pursuant to which, among other things, Merger Sub will be merged with and into the Company, with the Company as the surviving corporation (the “Surviving Corporation”) in such merger (the “Merger”) and, immediately following the Merger, the Surviving Corporation will merge with and into Parent, with Parent as the surviving corporation of such Merger (the “Second Step Merger”, and together with the Merger, the “Mergers”). A copy of the Merger Agreement has been provided to the Trustees. Capitalized terms used but not defined herein are to be deemed to have the same meanings assigned to them in the Merger Agreement.

 

The Trustees further acknowledge that, as of the date hereof, they have determined that the consummation of the Mergers would be in the best interests of the Trust’s beneficiaries and purposes. As an inducement to and condition of Parent’s willingness to enter into the Merger Agreement, the Trustees hereby agree, represent and warrant as follows:

 

1.            Owned Shares. As of the date hereof, the Trustees own (of record or beneficially) and have the full power and authority to vote 240,000 shares of Class A Company Common Stock and 10,075,000 shares of Class B Company Common Stock (collectively, the “Owned Shares”). For all purposes of this agreement, the Owned Shares will include any shares of Company Common Stock as to which the Trustees acquire beneficial or record ownership after the date hereof. The Owned Shares are owned by the Trustees free and clear of all encumbrances, voting arrangements and commitments of every kind, except as would not restrict the performance of the Trustees’ obligations or compliance with the restrictions under this agreement. The Trustees do not beneficially own any shares of Class A Company Common Stock or Class B Company Common Stock other than the Owned Shares.

 

2.            Agreement to Vote Owned Shares. The Trustees agree that, at the Company Meeting or any other meeting or action of the shareholders of the Company, including a written consent solicitation, the Trustees will (a) appear at such meeting or otherwise cause the Owned Shares to be counted as present thereat for the purpose of establishing a quorum, (b) vote all of the Owned Shares (or otherwise provide a proxy, consent or voting instruction or direction) in favor of (i) approval of the Merger Agreement, the Mergers and any other matters required to be approved or adopted in order to effect the Mergers and the transactions contemplated by the Merger Agreement and (ii) the adjournment or postponement of the Company Meeting, (c) not initiate any proxy solicitation or undertake any other efforts against the Merger Agreement, the Mergers or the transactions contemplated by the Merger Agreement, and (d) not vote the Owned Shares (or otherwise provide a proxy or consent) in favor of, or otherwise support, approval of any Acquisition Proposal with respect to the Company or any action that is intended to, or could reasonably be expected to, impede, interfere with, or delay or otherwise adversely affect the Mergers or the transactions contemplated by the Merger Agreement. Notwithstanding anything to the contrary in this agreement, the parties acknowledge that (x) this agreement is entered into by the Trustees solely in their respective capacities as Trustees and as holders of the Owned Shares and that nothing in this agreement shall prevent any of the Trustees from discharging his or her fiduciary duties as a member of the Board of Directors of the Company, and (y) the taking of any actions (or failures to act) by any of the undersigned in such person’s capacity as a member of the Board of Directors of the Company shall not be deemed to constitute a breach of this agreement.

 

 

3.            Transfer of Owned Shares and Company Common Stock. From the date hereof until the Effective Time, the Trustees agree that they will not, without the prior written consent of Parent, directly or indirectly, sell, offer for sale, transfer, pledge, assign, encumber or otherwise dispose of, or enter into any contract, agreement, option, commitment, derivative or other arrangement or understanding with respect to any sale, offer for sale, transfer, pledge, assignment, encumbrance or other disposition (each, a “Transfer”) of any of the Owned Shares or the voting rights thereunder.

 

4.            Further Assurances. The Trustees will take all reasonable actions and make all reasonable efforts, and will execute and deliver all such further agreements, documents, certificates, instruments, proxies and voting instructions as reasonably necessary, in order to fulfill their agreements and obligations contemplated hereby, including, without limitation, the agreement of the Trustees to vote the Owned Shares in accordance with Section 2 hereof.

 

5.            No Solicitation. The Trustees agree that they shall not, and they shall direct and use their respective reasonable best efforts to cause their agents and representatives (including, without limitation, any investment banker, attorney or accountant retained by the Trustees on behalf of the Trust) not to, directly or indirectly, (a) initiate, solicit, knowingly encourage or knowingly facilitate any inquiries or proposals with respect to any Acquisition Proposal with respect to the Company, (b) engage or participate in any negotiations with any person concerning any Acquisition Proposal with respect to the Company, (c) provide any confidential or nonpublic information or data to, or have or participate in any discussions with, any person relating to an Acquisition Proposal with respect to the Company, (d) enter into any term sheet, letter of intent, indication of interest, commitment, memorandum of understanding, agreement in principle, stock acquisition or disposition agreement, or other agreement (whether written or oral, binding or non-binding) in connection with or relating to any Acquisition Proposal with respect to the Company, or (e) solicit proxies or initiate a shareholder vote with respect to an Acquisition Proposal with respect to the Company or otherwise knowingly facilitate any effort or attempt to make or implement an Acquisition Proposal with respect to the Company, except in each case to notify a person that has made or, to the knowledge of the Trustees, is making any inquiries with respect to, or is considering making, an Acquisition Proposal, of the existence of the provisions of this Section 5. Notwithstanding the immediately preceding sentence, and subject to Section 2 hereof, in the event the Company is engaging in discussions or negotiations with a person making an Acquisition Proposal in accordance with Section 6.11 of the Merger Agreement with respect to such Acquisition Proposal, the Trustees and their agents and representatives (including, without limitation, any investment banker, attorney or accountant retained by the Trustees on behalf of the Trust) shall be entitled to engage in any discussions or negotiations that the Company is permitted to engage in pursuant to Section 6.11 of the Merger Agreement with respect to such Acquisition Proposal.

 

6.            Specific Performance. The parties agree that irreparable damage would occur if any provision of this agreement were not performed in accordance with its specific terms or otherwise breached. Accordingly, the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions or temporary restraining order to prevent breaches or threatened breaches of this agreement or to enforce specifically the performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security or a bond as a prerequisite to obtaining equitable relief.

 

 

7.            Public Announcements. Each of the parties agrees that no public release or announcement or statement concerning this agreement or concerning the transactions contemplated by the Merger Agreement shall be issued by any party without the prior written consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed), except (i) as required by applicable law or the rules or regulations of any applicable Governmental Entity or stock exchange to which the relevant party is subject, in which case the party required to make the release or announcement shall consult with the other party about, and allow the other party reasonable time to comment on, such release or announcement in advance of such issuance or (ii) for such releases, announcements or statements that are consistent with other such releases, announcement or statements made after the date of this agreement in compliance with this Section 7; provided that, in the case of any such public release or announcement or statement issued by Parent, the requirements in this Section 7 shall only apply to the extent that such public release or announcement or statement references the Trust or any of the Trustees and Parent shall only be required to provide the Trust with portions of such releases, announcements or statements that reference the Trust or Trustees.

 

8.            Termination of this Agreement. This agreement will terminate automatically upon the earliest to occur of: (i) the termination of the Merger Agreement by either or both of the Company or Parent pursuant to Section 8.1 of the Merger Agreement, (ii) the Board of Directors of the Company making a Recommendation Change in accordance with Section 6.3 of the Merger Agreement, (iii) the entry into any amendment, modification, waiver or other change to any provision of the Merger Agreement, as in effect on the date hereof, without the Trustees’ prior written consent, that (x) diminishes the amount or changes the form of the Merger Consideration, (y) extends the Termination Date (other than as contemplated by the terms of the Merger Agreement as in effect on the date hereof) or imposes any additional conditions or obligations that would reasonably be expected to materially impede or delay the consummation of the transactions contemplated by the Merger Agreement, or (z) otherwise would reasonably be expected to adversely affect the rights or obligations of the Trustees in connection with the transactions contemplated by the Merger Agreement, and (iv) the Effective Time; provided, however, that this Section 8 and Sections 11 through 25 of this agreement shall survive such termination. Upon such termination, no party shall have any further obligations or liabilities hereunder; provided, however, such termination will not relieve any party from liability for any willful breach of this agreement prior to such termination.

 

9.            Certain Representations and Warranties.

 

(a)           Each Trustee hereby represents and warrants to Parent that such Trustee has the right, power and authority to execute and deliver this agreement and to perform fully its obligations hereunder; such execution, delivery and performance does not and will not violate, or require any consent, approval, or notice under any law or result in the breach of, constitute a default under, result in the creation of any Lien on any Owned Shares pursuant to any contract or other instrument; this agreement has been duly executed and delivered by such Trustee and, assuming due authorization, execution, and delivery hereof by Parent, constitutes a legal, valid and binding agreement of such Trustee, enforceable in accordance with its terms (except to the extent that enforceability hereof may be limited by the Enforceability Exceptions); there is no claim, action, suit, dispute, investigation, examination, complaint or other proceeding pending against such Trustee or, to the knowledge of such Trustee, any other person or, to the knowledge of such Trustee, threatened against the Trustee or any other person, in each case, that restricts, limits, impairs or prohibits (or, if successful, would restrict, limit, impair or prohibit) the performance by the Trustees of their covenants, agreements and obligations hereunder.

 

 

(b)          Parent hereby represents and warrants to the Trustees that Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Indiana; Parent has the right, power and authority to execute and deliver this agreement and to perform fully its obligations hereunder; such execution, delivery and performance does not and will not violate, or require any consent, approval, or notice under any law or result in the breach of any contract; and this agreement has been duly executed and delivered by Parent and, assuming due authorization, execution, and delivery hereof by the Trustees, constitutes a legal, valid and binding agreement of Parent, enforceable in accordance with its terms (except to the extent that enforceability hereof may be limited by the Enforceability Exceptions).

 

10.          Appraisal/Dissenters Rights. To the extent permitted by applicable law, the Trustees hereby irrevocably and unconditionally waive and agree not to exercise or perfect any rights of appraisal or rights to dissent from the Merger that the Trustees may have with respect to the Owned Shares under applicable law.

 

11.          Governing Law. This agreement shall be governed and construed in accordance with the laws of the State of Minnesota without regard to any applicable conflicts of law.

 

12.          Counterparts. This agreement may be executed in two or more counterparts (including by electronic means, including a “.pdf” format data file), all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

 

13.          Chosen Courts. Each party agrees that it will bring any action or proceeding in respect of any claim arising out of or related to this agreement or the transactions contemplated hereby exclusively in the Chosen Courts, and, solely in connection with claims arising under this agreement or the transactions that are the subject of this agreement, (i) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Courts, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party, and (iv) agrees that service of process upon such party in any such action or proceeding will be effective if notice is given in accordance with Section 22.

 

14.          Severability. Whenever possible, each provision or portion of any provision of this agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this agreement shall be reformed, construed and enforced in such jurisdiction such that the invalid, illegal or unenforceable provision or portion thereof shall be interpreted to be only so broad as is enforceable.

 

 

15.          Electronic Transmission. This agreement and any signed agreement or instrument entered into in connection with this agreement, and any amendments or waivers hereto or thereto, to the extent signed and delivered by email delivery of a “.pdf” format data file, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party hereto shall raise the use of email delivery of a “.pdf” format data file to deliver a signature to this agreement or any amendment hereto or the fact that any signature or agreement or instrument was transmitted or communicated through the email delivery of a “.pdf” format data file as a defense to the formation of a contract and each party hereto forever waives any such defense.

  

16.           Amendment. Subject to compliance with applicable law, this agreement may be amended by the parties hereto. This agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each of the parties hereto.

 

17.          Extension; Waiver. The Trustees, with respect to Parent, and Parent, with respect to the Trustees, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of Parent (in the case of the Trustees) or the Trustees (in the case of Parent), (b) waive any inaccuracies in the representations and warranties of Parent (in the case of the Trustees) or the Trustees (in the case of Parent) contained herein, and (c) waive compliance with any of the agreements or satisfaction of any conditions of Parent (in the case of the Trustees) or the Trustees (in the case of Parent) contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, 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.

 

18.          Interpretation. The parties have participated jointly in negotiating and drafting this agreement. In the event that an ambiguity or a question of intent or interpretation arises, this agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this agreement. The headings contained in this agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this agreement. Whenever the words “include,” “includes” or “including” are used in this agreement, they shall be deemed to be followed by the words “without limitation.” This agreement shall not be interpreted or construed to require any person to take any action, or fail to take any action, if to do so would violate any applicable law.

 

19.          Entire Agreement. This agreement (including the documents and the instruments referred to herein) and the Investor Agreement constitute the entire agreement among the parties and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

 

20.          Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE EXTENT PERMITTED BY LAW AT THE TIME OF INSTITUTION OF THE APPLICABLE LITIGATION, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 20.

 

 

21.          Assignment; Third-Party Beneficiaries. 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. Any purported assignment in contravention hereof shall be null and void. 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. This agreement is not intended to, and does not, confer upon any person other than the parties hereto any rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein.

 

22.          Notices. All notices, requests, instructions or other communications or documents to be given or made hereunder by one party to the other parties shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document if sent at or prior to 5:00 p.m. local time of the recipient, and on the next business day if sent after 5:00 p.m. local time of the recipient (in each case except in the event of any “bounceback” or similar non-transmittal message); or (d) on the day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent 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 22):

	(i)	if to the Trustees, to:
		The Otto Bremer Trust
		30 E 7 Street Ste. 2900
		St. Paul, MN 55101-2988
		Attention:	Daniel C. Reardon
		Email:	dreardon@ottobremer.org
		With a copy (which shall not constitute notice) to:
		Sullivan & Cromwell LLP
		125 Broad Street
		New York, NY 10004
		Attention:	H. Rodgin Cohen
			Mitchell S. Eitel
			C. Michelle Chen
		Email:	cohenhr@sullcrom.com
			eitelm@sullcrom.com
			chenc@sullcrom.com
		and

 

 

		Bremer Financial Corporation
		380 St. Peter Street.
		Suite 500.
		Saint Paul, Minnesota 55102
		Attention:	Jeanne Crain
			Mitch Bleske
		Email:	jhcrain@bremer.com mjbleske@bremer.com
		and
		Wachtell, Lipton, Rosen & Katz
		51 West 52nd Street
		New York, NY 10533
		Attention:	Matthew M. Guest
			Eric M. Feinstein
		Email:	MGuest@wlrk.com
			EMFeinstein@wlrk.com
		and
	(ii)	if to Parent, to:
		Old National Bancorp
		One Main Street
		Evansville, IN 47708
		Attention:	Nicholas J. Chulos, Executive Vice President, Chief Legal Officer and Corporate Secretary
		Email:	nick.chulos@oldnational.com
		With a copy (which shall not constitute notice) to:
		Squire Patton Boggs (US) LLP
		201 E. Fourth Street, Suite 1900
		Cincinnati, OH 45202
		Attention:	James J. Barresi
			Alison LaBruyere
		Email:	james.barresi@squirepb.com
			alison.labruyere@squirepb.com

 

23.          Expenses. All costs and expenses incurred in connection with this agreement and the transactions contemplated hereby shall be paid by the party incurring such expense.

 

24.          No Ownership. Nothing contained in this Agreement shall be deemed to vest in Parent any direct or indirect ownership or incidence of ownership of or with respect to any Owned Shares. All rights, ownership and economic benefits of and relating to the Owned Shares shall remain vested in and belong to the Trustees, and Parent shall have no authority to direct the Trustees in the voting or disposition of any of the Owned Shares, except as provided herein.

 

25.          Trustees’ Capacity; No Recourse. Parent agrees and acknowledges that none of Parent or its affiliates has any claim or right of recovery under this agreement against, and no personal liability shall attach to, any of the Trustees in their individual capacities, through the Trust or otherwise, whether at law or equity, in contract, in tort or otherwise. Recourse on any obligation or liability undertaken by the Trustees in their capacities as Trustees of the Trust under or in connection with or by reason of this agreement shall be had solely against the assets comprising or payable to the Trust.

 

 

26.          New Trustees. No person shall become a trustee of the Trust after the date hereof, unless such person executes a joinder to this agreement in a form reasonably acceptable to the Trustees and Parent.

 

27.          Additional Matters. The parties agree to the matters set forth on Schedule A of this Agreement.

 

[Remainder of this page intentionally left blank. Signature page follows this page]

 

*        *        *

 

 

The undersigned has executed and delivered this agreement as of the day and year first above written.

 

Very truly yours,

 

	Caroline S. Johnson, as Trustee of Otto Bremer Trust
	/s/ Caroline S. Johnson
	Francis M. Miley, as Trustee of Otto Bremer Trust
	/s/ Francis M. Miley
	Daniel C. Reardon, as Trustee of Otto Bremer Trust
	/s/ Daniel C. Reardon

  

 

	Accepted as of the Date first above written:
	Old National Bancorp
	By:	/s/ James C. Ryan, III
		James C. Ryan, III
		Chief Executive Officer

 

 

 

Exhibit 10.2

 

FORM OF DIRECTOR VOTING AGREEMENT

 

November 25, 2024

 

Old National Bancorp

One Main Street

Evansville, Indiana 47708

 

Ladies and Gentlemen:

 

The undersigned shareholder and director (the “Shareholder”) of Bremer Financial Corporation, a Minnesota corporation (the “Company”), in the Shareholder’s capacity as a shareholder of the Company, and not in his or her capacity as a director or officer of the Company, as applicable, hereby acknowledges that the Company, Old National Bancorp, an Indiana corporation (“Parent”), and ONB Merger Sub, Inc., an Indiana corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), have entered into an Agreement and Plan of Merger, dated as of the same date hereof (as amended or modified from time to time, the “Merger Agreement”), pursuant to which, among other things, Merger Sub will be merged with and into the Company, with the Company as the surviving corporation (the “Surviving Corporation”) in such merger (the “Merger”) and, immediately following the Merger, the Surviving Corporation will merge with and into Parent, with Parent as the surviving corporation of such Merger (the “Second Step Merger”, and together with the Merger, the “Mergers”). A copy of the Merger Agreement has been provided to the Shareholder. Capitalized terms used but not defined herein are to be deemed to have the same meanings assigned to them in the Merger Agreement.

 

As an inducement to and condition of Parent’s willingness to enter into the Merger Agreement, the Shareholder hereby agrees, represents and warrants as follows:

 

1.            Owned Shares. As of the date hereof, the Shareholder owns (of record or beneficially) and has the full power and authority to vote [●] shares of Class A Company Common (the “Owned Shares”). For all purposes of this agreement, the Owned Shares will include any shares of Company Common Stock as to which the Shareholder acquires beneficial or record ownership after the date hereof. The Owned Shares are owned by the Shareholder free and clear of all encumbrances, voting arrangements and commitments of every kind, except as would not restrict the performance of the Shareholder’s obligations or compliance with the restrictions under this agreement. The Shareholder does not beneficially own any shares of Class A Company Common Stock or Class B Company Common Stock other than the Owned Shares.

 

2.            Agreement to Vote Owned Shares. The Shareholder agrees that, at the Company Meeting or any other meeting or action of the shareholders of the Company, including a written consent solicitation, the Shareholder will (a) appear at such meeting or otherwise cause the Owned Shares to be counted as present thereat for the purpose of establishing a quorum, (b) vote all of the Owned Shares (or otherwise provide a proxy, consent or voting instruction or direction) in favor of (i) approval of the Merger Agreement, the Mergers and any other matters required to be approved or adopted in order to effect the Mergers and the transactions contemplated by the Merger Agreement and (ii) the adjournment or postponement of the Company Meeting, (c) not initiate any proxy solicitation or undertake any other efforts against the Merger Agreement, the Mergers or the transactions contemplated by the Merger Agreement, and (d) not vote the Owned Shares (or otherwise provide a proxy or consent) in favor of, or otherwise support, approval of any Acquisition Proposal with respect to the Company or any action that is intended to, or could reasonably be expected to, impede, interfere with, or delay or otherwise adversely affect the Mergers or the transactions contemplated by the Merger Agreement. Notwithstanding anything to the contrary in this agreement, the parties acknowledge that (x) this agreement is entered into by the Shareholder solely in his or her capacity as a holder of the Owned Shares and that nothing in this agreement shall prevent the Shareholder from discharging his or her fiduciary duties as a member of the Board of Directors of the Company, and (y) the taking of any actions (or failures to act) by any of the undersigned in such person’s capacity as a member of the Board of Directors of the Company shall not be deemed to constitute a breach of this agreement.

 

 

3.            Transfer of Owned Shares and Company Common Stock. From the date hereof until the Effective Time, the Shareholder agrees that he or she will not, without the prior written consent of Parent, directly or indirectly, sell, offer for sale, transfer, pledge, assign, encumber or otherwise dispose of, or enter into any contract, agreement, option, commitment, derivative or other arrangement or understanding with respect to any sale, offer for sale, transfer, pledge, assignment, encumbrance or other disposition (each, a “Transfer”) of any of the Owned Shares or the voting rights thereunder.

 

4.            Further Assurances. The Shareholder will take all reasonable actions and make all reasonable efforts, and will execute and deliver all such further agreements, documents, certificates, instruments, proxies and voting instructions as reasonably necessary, in order to fulfill his or her agreements and obligations contemplated hereby, including, without limitation, the agreement of the Shareholder to vote the Owned Shares in accordance with Section 2 hereof.

 

5.            No Solicitation. The Shareholder agrees that he or she shall not, and the Shareholder shall direct and use his or her reasonable best efforts to cause his or her agents and representatives (including, without limitation, any investment banker, attorney or accountant retained by the Shareholder) not to, directly or indirectly, (a) initiate, solicit, knowingly encourage or knowingly facilitate any inquiries or proposals with respect to any Acquisition Proposal with respect to the Company, (b) engage or participate in any negotiations with any person concerning any Acquisition Proposal with respect to the Company, (c) provide any confidential or nonpublic information or data to, or have or participate in any discussions with, any person relating to an Acquisition Proposal with respect to the Company, (d) enter into any term sheet, letter of intent, indication of interest, commitment, memorandum of understanding, agreement in principle, stock acquisition or disposition agreement, or other agreement (whether written or oral, binding or non-binding) in connection with or relating to any Acquisition Proposal with respect to the Company, or (e) solicit proxies or initiate a shareholder vote with respect to an Acquisition Proposal with respect to the Company or otherwise knowingly facilitate any effort or attempt to make or implement an Acquisition Proposal with respect to the Company, except in each case to notify a person that has made or, to the knowledge of the Shareholder, is making any inquiries with respect to, or is considering making, an Acquisition Proposal, of the existence of the provisions of this Section 5. Notwithstanding the foregoing, in the event the Company is engaging in discussions or negotiations with a person making an Acquisition Proposal in accordance with Section 6.11 of the Merger Agreement with respect to such Acquisition Proposal, the Shareholder and his or her agents and representatives (including, without limitation, any investment banker, attorney or accountant retained by the Shareholder) shall be entitled to engage in any discussions or negotiations that the Company is permitted to engage in pursuant to Section 6.11 of the Merger Agreement with respect to such Acquisition Proposal.

 

6.            Specific Performance. The parties agree that irreparable damage would occur if any provision of this agreement were not performed in accordance with its specific terms or otherwise breached. Accordingly, the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions or temporary restraining order to prevent breaches or threatened breaches of this agreement or to enforce specifically the performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security or a bond as a prerequisite to obtaining equitable relief.

 

 

7.            Public Announcements. The Shareholder agrees that no public release or announcement or statement concerning this agreement or concerning the transactions contemplated by the Merger Agreement shall be issued by the Shareholder without the prior written consent of Parent (which consent shall not be unreasonably withheld, conditioned or delayed), except (i) as required by applicable law or the rules or regulations of any applicable Governmental Entity or stock exchange to which the Shareholder is subject, in which case the Shareholder shall consult with Parent about, and allow Parent reasonable time to comment on, such release or announcement in advance of such issuance or (ii) for such releases, announcements or statements that are consistent with other such releases, announcements or statements made after the date of this agreement in compliance with this Section 7.

 

8.            Termination of this Agreement. This agreement will terminate automatically upon the earliest to occur of: (i) the termination of the Merger Agreement by either or both of the Company or Parent pursuant to Section 8.1 of the Merger Agreement, (ii) the Board of Directors of the Company making a Recommendation Change in accordance with Section 6.3 of the Merger Agreement, (iii) the entry into any amendment, modification, waiver or other change to any provision of the Merger Agreement, as in effect on the date hereof, without the Shareholder’s prior written consent, that (x) diminishes the amount or changes the form of the Merger Consideration, (y) extends the Termination Date (other than as contemplated by the terms of the Merger Agreement as in effect on the date hereof) or imposes any additional conditions or obligations that would reasonably be expected to materially impede or delay the consummation of the transactions contemplated by the Merger Agreement, or (z) otherwise would reasonably be expected to adversely affect the rights or obligations of the Shareholder in connection with the transactions contemplated by the Merger Agreement, and (iv) the Effective Time; provided, however, that this Section 8 and Sections 11 through 25 of this agreement shall survive such termination. Upon such termination, no party shall have any further obligations or liabilities hereunder; provided, however, such termination will not relieve any party from liability for any willful breach of this agreement prior to such termination.

 

9.            Certain Representations and Warranties.

 

(a)           The Shareholder hereby represents and warrants to Parent that the Shareholder has the right, power and authority to execute and deliver this agreement and to perform fully its obligations hereunder; such execution, delivery and performance does not and will not violate, or require any consent, approval, or notice under any law or result in the breach of, constitute a default under, result in the creation of any Lien on any Owned Shares pursuant to any contract or other instrument; this agreement has been duly executed and delivered by the Shareholder and, assuming due authorization, execution, and delivery hereof by Parent, constitutes a legal, valid and binding agreement of the Shareholder, enforceable in accordance with its terms (except to the extent that enforceability hereof may be limited by the Enforceability Exceptions); there is no claim, action, suit, dispute, investigation, examination, complaint or other proceeding pending against the Shareholder or, to the knowledge of the Shareholder, any other person or, to the knowledge of the Shareholder, threatened against the Shareholder or any other person, in each case, that restricts, limits, impairs or prohibits (or, if successful, would restrict, limit, impair or prohibit) the performance by the Shareholder of his or her covenants, agreements and obligations hereunder.

 

 

(b)           Parent hereby represents and warrants to the Shareholder that Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Indiana; Parent has the right, power and authority to execute and deliver this agreement and to perform fully its obligations hereunder; such execution, delivery and performance does not and will not violate, or require any consent, approval, or notice under any law or result in the breach of any contract; and this agreement has been duly executed and delivered by Parent and, assuming due authorization, execution, and delivery hereof by the Shareholder, constitutes a legal, valid and binding agreement of Parent, enforceable in accordance with its terms (except to the extent that enforceability hereof may be limited by the Enforceability Exceptions).

 

10.           Appraisal/Dissenters Rights. To the extent permitted by applicable law, the Shareholder hereby irrevocably and unconditionally waives and agrees not to exercise or perfect any rights of appraisal or rights to dissent from the Merger that the Shareholder may have with respect to the Owned Shares under applicable law.

 

11.           Governing Law. This agreement shall be governed and construed in accordance with the laws of the State of Indiana without regard to any applicable conflicts of law.

 

12.          Counterparts. This agreement may be executed in two or more counterparts (including by electronic means, including a “.pdf” format data file), all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

 

13.          Chosen Courts. Each party agrees that it will bring any action or proceeding in respect of any claim arising out of or related to this agreement or the transactions contemplated hereby exclusively in the Chosen Courts, and, solely in connection with claims arising under this agreement or the transactions that are the subject of this agreement, (i) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Courts, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party, and (iv) agrees that service of process upon such party in any such action or proceeding will be effective if notice is given in accordance with Section 22.

 

14.          Severability. Whenever possible, each provision or portion of any provision of this agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this agreement shall be reformed, construed and enforced in such jurisdiction such that the invalid, illegal or unenforceable provision or portion thereof shall be interpreted to be only so broad as is enforceable.

 

15.          Electronic Transmission. This agreement and any signed agreement or instrument entered into in connection with this agreement, and any amendments or waivers hereto or thereto, to the extent signed and delivered by email delivery of a “.pdf” format data file, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party hereto shall raise the use of email delivery of a “.pdf” format data file to deliver a signature to this agreement or any amendment hereto or the fact that any signature or agreement or instrument was transmitted or communicated through the email delivery of a “.pdf” format data file as a defense to the formation of a contract and each party hereto forever waives any such defense.

 

 

16.           Amendment. Subject to compliance with applicable law, this agreement may be amended by the parties hereto. This agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each of the parties hereto.

 

17.          Extension; Waiver. The Shareholder, with respect to Parent, and Parent, with respect to the Shareholder, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of Parent (in the case of the Shareholder) or the Shareholder (in the case of Parent), (b) waive any inaccuracies in the representations and warranties of Parent (in the case of the Shareholder) or the Shareholder (in the case of Parent) contained herein, and (c) waive compliance with any of the agreements or satisfaction of any conditions of Parent (in the case of the Shareholder) or the Shareholder (in the case of Parent) contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, 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.

 

18.          Interpretation. The parties have participated jointly in negotiating and drafting this agreement. In the event that an ambiguity or a question of intent or interpretation arises, this agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this agreement. The headings contained in this agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this agreement. Whenever the words “include,” “includes” or “including” are used in this agreement, they shall be deemed to be followed by the words “without limitation.” This agreement shall not be interpreted or construed to require any person to take any action, or fail to take any action, if to do so would violate any applicable law.

 

19.          Entire Agreement. This agreement (including the documents and the instruments referred to herein) and the Investor Agreement constitute the entire agreement among the parties and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

 

20.          Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE EXTENT PERMITTED BY LAW AT THE TIME OF INSTITUTION OF THE APPLICABLE LITIGATION, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 20.

 

 

21.           Assignment; Third-Party Beneficiaries. 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. Any purported assignment in contravention hereof shall be null and void. 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. This agreement is not intended to, and does not, confer upon any person other than the parties hereto any rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein.

 

22.           Notices. All notices, requests, instructions or other communications or documents to be given or made hereunder by one party to the other parties shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document if sent at or prior to 5:00 p.m. local time of the recipient, and on the next business day if sent after 5:00 p.m. local time of the recipient (in each case except in the event of any “bounceback” or similar non-transmittal message); or (d) on the day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent 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 22):

 

	(i)	if to the Shareholder, to:
		c/o Bremer Financial Corporation
		380 St. Peter Street.
		Suite 500.
		Saint Paul, Minnesota 55102
		Attention:	Jeanne Crain
			Mitch Bleske
		Email:	jhcrain@bremer.com
			mjbleske@bremer.com
		With a copy (which shall not constitute notice) to:
		Wachtell, Lipton, Rosen & Katz
		51 West 52nd Street
		New York, NY 10533
		Attention:	Matthew M. Guest
			Eric M. Feinstein
		Email:	MGuest@wlrk.com
			EMFeinstein@wlrk.com
		and

 

 

	(ii)	if to Parent, to:
		Old National Bancorp
		One Main Street
		Evansville, IN 47708
		Attention:	Nicholas J. Chulos, Executive Vice President, Chief Legal Officer and Corporate Secretary
		Email:	nick.chulos@oldnational.com
		With a copy (which shall not constitute notice) to:
		Squire Patton Boggs (US) LLP
		201 E. Fourth Street, Suite 1900
		Cincinnati, OH 45202
		Attention:	James J. Barresi
			Alison LaBruyere
		Email:	james.barresi@squirepb.com
			alison.labruyere@squirepb.com

 

23.          Expenses. All costs and expenses incurred in connection with this agreement and the transactions contemplated hereby shall be paid by the party incurring such expense.

 

24.          No Ownership. Nothing contained in this Agreement shall be deemed to vest in Parent any direct or indirect ownership or incidence of ownership of or with respect to any Owned Shares. All rights, ownership and economic benefits of and relating to the Owned Shares shall remain vested in and belong to the Shareholder, and Parent shall have no authority to direct the Shareholder in the voting or disposition of any of the Owned Shares, except as provided herein.

 

[Remainder of this page intentionally left blank. Signature page follows this page]

 

*        *        *

 

 

The undersigned has executed and delivered this agreement as of the day and year first above written.

 

	Very truly yours,
	[Director Name]

 

 

	Accepted as of the Date first above written:
	Old National Bancorp
	By:
	Name:
	Title:

 

 

Exhibit 10.3

 

INVESTOR AGREEMENT

 

Dated as of November 25, 2024

 

 

TABLE OF CONTENTS

 

Page

 

Article I Certain Agreements

2

 

1.1	Regulatory Matters	2
1.2	Transfer Restrictions	4
1.3	Director Appointment and Election	6

 

Article II REPRESENTATIONS AND WARRANTIES

6

  

2.1	Representations and Warranties of the Trustees	6
2.2	Representations and Warranties of Parent	7

 

Article III REGISTRATION

7

 

3.1	Demand Registrations	7
3.2	Piggyback Registrations	10
3.3	Shelf Registration Statement	11
3.4	Holdback Agreements	13
3.5	Registration Procedures	13
3.6	Registration Expenses	18
3.7	Miscellaneous	18
3.8	Registration Indemnification.	19

 

Article IV DEFINITIONS

21

  

4.1	Defined Terms	21
4.2	Other Defined Terms	25
4.3	Interpretation	26

 

Article V MISCELLANEOUS

26

 

5.1	Term	26
5.2	Notices	27
5.3	Amendment	27
5.4	Extension; Waiver	28
5.5	Assignment; Third-Party Beneficiaries	28
5.6	Severability	28
5.7	Counterparts	28
5.8	Entire Agreement	28
5.9	Governing Law; Jurisdiction; WAIVER OF JURY TRIAL	29
5.10	Specific Performance	29
5.11	Trustees’ Obligations	29
5.12	Trustees’ Capacity; No Recourse	30
5.13	Change in Trustees	30

 

 

INVESTOR AGREEMENT, dated as of November 25, 2024 (this “Agreement”), by and among Old National Bancorp, an Indiana corporation (“Parent”), and Caroline S. Johnson, Francis M. Miley, and Daniel C. Reardon, solely in their respective capacities as trustees (the “Trustees”) of the Otto Bremer Trust, a trust created under trust instrument dated May 22, 1944 (the “Trust Instrument”) and governed by the laws of Minnesota (the “Trust”) (in such capacities, the “Trustees”), and not in their respective individual capacities, shall be effective as of, and subject to, the closing of the Merger (the “Closing”).

 

W I T N E S S E T H:

 

WHEREAS, on November 25, 2024, Parent, Bremer Financial Corporation, a Minnesota corporation (the “Company”), and ONB Merger Sub, Inc., an Indiana corporation and a wholly-owned Subsidiary of Parent (“Merger Sub”), entered into an Agreement and Plan of Merger (as it may be amended, modified or otherwise supplemented from time to time, the “Merger Agreement”), pursuant to which, among other things, (i) Merger Sub will merge with and into the Company, with the Company as the surviving entity (the “Merger”) and (ii) immediately following the Merger, the Company will merge with and into Parent, with Parent as the surviving entity, in each case, on the terms and subject to the conditions set forth in the Merger Agreement;

 

WHEREAS, pursuant to and subject to the terms and conditions of the Merger Agreement, in connection with the consummation of the Merger, the Trustees and other Company shareholders will receive cash and shares of common stock, no par value per share, of Parent (the “Parent Common Stock”); and

 

WHEREAS, in connection with entry into the Merger Agreement, each of the parties hereto wishes to set forth in this Agreement certain terms and conditions regarding the Trustees’ ownership of the Shares and to establish certain rights and obligations of Parent and the Trustees with respect to the Shares, in each case contingent upon and effective as of the Closing.

 

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

 

Article I

 

Certain Agreements

 

1.1           Regulatory Matters.

 

(a)           Each of Parent and the Trustees shall, and shall cause each of its and their Affiliates, as applicable, to, (i) cooperate with each other and use reasonable best efforts to seek to ensure, including by communicating with each other with respect to the Trustees’ purchases of Parent Common Stock, that no Parent Control Effect or Excess Business Holdings Effect occurs, and (ii) except as contemplated and/or permitted by Section 1.1(b) and/or Section 1.1(c), take no action that would reasonably be expected to cause a Parent Control Effect or an Excess Business Holdings Effect. The term “Parent Control Effect” means any effect, event, circumstance, condition, occurrence or development resulting in the Trustees or any of their Affiliates (x) directly or indirectly having “control” of Parent or Parent Bank for purposes of the BHC Act, (y) becoming subject to any notice, approval or filing obligation under the BHC Act or the CBC Act as a result of their ownership of securities of Parent or Parent Bank, or (z) becoming subject to any requirement to serve as a source of financial strength to Parent or Parent Bank whether pursuant to the BHC Act or pursuant to any proposed capital or liquidity maintenance agreement or any similar agreement with any Governmental Authority (each of (x), (y) and (z), a “Parent Control Effect”). The term “Excess Business Holdings Effect” means any effect, event, circumstance, condition, occurrence or development that will cause the Trust to have excess business holdings, as such term is defined in Section 4943 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

 

  

(b)           Without limiting Section 1.1(a), if at any time the Trustees reasonably determine in good faith, after consultation with their outside counsel and Parent, that (i) the Trustees’ ownership of Parent Common Stock has become illegal or in contravention of any Order or, if applicable, a finding of the staff of the Federal Reserve Board that, following the consummation of the transactions contemplated by this Agreement, including the receipt of the Parent Stock Merger Consideration by the Trustees, none of the Trust, the Trustees or any of their affiliates controls Parent for purposes of the BHC Act or the CBC Act, or (ii) a Parent Control Effect or an Excess Business Holdings Effect has otherwise occurred, then Parent and the Trustees shall, and shall cause each of its or their Affiliates, as applicable, to, cooperate in good faith to take such actions as are mutually agreeable to cure such illegality, contravention, Parent Control Effect or Excess Business Holdings Effect.

 

(c)           Notwithstanding anything to the contrary herein, (i) nothing in this Agreement shall be construed to prohibit Parent or any of its Affiliates from undertaking any redemption, recapitalization or repurchase of Parent Common Stock, of securities or rights, options, or warrants to purchase Parent Common Stock, or securities of any type whatsoever that are, or may become, convertible into or exchangeable into or exercisable for Parent Common Stock in each case; provided, that if any such action by Parent or any of its Affiliates would reasonably be expected to result in a Parent Control Effect or an Excess Business Holdings Effect, Parent shall offer the Trustees the right to participate in such redemption, recapitalization or repurchase to avoid a Parent Control Effect or an Excess Business Holdings Effect, it being agreed that the Trustees shall be offered the same terms and conditions as those offered to the other participants in such redemption, recapitalization or repurchase (except that the Trustees shall be permitted to participate on a more than pro rata basis based on the Trustees’ Investor Percentage Interest to the extent necessary to avoid a Parent Control Effect or an Excess Business Holdings Effect) and the Trustees shall have the option, in the Trustees’ sole discretion, to determine whether to participate, and shall promptly inform Parent of their determination as to whether to participate, in such redemption, recapitalization or repurchase; and (ii) nothing in this Agreement shall be construed to prohibit the Trustees from receiving any Voting Securities from Parent in connection with a stock split, stock dividend, subdivision, reclassification, recapitalization, exchange or similar reorganization of Voting Securities in respect of Parent Common Stock; provided, that if the Trustees’ receipt of all or a portion of such Voting Securities would reasonably be expected to cause a Parent Control Effect or an Excess Business Holdings Effect, the Trustees shall have the option, in the Trustees’ sole discretion, to receive Nonvoting Parent Securities, instead of such Voting Securities, as necessary to avoid the occurrence of a Parent Control Effect or an Excess Business Holdings Effect, it being agreed that the Trustees’ receipt of securities from Parent in connection with any stock split, stock dividend, subdivision, reclassification, recapitalization, exchange or similar reorganization of Voting Securities in respect of Parent Common Stock shall be on the same terms and conditions as those applicable to the other holders of Parent Common Stock (except that the Trustees shall be permitted to receive Nonvoting Parent Securities to the extent necessary to avoid the occurrence of a Parent Control Effect or an Excess Business Holdings Effect as reasonably determined by the Trustees in good faith, after consultation with their outside counsel and Parent). If at any time an action of Parent or any of its Affiliates described in this Section 1.1(c) would reasonably be expected to cause a Parent Control Effect and the Trustees, in their sole discretion, determine not to avoid a Parent Control Effect, Parent and the Trustees shall cooperate with each other and use reasonable best efforts to promptly prepare and file, or cause to be prepared and filed, all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all necessary permits, consents, approvals and authorizations of the Federal Reserve Board pursuant to the BHC Act or the CBC Act, as applicable, and to comply with the terms and conditions of all such permits, consents, approvals and authorization of the Federal Reserve Board; and (y) Parent shall not, and shall cause its Affiliates not to, take any such action described in this Section 1.1(c) prior to the receipt of all necessary regulatory authorizations, consents, orders or approvals applicable to Parent from the Federal Reserve Board pursuant to the BHC Act or the CBC Act.

 

 

1.2           Transfer Restrictions.

 

(a)           Trustees agree that Trustees will not (i) at any time during the period commencing on the Closing Date and ending on the date that is one hundred eighty (180) days following the Closing Date (the “Initial Lock-Up Period”), Transfer any shares of Parent Common Stock received as part of the Parent Stock Merger Consideration (including any securities subsequently received in any stock dividend, stock split, recapitalization, recombination or other similar transaction in respect of such Parent Stock Merger Consideration), or interest therein, through hedging or other derivative transaction or otherwise, and (ii) during the period commencing on the first day following the last day of the Initial Lock-Up Period and continuing for one hundred and eighty (180) days (the “Extended Lock-Up Period” and together with the Initial Lock-Up Period, the “Lock-Up Period”), the Trustees will not Transfer any shares of Parent Common Stock received as part of the Parent Stock Merger Consideration (including any securities subsequently received in any stock dividend, stock split, recapitalization, recombination or other similar transaction in respect of such Parent Stock Merger Consideration), or interest therein, through hedging or other derivative transaction or otherwise in an amount in excess of twelve and a half percent (12.5%) of the total number of shares of such Parent Common Stock received as part of the Parent Stock Merger Consideration in each of the consecutive ninety (90)-day periods comprising the Extended Lock-Up Period; provided that the restrictions in this Section 1.2(a) shall not apply to a block trade or repurchase by Parent in compliance with Section 1.2(a).

 

(i)              During the Lock-Up Period, the Trustees may request in writing that Parent consider engaging in a block trade transaction pursuant to which Parent would purchase shares of Parent Common Stock from the Trustees upon mutually agreeable terms (“Block Trade Request”). Parent shall consider and promptly respond to any Block Trade Request; provided that Parent shall have no obligation to engage in a block trade transaction with the Trustee, and the Trustees acknowledge and agree that without the prior written consent of Parent, which consent shall not be unreasonably withheld, conditioned or delayed, the Trustees may not engage in a block trade transaction during the Lock-Up Period with any party other than Parent.

 

  

(ii)             Following the Lock-Up Period, and until such time as the Trustees collectively beneficially own such number of shares of Parent Common Stock that is less than or equal to one percent (1%) of the total issued and outstanding shares of Parent Common Stock, if the Trustees determine to sell shares of Parent Common Stock either on the open market or in privately negotiated transactions, the Trustees shall first offer to sell such shares of Parent Common Stock to Parent at a price to be determined by the Trustees (“Trustee Sale Offer”). Parent shall consider and respond as promptly as reasonably practicable (and within three (3) Business Days of such Trustee Sale Offer) to any Trustee Sale Offer; provided however, the Trustees shall have no obligation with respect to a Trustee Sale Offer for any shares of Parent Common Stock sold pursuant to a trading plan under Rule 10b5-1 under the Exchange Act.

 

(iii)            Until the Trustees collectively beneficially own such number of shares of Parent Common Stock that is less than or equal to one percent (1%) of the total issued and outstanding shares of Parent Common Stock, if Parent determines to repurchase shares of Parent Common Stock either on the open market or in privately negotiated transactions or through accelerated share repurchase programs, Parent shall first offer to repurchase shares of Parent Common Stock from the Trustee at a price to be determined by Parent (“Repurchase Offer”). Trustees shall consider and respond as promptly as reasonably practicable (and within three (3) Business Days of such Repurchase Offer) to any Repurchase Offer; provided however, Parent shall have no obligation with respect to a Repurchase Offer for any shares of Parent Common Stock repurchased pursuant to a trading plan under Rule 10b5-1 under the Exchange Act unless such repurchase would reasonably be expected to result in (x) the Trustees collectively beneficially owning such number of shares of Parent Common Stock that is equal to or more than fifteen percent (15%) of the total issued and outstanding shares of Parent Common Stock, (y) a Parent Control Effect or (z) an Excess Business Holdings Effect.

 

(b)           The restrictions set forth in this Section 1.2 shall not apply to Transfers of Parent Common Stock received as part of the Parent Stock Merger Consideration (including any securities subsequently received in any stock dividend, stock split, recapitalization, recombination or other similar transaction in respect of such Parent Stock Merger Consideration), or interest therein, through hedging or other derivative transaction or otherwise (i) to Parent; (ii) as permitted by Section 1.1; or (iii) pursuant to any transaction approved by the Board of Directors of Parent (the “Board”) (including any committee thereof), including any merger, amalgamation, consolidation, exchange or other similar reorganization or series of related transactions involving Parent and a third party (including by way of a tender offer or exchange offer). Further, the Trustees agree and consent to the entry of stop transfer instructions with Parent and its transfer agent and registrar against the Transfer in violation of this Agreement of shares of Parent Common Stock acquired by the Trustees as a part of the Parent Stock Merger Consideration (including any securities subsequently received in any stock dividend, stock split, recapitalization, recombination or other similar transaction in respect of such Parent Stock Merger Consideration), or interest therein, through hedging or other derivative transaction or otherwise. Any such stop transfer instruction shall terminate upon expiration of the Lock-Up Period. In furtherance of the foregoing, during the Lock-Up Period, Parent is hereby authorized to decline to make or authorize any Transfer of securities if the Transfer would constitute a violation or breach of this Agreement. For purposes of this Agreement, “Transfer” means to offer, sell, contract to sell, pledge, assign, distribute by gift or donation, or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition of (whether by actual disposition or effective economic disposition due to cash settlement or otherwise)), directly or indirectly, any shares of Parent Common Stock or any securities convertible into, or exercisable or exchangeable for such capital stock, or publicly announce an intention to effect any such transaction.

 

  

1.3           Director Appointment and Election.

 

(a)           Parent agrees to take all action necessary so that, as of the Effective Time:

 

(i)              the number of directors constituting the Board shall be increased by one (1); and

 

(ii)             the Trust Designee shall be appointed as a director of the Board (“Director”) and shall serve in accordance with the corporate governance guidelines and standards applicable to all Parent directors.

 

(b)           Parent shall indemnify, or provide for the indemnification of, the Trust Designee and provide the Trust Designee with director and officer insurance to the same extent it indemnifies and provides insurance for the non-executive members of the Board and also provide fees and expense reimbursement to the Trust Designee to the same extent it provides fees and expense reimbursement to the non-executive members of the Board. Parent acknowledges and agrees that such obligation to indemnify the Trust Designee shall be the primary source of indemnification and recovery of such Trust Designee in connection therewith and any obligation on the part of the Trustees or any of their Affiliates to indemnify such Trust Designee or any recovery such Trust Designee may have under any director and officer or trustee insurance maintained by the Trustees or any of its Affiliates shall be secondary.

 

(c)           Notwithstanding anything herein to the contrary, in the event that it is reasonably expected that the provisions of this Section 1.3 and/or the position of the Trust Designee on the Board will cause a Parent Control Effect or an Excess Business Holdings Effect, Parent and the Trustees agree to cooperate in good faith to take such actions as are mutually agreeable to enable the Trust Designee to, subject to the other rights and restrictions set forth in this Section 1.3, serve as a Director without causing a Parent Control Effect or an Excess Business Holdings Effect.

 

Article II

 

REPRESENTATIONS AND WARRANTIES

 

2.1           Representations and Warranties of the Trustees. The Trustees hereby represent and warrant to Parent as follows:

 

(a)           The Trustees have all requisite power and authority to execute and deliver this Agreement, and to perform their obligations under this Agreement.

 

(b)           The execution and delivery by the Trustees of this Agreement and the performance by them of their obligations under this Agreement do not and will not conflict with or violate any provision of, or require the consent or approval of any Person (except for any such consents or approvals which have been obtained) under, (x) Applicable Law, (y) the Trust’s organizational documents or (z) any material contract or agreement to which the Trustees are a party.

 

  

(c)           This Agreement has been duly executed and delivered by the Trustees and, assuming the due authorization, execution and delivery by Parent, constitutes a legal, valid and binding obligation of the Trustees, enforceable against the Trustees in accordance with its terms, subject to bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

 

2.2           Representations and Warranties of Parent. Parent hereby represents and warrants to the Trustees as follows:

 

(a)           Parent is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Indiana. Parent has all requisite power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement.

 

(b)           The execution and delivery by Parent of this Agreement and the performance of the obligations of Parent under this Agreement do not and will not conflict with or violate any provision of, or require the consent or approval of any Person (except for any such consents or approvals which have been obtained) under, (x) Applicable Law, (y) the organizational documents of Parent or (z) any material contract or agreement to which Parent is a party.

 

(c)           The execution and delivery by Parent of this Agreement and the performance of the obligations of Parent under this Agreement have been duly authorized by all necessary corporate action on the part of Parent and does not require any corporate or other action on the part of any trustee or beneficial or record owner of any Equity Interest in it, other than those which have been obtained prior to the date hereof and are in full force and effect.

 

(d)           This Agreement has been duly executed and delivered by Parent and, assuming the due authorization, execution and delivery by the Trustees, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, subject to bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

 

Article III

 

REGISTRATION

 

3.1           Demand Registrations.

 

(a)           Subject to the terms and conditions hereof (x) solely during any period that Parent is then-ineligible under Applicable Law to register Registrable Securities on Form S-3 pursuant to Section 3.3 or (y) following the expiration of Parent’s obligation to keep the Shelf Registration Statement continuously effective pursuant to Section 3.3(b), but only if there is no Shelf Registration Statement then in effect, the Trustees shall be entitled to make two (2) written requests of Parent (each, a “Demand”) for registration under the Securities Act of an amount of Registrable Securities then held by the Trustees that equals or is greater than the Registrable Amount (a “Demand Registration”); provided that the Trustees shall not make a Demand that would require Parent to register Registrable Securities prior to the expiration of the transfer restrictions set forth in Section 1.2 and provided further that the Trustees shall not be entitled to more than two (2) Demands during any twelve (12) month period. Thereupon Parent will, subject to the terms of this Agreement, use its reasonable best efforts to effect the registration as promptly as practicable under the Securities Act of:

 

(i)              the Registrable Securities which Parent has been so requested to register by the Trustees for disposition in accordance with the intended method of disposition stated in such Demand; and

 

   

(ii)             all shares of Parent Common Stock which Parent may elect to register in connection with any offering of Registrable Securities pursuant to this Section 3.1;

 

but, in each case, subject to Section 3.1(f), and all to the extent necessary to permit the orderly disposition (in accordance with the intended methods thereof) of the Registrable Securities and the additional shares of Parent Common Stock, if any, to be so registered; provided, that Parent may use a registration statement on Form S-3 or any successor form thereto if Parent would qualify to use such form within thirty (30) days after the date on which the Demand Registration is given and Parent shall not be required to file such registration statement until it is so qualified.

 

(b)           A Demand shall specify: (i) the number of Registrable Securities requested to be registered in such Demand Registration, (ii) the intended method of disposition in connection with such Demand Registration, to the extent then known, including whether such Demand Registration will be an Underwritten Offering and (iii) the estimated gross proceeds of such Demand Registration, which may not be less than the Registrable Amount.

 

(c)           A Demand Registration shall not be deemed to have been effected and shall not count as a Demand Registration (i) unless a registration statement with respect thereto has become effective and has remained effective for a period of at least sixty (60) days or such shorter period in which all Registrable Securities included in such Demand Registration have actually been sold thereunder (provided, that such period shall be extended for a period of time equal to the period the holder of Registrable Securities refrains from selling any securities included in such registration statement at the request of Parent or the lead managing underwriter(s) pursuant to the provisions of this Agreement) or (ii) if, after it has become effective, such Demand Registration becomes subject, prior to sixty (60) days after effectiveness, to any stop order, injunction or other order or requirement of the Commission or other Governmental Authority such that no sales are possible thereunder for a period of ten (10) consecutive days or more, other than by reason of any act or omission by the Trustees. If Parent postpones or suspends a Demand Registration, the Trustees shall be entitled to withdraw their Demand and, if the Trustees do so, such Demand shall not count against the limitation on the number of the Trustees’ Demands set forth in Section 3.1(a).

 

(d)           Demand Registrations shall be on such appropriate registration form of the Commission as shall be reasonably selected by Parent and reasonably acceptable to the Trustees.

 

 

(e)           Parent shall not be obligated to (i) subject to Section 3.1(c), maintain the effectiveness of a registration statement under the Securities Act filed pursuant to a Demand Registration for a period longer than ninety (90) days or (ii) effect any Demand Registration (A) within six (6) months of a “firm commitment” Underwritten Offering in which the Trustees’ were offered “piggyback” rights pursuant to Section 3.2 (subject to Section 3.2(b)) and at least 75% of the number of Registrable Securities requested by the Trustees to be included in such Demand Registration were included and sold, (B) within six (6) months of the completion of any other Demand Registration or any Underwritten Offering pursuant to any Shelf Registration Statement, (C) if, in Parent’s reasonable judgment, it is not feasible for Parent to proceed with the Demand Registration because of the unavailability of audited or other required financial statements or other required information; provided, that Parent shall use its reasonable best efforts to obtain such financial statements or information as soon as practicable or (D) for an amount that is less than the Registrable Amount.

 

(f)           Notwithstanding anything to the contrary contained in this Agreement, Parent shall be entitled to postpone (upon written notice to the Trustees) the filing or the effectiveness of, or suspend the use of, a registration statement for any Demand Registration in the event of a Blackout Period until the expiration of the applicable Blackout Period. The Trustees agree to suspend the use of any registration statement in connection with any sale or purchase, or offer to sell or purchase, Registrable Securities promptly upon receipt of such notice.

 

(g)           If, in connection with a Demand Registration that involves an Underwritten Offering, the lead managing underwriter(s) advise(s) Parent that, in its (their) opinion, the inclusion of all of the securities sought to be registered in connection with such Demand Registration would adversely affect the price, timing or distribution of the securities offered, the market for the securities offered or the success of such Demand Registration, then Parent shall include in such registration statement only such securities as Parent is advised by such lead managing underwriter(s) can be sold without such adverse effect as follows and in the following order of priority: (i) first, up to the number of Registrable Securities requested to be included in such Demand Registration by the Trustees, which, in the opinion of the lead managing underwriter(s), can be sold without such an effect; (ii) second, securities Parent proposes to sell; and (iii) third, all other securities of Parent duly requested to be included in such registration statement, pro rata on the basis of the amount of such other securities requested to be included or such other allocation method determined by Parent.

 

(h)           Any time that a Demand Registration involves an Underwritten Offering, the Trustees shall select the investment banker(s) and manager(s) that will serve as managing underwriters (including which such managing underwriters will serve as lead or co-lead) and underwriters with respect to the offering of such Registrable Securities; provided, that such investment banker(s) and manager(s) shall be acceptable to Parent (such acceptance not to be unreasonably withheld, conditioned or delayed).

 

(i)            The Trustees may, by written notice to Parent, withdraw their Registrable Securities from a Demand Registration at any time prior to the effectiveness of the applicable registration statement, provided, that the Trustees reimburse Parent for all reasonable, out of pocket expenses incurred by Parent in connection with such Demand Registration. Upon receipt of notice from the Trustees to such effect, or if such withdrawal shall reduce the number of Registrable Securities sought to be included in such Demand Registration below the Registrable Amount, Parent shall cease all efforts to seek effectiveness of the applicable registration statement, unless Parent intends to effect a primary offering of securities pursuant to such registration statement. In any such event, such Demand Registration shall count as a Demand Registration for purposes of the limitations set forth in Section 3.1(a).

 

  

3.2           Piggyback Registrations.

 

(a)           From and after the expiration of the transfer restrictions set forth in Section 1.2, subject to the terms and conditions hereof, whenever Parent proposes to register any Parent Common Stock under the Securities Act (other than a registration by Parent (i) on Form S-4 or any successor form thereto (or similar form that relates to a transaction subject to Rule 145 under the Securities Act or any successor rule thereto), (ii) on Form S-8 or any successor form thereto (or other registration solely relating to an offering or sale to employees or directors of Parent pursuant to any employee stock plan or other employee benefit arrangement), (iii) for an offering solely of debt that is convertible into an Equity Interest of Parent, (iv) in connection with any dividend or distribution reinvestment or similar plan or (v) pursuant to Section 3.1) (such registration other than those referred to in the immediately preceding parenthetical, a “Piggyback Registration”), whether for its own account or for the account of others, Parent shall give the Trustees prompt written notice thereof (but not less than ten (10) Business Days prior to the filing by Parent with the Commission of any registration statement with respect thereto). Such notice (a “Piggyback Notice”) shall specify the number of shares of Parent Common Stock proposed to be registered, the proposed date of filing of such registration statement with the Commission, the proposed means of distribution, the proposed managing underwriter(s) (if any) and a good faith estimate by Parent of the proposed minimum offering price of such shares of Parent Common Stock, in each case to the extent then known. Subject to Section 3.2(b) and the expiration of the transfer restrictions set forth in Section 1.2, Parent shall include in each such Piggyback Registration all Registrable Securities held by the Trustees with respect to which Parent has received a written request (which written request shall specify the number of Registrable Securities requested to be disposed of by the Trustees) for inclusion therein within five (5) Business Days after such Piggyback Notice is received by the Trustees.

 

(b)           If, in connection with a Piggyback Registration that involves an Underwritten Offering, the lead managing underwriter(s) advises Parent that, in its opinion, the inclusion of all the shares of Parent Common Stock sought to be included in such Piggyback Registration by (i) Parent, (ii) other Persons who have sought to have shares of Parent Common Stock registered in such Piggyback Registration pursuant to rights to demand (other than pursuant to so-called “piggyback” or other incidental or participation registration rights) such registration (such Persons being “Other Demanding Sellers”), (iii) the Trustees and (iv) any other proposed sellers of shares of Parent Common Stock (such Persons being “Other Proposed Sellers”), as the case may be, would adversely affect the price, timing or distribution of the securities offered, the market for the securities offered or the success of such Piggyback Registration, then Parent shall include in the registration statement applicable to such Piggyback Registration only such shares of Parent Common Stock as Parent is so advised by such lead managing underwriter(s) can be sold without such an effect, as follows and in the following order of priority:

  

(i)              if the Piggyback Registration relates to an offering for Parent’s own account, then (A) first, such number of shares of Parent Common Stock to be sold by Parent, and (B) second, Registrable Securities of the Trustees and shares of Parent Common Stock sought to be registered by Other Demanding Sellers and by Other Proposed Sellers, pro rata on the basis of the number of Registrable Securities proposed to be sold by the Trustees and the number of shares of Parent Common Stock proposed to be sold by such Other Demanding Sellers and by such Other Proposed Sellers; or

 

  

(ii)             if the Piggyback Registration relates to an offering other than for Parent’s own account, then (A) first, such number of shares of Parent Common Stock sought to be registered by the Other Demanding Sellers and (B) second, shares of Parent Common Stock to be sold by Parent, Registrable Securities of the Trustees and shares of Parent Common Stock sought to be registered by Other Proposed Sellers, pro rata on the basis of the number of shares of Parent Common Stock proposed to be sold by Parent, the Trustees and such Other Proposed Sellers.

 

(c)           In connection with any Underwritten Offering under this Section 3.2, Parent shall not be required to include the Registrable Securities of the Trustees in the Underwritten Offering unless the Trustees accept the terms of the underwriting as agreed upon in good faith between Parent and the lead managing underwriter(s), which shall be selected by the Parent.

 

(d)           If, at any time after giving written notice of its intention to register any shares of Parent Common Stock as set forth in this Section 3.2, Parent shall determine for any reason not to register such shares of Parent Common Stock, Parent may, at its election, give written notice of such determination to the Trustees and thereupon shall be relieved of its obligation to register any Registrable Securities in connection with such particular withdrawn or abandoned Piggyback Registration.

 

3.3           Shelf Registration Statement.

 

(a)           Subject to the terms and conditions hereof, and further subject to the availability of a registration statement on Form S-3 or any successor form thereto (“Form S-3”) to Parent, the Trustees may by written notice delivered to Parent (the “Shelf Notice”) require Parent to use commercially reasonable efforts to file as soon as reasonably practicable (but in no event earlier than the expiration of the transfer restrictions set forth in Section 1.2), and to use reasonable best efforts to cause to be declared effective by the Commission as soon as reasonably practicable after such filing date, a Form S-3 providing for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (the “Shelf Registration Statement”) relating to the offer and sale, from time to time, of an amount of Registrable Securities then held by the Trustees that equals or is greater than the Registrable Amount; provided the Trustees shall not provide a Shelf Notice that would require Parent to register Registrable Securities prior to the expiration of the transfer restrictions set forth in Section 1.2. Notwithstanding the foregoing, if Parent is a well-known seasoned issuer (as defined in Rule 405 under the Securities Act), a Shelf Notice shall not be required and Parent shall use reasonable best efforts to file, as soon as reasonably practicable following the expiration of the transfer restrictions set forth in Section 1.2, the Shelf Registration Statement in the form of an automatic shelf registration statement (as defined in Rule 405 under the Securities Act) or any successor form thereto registering all Registrable Securities then held by the Trustees.

 

 

(b)           Subject to Section 3.3(c), Parent will use its reasonable best efforts to keep the Shelf Registration Statement continuously effective under the Securities Act until the earliest of (i) three (3) years after the Shelf Registration Statement has been declared effective; (ii) the date on which all Registrable Securities covered by the Shelf Registration Statement have been sold thereunder in accordance with the plan and method of distribution disclosed in the prospectus included in the Shelf Registration Statement, or otherwise cease to be Registrable Securities; and (iii) the date on which this Agreement terminates pursuant to Section 5.1. Subject to Section 3.3(c), if any Shelf Registration Statement ceases to be effective in accordance with clause (i) of the immediately preceding sentence, Parent will use its reasonable best efforts to as soon as reasonably practicable cause a new Shelf Registration Statement to be filed and become effective under the Securities Act covering all Registrable Securities covered by such original Shelf Registration Statement that had not been sold thereunder.

  

(c)           Notwithstanding anything to the contrary contained in this Agreement, Parent shall be entitled, from time to time, by providing written notice to the Trustees, to require the Trustees to suspend the use of the prospectus for sales of Registrable Securities under the Shelf Registration Statement during any Blackout Period and the Trustees agree to suspend the use of the prospectus for sales of Registrable Securities under the Shelf Registration Statement in connection with any sale or purchase, or offer to sell or purchase, Registrable Securities promptly upon receipt of such notice.

 

(d)           At any time that a Shelf Registration Statement is effective, if the Trustees deliver a notice to Parent stating that they intend to sell all or part of the Trustees’ Registrable Securities included on the Shelf Registration Statement (a “Shelf Offering”), including in an Underwritten Offering, then Parent shall promptly amend or supplement the Shelf Registration Statement as may be necessary in order to enable such Registrable Securities to be distributed pursuant to the Shelf Offering; provided, that Parent shall not be obligated to effect more than two (2) Shelf Offerings during any twelve (12)-month period or to effect any Shelf Offering for less than the Registrable Amount.

 

(e)           In connection with any underwritten Shelf Offering, if the lead managing underwriter(s) advises Parent and the Trustees that, in its opinion, the inclusion of all of the securities sought to be sold in connection with such Shelf Offering would adversely affect the price, timing or distribution of the securities offered, the market for the securities offered or the success of such Shelf Offering, then there shall be included in such Shelf Offering only such securities as the Trustees are advised by such lead managing underwriter(s) can be sold without such adverse effect, and such number of Registrable Securities shall be allocated in the same manner as described in Section 3.1(f). Except as otherwise expressly specified in this Section 3.3, any Shelf Offering shall be subject to the requirements, limitations and other provisions of Section 3.1(e)(ii) and Section 3.1(i) as would be applicable to a Demand Registration (i.e., as if such Shelf Offering were a Demand Registration).

 

(f)            If any of the Registrable Securities is to be sold in an underwritten Shelf Offering initiated by the Trustees, the Trustees shall select the investment banker(s) and manager(s) that will serve as managing underwriters (including which such managing underwriters will serve as lead or co-lead) and underwriters with respect to the offering of such Registrable Securities; provided, that such investment banker(s) and manager(s) shall be acceptable to Parent (such acceptance not to be unreasonably withheld, conditioned or delayed).

 

 

3.4           Holdback Agreements. In connection with any Underwritten Offering of Parent Common Stock, the Trustees agree to enter into customary agreements restricting the public sale or distribution of equity securities of Parent (including sales pursuant to Rule 144 under the Securities Act) to the extent required by the lead managing underwriter(s) with respect to an applicable Underwritten Offering during the period commencing on the date of the request (which shall be no earlier than the expected “pricing” of such Underwritten Offering) and continuing for not more than ninety (90) days after the date of the “final” prospectus (or “final” prospectus supplement if the Underwritten Offering is made pursuant to a Shelf Registration Statement), pursuant to which such Underwritten Offering shall be made, or such lesser period as is required by the lead managing underwriter(s); provided, that this provision shall be applicable to the Trustees only if, for so long as and to the extent that Parent is subject to the same or greater restrictions. In connection with any Underwritten Offering of Parent, to the extent required by the lead managing underwriter(s) for the applicable Underwritten Offering, Parent will not effect any public sale or distribution of any common equity (or securities convertible into or exchangeable or exercisable for common equity), during the period so required.

  

3.5           Registration Procedures.

 

(a)           If and whenever Parent is required to effect the registration of any Registrable Securities under the Securities Act as provided in Section 3.1 or Section 3.3 or in an Underwritten Offering in connection with a Piggyback Registration, Parent shall as promptly as reasonably practicable:

 

(i)              prepare and file with the Commission a registration statement to effect such registration in accordance with the intended method or methods of distribution of such securities and thereafter use reasonable best efforts to cause such registration statement to become and remain effective pursuant to the terms of this Article III; provided, however, that Parent may discontinue any registration of its securities which are not Registrable Securities at any time prior to the effective date of the registration statement relating thereto; provided, further, that before filing such registration statement or any amendments thereto, Parent will furnish to the Trustees, their counsel and the lead managing underwriter(s), if any, copies of all such documents proposed to be filed, which documents will be subject to the review and reasonable comment of such counsel, and other documents reasonably requested by such counsel, including any comment letter from the Commission, and, if requested by such counsel, provide such counsel reasonable opportunity to participate in the preparation of such registration statement and each prospectus included therein and such other opportunities to conduct a reasonable investigation within the meaning of the Securities Act, including reasonable access to Parent’s books and records, officers, accountants and other advisors; provided, that Parent shall not have any obligation to modify any information if Parent reasonably expects that so doing would cause (i) the registration statement to contain an 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 (ii) the prospectus to contain an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;

 

(ii)             prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective pursuant to the terms of this Article III, and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement;

 

  

(iii)            if requested by the lead managing underwriter(s), if any, or the Trustees, as promptly as reasonably practicable, include in a prospectus supplement or post-effective amendment such information as the lead managing underwriter(s), if any, and such Trustees may reasonably request in order to permit the intended method of distribution of such securities and make all required filings of such prospectus supplement or such post-effective amendment as soon as reasonably practicable after Parent has received such request; provided, however, that Parent shall not be required to take any actions under this Section 3.5(a)(iii) that are not, in the opinion of counsel for Parent, in compliance with Applicable Law;

 

(iv)            furnish, without charge, to the Trustees and each underwriter, if any, of the securities being sold by the Trustees such number of conformed copies of such registration statement and of each amendment and supplement thereto, such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and each free writing prospectus (as defined in Rule 405 of the Securities Act) (a “Free Writing Prospectus”) utilized in connection therewith and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents as the Trustees and underwriter, if any, may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by the Trustees;

 

(v)            use reasonable best efforts to register or qualify or cooperate with the Trustees, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities covered by such registration statement under such other securities laws or “blue sky” laws of such jurisdictions as the Trustees and any underwriter of the securities being sold by the Trustees shall reasonably request, and to keep each such registration or qualification (or exemption therefrom) effective during the period such registration statement is required to be kept effective and take any other action which may be necessary to enable the Trustees and underwriters to consummate the disposition in such jurisdictions of the Registrable Securities owned by the Trustees, except that Parent shall not for any such purpose be required to (A) qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this clause (v) be obligated to be so qualified, (B) subject itself to taxation in any such jurisdiction or (C) file a general consent to service of process in any such jurisdiction;

 

(vi)            use reasonable best efforts to cause such Registrable Securities to be listed on each securities exchange on which similar securities issued by Parent are then listed;

 

(vii)           use reasonable best efforts to provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement;

 

(viii)          enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in underwritten offerings, which the Trustees shall also be required to enter into) and use its reasonable best efforts to take all such other actions reasonably requested by the Trustees (including those reasonably requested by the lead managing underwriter(s), if any) to expedite or facilitate the disposition of such Registrable Securities;

 

  

(ix)            in connection with an Underwritten Offering, use reasonable best efforts to obtain for the Trustees and underwriter(s) (A) opinions of counsel for Parent, covering the legal matters customarily covered in opinions requested of legal counsel to issuers in underwritten secondary offerings and (B) “comfort” letters and updates thereof (or, in the case of any such Person which does not satisfy the conditions for receipt of a “comfort” letter specified in Statement on Auditing Standards No. 72, an “agreed upon procedures” letter) signed by the independent public accountants who have certified Parent’s financial statements and, to the extent required, any other financial statements included in such registration statement, covering the matters customarily covered in “comfort” letters in connection with underwritten offerings;

 

(x)             make available for inspection by the Trustees, any underwriter participating in any disposition pursuant to any registration statement, and any attorney, accountant or other agent or representative retained in connection with such offering by the Trustees or underwriter (collectively, the “Inspectors”), financial and other records, pertinent corporate documents and instruments of Parent and other relevant information of Parent (collectively, the “Records”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility; provided, however, that Parent shall not be required to provide any information under this clause (x) if (A) Parent believes, after consultation with counsel for Parent, that to do so would cause Parent to forfeit an attorney-client or other applicable privilege that was applicable to such information or (B) if either (1) Parent has requested and been granted from the Commission confidential treatment of such information contained in any filing with the Commission or documents provided supplementally or otherwise or (2) Parent reasonably determines in good faith that such Records are confidential and so notifies the Inspectors in writing; unless, prior to furnishing any such information with respect to clause (1) or (2), the Trustees enter into and each of its applicable Inspectors enter into, a customary confidentiality agreement; provided, further, that the Trustees agree that they will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction or by another Governmental Authority, give notice to Parent and allow Parent, at its expense, to undertake appropriate action seeking to prevent disclosure of the Records deemed confidential;

 

(xi)            as promptly as practicable notify the Trustees and the underwriters, if any, of the following events: (A) the filing of the registration statement, any amendment thereto, the prospectus or any prospectus supplement related thereto or post-effective amendment to the registration statement or any Free Writing Prospectus utilized in connection therewith, and, with respect to the registration statement or any post-effective amendment thereto, when the same has become effective; (B) any request or comments, oral or written, by the Commission or any other U.S. or state Governmental Authority for amendments or supplements to the registration statement or the prospectus or for additional information; (C) the issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings by any Person for that purpose; (D) the receipt by Parent of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction or the initiation or threat of any proceeding for such purpose; (E) if at any time the representations and warranties of Parent contained in any underwriting agreement contemplated by Section 3.5(a)(viii) cease to be true and correct in any material respect; and (F) upon becoming aware of the happening of any event that makes any statement made in such registration statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in such registration statement, prospectus or documents so that, in the case of the registration statement, it will not 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 that in the case of the prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and, at the request of the Trustees, promptly prepare and furnish to the Trustees a reasonable number of copies of a supplement to or an amendment of such registration statement or prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

 

  

(xii)            use reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of such registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction at the earliest reasonable practicable date, except that Parent shall not for any such purpose be required to (A) qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this clause (xii) be obligated to be so qualified, (B) subject itself to taxation in any such jurisdiction or (C) file a general consent to service of process in any such jurisdiction;

 

(xiii)          cooperate with the Trustees and the lead managing underwriter(s) to facilitate the timely preparation and delivery of certificates (which shall not bear any restrictive legends unless required under Applicable Law) representing securities sold under any registration statement, and enable such securities to be in such denominations and registered in such names as the lead managing underwriter(s) or the Trustees may request and keep available and make available to Parent’s transfer agent prior to the effectiveness of such registration statement a supply of such certificates;

 

(xiv)          cooperate with the Trustees and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA; and

 

(xv)           have appropriate officers of Parent prepare and make presentations at a reasonable and customary number of “road shows” and before analysts and rating agencies, as the case may be, and other information meetings reasonably organized by the underwriters and otherwise use its reasonable best efforts to cooperate as reasonably requested by the Trustees and the underwriters in the offering, marketing or selling of the Registrable Securities.

 

 

(b)           Parent may require the Trustees and each underwriter, if any, to furnish Parent in writing such information regarding the Trustees or underwriter and the distribution of such Registrable Securities as Parent may from time to time reasonably request in writing to complete or amend the information required by such registration statement. The Trustees shall as promptly as practicable notify in writing Parent and the underwriters, if any, with respect to any registered offering of Registrable Securities if at any time the representations and warranties of the Trustees contained in any underwriting agreement cease to be true and correct in any material respect and upon becoming aware of the happening of any event that makes any statement made in such registration statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference, to the extent based on information provided by the Trustees, untrue in any material respect or that requires the making of any changes in such registration statement, prospectus or documents so that, in the case of the registration statement, it will not 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 that in the case of the prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent based on information provided by the Trustees.

  

(c)           The Trustees agree that promptly upon receipt of any notice from Parent of the happening of any event of the kind described in clause (B), (C), (D), (E) or (F) of Section 3.5(a)(xi), the Trustees shall forthwith discontinue the Trustees’ disposition of Registrable Securities pursuant to the applicable registration statement and prospectus relating thereto until the Trustees’ receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.5(a)(xi), or until it is advised in writing by Parent that the use of the applicable prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such prospectus; provided, however, that Parent shall extend the time periods under Section 3.1(e) with respect to the length of time that the effectiveness of a registration statement must be maintained by the amount of time the holder is required to discontinue disposition of such securities.

 

(d)           With a view to making available to the holders of Registrable Securities the benefits of Rule 144 under the Securities Act and any other rule or regulation of the Commission that may at any time permit a holder to sell securities of Parent to the public without registration or pursuant to a registration on Form S-3 (or any successor form), Parent shall:

 

(i)              use reasonable best efforts to make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act;

 

(ii)             use reasonable best efforts to file with the Commission in a timely manner all reports and other documents required of Parent under the Exchange Act, at any time when Parent is subject to such reporting requirements; and

 

(iii)            furnish to any holder so long as the holder owns Registrable Securities, promptly upon request, a written statement by Parent as to its compliance with the reporting requirements of Rule 144 under the Securities Act and of the Exchange Act, a copy of the most recent annual or quarterly report of Parent, and such other reports and documents so filed or furnished by Parent with the Commission as such holder may reasonably request in connection with the sale of Registrable Securities without registration (in each case to the extent not readily publicly available).

 

 

3.6           Registration Expenses. All fees and expenses incident to Parent’s performance of its obligations under this Article III, including (a) all registration and filing fees, including all fees and expenses of compliance with securities and “blue sky” laws and all fees and expenses associated with filings required to be made with FINRA (including, if applicable, the fees and expenses of any “qualified independent underwriter” as such term is defined in FINRA Rule 5121 or any brokers’ or dealers’ expenses, including road show and travel expenses), (b) all printing (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with the Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by a holder of Registrable Securities) and copying expenses, (c) all messenger, telephone and delivery expenses, (d) all fees and expenses of Parent’s independent certified public accountants and counsel (including with respect to “comfort” letters and opinions) and (e) expenses of Parent incurred in connection with any “road show”, shall be borne solely by Parent whether or not any registration statement is filed or becomes effective. The Trustees shall pay (i) all underwriters’, brokers’ or dealers’ discounts or commissions and transfer taxes, if any, relating to the sale of the Trustees’ Registrable Securities pursuant to any registration and (ii) all underwriters’, brokers’ or dealers’ expenses, including marketing, road show and travel expenses relating to the sale of the Trustee’s Registrable Securities, and (iii) the Trustees’ legal fees and expenses. Notwithstanding the foregoing, in the event of an Underwritten Offering initiated by the Trustees in which Parent is not, and no other Person is, otherwise registering any Parent Common Stock, the Trustees shall reimburse the Company for all reasonable, out-of-pocket fees and expenses incurred by the Company in connection with such Underwritten Offering, including the fees and expenses specified in this Section 3.6(a)-(e). The obligation of Parent to bear and pay the fees and expenses as set forth in this Section 3.6 shall apply irrespective of whether a registration, once properly demanded or requested, becomes effective or is withdrawn or suspended.

  

3.7           Miscellaneous. Not less than seven (7) Business Days before the expected filing date of each registration statement pursuant to this Agreement, Parent shall notify the Trustees, if the Trustees have timely provided the requisite notice hereunder entitling the Trustees to register Registrable Securities in such registration statement, of the information, documents and instruments from the Trustees that Parent or any underwriter reasonably requests in connection with such registration statement, including a questionnaire, custody agreement, power of attorney, lock-up letter and underwriting agreement (the “Requested Information”). If Parent has not received, on or before the Business Day before the expected filing date, the Requested Information from the Trustees, Parent may file the registration statement without including Registrable Securities of the Trustees. The failure to so include in any registration statement the Registrable Securities of the Trustees (with regard to that registration statement) shall not result in any liability on the part of Parent to such holder.

 

 

3.8           Registration Indemnification.

 

(a)           Parent shall indemnify and hold harmless, to the fullest extent permitted by Applicable Law, the Trustees and their Affiliates and their respective officers, directors, employees, accountants, attorneys and agents and each Person who controls (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) any such indemnified Person and the officers, directors, employees, accountants, attorneys and agents of each such controlling Person (each, a “Trust Indemnified Person”), from and against all losses, claims, damages, liabilities, costs, expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses), judgments, fines, penalties, charges and amounts paid in settlement (collectively, the “Losses”), as incurred, arising out of or resulting from any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus or preliminary prospectus or Free Writing Prospectus filed pursuant to this Agreement or any amendment or supplement thereto or any omission (or alleged omission) of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and any violation by Parent of the Securities Act, the Exchange Act, and state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to any registration statement, and (without limitation of the preceding portions of this Section 3.8(a)) will reimburse the Trust Indemnified Person, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such claim, Loss, damage, liability or action, except in each case insofar as the same are caused by any information furnished to Parent by or on behalf of any Trust Indemnified Person expressly for use therein.

  

(b)           In connection with any registration statement in which the Trustees are participating, the Trustees shall indemnify and hold harmless, to the fullest extent permitted by Applicable Law, Parent and its Affiliates and their respective officers, directors, employees, accountants, attorneys and agents and each Person who controls (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) Parent or such other indemnified Person and the officers, directors, employees, accountants, attorneys and agents of each such controlling Person (each, a “Parent Indemnified Person”), from and against all Losses, as incurred, arising out of or resulting from any untrue statement (or alleged untrue statement) of material fact contained in any registration statement, prospectus or preliminary prospectus or Free Writing Prospectus filed pursuant to this Agreement or any amendment or supplement thereto or any omission (or alleged omission) of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (without limitation of the preceding portions of this Section 3.8(b)) will reimburse the Parent Indemnified Person, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such claim, Loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement or omission is made in such registration statement, prospectus or preliminary prospectus or Free Writing Prospectus or any amendment or supplement thereto in reliance upon and in conformity with information furnished to Parent by the Trustees for inclusion in such registration statement, prospectus or preliminary prospectus or Free Writing Prospectus or any amendment or supplement thereto. Notwithstanding the foregoing, the Trustees shall not be required to provide indemnification in excess of the amount equal to the net proceeds actually received by the Trustees and their Affiliates from their sale of Registrable Securities in connection with the offering that gave rise to the indemnification obligation.

 

(c)           Any Person entitled to indemnification hereunder shall give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification; provided, however, that the failure to give such notice shall not release the indemnifying party from its obligation, except to the extent that the indemnifying party has been actually and materially prejudiced by such failure to provide such notice on a timely basis.

 

 

(d)           In any case in which any such action is brought against any indemnified party, the indemnifying party will be entitled to participate therein, and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election to so assume the defense thereof and acknowledging the obligations of the indemnifying party with respect to such proceeding, the indemnifying party will not (so long as it shall continue to have the right to defend, contest, litigate and settle the matter in question in accordance with this paragraph) be liable to such indemnified party hereunder for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, supervision and monitoring (unless (i) such indemnified party (based upon advice of its counsel) reasonably objects to such assumption on the grounds that there may be defenses available to it which are different from or in addition to the defenses available to such indemnifying party and, as a result, a conflict of interest exists or (ii) the indemnifying party shall have failed within a reasonable period of time to assume such defense and the indemnified party is or would reasonably be expected to be materially prejudiced by such delay, in either event the indemnified party shall be promptly reimbursed by the indemnifying party for the reasonable expenses incurred in connection with retaining one separate legal counsel (for all indemnified parties in connection therewith)). Notwithstanding any such assumption by an indemnifying party, the indemnified party shall have the right to employ separate counsel in any such matter and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party except as provided in the previous sentence. An indemnifying party shall not be liable for any settlement of an action or claim effected without its consent. No matter shall be settled by an indemnifying party without the consent of the indemnified party (which consent shall not be unreasonably withheld, conditioned or delayed), unless such settlement (x) includes as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation, (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any indemnified party and (z) does not involve any injunctive or equitable relief that would be binding on the indemnified party or any payment that is not covered by the indemnification hereunder.

  

(e)           The indemnification provided for under this Agreement shall survive the transfer of the Registrable Securities and the termination of this Agreement.

 

(f)           If recovery is not available under the foregoing indemnification provisions for any reason or reasons other than as specified therein, any Person who would otherwise be entitled to indemnification by the terms thereof shall nevertheless be entitled to contribution with respect to any Losses with respect to which such Person would be entitled to such indemnification but for such reason or reasons, in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party, the Persons’ relative knowledge and access to information concerning the matter with respect to which the claim was asserted, the opportunity to correct and prevent any statement or omission, and other equitable considerations appropriate under the circumstances. It is hereby agreed that it would not necessarily be equitable if the amount of such contribution were determined by pro rata or per capita allocation. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not found guilty of such fraudulent misrepresentation. Notwithstanding the foregoing, neither the Trustees nor the Trust shall be required to make a contribution in excess of the amount received by the Trustees or the Trust from their sale of Registrable Securities in connection with the offering that gave rise to the contribution obligation. In addition, no Person shall be obligated to contribute hereunder for any amounts in payment for any settlement of any action or claim, effected without such Person’s written consent, which consent shall not be unreasonably withheld, delayed or conditioned.

 

  

Article IV

 

DEFINITIONS

 

4.1           Defined Terms. Capitalized terms when used in this Agreement have the following meanings:

 

“Adverse Disclosure” means public disclosure of material non-public information that, in the good faith judgment of Parent (after consultation with legal counsel): (i) would be required to be made in any registration statement or any related prospectus filed with the Commission by Parent so that such registration statement or prospectus would not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading; (ii) would not be required to be made at such time but for the filing, effectiveness or continued use of such registration statement or prospectus; and (iii) either (A) could reasonably be expected to have a material adverse effect on Parent’s ability to effect a material proposed acquisition, disposition, financing, reorganization, recapitalization or similar transaction or (B) relates to information the accuracy of which has yet to be determined by Parent or which is the subject of an ongoing investigation or inquiry; provided that Parent takes all action as necessary to as expeditiously as possible make such determination and conclude such investigation or inquiry.

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. For purposes of this definition, “control” when used with respect to any Person, unless otherwise specified, has the same meaning as set forth in Section 2(a)(2) of the BHC Act and Regulation Y of the Federal Reserve Board, and the terms “controlling” and “controlled” have correlative meanings; provided, however, that the Trustees shall not be deemed an Affiliate of Parent or any of its Subsidiaries for purposes of this Agreement and, provided further, that the Trustees, together, shall be considered as one Person for purposes this definition.

 

“Applicable Law” means, with respect to any Person, all applicable U.S., non-U.S. or transnational federal, state or local Laws.

 

“Beneficial Owner”, “Beneficially Own” or “Beneficial Ownership” has the meaning assigned to such term in Rule 13d-3 under the Exchange Act, and a Person’s beneficial ownership of securities shall be calculated in accordance with the provisions of such Rule (in each case, irrespective of whether or not such Rule is actually applicable in such circumstance).

  

 

“BHC Act” means the Bank Holding Company Act of 1956, as amended, and all related rules, regulations, and published guidance promulgated thereunder.

 

“Blackout Period” means (i) any regular quarterly period during which directors and executive officers of Parent are not permitted to trade under the insider trading policy of Parent then in effect, (ii) in the event that Parent determines in good faith that the registration would reasonably be expected to materially adversely affect or materially impede, delay or interfere with any material bona fide financing of Parent or any material corporate reorganization or other material transaction under consideration by Parent or would require Parent to make an Adverse Disclosure, or (iii) upon issuance by the Commission of a stop order suspending the effectiveness of any registration statement with respect to Registrable Securities or the initiation of legal proceedings with respect to such registration statement under Section 8(d) or 8(e) of the Securities Act; provided, that a Blackout Period described in clause (ii) may not occur more than two (2) times in any period of twelve (12) consecutive months or for a period of more than forty-five (45) consecutive days on any one occasion.

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which banks in Minneapolis, Minnesota or Evansville, Indiana are authorized by law or executive order to be closed.

 

“CBC Act” means the Change in Bank Control Act of 1978, as amended, and all related rules, regulations, and published guidance promulgated thereunder.

 

“Change in Control” means the occurrence of any of the following events:

 

(a)           the sale or disposition, in one or a series of related transactions, of all or substantially all, of the assets of Parent to any Person or Group;

 

(b)           any Person or Group is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of the total voting power of the Voting Securities of Parent (or any Person which controls Parent or which is a successor to all or substantially all of the assets of Parent), including by way of merger, recapitalization, reorganization, redemption, issuance of capital stock, consolidation, tender or exchange offer or otherwise; or

 

(c)           a merger of Parent with or into another Person in which the holders of Voting Securities of Parent as of immediately prior to such merger cease to hold at least 50% of the outstanding equity or voting securities of Parent (or the surviving corporation in such merger or the ultimate parent thereof) immediately following such merger.

 

“Closing Date” has the meaning ascribed to such term in the Merger Agreement.

 

“Commission” means the Securities and Exchange Commission or any other federal agency administering the Securities Act.

 

“Effective Time” has the meaning ascribed to such term in the Merger Agreement.

 

 

“Equity Interest” means any share of capital stock or other class of equity securities of a Person, whether voting or non-voting.

  

“Exchange Act” means the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder.

 

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

 

“FINRA” means the Financial Industry Regulatory Authority, Inc.

 

“Governmental Authority” means any federal, national, state, local, cantonal, municipal, international or multinational government or political subdivision thereof, governmental department, commission, board, bureau, agency, taxing or regulatory authority, instrumentality or judicial or administrative body, or arbitrator or SRO, having jurisdiction over the matter or matters in question.

 

“Group” has the meaning assigned to such term in Section 13(d)(3) of the Exchange Act.

 

“Investor Percentage Interest” means the percentage calculated by dividing (x) the number of Voting Securities that are, as of the date of such calculation, Beneficially Owned by the Trustees or any of their respective Affiliates, in the aggregate, by (y) the number of issued and outstanding Voting Securities as of the date of such calculation.

 

“Laws” means laws, statutes, binding Orders, rules, and regulations, ordinances, directives, treaties, rules of common law and rules of any applicable SRO.

 

“Nonvoting Parent Securities” means shares of common stock, shares of preferred stock, or other equity securities issued by Parent, in each case with identical rights, privileges, qualifications and limitations in all respects as shares of Parent Common Stock, except that such securities shall be “nonvoting securities” as such term is defined in Regulation Y of the Federal Reserve Board for as long as they are owned or controlled by the Trustees or any other assignee or transferee of the Trustees that are Affiliates of the Trustees.

 

“Order” means any order, writ, decree, judgment, award, decision, injunction, ruling, settlement, verdict, consent decree, compliance order, civil or administrative order, or stipulation issued, promulgated, made, rendered or entered into by or with any Governmental Authority or arbitrator (in each case, whether temporary, preliminary or permanent).

 

“Parent Bank” has the meaning ascribed to such term in the Merger Agreement.

 

“Parent Stock Merger Consideration” has the meaning ascribed to such term in the Merger Agreement.

 

“Person” an individual, firm, body corporate (wherever incorporated), partnership, limited liability company, association, joint venture, trust, works council or employee representative body (whether or not having separate legal personality) or other entity or organization, including a Governmental Authority.

 

 

“Registrable Amount” means an amount of Registrable Securities having an aggregate value of at least $25 million (based on the anticipated offering price (as reasonably determined in good faith by Parent)), without regard to any underwriting discount or commission, or such lesser amount of Registrable Securities as would result in the disposition of all of the Registrable Securities Beneficially Owned by the Trustees.

 

“Registrable Securities” means the Shares Beneficially Owned by the Trustees and any shares of Parent Common Stock received by the Trustees in respect of the Shares in connection with any stock split, stock dividend, subdivision, reclassification, recapitalization, exchange or similar reorganization of shares; provided, that any such Shares shall cease to be Registrable Securities when (i) they are sold pursuant to an effective registration statement under the Securities Act, (ii) they are sold pursuant to Rule 144 under the Securities Act, (iii) they become eligible for sale pursuant to Rule 144 under the Securities Act without volume or manner-of-sale restrictions; provided, that the Trustees then collectively beneficially own such number of shares of Parent Common Stock that is less than ten percent (10%) of the total issued and outstanding shares of Parent Common Stock, or (iv) they shall have ceased to be outstanding.

 

“Securities Act” means the Securities Act of 1933 and the rules and regulations promulgated thereunder.

 

“Shares” means the shares of Parent Common Stock issued to the Trustees pursuant to the Merger Agreement (as adjusted for any stock split, reverse stock split, stock dividend, subdivision, reclassification, recapitalization, exchange or similar reorganization of shares).

 

“SRO” means (i) any “self-regulatory organization” as defined in Section 3(a)(26) of the Exchange Act, (ii) any other United States or foreign securities exchange, futures exchange, commodities exchange or contract market, or (iii) any other securities exchange.

 

“Subsidiary” means, with respect to any Person, another Person, (a) an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing Person or body or (b) more than fifty (50%) of the equity interests of which, is owned directly or indirectly by such first Person.

 

“Trust Designee” means one of the Trustees serving as a trustee of the Trust immediately prior to the Effective Time (as determined by the Trustees in their sole discretion).

 

“Underwritten Offering” means a sale of securities of Parent, in an amount no less than the Registrable Amount, to an underwriter or underwriters for reoffering to the public.

 

“Voting Securities” means shares of Parent Common Stock and any other securities of Parent entitled to vote generally in the election of directors of Parent.

 

 

4.2           Other Defined Terms.

 

Term	Section
$	4.1
Agreement	Preamble
Block Trade Request	1.2(a)
Board	1.2
Chosen Courts	5.9(b)
Closing	Preamble
Company	Recitals
Demand	3.1(a)
Demand Registration	3.1(a)
Director	1.3(a)(ii)
dollars	4.1
Excess Business Holdings Effect	1.1(a)
Extended Lock-Up Period	1.2(a)
Form S-3	3.3(a)
Free Writing Prospectus	3.5(a)(iv)
Initial Lock-Up Period	1.2(a)
Inspectors	3.5(a)(x)
Lock-Up Period	1.2(a)
Losses	3.8(a)
Merger	Recitals
Merger Agreement	Recitals
Merger Sub	Recitals
Other Demanding Sellers	3.2(b)
Other Proposed Sellers	3.2(b)
Parent	Preamble
Parent Common Stock	Recitals
Parent Control Effect	1.1(a)
Parent Indemnified Person	3.8(a)
Piggyback Notice	3.2(a)
Piggyback Registration	3.2(a)
Records	3.5(a)(x)
Requested Information	3.7
Shelf Notice	3.3(a)
Shelf Offering	3.3(d)
Shelf Registration Statement	3.3(a)
the date hereof	4.1
Transfer	1.2(b)
Trust	Preamble
Trust Indemnified Person	3.8(a)
Trustees	Preamble

 

 

4.3           Interpretation. The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” References to “the date hereof” shall mean the date of this Agreement. The word “or” is not exclusive and the word “extent” and the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such word or phrase shall not merely mean “if”. All references to “dollars” or “$” in this Agreement are to United States dollars. If, and as often as, there is any change in the outstanding shares of Parent Common Stock by reason of any stock split, reverse stock split, stock dividend, subdivision, reclassification, recapitalization or exchange or similar reorganization of shares, appropriate adjustment shall be made in the provisions of this Agreement so as to fairly and equitably preserve, as far as practicable, the rights and obligations set forth herein that continue to be applicable on the date of such change. This Agreement shall not be interpreted or construed to require any person to take any action, or fail to take any action, if to do so would violate any applicable law. References to any statute or regulation refer to such statute or regulation, as amended, modified, supplemented or replaced from time to time (and, in the case of statutes, include any rules and regulations promulgated under the statute) and references to any section of any statute or regulation include any successor to such section.

  

Article V

 

MISCELLANEOUS

 

5.1           Term. This Agreement will be effective as of, and subject to, the Closing and, except as otherwise set forth herein, will continue in effect thereafter until the first date on which the Trustees cease to Beneficially Own any Shares; provided, however, that (a) the provisions contained in Article III of this Agreement, except Section 3.8, shall survive so long as there are, and shall automatically terminate when there are no longer, any Registrable Securities outstanding, (b) the representations and warranties of the Trustees and Parent in Section 2.1 and Section 2.2, respectively, the indemnity and contribution provisions contained in Section 3.8, Article IV and this Article V shall survive termination of this Agreement and (c) Section 1.1 shall automatically terminate on the first date on which the number of shares of Parent Common Stock owned by the Trustees, in the aggregate, is less than five percent (5%) of the number of outstanding shares of Parent Common Stock. Notwithstanding anything to the contrary contained in this Agreement, this Agreement shall be null and void, and shall not become effective, if the Merger Agreement is terminated in accordance with its terms prior to the Closing.

 

 

5.2           Notices.

 

(a)           All notices, requests, instructions or other communications or documents to be given or made hereunder by one party to the other parties shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document if sent at or prior to 5:00 p.m. local time of the recipient, and on the next Business Day if sent after 5:00 p.m. local time of the recipient (in each case except in the event of any “bounceback” or similar non-transmittal message); or (d) on the day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent 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 5.2):

 

(i)

if to Parent, to:

 

	Name:	Old National Bancorp
	Address:	One Main Street
		Evansville,IN 47708
	Attention:	Nicholas J. Chulos, Executive Vice President, Chief Legal Officer and Corporate Secretary
	Email:	nick.chulos@oldnational.com

 

with a copy to (which shall not be considered notice):

 

	Name:	Squire Patton Boggs (US) LLP
	Address:	201 E. Fourth Street, Suite 1900
		Cincinnati, OH 45202
	Attention:	James J. Barresi
		Alison LaBruyere
	Email:	james.barresi@squirepb.com
		alison.labruyere@squirepb.com

 

(ii)

if to the Trustees, to:

 

	Name:	The Otto Bremer Trust
	Address:	30 E 7 Street Ste. 2900
		St. Paul, MN 55101-2988
	Attention:	Daniel C. Reardon
	Email:	dreardon@ottobremer.org

 

with a copy to (which shall not be considered notice):

	Name:	Sullivan& Cromwell LLP
	Address:	125 Broad Street
		New York, NY 10004
	Attention:	H. Rodgin Cohen
		Mitchell S. Eitel
		C. Michelle Chen
	Email:	cohenhr@sullcrom.com
		eitelm@sullcrom.com
		chenc@sullcrom.com

 

5.3           Amendment. Subject to compliance with applicable law, this agreement may be amended by the parties hereto. This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each of the parties hereto.

 

 

5.4           Extension; Waiver. The Trustees, with respect to Parent, and Parent, with respect to the Trustees, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of Parent (in the case of the Trustees) or the Trustees (in the case of Parent), (b) waive any inaccuracies in the representations and warranties of Parent (in the case of the Trustees) or the Trustees (in the case of Parent) contained herein, and (c) waive compliance with any of the agreements or satisfaction of any conditions of Parent (in the case of the Trustees) or the Trustees (in the case of Parent) contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, 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.

  

5.5           Assignment; Third-Party Beneficiaries. 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. Any purported assignment in contravention hereof shall be null and void. 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; provided, that, except to the acquiring Person or Group in connection with a Change in Control, no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto. This agreement is not intended to, and does not, confer upon any person other than the parties hereto any rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein; provided, that the Persons indemnified under Section 3.8 are intended third party beneficiaries of Section 3.8.

 

5.6           Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this agreement shall be reformed, construed and enforced in such jurisdiction such that the invalid, illegal or unenforceable provision or portion thereof shall be interpreted to be only so broad as is enforceable.

 

5.7           Counterparts. This Agreement may be executed in two or more counterparts (including by electronic means, including a “.pdf” format data file), all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

 

5.8           Entire Agreement. This Agreement (including the documents and the instruments referred to in this Agreement), the Merger Agreement (including the documents and the instruments referred to therein), and the Trustee Voting Agreement, dated November 25, 2024, by and among the Parent and the Trustees, constitute the entire agreement among the parties and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

 

 

5.9           Governing Law; Jurisdiction; WAIVER OF JURY TRIAL.

  

(a)           This Agreement shall be governed by and construed in accordance with the law of the State of Minnesota, without regard to any conflicts of law.

 

(b)           Each party agrees that it will bring any action or proceeding in respect of any claim arising out of or related to this Agreement or the transactions contemplated hereby exclusively in any federal or state court of competent jurisdiction located in the State of Minnesota (the “Chosen Courts”), and, solely in connection with claims arising under this Agreement or the transactions that are the subject of this Agreement, (i) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Courts, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party and (iv) agrees that service of process upon such party in any such action or proceeding will be effective if notice is given in accordance with Section 5.2.

 

(c)           EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE EXTENT PERMITTED BY LAW AT THE TIME OF INSTITUTION OF THE APPLICABLE LITIGATION, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.9(c).

 

5.10           Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with its specific terms or otherwise breached. Accordingly, the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches or threatened breaches of this agreement or to enforce specifically the performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security or a bond as a prerequisite to obtaining equitable relief.

 

5.11           Trustees’ Obligations. Nothing in this Agreement shall (i) prevent any of the Trustees from discharging his or her fiduciary duties as a member of the Board or (ii) require the Trustees to take any action that would constitute a breach of the trust under or be inconsistent with the trust instrument of the Trust.

 

 

5.12           Trustees’ Capacity; No Recourse. Parent agrees and acknowledges that none of Parent or its Affiliates has any claim or right of recovery under this Agreement against, and no personal liability shall attach to, any of the Trustees, through the Trust or otherwise, whether at law or equity, in contract, in tort or otherwise.

  

5.13           Change in Trustees. If any Trustee ceases to be a trustee of the Trust after the date hereof, then such Person shall no longer constitute a party to, or a “Trustee” for purposes of, this Agreement. If any Person becomes a trustee of the Trust after the date hereof, such Person shall execute a joinder to this agreement in a form reasonably acceptable to the Trustees and Parent and shall be deemed to be a “Trustee” for all purposes of this Agreement.

 

[The remainder of this page intentionally left blank.]

 

  

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement by their authorized representatives as of the date first above written.

 

	Old National Bancorp
	By:	/s/ James C. Ryan, III
		James C. Ryan, III
		Chief Executive Officer

 

[Signature Page to Investor Agreement]

 

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement by their authorized representatives as of the date first above written.

 

	Caroline S. Johnson, as Trustee of Otto Bremer Trust
	/s/ Caroline S. Johnson
	Francis M. Miley, as Trustee of Otto Bremer Trust
	/s/ Francis M. Miley
	Daniel C. Reardon, as Trustee of Otto Bremer Trust
	/s/ Daniel C. Reardon

  

[Signature Page to Investor Agreement]

 

 

 

 

Exhibit 10.4

 

Forward Confirmation

 

Date: November 25, 2024

 

To:	Old National Bancorp
From:	Citibank, N.A.

 

Ladies and Gentlemen:

 

The purpose of this letter agreement is to confirm the terms and conditions of the Transaction entered into between Citibank, N.A. (“Dealer”) and Old National Bancorp (the “Counterparty”) on the Trade Date specified below (the “Transaction”). This letter agreement constitutes a “Confirmation” as referred to in the ISDA 2002 Master Agreement specified below.

 

The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc. (“ISDA”), are incorporated into this Confirmation. In the event of any inconsistency between the Equity Definitions and this Confirmation, this Confirmation shall govern.

 

Each party is hereby advised, and each such party acknowledges, that the other party has engaged in, or refrained from engaging in, substantial financial transactions and has taken other material actions in reliance upon the parties’ entry into the Transaction to which this Confirmation relates on the terms and conditions set forth below.

 

1. This Confirmation evidences a complete and binding agreement between Dealer and Counterparty as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall supplement, form a part of, and be subject to an agreement in the form of the ISDA 2002 Master Agreement (the “Agreement”) as if Dealer and Counterparty had executed an agreement in such form (without any Schedule but (i) with the elections set forth in this Confirmation and (ii) with the election that the “Cross Default” provisions of Section 5(a)(vi) of the Agreement will apply to Dealer as if (a) the phrase “, or becoming capable at such time of being declared,” were deleted from Section 5(a)(vi)(1) of the Agreement; (b) the “Threshold Amount” with respect to Dealer were three percent of the shareholders’ equity of Dealer’s ultimate parent; (c) the following language were added to the end of Section 5(a)(vi) of the Agreement: “Notwithstanding the foregoing, a default under subsection (2) hereof shall not constitute an Event of Default if (x) the default was caused solely by error or omission of an administrative or operational nature; (y) funds were available to enable the party to make the payment when due; and (z) the payment is made within two Local Business Days of such party’s receipt of written notice of its failure to pay.”; and (d) the term “Specified Indebtedness” had the meaning specified in Section 14 of the Agreement, except that such term shall not include obligations in respect of deposits received in the ordinary course of a party’s banking business). In the event of any inconsistency between provisions of the Agreement and this Confirmation, this Confirmation will prevail for the purpose of the Transaction to which this Confirmation relates. The parties hereby agree that, other than the Transaction to which this Confirmation relates, no Transaction shall be governed by the Agreement. For purposes of the Equity Definitions, the Transaction is a Share Forward Transaction.

 

 

2. The terms of the particular Transaction to which this Confirmation relates are as follows:

 

General Terms:
Trade Date:	November 25, 2024
Effective Date:	November 26, 2024, or such later date on which the conditions set forth in Paragraph 7(a) below have been satisfied.
Seller:	Counterparty
Buyer:	Dealer
Shares:	The common stock of Counterparty, no par value (Ticker Symbol: “ONB”)
Number of Shares:	Initially, 19,047,619 Shares (the “Initial Number of Shares”), subject to reduction (i) as provided in Paragraph 7 below and (ii) on each Settlement Date, by the number of Settlement Shares settled on such date.
Initial Forward Price:	USD 20.16 per Share
Forward Price:	(a)    On the Effective Date, the Initial Forward Price; and
	(b)   on each calendar day thereafter, (i) the Forward Price as of the immediately preceding calendar day multiplied by (ii) the sum of 1 and the Daily Rate for such day; provided that, on each Forward Price Reduction Date, the Forward Price in effect on such date shall be the Forward Price otherwise in effect on such date, minus the Forward Price Reduction Amount for such Forward Price Reduction Date.
	Notwithstanding the foregoing, to the extent Counterparty delivers Shares hereunder on or after a Forward Price Reduction Date and at or before the record date for an ordinary cash dividend with an ex-dividend date corresponding to such Forward Price Reduction Date, the Calculation Agent shall adjust the Forward Price to the extent it determines that such an adjustment is appropriate and necessary to preserve the economic intent of the parties by offsetting the economic effect of the Dealer having received the benefit of both (i) the Forward Price Reduction Amount and (ii) the ordinary cash dividend with an ex-dividend date corresponding to such Forward Price Reduction Amount (taking into account Dealer’s commercially reasonable hedge positions in respect of the Transaction).
Daily Rate:	For any day, (i)(A) the Overnight Bank Rate for such day, minus (B) the Spread, divided by (ii) 365.

 

 

Overnight Bank Rate:	For any day, the rate set forth for such day opposite the caption “Overnight bank funding rate,” as such rate is displayed on Bloomberg Screen “OBFR01 <Index> <GO>”, or any successor page; provided that, if no rate appears for a particular day on such page, the rate for the immediately preceding day for which a rate does so appear shall be used for such day.
Spread:	75 basis points
Prepayment:	Not Applicable
Variable Obligation:	Not Applicable
Forward Price Reduction Dates:	As set forth on Schedule I
Forward Price Reduction Amounts:	For each Forward Price Reduction Date, the Forward Price Reduction Amount set forth opposite such date on Schedule I
Exchange:	NASDAQ Global Select Market
Related Exchange(s):	All Exchanges
Clearance System:	The Depository Trust Company
Securities Act:	Securities Act of 1933, as amended
Exchange Act:	Securities Exchange Act of 1934, as amended
Market Disruption Event:	Section 6.3(a) of the Equity Definitions is hereby amended by replacing the first sentence in its entirety with the following: “‘Market Disruption Event’ means in respect of a Share or an Index, the occurrence or existence of (i) a Trading Disruption, (ii) an Exchange Disruption, (iii) an Early Closure or (iv) a Regulatory Disruption, in each case that the Calculation Agent reasonably determines is material”.
Early Closure:	Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.
Regulatory Disruption:	Any event that Dealer, based on the advice of counsel, reasonably determines makes it advisable with regard to any legal, regulatory or self-regulatory requirements or related policies and procedures that generally apply to transactions of a nature and kind similar to the Transaction and have been adopted in good faith by Dealer (whether or not such policies or procedures are imposed by law or have been voluntarily adopted by Dealer) for Dealer to refrain from or decrease any market activity in connection with the Transaction in order to establish, maintain or unwind a commercially reasonable hedge position.

 

 

Settlement:
Settlement Currency:	USD (all amounts shall be converted to the Settlement Currency in good faith and in a commercially reasonable manner by the Calculation Agent)
Settlement Date:	Any Scheduled Trading Day following the Effective Date and up to and including the Final Date that is either:
	(a)  designated by Counterparty as a “Settlement Date” by a written notice (a “Settlement Notice”) that satisfies the Settlement Notice Requirements, if applicable, and is delivered to Dealer (i) by 12:00 p.m., New York City time, on the day that is one Scheduled Trading Day prior to such Settlement Date, which may be the Final Date, if Physical Settlement applies, and (ii) no less than 75 Scheduled Trading Days prior to such Settlement Date, which may be the Final Date, if Cash Settlement or Net Share Settlement applies; provided that, if Dealer shall fully unwind a commercially reasonable hedge with respect to the portion of the Number of Shares to be settled during an Unwind Period by a date that is more than one Scheduled Trading Day prior to a Settlement Date specified above, Dealer may, by written notice to Counterparty, no fewer than one Scheduled Trading Day prior thereto, specify any Scheduled Trading Day prior to such original Settlement Date as the Settlement Date; or
	(b)   designated by Dealer as a Settlement Date pursuant to Paragraph 7(g) below;
	provided that the Final Date will be a Settlement Date if on such date the Number of Shares for which a Settlement Date has not already been designated is greater than zero, and provided, further, that, following the occurrence of at least five consecutive Disrupted Days during an Unwind Period and while such Disrupted Days are continuing, Dealer may designate any subsequent Scheduled Trading Day as the Settlement Date with respect to the portion of the Settlement Shares, if any, for which Dealer has determined an Unwind VWAP Price during such Unwind Period, it being understood that the Unwind Period with respect to the remainder of such Settlement Shares shall recommence on the next succeeding Exchange Business Day that is not a Disrupted Day in whole.
Final Date:	November 26, 2025 (or if such day is not a Scheduled Trading Day, the next following Scheduled Trading Day)
Settlement Shares:	(a)   With respect to any Settlement Date other than the Final Date, the number of Shares designated as such by Counterparty in the relevant Settlement Notice or designated by Dealer pursuant to Paragraph 7(g) below, as applicable; provided that the Settlement Shares so designated shall, in the case of a designation by Counterparty, (i) not exceed the Number of Shares at that time and (ii) be at least equal to the lesser of 100,000 and the Number of Shares at that time, in each case with the Number of Shares determined taking into account pending Settlement Shares; and
	(b)   with respect to the Settlement Date on the Final Date, a number of Shares equal to the Number of Shares at that time;
	in each case with the Number of Shares determined taking into account pending Settlement Shares.

 

 

Settlement Method Election:	Physical Settlement, Cash Settlement, or Net Share Settlement, at the election of Counterparty as set forth in a Settlement Notice that satisfies the Settlement Notice Requirements, if applicable; provided that Physical Settlement shall apply (i) if no Settlement Method is validly selected, (ii) with respect to any Settlement Shares in respect of which Dealer is unable, in good faith and in its commercially reasonable discretion, to unwind its commercially reasonable hedge by the end of the Unwind Period (taking into account the unwind of hedges related to each other forward or other equity derivative transaction (if any) entered into between Dealer and Counterparty (each, an “Additional Equity Derivative Transaction”)) (A) in a manner that, in the reasonable discretion of Dealer, based on advice of external counsel, is consistent with the requirements for qualifying for the safe harbor provided by Rule 10b-18 under the Exchange Act (“Rule 10b-18”) or (B) in its commercially reasonable judgment, due to the occurrence of five or more Disrupted Days or to the lack of sufficient liquidity in the Shares on any Exchange Business Day during the Unwind Period, (iii) to any Termination Settlement Date (as defined in Paragraph 7(g) below) and (iv) if the Final Date is a Settlement Date other than as the result of a valid Settlement Notice in respect of such Settlement Date; provided, further, that, if Physical Settlement applies under clause (ii) immediately above, Dealer shall provide written notice to Counterparty at least one Scheduled Trading Day prior to the applicable Settlement Date.
Settlement Notice Requirements:	Notwithstanding any other provision hereof, a Settlement Notice delivered by Counterparty that specifies Cash Settlement or Net Share Settlement will not be effective to establish a Settlement Date or require Cash Settlement or Net Share Settlement unless Counterparty delivers to Dealer with such Settlement Notice a representation, dated as of the date of such Settlement Notice and signed by Counterparty which may be part of such Settlement Notice, containing (x) the representations set forth in clause (i) under the heading “Additional Representations and Agreements of Counterparty” in Paragraph 7(e) below and (y) a representation from Counterparty that neither Counterparty nor any of its subsidiaries has applied, and shall not until after the first date on which no portion of the Transaction remains outstanding following any final exercise and settlement, cancellation or early termination of the Transaction, apply, for a loan, loan guarantee, direct loan (as that term is defined in the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”)) or other investment, or receive any financial assistance or relief under any program or facility (collectively “Financial Assistance”) that (I) is established under applicable law (whether in existence as of the Trade Date or subsequently enacted, adopted or amended), including without limitation the CARES Act and the Federal Reserve Act, as amended, and (II) (X) requires under applicable law (or any regulation, guidance, interpretation or other pronouncement of a governmental authority with jurisdiction for such program or facility) as a condition of such Financial Assistance, that Counterparty comply with any requirement not to, or otherwise agree, attest, certify or warrant that it has not, as of the date specified in such condition, repurchased, or will not repurchase, any equity security of Issuer, and that it has not, as of the date specified in the condition, made a capital distribution or will make a capital distribution, or (Y) where the terms of such election in respect of the Transaction would cause Counterparty under any circumstance to fail to satisfy any condition for application for or receipt or retention of the Financial Assistance (collectively “Restricted Financial Assistance”), other than any such applications for Restricted Financial Assistance that were (or would be) made (x) determined based on the advice of outside counsel of national standing that the terms of the Transaction would not cause Counterparty to fail to satisfy any condition for application for or receipt or retention of such Financial Assistance based on the terms of the program or facility as of the date of such advice or (y) after delivery to Dealer evidence or other guidance from a governmental authority with jurisdiction for such program or facility that such election in respect of the Transaction is permitted under such program or facility (either by specific reference to the Transaction or by general reference to transactions with the attributes of the Transaction in all relevant respects).

 

 

Physical Settlement:	If Physical Settlement is applicable, then Counterparty shall deliver to Dealer through the Clearance System a number of Shares equal to the Settlement Shares for such Settlement Date, and Dealer shall pay to Counterparty, by wire transfer of immediately available funds to an account designated by Counterparty, an amount equal to the Physical Settlement Amount for such Settlement Date, on a delivery versus payment basis. If, on any Settlement Date, the Shares to be delivered by Counterparty to Dealer hereunder are not so delivered (the “Deferred Shares”), and a Forward Price Reduction Date occurs during the period from, and including, such Settlement Date to, but excluding, the date such Shares are actually delivered to Dealer, then the portion of the Physical Settlement Amount payable by Dealer to Counterparty in respect of the Deferred Shares shall be reduced by an amount equal to the Forward Price Reduction Amount for such Forward Price Reduction Date, multiplied by the number of Deferred Shares (for the avoidance of doubt, subject to the last paragraph of the definition of Forward Price).
Physical Settlement Amount:	For any Settlement Date for which Physical Settlement is applicable, an amount in cash equal to the product of (a) the Forward Price in effect on the relevant Settlement Date multiplied by (b) the Settlement Shares for such Settlement Date.
Cash Settlement:	On any Settlement Date in respect of which Cash Settlement applies, if the Cash Settlement Amount is a positive number, Dealer will pay the Cash Settlement Amount to Counterparty. If the Cash Settlement Amount is a negative number, Counterparty will pay the absolute value of the Cash Settlement Amount to Dealer. Such amounts shall be paid on such Settlement Date by wire transfer of immediately available funds.
Cash Settlement Amount:	For any Settlement Date in respect of which Cash Settlement applies, an amount determined by the Calculation Agent equal to:
	(a)  (i)(A) the average of the Forward Prices over the period beginning on, and including, the date that is one Settlement Cycle following the first day of the applicable Unwind Period and ending on, and including, such Settlement Date (calculated assuming no reduction to the Forward Price for any Forward Price Reduction Date that occurs during such Unwind Period, which is accounted for in clause (b) below), minus a commercially reasonable commission related to Dealer’s purchase of Shares in connection with the unwind of its commercially reasonable hedge position (not to exceed USD 0.02 per Share), to repurchase each Settlement Share, minus (B) the average of the 10b-18 VWAPs on each Exchange Business Day during such Unwind Period (the “Unwind VWAP Price”), multiplied by (ii) the Settlement Shares for such Settlement Date; minus
	(b)  the product of (i) the Forward Price Reduction Amount for any Forward Price Reduction Date that occurs during such Unwind Period and (ii) the number of Settlement Shares for such Settlement Date with respect to which Dealer has not unwound its hedge (assuming Dealer has a commercially reasonable hedge position and unwinds its hedge position in a commercially reasonable manner), including the settlement of such unwinds, as of such Forward Price Reduction Date.
Net Share Settlement:	On any Settlement Date in respect of which Net Share Settlement applies, if the Cash Settlement Amount is a (i) positive number, Dealer shall deliver a number of Shares to Counterparty equal to the Net Share Settlement Shares, or (ii) negative number, Counterparty shall deliver a number of Shares to Dealer equal to the Net Share Settlement Shares; provided that, if Dealer determines in its reasonable judgment that it would be required to deliver Net Share Settlement Shares to Counterparty, Dealer may elect to deliver a portion of such Net Share Settlement Shares on one or more dates prior to the applicable Settlement Date upon one Scheduled Trading Day’s prior notice to Counterparty.

 

 

Net Share Settlement Shares:	With respect to a Settlement Date, the absolute value of the Cash Settlement Amount divided by the Unwind VWAP Price, with the number of Shares rounded up in the event such calculation results in a fractional number.
10b-18 VWAP:	For any Exchange Business Day, the 10b-18 Volume Weighted Average Price per Share as reported in the composite transactions for United States exchanges and quotation systems for the regular trading session (including any extensions thereof) of the Exchange on such Exchange Business Day (without regard to pre-open or after hours trading outside of such regular trading session for such Exchange Business Day), as published by Bloomberg at 4:15 p.m. New York time (or 15 minutes following the end of any extension of the regular trading session) on such Exchange Business Day, on Bloomberg page “ONB <Equity> AQR SEC” (or any successor thereto), or if such price is not so reported on such Exchange Business Day for any reason or is, in the Calculation Agent’s reasonable determination, erroneous, such 10b-18 VWAP shall be as reasonably determined by the Calculation Agent. For purposes of calculating the 10b-18 VWAP for such Exchange Business Day, the Calculation Agent will use reasonable efforts to include only those trades that are reported during the period of time during which Counterparty could purchase its own shares under Rule 10b-18(b)(2) and are effected pursuant to the conditions of Rule 10b-18(b)(3), each under the Exchange Act (such trades, “Rule 10b-18 eligible transactions”).
Cash Settlement Valuation Disruption:	The Calculation Agent shall determine for any Disrupted Day during an Unwind Period whether (i) such Disrupted Day is a Disrupted Day in full, in which case the 10b-18 VWAP for such Disrupted Day shall not be included in the calculation of the Cash Settlement Amount, or (ii) such Disrupted Day is a Disrupted Day only in part, in which case the 10b-18 VWAP for such Disrupted Day shall be determined by the Calculation Agent based on Rule 10b-18 eligible transactions in the Shares on such Disrupted Day, taking into account the nature and duration of the relevant Market Disruption Event, and the weightings of the 10b-18 VWAP and the Forward Prices for each day during an Unwind Period shall be adjusted in a commercially reasonable manner by the Calculation Agent for purposes of determining the Cash Settlement Amount to account for the occurrence of such partially Disrupted Day, with such adjustments based on the duration of any Market Disruption Event and recent volume, historical trading patterns and prices of the Shares.

 

 

Unwind Period:	The period from and including the first Exchange Business Day following the date Counterparty validly elects Cash Settlement or Net Share Settlement in respect of a Settlement Date through the Scheduled Trading Day immediately preceding such Settlement Date  subject to Paragraph 7(g) below. Dealer shall notify Counterparty of the expected last date of the Unwind Period (which expectation shall not be binding upon Dealer) promptly following Dealer’s receipt of a Settlement Notice specifying Cash Settlement or Net Share Settlement.
Failure to Deliver:	Not Applicable.
Share Cap:	Notwithstanding any other provision of this Confirmation, in no event will Counterparty be required to deliver to Dealer on any Settlement Date, whether pursuant to Physical Settlement, Net Share Settlement or any Private Placement Settlement, a number of Shares in excess of (i) two times the Initial Number of Shares, subject to adjustment from time to time in accordance with the provisions of this Confirmation or the Equity Definitions, minus (ii) the aggregate number of Shares delivered by Counterparty to Dealer hereunder prior to such Settlement Date.
Adjustments:
Method of Adjustment:	Calculation Agent Adjustment. Section 11.2(e) of the Equity Definitions is hereby amended by deleting clauses (iii) and (v) thereof. For the avoidance of doubt, the declaration or payment of a cash dividend will not constitute a Potential Adjustment Event.
Additional Adjustment:	If the actual cost to Dealer (or an affiliate of Dealer), over any 10 consecutive Scheduled Trading Day period, of borrowing a number of Shares equal to the Number of Shares to hedge in a commercially reasonable manner its exposure to the Transaction exceeds a weighted average rate equal to 50 basis points per annum, the Calculation Agent shall reduce the Forward Price to compensate Dealer for the amount by which such cost exceeded a weighted average rate equal to 50 basis points per annum during such period. The Calculation Agent shall notify Counterparty prior to making any such adjustment to the Forward Price.
Extraordinary Events:	In lieu of the applicable provisions contained in Article 12 of the Equity Definitions, the consequences of any Extraordinary Event (including, for the avoidance of doubt, any Merger Event, Tender Offer, Nationalization, Insolvency, Delisting, or Change in Law) shall be as specified in Paragraphs 7(f) and 7(g) below, respectively. Notwithstanding anything to the contrary herein or in the Equity Definitions, no Additional Disruption Event will be applicable except to the extent expressly referenced in Paragraph 7(f)(iv) below. The definition of “Tender Offer” in Section 12.1(d) of the Equity Definitions is hereby amended by replacing “10%” with “15%.”

 

 

Non-Reliance:	Applicable
Agreements and Acknowledgments:
Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable
Transfer:	Notwithstanding anything to the contrary herein or in the Agreement, Dealer may assign, transfer and set over all rights, title and interest, obligations, powers, privileges and remedies of Dealer under the Transaction, in whole or in part, to (A) an affiliate of Dealer, whose obligations hereunder are fully and unconditionally guaranteed by Dealer or its ultimate parent entity, or (B) any other affiliate of Dealer or its ultimate parent entity with a long-term issuer rating equal to or better than the credit rating of Dealer or its ultimate parent entity at the time of transfer without the consent of Counterparty; provided that, (i) at the time of such assignment, transfer or set over, Counterparty would not, as a result of such assignment, transfer or set over, reasonably be expected at any time (A) to be required to pay (including a payment in kind) to Dealer or such assignee, transferee or other recipient of rights, title and interest, obligations, powers, privileges and remedies an amount in respect of an Indemnifiable Tax greater than the amount Counterparty would have been required to pay to Dealer in the absence of such assignment, transfer or set over, or (B) to receive a payment (including a payment in kind) after such assignment, transfer or set over that is less than the amount Counterparty would have received from Dealer in the absence of such assignment, transfer or set over, (ii) prior to such assignment, transfer or set over, Dealer shall have caused the assignee, transferee or other recipient of rights, title and interest, obligations, powers, privileges and remedies to make such Payee Tax Representations and to provide such tax documentation as may be reasonably requested by Counterparty to permit Counterparty to determine that the assignment, transfer or set over complies with the requirements of clause (i) in this Paragraph, (iii) such assignment, transfer or set over will not cause a deemed exchange for Counterparty of the Transaction under Section 1001 of the Code (as defined below) and (iv) at all times, Dealer or any assignee, transferee or other recipient of rights, title and interest, obligations, powers, privileges and remedies shall be eligible to provide a U.S. Internal Revenue Service Form W-9 or W-8ECI, or any successor thereto, with respect to any payments or deliveries under the Agreement.

 

 

Hedging Party:	For all applicable Extraordinary Events, Dealer.
3. Calculation Agent:	Dealer whose judgments, determinations and calculations shall be made in good faith and in a commercially reasonable manner; provided that, following the occurrence and during the continuance of an Event of Default of the type described in Section 5(a)(vii) of the Agreement with respect to which Dealer is the sole Defaulting Party, if the Calculation Agent fails to timely make any calculation, adjustment or determination required to be made by the Calculation Agent hereunder or to perform any obligation of the Calculation Agent hereunder and such failure continues for five Exchange Business Days following notice to the Calculation Agent by Counterparty of such failure, Counterparty shall have the right to designate a nationally recognized third-party dealer in over-the-counter corporate equity derivatives to act, during the period commencing on the date such Event of Default occurred and ending on the Early Termination Date with respect to such Event of Default, as the Calculation Agent. Following any determination, adjustment or calculation by the Calculation Agent hereunder, upon a written request by Counterparty, the Calculation Agent shall promptly (but in any event within five Scheduled Trading Days) provide to Counterparty by email to the email address provided by Counterparty in such request a report (in a commonly used file format for the storage and manipulation of financial data) displaying in reasonable detail the basis for such determination, adjustment or calculation (including any assumptions used in making such determination, adjustment or calculation), it being understood that the Calculation Agent shall not be obligated to disclose any proprietary or confidential models or other proprietary or confidential information used by it for such determination, adjustment or calculation.
4. Account Details:
(a) Account for delivery of Shares to Dealer:	To be advised
(b) Account for delivery of Shares to Counterparty:	To be furnished
(c) Account for payments to Counterparty:	To be advised under separate cover or telephone confirmed prior to each Settlement Date
(d)  Account for payments to Dealer:	To be advised

 

 

5. Offices:

 

The Office of Counterparty for the Transaction is: Inapplicable, Counterparty is not a Multibranch Party

 

The Office of Dealer for the Transaction is: New York

 

6. Notices: For purposes of this Confirmation:

 

(a) Address for notices or communications to Counterparty:

 

Old National Bancorp

One Main Street

Evansville, Indiana, 47708

Attention: John Moran

Telephone: 812-461-9209

Email: John.Moran@oldnational.com

 

With a copy to:

 

Old National Bancorp

One Main Street

Evansville, Indiana, 47708

Attention:  Nick Chulos

Telephone: 773-765-7499

Email: Nick.Chulos@oldnational.com

 

(b) Address for notices or communications to Dealer:

 

Citibank, N.A.

388 Greenwich Street

New York, New York 10013

Attention: Theodore Finkelstein and Bianca Gotuaco

Email: theodore.finkelstein@citi.com; bianca.gotuaco@citi.com;

eq.us.corporates.middle.office@citi.com;

eq.us.ses.notifications@citi.com

 

7. Other Provisions:

 

(a) Conditions to Effectiveness. The effectiveness of this Confirmation on the Effective Date shall be subject to the satisfaction or waiver by Dealer of the following conditions: (i) the condition that the representations and warranties of Counterparty contained in the Underwriting Agreement dated November 25, 2024 between Counterparty, Dealer and the other parties thereto (the “Underwriting Agreement”) and any certificate delivered pursuant thereto by Counterparty are true and correct on such date as if made as of such date, (ii) the condition that Counterparty has performed all of the obligations required to be performed by it under the Underwriting Agreement on or prior to such date, (iii) all of the applicable conditions set forth in Section 5 of the Underwriting Agreement, (iv) the condition that the Underwriting Agreement shall not be terminated pursuant to Section 9 or 10 of the Underwriting Agreement and (v) the condition, as determined by Dealer, that neither of the following has occurred: (A) Dealer or its affiliate is unable through commercially reasonable efforts to borrow and deliver for sale a number of Shares equal to the Initial Number of Shares in connection with establishing its hedge position or (B) in Dealer’s commercially reasonable judgment either it is impracticable to do so or Dealer or its affiliate would incur a stock loan cost of more than a rate equal to 200 basis points per annum to do so (in either of which events this Confirmation shall be effective but the Number of Shares for the Transaction shall be the number of Shares Dealer (or its affiliate) is required to deliver in accordance with the Underwriting Agreement).

 

 

(b) Underwriting Agreement Representations, Warranties and Covenants. On the Trade Date and on each date on which Dealer or its affiliates makes a sale pursuant to a prospectus in connection with a hedge of the Transaction, Counterparty repeats and reaffirms as of such date all of the representations and warranties contained in the Underwriting Agreement. Counterparty hereby agrees to comply with its covenants contained in the Underwriting Agreement as if such covenants were made in favor of Dealer.

 

(c) Interpretive Letter. Counterparty agrees and acknowledges that the Transaction is being entered into in accordance with the October 9, 2003 interpretive letter from the staff of the Securities and Exchange Commission to Goldman, Sachs & Co. (the “Interpretive Letter”) and agrees to take all actions, and to omit to take any actions, reasonably requested by Dealer for the Transaction to comply with the Interpretive Letter. Without limiting the foregoing, Counterparty agrees that neither it nor any “affiliated purchaser” (as defined in Regulation M (“Regulation M”) under the Exchange Act) will, directly or indirectly, bid for, purchase or attempt to induce any person to bid for or purchase, the Shares or securities that are convertible into, or exchangeable or exercisable for, Shares during any “restricted period” as such term is defined in Regulation M. In addition, Counterparty represents that it is eligible to conduct a primary offering of Shares on Form S-3, the offering contemplated by the Underwriting Agreement complies with Rule 415 under the Securities Act, and the Shares are “actively traded” as defined in Rule 101(c)(1) of Regulation M.

 

(d) Agreements and Acknowledgments Regarding Shares.

 

(i) Counterparty agrees and acknowledges that, in respect of any Shares delivered to Dealer hereunder, such Shares shall be newly issued (unless mutually agreed otherwise by the parties) and, upon such delivery, duly and validly authorized, issued and outstanding, fully paid and nonassessable, free of any lien, charge, claim or other encumbrance and not subject to any preemptive or similar rights and shall, upon such issuance, be accepted for listing or quotation on the Exchange.

 

(ii) Counterparty agrees and acknowledges that Dealer (or an affiliate of Dealer) will hedge its exposure to the Transaction by selling Shares borrowed from third party securities lenders or other Shares pursuant to a registration statement, and that, pursuant to the terms of the Interpretive Letter, the Shares up to the Initial Number of Shares delivered, pledged or loaned by Counterparty to Dealer (or an affiliate of Dealer) in connection with the Transaction may be used by Dealer (or an affiliate of Dealer) to return to securities lenders without further registration or other restrictions under the Securities Act, in the hands of those securities lenders, irrespective of whether such securities loan is effected by Dealer or an affiliate of Dealer. Accordingly, subject to Paragraph 7(h) below, Counterparty agrees that the Shares that it delivers to Dealer (or an affiliate of Dealer) pursuant to this Confirmation on or prior to the final Settlement Date will not bear a restrictive legend and that such Shares will be deposited in, and the delivery thereof shall be effected through the facilities of, the Clearance System.

 

 

(iii) Counterparty agrees and acknowledges that it has reserved and will keep available at all times, free from preemptive or similar rights and free from any lien, charge, claim or other encumbrance, authorized but unissued Shares at least equal to the Share Cap, solely for the purpose of settlement under the Transaction.

 

(iv) Unless the provisions set forth below under “Private Placement Procedures” are applicable, Dealer agrees to use any Shares delivered by Counterparty hereunder on any Settlement Date to return to securities lenders to close out open securities loans created by Dealer or an affiliate of Dealer in the course of Dealer’s or such affiliate’s hedging activities related to Dealer’s exposure under the Transaction.

 

(v) In connection with bids and purchases of Shares in connection with any Cash Settlement or Net Share Settlement of the Transaction, Dealer shall use its good faith efforts to conduct its activities, or cause its affiliates to conduct their activities, in a manner consistent with the requirements of the safe harbor provided by Rule 10b-18, as if such provisions were applicable to such purchases and any analogous purchases under any Additional Equity Derivative Transaction, taking into account any applicable Securities and Exchange Commission no action letters, as appropriate, and subject to any delays between the execution and reporting of a trade of the Shares on the Exchange and other circumstances beyond Dealer’s control; provided that without limiting the generality of this paragraph (v), Dealer shall not be responsible for any failure to comply with Rule 10b-18(b)(3) under the Exchange Act to the extent any transaction that was executed (or deemed to be executed) by or on behalf of Counterparty or an “affiliated purchaser” (as defined under Rule 10b-18) pursuant to a separate agreement is not deemed to be an “independent bid” or an “independent transaction” for purposes of Rule 10b-18(b)(3) under the Exchange Act.

 

(e) Additional Representations and Agreements of Counterparty. Counterparty represents, warrants and agrees as follows:

 

(i) Counterparty represents to Dealer on the Trade Date and on any date that Counterparty notifies Dealer that Cash Settlement or Net Share Settlement applies to the Transaction, that (A) Counterparty is not aware of any material nonpublic information regarding Counterparty or the Shares, (B) each of its filings under the Securities Act, the Exchange Act or other applicable securities laws that are required to be filed have been filed and that, as of the date of this representation, when considered as a whole (with the more recent such filings deemed to amend inconsistent statements contained in any earlier such filings), there is no misstatement of material fact contained therein or omission of a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, and (C) Counterparty is not entering into this Confirmation nor making any election hereunder to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for Shares) or otherwise in violation of the Exchange Act. In addition to any other requirement set forth herein, Counterparty agrees not to designate, or to appropriately rescind or modify a prior designation of, any Settlement Date with respect to which Cash Settlement or Net Share Settlement applies if it is notified by Dealer that, in the reasonable determination of Dealer, based on advice of external counsel, such settlement or Dealer’s related market activity in respect of such date would result in a violation of any applicable federal or state law or regulation, including the U.S. federal securities laws.

 

 

(ii) It is the intent of Dealer and Counterparty that following any election of Cash Settlement or Net Share Settlement by Counterparty, the purchase of Shares by Dealer during any Unwind Period shall comply with the requirements of Rule 10b5-l(c)(l)(i)(B) under the Exchange Act and that this Confirmation shall be interpreted to comply with the requirements of Rule 10b5-l(c) under the Exchange Act. Counterparty acknowledges that (i) during any Unwind Period Counterparty shall not have, and shall not attempt to exercise, any influence over how, when or whether to effect purchases of Shares by Dealer (or its agent or affiliate) in connection with this Confirmation and (ii) Counterparty is entering into the Agreement and this Confirmation in good faith and not as part of a plan or scheme to evade compliance with federal securities laws including, without limitation, Rule 10b-5 under the Exchange Act. In addition, Counterparty agrees to act in good faith with respect to this Confirmation and the Agreement.

 

(iii) Counterparty shall, at least one day prior to the first day of any Unwind Period, notify Dealer of the total number of Shares, purchased in Rule 10b-18 purchases of blocks pursuant to the once-a-week block exception contained in Rule 10b-18(b)(4) by or for Counterparty or any of its affiliated purchasers during each of the four calendar weeks preceding the first day of the Unwind Period and during the calendar week in which the first day of the Unwind Period occurs (“Rule 10b-18 purchase”, “blocks” and “affiliated purchaser” each being used as defined in Rule 10b-18).

 

(iv) During any Unwind Period, Counterparty shall (i) notify Dealer prior to the opening of trading in the Shares on any day on which Counterparty makes, or reasonably expects in advance of the opening to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any merger, acquisition, or similar transaction involving a recapitalization relating to Counterparty (other than any such transaction in which the consideration consists solely of cash and there is no valuation period), (ii) promptly notify Dealer following any such announcement that such announcement has been made, and (iii) promptly deliver to Dealer following the making of any such announcement information indicating (A) Counterparty’s average daily Rule 10b-18 purchases (as defined in Rule 10b-18) during the three full calendar months preceding the date of the announcement of such transaction and (B) Counterparty’s block purchases (as defined in Rule 10b-18) effected pursuant to Rule 10b-18(b)(4) during the three full calendar months preceding the date of the announcement of such transaction. In addition, Counterparty shall promptly notify Dealer of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders.

 

(v) Neither Counterparty nor any of its affiliated purchasers (within the meaning of Rule 10b-18) shall take or refrain from taking any action (including, without limitation, any direct purchases by Counterparty or any of its affiliates, or any purchases by a party to a derivative transaction with Counterparty or any of its affiliates), either under this Confirmation, under an agreement with another party or otherwise, that Counterparty reasonably believes to cause any purchases of Shares by Dealer or any of its affiliates in connection with any Cash Settlement or Net Share Settlement of the Transaction not to meet the requirements of the safe harbor provided by Rule 10b-18 determined as if all such foregoing purchases were made by Counterparty.

 

(vi) Counterparty will not engage in any “distribution” (as defined in Regulation M), other than a distribution meeting, in each case, the requirements of an exception set forth in each of Rules 101(b) and 102(b) of Regulation M that would cause a “restricted period” (as defined in Regulation M) to occur during any Unwind Period.

 

 

(vii) Counterparty is not, and after giving effect to the transactions contemplated hereby will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

 

(viii) Counterparty is not insolvent, nor will Counterparty be rendered insolvent as a result of the Transaction or its performance of the terms hereof.

 

(ix) Without limiting the generality of Section 13.1 of the Equity Definitions, Counterparty acknowledges that Dealer is not making any representations or warranties or taking any position or expressing any view with respect to the treatment of the Transaction under any accounting standards including ASC Topic 260, Earnings Per Share, ASC Topic 815, Derivatives and Hedging, or ASC Topic 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (or any successor issue statements).

 

(x) Counterparty understands that no obligations of Dealer to it hereunder will be entitled to the benefit of deposit insurance and that such obligations will not be guaranteed by any affiliate of Dealer or any governmental agency.

 

(xi) To Counterparty’s actual knowledge, no federal, state or local (including non-U.S. jurisdictions) law, rule, regulation or regulatory order applicable to the Shares would give rise to any reporting, consent, registration or other requirement (including without limitation a requirement to obtain prior approval from any person or entity) as a result of Dealer or its affiliates owning or holding (however defined) Shares, other than Sections 13 and 16 under the Exchange Act; provided that Counterparty makes no representation or warranty regarding any such requirement that is applicable generally to the ownership of equity securities by Dealer or its affiliates solely as a result of their being a financial institution or broker-dealer.

 

(xii) No filing with, or approval, authorization, consent, license, registration, qualification, order or decree of, any court or governmental authority or agency, domestic or foreign, is necessary or required for the execution, delivery and performance by Counterparty of this Confirmation and the consummation of the Transaction (including, without limitation, the issuance and delivery of Shares on any Settlement Date) except (i) such as have been obtained under the Securities Act and (ii) as may be required to be obtained under state securities laws.

 

(xiii) Counterparty (i) has such knowledge and experience in financial and business affairs as to be capable of evaluating the merits and risks of entering into the Transaction; (ii) has consulted with its own legal, financial, accounting and tax advisors in connection with the Transaction; and (iii) is entering into the Transaction for a bona fide business purpose.

 

(xiv) Counterparty will, by the next succeeding Scheduled Trading Day notify Dealer upon obtaining knowledge of the occurrence of any event that would constitute an Event of Default, a Potential Event of Default or a Potential Adjustment Event.

 

(xv) Counterparty (i) is capable of evaluating investment risks independently, both in general and with regard to particular transactions and investment strategies involving a security or securities; (ii) will exercise independent judgment in evaluating the recommendations of any broker-dealer or its associated persons, unless it has otherwise notified the broker-dealer in writing; and (iii) has total assets of at least USD 50 million as of the date hereof.

 

 

(f) Acceleration Events. Each of the following events shall constitute an “Acceleration Event”:

 

(i) Stock Borrow Event. Dealer (or an affiliate of Dealer) (A) is not after using good faith commercially reasonable efforts able to hedge its exposure under the Transaction because insufficient Shares are made available for borrowing by securities lenders or (B) would incur a cost to borrow (or to maintain a borrow of) Shares to hedge its exposure under the Transaction that is greater than a rate equal to 200 basis points per annum (each, a “Stock Borrow Event”);

 

(ii) Dividends and Other Distributions. On any day occurring after the Trade Date, Counterparty declares a distribution, issue or dividend to existing holders of the Shares of (A) any cash dividend (other than an Extraordinary Dividend) to the extent all cash dividends having an ex-dividend date during the period from, and including, any Forward Price Reduction Date (with the Trade Date being a Forward Price Reduction Date for purposes of this Paragraph 7(e)(ii) only) to, but excluding, the next subsequent Forward Price Reduction Date exceeds, on a per Share basis, the Forward Price Reduction Amount set forth opposite the first date of any such period on Schedule I, (B) any Extraordinary Dividend, (C) any share capital or other securities of another issuer acquired or owned (directly or indirectly) by Counterparty as a result of a spin-off or other similar transaction or (D) any other type of securities (other than Shares), rights or warrants or other assets, in any case for payment (cash or other consideration) at less than the prevailing market price, as determined in a commercially reasonable manner by Dealer; “Extraordinary Dividend” means any dividend or distribution (that is not an ordinary cash dividend) declared by the Issuer with respect to the Shares that is (1) a dividend or distribution declared on the Shares at a time at which the Issuer has not previously declared or paid dividends or distributions on such Shares for the prior four quarterly periods, (2) a payment or distribution by the Issuer to holders of Shares that the Issuer announces will be an “extraordinary” or “special” dividend or distribution, (3) a payment by the Issuer to holders of Shares out of the Issuer’s capital and surplus or (4) any other “special” dividend or distribution on the Shares that is, by its terms or declared intent, outside the normal course of operations or normal dividend policies or practices of the Issuer;

 

(iii) ISDA Termination. Dealer has the right to designate an Early Termination Date pursuant to Section 6 of the Agreement, in which case, except as otherwise specified herein and except as a result of an Event of Default under Section 5(a)(i) of the Agreement, the provisions of Paragraph 7(g) below shall apply in lieu of the consequences specified in Section 6 of the Agreement;

 

(iv) Other ISDA Events. An Announcement Date occurs in respect of any Merger Event, Tender Offer, Nationalization, Insolvency, Delisting or the occurrence of any Hedging Disruption or Change in Law; provided that, in case of a Delisting, in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); provided, further, that (i) the definition of “Change in Law” provided in Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (A) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the formal or informal interpretation” and (B) immediately following the word “Transaction” in clause (X) thereof, adding the phrase “in the manner reasonably contemplated by Dealer on the Trade Date:” (ii) any determination as to whether (A) the adoption of or any change in any applicable law or regulation (including, without limitation, any tax law) or (B) the promulgation of or any change in or announcement or statement of the formal or informal interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law or regulation (including any action taken by a taxing authority), in each case, constitutes a “Change in Law” shall be made without regard to Section 739 of the Wall Street Transparency and Accountability Act of 2010 (the “WSTAA”) or any similar provision in any legislation enacted on or after the Trade Date; and (iii) any Change in Law that results in an actual cost to Dealer to borrow (or maintain a borrow of) Shares to hedge its exposure under the Transaction that is equal to or less than 200 basis points per annum shall not constitute a “materially increased cost” for purposes of clause (Y) of the definition of “Change in Law” as a result of such cost.

 

 

(v) Ownership Event. On any day, the Share Amount for such day exceeds the Post-Effective Limit for such day (if any applies) (each, an “Ownership Event”). For purposes of this clause (v), the “Share Amount” as of any day is the number of Shares that Dealer and any person whose ownership position would be aggregated with that of Dealer (Dealer or any such person, a “Dealer Person”) under any law, rule, regulation or regulatory order or Counterparty’s constituent document that for any reason is, or after the Trade Date becomes, applicable to ownership of Shares (“Applicable Provisions”), owns, beneficially owns, constructively owns, controls, holds the power to vote or otherwise meets a relevant definition of ownership of under the Applicable Provisions, as determined by Dealer in its reasonable discretion. The “Post-Effective Limit” means (x) the minimum number of Shares that would give rise to reporting or registration obligations (except for any filing requirements on Form 13F, Schedule 13D or Schedule 13G under the Exchange Act, in each case, as in effect on the Trade Date) or other requirements (including obtaining prior approval from any person or entity) of a Dealer Person, or would result in an adverse effect on a Dealer Person, under the Applicable Provisions, as determined by Dealer in its reasonable discretion, minus (y) 1.0% of the number of Shares outstanding.

 

(g) Termination Settlement. Upon the occurrence of any Acceleration Event, Dealer shall have the right to designate, upon at least one Scheduled Trading Day’s notice, any Scheduled Trading Day following such occurrence to be a Settlement Date hereunder (a “Termination Settlement Date”) to which Physical Settlement shall apply, and to select the number of Settlement Shares relating to such Termination Settlement Date; provided that (i) in the case of an Acceleration Event arising out of an Ownership Event, the number of Settlement Shares so designated by Dealer shall not exceed the number of Shares necessary to reduce the Share Amount to reasonably below the Post-Effective Limit and (ii) in the case of an Acceleration Event arising out of a Stock Borrow Event, the number of Settlement Shares so designated by Dealer shall not exceed the number of Shares as to which such Stock Borrow Event exists. If, upon designation of a Termination Settlement Date by Dealer pursuant to the preceding sentence, Counterparty fails to deliver the Settlement Shares relating to such Termination Settlement Date when due or otherwise fails to perform obligations within its control in respect of the Transaction, it shall be an Event of Default with respect to Counterparty and Section 6 of the Agreement shall apply. If an Acceleration Event occurs during an Unwind Period relating to a number of Settlement Shares to which Cash Settlement or Net Share Settlement applies, then on the Termination Settlement Date relating to such Acceleration Event, notwithstanding any election to the contrary by Counterparty, Cash Settlement or Net Share Settlement shall apply to the portion of the Settlement Shares relating to such Unwind Period as to which Dealer has unwound its hedge and Physical Settlement shall apply in respect of (x) the remainder (if any) of such Settlement Shares and (y) the Settlement Shares designated by Dealer in respect of such Termination Settlement Date. If an Acceleration Event occurs after Counterparty has designated a Settlement Date to which Physical Settlement applies but before the relevant Settlement Shares have been delivered to Dealer (unless delivery of such Shares has already been initiated by Counterparty and such delivery is not subject to delay), then Dealer shall have the right to cancel such Settlement Date and designate a Termination Settlement Date in respect of such Shares pursuant to the first sentence hereof. Notwithstanding the foregoing, in the case of a Nationalization or Merger Event, if at the time of the related Settlement Date the Shares have changed into cash or any other property or the right to receive cash or any other property, the Calculation Agent shall adjust the nature of the Shares as it determines appropriate to account for such change such that the nature of the Shares is consistent with what shareholders receive in such event. For the avoidance of doubt, if Dealer designates a Termination Settlement Date as a result of an Acceleration Event caused by an excess dividend of the type described in Paragraph 7(f)(ii) above, no adjustments(s) shall be made to the terms of this contract to account for the amount of such excess dividend.

 

 

(h) Private Placement Procedures. If Counterparty is unable to comply with the provisions of Paragraph 7(d)(ii) above because of a change in law or a change in the policy of the Securities and Exchange Commission or its staff, or Dealer otherwise determines that in its reasonable opinion any Shares to be delivered to Dealer by Counterparty may not be freely returned by Dealer or its affiliates to securities lenders as described under such sub-paragraph (ii) or otherwise constitute “restricted securities” as defined in Rule 144 under the Securities Act, then delivery of any such Shares (the “Restricted Shares”) shall be effected as provided below, unless waived by Dealer.

 

(i) If Counterparty delivers the Restricted Shares pursuant to this clause (i) (a “Private Placement Settlement”), then delivery of Restricted Shares by Counterparty shall be effected in accordance with private placement procedures customary for private placements of equity securities of substantially similar size with respect to such Restricted Shares reasonably acceptable to Dealer; provided that Counterparty may not elect a Private Placement Settlement if, on the date of its election, it has taken, or caused to be taken, any action that would make unavailable either the exemption pursuant to Section 4(a)(2) of the Securities Act for the sale by Counterparty to Dealer (or any affiliate designated by Dealer) of the Restricted Shares or the exemption pursuant to Section 4(a)(1) or Section 4(a)(3) of the Securities Act for resales of the Restricted Shares by Dealer (or any such affiliate of Dealer), and if Counterparty fails to deliver the Restricted Shares when due or otherwise fails to perform obligations within its control in respect of a Private Placement Settlement, it shall be an Event of Default with respect to Counterparty and Section 6 of the Agreement shall apply. The Private Placement Settlement of such Restricted Shares shall include customary representations, covenants, blue sky and other governmental filings and/or registrations, indemnities to Dealer, due diligence rights (for Dealer or any designated buyer of the Restricted Shares by Dealer), opinions and certificates, and such other documentation as is customary for private placement agreements of equity securities of a substantially similar size, all reasonably acceptable to Dealer. In the case of a Private Placement Settlement, Dealer shall, in its good faith discretion, adjust the amount of Restricted Shares to be delivered to Dealer hereunder to reflect the fact that such Restricted Shares may not be freely returned to securities lenders by Dealer and may only be saleable by Dealer at a discount to reflect the lack of liquidity in Restricted Shares. Notwithstanding the Agreement or this Confirmation, the date of delivery of such Restricted Shares shall be the Clearance System Business Day following notice by Dealer to Counterparty of the number of Restricted Shares to be delivered pursuant to this clause (i). For the avoidance of doubt, delivery of Restricted Shares shall be due as set forth in the previous sentence and not be due on the date that would otherwise be applicable.

 

 

(ii) If Counterparty delivers any Restricted Shares in respect of the Transaction, Counterparty agrees that (A) such Shares may be transferred by and among Dealer and its affiliates and (B) after the minimum “holding period” within the meaning of Rule 144(d) under the Securities Act has elapsed, Counterparty shall promptly remove, or cause the transfer agent for the Shares to remove, any legends referring to any transfer restrictions from such Shares upon delivery by Dealer (or such affiliate of Dealer) to Counterparty or such transfer agent of any seller’s and broker’s representation letters customarily delivered by Dealer or its affiliates in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act, each without any further requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by Dealer (or such affiliate of Dealer).

 

(i) Indemnity. Counterparty agrees to indemnify Dealer and its affiliates and their respective directors, officers, employees, agents and controlling persons (Dealer and each such affiliate or person being an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities, joint and several, incurred by or asserted against such Indemnified Party arising out of, in connection with, or relating to, any breach of any covenant or representation made by Counterparty in this Confirmation or the Agreement and will reimburse any Indemnified Party for all reasonable expenses (including reasonable legal fees and expenses) as they are incurred in connection with the investigation of, preparation for, or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto, except to the extent determined in a final and nonappealable judgment by a court of competent jurisdiction to have resulted from Dealer’s gross negligence, fraud, bad faith and/or willful misconduct or from a breach of any representation or covenant of Dealer contained in this Confirmation or the Agreement. The foregoing provisions shall survive any termination or completion of the Transaction.

 

(j) Waiver of Trial by Jury. COUNTERPARTY AND DEALER HEREBY IRREVOCABLY WAIVE (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF DEALER OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.

 

(k) Governing Law/Jurisdiction. This Confirmation and the Agreement, and any claim, controversy or dispute arising under or related to this Confirmation or the Agreement, shall be governed by the laws of the State of New York without reference to the conflict of laws provisions thereof. The parties hereto irrevocably submit to the exclusive jurisdiction of the courts of the State of New York and the United States Court for the Southern District of New York in connection with all matters relating hereto and waive any objection to the laying of venue in, and any claim of inconvenient forum with respect to, these courts.

 

(l) Designation by Dealer. Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Counterparty, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Counterparty only to the extent of any such performance.

 

 

(m) Insolvency Filing. Notwithstanding anything to the contrary herein, in the Agreement or in the Equity Definitions, upon any Insolvency Filing or other proceeding under the Bankruptcy Code in respect of the Issuer, the Transaction shall automatically terminate on the date thereof without further liability of either party to this Confirmation to the other party (except for any liability in respect of any breach of representation or covenant by a party under this Confirmation prior to the date of such Insolvency Filing or other proceeding), it being understood that the Transaction is a contract for the issuance of Shares by the Issuer.

 

(n) Disclosure. Effective from the date of commencement of discussions concerning the Transaction, each of Dealer and Counterparty and each of their employees, representatives, or other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Transaction and all materials of any kind (including opinions or other tax analyses) relating to such tax treatment and tax structure.

 

(o) Right to Extend. Dealer may postpone any Settlement Date with respect to which Cash Settlement or Net Share Settlement applies or any other date of valuation or delivery with respect to which Cash Settlement or Net Share Settlement applies, with respect to some or all of the relevant Settlement Shares, if Dealer determines, based on advice of external counsel, that such extension is reasonably necessary or appropriate to enable Dealer to effect purchases of Shares in connection with its commercially reasonable hedging activity hereunder in a manner that would, if Dealer were Counterparty or an affiliated purchaser of Counterparty, be in compliance with applicable legal and regulatory requirements.

 

(p) Counterparty Share Repurchases. Counterparty agrees not to repurchase, directly or indirectly, any Shares if, immediately following such purchase, the Outstanding Share Percentage would be equal to or greater than 8.9%. The “Outstanding Share Percentage” as of any day is the fraction (1) the numerator of which is the aggregate of the Number of Shares for the Transaction and the “Number of Shares” under each Additional Equity Derivative Transaction that is a share forward transaction and (2) the denominator of which is the number of Shares outstanding on such day.

 

(q) Limit on Beneficial Ownership. Notwithstanding any other provisions hereof, Dealer shall not have an “interest” in Shares hereunder, Dealer shall not have the right to acquire Shares hereunder and Dealer shall not be entitled to take delivery of any Shares hereunder (in each case, whether in connection with the purchase of Shares on any Settlement Date or any Termination Settlement Date, any Private Placement Settlement or otherwise) to the extent (but only to the extent) that, after such receipt of any Shares hereunder, (i) the Share Amount would exceed the Post-Effective Limit, (ii) Dealer and its affiliates would directly or indirectly own or control, for purposes of the Bank Holding Company Act of 1956, as amended (the “BHCA”), in excess of 4.0% of the outstanding Shares, (iii) Dealer and each person subject to aggregation of Shares with Dealer under Section 13 or Section 16 of the Exchange Act and the rules promulgated thereunder (including all persons who may form a “group” within the meaning of Rule 13d-5(b)(1) under the Exchange Act) (collectively, the “Dealer Group”) would directly or indirectly beneficially own (as such term is defined for purposes of Section 13 or Section 16 of the Exchange Act and the rules promulgated thereunder) in excess of 4.9% of the then outstanding Shares (the “Threshold Number of Shares”) or (iv) Dealer would hold or beneficially own 5.0% or more of the number of Shares of Counterparty’s outstanding common stock or 5.0% or more of Counterparty’s outstanding voting power (the “Exchange Limit”). Any purported delivery hereunder shall be void and have no effect to the extent (but only to the extent) that, after such delivery, (i) the Share Amount would exceed the Post-Effective Limit, (ii) Dealer and its affiliates would directly or indirectly own or control, for purposes of the BHCA, in excess of 4.0% of the outstanding Shares, (iii) the Dealer Group would directly or indirectly so beneficially own in excess of the Threshold Number of Shares or (iv) Dealer would directly or indirectly hold or beneficially own in excess of the Exchange Limit. If any delivery owed to Dealer hereunder is not made, in whole or in part, as a result of this provision, Counterparty’s obligation to make such delivery shall not be extinguished and Counterparty shall make such delivery as promptly as practicable after, but in no event later than one Scheduled Trading Day after, Dealer gives notice to Counterparty that, after such delivery, (i) the Share Amount would not exceed the Post-Effective Limit, (ii) Dealer and its affiliates would not directly or indirectly own or control for the purposes of the BHCA in excess of 4.0% of the outstanding Shares, (iii) the Dealer Group would not directly or indirectly so beneficially own in excess of the Threshold Number of Shares and (iv) Dealer would not directly or indirectly hold in excess of the Exchange Limit.

 

 

In addition, notwithstanding anything herein to the contrary, if any delivery owed to Dealer hereunder is not made, in whole or in part, as a result of the immediately preceding paragraph, Dealer shall be permitted to make any payment due in respect of such Shares to Counterparty in two or more tranches that correspond in amount to the number of Shares delivered by Counterparty to Dealer pursuant to the immediately preceding paragraph.

 

(r) Commodity Exchange Act. Each of Dealer and Counterparty agrees and represents that it is an “eligible contract participant” as defined in Section 1a(18) of the U.S. Commodity Exchange Act, as amended (the “CEA”), the Agreement and the Transaction are subject to individual negotiation by the parties and have not been executed or traded on a “trading facility” as defined in Section 1a(51) of the CEA.

 

(s) Bankruptcy Status. Subject to Paragraph 7(m) above, Dealer acknowledges and agrees that this Confirmation is not intended to convey to Dealer rights with respect to the transactions contemplated hereby that are senior to the claims of Counterparty’s common stockholders in any U.S. bankruptcy proceedings of Counterparty; provided, however, that nothing herein shall be deemed to limit Dealer’s right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with respect to this Confirmation and the Agreement; and provided, further, that nothing herein shall limit or shall be deemed to limit Dealer’s rights in respect of any transaction other than the Transaction.

 

(t) No Collateral or Setoff. Notwithstanding Section 6(f) or any other provision of the Agreement or any other agreement between the parties to the contrary, the obligations of Counterparty hereunder are not secured by any collateral. Obligations in respect of the Transaction shall not be set off against any other obligations of the parties, whether arising under the Agreement, this Confirmation, under any other agreement between the parties hereto, by operation of law or otherwise, and no other obligations of the parties shall be set off against obligations in respect of the Transaction, whether arising under the Agreement, this Confirmation, under any other agreement between the parties hereto, by operation of law or otherwise, and each party hereby waives any such right of setoff; except that set-off solely with respect to amounts payable under the Transaction and any and all Additional Equity Derivative Transactions governed by the Agreement shall be permissible.

 

 

(u) Tax Matters.

 

(i) Payer Tax Representations. For the purpose of Section 3(e) of the Agreement, each of Dealer and Counterparty makes the following representation: It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 9(h) of the Agreement or amounts payable hereunder that may be considered to be interest for U.S. federal income tax purposes) to be made by it to the other party under the Agreement. In making this representation, it may rely on (A) the accuracy of any representations made by the other party pursuant to Section 3(f) of the Agreement, (B) the satisfaction of the agreement contained in Section 4(a)(i) or Section 4(a)(iii) of the Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or Section 4(a)(iii) of the Agreement and (C) the satisfaction of the agreement of the other party contained in Section 4(d) of the Agreement, except that it will not be a breach of this representation where reliance is placed on clause (B) above and the other party does not deliver a form or document under Section 4(a)(iii) of the Agreement by reason of material prejudice to its legal or commercial position.

 

(ii) Payee Tax Representations. For the purpose of Section 3(f) of the Agreement:

 

(1) Dealer makes the following representations:

 

a.

It is a “U.S. person” (as that term is used in section 1.1441-4(a)(3)(ii) of the United States Treasury Regulations) for U.S. federal income tax purposes (or, if it is disregarded for U.S. federal income tax purposes, its beneficial owner is) and is a U.S. resident for U.S. federal income tax purposes.

 

(2) Counterparty makes the following representations:

 

a.

It is a “U.S. person” (as that term is used in Section 1.1441-4(a)(3)(ii) of the United States Treasury Regulations) for U.S. federal income tax purposes and is an exempt recipient under Section 1.6049-4(c)(1)(ii) of the United States Treasury Regulations.

 

(iii) Withholding Tax Imposed on Payments to non-U.S. Counterparties under the United States Foreign Account Tax Compliance Provisions of the HIRE Act. “Tax” as used in Paragraph 7(u)(i) above and “Indemnifiable Tax” as defined in Section 14 of the Agreement, shall not include any FATCA Withholding Tax. For the avoidance of doubt, a FATCA Withholding Tax is a Tax, the deduction or withholding of which is required by applicable law for the purposes of Section 2(d) of the Agreement.

 

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

 

“FATCA Withholding Tax” means any U.S. federal withholding tax imposed or collected pursuant to Sections 1471 through 1474 of the Code, any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code.

 

 

(iv) 871(m) Protocol. To the extent that either party to the Agreement with respect to the Transaction is not an adhering party to the ISDA 2015 Section 871(m) Protocol published by ISDA on November 2, 2015 and available at www.isda.org, as may be amended, supplemented, replaced or superseded from time to time (the “871(m) Protocol”), the parties agree that the provisions and amendments contained in the Attachment to the 871(m) Protocol are incorporated into and apply to this Confirmation and the Agreement with respect to the Transaction as if set forth in full herein. The parties further agree that, solely for purposes of applying such provisions and amendments to this Confirmation and the Agreement with respect to the Transaction, references to “each Covered Master Agreement” in the 871(m) Protocol will be deemed to be references to this Confirmation and the Agreement with respect to the Transaction, and references to the “Implementation Date” in the 871(m) Protocol will be deemed to be references to the Trade Date of the Transaction. For greater certainty, if there is any inconsistency between this provision and the provisions contained in any other agreement between the parties with respect to the Transaction, this provision shall prevail unless such other agreement expressly overrides the provisions of the Attachment to the 871(m) Protocol. Notwithstanding anything to the contrary in this Section 7(u)(iv), the last sentence of Section 2(d)(iii) of the Agreement as proposed to be added by the 871(m) Protocol is not incorporated herein.

 

(v) Tax Documentation. For the purposes of Sections 4(a)(i) and 4(a)(ii) of the Agreement, Counterparty shall provide to Dealer a valid and duly executed U.S. Internal Revenue Service Form W-9, or any successor thereto, completed accurately (i) on or before the date of execution of this Confirmation; (ii) promptly upon reasonable demand by Dealer; and (iii) promptly upon learning that any such tax form previously provided by Counterparty has become inaccurate or incorrect.

 

For the purposes of Sections 4(a)(i) and 4(a)(ii) of the Agreement, Dealer shall provide to Counterparty a valid and duly executed U.S. Internal Revenue Service Form W-9, or any successor thereto, completed accurately (i) on or before the date of execution of this Confirmation; (ii) promptly upon reasonable demand by Counterparty; and (iii) promptly upon learning that any such tax form previously provided by Dealer has become inaccurate or incorrect.

 

(vi) Deduction or Withholding for Tax. Sections 2(d)(i), 2(d)(i)(4), 2(d)(ii)(1) of the Agreement and the definition of “Tax” are hereby amended by replacing the words “pay”, “paid”, “payment” or “payments” with the words “pay or deliver”, “paid or delivered”, “payment or delivery” or “payments or deliveries”, respectively.

 

(v) Wall Street Transparency and Accountability Act of 2010. The parties hereby agree that none of (i) Section 739 of the WSTAA, (ii) any similar legal certainty provision included in any legislation enacted, or rule or regulation promulgated, on or after the Trade Date, (iii) the enactment of the WSTAA or any regulation under the WSTAA, (iv) any requirement under the WSTAA or (v) any amendment made by the WSTAA shall limit or otherwise impair either party’s right to terminate, renegotiate, modify, amend or supplement this Confirmation or the Agreement, as applicable, arising from a termination event, force majeure, illegality, increased cost, regulatory change or similar event under this Confirmation, the Equity Definitions or the Agreement (including, but not limited to, any right arising from any Acceleration Event).

 

(w) Other Forwards / Dealers. Dealer acknowledges that Counterparty may enter into one or more substantially similar forward transactions for the Shares (each, an “Other Forward”) with one or more other dealers. Dealer and Counterparty agree that if Counterparty designates a “Settlement Date” with respect to one or more Other Forwards for which “Cash Settlement” or “Net Share Settlement” is applicable, and the resulting “Unwind Period” for such Other Forwards coincides for any period of time with an Unwind Period for the Transaction (the “Overlap Unwind Period”), Counterparty shall notify Dealer at least one Scheduled Trading Day prior to the commencement of such Overlap Unwind Period of the first Scheduled Trading Day and length of such Overlap Unwind Period, and Dealer shall be permitted to purchase Shares to unwind its hedge only on alternating Scheduled Trading Days during such Overlap Unwind Period, commencing on the first, second, third or later Scheduled Trading Day of such Overlap Unwind Period, as notified to Dealer by Counterparty at least one Scheduled Trading Day prior to such Overlap Unwind Period (which alternating Scheduled Trading Days, for the avoidance of doubt, may be every other Scheduled Trading Day if there is only one other dealer, every third Scheduled Trading Day if there are two other dealers, etc.).

 

 

(x) Delivery of Cash. For the avoidance of doubt, nothing in this Confirmation shall be interpreted as requiring Counterparty to deliver cash in respect of the settlement of the Transaction, except in circumstances where the required cash settlement thereof is permitted for classification of the contract as equity by ASC 815-40-25 (formerly EITF 00-19) as in effect on the Trade Date (including, without limitation, where Counterparty so elects to deliver cash or fails timely to elect to deliver Shares in respect of such settlement). For the avoidance of doubt, the preceding sentence shall not be construed as limiting (i) Paragraph 7(i) above or (ii) any damages that may be payable by Counterparty as a result of breach of this Confirmation.

 

(y) Counterparts.

 

(i) Counterparts may be delivered via facsimile, electronic mail (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., DocuSign and AdobeSign (any such signature, an “Electronic Signature”)) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. The words “execution,” “signed,” “signature” and words of like import in this Confirmation or in any other certificate, agreement or document related to this Confirmation shall include any Electronic Signature, except to the extent electronic notices are expressly prohibited under this Confirmation or the Agreement.

 

(ii) Notwithstanding anything to the contrary in the Agreement, either party may deliver to the other party a notice relating to any Event of Default or Termination Event under this Confirmation by email.

 

(z) U.S. Stay Regulations. To the extent that the QFC Stay Rules are applicable hereto, then the parties agree that (i) to the extent that prior to the date hereof both parties have adhered to the 2018 ISDA U.S. Resolution Stay Protocol (the “Protocol”), the terms of the Protocol are incorporated into and form a part of this Confirmation, and for such purposes this Confirmation shall be deemed a Protocol Covered Agreement and each party shall be deemed to have the same status as “Regulated Entity” and/or “Adhering Party” as applicable to it under the Protocol; (ii) to the extent that prior to the date hereof the parties have executed a separate agreement the effect of which is to amend the qualified financial contracts between them to conform with the requirements of the QFC Stay Rules (the “Bilateral Agreement”), the terms of the Bilateral Agreement are incorporated into and form a part of this Confirmation and each party shall be deemed to have the status of “Covered Entity” or “Counterparty Entity” (or other similar term) as applicable to it under the Bilateral Agreement; or (iii) if clause (i) and clause (ii) do not apply, the terms of Section 1 and Section 2 and the related defined terms (together, the “Bilateral Terms”) of the form of bilateral template entitled “Full-Length Omnibus (for use between U.S. G-SIBs and Corporate Groups)” published by ISDA on November 2, 2018 (currently available on the 2018 ISDA U.S. Resolution Stay Protocol page at www.isda.org and a copy of which is available upon request), the effect of which is to amend the qualified financial contracts between the parties thereto to conform with the requirements of the QFC Stay Rules, are hereby incorporated into and form a part of this Confirmation, and for such purposes this Confirmation shall be deemed a “Covered Agreement,” Dealer shall be deemed a “Covered Entity” and Counterparty shall be deemed a “Counterparty Entity.” In the event that, after the date of this Confirmation, both parties hereto become adhering parties to the Protocol, the terms of the Protocol will replace the terms of this Paragraph 7(z). In the event of any inconsistencies between this Confirmation and the terms of the Protocol, the Bilateral Agreement or the Bilateral Terms (each, the “QFC Stay Terms”), as applicable, the QFC Stay Terms will govern. Terms used in this Paragraph 7(z) without definition shall have the meanings assigned to them under the QFC Stay Rules. For purposes of this Paragraph 7(z), references to “this Confirmation” include any related credit enhancements entered into between the parties or provided by one to the other.

 

 

“QFC Stay Rules” means the regulations codified at 12 C.F.R. 252.2, 252.81–8, 12 C.F.R. 382.1-7 and 12 C.F.R. 47.1-8, which, subject to limited exceptions, require an express recognition of the stay-and-transfer powers of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and the Orderly Liquidation Authority under Title II of the Dodd Frank Wall Street Reform and Consumer Protection Act and the override of default rights related directly or indirectly to the entry of an affiliate into certain insolvency proceedings and any restrictions on the transfer of any covered affiliate credit enhancements.

 

(aa) Adjustments. For the avoidance of doubt, whenever the Calculation Agent, the Hedging Party or the Determining Party is called upon to make an adjustment, determination or election pursuant to the terms of this Confirmation or the Equity Definitions to take into account the effect of an event, the Calculation Agent, the Hedging Party or the Determining Party, as applicable, shall make such adjustment, determination or election in a commercially reasonable manner by reference to the effect of such event on the Hedging Party, assuming that the Hedging Party maintains a commercially reasonable hedge position at the time of the event.

 

 

Please confirm your agreement to be bound by the terms stated herein by executing the copy of this Confirmation enclosed for that purpose and returning it to us.

 

	Yours sincerely,
	Citibank, N.A.
	By:	/s/ Eric Natelson
		Name: Eric Natelson
		Title: Authorized Signatory

 

 

Confirmed as of the date first above written:

 

	Old National Bancorp
	By:	/s/ John V. Moran
		Name: John V. Moran, IV
		Title: Senior Executive Vice President and Chief Financial Officer

 

 

SCHEDULE I

 

Forward Price Reduction Date			Forward Price Reduction Amount
Trade Date			USD	0.0000
December 5, 2024			USD	0.1400
March 5, 2025			USD	0.1400
June 5, 2025			USD	0.1400
September 5, 2025			USD	0.1400
Final Date			USD	0.0000

 

 

 

Exhibit 23.2

 

Consent of Independent Auditors

 

We consent to the reference to our firm under the caption "Experts" in the Registration Statement on Form S-3 (No. 333-272312) and related Prospectus of Old National Bancorp for the registration of shares of its common stock and to the inclusion therein of our report dated March 26, 2024, with respect to the consolidated financial statements of Bremer Financial Corporation as of and for the years ended December 31, 2023 and 2022 appearing therein and in the Current Report on Form 8-K of Old National Bancorp dated November 25, 2024.

 

/s/ Ernst & Young LLP

 

Minneapolis, Minnesota

November 25, 2024

 

 

 

Exhibit 99.1

 

 

NEWS RELEASE   For Immediate Release November 25, 2024

Old National Contacts: Media: Rick Vach (904) 535-9489 Investors: Lynell Durchholz (812) 464-1366   Bremer Contact: Media: Clarise Tushie cmtushie@bremer.com

 

Old National to partner with St. Paul, Minn.-based

Bremer Financial Corporation

 

Bremer, with $16.2 billion in total assets, bolsters Old National’s presence in the Twin
Cities and expands its footprint into several other vibrant Midwestern markets

 

 

EVANSVILLE, IN & ST. PAUL, MN – Old National Bancorp (NASDAQ: ONB) (“Old National”) and Bremer Financial Corporation (“BFC” or “Bremer”) jointly announced today that they entered into a definitive merger agreement. Founded in 1943, BFC is the bank holding company for Bremer Bank.

 

As of September 30, 2024, Bremer had $16.2 billion in total assets, $11.5 billion in total loans, and $13.2 billion in deposits. After the partnership is completed, Old National will become the third-largest bank in the Twin Cities. In addition, the partnership expands Old National’s reach into several other vibrant markets throughout Minnesota, North Dakota and Wisconsin. Once combined, the new organization would have over $70 billion in assets (based on September 30, 2024 asset figures), a significantly larger footprint, and offer additional banking capabilities and enhanced resources to serve customers.

 

“This partnership represents an outstanding fit between two highly compatible, relationship- and community-focused banks,” said Old National Chairman and CEO Jim Ryan. “When you look at what has made Bremer Bank a leading institution since 1943, what you quickly find are the same strategic priorities and cultural principles that have guided Old National’s success for 190 years: a strong deposit franchise, a diversified loan portfolio accentuated by exceptional credit quality, and a passion for investing in and strengthening communities. I am incredibly confident that, through this partnership, Bremer and Old National will be even better together.”

 

“For more than 80 years, we’ve been honored to carry out the legacy of our founder, Otto Bremer,” said Jeanne Crain, President and CEO of Bremer. “When our majority shareholder, the Otto Bremer Trust, reaffirmed its interest in selling Bremer Bank, we appreciated the opportunity to identify a partner through a collaborative process to ensure the best possible outcome for our customers, employees, and our communities. With Old National, we have confidence we found a great fit.”

 

The Otto Bremer Trust

 

The Otto Bremer Trust (the “Trust”) is a private charitable trust based in St. Paul, Minnesota. It currently holds a majority ownership stake in Bremer. Established in 1944, the Trust works to combine finance and philanthropy in service of the community. Since its inception, the Trust has made more than $1.1 billion in grants and program-related investments to more than 4,200 organizations.

 

 

Upon closing of this transaction, the Trust will have an approximate 11% ownership stake in Old National and a Trustee of the Otto Bremer Trust will join the Old National Board of Directors.

 

The Otto Bremer Trust commented: “All of us at the Otto Bremer Trust are excited that the Bremer Bank legacy of investing in people, places and opportunities continues with one of the most community-minded banks in the nation. This partnership expands the scope of what can be accomplished for and within our communities – civically, socially and economically.”

 

The partnership transaction includes 70 total banking centers in Minnesota, North Dakota and Wisconsin

 

48 branches in Minnesota, including:

 

•

18 locations in the Twin Cities region

•

5 locations in the Rochester region

•

7 locations in the Alexandria region

•

4 locations in the St. Cloud region

 

14 branches in North Dakota, including:

 

•

6 locations in the Grand Forks region

•

7 locations in the Fargo region

 

8 branches in Wisconsin, including:

 

•

1 location in Appleton

•

1 location in Eau Claire

 

Under the terms of the definitive merger agreement, each outstanding share of Bremer common stock will be converted into the right to receive 4.182 shares of Old National common stock plus $26.22 in cash, valuing the transaction at approximately $1,401 million, or $116.76 per share, based on Old National’s closing stock price on November 22, 2024. The definitive merger agreement has been unanimously approved by the Board of Directors of Bremer and Old National. The transaction is subject to customary closing conditions and regulatory approvals, including the approval of Bremer shareholders. The transaction is anticipated to close in the middle of 2025.

 

Citi served as exclusive financial advisor to Old National, and Squire Patton Boggs (US) LLP acted as legal counsel.

 

J.P. Morgan served as financial advisor for Bremer, and Wachtell, Lipton, Rosen & Katz acted as legal counsel.

 

Keefe, Bruyette & Woods, A Stifel Company served as financial advisor for the Otto Bremer Trust, and Sullivan & Cromwell LLP acted as legal counsel.

 

CONFERENCE CALL AND WEBCAST

 

Old National will hold a conference call and live webcast at 8:00 a.m. Central Time on Monday, November 25, 2024, to discuss the acquisition of Bremer. The live audio webcast link and corresponding presentation slides will be available on Old National’s Investor Relations web page at oldnational.com and will be archived there for 12 months. To listen to the live conference call, dial U.S. (800) 715-9871 or International (646) 307-1963, Conference ID Code 2981053. A replay of the call will also be available from approximately 8:00 a.m. Central Time on November 26 through December 2.  To access the replay, dial U.S. (800) 770-2030 or International (647) 362-9199, Conference ID Code 2981053.

 

 

ABOUT BREMER FINANCIAL CORPORATION

 

Bremer Financial Corporation is a privately held regional financial services company with $16 billion in assets. Founded in 1943 by Otto Bremer, the company is headquartered in St. Paul, Minnesota, and provides a comprehensive range of banking, mortgage, investment, wealth management, and insurance products and services throughout Minnesota, North Dakota and Wisconsin. Clients include small businesses, mid-sized corporations, agribusinesses, nonprofits, public and government entities, and individuals and families.

 

ABOUT OLD NATIONAL

 

Old National Bancorp (NASDAQ: ONB) is the holding company of Old National Bank. As the sixth largest commercial bank headquartered in the Midwest, Old National proudly serves clients primarily in the Midwest and Southeast. With approximately $54 billion of assets and $31 billion of assets under management, Old National ranks among the top 30 banking companies headquartered in the United States. Tracing our roots to 1834, Old National focuses on building long-term, highly valued partnerships with clients while also strengthening and supporting the communities we serve. In addition to providing extensive services in consumer and commercial banking, Old National offers comprehensive wealth management and capital markets services. For more information and financial data, please visit Investor Relations at oldnational.com. In 2024, Points of Light named Old National one of "The Civic 50" -- an honor reserved for the 50 most community-minded companies in the United States.

 

Cautionary Note Regarding Forward-Looking Statements

 

Certain statements in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder, which statements involve inherent risks and uncertainties. Examples of forward-looking statements include, but are not limited to, statements regarding the outlook and expectations of Old National and Bremer, respectively, with respect to the proposed transaction, the strategic benefits and financial benefits of the proposed transaction, including the expected impact of the proposed transactions on the combined company’s future financial performance (including anticipated accretion to earnings per share, the tangible book value earn-back period and other operating and return metrics), the timing of the closing of the proposed transaction, and the ability to successfully integrate the combined businesses. Such statements are often characterized by the use of qualified words (and their derivatives) such as “may,” “will,” “anticipate,” “could,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “project” and “intend,” as well as words of similar meaning or other statements concerning opinions or judgment of Old National or Bremer or their respective management about future events. Forward-looking statements are based on assumptions as of the time they are made and are subject to risks, uncertainties and other factors that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated results expressed or implied by such forward-looking statements. Such risks, uncertainties and assumptions include, among others, the following:

 

•

the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement;

 

•

the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction) and the possibility that the proposed transaction does not close when expected or at all because required regulatory approvals, the approval by Bremer’s shareholders, or other approvals and the other conditions to closing are not received or satisfied on a timely basis or at all;

 

 

•

the outcome of any legal proceedings that may be instituted against Old National or Bremer;

 

•

the possibility that the anticipated benefits of the proposed transaction, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of changes in, or problems arising from, general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which Old National and Bremer operate;

 

•

the possibility that the integration of the two companies may be more difficult, time-consuming or costly than expected;

 

•

the impact of purchase accounting with respect to the proposed transaction, or any change in the assumptions used regarding the assets acquired and liabilities assumed to determine their fair value and credit marks;

 

•

the possibility that the proposed transaction may be more expensive or take longer to complete than anticipated, including as a result of unexpected factors or events;

 

•

the diversion of management’s attention from ongoing business operations and opportunities;

 

•

potential adverse reactions of Old National’s or Bremer’s customers or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction;

 

•

a material adverse change in the financial condition of Old National or Bremer;

 

•

changes in Old National’s share price before closing;

 

•

risks relating to the potential dilutive effect of shares of Old National’s common stock to be issued in the proposed transaction;

 

•

general competitive, economic, political and market conditions;

 

•

major catastrophes such as earthquakes, floods or other natural or human disasters, including infectious disease outbreaks; and

 

•

other factors that may affect future results of Old National or Bremer, including, among others, changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates; deposit flows; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; and other actions of the Federal Reserve Board, the Office of the Comptroller of the Currency and legislative and regulatory actions and reforms.

 

These factors are not necessarily all of the factors that could cause Old National, Bremer, or the combined company’s actual results, performance or achievements to differ materially from those expressed in or implied by any of the forward-looking statements. Other factors, including unknown or unpredictable factors, also could harm Old National’s, Bremer’s, or the combined company’s results.

 

 

Although each of Old National and Bremer believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results of Old National or Bremer will not differ materially from any projected future results expressed or implied by such forward-looking statements. Additional factors that could cause results to differ materially from those described above can be found in Old National’s most recent annual report on Form 10-K for the fiscal year ended December 31, 2023 (and which is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/707179/000070717924000006/onb-20231231.htm), quarterly reports on Form 10-Q, and other documents subsequently filed by Old National with the Securities Exchange Commission (“SEC”). The actual results anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on Old National, Bremer or each of their respective businesses or operations. Investors are cautioned not to rely too heavily on any such forward-looking statements. Old National and Bremer urge you to consider all of these risks, uncertainties and other factors carefully in evaluating all such forward-looking statements made by Old National and Bremer. Forward-looking statements speak only as of the date they are made, and Old National and Bremer undertake no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.

 

No Offer or Solicitation

 

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or the solicitation of any vote or approval with respect to the proposed transaction between Old National and Bremer. No offer of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act of 1933, as amended, and no offer to sell or solicitation of an offer to buy shall be made in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

 

Important Additional Information about the Transaction and Where to Find It

 

In connection with the proposed transaction, Old National intends to file with the SEC a Registration Statement on Form S-4 (the “Registration Statement”) to register the shares of Old National capital stock to be issued in connection with the proposed transaction. The Registration Statement will include a proxy statement of Bremer and a prospectus of Old National (the “Proxy Statement/Prospectus”), and Old National may file with the SEC other relevant documents concerning the proposed transaction. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION WHEN THEY BECOME AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT OLD NATIONAL, BREMER AND THE PROPOSED TRANSACTION AND RELATED MATTERS.

 

A copy of the Registration Statement, Proxy Statement/Prospectus, as well as other filings containing information about Old National, may be obtained, free of charge, at the SEC’s website (http://www.sec.gov) when they are filed. You will also be able to obtain these documents, when they are filed, free of charge, from Old National by accessing Old National’s website at https://ir.oldnational.com. Copies of the Registration Statement, the Proxy Statement/Prospectus and the filings with the SEC that will be incorporated by reference therein can also be obtained, without charge, by directing a request to Old National’s Investor Relations, Old National Bancorp, One Main Street, Evansville, Indiana, 47708, or by calling (812) 464-1366. The information on Old National’s website is not, and shall not be deemed to be, a part of this communication or incorporated into other filings either company makes with the SEC.

 

 

 

 

 

Exhibit 99.2

 

To Partner With November 25, 2024

Disclaimer and Caution About Forward - Looking Statements 2 Certain statements in this presentation constitute “forward - looking statements” within the meaning of the Private Securities Lit igation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and S ect ion 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b - 6 promulgated thereunder, which statements involve inherent risks and uncertainties. Examples of forward - looking statements include, but are not limited to, statements regarding the outlo ok and expectations of Old National Bancorp (the “Company”, “Old National”, “ONB”, “we” or “us”) and Bremer Financial Corporation (“Bremer”), respectively, with respect to the proposed transaction, the strategic benefits and financial benefits of the proposed transaction, including the expected impact of the proposed transactions on the combined company’s future financial performanc e ( including anticipated accretion to earnings per share, the tangible book value earn - back period and other operating and return metrics), the timing of the closing of the proposed transaction, the ability to successfully integrate the combined businesse s, and statements on the slides entitled “Transaction Highlights”, “Key Transaction Terms”, “Key Financial Assumptions,” “Financ ial ly Attractive Transaction Accelerating Top Quartile Returns,” “Rapid Capital Accretion,” “Creating Value For All Stakeholders,” “Pr o Forma Deposit Composition,” “Pro Forma Loan Composition,” and “Pro Forma Earnings Per Share Reconciliation.” Such statemen ts are often characterized by the use of qualified words (and their derivatives) such as “may,” “will,” “anticipate,” “could,” “ sho uld,” “would”, “believe,” “contemplate”, “expect,” “estimate”, “continue”, “plan”, “project” and “intend”, as well as words o f s imilar meaning or other statements concerning opinions or judgment of Old National or Bremer or their respective management about future events . F orward - looking statements are based on assumptions as of the time they are made and are subject to risks, uncertainties and othe r factors that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence which could cause ac tua l results to differ materially from anticipated results, expressed or implied by such forward - looking statements. Such risks, u ncertainties and assumptions, include, among others, the following: the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to te rminate the merger agreement; the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of condit ion s that could adversely affect the combined company or the expected benefits of the proposed transaction) and the possibility that the proposed transaction does not close when expected or at all because required regulatory approvals, the approval by B rem er’s shareholders, or other approvals and the other conditions to closing are not received or satisfied on a timely basis or at all; the outcome of any legal proceedings that may be instituted against Old National or Bremer; the possibility that the anticipated benefits of the proposed transaction, including anticipated cost savings and strategic g ain s, are not realized when expected or at all, including as a result of changes in, or problems arising from, general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree o f c ompetition in the geographic and business areas in which Old National and Bremer operate; the possibility that the integration of the two companies may be more difficult, time - consuming or costly than expected; the impact of purchase accounting with respect to the proposed transaction, or any change in the assumptions used regarding t he assets acquired and liabilities assumed to determine their fair value and credit marks; the possibility that the proposed transaction may be more expensive or take longer to complete than anticipated, including as a result of unexpected factors or events; the diversion of management’s attention from ongoing business operations and opportunities; potential adverse reactions of Old National’s or Bremer’s customers or changes to business or employee relationships, includi ng those resulting from the announcement or completion of the proposed transaction; a material adverse change in the financial condition of Old National or Bremer; changes in Old National’s share price before closing; risks relating to the potential dilutive effect of shares of Old National’s common stock to be issued in the proposed transac tio n; general competitive, economic, political and market conditions; major catastrophes such as earthquakes, floods or other natural or human disasters, including infectious disease outbreaks; a nd other factors that may affect future results of Old National or Bremer, including, among others, changes in asset quality and cr edit risk; the inability to sustain revenue and earnings growth; changes in interest rates; deposit flows; inflation; custome r borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital manag eme nt activities; and other actions of the Federal Reserve Board, the Office of the Comptroller of the Currency and legislative and regulatory actions and reforms. These factors are not necessarily all of the factors that could cause Old National, Bremer, or the combined company’s actual res ults, performance or achievements to differ materially from those expressed in or implied by any of the forward - looking statemen ts. Other factors, including unknown or unpredictable factors, also could harm Old National’s, Bremer’s, or the combined company’ s r esults. Although each of Old National and Bremer believes that its expectations with respect to forward looking statements are based upo n reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assuranc e t hat actual results of Old National or Bremer will not differ materially from any projected future results expressed or implied by su ch forward - looking statements. Additional factors that could cause results to differ materially from those described above can be found in Old National’s most recent annual report on Form 10 - K for the fiscal year ended December 31, 2023 and quarterly reports on Form 10 - Q, and other documents subsequently filed by Old National with the Securities and Exchange Commission (the “SEC”). The actual results anticipated may not be realized or, even if substantially realized, they may not have the expected consequence s t o or effects on Old National, Bremer or their respective businesses or operations. Investors are cautioned not to rely too h eav ily on any such forward - looking statements. Old National and Bremer urge you to consider all of these risks, uncertainties and other facto rs carefully in evaluating all such forward - looking statements made by Old National and Bremer. Forward looking statements speak only as of the date they are made and Old National and Bremer undertake no obligation to update or clarify these forward - looking stat ements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law. No Offer or Solicitation This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or the solicita tio n of any vote or approval with respect to the proposed transaction between Old National and Bremer. No offer of securities s hal l be made except by means of a prospectus meeting the requirements of the Securities Act of 1933, as amended, and no offer to sell or s oli citation of an offer to buy shall be made in any jurisdiction in which such offer, solicitation or sale would be unlawful pri or to registration or qualification under the securities laws of such jurisdiction.

Additional Information 3 Important Additional Information and Where to Find It In connection with the proposed transaction, Old National intends to file with the SEC a Registration Statement on Form S - 4 (the “Registration Statement”) to register the shares of Old National capital stock to be issued in connection with the proposed t ra nsaction. The Registration Statement will include a proxy statement of Bremer and a prospectus of Old National (the “Proxy Statement/Pr osp ectus”), and Old National may file with the SEC other relevant documents concerning the proposed transaction. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT/P ROSPECTUS REGARDING THE PROPOSED TRANSACTION WHEN THEY BECOME AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUM ENT S, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT OLD NATIONAL, BREMER AND THE PROPOSED TRANSACTION AND RELATED MATTERS. A copy of the Registration Statement, Proxy Statement/Prospectus, as well as other filings containing information about Old N ati onal and Bremer, may be obtained, free of charge, at the SEC’s website (http://www.sec.gov) when they are filed. You will al so be able to obtain these documents, when they are filed, free of charge, from Old National by accessing Old National’s website at ht tps://ir.oldnational.com. Copies of the Registration Statement, Proxy Statement/Prospectus and the filings with the SEC that wi ll be incorporated by reference therein can also be obtained, without charge, by directing a request to Old National’s Investor Rel ati ons, Old National Bancorp, One Main Street, Evansville, Indiana, 47708, or by calling (812) 464 - 1366. The information on Old Na tional’s website is not, and shall not be deemed to be, a part of this communication or incorporated into other filings either company ma kes with the SEC. Bremer Data Unless otherwise indicated, data about Bremer provided in this presentation, including financial information, has been obtain ed from Bremer management. Pro Forma Forward - Looking Data Neither Old National’s nor Bremer’s independent registered public accounting firms have studied, reviewed or performed any pr oce dures with respect to the pro forma forward - looking financial data for the purpose of inclusion in this presentation, and, accor dingly, neither have expressed an opinion or provided any form of assurance with respect thereto for the purpose of this presentation . These pro forma forward - looking financial data are for illustrative purposes only and should not be relied on as necessarily bei ng indicative of future results. The assumptions and estimates underlying the pro forma forward - looking financial data are inheren tly uncertain and are subject to a wide variety of significant business, economic and competitive risks and uncertainties tha t c ould cause actual results to differ materially from those contained in the prospective financial information, including those in the “Ca uti on about Forward - Looking Statements” disclaimer on slide 2 of this presentation. Pro forma forward - looking financial data is in herently uncertain due to a number of factors outside of Old National’s and Bremer’s control. Accordingly, there can be no assurance tha t the prospective results are indicative of future performance of the combined company after the proposed acquisition or that ac tual results will not differ materially from those presented in the pro forma forward - looking financial data. Inclusion of pro forma financial data in this presentation should not be regarded as a representation by any person that the results contained in th e prospective financial information will be achieved. Non - GAAP Financial Measures This presentation includes certain financial measures derived from consolidated financial data but not presented in accordanc e w ith U.S. generally accepted accounting principles (“GAAP”). The Company believes that these non - GAAP measures, when taken together with its financial results presented in accordance with GAAP, provide meaningful supplemental information regarding its operating performance and facilitate internal comparisons of its historical operating performance on a mere consistent basis. These non - GAAP financial measures, however, are subject to inherent limitations, may not be comparable to similarly titled measures us ed by other companies and should not be considered in isolation or as an alternative to GAAP measures. Please refer to the appendix for more information about the non - GAAP financial measures, and reconciliations of the non - GAAP financial measures to t heir most directly comparable GAAP financial measures. Market and Industry Data Unless otherwise indicated, market data and certain industry forecast data used in this presentation were obtained from inter nal reports, where appropriate, as well as third party sources and other publicly available information. Data regarding the indu st ries in which the Company competes, its market position and market share within these industries are inherently imprecise and are sub jec t to significant business, economic and competitive uncertainties beyond the Company’s control. In addition, assumptions and estimates of the Company and its industries’ future performance are necessarily subject to a high degree of uncertainty and r isk due to a variety of factors. These and other factors could cause future performance to differ materially from assumptions an d estimates.

A Combination Creating the Premier Midwest Regional Bank Source: S&P Capital IQ, FactSet, ONB filings and management and Bremer filings . Financial data as of the quarter ended September 30, 2024 . 1. Reflects pro forma balances as of September 30, 2024 for illustrative purposes. 2. Pro forma impact is presented for illus tra tive purposes only. Inclusive of all purchase accounting adjustments, merger costs, CECL provision expense, sale of CRE loans and common equity offering. See disclaimer "Pro Forma Forward - Looking Da ta" and slides 8 and 17 for key financial assumptions. There can be no assurance that we will be able to find a prospective purchaser for the CRE loan sale concurrent with the merger or to sell the loans at a price or other terms acceptable to us. See appendix for Pro Forma EPS reconciliation. 3 . Reflects bank - level data. 4. Branch data as of June 30, 2024. 4 Compelling Partnership 1 Complementary Pro Forma Footprint 4 ~22% 2026E EPS Accretion 2.0 yrs TBVPS Earnback ~20% Internal Rate Of Return < 250% Pro Forma CRE / Total RBC At Close 3 ~1.3% Pro Forma 2026E ROAA 18.4% Pro Forma 2026E ROATCE 10.2% Pro Forma CET1 At Close ~84% Pro Forma Loans / Deposits At Close Gross Loans $46B Deposits $54B Wealth AUM $39B Total Assets $70B ND MN SD IA MO IL TN KY OH IN MI WI ONB Disciplined Approach Focused on Maximizing Shareholder Value 2 (289) (70) Pro Forma Scale

x Creates the premier regional bank in the Midwest and enhances all the objectives of our corporate strategy x Adds an attractive, granular deposit base with concentration in the Twin Cities and other key upper Midwest markets x Delivers significant scale with platform for strategic investments and capacity for continued organic growth x Ability to leverage larger balance sheet and product suite across Bremer’s commercial and wealth businesses x Meaningfully expands wealth management and contribution of high - value, lower volatility revenue x Continuation of our M&A strategy: attractive financial metrics driven by disciplined pricing • ~1.00x tangible book value and 6.1x 2025E EPS with cost savings 1 • ~22% accretive to 2026E EPS • ~10% TBVPS dilution at close with an earnback of 2.0 years x Potential cost savings estimates include personnel and infrastructure investments required for a large regional bank x Ability to accelerate top quartile returns and shareholder value creation • Pro forma 2026E ROAA of ~1.3% and ROTCE of 18.4% x Expected rapid capital accretion provides strategic optionality x Highly compatible, relationship - based business philosophies and culture x Similar credit underwriting standards with outperformance relative to broader industry; Bremer’s 10yr average NCO rate is only 6bps x Planned retention of key market personnel and infrastructure with limited branch closures x Long track record of successful partnerships and integrations Transaction Highlights Strategically Compelling 5 Financially Attractive Low Risk Partnership Source: S&P Capital IQ, FactSet, ONB filings and management and Bremer filings . Financial data as of the quarter ended September 30, 2024 . Branch data as of June 30, 2024. Pro forma impact is presented for illustrative purposes only. See disclaimer "Pro Forma Forward - Looking Data" and slide 8 and 17 for key f inancial assumptions. 1. Includes impact from ~$111M pre - tax fully phased - in cost savings in 2025.

28% 15% 44% 9% 3% 6% 18% 10% 13% 17% 16% 10% 9% Loan & Deposit Composition O O CRE Investor CRE $11.5B Loans $13.2B Deposits CLD Multifamily C&I 1 - 4 Family Cons. & Other 2 Agriculture Retail Time Jumbo Time Non - Int Demand Now & Other Trans. MMDA & Savings • Established in 1943 and headquartered in St. Paul, MN – 2 nd largest traditional bank headquartered in Minnesota • Private institution, ~86% owned by the Otto Bremer Trust (a charitable organization) • Operates 70 branches across Minnesota, Wisconsin and North Dakota • Primarily concentrated in Minneapolis - St. Paul with the 6 th ranked market share 1 • Community - focused banking model with commercially - oriented loan portfolio • High - quality, low - cost deposit base with competitive positioning in key markets Overview of Bremer Financial Corporation 6 Source: S&P Capital IQ, ONB filings and management and Bremer management and filings . Financial data as of the quarter ended September 30, 2024. Total may not sum to 100 due to rounding. Branch data as of June 30, 2024. 1. Rank based on traditional commercial banks. 2. Primarily state, politica l a nd municipal loans. 3. Based on the nine months ended September 30, 2024. Key Ratios Balance Sheet ($B) Profitability Company Overview Key Financial Metrics 3 3

Proj . Pop. CAGR (’24 - ’29E) Minneapolis-St. Paul Market Dynamics % of Deposits Franchise 1U.S. Bancorp $111,326 21.1% 2Wells Fargo 41,922 3.0 Old National + Bremer Old National + Bremer 8,992 18.0 3Huntington 6,604 4.2 4Bank of Montreal 6,097 3.0 5Bank of America 5,957 0.3 6 Bremer Financial 5,452 42.6 7State Bankshares 4,161 34.7 8Bridgewater 4,034 100.0 9 Old National 3,540 8.8 10Choice Financial 2,997 68.6 % of Market Market MSA Branches Deposits Franchise Rank Share Rank Share 1 Chicago, IL 89 $16.4 32.7% 9 2.8% 4 7.7% 2 Twin Cities, MN 47 9.0 18.0 3 4.0 2 5.2 3 Evansville, IN 15 4.2 8.4 1 35.5 1 35.5 4 Indianapolis, IN 21 2.1 4.2 12 2.4 9 3.2 5 Milwaukee, WI 6 1.4 2.8 9 1.9 6 2.7 6 Nashville, TN 7 1.0 1.9 16 1.0 12 1.3 7 Madison, WI 11 1.0 1.9 9 3.8 7 4.9 8 St. Cloud, MN 3 0.9 1.8 2 11.8 2 13.1 9 Bloomington, IN 5 0.8 1.7 2 22.4 1 30.4 10 Grand Forks, ND 3 0.6 1.3 2 16.2 2 17.1 Top 10 Markets 207 $37.4 74.7% 7 7.6% 4 10.3% All Markets 359 51.7 100.0 6 10.1 Pro Forma Combined Footprint Enhances Regional Scale & Density in Key Markets 7 Source: S&P Capital IQ, ONB filings and management and Bremer filings. Financial data as of September 30, 2024 unless otherwi se specified. Branch data as of June 30, 2024. Pro forma impact is presented for illustrative purposes only. See disclaimer "Pro Forma Forward - Looking Data" and slides 8 and 17 for key financial assumptions. 1. Rank based on traditional commercial banks. 2. Excludes money center banks, trust banks and foreign - owned bank subsidiaries. Expands Our Midwest Footprint… …With Density in The Twin Cities… 1 7 MSAs with Bremer Contribution All Banks Regional Banks 2 …And Stronger Demographics Pro Forma National Average: 2.4% Median Household Income National Average: $75.9k 1 ($B) ($M)

Key Transaction Terms 8 8 Transaction Structure Bremer shareholders will receive 4.182 ONB shares (fixed exchange ratio) and $26.22 per share in cash for each Bremer share – Aggregate consideration to Bremer shareholders equates to approximately 50 million shares of ONB and $315 million in cash Approximately 78% stock and 22% cash consideration Pro forma ownership: ~81.6% ONB, ~12.8% Bremer and ~5.6% new shareholders 1 Approvals & Timing Approval of Bremer shareholders required – Otto Bremer Trust will enter into a voting agreement at signing to approve the transaction (86% voting control of Bremer shar es) Customary regulatory approvals Anticipated closing in the middle of 2025 Board Representation Otto Bremer Trust to appoint one Trustee to Old National Bancorp Board of Directors Transaction Value 2 Deal value of ~$1.401 billion Price / TBV: 1.00x Price / 2025E EPS: 9.7x Price / 2025E EPS with cost savings: 6.1x 3 Source: S &P Capital IQ, ONB filings and management and Bremer filings . Financial data as of the quarter ended September 30, 2024 . Pro forma impact is presented for illustrative purposes only. See disclaimer “Pro Forma Forward - Looking Data” and slides 8 and 17 for key financial assumptions. 1. Pro forma ownership assumes common equity raise base offering of $400M at $21.00, full exercise of 15% greenshoe and full ph ysical settlement for illustrative purposes. 2. Based on ONB’s closing stock price on November 22, 2024 of $21.65. 3. Includes impac t f rom ~$111M pre - tax fully phased - in cost savings in 2025. Common Equity Raise $400 million common equity offering Forward settlement mechanism to provide flexibility around settlement amount and date

49% 52% 53% 56% 1.34% 1.30% 1.19% 1.12% 18.4% 14.5% 14.1% 12.5% 9 Pro Forma Top Quartile Profitability 1,4 2026E ROAA 2026E ROATCE 2026E Efficiency Ratio Standalone Standalone Standalone Financially Attractive Transaction Accelerating Top Quartile Returns Pro Forma Pro Forma Pro Forma Top Quartile Top Quartile Top Quartile Disciplined M&A Strategy 1 Strong Pro Forma Capital Position 1 ~20% Median Median Median 2.0yrs ~22% 2026E EPS Accretion TBVPS Earnback Period 2 Internal Rate Of Return Announced Deal Metrics Source: S&P Capital IQ, FactSet, ONB filings and management and Bremer filings. Financial data as of the quarter ended Septem ber 30, 2024. 1. Pro forma impact is presented for illustrative purposes only. Inclusive of all purchase accounting adjustments, merger costs, CECL provision expense, sale of CRE loans and common equity offering. See disclaimer "Pro Forma Forward - Looking Data" and slides 8 and 17 for key financial assumptions . There can be no assurance that we will be able to find a prospective purchaser for the CRE loan sale concurrent with the merger or to sell the loans at a price or other terms accepta ble to us. See appendix for Pro Forma EPS reconciliation. 2. Earnback period calculation is based on the crossover method. 3. Reflects bank - level data. 4. Analysis based on public U.S. banks $20bn - $100bn in total assets. 10.2% CET1 12.2% TRBC 244% CRE / TRBC 3 Capital At Close

10.2% 11.8% 1.9% 0.7% 0.5% 12.9% (0.6%) (0.8%) CET1 (at Close) ONB Standalone Earnings Bremer Synergized Earnings Dividends RWAs & Other Accretion of FV Marks CET1 (2026E) Rapid Capital Accretion 10 Enhanced Earnings & Accretion of Fair Value Marks 1 6 Quarters of Projected Core Retained Earnings Benefit From Remaining FV Marks Accretion After 2026 Pro Forma CET1 Ratio 1 4 2 3 Leverage Ratio 8.2% CET1 Ratio 10.2% Total RBC Ratio 12.2% Key Takeaways 1 Snapshot of Projected Pro Forma Capital Ratios at Close 1 Source: S&P Capital IQ, FactSet, ONB filings and management and Bremer filings. Financial data as of the quarter ended Septem ber 30, 2024 . 1. Pro forma impact is presented for illustrative purposes only. Inclusive of all purchase accounting adjustments, merger costs, CE CL provision expense and sale of CRE loans and common equity offering. See disclaimer "Pro Forma Forward - Looking Data" and slides 8 and 17 for key financial assumptions. There can be no assurance that we will be able to find a prospective purchaser for the CRE loan sale concurrent with the merger or to sell the loans at a price or other terms acceptable to us. See appendix for Pro Forma EPS reconciliation. 2. Reflects impact from Bremer standalone projected earnings and cost savings. 3. Includes ~$14M net impact to CET1 from sale of CRE loans, amortization of intangibles and other adjustments. 4. Reflects impact from remaining after - tax fair value marks through earnings post - 2026 , prior to any additional risk - weighted asset growth. Meaningful capital generation from expected $1.3B+ of combined core earnings over 18 months post - closing ~160bps in expected CET1 growth by year - end 2026 2026E CET1 expected to end at a strong 11.8%

Comprehensive Due Diligence Old National Diligence Summary 1 ~3,400 Files posted to virtual data room and reviewed by ONB due diligence team 20+ External participants, including consultants and advisors 75+ ONB internal Participants By The Numbers 100% Bremer consumer loans reviewed or modeled ~1,200 Individual Bremer commercial loans were reviewed (70% of commercial exposure) • Management and employees have significant acquisition and integration experience ○ Old National management team has successfully completed and integrated 9 bank M&A transactions over the last 10 years ○ Integration process will evaluate and reflect best practices and people at each bank Disciplined & Experienced With M&A • Comprehensive process led by Old National senior leadership team ○ Significant alignment in credit philosophy, approach and risk appetite ○ Strong risk and compliance culture throughout each organization • Detailed review of both companies’ cost structure and expected synergies • Extensive credit due diligence performed, including thorough loan file review to assess risk appetite, underwriting practices, loan administration and risk rating accuracy Thorough Due Diligence Process 11 Operations Facilities Diligence Focus Credit Commercial & Treasury Management Community Banking Wealth Human Resources Information Technology Balance Sheet, Liquidity and Capital Vendor Management Legal, Audit, Risk and Compliance Finance, Tax & Accounting Source: ONB management. 1. Amounts and percentages are approximated.

12 Strengthening and Supporting Our Communities Old National announced an expanded $9.5 billion 5 - year Community Growth Plan in April 2024, underscoring our long - standing commi tment to support historically underserved and economically disadvantaged individuals, families and communities throughout our footp rin t. Committed to Diversity, Equity & Inclusion 47% 50% 67% 25% 100% Corporate Board Diversity (Women + People of Color) Executive Leader Diversity (Women + People of Color) Old National Team Members are Women Total Workforce Racial / Ethnic Diversity Score on Disability Equality Index Best Places to Work 2023 Minnesota Community Impact Future Plans x Planning to enhance existing community investment program x Focus on increased lending, investment and expanded philanthropic effort throughout Bremer’s communities x Opportunity to partner with the Otto Bremer Trust on furthering their vision and supporting important initiatives in the upper Midwest Banking with a Heart > $330k ONB Foundation Grants to Minnesota Nonprofits > $550k Invested across Minnesota Sponsorships 5,000+ Team Member Volunteer Hours 52% Funds went to organizations who primarily serve underrepresented communities Since 2006, our team members have volunteered more than 1.2 million hours ~$334M in equity funding to disadvantaged businesses and communities since 2015 1 Over 57,000 combined service hours in 2023 alone (total value of ~$27 million) ~$12M in total grants and sponsorships benefiting more than 2,000 organizations $564M in CRA - eligible community development loans 1 Source: ONB management and filings. 1. Metric as of 2023. 2023

Creating Value For All Stakeholders 1 Attractive Pro Forma Scale and Profitability & Well - Positioned for Continued Outperformance ~22% 2026E EPS Accretion 2.0yrs Crossover TBVPS Earnback 18.4% ROATCE Top Quartile Profitability ~10.2% CET1 Robust Capital ~160bps Expected CET1 Growth in 18 Months Branches 359 Gross Loans $46B Deposits $54B 13 Source: S&P Capital IQ, ONB filings and management and Bremer fillings . Financial data as of the quarter ended September 30, 2024 unless otherwise specified . Branch data as of June 30, 2024. 1. Pro forma impact is presented for illustrative purposes only. Inclusive of all purchase accounting adjustments, merger cos ts, CECL provision expense, sale of CRE loans and common equity offering. See disclaimer "Pro Forma Forward - Looking Data" and slide 8 and 17 for key financial assumptions. See appendix for Pro Forma EPS reconciliation. 2. Based on September 30, 2024 balances for illustrative purposes. 3. Includes impact from CRE loan sale. There can be no assurance that we will be able to find a prospective purchaser for the CRE loan sale concurrent with the merg er or to sell the loans at a price or other terms acceptable to us. 4. Earnback period calculation is based on crossover method. 4 Total Assets $70B AUM $39B 3 Pro Forma Scale 2

Assets ($B) AUM ($B) 1 Core EPS Efficiency Ratio Deposits / Branch ($M) Avg. MSA Population Median HHI Proven Track Record of Enhancing Franchise Value 2013 2024E 2026E + Source: S&P Capital IQ, FactSet, ONB filings and management and Bremer filings. Financial data as of the quarter ended Septem ber 30, 2024. Branch data as of June 30, 2024. 1. Pro forma impact is presented for illustrative purposes only. See disclaimer "Pro Forma Forward - Looking Data" and slide 8 and 17 for key financial assumptions. 2. Market share rank based on traditional commercial banks. 14 Build scale and capabilities to better serve our clients and compete with larger competitors Execute strategic partnerships designed to deliver attractive returns and create shareholder value Invest in technology and initiatives to drive efficiencies Compound shareholder capital while positioning to produce strong risk - adjusted returns Expand into attractive markets across our footprint to enhance growth potential New Markets 1,2 Twin Cities Indianapolis Milwaukee Nashville Chicago ~$16bn in Deposits, #9 in Market Share ~$9bn in Deposits, #3 in Market Share ~$2bn in Deposits, #12 in Market Share ~$1bn in Deposits, #9 in Market Share ~$1bn in Deposits, #16 in Market Share Franchise Transformation ROATCE $10 $54 $77 $6 $31 $39 $1.05 $1.83 $2.56 13.7% 15.9% 18.4% 67% 55% 49% $42.7 $141.3 $164.9 463k 4.6m 4.0m $40,663 $78,573 $79,903 1 Bremer adds $5bn+ deposits in Minneapolis - St. Paul

Appendix

$57 $71 $73 $82 $105 2019 2020 2021 2022 2023 The Otto Bremer Trust will own ~11% 1 of Old National and appoint one Trustee to its Board A Long - Term Shareholder & Partnership for Good 16 • The Otto Bremer Trust is a private charitable trust based in St. Paul, Minnesota • 501(C)(3) tax - exempt organization that has owned 86% or more of Bremer for 80+ years • Chartable Focus Areas: Basic Needs, Community Asset Building, Health & Well Being, Restorative & Emergency Services Over $1 Billion of Community Investments 2023 Investment Highlights Minnesota ~$61mm 638 Grants & PRIs 2 Montana ~$12mm 124 Grants & PRIs 2 North Dakota ~$8mm 85 Grants Wisconsin ~$24mm 290 Grants & PRIs 2 ($M) Source: Otto Bremer Trust press releases . 1. Pro forma ownership assumes common equity raise base offering of $400M at $21.00, full exercise of 15% greenshoe and full phy sic al settlement for illustrative purposes. 2. Program related investments (PRIs).

Key Financial Assumptions 17 17 Earnings ONB projections based on Wall Street consensus estimates Bremer projections based on ONB management’s estimates following extensive due diligence (~0.85% run - rate ROAA) Source: S&P Capital IQ, FactSet, ONB filings and management and Bremer fillings . Financial data as of the quarter ended September 30, 2024 . Note: Fair value marks reflect pre - tax figures. 1. All balance sheet marks are preliminary subject to change. 2. There can be no assurance that we will be able to find a prospective purchaser for the CRE loan sale concurrent with the merg er or to sell the loans at a price or other terms acceptable to us. Synergies & Merger Costs Cost savings of ~30% of Bremer’s 2025E noninterest expense (~$111 million pre - tax) – 25% realized in 2025 and 100% in 2026 and thereafter Revenue synergies expected but not included ~$194 million pre - tax one - time merger expenses (fully - reflected in pro forma tangible book value estimate at closing) Intangibles Core deposit intangible of $479 million, or 4.0% of non - time deposits; amortized sum - of - years digits over 10 years Customer relationship intangible of $20 million; amortized sum - of - years digits over 13 years Loan Fair Value Marks 1 Gross credit mark of $190 million or ~1.6% of Bremer’s gross loans (equivalent to 1.8x existing reserves) Credit mark allocated ~60% PCD and ~40% non - PCD Non - PCD credit mark accreted into earnings over 7 years using sum - of - the - years digits Reserve for non - PCD loans and unfunded commitments established on Day 2 (reflected in pro forma TBV at closing) $585 million interest rate mark; accreted over 7 years using sum - of - the - years digits Other Fair Value Marks Securities mark of $384 million (in addition to AOCI losses); accreted over 5 years using straight line method Write - up of $18 million on interest - bearing liabilities; accreted over 2.5 years using straight line method CRE Loan Sale 2 Up to ~$2.4 billion CRE loans expected to be sold post - close Maintains CRE / TRBC ratio below 250%

28% 15% 44% 9% 3% 23% 20% 39% 12% 5% Pro Forma Deposit Composition $ 40.8B $13.2B $54.1B Source: S&P Capital IQ, ONB filings and management and Bremer filings . Financial data as of the quarter ended September 30, 2024 . Total may not sum to 100 due to rounding. Pro forma impact is presented for illustrative purposes only. See disclaimer "Pro Forma Forward - Looking Data" and slide 8 and 17 for key financial assumptions. Q3‘24 Cost of Deposits: 2.25% Q3‘24 Cost of Deposits: 2.33% Q3‘24 Cost of Deposits: 2.26% Pro Forma Non - Int. Demand NOW & Other Trans. MMDAs & Savings Retail Time Jumbo Time Non - Int. Demand NOW & Other Trans. MMDAs & Savings Retail Time Jumbo Time Non - Int. Demand NOW & Other Trans. MMDAs & Savings Retail Time Jumbo Time 18

6% 18% 10% 13% 17% 16% 10% 8% 7% 24% 11% 13% 15% 23% 4% Pro Forma Loan Composition $36.4B $11.5B $45.6B Pro Forma Q3‘24 Yield: 6.36% Q3‘24 Yield: 5.84% Q3‘24 Yield: 6.23% C LD Multifamily OO CRE C&I 1 - 4 Family Other Consumer Agriculture C LD Multifamily OO CRE C&I Other Consumer Agriculture C LD Multifamily OO CRE C&I Other Consumer Agriculture Investor CRE 2 Source: S&P Capital IQ, ONB filings and management and Bremer fillings. Financial data as of the quarter ended September 30, 202 4. Total may not sum to 100 due to rounding. Pro forma impact is presented for illustrative purposes only. Does not include purchase accounting adjustments. See disclaime r " Pro Forma Forward - Looking Data" and slides 8 and 17 for key financial assumptions. 1. Loan total and composition include impact from CRE loan sale. There can be no assurance that we will be able to find a prospective purchaser for the CRE loan sale concurrent with the merger or to sell the loans at a price or other terms acceptable to us. 2. Includes state, political and municipal loans. 1 - 4 Family 1 - 4 Family Investor CRE Investor CRE 19 1

0.07% 0.06% 0.11% ONB Barley Regional Banks 0.11% 0.16% 0.16% ONB Barley Regional Banks History of Strong Credit Quality Both franchises have a history of strong credit performance driven by a conservative approach to risk 15yr Cumulative NCOs Regional Banks 2 5yr Average Regional Banks 2 YTD 2024 Source: S&P Capital IQ, ONB filings and management and Bremer filings. Financial data as of the quarter ended September 30, 2 024 . 1. Excludes PCD loans with allowance at acquisition. 2. Based on public U.S. banks $20bn - $100bn in total assets. 1 Regional Banks 2 NCOs / Average Loans 20

2026E EPS reconciliation $ millions ONB net income (consensus estimate) $669.0 Bremer net income (ONB management's estimate) 151.6 After-tax transaction adjustments Cost savings $87.7 Rate marks accretion 177.2 Non-PCD credit mark accretion 11.0 Intangible amortization (64.1) Earnings impact from CRE loan sale (34.6) Other adjustments 5.6 ONB pro forma net income $1,003.5 Pro forma average diluted shares outstanding 392.1 Pro forma 2026E EPS $2.56 ONB standalone EPS $2.09 EPS accretion to ONB ($) $0.47 EPS accretion to ONB (%) 22.4% Pro Forma Earnings Per Share Reconciliation Source: S&P Capital IQ, FactSet, ONB filings and management and Bremer filings. Financial data as of the quarter ended Septem ber 30, 2024 . Pro forma impact is presented for illustrative purposes only. See disclaimer "Pro Forma Forward - Looking Data" and slide 8 and 17 for key financial assumptions. 1. Based on 2026E median consensus estimates. 2. There can be no assurance that we will be able to find a prospective purchaser for the CRE loan sale concurrent with the merg er or to sell the loans at a price or other terms acceptable to us. 21 1 2

Basic shares Tangible book value per share build to close $ millions (millions) $ Per share ONB tangible book value as of 9/30/24 $3,818 319 $11.97 (+) Three quarters of consensus earnings prior to close 453 ( – ) Three quarters of dividends prior to close (134) (+) Amortization of existing intangibles 22 ONB standalone tangible book value per share at close $4,160 319 $13.04 Pro forma merger adjustments ONB standalone tangible book value at close $4,160 319 $13.04 (+) Common equity issued as consideration 1,086 50 (+) Third-party equity issuance 442 22 (–) Goodwill & intangibles created (885) (–) Restructuring charges (153) (–) Day 2 CECL provision for non-PCD loans (60) (–) Day 2 provision for unfunded comittments (4) ONB pro forma tangible book value per share at close $4,587 391 $11.73 TBVPS dilution to ONB ($) ($1.31) TBVPS dilution to ONB (%) (10.1%) Goodwill & other intangible asset recognition $ millions Merger consideration $1,401 Bremer tangible book value at close 1,443 (–) Fair value adjustments (pre-tax) (1,064) (+) Net DTA / (DTL) from fair value adjustments 263 Adjusted tangible book value at closing $641 Excess over adjusted tangible book value $760 (–) Core deposit intangibles created (479) (–) Client relationship intangibles created (20) (+) DTL on intangibles created 125 Goodwill created $385 Purchase Accounting Summary Source: S&P Capital IQ, FactSet, ONB filings and management and Bremer filings . Financial data as of the quarter ended September 30, 2024 . Note: Based on assumptions as of announcement date; subject to change at transaction closing. Pro forma impact is presented f or illustrative purposes only. See disclaimer "Pro Forma Forward - Looking Data" and slide 8 and 17 for key financial assumptions. See disclaimer "Non - GAAP Financial Measures." 1. Old National tangible book value equal to common shareholders equity less goodwill and other intangible assets. 2. Assumes common equity raise base offering of $400 M at $21.00, net of underwriting spread, full exercise of 15% greenshoe and full physical settlement for illustrative purposes. 1 22 2

Non - GAAP Reconciliation Source: S&P Capital IQ, FactSet, ONB filings and management and Bremer management. Financial data as of the quarter ended Sep tem ber 30, 2024 . 23 $M September 30, 2024 Shareholders' equity $6,367 Less: Preferred equity (244) Shareholders' common equity 6,124 Less: Goodwill and other intangible assets (2,305) Tangible shareholders' common equity $3,818 Common shares outstanding (millions) 319 Tangible common book value per share $11.97 Old National Bremer ONB share price at November 22, 2024 $21.65 Price / tangible book value per share 1.81x $M September 30, 2024 Shareholders' equity $1,516 Less: Goodwill and other intangible assets (113) Tangible shareholders' common equity $1,403 Common shares outstanding (millions) 12 Tangible common book value per share $116.88 Transaction price $1,401 Transaction price / tangible book value 1.00x

 

Exhibit 99.3

 

oldnational.com	Investor Relations:  Lynell Durchholz
	(812) 464-1366
NEWS RELEASE	lynell.durchholz@oldnational.com
For Immediate Release	Media Relations:
November 25, 2024	Rick Vach
	(904) 535-9489
	rick.vach@oldnational.com

 

Old National Announces Pricing of Common Stock Offering

 

EVANSVILLE, IN – Old National Bancorp (NASDAQ: ONB) (“Old National”) today announced the pricing of an underwritten public offering of 19,047,619 shares of its common stock, no par value (the “Common Stock”), at a public offering price of $21.00 per share (before underwriting discounts and commissions), for an aggregate offering amount of $400 million. The approximate net proceeds of the offering will be $384 million (before offering expenses, assuming the underwriters do not exercise their option to purchase additional shares and assuming full physical settlement of the forward sale agreement at the initial forward price) in connection with the forward sale agreement described below.

 

The underwriters have been granted the option to purchase up to an additional 2,857,143 shares of Common Stock. If such option is exercised, then Old National plans to enter into an additional forward sale agreement with the forward purchaser in respect of the number of additional shares of Old National’s Common Stock that is subject to the exercise of such option. The offering is expected to close on November 26, 2024, subject to the satisfaction of customary conditions.

 

Citigroup Global Markets Inc. (“Citi”) is acting as lead joint book-running manager and stabilization agent for the offering. Keefe, Bruyette & Woods, Inc., A Stifel Company (“KBW”) is acting as joint book-running manager.

 

In connection with the offering, Old National entered into a forward sale agreement with an affiliate of Citi (the “forward purchaser”), pursuant to which Old National has agreed to sell shares of Common Stock to the forward purchaser at the initial forward sale price, which is equal to the price per share at which the underwriters purchase the shares in the offering, as adjusted over the term of the forward sale agreement. In connection with the forward sale agreement, the forward purchaser or its affiliate is borrowing from third parties an aggregate of 19,047,619 shares of Common Stock. Such borrowed shares of Common Stock will be delivered by Citi (in such capacity, the “forward seller”) for sale to the underwriters in the offering.

 

Old National expects to physically settle the forward sale agreement (by the delivery of shares of Common Stock) and receive proceeds from the sale of those shares of Common Stock upon one or more forward settlement dates within approximately 12 months from the date hereof. Old National may also elect cash settlement or net share settlement for all or a portion of its obligations under the forward sale agreement. If the forward purchaser or its affiliate does not borrow and deliver to the forward seller for sale all of the shares of Common Stock to be delivered and sold by it pursuant to the terms of the underwriting agreement, Old National will issue and sell directly to the underwriters the number of shares of Common Stock not borrowed and delivered for sale by the forward purchaser or its affiliate, and under such circumstances the number of shares of Common Stock underlying the forward sale agreement will be decreased by the number of shares of Common Stock that Old National issues and sells.

 

 

Old National will not initially receive proceeds from the sale of the shares of Common Stock sold by the forward seller to the underwriters but will have the right to receive proceeds from physical settlement under the forward sale agreement, based on the then-prevailing forward sale price. Old National intends to use any net proceeds that it receives upon settlement of the forward sale agreement and the additional forward sale agreement, if any, for general corporate purposes, which may include, among other uses, contributing Tier 1 capital into Old National Bank. The precise amounts and timing of these uses of proceeds will depend on the funding requirements of Old National and its subsidiaries.

 

The Common Stock will be issued pursuant to an effective shelf registration statement (File No. 333- 272312) and a preliminary prospectus supplement filed with the Securities and Exchange Commission (the "SEC"), and a final prospectus supplement to be filed with the SEC.

 

Copies of the registration statement, the preliminary prospectus supplement and the accompanying base prospectus relating to the Common Stock offering can be obtained without charge by visiting the SEC's website at www.sec.gov, or by contacting Citi, Citigroup, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717 or by telephone at (800) 831-9146 or KBW by telephone at (800) 966-1559 or by email at USCapitalMarkets@kbw.com.

 

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the Common Stock in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. Any offering of the Common Stock is being made only by means of a written prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

 

ABOUT OLD NATIONAL

 

Old National Bancorp (NASDAQ: ONB) is the holding company of Old National Bank. As the sixth largest commercial bank headquartered in the Midwest, Old National proudly serves clients primarily in the Midwest and Southeast. With approximately $54 billion of assets and $31 billion of assets under management, Old National ranks among the top 30 banking companies headquartered in the United States. Tracing our roots to 1834, Old National focuses on building long-term, highly valued partnerships with clients while also strengthening and supporting the communities we serve. In addition to providing extensive services in consumer and commercial banking, Old National offers comprehensive wealth management and capital markets services. For more information and financial data, please visit Investor Relations at oldnational.com. In 2024, Points of Light named Old National one of "The Civic 50" -- an honor reserved for the 50 most community-minded companies in the United States.

 

FORWARD LOOKING STATEMENTS

 

Caution About Forward-Looking Statements

 

Certain statements in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not limited to, statements regarding the expected physical settlement of the forward sale agreement, the expected use of proceeds from the offering, the outlook and expectations of Old National with respect to the offering, and the benefits of the offering. Such statements are often characterized by the use of qualified words (and their derivatives) such as “may,” “will,” “anticipate,” “could,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “project” and “intend,” or words of similar meaning or other statements concerning opinions or judgment of Old National and its management about future events. Forward-looking statements are based on assumptions as of the time they are made and are subject to risks, uncertainties and other factors that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated results, expressed or implied by such forward-looking statements. Such risks, uncertainties and assumptions, include, among others, Old National’s ability to complete the offering, future capital needs, and ability to deploy the net proceeds of the offering in the manner it expects.

 

 

Additional factors that could cause results to differ materially from those described above can be found in Old National’s most recent annual report on Form 10-K and quarterly reports on Form 10-Q, and other documents subsequently filed by Old National with the SEC. The actual results anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on Old National or its business or operations. Investors are cautioned not to rely too heavily on any such forward-looking statements. Forward-looking statements speak only as of the date they are made, and Old National undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

 

Exhibit 99.4

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

 

Defined terms included below have the same meaning as terms defined and included elsewhere in the preliminary prospectus supplement dated November 24, 2024 (the “Preliminary Prospectus Supplement”), except that, unless the context requires otherwise, the term “forward sale agreement” as used herein does not include any additional forward sale agreement that we may enter into in connection with the exercise by the underwriters of their option to purchase additional shares in the offering of shares of common stock contemplated by the Preliminary Prospectus Supplement (the “Offering”).

 

Introduction

 

Old National is providing the following unaudited pro forma condensed combined financial data to aid shareholders in their analysis of the financial aspects of the Merger and the forward sale agreement. See “Summary — Recent Developments — Proposed Acquisition of Bremer Financial Corporation” for more information on the Merger and see “Underwriting (Conflicts of Interest) — Forward Sale Agreement” for a description of the forward sale agreement. The unaudited pro forma condensed combined financial data has been prepared in accordance with Article 11 of Regulation S-X and should be read in conjunction with the accompanying notes.

 

The unaudited pro forma condensed combined balance sheet as of September 30, 2024 combines the unaudited consolidated balance sheet of Old National as of September 30, 2024 with the unaudited consolidated balance sheet of Bremer as of September 30, 2024, giving effect to the Merger and the forward sale agreement as if the Merger had been consummated and the forward sale agreement had been fully physically settled on September 30, 2024.

 

The unaudited pro forma condensed combined statement of income for the year ended December 31, 2023, combines the audited consolidated statement of income of Old National for the year ended December 31, 2023, with the audited consolidated statement of income of Bremer for the year ended December 31, 2023, giving effect to the Merger and the forward sale agreement as if the Merger had been consummated and the forward sale agreement had been fully physically settled on January 1, 2023.

 

The unaudited pro forma condensed combined statement of income for the nine months ended September 30, 2024, combines the unaudited consolidated statement of income of Old National for the nine months ended September 30, 2024, with the unaudited consolidated statement of income of Bremer for the nine months ended September 30, 2024, giving effect to the Merger and the forward sale agreement as if the Merger had been consummated and the forward sale agreement had been fully physically settled on January 1, 2023. Old National’s acquisition of CapStar Financial Holdings, Inc., which was completed on April 1, 2024, is not reflected in the unaudited pro forma condensed combined statement of income for the nine months ended September 30, 2024 as presented here, as such acquisition (individually, and when considered together with all other individually insignificant transactions by Old National since December 31, 2023) was not considered significant under Regulation S-X.

 

The unaudited pro forma condensed combined financial data was derived from, and should be read in conjunction with, the following historical financial statements and the accompanying notes, which are included or incorporated by reference into the Preliminary Prospectus Supplement and the accompanying base prospectus:

 

·

The historical audited consolidated financial statements of Old National as of and for the year ended December 31, 2023 (included in Old National’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023);

 

·

The historical unaudited consolidated financial statements of Old National as of and for the nine months ended September 30, 2024 (included in Old National’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024);

 

·

The historical audited consolidated financial statements of Bremer as of and for the year ended December 31, 2023 (included in the Preliminary Prospectus Supplement); and

 

·

The historical unaudited consolidated financial statements of Bremer as of and for the nine months ended September 30, 2024 (included in the Preliminary Prospectus Supplement);

 

The unaudited pro forma condensed combined financial data should also be read together with other financial data included elsewhere or incorporated by reference into the Preliminary Prospectus Supplement.

 

 

The foregoing historical financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The unaudited pro forma condensed combined financial data has been prepared based on the aforementioned historical financial statements and the assumptions and adjustments as described in the notes to the unaudited pro forma condensed combined financial data. The pro forma adjustments reflect transaction accounting adjustments related to the Merger and the forward sale agreement, all of which are discussed in further detail below. Amounts presented reflect the accounting for the acquisition of Bremer by Old National. The unaudited pro forma condensed combined financial data is presented for illustrative purposes only and does not purport to represent the combined company’s consolidated results of operations or consolidated financial position that would actually have occurred had the Merger been consummated and the forward sale agreement been fully physically settled on the dates assumed or to project the combined company’s consolidated results of operations or consolidated financial position for any future date or period.

 

The unaudited pro forma condensed combined financial data appearing below also does not consider any potential effects of changes in market conditions, certain asset dispositions (including the proposed sale of approximately $2.4 billion of commercial real estate loans at, or shortly after the completion of the Merger), cost savings, or revenue synergies, among other factors, and, accordingly, does not attempt to predict or suggest future results. In addition, as explained in more detail in the accompanying notes, the preliminary allocation of the pro forma purchase price reflected in the unaudited pro forma condensed combined financial data is subject to adjustment and may vary significantly from the actual purchase price allocation that will be recorded upon completion of the Merger.

 

Accounting for the Merger

 

The acquisition of Bremer will be accounted for using the acquisition method of accounting. The total purchase price will be allocated to the tangible and intangible assets and liabilities acquired based on their respective fair values. The allocation of the purchase price reflected in the following unaudited pro forma condensed combined financial data is preliminary and is subject to adjustment upon receipt of, among other things, appraisals of some of the assets and liabilities of Bremer. Upon completion of the Merger, a final determination of the fair values of Bremer assets acquired and liabilities assumed will be performed. Any changes in the fair values of the net assets or total purchase price as compared with the information shown in the unaudited pro forma condensed combined financial data may change the amount of the total purchase consideration allocated to goodwill, deferred taxes, and other assets and liabilities, and may impact the combined company’s statement of income.

 

Forward Sale Agreement

 

In connection with the forward sale agreement, the forward purchaser or its affiliate is expected to borrow from third parties an aggregate of      shares of our common stock. Such borrowed shares of our common stock will be delivered by the forward seller for sale to the underwriters in this offering. In the event that (i) the forward purchaser (or its affiliate) is unable through commercially reasonable efforts to borrow and deliver for sale to the underwriters on the anticipated closing date the number of shares of our common stock to be sold to the underwriters or (ii) in the forward purchaser’s commercially reasonable judgment either it is impracticable to do so or the forward purchaser (or its affiliate) would incur a stock loan rate greater than a specified rate to borrow and deliver for sale to the underwriters on the anticipated closing date such number of shares of our common stock, or if certain other conditions to the forward seller’s obligations have not been satisfied, then we will issue and sell directly to the underwriters a number of shares of our common stock equal to the number of shares of our common stock that the forward purchaser or its affiliate does not borrow and deliver. Under such circumstances, the number of shares of our common stock underlying the forward sale agreement will be decreased by the number of shares of our common stock that we issue and sell to the underwriters. For purposes of this section “Unaudited Pro Forma Condensed Combined Financial Data,” we have assumed a total offering size of $400.0 million in the offering contemplated by the Preliminary Prospectus Supplement.

 

We will not initially receive any proceeds from the sale of the shares of our common stock sold by the forward seller to the underwriter. We expect to physically settle the forward sale agreement at the assumed offering size of $400.0 million (by the delivery of shares of our common stock) and receive proceeds from the sale of those shares of our common stock upon one or more forward settlement dates within approximately 12 months from the date hereof. We may also elect cash settlement or net share settlement for all or a portion of our obligations under the forward sale agreement. If we elect to cash settle or net share settle the forward sale agreement, then we may not receive any proceeds from the issuance of shares of our common stock in respect of the forward sale agreement, and we will instead receive or pay cash (in the case of cash settlement) or receive or deliver shares of our common stock (in the case of net share settlement).

 

 

Basis of Pro Forma Presentation

 

The historical financial data of Old National and Bremer has been adjusted to give pro forma effect to the transaction accounting required for the Merger and the forward sale agreement. The adjustments in the unaudited pro forma condensed combined financial data have been identified and presented to provide relevant information necessary to evaluate the financial overview of the combined company upon closing of the Merger and full physical settlement of the forward sale agreement at the assumed offering size of $400.0 million.

 

The unaudited pro forma condensed combined financial data is not necessarily indicative of what the combined company’s balance sheet or statement of income would have been had the Merger been completed and the forward sale agreement been fully physically settled at the assumed offering size of $400.0 million as of the dates indicated, nor do they purport to project the future financial position or operating results of the combined company. The unaudited pro forma condensed combined financial data is presented for illustrative purposes only and does not reflect the costs of any integration activities or cost savings or synergies that may be achieved because of the Merger. Bremer and Old National have not had any historical material relationship before the Merger. Accordingly, no pro forma adjustments were required to eliminate activities among the companies.

 

 

PRO FORMA CONDENSED COMBINED BALANCE SHEET

 

		September 30, 2024
										Transaction Accounting Adjustments
(dollars in thousands)			Historical ONB				Historical Bremer				Fair Value				Other			Reference			Pro Forma Combined
Assets
Cash and due from banks		$	498,120			$	301,387			$	(315,000	)		$	247,000			A, B, C		$	731,507
Money market and other interest-earning investments			693,450				—				—				—						693,450
Investment securities			10,869,749				3,611,145				(384,000	)			—			D			14,096,894
Loans held for sale			62,376				11,375				—				—						73,751
Loans			36,400,643				11,524,549				(665,000	)			—			E			47,260,192
Allowance for credit losses			(380,840	)			(105,797	)			(4,203	)			(80,000	)		F, G			(570,840	)
Net loans			36,019,803				11,418,752				(669,203	)			(80,000	)					46,689,352
Premises and equipment, net			599,528				151,345				—				—						750,873
Goodwill			2,176,999				112,686				280,733				—			H			2,570,418
Other intangible assets			128,085				648				498,868				—			I			627,601
Company-owned life insurance			863,723				177,935				—				—						1,041,658
Accrued interest receivable and other assets			1,690,460				423,606				263,000				21,250			J, K			2,398,316
Total assets		$	53,602,293			$	16,208,879			$	(325,602	)		$	188,250					$	69,673,820
Liabilities and shareholders’ equity
Noninterest-bearing demand deposits		$	9,429,285			$	3,756,503			$	—			$	—					$	13,185,788
Interest-bearing deposits			31,416,461				9,472,453				—				—						40,888,914
Borrowings			5,449,096				1,161,759				18,000				—			L			6,628,855
Accrued expenses and other liabilities			940,153				302,253				122,000				5,000			M, N			1,369,406
Total liabilities			47,234,995				14,692,968				140,000				5,000						62,072,963
Preferred stock			230,500				—				—				—						230,500
Common stock			318,955				123,892				(73,710	)			19,111			O, B			388,248
Capital surplus			4,560,576				—				1,000,127				380,889			O, B			5,941,592
Retained earnings			1,861,023				1,574,294				(1,574,294	)			(216,750	)		O, P			1,644,273
Accumulated other comprehensive income (loss), net of tax			(603,756	)			(182,275	)			182,275				—			O			(603,756	)
Total shareholders’ equity			6,367,298				1,515,911				(465,602	)			183,250						7,600,857
Total liabilities and shareholders’ equity		$	53,602,293			$	16,208,879			$	(325,602	)		$	188,250					$	69,673,820

 

See accompanying notes to pro forma condensed combined financial statements.

 

 

PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

 

			For the Nine Months Ended September 30, 2024
											Transaction Accounting Adjustments
(dollars and shares in thousands, except per share data)			Historical ONB				Historical Bremer				Fair Value				Other			Reference			Pro Forma Combined
Interest income
Loans, including fees		$	1,633,459			$	491,790			$	106,875			$	—			Q		$	2,232,124
Investment securities			273,118				76,804				57,600				—			R			407,522
Other			32,992				12,148				—				—						45,140
Total interest income			1,939,569				580,742				164,475				—						2,684,786
Interest expense
Deposits			630,972				215,258				—				—						846,230
Borrowings			171,994				55,569				(5,400	)			—			S			222,163
Total interest expense			802,966				270,827				(5,400	)			—						1,068,393
Net interest income			1,136,603				309,915				169,875				—						1,616,393
Provision for credit losses			83,602				16,682				—				—						100,284
Net interest income after provision for credit losses			1,053,001				293,233				169,875				—						1,516,109
Wealth and investment services fees			86,779				28,040				—				—						114,819
Service charges on deposit accounts			57,598				13,733				—				—						71,331
Debit card and ATM fees			32,409				9,267				—				—						41,676
Mortgage banking revenue			19,211				7,361				—				—						26,572
Other income			62,934				39,679				—				—						102,613
Total noninterest income			258,931				98,080				—				—						357,011
Salaries and employee benefits			456,490				161,408				—				—						617,898
Occupancy			80,696				13,864				—				—						94,560
Equipment			27,263				19,666				—				—						46,929
Technology			67,368				15,276				—				—						82,644
Professional fees			24,236				20,226				—				—						44,462
Amortization of intangibles			20,291				87				60,886				—			T			81,264
Other expense			141,255				51,049				—				—						192,304
Total noninterest expense			817,599				281,576				60,886				—						1,160,061
Income before income taxes			494,333				109,737				108,989				—						713,059
Income tax expense			109,018				18,605				27,247				—			U			154,870
Net income			385,315				91,132				81,742				—						558,189
Preferred dividends			(12,101	)			—				—				—						(12,101	)
Net income applicable to common shareholders		$	373,214			$	91,132			$	81,742			$	—					$	546,088
Net income per common share
Basic		$	1.21			$	7.59													$	1.45
Diluted		$	1.21			$	7.59													$	1.45
Average common shares outstanding
Basic			307,426				12,000				38,182				19,111			V, B			376,719
Diluted			308,605				12,000				38,182				19,111			V, B			377,898

 

See accompanying notes to pro forma condensed combined financial statements.

 

 

PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

 

			For the Year Ended December 31, 2023
										Transaction Accounting Adjustments
(dollars and shares in thousands, except per share data)			Historical ONB				Historical Bremer				Fair Value				Other			Reference			Pro Forma Combined
Interest income
Loans, including fees		$	1,860,077			$	589,495			$	166,250			$	—			Q		$	2,615,822
Investment securities			307,061				97,591				76,800				—			R			481,452
Other			39,683				23,279				—				—						62,962
Total interest income			2,206,821				710,365				243,050				—						3,160,236
Interest expense
Deposits			484,360				191,529				—				—						675,889
Borrowings			219,308				80,455				(7,200	)			—			S			292,563
Total interest expense			703,668				271,984				(7,200	)			—						968,452
Net interest income			1,503,153				438,381				250,250				—						2,191,784
Provision for credit losses			58,887				19,187				—				85,000			G, N			163,074
Net interest income after provision for credit losses			1,444,266				419,194				250,250				(85,000	)					2,028,710
Wealth and investment services fees			107,784				37,106				—				—						144,890
Service charges on deposit accounts			71,945				18,290				—				—						90,235
Debit card and ATM fees			42,153				9,925				—				—						52,078
Mortgage banking revenue			16,319				10,486				—				—						26,805
Other income			95,141				31,888				—				—						127,029
Total noninterest income			333,342				107,695				—				—						441,037
Salaries and employee benefits			546,364				207,595				—				—						753,959
Occupancy			106,676				20,794				—				—						127,470
Equipment			32,163				23,172				—				—						55,335
Technology			80,343				17,531				—				—						97,874
Professional fees			27,335				26,647				—				—						53,982
Amortization of intangibles			24,155				153				90,124				—			T			114,432
Merger-related costs			—				—				—				194,000			C			194,000
Other expense			209,270				74,581				—				—						283,851
Total noninterest expense			1,026,306				370,473				90,124				194,000						1,680,903
Income before income taxes			751,302				156,416				160,126				(279,000	)					788,844
Income tax expense			169,310				32,408				40,031				(69,750	)		U			171,999
Net income			581,992				124,008				120,095				(209,250	)					616,845
Preferred dividends			(16,135	)			—				—				—						(16,135	)
Net income applicable to common shareholders		$	565,857			$	124,008			$	120,095			$	(209,250	)				$	600,710
Net income per common share
Basic		$	1.95			$	10.33													$	1.67
Diluted		$	1.94			$	10.33													$	1.66
Average common shares outstanding
Basic			290,748				12,000				38,182				19,111			V, B			360,041
Diluted			291,855				12,000				38,182				19,111			V, B			361,148

 

See accompanying notes to pro forma condensed combined financial statements.

 

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

 

Note 1 — Basis of Presentation

 

The pro forma condensed combined financial information and explanatory notes have been prepared to illustrate the effects of the merger under the acquisition method of accounting with Old National as the acquirer. The pro forma condensed combined financial information is presented for illustrative purposes only and does not necessarily indicate the financial condition or results of operations of the combined company had the companies been combined at the beginning of each period presented, nor does it necessarily indicate the results of operations in future periods or the future financial position of the combined company. Under the acquisition method of accounting, the assets and liabilities of Bremer, as of the effective date of the Merger, will be recorded by Old National at their respective fair values and the excess of the Merger Consideration over the fair value of Bremer’s net assets will be allocated to goodwill.

 

In connection with the Merger, which is currently expected to be completed in the second quarter of 2025 subject to the satisfaction of customary closing conditions, each share of Bremer common stock, issued and outstanding immediately prior to the effective time, other than shares of restricted Bremer common stock and certain shares held by Old National or Bremer, will be converted into the right to receive 4.182 shares of our common stock and cash in lieu of fractional shares and $26.22 in cash, valuing the transaction at approximately $1.4 billion based on the closing share price of our common stock of $20.93 as of November 20, 2024.

 

The pro forma allocation of the purchase price reflected in the pro forma condensed combined financial information is subject to adjustment and may vary from the actual purchase price allocation that will be recorded at the time of the Merger. Adjustments may include, but not be limited to, changes in (i) Bremer’s balance sheet through the effective time; (ii) the aggregate value of Merger Consideration paid if the price of shares of our common stock varies from the assumed $20.93 per share; (iii) total merger- related expenses if consummation and/or implementation costs vary from currently estimated amounts; and (iv) the underlying values of assets and liabilities if market and credit conditions differ from current assumptions.

 

Note 2 — Preliminary Purchase Price Allocation

 

The following table summarizes the determination of the purchase price consideration with a sensitivity analysis assuming a 10% increase and 10% decrease in the price per share of our common stock from the November 20, 2024 baseline with its impact on the preliminary goodwill.

 

		November 20,
(dollars in thousands, except per share data)		2024				10% Increase				10% Decrease
Common shares of Bremer			12,000,000				12,000,000				12,000,000
Exchange ratio			4.182				4.182				4.182
Old National shares issued			50,182,000				50,182,000				50,182,000
Price per share of our common stock		$	20.93			$	23.02			$	18.84
Preliminary fair value of consideration for common stock		$	1,050,309			$	1,155,340			$	945,278
Cash consideration paid			315,000				315,000				315,000
Total pro forma purchase price consideration		$	1,365,309			$	1,470,340			$	1,260,278
Preliminary goodwill		$	393,419			$	498,450			$	288,388

 

 

The following table sets forth a preliminary allocation of the estimated total purchase price to the fair value of Bremer’s assets and liabilities as of Bremer’s unaudited consolidated balance sheet as of September 30, 2024, with the excess recorded as goodwill (in thousands).

 

Assets
Cash and due from banks(1)		$	(13,613	)
Money market and other interest-earning investments			—
Investment securities			3,227,145
Loans held for sale			11,375
Loans, net of allowance for credit losses			10,749,549
Premises and equipment			151,345
Other intangible assets			499,516
Company-owned life insurance			177,935
Accrued interest receivable and other assets			686,606
Total assets acquired		$	15,489,858
Liabilities and shareholders’ equity
Noninterest-bearing demand deposits		$	3,756,503
Interest-bearing deposits			9,472,453
Total borrowings			1,179,759
Other liabilities			424,253
Total liabilities			14,832,968
Net assets acquired			656,890
Preliminary goodwill		$	393,419

 

(1)	Reflects the impact of the $315.0 million cash portion of consideration paid in accordance with the Merger Agreement.

 

Note 3 — Pro Forma Adjustments

 

A)	Represents the cash portion of the consideration paid in accordance with the merger agreement.

 

B)

Represents the receipt of $400.0 million from the forward purchaser and the issuance of 19,111,323 shares, in accordance with the terms of the forward sale agreement and assuming such shares are issued at the forward sale price of $20.93 per share and that the forward sale agreement has been fully physically settled.

 

C)	Represents pre-tax nonrecurring merger-related costs of $194.0 million (net of tax $153.0 million) expected to be incurred as a result of the Merger.

 

D)	Adjustments to reflect preliminary estimate of Bremer’s securities portfolio fair value based on estimates of expected cash flows and current interest rates.

 

E)

Adjustments to loans based on preliminary valuation include the following (i) adjustments for credit deterioration in the acquired loan portfolio, (ii) an interest rate mark based on current market interest rates and spreads, and (iii) a gross up of PCD loans, each as reflected in the following table:

 

 

Adjustments to loans
To record fair value related to the interest rate component of the loan portfolio		$	(585,000	)
To record fair value related to the credit component of the loan portfolio			(190,000	)
To record the purchased credit deteriorated loan CECL gross-up			110,000
Total adjustment to loans		$	(665,000	)

 

  

F)

Adjustments to allowance for credit losses consist of (i) an adjustment to reverse Bremer’s existing allowance for credit losses, (ii) the credit mark on purchased credit deteriorated loans, and (iii) an additional allowance for non-PCD loans under CECL which will be recognized through the income statement of the combined company following the closing of the Merger, each as reflected in the following table:

 

Adjustments to allowance for credit losses on loans
To eliminate Bremer’s allowance for credit losses at closing		$	105,797
Increase in the allowance for credit losses for gross-up for estimate of lifetime credit losses for purchased credit deteriorated (“PCD”) loans			(110,000	)
Total fair value adjustments to allowance for credit losses			(4,203	)
Provision for estimated lifetime credit losses for non-PCD loans			(80,000	)
Total transaction accounting adjustments to allowance for credit losses		$	(84,203	)

 

G)	Provision for estimated lifetime credit losses for non-PCD loans of $80,000 to be recorded immediately following consummation of the Merger.

 

H)	Adjustments to eliminate Bremer’s historical goodwill of $112,686 and to record estimated goodwill associated with the Merger of $393,419.

 

I)	Adjustments to eliminate Bremer’s historical intangible assets of $648 and to record estimated core deposit and customer relationship intangibles associated with the Merger of $499,516.

 

J)	Adjustments to deferred tax assets to reflect the effects of acquisition accounting adjustments. An estimated blended federal and state statutory tax rate of 25% was used.

 

K)	Adjustments to deferred tax assets to record the income tax effect of the $80,000 provision for credit losses for non-PCD loans and $5,000 provision for credit losses on unfunded loan commitments. An estimated blended federal and state statutory tax rate of 25% was used.

 

L)	Adjustments to reflect preliminary estimate of fair value of Bremer’s FHLB advances, subordinated debt and junior subordinated debentures based on current market rates and spreads for similar instruments.

 

M)	Adjustments to deferred tax liabilities of $125,000 to reflect the effects of acquisition accounting adjustments and to eliminate Bremer’s existing allowance for credit losses on unfunded commitments of $3,000. An estimated blended federal and state statutory tax rate of 25% was used.

 

N)	Provision for estimated lifetime credit losses for non-PCD unfunded loan commitments of $5,000 to be recorded immediately following consummation of the Merger.

 

O)

Adjustments to eliminate Bremer’s historical common equity and to record the issuance of Old National common shares to holders of Bremer common shares. As of November 20, 2024, these shares are valued at approximately $1,050,309 with estimated values of $50,182 to common stock and $1,000,127 to capital surplus.

 

P)	Adjustments to retained earnings to reflect the after-tax effect of the provision for credit losses for non- PCD loans and unfunded commitments of $63,750 and nonrecurring merger-related costs expected to be incurred as a result of the Merger of $153,000.

 

Q)	Net adjustments to interest income to record estimated accretion of discounts on loans associated with the Merger. The discount is expected to be accreted over seven years using the sum-of-years digits method.

 

R)	Net adjustments to interest income to record estimated accretion of discounts on investment securities associated with the Merger. The discount is expected to be accreted over five years using the straight- line method.

 

S)	Adjustments to interest expense to record amortization of net premiums on acquired borrowings associated with the Merger. The premium is expected to be amortized over two and a half years using the straight-line method.

 

T)

Net adjustments to intangible amortization expense to eliminate Bremer’s historical intangible amortization expense and to record estimated amortization associated with the Merger. The discounts on the core deposit intangible and the customer relationship intangible are expected to be amortized over ten and thirteen years, respectively, using the sum-of-years digits method.

 

U)	Adjustment to income tax expense as a result of the transaction accounting adjustments. An estimated blended federal and state statutory tax rate of 25% was used.

 

V)	Adjustments to weighted-average common shares outstanding to eliminate weighted-average shares of Bremer common stock outstanding and to record Old National shares outstanding using the exchange ratio of 4.182 per the merger agreement.

 

 

 

Exhibit 99.5

 

Index to Consolidated Financial Statements

 

Bremer Financial Corporation

 

	Page
Audited Consolidated Financial Statements
Fiscal Year Ended December 31, 2023 and 2022
Report of Independent Auditors	3
Consolidated Balance Sheets	5
Consolidated Statement of Income	6
Consolidated Statement of Comprehensive Income	7
Consolidated Statement of Shareholders Equity	8
Consolidated Statement of Cash Flows	9
Notes to Consolidated Financial Statements	10
Interim Consolidated Financial Statements (Unaudited)
Nine Months Ended September 30, 2024
Consolidated Balance Sheet	1
Consolidated Statement of Income	2

 

 

Contents

 

Report of Independent Auditors	3
Consolidated Financial Statements
Consolidated Balance Sheet	5
Consolidated Statement of Income	6
Consolidated Statement of Comprehensive Income	7
Consolidated Statement of Shareholders’ Equity	8
Consolidated Statement of Cash Flows	9
Notes to Consolidated Financial Statements
Note 1 — Company Description	10
Note 2 — Accounting Policies	10
Note 3 — Recent Accounting Pronouncements	19
Note 4 — Restrictions on Cash, Cash Equivalents, and Due from Banks	21
Note 5 — Investment Securities	21
Note 6 — Loans Held for Investment and Allowance for Credit Losses	24
Note 7 — Mortgage Banking	29
Note 8 — Premises, Equipment, and Lease Commitments	31
Note 9 — Intangible Assets	31
Note 10 — Deposits	32
Note 11 — Short-Term Borrowings	32
Note 12 — Long-Term Debt	33
Note 13 — Employee Benefit Plans	34
Note 14 — Other Noninterest Income	38
Note 15 — Other Noninterest Expense	38
Note 16 — Income Taxes	39
Note 17 — Commitments and Contingencies	40
Note 18 — Derivatives and Hedging Activities	41
Note 19 — Common Stock	44
Note 20 — Regulatory Matters	45
Note 21 — Fair Value	46
Note 22 — Subsequent Events	51

 

 

Ernst & Young, LLP 700 Nicollet Mall Suite 500 Minneapolis, MN 55402

Tel: +1 612 343 1000 ey.com

 

Report of Independent Auditors

 

The Board of Directors and Shareholders

Bremer Financial Corporation

 

Opinion

 

We have audited the consolidated financial statements of Bremer Financial Corporation (the Company), which comprise the consolidated balance sheets as of December 31, 2023 and 2022, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

 

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

We also have audited, in accordance with auditing standards generally accepted in the United States of America, the Company’s internal control over financial reporting, including internal control over the preparation of regulatory financial statements, in accordance with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria) and our report dated March 26, 2024 expressed an unmodified opinion thereon.

 

Basis for Opinion

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Adoption of ASU 2016-13, Financial Instruments — Credit Losses

 

As discussed in Note 3 to the financial statements, in 2023 the Company changed its method of accounting for credit losses as a result of the adoption of the amendments to the FASB Accounting Standards Codification resulting from Accounting Standards Update (ASU) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and the related amendments. Our opinion is not modified with respect to this matter.

 

Responsibilities of Management for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

 

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are available to be issued.

 

 

 

Auditor’s Responsibilities for the Audit of the Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

 

In performing an audit in accordance with GAAS, we:

 

·

Exercise professional judgment and maintain professional skepticism throughout the audit.

 

·

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

 

·

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.

 

·

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

 

·

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

 

 

March 26, 2024

 

 

Bremer Financial Corporation

 

Consolidated Balance Sheet  

 

At December 31 (Dollars in Thousands)		2023				2022
Assets
Cash, cash equivalents, and due from banks		$	391,470			$	713,841
Investment securities
Available-for-sale			1,623,960				1,754,823
Held-to-maturity (fair value $1,788,900 and $1,827,650, respectively; $78,478 and $59,954 pledged as collateral, respectively)(A)			2,104,572				2,175,723
Loans held for sale			10,334				11,851
Loans held for investment
Loans			11,454,296				10,621,894
Less allowance for loan losses			(102,751	)			(112,832	)
Net loans held for investment			11,351,545				10,509,062
Premises and equipment, net			140,969				129,349
Goodwill and other intangibles, net			136,731				138,904
Bank owned life insurance			173,037				170,155
Other assets			443,112				387,085
Total assets		$	16,375,730			$	15,990,793
Liabilities and Shareholders’ Equity
Deposits
Noninterest-bearing		$	3,967,525			$	4,906,954
Interest-bearing			8,962,601				8,276,598
Total deposits			12,930,126				13,183,552
Short-term borrowings			659,230				860,946
Long-term debt			1,023,118				241,664
Accrued expenses and other liabilities			314,756				341,800
Total liabilities			14,927,230				14,627,962
Redeemable Class A common stock, 960,000 shares issued and outstanding			115,880				109,026
Shareholders’ equity
Common stock
Class A, no par, 12,000,000 shares authorized; 240,000 shares issued and outstanding			57				57
Class B, no par, 10,800,000 shares authorized, issued, and outstanding			2,562				2,562
Retained earnings			1,538,586				1,483,556
Accumulated other comprehensive income (loss)			(208,585	)			(232,370	)
Total shareholders’ equity			1,332,620				1,253,805
Total liabilities and shareholders’ equity		$	16,375,730			$	15,990,793

 

(A) Includes only collateral pledged by the Company where counterparties have the right to sell or pledge the collateral.

 

See Notes to Consolidated Financial Statements

 

 

Bremer Financial Corporation

 

Consolidated Statement of Income

 

Year Ended December 31 (Dollars in Thousands)		2023				2022
Interest Income
Loans, including loans held for sale		$	589,495			$	412,233
Investment securities			97,591				92,789
Other interest income			23,279				9,764
Total interest income			710,365				514,786
Interest Expense
Deposits			191,529				37,644
Short-term borrowings			47,342				4,312
Long-term debt			31,402				7,541
Other			1,711				404
Total interest expense			271,984				49,901
Net interest income			438,381				464,885
Provision for credit losses			19,187				(9,030	)
Net interest income after provision for credit losses			419,194				473,915
Noninterest Income
Service charges			28,215				28,663
Insurance revenue			15,986				13,794
Investment management and trust fees			18,829				19,971
Brokerage revenue			18,277				19,027
Mortgage banking and loan fees			10,486				21,427
Realized gains (losses) on investment securities			(2,578	)			134
Other			18,480				26,086
Total noninterest income			107,695				129,102
Noninterest Expense
Compensation and employee benefits			207,595				220,654
Occupancy and equipment, net			43,966				48,880
Data processing fees			17,531				21,033
FDIC premiums and examination fees			17,544				10,163
Other			83,837				54,195
Total noninterest expense			370,473				354,925
Income before taxes			156,416				248,092
Applicable income taxes			32,408				49,632
Net income		$	124,008			$	198,460

 

See Notes to Consolidated Financial Statements

 

 

Bremer Financial Corporation

 

Consolidated Statement of Comprehensive Income

 

Year Ended December 31 (Dollars in Thousands)		2023				2022
Net income		$	124,008				$ 198,460
Reclassifications of realized losses (gains) to earnings, net of tax
Realized losses (gains) on available-for-sale securities			1,882				(98	)
Other employee benefit plan amortization			7,447				821
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on available-for-sale securities			18,915				(196,585	)
Unrealized gains (losses) on derivatives and hedging activities			(1,960	)			(881	)
Net gains (losses) arising during period related to employee benefit plans			(430	)			(42,463	)
Other comprehensive income (loss)			25,854				(239,206	)
Comprehensive income (loss)		$	149,862			$	(40,746	)

 

See Notes to Consolidated Financial Statements

 

 

 

Bremer Financial Corporation

 

Consolidated Statement of Shareholders’ Equity

 

			Common Stock								Retained				Accumulated Other Comprehensive
(Dollars in Thousands)			Class A				Class B				Earnings				(Loss) Income				Total Equity
Balance December 31, 2021		$	57			$	2,562				$1,369,421			$	(12,301	)			$1,359,739
Net income			—				—				198,460				—				198,460
Other comprehensive income (loss)			—				—				—				(239,206	)			(239,206	)
Dividends, $5.84 per share			—				—				(74,400	)			—				(74,400	)
Allocation to redeemable Class A common stock(A)			—				—				(9,925	)			19,137				9,212
Balance December 31, 2022			57				2,562			$	1,483,556				(232,370	)			1,253,805
Change in accounting principle(B)			—				—				16,927				—				16,927
Net income			—				—				124,008				—				124,008
Other comprehensive income (loss)			—				—				—				25,854				25,854
Dividends, $6.76 per share			—				—				(81,120	)			—				(81,120	)
Allocation to redeemable Class A common stock(A)			—				—				(4,785	)			(2,069	)			(6,854	)
Balance December 31, 2023		$	57			$	2,562			$	1,538,586			$	(208,585	)		$	1,332,620

 

(A)	Reflects the allocation of net income after the payment of dividends and allocation of other comprehensive income (loss).

 

(B)

Effective January 1, 2023 the Company adopted accounting guidance requiring the recognition of credit losses on financial instruments using an expected loss model rather than incurred losses. Upon adoption, the Company decreased its allowance for credit losses and increased retained earnings net of deferred taxes through a cumulative-effect adjustment.

 

See Notes to Consolidated Financial Statements

 

 

Bremer Financial Corporation

 

Consolidated Statement of Cash Flows

 

Year Ended December 31 (Dollars in Thousands)		2023				2022
Operating Activities
Net income		$	124,008			$	198,460
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses			19,187				(9,030	)
Depreciation and amortization			12,518				13,959
Amortization and accretion, net			9,128				6,503
Deferred income tax provision			(2,233	)			8,182
Change in fair value of MSRs			3,339				(2,792	)
Investment securities losses (gains), net			2,578				(134	)
Loan sales losses (gains), net			(5,906	)			1,392
Proceeds from sales of loans originated for sale			198,222				325,574
Loans originated for sale			(188,117	)			(284,004	)
Other, net			(73,315	)			173,435
Net cash provided by (used in) operating activities			99,409				431,545
Investing Activities
Purchases of available-for-sale investment securities			(60,000	)			(381,527	)
Purchases of held-to-maturity investment securities			(131,182	)			(342,396	)
Proceeds from maturities of available-for-sale investment securities			136,572				216,220
Proceeds from maturities of held-to-maturity investment securities			201,189				226,798
Proceeds from sales and calls of available-for-sale investment securities			76,655				25,782
Net change in loans held for investment			(865,797	)			(451,371	)
Purchase of premises and equipment			(39,644	)			(12,908	)
Proceeds from sale of premises and equipment			12,741				1,767
Other, net			1,037				1,081
Net cash provided by (used in) investing activities			(668,429	)			(716,554	)
Financing Activities
Net change in noninterest-bearing deposits			(939,429	)			(238,253	)
Net change in interest-bearing deposits			686,003				(1,071,031	)
Net change in short-term borrowings			(201,716	)			659,977
Proceeds from issuance of long-term debt			782,911				24,625
Common stock dividends paid			(81,120	)			(74,400	)
Net cash provided by (used in) financing activities			246,649				(699,082	)
Net increase (decrease) in cash, cash equivalents, and due from banks			(322,371	)			(984,091	)
Cash, cash equivalents, and due from banks at beginning of year			713,841				1,697,932
Cash, cash equivalents, and due from banks at end of year		$	391,470			$	713,841
Supplemental Disclosures of Cash Flow Information
Cash paid for interest		$	254,129			$	43,024
Cash paid for income taxes			30,926				37,452
Non-cash transfer of loans to other assets			229				157
Non-cash acquisition of operating leases			157				13,248

 

See Notes to Consolidated Financial Statements

 

 

Notes to Consolidated Financial Statements

 

Note 1. Company Description

 

Bremer Financial Corporation and its subsidiaries, including Bremer Bank, (collectively referred to as the “Company” or “Bremer”) is a privately held, regional financial services company jointly owned by the Otto Bremer Trust (“OBT”), Bremer directors, and Bremer employees. Founded in 1943 by Otto Bremer, the Company is headquartered in St. Paul, Minnesota and provides a comprehensive range of banking, mortgage, investment, wealth management, trust and insurance products and services primarily throughout Minnesota, North Dakota, and Wisconsin. Clients include small businesses, mid-sized corporations, agribusinesses, non-profits, public and government entities, and individuals and families. Lending and depository services are primarily provided through banking offices located in Minnesota, North Dakota, and Wisconsin.

 

Note 2. Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements, prepared in conformity with accounting principles generally accepted in the United States, include the accounts of the Company and its subsidiaries and all variable interest entities (“VIEs”) for which the Company has both the power to direct activities of the VIE that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or right to receive benefits of the VIE that could potentially be significant to the VIE. Consolidation eliminates all intercompany accounts and transactions.

 

Certain items in prior periods have been reclassified to conform to the current period presentation.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual experience could differ from those estimates and assumptions.

 

Cash, Cash Equivalents, and Due from Banks

 

The Company has defined cash equivalents as cash items in process, interest-bearing balances due from depository institutions with an original maturity date of less than 90 days, and federal funds sold, which have original maturity dates less than 90 days.

 

Investment Securities

 

Available-for-sale Investment Securities

 

Available-for-sale securities include debt securities that are carried at fair value with unrealized net gains or losses reported within other comprehensive income (loss), net of tax. These securities may be sold before maturity in response to changes in the Company’s interest rate risk profile, funding needs, demand for collateralized deposits by public entities, or other reasons. Realized gains or losses on securities are determined on a trade date basis based on the specific amortized cost of the investments sold. Declines in fair value related to credit, if any, are recorded by establishing an allowance for credit losses.

 

Securities in an unrealized loss position are assessed to determine whether management intends to sell, or it is more likely than not they will be required to sell the security before recovery of its amortized cost basis. If either criterion is met, the security’s amortized cost is written down to fair value through income.

 

 

For securities that do not meet either criterion, management periodically evaluates whether the decline in fair value below the amortized cost basis of the security is the result of credit related factors. As a part of this evaluation, management considers various factors such as the extent of the unrealized loss, nature of the investment security, credit ratings or financial condition of the issuer, expected cash flow scenarios, existence of any government or agency guarantees, and market conditions. If there is indication that a credit loss exists, the Company measures the allowance for credit losses using market information where available and discounting expected cash flows at the original effective rate of the investment security. The present value of expected cash flows is compared to the security’s amortized cost with any excess amortized cost recorded as a credit loss. The credit loss is limited to the excess of the security’s amortized cost over fair value. Changes in the allowance for credit losses are reported within provision for credit losses on the consolidated income statement. Charge-offs are recognized against the allowance when uncollectibility on the security is confirmed or the criteria regarding intent or requirement to sell is met. Refer to Note 5 for additional information.

 

Accrued interest receivable is excluded from the amortized cost basis of available-for-sale securities and the measurement of the allowance for credit losses. Accrued interest receivable on available-for-sale securities is presented within other assets in the consolidated balance sheet.

 

Held-to-maturity Investment Securities

 

Debt securities for which the Company has the positive intent and ability to hold to maturity are reported at historical cost adjusted for amortization of premiums and accretion of discounts. Expected credit losses, if any, are recorded by establishing an allowance for credit losses.

 

The held-to-maturity investment securities are comprised of U.S. Treasury and U.S. agency mortgage- backed securities that are issued by U.S. government entities or agencies, are either explicitly or implicitly guaranteed by the U.S. government, and have no history of credit losses. Accordingly, the Company does not expect to incur any credit losses on held-to-maturity investment securities and no allowance for credit losses has been recorded at December 31, 2023.

 

Accrued interest receivable is excluded from the amortized cost basis of held-to-maturity securities and the measurement of the allowance for credit losses. Accrued interest receivable on held-to-maturity securities is presented within other assets in the consolidated balance sheet.

 

Loans Held for Sale

 

Loans held for sale (“LHFS”) represent loans originated by the Company, intended to be sold in the secondary market. LHFS primarily include first lien, single-family residential mortgage loans that conform to underwriting standards of the Government Sponsored Enterprises (“GSEs”). The LHFS portfolio is carried at the lower of cost or fair value, with any changes in carrying value recorded in noninterest income. Net gains realized on the sales of loans are recognized in noninterest income at the time of sale and are determined by the difference between the net sales proceeds and the carrying value of the loans sold, including any deferred origination fees and costs.

 

Loans Held for Investment

 

Loans held for investment (“LHFI”) include loans originated by the Company, as well as purchased loans, that management has the intent and ability to hold for the foreseeable future or until maturity or payoff. The Company’s accounting methods differ depending on whether the loans are originated or purchased, and for purchased loans, whether the loans contained evidence of credit deterioration at acquisition.

 

Originated LHFI

 

Originated LHFI are reported at the principal amount outstanding adjusted for charge-offs, the allowance for credit losses, and net of unearned income or deferred loan fees and costs. Interest income is accrued based on the principal amount outstanding. Certain direct loan origination fees and costs, as well as commitment fees, are deferred and recognized over the life of the loan or commitment as yield adjustments. The Company has elected to exclude accrued interest receivable from the amortized cost basis of LHFI and the measurement of the allowance for credit losses. Accrued interest receivable related to LHFI is presented within other assets in the consolidated balance sheet.

 

 

Purchased LHFI

 

All purchased LHFI are measured at their initial investment or at fair value if acquired as a part of a business combination, in accordance with applicable accounting guidance. For loans acquired after December 31, 2022, an allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for loans considered purchase credit deteriorated (PCD) is established by adjusting the basis of the acquired loans whereas the allowance for non-PCD loans is recognized through provision expense. Non-credit related premiums and discounts are amortized and accreted into income over the life of the loan. The Company did not have any PCD loans at December 31, 2023.

 

Prior to January 1, 2023, purchased LHFI were measured at their initial investment or at fair value if acquired as a part of a business combination, including any credit discounts, in accordance with applicable accounting guidance. An allowance for loan losses was not recorded at the acquisition date.

 

Allowance for Credit Losses

 

Beginning January 1, 2023, the allowance for credit losses is established for current expected credit losses on the Company’s loan portfolio, including unfunded commitments. The allowance considers expected losses for the remaining contractual lives of the applicable assets, inclusive of expected recoveries and prepayments. The allowance is increased through provisions charged to earnings and reduced by net charge-offs. Management evaluates the allowance for credit losses on a quarterly basis.

 

The Company considers multiple economic scenarios over a reasonable and supportable two-year forecast period. Expected credit losses for periods beyond the reasonable and supportable forecast period are determined based on a reversion method which reverts to long-term historical loss estimates over a consecutive four quarter period on a straight-line basis. Economic scenarios are weighted based on the Company’s expectation of economic conditions for the foreseeable future and reflect significant judgment and consideration of forecast uncertainty. Other factors affecting credit losses not reflected in the economic scenarios may be considered by management when estimating expected credit losses. These factors may include, but are not limited to, loan servicing practices, regulatory guidance, and/or fiscal or monetary policy actions.

 

The allowance for credit losses utilizes forward-looking expected loss models to consider a variety of factors affecting lifetime credit losses. These factors include, but are not limited to, macroeconomic variables such as unemployment rates, unemployment claims, nonfarm employment levels, real gross domestic product levels, home price index, commercial real estate price index, and agriculture price index, as well as loan and borrower characteristics, such as probability of default, loss given default, and exposure at default depending on the loan risk characteristics, delinquency status, industry, geographic location, collateral type and available valuation information, and the remaining term of the loan, adjusted for expected prepayments.

 

The Company offers a broad array of lending products and categorizes its loan portfolio into two segments, which is the level at which it develops and documents a systematic methodology to determine the allowance for credit losses. The Company’s two loan portfolio segments are commercial lending and consumer lending. The Company further disaggregates its loan portfolio segments into various classes based on their underlying risk characteristics. The three classes within the commercial lending segment are commercial loans, commercial real estate loans, and agriculture loans. The two classes within the consumer lending segment are residential mortgages and retail loans. Where similar loan risk characteristics exist, the allowance is measured on a collective (pool) basis.

 

The commercial class consists of loans made to businesses to provide financing for business operations, capital purchases, acquisitions, expansions, and other business investments. Lending in this segment is to a wide variety of industries, including manufacturing, retail operations, education, health care, professional offices, nonprofits, and municipalities. These loans are generally secured by business assets and guaranteed by owners, and cash flows from operations are generally the primary source of repayment. Key risk characteristics relevant to this class include the industry, geography, size of the borrower’s business, repayment sources, the borrower’s debt capacity and financial performance, strength and liquidity of guarantors, management expertise, loan covenants, and value of collateral. The Company considers these characteristics in assigning risk ratings and estimating the allowance.

 

 

The commercial real estate class includes loans made to businesses secured by real estate. Properties securing the loans in this class are comprised of both owner-occupied and non-owner-occupied properties. Non-owner-occupied properties include hotels and lodging, multifamily residential buildings, office buildings, office warehouses, medical/assisted living, and retail buildings. Key risk characteristics relevant to this class include the industry, geography, size of the borrower’s business, repayment sources, borrower’s debt capacity and financial performance, strength and liquidity of guarantors, loan covenants, tenants, property characteristics, and value of collateral. The Company considers these characteristics in assigning risk ratings and estimating the allowance.

 

The agriculture class includes loans made to individuals and businesses involved in agriculture, including crop and livestock production, dairy, and other agribusiness activities. Loans in this segment are generally secured by agricultural land, crops, livestock, equipment, and operating assets and are guaranteed by owners. The primary source of repayment is generally cash flow from operations. Key risk characteristics relevant to this class include the geography of the borrower’s operations, industry characteristics, commodity prices, marketing activity, weather patterns, insurance and government program support, repayment sources, borrower’s debt capacity and financial performance, loan covenants, and value of collateral. The Company considers these characteristics in assigning risk ratings and estimating the allowance.

 

The residential real estate class includes loans made to consumers, including residential first mortgages, residential construction loans, and home equity first lien loans. These loans are typically fixed-rate loans secured by residential real estate. Key risk characteristics relevant to this class include the borrower’s capacity and willingness to repay, payment history, income and debt levels, value and location of collateral, unemployment rates, and other economic factors. The Company considers these characteristics in assigning, as applicable, risk classifications and estimating the allowance.

 

The retail class includes consumer loans, including home equity second lien loans, loans secured by automobiles and other installment loans, and unsecured term loans and revolving credit lines. Key risk characteristics relevant to this segment include the borrower’s capacity and willingness to repay, payment history, income and debt levels, value and location of collateral, unemployment rates, and other economic factors. The Company considers these characteristics in assigning, as applicable, risk classifications and estimating the allowance.

 

Loans that do not exhibit similar risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. If an individually evaluated loan is determined to be collateral dependent or meets the criteria to apply the collateral dependent practical expedient, expected credit losses are estimated based on the fair value of collateral less applicable selling costs. If not, a discounted cash flows methodology is used.

 

The Company’s methodology for determining the allowance for credit losses also considers the need for adjustments to the estimated allowance amounts described above as a result of limitations inherent in the methodologies used. Using a systematic approach, necessary adjustments are made to consider the potential impact of other qualitative factors not captured in the quantitative model which include, but are not limited to, the following: model imprecision, imprecision in economic scenario assumptions, and emerging risks related to changes in the economic environment that are affecting specific loan segments. The consideration of these qualitative factors is incorporated in the allowance for credit losses for each loan class.

 

Prior to implementation of Accounting Standard Update 2016-13 on January 1, 2023, the Company was required to use an incurred loss methodology to estimate credit losses. The allowance for credit losses and resulting provision expense levels for comparative periods presented were estimated in accordance with that methodology and applicable accounting guidance.

 

 

Allowance for Unfunded Commitments

 

The allowance for unfunded commitments is determined using similar procedures and methodologies used for LHFI supplemented by the information related to future funding expectations. The future funding expectations are based on historical weighted average utilization levels. The reserve is included in accrued expenses and other liabilities on the consolidated balance sheet. Net adjustments to the reserve for unfunded commitments are included in provision for credit losses on the consolidated statement of income.

 

Nonaccrual and Past Due Loans

 

The LHFI portfolio is reviewed regularly by the Company and loans are placed on nonaccrual status when the collection of interest or principal is unlikely. When a loan is placed on nonaccrual status, unpaid accrued interest is reversed and future interest accruals are suspended. The Company’s policy is to assign loans to nonaccrual status when payment of interest and principal in full is not expected, principal or interest has been in default for 90 days, the loan is being maintained on a cash basis due to the deterioration in the condition of the borrower, or the loan has otherwise been determined to be impaired. An exception to this policy can be made if a loan is well-collateralized and in the process of collection, with the expectation that the loan will be fully repaid or brought current before it becomes a maximum of 150 days past due.

 

A nonaccrual loan may be restored to accrual status when 1) none of its principal and interest is due and unpaid and the Company expects repayment of the remaining contractual principal and interest as agreed; 2) the borrower has resumed paying the full amount of the scheduled contractual interest and principal payments for a minimum of six months; or 3) repayment criteria established by the Company to bring the loan current have been met, even though the loan has not yet been brought fully current.

 

Credit Quality and Risk Ratings

 

The Company categorizes its loans into one of 12 internal risk rating categories that are based on relevant information about the borrower’s ability to service debt, as well as expectations for future performance, with primary consideration in assigning risk ratings being the strength of the primary repayment source for the loan. The Company categorizes its loans into the internal risk rating categories on an ongoing basis.

 

The 12 internal risk rating categories are mapped to pass, special mention, or classified credit quality indicator categories. Pass loans are not classified on the Company’s rating scale for problem credits, as minimal credit risk has been identified. Special mention loans have a potential weakness requiring credit monitoring activities. Classified loans have a well-defined weakness that results in greater risk regarding the full collection of contractual cash flows. Loans in the special mention and classified categories are considered criticized loans.

 

Impaired Loans

 

A loan is considered impaired when management determines it is probable that the Company will be unable to collect all amounts due according to the original contractual terms of the loan agreement. Impairment is measured as the difference between the recorded investment in the loan (including accrued interest, net deferred loan fees or costs, and unamortized premium or discount) and the estimated present value of total expected future cash flows, discounted at the loan’s effective rate, or the fair value of the collateral less selling costs, if the loan is collateral dependent. Impairment is recognized by either adjusting the allowance for credit losses, or by charging off the impaired amount. All nonaccrual loans meet the definition of impaired loans.

 

Loan Modifications

 

In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience financial difficulties in the near- term. In most cases, the modification is either a concessionary reduction in interest rate, extension of the maturity date, or reduction in the principal balance that would otherwise not be considered. If a loan has been formally restructured and, under the restructured agreement, the payments have been current for six months and all future payments are expected to be collected in full and in a timely manner, the loan may be returned to accruing status.

 

 

Charge-Offs

 

Commercial, commercial real estate, and agricultural loans are charged-off when they are determined to be impaired and uncollectible and the net realizable value of the underlying collateral or expected cash flows is less than the Company’s recorded investment in the loan.

 

Residential real estate loans are placed on nonaccrual status during the month the loan becomes 90 consecutive days past due. A current value of the real estate collateral is determined before the loan is 180 consecutive days past due, and any loan balance in excess of the collateral value, less selling costs, is charged off. Collateral values are periodically updated when necessary.

 

Other secured consumer loans not secured by real estate will be charged off during the month when the loan becomes 120 days past due. The entire loan balance is charged off unless a substantiated value can be assigned to the collateral, in which case the loan is charged down to the value of the collateral less selling costs.

 

Unsecured consumer loans are charged off during the month when the loan becomes 90 days past due.

 

Other Real Estate Owned

 

Other real estate owned (“OREO”) represents properties that have been acquired in satisfaction of debt through foreclosure, or real estate holdings as otherwise defined by bank regulators, and is initially recorded at fair value less estimated costs to sell. Any adjustment to fair value less costs to sell at the time of foreclosure is charged to the allowance for loan losses. The properties are appraised periodically to ensure that the recorded amount is supported by the current fair value, less costs to sell. OREO is included in other assets on the consolidated balance sheets. Adjustments to fair value, less costs to sell and subsequent to the initial adjustment, based on declines in property value, operating expenses, and losses on sales, are charged to noninterest expense, while income, including gains on sales, is included in other noninterest income.

 

Premises and Equipment

 

Premises and equipment are carried at cost, less accumulated depreciation, with depreciation generally calculated on a straight-line basis over the estimated useful lives of the assets, which range from 3 to 39 years. Maintenance and repair costs are charged to net occupancy and equipment expense on the consolidated statement of income as incurred. Gains and losses on disposition of premises and equipment are included in other noninterest income and other noninterest expense on the consolidated statement of income.

 

The Company, as lessee, records a right of use asset (ROU) for each lease with an original term greater than 12 months. ROU assets are included in premises and equipment, with the corresponding lease liabilities included in accrued expenses and other liabilities on the consolidated balance sheet.

 

Capitalized Software

 

The Company capitalizes certain costs associated with the acquisition or development of internal-use software. Once the software is ready for its intended use, these costs are amortized on a straight-line basis over the software’s expected useful life and reviewed for impairment on an ongoing basis. The estimated useful life is generally 3 years. Capitalized software costs are recorded within other assets on the consolidated balance sheet. Capitalized software amortization expense, impairment charges, and contract termination costs are included in other noninterest expense on the consolidated income statement.

 

Goodwill and Other Intangible Assets

 

Intangible assets include goodwill, mortgage servicing rights (“MSRs”), core deposit premiums, and other intangible assets. Goodwill represents the excess of acquisition cost over the estimated fair value of assets acquired and liabilities assumed in a business combination. Other intangibles primarily relate to the value associated with certain purchased portfolios or business activities, whether through a business combination or other purchase. Goodwill is not amortized, and the Company assesses goodwill for impairment annually as of October 1. The Company evaluates certain qualitative considerations, supplemented by quantitative metrics, as part of the evaluation. Other intangible assets and core deposit premiums with finite lives are amortized over a period of time and are evaluated for impairment if certain indicators of impairment are identified.

 

 

MSRs are capitalized as separate assets when mortgage loans are sold to third parties and the contractual right to service the loans is retained. The Company has elected to account for the MSRs at fair value. Because MSRs do not trade in an active market with readily observable prices, the Company determines the fair value by estimating the present value of future cash flows associated with the contractual servicing activities, using a discounted cash flow calculation and market based assumptions, such as prepayment rates, discount rates, and other assumptions. The estimate of MSR fair value is calculated by a third-party valuation firm and significant assumptions are benchmarked against peers. Changes in the fair value of MSRs are included in noninterest income on the consolidated statement of income.

 

Bank Owned Life Insurance

 

The Company has purchased single-premium bank-owned life insurance (“BOLI”), insuring a group of its key officers. Substantially all BOLI is in the form of an experience-rated mortality, separate-account product. BOLI is included on the consolidated balance sheet at its cash surrender value (“CSV”). Earnings on the underlying investments, less mortality and servicing costs, increase the CSV of the policy on the consolidated balance sheet and are included in other noninterest income on the consolidated statement of income.

 

Derivatives and Hedging Activities

 

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain floating and fixed-rate borrowings. The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivatives, whether the Company has elected to designate the derivatives in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

 

Derivatives designated and qualifying as hedges of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges.

 

Derivatives designated and qualifying as hedges of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. For derivatives designated as fair value hedges, changes in fair value of the derivatives and corresponding assets or liabilities are included in interest income or expense on the consolidated statement of income. For derivatives designated as cash flow hedges, changes in the fair value of the derivatives are included in other comprehensive income, net of tax.

 

The Company may enter into derivative contracts that are intended to economically hedge certain risks even though the Company elects not to apply hedge accounting. Also, certain derivatives not designated as hedges result from a service the Company provides to certain qualified commercial banking customers by executing interest rate derivatives with these customers to facilitate their risk management strategies. Those derivatives are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. Changes in fair value are included in noninterest income on the consolidated statement of income.

 

 

As part of the Company’s risk management strategy in the residential mortgage banking business, derivative instruments such as forward sales contracts are utilized. The Company’s obligations under forward contracts consist of commitments to deliver mortgage loans originated at a future date. The Company also has derivative contracts that are created through its mortgage operations when the Company commits to originate a mortgage loan intended to be sold at a future date, referred to as interest rate lock commitments. The fair value of forward sales contracts and interest rate lock commitments are included in other assets or accrued expenses and other liabilities on the consolidated balance sheet. Changes in fair value of these instruments are included in other noninterest income on the consolidated statement of income.

 

Employee Benefit Plans

 

The Company provides a defined benefit pension plan to substantially all employees based on years of service and employee compensation while employed with the Company. Depending on the measurement of the liability and the fair value of plan assets, a net asset or liability may be recorded. Liabilities related to future benefit obligations and assets related to the Company’s funding contributions are measured using assumptions, including long-term discount rates and the expected return on plan assets. The Company recognizes the net funded or unfunded status of the defined benefit pension plan in other assets or accrued expenses and other liabilities on the consolidated balance sheet. Deferred actuarial gains and losses, and the prior service costs and credits, are recorded in other comprehensive income, net of tax. Periodic service- related costs associated with this plan are recorded in compensation and employee benefit expense on the consolidated statement of income. Other net benefit costs are recorded within other noninterest expense on the consolidated statement of income.

 

Income Taxes

 

The Company is subject to U.S. federal income tax, as well as income tax in certain state jurisdictions. Income tax expense consists of two components, current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period. Deferred income tax expense relates to timing differences between the period in which transactions are reflected on the consolidated financial statements (referred to as the “book basis”) and the period in which transactions are considered taxable (referred to as the “tax basis”). The Company determines deferred income taxes using the balance sheet method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized subject to management judgment that realization is more likely than not. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense on the consolidated statement of income.

 

Changes in relevant tax laws may impact the measurement of deferred tax assets and liabilities. The impact of changes to tax law, including changes to tax rates, on the measurement of deferred taxes is included in current income tax expense on the consolidated statement of income at the date of enactment.

 

Revenue Recognition

 

In the ordinary course of business, the Company recognizes income derived from various revenue generating activities. Certain revenues are generated for amounts the Company expects to be entitled to from contracts with customers related to the transfer of services or products. Total revenue from certain contracts with customers, which is accounted for under applicable revenue recognition accounting guidance, of $81.3 million and $81.5 million was recognized for the years ended December 31, 2023 and 2022, respectively. Revenue generating activities related to financial assets and liabilities are also recognized but accounted for under other applicable accounting guidance; including interest income on loans and investment securities, mortgage servicing fees and other mortgage banking activities, loan commitment fees, gains and losses on securities, fees collected related to customer derivatives activities, and other miscellaneous income items. Certain specific policies include the following:

 

 

Credit and Debit Card Revenue

 

Debit card revenue includes interchange from debit cards processed through card association networks and other transaction and account management fees. Interchange rates are generally set by the card associations and based on purchase volumes and other factors. The Company records interchange as services are provided. Other fees, including transaction fees, are recognized as services are provided. Credit card revenue includes fees earned related to joint marketing agreements with unrelated third parties and is recorded when services are provided. Credit and debit card revenue is recorded within service charges on the consolidated statement of income.

 

Deposit Service Charges

 

Deposit service charges include service charges on deposit accounts received under depository agreements with customers to provide access to deposited funds and serve as a custodian of funds. Checking or savings accounts may contain fees for various services used on a day-to-day basis by a customer. Fees are recognized as services are delivered to and consumed by the customer, or as penalty fees are charged. Deposit service charges are recorded within service charges on the consolidated statement of income.

 

Insurance Revenue

 

Insurance revenue includes commissions related to policies provided to customers through agency contracts with insurance carriers. Coverage types primarily relate to property and casualty policies. Commission revenue is generally recorded on the effective date of the policy or when control of the policy has transferred to the applicable carrier. These commissions are recorded within insurance revenue on the consolidated statement of income.

 

Investment Management and Trust Fees

 

Investment management and trust fees are recognized over the period in which services are performed and are generally based on a percentage of the fair value of the assets under management or administration, as well as other asset management related fees. Revenue related to these activities is recorded within investment management and trust fees on the consolidated statement of income.

 

Brokerage Revenue

 

Brokerage revenue includes commissions related to the execution of requested security trades and investment advisory fees. Commissions and investment advisory fees are recognized as services are delivered to and utilized by the customer. These fees are recorded within brokerage revenue on the consolidated statement of income.

 

Comprehensive Income

 

Comprehensive income is defined as the change in equity during a period resulting from transactions and other events and circumstances from non-owner sources. For the Company, comprehensive income consists of net income, as reported on the consolidated statement of income, and other comprehensive income, net of tax, which includes the change in unrealized gains and losses on available-for-sale securities, derivatives and hedging activities, and pension and other postretirement plans related gains and losses and prior service cost or credits that arise during the period but are not recognized as components of net periodic benefit cost. Income tax effects of amounts reported within other comprehensive income (loss) related to available-for-sale securities are released under the portfolio approach. Income tax effects of amounts recorded within other comprehensive income (loss) related to employee benefit plans would be released upon termination of the plans.

 

 

Note 3. Recent Accounting Pronouncements

 

The following summarizes recent accounting standards updates (“ASU”) issued by the FASB, which are relevant to the Company and were adopted during the years ended December 31, 2023 or December 31, 2022, or that will be applicable in a future period:

 

Standard		Description		Effective Date and Financial Statement Impact
ASU 2023-09 — Income Taxes (Topic 740): Improvements to Income Tax Disclosures		In December of 2023, the FASB issued new accounting guidance related to income tax disclosures. The amendments in this update require additional income tax rate reconciliation and income taxes paid disclosures. The guidance may be adopted on a prospective or retrospective basis.		The guidance is effective fiscal years beginning after December 15, 2024 with early adoption permitted. The Company is evaluating the impact of the guidance on its consolidated financial statements.
ASU 2023-02 — Investments — Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method		In March of 2023, the FASB issued new accounting guidance related to accounting for tax credit investments. Under the new guidance, an entity may elect, on a program-by-program basis, to account for tax credit investments using the proportional amortization method if certain conditions are met. The guidance may be adopted on a modified retrospective or retrospective basis.		The guidance is effective fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is evaluating the impact of the guidance on its consolidated financial statements.
ASU 2022-02 — Financial Instruments — Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures		In March of 2022, the FASB issued new accounting guidance related to troubled debt restructurings (TDR) and vintage disclosures. The guidance eliminates TDR accounting while enhancing disclosure requirements for certain loan modifications made to borrowers experiencing financial difficulty. It also requires disclosure of current period gross charge-offs by year of origination for financing receivables.		The Company adopted the guidance as of January 1, 2023 on a modified retrospective basis. The adoption of this guidance is not material to the Company’s consolidated financial statements.
ASU 2022-01 — Derivatives and Hedging (Topic 815): Fair Value Heding — Portfolio Layer		In March of 2022, the FASB issued new accounting guidance related to fair value hedge accounting of portfolios of financial assets. Under the new guidance, the current last-of-layer method is expanded to allow for multiple hedge layers in a single closed portfolio and, as a result, was renamed the portfolio layer method. It also expands the scope of this method to non- prepayable financial assets.		The Company adopted the guidance as of January 1, 2023 on a prospective basis. The adoption of this guidance is not material to the Company’s consolidated financial statements.

 

 

Standard		Description		Effective Date and Financial Statement Impact
ASU 2020-04 — Facilitation of the Effects of Reference Rate Reform on Financial Reporting ASU 2022-06 — Deferral of the Sunset Date of Topic 848		In March 2020, the FASB issued new accounting guidance to provide optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The following expedients are provided for modified contracts whose reference rate is changed: 1) receivables and debt contracts are accounted for prospectively by adjusting the effective interest rate, 2) leases are accounted for as a continuation of the existing contracts with no reassessments of the lease classification and discount rate or remeasurements of lease payments that otherwise would be required, and 3) an entity is not required to reassess its original conclusion about whether that contract contains an embedded derivative that is clearly and closely related to the economic characteristics and risks of the host contract. When elected the expedients must be applied consistently for all eligible contracts or transactions.		The guidance is subject to election as of March 12, 2020 and can be elected through December 31, 2024. The Company has made certain elections under the guidance. The elections made did not have a material impact on the consolidated financial statements
		In December 2022, the FASB issued guidance to defer the sunset date of ASU 2020-04 from December 31, 2022 to December 31, 2024 and to make the optional expedients available through the LIBOR transition date of June 30, 2023.
ASU 2016-13 — Financial Instruments — Credit Losses		In June 2016, the FASB issued new accounting guidance related to the recognition of credit losses on loans and other financial instruments based on an expected loss model (CECL), replacing the incurred loss model that is currently in use. Under the new guidance, an entity will measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The expected loss model will apply to loans and leases, unfunded lending commitments, held-to- maturity debt securities and other debt instruments measured at amortized cost. The impairment model for available-for-sale debt securities will require the recognition of credit losses through a valuation allowance when fair value is less than amortized cost and the decline is due to credit-related factors, regardless of whether the impairment is considered to be other-than-temporary.		The Company adopted CECL as of January 1, 2023, using the modified retrospective method for all financial assets measured at amortized cost and off- balance sheet credit exposures. The adoption of CECL resulted in a decrease in the Company’s allowance for credit losses and the liability for expected credit losses on commitments to extend credit as a result of changing from the “incurred loss” model, which encompassed allowances for current known and inherent losses within the portfolio, to the “expected loss” model, which encompasses allowances for losses expected to be incurred over the contractual life of the portfolio. The adoption impacts were applied through a cumulative- effect adjustment to retained earnings of $16.9 million as of January 1, 2023. The transition adjustment included a decrease in the allowance for credit losses of $23.2 million net of the corresponding decrease in deferred tax assets of $6.3 million. The adoption of CECL did not have a material impact on the Company’s investment securities portfolio.
		The guidance was effective on January 1, 2023, with a cumulative-effect adjustment to retained earnings as of that date.

 

 

Note 4. Restrictions on Cash, Cash Equivalents, and Due from Banks

 

Banking regulators may require bank subsidiaries to maintain minimum average reserve balances, either in the form of vault cash or reserve balances held with central banks or other financial institutions. The Company did not have reserve requirements at December 31, 2023 and 2022, respectively.

 

Note 5. Investment Securities

 

The amortized cost, gross unrealized holding gains and losses, and fair value of available-for-sale and held-to-maturity investment securities at December 31 were as follows:

 

						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
(Dollars in Thousands)		Cost				Gains				Losses				Value
2023
Available-for-sale
U.S Treasury securities		$	—			$	—			$	—			$	—
Obligations of U.S. government agencies			45,133				5				284				44,854
Obligations of state and political subdivisions			328,909				515				9,855				319,569
Agency mortgage-backed securities
Residential			1,212,216				—				177,771				1,034,445
Commercial			111,874				1				6,713				105,162
Non-agency residential mortgage-backed securities			104,475				—				12,460				92,015
Corporate debt securities			33,839				—				5,924				27,915
Total available-for-sale		$	1,836,446			$	521			$	213,007			$	1,623,960
Held-to-maturity
U.S. Treasury securities		$	78,478			$	115			$	—			$	78,593
Agency mortgage-backed securities
Residential			1,963,778				318				310,780				1,653,316
Commercial			62,316				—				5,325				56,991
Total held-to-maturity		$	2,104,572			$	433			$	316,105			$	1,788,900
2022
Available-for-sale
U.S. Treasury securities		$	100			$	—			$	—			$	100
Obligations of U.S. government agencies			6,295				20				368				5,947
Obligations of state and political subdivisions			399,472				1,180				16,075				384,577
Agency mortgage-backed securities
Residential			1,314,951				—				198,482				1,116,469
Commercial			127,243				1				8,298				118,946
Non-agency residential mortgage-backed securities			113,907				—				14,181				99,726
Corporate debt securities			33,831				—				4,773				29,058
Total available-for-sale		$	1,995,799			$	1,201			$	242,177			$	1,754,823
Held-to-maturity
U.S. Treasury securities		$	59,954			$	—			$	1,766			$	58,188
Agency mortgage-backed securities
Residential			2,052,699				—				340,001				1,712,698
Commercial			63,070				—				6,306				56,764
Total held-to-maturity		$	2,175,723			$	—			$	348,073			$	1,827,650

 

Available-for-sale investment securities are carried at fair value, with net unrealized gains or losses reported within accumulated other comprehensive income or loss, net of tax, in shareholders’ equity. Held- to-maturity investment securities are carried at amortized cost.

 

 

The Company holds required investments in Federal Home Loan Bank (“FHLB”) stock and Federal Reserve Bank (“FRB”) stock, which were recorded at cost and were included in other assets on the consolidated balance sheet. The amounts of FHLB and FRB stock held were $84.6 million and $54.9 million at December 31, 2023 and 2022, respectively. Investment securities of $1.8 billion and $2.2 billion were pledged as collateral to secure public deposits and for other purposes at December 31, 2023 and 2022, respectively.

 

The following table provides information regarding the amount of interest income recognized related to taxable and non-taxable investment securities:

 

Year Ended December 31 (Dollars in Thousands)		2023				2022
Taxable		$	88,520			$	82,103
Non-taxable			9,071				10,686
Total interest income from investment securities		$	97,591			$	92,789

 

 

 

 

Proceeds from sales and calls of available-for-sale investment securities were $76.6 million and $25.8 million for the years ended December 31, 2023 and 2022, respectively. Net gains of $0.5 million and $0.1 million were realized on those sales and calls for the years ended December 31, 2023 and 2022, respectively. For 2023, the net losses include $3.1 million of non-credit related impairments recognized as a result of management’s intention to sell certain available-for-securities. The following table provides information regarding the gains and losses realized on available-for-sale investment securities:

 

Year Ended December 31 (Dollars in Thousands)		2023				2022
Realized gains		$	495			$	150
Realized losses			(3,073	)			(16	)
Net realized gains (losses)		$	(2,578	)		$	134
Income tax expense (benefit) on net realized gains (losses)		$	(696	)		$	36

 

The gross unrealized losses and fair value, aggregated by investment category, and the length of time the individual securities have been in a continuous unrealized loss position for available-for-sale securities at December 31, 2023, were as follows:

 

		Less than 12 Months								12 Months or More								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(Dollars in Thousands)		Value				Losses				Value				Losses				Value				Losses
Available-for-sale
Obligations of U.S. government agencies		$	—			$	—			$	4,230			$	284			$	4,230			$	284
Obligations of state and political subdivisions			11,615				625				131,209				9,230				142,824				9,855
Agency mortgage-backed securities
Residential			—				—				1,018,482				177,771				1,018,482				177,771
Commercial			790				5				94,948				6,708				95,738				6,713
Non-agency residential mortgage- backed securities			—				—				92,014				12,460				92,014				12,460
Corporate debt securities			—				—				27,915				5,924				27,915				5,924
Total available-for-sale		$	12,405			$	630			$	1,368,798			$	212,377			$	1,381,203			$	213,007

 

These unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase of these available-for-sale investment securities. U.S. Treasury, obligations of U.S. government agencies, and agency mortgage-backed securities are issued, guaranteed, and otherwise supported by the United States government. The Company’s obligations of state and political subdivisions, non-agency residential mortgage-backed securities, and corporate debt securities are generally high grade. Accordingly, the Company does not consider these unrealized losses to be credit related and an allowance for credit losses is not necessary.

 

For the years ended December 31, 2023 and 2022, the Company recognized non-credit related impairment losses of $3.1 million and $0.0 million, respectively, on available-for-sale securities. The recognition of the $3.1 million related to management’s intention to sell certain available-for-sale securities in a non-credit related unrealized loss position at time of the decision. At December 31, 2023, the Company had no other plans to sell investment securities with unrealized losses, and believes it is more likely than not it would not be required to sell such investment securities before recovery of the respective amortized cost.

 

 

The amortized cost and estimated fair value of the investment securities portfolio, by contractual maturity, at December 31, 2023, were as follows:

 

		Available-for-sale								Held-to-maturity
(Dollars in Thousands)		Amortized Cost				Fair Value				Amortized Cost				Fair Value
Within 1 year		$	14,469			$	14,461			$	78,477			$	78,594
1 – 5 years			199,279				196,163				24,697				23,183
5 – 10 years			252,606				237,605				15,571				14,206
After 10 years			1,370,092				1,175,731				1,985,827				1,672,917
Total investment securities		$	1,836,446			$	1,623,960			$	2,104,572			$	1,788,900

 

Note 6. Loans Held for Investment and Allowance for Credit Losses

 

The loans held for investment portfolio consisted of the following at December 31:

 

		2023								2022
						Percent of								Percent of
(Dollars in Thousands)		Amount				Total LHFI				Amount				Total LHFI
Commercial		$	2,698,306				23.5	%		$	2,427,072				22.9	%
Commercial real estate
Owner occupied			2,382,295				20.8				2,227,106				21.0
Income producing			3,144,775				27.5				2,946,746				27.7
Construction, development, and other			22,466				0.2				19,741				0.2
Total commercial real estate			5,549,536				48.5				5,193,593				48.9
Agriculture			1,164,967				10.2				1,139,405				10.7
Residential mortgage
Residential mortgage, first lien			1,754,803				15.3				1,545,038				14.5
Home equity, first lien			67,342				0.6				79,726				0.8
Total residential mortgage			1,822,145				15.9				1,624,764				15.3
Retail
Home equity, second lien			127,378				1.1				126,514				1.2
Other consumer			91,964				0.8				110,546				1.0
Total retail			219,342				1.9				237,060				2.2
Total loans held for investment		$	11,454,296				100.0	%		$	10,621,894				100.0	%

 

Deferred fees net of deferred costs included in the carrying amounts of LHFI were $14.7 million and $13.6 million at December 31, 2023 and 2022, respectively.

 

Loans totaling $6.7 billion and $4.9 billion at December 31, 2023 and 2022, respectively, were pledged at the Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB). The Company currently pledges residential, agricultural, commercial, construction, and commercial real estate mortgage loans, as permitted by the FHLB and FRB.

 

The Company may provide loans to certain executive officers, directors, and their related interests. Amounts outstanding were immaterial at December 31, 2023 and 2022.

 

 

Activity in the allowance for loan losses was as follows:

 

						Commercial								Residential
(Dollars in Thousands)		Commercial				Real Estate				Agriculture				Mortgage				Retail				Total
Balance December 31, 2021		$	27,615			$	68,509			$	13,004			$	11,262			$	3,257			$	123,647
Provision for loan losses			1,072				(961	)			(3,594	)			(4,945	)			(602	)			(9,030	)
Charge-offs and recoveries
Charge-offs			(539	)			(2,819	)			(241	)			(503	)			(963	)			(5,065	)
Recoveries			385				1,124				551				150				1,070				3,280
Net (charge-offs) recoveries			(154	)			(1,695	)			310				(353	)			107				(1,785	)
Balance December 31, 2022			28,533				65,853				9,720				5,964				2,762				112,832
Adoption of ASU 2016-13			(5,577	)			(29,255	)			(3,445	)			14,985				4,235				(19,057	)
Provision for loan losses			8,124				10,442				813				3,202				(2,306	)			20,275
Charge-offs and recoveries
Charge-offs			(3,749	)			(11,115	)			(62	)			(65	)			(773	)			(15,764	)
Recoveries			460				2,943				43				176				843				4,465
Net (charge-offs) recoveries			(3,289	)			(8,172	)			(19	)			111				70				(11,299	)
Balance December 31, 2023		$	27,791			$	38,868			$	7,069			$	24,262			$	4,761			$	102,751

 

Accrued interest receivable related to LHFI is excluded from the measurement of the allowance for credit losses and was $65.9 million and $52.9 million at December 31, 2023 and 2022, respectively.

 

Gross charge-offs of loans by origination year during the year ended December 31, 2023 were as follows:

 

						Commercial								Residential
(Dollars in Thousands)		Commercial				Real Estate				Agriculture				Mortgage				Retail				Total
Originated in 2023		$	406			$	—			$	—			$	—			$	246			$	652
Originated in 2022			2,068				2,340				—				—				84				4,492
Originated in 2021			59				434				—				—				10				503
Originated in 2020			—				—				—				7				1				8
Originated in 2019			46				1,881				—				—				4				1,931
Originated prior to 2019			—				6,460				62				52				33				6,607
Revolving			1,170				—				—				—				369				1,539
Revolving converted to term			—				—				—				6				26				32
Total charge-offs		$	3,749			$	11,115			$	62			$	65			$	773			$	15,764

 

Note, year of origination is based on the original origination date of the loan.

 

 

The following table provides a summary of loans on accrual and nonaccrual status, as well as the delinquency status of accruing loans, at December 31:

 

		Accruing and Days Past Due
(Dollars in Thousands)		Current or Less Than 30 Days Past Due				30 to 89 Days Past Due				90 Days and Over				Nonaccrual(1)				Total
2023
Commercial		$	2,658,433			$	9,213			$	786			$	29,874			$	2,698,306
Commercial real estate			5,534,401				3,081				—				12,054				5,549,536
Agriculture			1,160,441				2,985				—				1,541				1,164,967
Residential mortgage			1,801,312				12,256				—				8,577				1,822,145
Retail			217,183				636				29				1,494				219,342
Total		$	11,371,770			$	28,171			$	815			$	53,540			$	11,454,296
2022
Commercial		$	2,409,914			$	3,352			$	222			$	13,584			$	2,427,072
Commercial real estate			5,169,888				9,990				—				13,715				5,193,593
Agriculture			1,136,758				1,012				—				1,635				1,139,405
Residential mortgage			1,604,738				8,499				—				11,527				1,624,764
Retail			234,855				790				—				1,415				237,060
Total		$	10,556,153			$	23,643			$	222			$	41,876			$	10,621,894

 

(1)	At December 31, 2023 and 2022, nonaccrual loans without an associated allowance for credit losses were immaterial. Interest income recognized on nonaccrual loans was immaterial for the years ended December 31, 2023 and 2022.

 

Loans on properties that were acquired through foreclosure or other proceedings on defaulted loans and that were transferred to other assets are immaterial for the years ended December 31, 2023 and 2022. Other nonperforming assets, consisting of OREO, are immaterial for the years ended December 31, 2023 and 2022.

 

 

The following tables provide information regarding internal credit quality ratings for the loans held for investment portfolio:

 

		At December 31, 2023
						Criticized
						Special								Total
(Dollars in Thousands)		Pass				Mention				Classified				Criticized				Total
Commercial
Originated in 2023		$	569,777			$	6,917			$	2,451			$	9,368			$	579,145
Originated in 2022			469,522				12,617				33,911				46,528				516,050
Originated in 2021			376,824				16,271				5,482				21,753				398,577
Originated in 2020			241,051				349				4,469				4,818				245,869
Originated in 2019			114,444				63				5,391				5,454				119,898
Originated prior to 2019			277,132				15,623				12,635				28,258				305,390
Revolving			418,320				62,707				52,350				115,057				533,377
Total commercial			2,467,070				114,547				116,689				231,236				2,698,306
Commercial real estate
Originated in 2023			508,743				4,887				500				5,387				514,130
Originated in 2022			793,619				25,286				8,407				33,693				827,312
Originated in 2021			802,574				2,829				125,744				128,573				931,147
Originated in 2020			707,961				22,778				19,689				42,467				750,428
Originated in 2019			572,291				4,117				71,147				75,264				647,555
Originated prior to 2019			1,675,946				43,376				134,295				177,671				1,853,617
Revolving			21,841				—				3,506				3,506				25,347
Total commercial real estate			5,082,975				103,273				363,288				466,561				5,549,536
Agriculture
Originated in 2023			156,547				270				2,345				2,615				159,162
Originated in 2022			152,732				77				4,913				4,990				157,722
Originated in 2021			112,755				690				4,545				5,235				117,990
Originated in 2020			95,730				1,654				2,084				3,738				99,468
Originated in 2019			66,324				825				1,024				1,849				68,173
Originated prior to 2019			255,155				1,238				5,542				6,780				261,935
Revolving			291,814				3,491				5,212				8,703				300,517
Total agriculture			1,131,057				8,245				25,665				33,910				1,164,967
Residential mortgages
Originated in 2023			235,055				—				148				148				235,203
Originated in 2022			425,476				—				163				163				425,639
Originated in 2021			477,601				—				3,596				3,596				481,197
Originated in 2020			427,411				—				1,453				1,453				428,864
Originated in 2019			89,938				—				112				112				90,050
Originated prior to 2019			106,272				—				2,889				2,889				109,161
Revolving			38,602				—				732				732				39,334
Revolving converted to term			12,030				65				602				667				12,697
Total residential mortgage			1,812,385				65				9,695				9,760				1,822,145
Retail
Originated in 2023			13,000				—				36				36				13,036
Originated in 2022			11,440				—				2				2				11,442
Originated in 2021			12,382				—				19				19				12,401
Originated in 2020			6,179				—				13				13				6,192
Originated in 2019			2,279				—				—				—				2,279
Originated prior to 2019			21,914				—				683				683				22,597
Revolving			134,218				4				777				781				134,999
Revolving converted to term			15,896				—				500				500				16,396
Total retail			217,308				4				2,030				2,034				219,342
Total loans		$	10,710,795			$	226,134			$	517,367			$	743,501			$	11,454,296

 

Note, year of origination is based on the original origination date of the loan.

 

 

		At December 31, 2022
						Criticized
						Special								Total
(Dollars in Thousands)		Pass				Mention				Classified				Criticized				Total
Commercial
Originated in 2023		$	—			$	—			$	—			$	—			$	—
Originated in 2022			590,731				2,658				3,455				6,113				596,844
Originated in 2021			475,172				516				1,830				2,346				477,518
Originated in 2020			298,256				1,551				6,295				7,846				306,102
Originated in 2019			151,885				941				5,688				6,629				158,514
Originated prior to 2019			333,617				1,711				15,163				16,874				350,491
Revolving			491,375				20,479				25,749				46,228				537,603
Total commercial			2,341,036				27,856				58,180				86,036				2,427,072
Commercial real estate
Originated in 2023			—				—				—				—				—
Originated in 2022			556,037				684				3,160				3,844				559,881
Originated in 2021			886,620				—				14,129				14,129				900,749
Originated in 2020			800,467				4,648				62,541				67,189				867,656
Originated in 2019			661,117				8,070				46,972				55,042				716,159
Originated prior to 2019			1,832,464				41,438				252,757				294,195				2,126,659
Revolving			16,973				1,865				3,651				5,516				22,489
Total commercial real estate			4,753,678				56,705				383,210				439,915				5,193,593
Agriculture
Originated in 2023			—				—				—				—				—
Originated in 2022			203,827				882				4,572				5,454				209,281
Originated in 2021			133,852				519				4,377				4,896				138,748
Originated in 2020			114,754				2,056				1,762				3,818				118,572
Originated in 2019			76,289				881				1,188				2,069				78,358
Originated prior to 2019			285,735				2,149				8,942				11,091				296,826
Revolving			292,576				766				4,278				5,044				297,620
Total agriculture			1,107,033				7,253				25,119				32,372				1,139,405
Residential mortgages
Originated in 2023			—				—				—				—				—
Originated in 2022			355,192				—				685				685				355,877
Originated in 2021			518,536				73				3,947				4,020				522,556
Originated in 2020			463,024				—				870				870				463,894
Originated in 2019			97,317				—				980				980				98,297
Originated prior to 2019			119,172				—				4,958				4,958				124,130
Revolving			46,131				—				979				979				47,110
Revolving converted to term			12,189				68				643				711				12,900
Total residential mortgage			1,611,561				141				13,062				13,203				1,624,764
Retail
Originated in 2023			—				—				—				—				—
Originated in 2022			19,515				—				10				10				19,525
Originated in 2021			18,108				—				28				28				18,136
Originated in 2020			10,434				—				12				12				10,446
Originated in 2019			3,802				—				—				—				3,802
Originated prior to 2019			29,315				3				1,167				1,170				30,485
Revolving			136,075				109				701				810				136,885
Revolving converted to term			17,576				—				205				205				17,781
Total retail			234,825				112				2,123				2,235				237,060
Total loans		$	10,048,133			$	92,067			$	481,694			$	573,761			$	10,621,894

 

Note, year of origination is based on the original origination date of the loan.

 

 

 

Loan Modifications

 

In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience financial difficulties in the near-term. Loans modified are immaterial during the years ended December 31, 2023 and 2022.

 

Note 7. Mortgage Banking

 

Residential Mortgage Loan Sales

 

The Company completes residential mortgage loan sales in the normal course of business, primarily to GSEs, resulting in the derecognition of sold loan amounts from the consolidated balance sheet. In accordance with the accounting guidance for the transfer of financial assets, the Company considers any continuing involvement with residential mortgage loans sold in determining whether such assets can be derecognized from the consolidated balance sheet. The Company’s continuing involvement with residential mortgage loans sold is generally limited to customary market servicing arrangements and representation and warranty clauses. MSR assets are recorded at the fair value of the servicing arrangements. Liabilities related to representation and warranty clauses are initially recorded at fair value and were not material at December 31, 2023 or 2022. Any gain or loss on sale of residential mortgage loans depends on the previous carrying amount, the consideration received, and any liabilities incurred in exchange for the sold loans. Upon sale, any servicing assets or other interests that continue to be held by the Company are initially recognized at fair value.

 

Proceeds from residential mortgage loans sold were $182.4 million and $319.1 million during the years ended December 31, 2023 and 2022, respectively. Net gains on sales of residential mortgage loans included in mortgage banking and loan fee income, including origination fees, the initial fair value of originated MSRs, and servicing release premiums received, were $6.0 million and $6.7 million for the years ended December 31, 2023 and 2022, respectively.

 

Risk Management

 

In the normal course of business, the Company issues interest rate lock commitments to customers. To the extent such commitments relate to loans the Company intends to sell to a third party, the commitment is initially recognized at fair value at the date of the commitment. The Company records closed mortgage loans held for sale at the lower of cost or fair value.

 

 

Through these mortgage banking activities, the Company assumes interest rate risk through interest rate lock commitments, as well as mortgage loans held for sale. As part of the Company’s risk management strategy, the Company makes offsetting commitments for future delivery of residential mortgage-backed securities. The primary objective of economically hedging mortgage banking activities is to offset changes in the fair value of interest rate lock commitments and mortgage loans held for sale. Activity included in mortgage banking and loan fees was $0.8 million in gains and $3.9 million in gains for the years ended December 31, 2023 and 2022, respectively. Refer to Note 18 for additional information regarding this economic hedging activity and Note 21 for information regarding the fair value of interest rate lock commitments and mortgage loans held for sale.

 

Mortgage Servicing Rights

 

The Company serviced $2.1 billion of residential mortgage loans for others at December 31, 2023 and 2022. Loan servicing fees included in mortgage banking and loan fees were $5.2 million and $5.4 million for the years ended December 31, 2023 and 2022, respectively.

 

The fair value of MSRs is recorded within goodwill and other intangibles, net on the consolidated balance sheet. Changes in the fair value of MSRs, which are included in mortgage banking and loan fees on the consolidated income statement, are summarized as follows:

 

Year Ended December 31 (Dollars in Thousands)		2023				2022
Balance at beginning of period		$	25,331			$	19,458
Origination of servicing assets			1,318				3,081
Change in fair value of MSRs Due to market changes			(1,270	)			5,635
Due to loan portfolio runoff			(2,069	)			(2,843	)
Balance at end of period		$	23,310			$	25,331

 

The following table provides the aggregate unpaid principal balance of mortgage loans serviced for others, as well as the third parties for which loans are serviced, at December 31:

 

(Dollars in Thousands)		2023				2022
Federal National Mortgage Association		$	1,704,661			$	1,737,312
Federal Home Loan Mortgage Corporation			376,213				384,479
Federal Home Loan Bank and other			409				452
		$	2,081,283			$	2,122,243

 

In the determination of the fair value of MSRs, certain key assumptions are made. The key assumptions considered by the Company were the constant prepayment rate (“CPR”), which is an estimated loan prepayment rate that uses historical prepayment rates for previous loans similar to the loans being evaluated, and a market based discount rate. Refer to Note 21 for additional information regarding the fair value of MSRs.

 

The following table provides information about the fair value of MSRs and the related key assumptions at December 31:

 

(Dollars in Thousands)		2023				2022
Unpaid principal balance of servicing portfolio		$	2,081,283			$	2,122,243
Fair value		$	23,310			$	25,331
Value (fair value divided by servicing portfolio, in basis points)			112				119
Weighted average expected prepayment (constant prepayment rate)			8.6	%			7.3	%
Weighted average discount rate			10.3	%			10.0	%

 

 

Note 8. Premises, Equipment, and Lease Commitments

 

Premises and equipment at December 31 consisted of the following:
(Dollars in Thousands)		2023				2022
Land		$	23,366			$	25,872
Buildings and improvements			148,421				134,153
Furniture and equipment			68,597				72,620
Construction in progress			1,313				5,171
Right of use assets			17,497				19,591
Total premises and equipment			259,194				257,407
Less: accumulated depreciation and amortization			118,225				128,058
Premises and equipment, net		$	140,969			$	129,349

 

Depreciation and amortization expense on premises and equipment was $10.5 million and $11.4 million for the years ended December 31, 2023 and 2022, respectively. Depreciation on premises and equipment is calculated on a straight-line basis for book purposes. Buildings are depreciated over an estimated useful life not to exceed 39 years, furniture and equipment is depreciated over periods of between 3 and 10 years, and leasehold improvements are depreciated over the term of the underlying lease, not to exceed the estimated useful life of the improvements.

 

The Company leases certain facilities for use in its operations, which each are accounted for as operating leases. Leased facilities include retail branches and other corporate offices and locations. For each lease, the Company records a lease liability and a corresponding right of use (ROU) asset. The Company had recorded $17.5 million and $19.5 million of ROU assets within premises and equipment, net and $19.3 million and $20.2 million of lease liabilities within accrued expenses and other liabilities on the consolidated balance sheet at December 31, 2023 and 2022 respectively. Total expenses incurred related to these lease agreements during the year ended December 31, 2023 and 2022, was $5.2 million and $5.4 million respectively, which was primarily attributable to contractual lease payments.

 

At December 31, 2023, the weighted average remaining term and discount rate of the Company’s leased assets were 11.5 years and 3.4%, respectively. At December 31, 2022, the weighted average remaining term and discount rate of the Company’s leased assets were 12.3 years and 3.2%, respectively.

 

Contractual future minimum rental payments for operating leases in excess of one year in subsequent fiscal years are as follows:

 

(Dollars in Thousands)
2024		$	2,876
2025			2,525
2026			1,922
2027			1,984
2028			1,930
2029 and thereafter			12,389

 

Note 9. Intangible Assets

 

Intangible assets consist of goodwill, core deposit premiums, MSRs, and other intangibles. Goodwill and MSRs are not amortized. Goodwill is assessed for impairment on an annual basis, and MSRs are recorded at fair value. No impairment of goodwill was recorded for the years ending December 31, 2023 and 2022. Refer to Note 7 for additional information regarding MSRs.

 

Amortization of core deposit premiums and other intangibles is included in noninterest expense on the consolidated statement of income, with amortization periods of 7 to 15 years.

 

 

Intangible assets at December 31 consisted of:

 

		2023												2022
		Gross								Net				Gross								Net
		Carrying				Accumulated				Carrying				Carrying				Accumulated				Carrying
(Dollars in Thousands)		Value				Amortization				Value				Value				Amortization				Value
Goodwill		$	112,686			$	—			$	112,686			$	112,686			$	—			$	112,686
Core deposit premiums			3,498				3,498				—				3,498				3,462				36
MSRs			23,310				—				23,310				25,331				—				25,331
Other intangibles			2,105				1,370				735				2,105				1,254				851
Total		$	141,599			$	4,868			$	136,731			$	143,620			$	4,716			$	138,904

 

The Company recorded aggregate intangible amortization expense of $0.2 million and $0.6 million for the years ended December 31, 2023 and 2022, respectively.

 

The estimated amortization expense for the next five years is as follows:

 

(Dollars in Thousands)
2024		$	116
2025			116
2026			116
2027			112
2028			95

 

Note 10. Deposits

 

Total deposits at December 31 consisted of:
(Dollars in Thousands)		2023				2022
Noninterest-bearing		$	3,967,525			$	4,906,954
Non-maturity interest-bearing			7,693,554				7,576,110
Time certificates of deposit Balance $250,000 or less			960,849				520,247
Balance more than $250,000			308,198				180,241
Total deposits		$	12,930,126			$	13,183,552

 

The following table provides information regarding the maturity of time certificates of deposit at December 31:

 

		Balances Greater Than $250,000								Balances $250,000 or Less
(Dollars in Thousands)		2023				2022				2023				2022
3 months or less		$	44,735			$	54,131			$	194,982			$	145,801
3 months to 6 months			68,743				43,385				169,766				79,102
6 months to 12 months			154,458				55,447				365,076				174,860
Over 12 months			40,262				27,278				231,025				120,484
Total time certificates		$	308,198			$	180,241			$	960,849			$	520,247

 

Note 11. Short-Term Borrowings

 

Short-term borrowings, which have an original maturity of one year or less, consist of federal funds, repurchase agreements, and FHLB borrowings. Investment securities of $64.2 million and $85.9 million at December 31, 2023 and 2022, respectively, were sold with agreements to repurchase (“repurchase agreements”). All repurchase agreements are customer related. There were no federal funds borrowings at December 31, 2023 and 2022.

 

 

The following table provides information regarding short-term borrowings at and for the years ended December 31, 2023 and 2022:

 

		Federal Funds
		and Repurchase				FHLB
Year Ended December 31 (Dollars in Thousands)		Agreements				Borrowings
Balance at December 31
2023		$	64,230			$	595,000
2022		$	85,946			$	775,000
Weighted average interest rate at December 31
2023			0.05	%			5.59	%
2022			0.09	%			4.71	%
Maximum amount outstanding at any month-end
2023		$	82,380			$	1,450,000
2022		$	107,228			$	775,000
Average amount outstanding during year
2023		$	76,714			$	886,327
2022		$	101,845			$	109,201
Weighted average interest rate during year
2023			0.07	%			5.34	%
2022			0.07	%			3.89	%

 

Note 12. Long-Term Debt

 

Long-term debt, which have an original maturity of more than one year, at December 31 consisted of the following:

 

(Dollars in Thousands)		2023				2022
Junior subordinated deferrable interest debentures		$	61,856			$	61,856
Subordinated notes			100,000				100,000
FHLB borrowings			755,000				—
Tax credit related borrowings			104,750				76,838
Other(A)			1,512				2,970
Total long-term debt		$	1,023,118			$	241,664

 

(A) Includes amounts related to derivatives and hedging activities for subordinated notes. Refer to Note 18 for additional information.

 

In June 2006, the Company issued $61.9 million in junior subordinated deferrable interest debentures (“debentures”) in connection with the issuance of $60.0 million of capital securities through Bremer Statutory Trust II (“BSTII”). The Company evaluated BSTII and concluded that the trust is a variable interest entity not subject to consolidation. The debentures bear interest at a floating rate of three-month CME Term SOFR, plus 1.86%, resulting in a rate of 7.24% at December 31, 2023. The debentures mature on June 1, 2036 but may be redeemed by the Company at par on any quarterly interest payment date at the Company’s discretion. At December 31, 2023, the $60.0 million in capital securities qualified as Tier I capital under guidelines of the FRB.

 

 

In December 2014, the Company issued $100.0 million in subordinated notes to support ongoing business operations and the Company’s future growth strategy. The notes bear interest at a 5.20% fixed rate and mature on December 30, 2024. At December 31, 2023, none of the subordinated debt qualified as Tier II capital under guidelines of the FRB. The Company phased out the subordinated notes from Tier II capital over a 5 year period, beginning in December 2019. In January 2015, the Company entered into a 10-year, pay variable, receive fixed, interest rate swap to hedge the subordinated debt. The company terminated the swap in July 2021. For additional detail, see the “Fair Value Hedges of Interest Rate Risk” section under Note 18.

 

The FHLB borrowings bear interest at rates ranging from 4.13% to 5.57%, with maturity dates from 2024 through 2028, and are secured by certain loans as discussed in Note 6.

 

The Company enters into certain tax credit investment structures related to the New Markets Tax Credits program (“NMTCs”). As a result, the Company records certain notes payable, which are issued in the normal course of business as part of NMTC investment structures. The purpose of these notes is to supplement the investments made by the Company by financing projects that generate tax credits. Each of the notes is structured with a seven year interest only period, and maturity dates ranging from 2027 through 2053. Each structure contains separate put agreements, which allow the Company to put the notes to designated third parties at the end of the seven year interest only period. The notes bear a weighted average interest rate of 3.45%.

 

Maturities of outstanding long-term debt at December 31, 2023 were as follows:

 

(Dollars in Thousands)
2024		$	486,512
2025			145,000
2026			115,000
2027			85,000
2028 and later			191,606
Total		$	1,023,118

 

Note 13. Employee Benefit Plans Pension Plans

 

The Company maintains the Bremer Retirement Plan (“Pension Plan”), which is a qualified defined benefit pension plan designed to provide retirement benefits to substantially all the employees of the Company, its subsidiaries, and OBT. An employee who has attained the age of 21 and completed 1,000 hours of service within a 12-month period shall become a participant in the Pension Plan on the next semiannual entry date. In addition, the Company has a Supplemental Executive Retirement Plan (“SERP”), an unfunded plan designed to supplement the benefits determined under the Pension Plan for certain highly compensated employees of the Company to the extent the benefits under the Pension Plan are capped by compensation limits.

 

Other Postretirement Benefits

 

The Company provides certain retiree health care benefits relating primarily to medical insurance co-payments to retired employees between the ages of 55 and 65. The Company amended the Company’s Retiree Medical Plan effective January 1, 2006, which gradually eliminated the medical premium subsidy for retired employees over a period of ten years ending December 31, 2015, while continuing to allow retired employees access to the Company’s group medical coverage. The Company accrues the cost of these benefits during the employees’ active service, and benefits are funded as incurred.

 

 

 

Pension Plans and Other Postretirement Benefits

 

The Company recognizes actuarial gains or losses and prior service costs or credits, and measures plan assets and pension obligations, and accumulated other comprehensive income or loss, net of tax, at December 31 of each year. The Company expects to amortize the following amounts from accumulated other comprehensive income in shareholders’ equity on the consolidated balance sheet to net periodic benefit cost in noninterest expense on the consolidated statement of income during the year ended December 31, 2024:

 

(Dollars in Thousands)		Pension Benefits				Other Postretirement Benefits
Gain (loss), net		$	9,460			$	(712	)

 

The following table summarizes the changes in benefit obligations and plan assets for the years ended December 31, and the funded status and amounts recognized on the consolidated balance sheet at December 31 for the retirement plans:

 

		Pension Benefits								Other Postretirement Benefits
(Dollars in Thousands)		2023				2022				2023				2022
Change in Projected Benefit Obligation
Benefit obligation at beginning of period		$	260,543			$	358,890			$	4,997			$	6,564
Service cost			7,608				12,400				215				287
Interest cost			14,230				10,956				263				192
Participants’ contributions			—				—				648				895
Actuarial loss (gain)			13,663				(110,972	)			(820	)			(1,366	)
Benefit payments			(11,246	)			(10,731	)			(749	)			(1,575	)
Benefit obligation at end of period		$	284,798			$	260,543			$	4,554			$	4,997
Change in Fair Value of Plan Assets
Fair value at beginning of period		$	313,824			$	464,843			$	—			$	—
Actual return on plan assets			33,814				(140,634	)			—				—
Employer contributions			—				—				—				680
Participant contributions			—				—				—				895
Benefit payments			(10,900	)			(10,385	)			—				(1,575	)
Fair value at end of period		$	336,738			$	313,824			$	—			$	—
Funded (Unfunded) Status		$	51,940			$	53,281			$	(4,554	)		$	(4,997	)
Components of the Consolidated Balance Sheet
Prepaid benefit asset		$	55,020			$	56,400			$	—			$	—
Accrued benefit liability			(3,080	)			(3,119	)			(4,554	)			(4,997	)
Recognized amount		$	51,940			$	53,281			$	(4,554	)		$	(4,997	)
Accumulated Other Comprehensive Income (Loss), Pretax
Actuarial gain (loss), net		$	(109,023	)		$	(118,493	)		$	6,923			$	6,779
Prior service credit (cost), net			—				—				—				—
Recognized amount		$	(109,023	)		$	(118,493	)		$	6,923			$	6,779

 

 

The accumulated benefit obligation for the Company’s pension plans was $263.2 million and $240.7 million at December 31, 2023 and 2022, respectively. Net pension expense for the plans at December 31 was as follows:

 

		Pension Benefits								Other Postretirement Benefits
Year Ended December 31 (Dollars in Thousands)		2023				2022				2023				2022
Service cost		$	7,608			$	12,400			$	215			$	287
Interest cost			14,230				10,956				263				192
Expected return on plan assets			(21,561	)			(29,871	)			—				—
Actuarial loss (gain) amortization			10,880				1,682				(677	)			(557	)
Net periodic benefit cost (income)		$	11,157			$	(4,833	)		$	(199	)		$	(78	)

 

The components of net periodic benefit cost, other than the service cost component, are included in other noninterest expense in the consolidated statement of income.

 

Weighted average assumptions used to determine benefit obligations at December 31, as well as the weighted average assumptions used to determine net periodic benefit cost for the years ended December 31, were as follows:

 

		Pension Benefits								Other Postretirement Benefits
		2023				2022				2023				2022
Benefit Obligations at December 31
Discount rate			5.21	%			5.59	%			5.21	%			5.59	%
Rate of compensation increase			4.00	%			4.00	%			N/A				N/A
Net Periodic Benefit Cost for Years Ended December 31
Discount rate			5.59	%			3.10	%			5.59	%			3.10	%
Expected return on plan assets			7.00	%			6.50	%			N/A				N/A
Rate of compensation increase			4.00	%			4.00	%			N/A				N/A

 

The discount rate utilized to determine future pension obligations is based primarily on a review of current high-quality fixed-income securities that could be used to settle the obligations of the plan.

 

The December 31, 2023 assumption for the long-term rate of return on plan assets, which will be used to determine net periodic benefit cost for the year ended December 31, 2024, is 7.0%, representing the expected long-term rate of return on plan assets reflecting the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the benefit obligation. The assumption was determined by reflecting expectations regarding future long-term rates of return for the investment portfolio, with consideration given to the distribution of investments by, and historical rates of return of, each individual asset class.

 

For purposes of other postretirement benefits measurements, the Company assumed health care trend rates at December 31, as follows:

 

		2023				2022
Current year trend			6.25	%			6.50	%
Ultimate year trend			5.00	%			5.00	%
Year of ultimate trend rates			2029				2029

 

 

The following table presents information about the Company’s Pension Plan assets measured at fair value on a recurring basis at December 31 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. See Note 21 for a description of Level 1, Level 2, and Level 3 hierarchies.

 

(Dollars in Thousands)		Level 1				Level 2				Level 3				Total
2023
Cash and money market funds		$	9,074			$	—			$	—			$	9,074
Group trust at NAV															187,379	(1)
Comingled funds at NAV															88,538	(1)
Collective investment trust at NAV															51,747	(1)
Total		$	9,074			$	—			$	—			$	336,738
2022
Cash and money market funds		$	8,011			$	—			$	—			$	8,011
Group trust at NAV															189,842	(1)
Comingled funds at NAV															68,118	(1)
Collective investment trust at NAV															47,853	(1)
Total		$	8,011			$	—			$	—			$	313,824

 

(1)	These investments are valued based on net asset value per share as a practical expedient; fair values are provided to reconcile to total investment assets of the plans at fair value.

 

The Company’s long-term asset allocation targets are 75% return seeking assets and 25% liability- hedging fixed income. The return seeking assets allocation is distributed over a number of professionally managed comingled investment trusts and real estate investment trust. The Company regularly reviews the actual asset allocation and periodically rebalances the investments to the targeted allocation when considered appropriate. The Company believes that 7.0% is a reasonable long-term rate of return assumption for the pension plan assets for 2024, given the long-term asset allocation strategy and investment time horizon. During the years ended December 31, 2023 and 2022, the pension plan assets generated total composite returns of 11.2% and -30.5%, respectively. The Company will continue to evaluate the actuarial assumptions, including the expected rate of return, at least annually, and will adjust as necessary.

 

In developing strategic asset allocation guidelines for the plan, an emphasis is placed on the long-term characteristics of individual asset classes, the benefits of diversification among multiple asset classes, and the Company’s long-term return expectations for the plan. Consideration is also given to the proper level of risk of the plan, particularly with respect to the long-term nature of the plan’s liabilities and long-term investment horizon of plan assets.

 

The Company seeks to maintain an adequately funded Pension Plan, defined as having a fair market value of plan assets to projected benefit obligation ratio of at least 94% to 100%. This is generally achieved by making annual cash contributions to the plan in an amount at least equal to the current year’s calculated service cost. Contributions to the plan are intended to provide for benefits attributed to service to date and for those expected to be earned in the future.

 

 

The Company currently expects that there will be no minimum required contribution to the pension plan in 2024 under the provisions of the Pension Protection Act of 2006, as modified by the Worker, Retiree, and Employer Recovery Act of 2008. However, management may make a discretionary cash contribution to ensure that the plans remain adequately funded, and expects to make the following benefit payments, which reflect expected future service, as appropriate:

 

Year Ended December 31 (Dollars in Thousands)		Pension Benefits				Postretirement Benefits
2024		$	12,819			$	499
2025			13,659				463
2026			14,620				433
2027			15,550				434
2028			16,335				408
2029 through 2033			92,113				2,085

 

401(k) Plan

 

The 401(k) Plan is a defined contribution plan. The Company provides a 100% match of the first 1% to 5% of plan compensation the employee contributes on a pretax basis. Total employer contributions of $6.0 million and $5.9 million were made for the years ended December 31, 2023 and 2022, respectively.

 

Employee Stock Ownership Plan

 

The Employee Stock Ownership Plan is a defined contribution plan covering substantially all employees of the Company, and the plan holds 103,356 shares of Class A common stock of the Company. Contributions to the plan are made exclusively by the Company as determined by the annual cash needs of the plan and are credited to the individual accounts of the employees who are participants in the plan for the fiscal year the contribution is made. Contributions and forfeitures are allocated to participants on the basis of total compensation, defined as 100% of base pay and eligible commissions earned during the plan year, while dividends paid on allocated shares increase participant accounts. Contributions of $1.0 million and $1.5 million were made to this plan during the years ended December 31, 2023 and 2022, respectively.

 

Note 14. Other Noninterest Income

 

The following table provides information regarding the components of other noninterest income:

 

Year Ended December 31 (Dollars in Thousands)		2023				2022
Other loan fees		$	4,515			$	6,145
Equity in earnings of unconsolidated subsidiaries			713				6,914
Other			13,252				13,027
Total other noninterest income		$	18,480			$	26,086

 

Note 15. Other Noninterest Expense

 

The following table provides information regarding the components of other noninterest expense:

 

Year Ended December 31 (Dollars in Thousands)		2023				2022
Professional fees		$	26,647			$	20,338
Marketing			9,366				8,773
Software development contract termination costs			—				5,361
Other lending expense			3,645				3,838
Other components of net benefit costs			3,134				(17,599	)
Other			41,045				33,484
Total other noninterest expense		$	83,837			$	54,195

 

 

Note 16. Income Taxes

 

The components for the provision for income taxes were:

 

Year Ended December 31 (Dollars in Thousands)		2023				2022
Current:
Federal		$	16,200			$	26,309
State			18,441				15,141
Deferred			(2,233	)			8,182
Total provision for income taxes		$	32,408			$	49,632

 

The following provides a reconciliation between the provision for income taxes and the amount computed by applying the statutory federal income tax rate:

 

Year Ended December 31 (Dollars in Thousands)		2023				2022
Federal tax at statutory rate		$	32,847			$	52,099
State income tax, net of federal tax benefits			9,668				13,738
Less tax effect of:
Interest on state and political subdivision securities			1,669				2,200
Other tax-exempt interest			8,270				7,478
Tax credits			8,247				6,723
Unrecognized tax benefits			(6,252	)			(232	)
Other			(1,827	)			36
Total provision for income taxes		$	32,408			$	49,632

 

The Company invests in certain structures, which are designed to provide income tax credits on a federal and/or state basis, including New Market Tax Credits (NMTCs), low-income housing tax credits, and historic tax credits. Tax credits recognized based on these investments were $8.2 million and $6.7 million for the years ended December 31, 2023 and 2022, respectively.

 

Temporary differences resulting in deferred tax assets and liabilities, included on a net basis within accrued expenses and other liabilities on the consolidated balance sheet, were as follows at December 31:

 

(Dollars in Thousands)		2023				2022
Deferred tax assets
Allowance for credit losses		$	28,827			$	32,433
Accumulated other comprehensive loss, employee benefit plans			27,567				30,163
Compensation and employee benefits			16,955				18,711
Lease liability			5,299				5,402
Deferred loan fees			3,564				3,217
Nonaccrual loan interest income			1,353				1,389
Partnership investment			607				1,775
Accumulated other comprehensive loss, available-for-sale securities			57,371				65,064
Other			4,357				2,181
Gross deferred tax assets		$	145,900			$	160,335
Deferred tax liabilities
Prepaid pension asset		$	44,794			$	46,593
Goodwill and other intangible assets			15,817				14,844
Premises and equipment			5,689				4,767
Mortgage servicing rights			6,071				6,404
Right of use asset			4,803				5,243
Accumulated other comprehensive income, derivatives			1,082				1,807
Prepaid expenses			1,010				838
Other			2,003				1,510
Gross deferred tax liabilities		$	81,269			$	82,006
Net deferred tax asset (liability)		$	64,631			$	78,329

 

 

 

 

The Company’s deferred tax assets represent the anticipated federal, and state tax benefits expected to be realized in future years upon the utilization of the underlying tax attributes comprising the balance. In management’s opinion, the deferred tax assets will be fully realized through future reversals of deferred tax liabilities along with future taxable income exclusive of existing deferred tax liabilities. Accordingly, no valuation allowance has been provided.

 

Liabilities for unrecognized tax benefits were $7.4 million and $1.2 million at December 31, 2023 and 2022, respectively. The Company is no longer subject to income tax examinations for years prior to 2020 for federal purposes and 2019 for state purposes.

 

Note 17. Commitments and Contingencies

 

The Company utilizes various off-balance-sheet instruments to satisfy the financing needs of customers. These instruments represent contractual obligations of the Company to provide funding, within a specified time period, to a customer. The following provides information regarding the outstanding commitments at December 31:

 

(Dollars in Thousands)		2023				2022
Loan commitments		$	3,054,683			$	3,421,432
Standby letters of credit			57,639				63,657

 

Loan commitments represent contractual agreements to provide funding to customers over a specified time period so long as there is no violation of any condition of the contract. These loans are generally operating lines of credit.

 

Standby letters of credit represent a conditional commitment to satisfy an obligation to a third party, generally to support public and private borrowing arrangements, on behalf of the customer.

 

The Company’s potential exposure to credit loss in the event of nonperformance by the other party is represented by the contractual amount of those instruments. The credit risk associated with letters of credit and loan commitments is substantially the same as extending credit in the form of a loan; therefore, the same credit policies apply in evaluating potential letters of credit or loan commitments. The amount of collateral obtained, if deemed necessary upon the extension of credit, is based on management’s credit evaluation. The type of collateral held varies, but includes real estate, accounts receivable, inventory, and productive assets. Management assesses unfunded commitments for credit risk and estimates a liability related to losses that may result from the assessed risk. The liability for unfunded commitments, included in accrued expenses and other liabilities on the consolidated balance sheet, was $3.1 million and $8.3 million at December 31, 2023 and 2022, respectively.

 

 

Other Commitments and Contingencies

 

Under contracts with service providers, the Company is obligated for future payments. Contractual future minimum payments over the term of the contracts are as follows:

 

(Dollars in Thousands)
2024		$	23,454
2025			20,464
2026			19,317
2027			17,684
2028			17,231
2029 and later			14,796

 

The Company is routinely involved in legal actions that are incidental to the business of the Company. Although it is difficult to predict the ultimate outcome of these cases, management believes, based on discussions with counsel, that any ultimate liability will not materially affect the Company’s consolidated financial position or results of operations.

 

Note 18. Derivatives and Hedging Activities

 

Risk Management Objectives of Using Derivatives

 

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount and duration of its wholesale funding, investment portfolio, and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain floating and fixed-rate borrowings. In addition, the Company may also utilize derivative financial positions to hedge changes in the fair value of certain related assets or liabilities and to accommodate the business requirements of its customers.

 

 

Fair Values of Derivative Instruments on the Consolidated Balance Sheet

 

The following table presents the fair value of the Company’s derivative financial instruments and notional amounts at December 31, categorized by hedging designation:

 

		Assets																Liabilities
		2023								2022								2023								2022
(Dollars in Thousands)		Fair Value				Notional Value				Fair Value				Notional Value				Fair Value				Notional Value				Fair Value				Notional Value
Designated hedging
Fair value hedges:
Interest rate contracts		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Cash flow hedges:
Interest rate contracts			—				—				—				—				—				—				—				—
Not designated hedging
Customer-related:
Interest rate contracts			33,155				2,116,933				33,856				1,898,377				140,556				2,116,933				167,862				1,898,377
Credit contracts			—				49,819				9				49,087				—				83,606				1				60,613
Mortgage banking:
Rate locks			304				6,883				177				4,929				—				—				—				—
Forward contracts			—				—				—				—				218				11,000				53				6,000
Total derivatives		$	33,459			$	2,173,635			$	34,042			$	1,952,393			$	140,774			$	2,211,539			$	167,916			$	1,964,990

 

Certain derivative exchanges have enacted a rule change which in effect results in the legal characterization of variation margin payments for certain derivative contracts as settlement of the derivatives mark-to- market exposure and not collateral. Accordingly, the Company’s reporting of certain derivatives reflects variation margin recorded on trades cleared through these exchanges as settled. The daily settlement of the derivative exposure does not change or reset the contractual terms of the instrument.

 

Derivatives are classified as other assets or other liabilities on the consolidated balance sheet.

 

Derivatives Designated as Hedging Instruments

 

Fair Value Hedges of Interest Rate Risk

 

The Company is exposed to changes in the fair value of certain of its fixed-rate obligations due to changes in the benchmark interest rate, SOFR. Interest rate swaps designated as fair value hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. As of December 31, 2023, the Company did not have any interest rate contracts that were designated as fair value hedges.

 

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. The Company includes the gain or loss on the hedged items in the same line item as the offsetting loss or gain on the related derivatives.

 

During 2021, the Company terminated an interest rate swap that was designated as a fair value hedge of interest rate risk associated the Company’s fixed rate subordinated notes. The interest rate swap, which had a notional value of $100.0 million, terminated with a settlement value of $5.0 million. The $5.0 million basis adjustment to the fixed rate subordinated notes’ carrying amount will be amortized as a reduction of interest expense between July 2021, the date of the interest rate swap termination, and December of 2024, the maturity date of the debt. Amortization of the basis adjustment totaled $1.5 million and $1.4 million during the years ended December 31, 2023 and 2022, respectively. The unamortized balance of the basis adjustment totaled $1.5 million and $3.0 million at December 31, 2023 and 2022, respectively. The amounts to be amortized during the next 12 months is $1.5 million.

 

 

 

Cash Flow Hedges of Interest Rate Risk

 

The Company’s objectives in using interest rate derivatives are to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed payments over the life of the agreements without exchange of the underlying notional amount. The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income or loss and is subsequently reclassified into earnings in the period that the hedged transaction affects earnings. As of December 31, 2023, the Company did not have any interest rate contracts designated as cash flow hedges.

 

During 2022, the Company terminated two interest rate swaps that were designated as cash flow hedges of interest rate risk associated with certain of the Company’s variable rate funding. The interest rate swaps, which had a combined notional value of $200.0 million, terminated at a settlement value of $8.1 million. This amount will be reclassified from accumulated other comprehensive income to interest expense between January 2022, the termination date, and April 2026, the original combined term of the interest rate swaps. A reduction to interest expense of $2.2 million was recorded related to these transactions during the year ended December 31, 2023. The accumulated other comprehensive income balance totaled $4.0 million and $6.3 million at December 31, 2023 and 2022, respectively. The amounts to be reclassified during the next 12 months is $2.2 million.

 

During 2019, the Company terminated an interest rate swap that was designated as a cash flow hedge of interest rate risk associated with certain of the Company’s variable rate loans. The interest rate swap, which had a notional value of $200.0 million, terminated at a settlement value of $6.6 million. This amount was reclassified from accumulated other comprehensive income to interest income on a straight-line basis between July 2019, the termination date, and March of 2023, the original term of the interest rate swap. Interest income of $0.4 million and $1.8 million was recorded related to this transaction during the years ended December 31, 2023 and 2022, respectively. The accumulated other comprehensive income balance totaled $0.0 million and $0.4 million at December 31, 2023 and 2022, respectively.

 

Derivatives Not Designated as Hedging Instruments

 

The Company executes interest rate derivatives with commercial banking customers to facilitate their respective risk management strategies. Those interest rate derivatives are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. Interest rate derivatives associated with this program are reported on the consolidated balance sheet at fair value, with changes in fair value of both the customer derivatives and the offsetting derivatives recognized directly in net income. Amounts related to these activities are reflected as customer-related interest rate contracts within this footnote. Derivatives related to these activities are subject to credit risk associated with counterparties to the derivative contracts. The Company measures that credit risk using a credit valuation adjustment and includes it within the fair value of the derivative. Included within other noninterest income on the consolidated statement of income are amounts recorded related to credit valuation adjustments of $0.3 million in positive adjustments and $0.6 million in positive adjustments during the years ended December 31, 2023 and 2022, respectively.

 

Credit risk participation agreements arise when the Company contracts with other institutions, as a guarantor or beneficiary, to share the credit risk associated with certain interest rate swaps. These agreements provide for reimbursement of losses resulting from a third-party default on the underlying swap. Amounts related to these activities are reflected as customer-related credit contracts within this footnote. Amounts recorded within other noninterest income on the consolidated statement of income related to these activities were not material for the years ended December 31, 2023 and 2022.

 

As part of the Company’s risk management strategy through its mortgage banking activities, derivative instruments such as forward sales contracts are utilized. Changes in the fair value of these derivative instruments are recorded in mortgage banking and loan fees. Amounts related to these activities are reflected as mortgage banking forward contracts within this footnote.

 

 

In the normal course of business through its mortgage banking activities, interest rate lock commitments arise related to agreements with customers regarding residential mortgage loans. Such commitments provide a specified interest rate for a specified time period to the customer. Where the Company intends to sell the resulting loan, authoritative accounting guidance requires that these commitments be recorded at fair value on the consolidated balance sheet. Changes in the fair value of these interest rate lock commitments are recorded in other noninterest income and are offset by the changes in the fair value of forward sales contracts. Amounts related to these activities are reflected as mortgage banking rate locks within this footnote. Amounts recorded within mortgage banking and loan fees on the consolidated statement of income related to these activities were $0.8 million in gains and $3.9 million in gains for the years ended December 31, 2023 and 2022, respectively.

 

Credit-Risk-Related Contingent Features

 

The Company has agreements with its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company also has agreements with its derivative counterparties that contain a provision where if the Company fails to maintain its status as an adequately capitalized institution, the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements. As of December 31, 2023, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for non- performance risk, related to these agreements was immaterial. The Company has minimum collateral posting thresholds with its derivative counterparties and has not posted any collateral at December 31, 2023. If the Company had breached any of these provisions at year end, it could have been required to settle its obligations under the agreements at the termination value.

 

Note 19. Common Stock

 

The Company has authorized 12,000,000 shares of Class A common stock and 10,800,000 shares of Class B common stock. The shares of Class A common stock have full rights to vote on all matters presented before the Company’s shareholders, including the election of the Company’s directors. The Class B common stock, all of which is held by OBT, is non-voting except with respect to certain extraordinary corporate transactions, upon which the holders would have the right to vote on an equivalent per-share basis with the holders of Class A common stock.

 

Each share of Class B common stock is convertible into one share of Class A common stock upon the occurrence of the following events: (i) at the affirmative election of a third party or entity, upon the transfer of Class B common stock from OBT to any third party or entity, or (ii) at the affirmative election of the holder of Class B common stock, if cash dividends have not been paid on Class A and Class B common stock with respect to any year in an amount equal to at least 5% of the Company’s net book value as of the last day of the immediately preceding year. The Company has reserved 10,800,000 shares of Class A common stock in the event of conversion of the Class B common stock.

 

At December 31, 2023 and 2022, 960,000 shares of redeemable Class A stock were issued and outstanding. At December 31, 2023, these shares were subject to redemption at a price of $120.71 per share, which was net book value. These shares are owned by employees and directors of the Company and its subsidiaries and the employee benefit plans of the Company. The employee holders of Class A common stock have the right to require the Company to purchase their shares upon their deaths, permanent disabilities, or retirements, while the Company has the option to purchase the shares from holders upon the occurrence of certain events, which include death, retirement, or termination of the employee’s employment. It is the Company’s intent that these 960,000 shares will continue to be held by employees, directors, and employee benefit plans of the Company and its subsidiaries and not be directly purchased by the Company or OBT.

 

On October 28, 2019, OBT delivered notice to the Company asserting that the trustees of OBT had sold 725,000 shares of the Company’s Class B common stock to 19 entities, each of which delivered a notice of an intent to convert such shares of Class B common stock into Class A common stock. As of December 31, 2023, the validity of these purported transactions was the subject of ongoing litigation. These consolidated financial statements do not reflect such transactions.

 

 

Note 20. Regulatory Matters

 

The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classification are also subject to qualitative judgments by the 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, as defined in the regulations and set forth in the following table, of total, common equity Tier I, and Tier I capital to risk-weighted assets, and of Tier I capital to average assets. Effective January 1, 2015, under a phase-in period, revised regulatory capital guidelines increased the minimum required ratios and established a capital conservation buffer. The capital conservation buffer adds 2.5% to the minimum Tier I Common Equity ratio in order to avoid constraints on capital distributions, such as dividends, and certain bonus compensation for executive officers. The Company is required to phase out the subordinated notes from Tier II capital over a 5 year period, beginning in December 2019. As of December 31, 2023, the Company meets all capital adequacy requirements to which it is subject.

 

The Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) required the establishment of a capital- based supervisory system of prompt corrective action for all depository institutions. The Federal Reserve Board’s implementation of FDICIA defines “well-capitalized” institutions as those for which Tier I capital ratio equals or exceeds 8%, total risk-based capital ratio equals or exceeds 10%, and leverage ratio equals or exceeds 5%. Bremer Bank’s ratios in each of these categories met or exceeded the “well- capitalized” ratios at December 31, 2023

 

As an approved mortgage seller and servicer, Bremer Bank, through its mortgage banking division, is required to maintain various levels of shareholder’s equity, as specified by various agencies, including the United States Department of Housing and Urban Development, Government National Mortgage Association, Federal Home Loan Mortgage Corporation, and the Federal National Mortgage Association. At December 31, 2023, Bremer Bank met these requirements.

 

The following provides the Company’s and Bremer Bank’s actual capital amounts and ratios at December 31:

 

																		To Be Well Capitalized
										For Capital								Under Prompt Corrective
		Actual								Adequacy Purpose								Action Provisions
		Amount				Ratio				Amount				Ratio				Amount				Ratio
At December 31, 2023
Total capital (to risk-weighted assets):
Consolidated		$	1,743,562				13.87	%		$	1,005,686		≥		8.00	%			N/A
Bremer Bank			1,610,614				12.87				1,001,254		≥		8.00				1,251,567		≥		10.00	%
Tier I capital (to risk-weighted assets):
Consolidated			1,635,177				13.01				754,265		≥		6.00				N/A
Bremer Bank			1,504,792				12.02				750,940		≥		6.00				1,001,254		≥		8.00
Common Equity Tier I capital (to risk-weighted assets):
Consolidated			1,575,177				12.53				565,698		≥		4.50				N/A
Bremer Bank			1,504,792				12.02				563,205		≥		4.50				813,519		≥		6.50
Tier I capital (to average assets):
Consolidated			1,635,177				9.82				666,387		≥		4.00				N/A
Bremer Bank			1,504,792				9.06				664,547		≥		4.00				830,683		≥		5.00
At December 31, 2022
Total capital (to risk-weighted assets):
Consolidated		$	1,718,975				14.43	%		$	952,997		≥		8.00	%			N/A
Bremer Bank			1,544,907				13.01				949,682		≥		8.00				1,187,103		≥		10.00	%
Tier I capital (to risk-weighted assets):
Consolidated			1,574,697				13.22				714,748		≥		6.00				N/A
Bremer Bank			1,423,785				11.99				712,262		≥		6.00				949,682		≥		8.00
Common Equity Tier I capital (to risk-weighted assets):
Consolidated			1,514,697				12.72				536,061		≥		4.50				N/A
Bremer Bank			1,423,785				11.99				534,196		≥		4.50				771,617		≥		6.50
Tier I capital (to average assets):
Consolidated			1,574,697				9.80				642,422		≥		4.00				N/A
Bremer Bank			1,423,785				8.89				640,544		≥		4.00				800,680		≥		5.00

 

 

Federal law prevents the Company, its nonbank subsidiaries and OBT from borrowing from Bremer Bank unless the loans are secured by the statutorily required amount of collateral. Further, the secured loans that may be made by Bremer Bank are generally limited to 10% of Bremer Bank’s equity if made to the Company or any individual affiliate and 20% of Bremer Bank’s equity if made to all affiliates and the Company in the aggregate. At December 31, 2023 and 2022, Bremer Bank had not extended credit to the Company.

 

The payment of dividends by the Company to shareholders and the payment of dividends by Bremer Bank to the Company are both subject to various limitations by bank regulators, which include maintenance of certain minimum capital ratios as well as limitations based on the level of net income and dividends paid in recent periods.

 

Note 21. Fair Value

 

The Company uses fair value measurements for the initial recording of certain assets and liabilities, periodic remeasurement of certain assets and liabilities, and disclosures. Derivatives, available-for-sale investment securities, and MSRs are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as LHFS, impaired loans, and OREO, and certain other assets and other liabilities. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-fair value accounting or impairment write- downs of individual assets.

 

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value measurement reflects all the assumptions that market participants would use in pricing the asset or liability, including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance. The Company groups its assets and liabilities measured at fair value into a three-level hierarchy for valuation techniques used to measure financial assets and financial liabilities at fair value. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:

 

Fair Value Hierarchy		Definition
Level 1		Quoted prices in active markets for identical assets or liabilities. Level 1 includes U.S. Treasury securities.
Level 2		Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 includes debt securities that are traded less frequently than exchange-traded instruments and which are typically valued using third party pricing services; derivative contracts and other assets and liabilities.
Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments for which values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category includes MSRs and interest rate lock commitments.

 

When the Company changes its valuation inputs for measuring financial assets and financial liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period in which the transfers occur. During the years ended December 31, 2023 and 2022, there were no transfers of financial assets or financial liabilities between the hierarchy levels.

 

Recurring Fair Value Measurements

 

The following section describes the valuation methodologies used by the Company to measure financial assets and liabilities at fair value on a recurring basis. In addition, the following section includes an indication of the level of the fair value hierarchy in which the assets or liabilities are classified. Where appropriate, the description includes information about the valuation models and key inputs to those models. During the years ended December 31, 2023 and 2022, there were no significant changes to the valuation techniques used by the Company to measure fair value. The following table provides the balances of assets and liabilities measured at fair value on a recurring basis at December 31:

 

(Dollars in Thousands)		Level 1				Level 2				Level 3				Total
2023
Available-for-sale securities		$	—			$	1,623,960			$	—			$	1,623,960
Mortgage servicing rights			—				—				23,310				23,310
Derivative assets			—				33,155				304				33,459
Total assets		$	—			$	1,657,115			$	23,614			$	1,680,729
Derivative liabilities		$	—			$	140,774			$	—			$	140,774
2022
Available-for-sale securities		$	100			$	1,754,723			$	—			$	1,754,823
Mortgage servicing rights			—				—				25,331				25,331
Derivative assets			—				33,865				177				34,042
Total assets		$	100			$	1,788,588			$	25,508			$	1,814,196
Derivative liabilities		$	—			$	167,916			$	—			$	167,916

 

Available-For-Sale Securities

 

When quoted market prices for identical securities are available in an active market, these prices are used to determine fair value and these securities are classified within Level 1 of the fair value hierarchy. Level 1 investment securities include U.S. Treasury securities.

 

 

For other securities, quoted market prices may not be readily available for the specific securities. When possible, the Company determines fair value based on market observable information, including quoted market prices for similar securities, inactive transaction prices, and broker quotes. These securities are classified within Level 2 of the fair value hierarchy. Level 2 valuations are generally provided by a third-party pricing service. The Company reviews the valuation methodologies utilized by the pricing service and, on a quarterly basis, reviews the security level prices provided by the pricing service against management’s expectation of fair value, based on changes in various benchmarks and market knowledge from recent trading activity, as well as comparisons to other independent secondary pricing sources. Level 2 investment securities include agency mortgage-backed securities, certain other asset-backed securities, obligations of state and political subdivisions, agency debt securities, and corporate debt securities.

 

The Company did not hold any available-for-sale securities that were classified within Level 3 at December 31, 2023 or 2022.

 

Mortgage Servicing Rights

 

MSRs are valued using a discounted cash flow methodology and are classified within Level 3. The Company determines fair value of the MSRs by projecting future cash flows using prepayment rates and other assumptions and discounts these cash flows using a market based discount rate. The MSR valuations, as well as the assumptions used, are developed with the assistance of a third party. Risks inherent in MSR valuation include higher than expected prepayment rates and/or delayed receipt of cash flows. There is minimal observable market activity for MSRs on comparable portfolios and, therefore, the determination of fair value requires significant management judgment. Refer to Note 7 for further information on MSR valuation assumptions.

 

Derivatives

 

The Company obtains the fair value of interest rate swaps from a third-party pricing service that uses an industry standard discounted cash flow methodology. In addition, credit valuation adjustments are incorporated in the fair values to account for potential non-performance risk. In adjusting the fair value of its interest rate swap contracts for the effect of non-performance risk, the Company has considered any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. In conjunction with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of these derivative financial instruments, which are subject to master netting agreements, on a net basis by counterparty portfolio.

 

The Company has determined that the primary inputs used to value its interest rate swaps offered to qualified commercial borrowers fall within Level 2 of the fair value hierarchy, while the credit valuation adjustments associated with these derivatives utilize Level 3 inputs, such as estimates of current credit spreads. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its interest rate swaps and has determined that the credit valuation adjustment is not significant to the overall valuation of these derivatives. As a result, the Company classifies its interest rate swap valuations in Level 2 of the fair value hierarchy.

 

Mortgage interest rate lock commitments and forward sale contracts are valued based on the securities prices of similar collateral, term, rate, and delivery for which the loan is eligible to deliver in place of the particular security. The Company’s mortgage security prices are supplied by a market data vendor, which in turn accumulates prices from a broad list of securities dealers. Prices are processed through a mortgage pipeline management system that accumulates and segregates all interest rate lock commitment and forward sale transactions according to the similarity of various characteristics (maturity, term, rate, and collateral). Prices are matched to those positions that are deemed to be an eligible substitute or offset (i.e., deliverable) for a corresponding security observed in the market and adjusted for an assumed pull-through rate. As a result, the Company classifies its interest mortgage commitments in Level 3 of the fair value hierarchy.

 

 

Non-Recurring Fair Value Measurements

 

The following section describes the valuation methodologies used by the Company to measure financial assets and liabilities at fair value on a non-recurring basis. In addition, the following section includes an indication of the level of the fair value hierarchy in which the assets or liabilities are classified. Where appropriate, the description includes information about the valuation models and key inputs to those models. During the years ended December 31, 2023 and 2022, there were no significant changes to the valuation techniques used by the Company to measure fair value on a nonrecurring basis. The following table provides the balances of assets and liabilities measured at fair value on a non-recurring basis at December 31:

 

(Dollars in Thousands)		Level 1				Level 2				Level 3				Total
2023
Impaired loans, included in LHFI		$	—			$	—			$	52,828			$	52,828
OREO			—				—				3,625				3,625
Total assets		$	—			$	—			$	56,453			$	56,453
2022
Impaired loans, included in LHFI		$	—			$	—			$	51,158			$	51,158
OREO			—				—				273				273
Total assets		$	—			$	—			$	51,431			$	51,431

 

Impaired Loans

 

Impaired loans are recorded at the loan’s observable market prices, the estimated fair value of the collateral for collateral-dependent loans, or the present value of the expected future cash flows discounted using market based credit spreads of comparable debt instruments of the specific borrower or comparable borrowers. Appraised values, adjusted for management’s assumptions relating to costs to hold, maintain, and sell the property, are generally used on real estate collateral-dependent impaired loans. Given the significant assumptions used in the valuation, impaired loans are included within Level 3 of the fair value hierarchy.

 

Other Real Estate Owned

 

The fair value of OREO is based on third party appraisals, net of estimated selling costs. Given the significant assumptions used in the valuation, OREO is included within Level 3 of the fair value hierarchy.

 

Loans Held for Sale

 

LHFS, which consist primarily of current production of certain first-lien residential mortgage loans, are carried at the lower of cost or estimated fair value. Fair value is estimated using observable inputs, primarily actual sale experience as well as secondary market price quotes. The Company did not record any adjustments to LHFS during the years ended December 31, 2023 or 2022, as fair value approximated carrying value at December 31, 2023 and 2022. Given that fair value is based on observable market prices, LHFS would be classified within Level 2 of the fair value hierarchy. The Company had recorded loans held for sale of $10.3 million and $11.9 million at December 31, 2023 and 2022, respectively.

 

Disclosures About Fair Value of Financial Instruments

 

The following section describes the valuation methodologies used by the Company to measure financial assets and liabilities at fair value for disclosure purposes only. In addition, the following section includes an indication of the level of the fair value hierarchy in which the assets or liabilities are classified. Where appropriate, the description includes information about the valuation models and key inputs to those models. During the years ended December 31, 2023 and 2022, there were no significant changes to the valuation techniques used by the Company to measure fair value for disclosure purposes.

 

 

The following table provides the balances of financial assets and financial liabilities measured at fair value for disclosure purposes only at December 31:

 

						Fair Value
		Carrying
(Dollars in Thousands)		Amount				Level 1				Level 2				Level 3				Total
2023
Cash, cash equivalents, and due from banks		$	391,470			$	391,470			$	—			$	—			$	391,470
Held-to-maturity securities			2,104,572				78,593				1,710,307				—				1,788,900
Loans held for investment			11,351,545				—				—				10,984,984				10,984,984
Total financial assets		$	13,847,587			$	470,063			$	1,710,307			$	10,984,984			$	13,165,354
Deposits		$	12,930,126			$	—			$	12,941,093			$	—			$	12,941,093
Short-term borrowings			659,230				—				659,292				—				659,292
Long-term debt			1,023,118				—				1,007,900				—				1,007,900
Total financial liabilities		$	14,612,474			$	—			$	14,608,285			$	—			$	14,608,285
2022
Cash, cash equivalents, and due from banks		$	713,841			$	713,841			$	—			$	—			$	713,841
Held-to-maturity securities			2,175,723				58,188				1,769,462				—				1,827,650
Loans held for investment			10,509,062				—				—				9,935,140				9,935,140
Total financial assets		$	13,398,626			$	772,029			$	1,769,462			$	9,935,140			$	12,476,631
Deposits		$	13,183,552			$	—			$	13,185,252			$	—			$	13,185,252
Short-term borrowings			860,946				—				861,723				—				861,723
Long-term debt			241,664				—				225,152				—				225,152
Total financial liabilities		$	14,286,162			$	—			$	14,272,127			$	—			$	14,272,127

 

Cash, Cash Equivalents, and Due from Banks

 

The carrying value of cash, cash equivalents, and due from banks approximates fair value due to the relatively short period of time between the origination of the instruments and their expected realization. These amounts are classified within Level 1.

 

Held-To-Maturity Securities

 

When quoted market prices for identical securities are available in an active market, these prices are used to determine fair value and these securities are classified within Level 1 of the fair value hierarchy. Level 1 investment securities include U.S. Treasury securities.

 

For other held-to-maturity securities, quoted market prices may not be readily available for the specific securities. When possible, the Company determines fair value based on market observable information, including quoted market prices for similar securities, inactive transaction prices, and broker quotes. These securities are classified within Level 2 of the fair value hierarchy. Level 2 valuations are generally provided by a third party pricing service. The Company reviews the valuation methodologies utilized by the pricing service and, on a quarterly basis, reviews the security level prices provided by the pricing service against management’s expectation of fair value, based on changes in various benchmarks and market knowledge from recent trading activity, as well as comparisons to other independent secondary pricing sources. Level 2 investment securities include agency mortgage-backed securities. The Company did not hold any held-to- maturity securities that were classified within Level 3 at December 31, 2023 or 2022.

 

 

Loans Held for Investment

 

The LHFI portfolio consists of both variable and fixed-rate obligations, the fair value of which was estimated using discounted cash flow analyses and other valuation techniques. To calculate discounted cash flows, the loans were aggregated into pools of similar types and expected repayment terms. The expected cash flows of loans considered historical prepayment experience and estimated credit losses for non- performing loans and were discounted using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan type. In addition, when computing the estimated fair values for loans, the best estimate of losses inherent in the portfolio is deducted. Given the significant assumptions used in the valuation, LHFI is included within Level 3.

 

Deposits

 

The estimated fair value of deposits with no stated maturity, such as noninterest-bearing savings and money market checking accounts, is the amount payable on demand. The fair value of time deposits is estimated using the rates currently offered for deposits of similar remaining maturities. Deposits are included within Level 2.

 

Short-Term Borrowings

 

Short-term borrowings consist of federal funds, repurchase agreements, and FHLB borrowings. For variable-rate borrowings, fair value approximates carrying value. For fixed-rate borrowings, the fair value is determined by discounting future cash flows at current rates for borrowings with similar remaining maturities. Short-term borrowings are included within Level 2.

 

Long-Term Debt

 

For fixed-rate debt, the fair value is determined by discounting future cash flows at current rates for debt with similar remaining maturities and call features or by using market prices for similar assets. For variable-rate debt, fair value is determined by using market prices for similar assets. Long-term debt is included within Level 2.

 

Off-Balance Sheet Financial Instruments

 

The Company estimates the fair value of loan commitments and letters of credit based on the related amount of unamortized deferred commitment fees adjusted for probable losses from these arrangements. Substantially all of these commitments have floating rates and do not expose the Company to interest rate risk. The fair value of these unfunded commitments is approximately equal to their carrying value, which was $3.1 million and $8.3 million at December 31, 2023 and 2022, respectively.

 

Note 22. Subsequent Events

 

The Company evaluated all subsequent event activity through March 26, 2024 (the date the accompanying financial statements were available to be issued) and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes to the financial statements.

 

 

 

 

 

Exhibit 99.6

 

Bremer Financial Corporation

 

Consolidated Balance Sheet

(dollars in thousands, unaudited)

 

		September 30
		2024				2023
Assets
Cash, cash equivalents, and due from banks		$	301,387			$	369,679
Investment securities
Available-for-sale			1,646,023				1,577,355
Held-to-maturity			1,965,122				2,137,779
Loans held for sale			11,375				26,651
Loans held for investment
Loans held for investment			11,524,549				11,395,895
Less allowance for loan losses			(105,797	)			(101,117	)
Net loans held for investment			11,418,752				11,294,778
Premises and equipment, net			151,345				140,332
Goodwill and other intangibles, net			135,983				138,783
Bank owned life insurance			177,935				173,134
Other assets			400,957				461,691
Total assets		$	16,208,879			$	16,320,182
Liabilities and Shareholders’ Equity
Deposits
Noninterest-bearing		$	3,756,503			$	4,094,807
Interest-bearing			9,472,453				8,682,808
Total deposits			13,228,956				12,777,615
Short-term borrowings			127,691				744,757
Long-term debt			1,034,068				1,023,487
Accrued expenses and other liabilities			302,253				399,545
Total liabilities			14,692,968				14,945,404
Redeemable class A common stock, 960,000 shares issued and outstanding			121,273				109,982
Shareholders’ equity
Common stock(1)
Class A, no par, 12,000,000 shares authorized; 965,000 shares issued and outstanding			229				57
Class B, no par, 10,800,000 shares authorized; 10,075,000 shares issued and outstanding			2,390				2,562
Retained earnings			1,574,294				1,545,102
Accumulated other comprehensive gain (loss), net of tax			(182,275	)			(282,925	)
Total shareholders’ equity			1,394,638				1,264,796
Total liabilities and shareholders’ equity		$	16,208,879			$	16,320,182

 

 

(1)

During 3Q24, a legal settlement was reached resulting in the sale and conversion of 725,000 shares of class B common stock by Otto Bremer Trust. The shares have been converted to class A and are owned by outside hedge funds. The common stock descriptions and balances above reflect the reclassification of 725,000 shares (including paid in capital) from class B to A as a result of the settlement.

 

 

Bremer Financial Corporation

 

Consolidated Statement of Income

(dollars in thousands, unaudited)

 

		Three Months ended September 30,								Nine Months ended September 30,
		2024				2023				2024				2023
Interest income
Loans, including loans held for sale		$	167,493			$	154,624			$	491,790			$	430,088
Investment securities			27,431				24,491				76,804				72,974
Other			4,014				4,868				12,148				16,185
Total interest income			198,938				183,983				580,742				519,247
Interest expense
Deposits			75,552				54,879				215,258				124,678
Short-term borrowings			4,730				11,660				15,340				39,713
Long-term debt			13,258				10,908				38,902				18,753
Other			271				542				1,327				1,094
Total interest expense			93,811				77,989				270,827				184,238
Net interest income			105,127				105,994				309,915				335,009
Provision for credit losses			12,300				2,503				16,682				4,139
Net interest income after provision for credit losses			92,827				103,491				293,233				330,870
Noninterest income
Service charges			8,103				7,198				23,000				21,143
Insurance revenue			3,489				2,878				9,632				8,356
Investment management and trust fees			4,794				4,615				14,498				14,207
Brokerage revenue			4,401				4,648				13,542				13,866
Mortgage banking and loan fees			1,365				3,838				7,361				10,204
Realized gains (losses) on investment securities			(4,374	)			196				(5,748	)			485
Other			28,178				4,816				35,795				14,070
Total noninterest income			45,956				28,189				98,080				82,331
Noninterest expense
Compensation and employee benefits			51,441				51,178				161,408				155,152
Occupancy and equipment, net			10,802				10,621				33,530				32,644
Data processing fees			4,767				4,305				15,276				13,499
FDIC premiums and examination fees			3,998				3,894				13,061				10,664
Other			17,304				18,518				58,301				59,941
Total noninterest expense			88,312				88,516				281,576				271,900
Income before taxes			50,471				43,164				109,737				141,301
Applicable income taxes			9,649				12,730				18,605				30,490
Net income		$	40,822			$	30,434			$	91,132			$	110,811

 

 

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