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0000707179-04-000085.txt : 20040510
0000707179-04-000085.hdr.sgml : 20040510
20040510121547
ACCESSION NUMBER: 0000707179-04-000085
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 10
CONFORMED PERIOD OF REPORT: 20040331
FILED AS OF DATE: 20040510
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: OLD NATIONAL BANCORP /IN/
CENTRAL INDEX KEY: 0000707179
STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021]
IRS NUMBER: 351539838
STATE OF INCORPORATION: IN
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-15817
FILM NUMBER: 04791779
BUSINESS ADDRESS:
STREET 1: 420 MAIN ST
CITY: EVANSVILLE
STATE: IN
ZIP: 47708
BUSINESS PHONE: 8124641434
MAIL ADDRESS:
STREET 1: 420 MAIN ST
CITY: EVANSVILLE
STATE: IN
ZIP: 47708
FORMER COMPANY:
FORMER CONFORMED NAME: O
DATE OF NAME CHANGE: 19950822
10-Q
1
onb10q0304.txt
OLD NATIONAL BANCORP FROM 10-Q FOR MARCH 31, 2004
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------------------
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 1-15817
------------------------------
OLD NATIONAL BANCORP
(Exact name of Registrant as specified in its charter)
INDIANA 35-1539838
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
420 Main Street 47708
Evansville, Indiana (Zip Code)
(Address of principal executive offices)
----------------
(812) 464-1434
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to the filing requirements for
at least the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock. The Registrant has one class of common stock (no par value) with
66,357,000 shares outstanding at April 30, 2004.
OLD NATIONAL BANCORP
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
--------
Consolidated Balance Sheet
March 31, 2004 and 2003, and December 31, 2003 3
Consolidated Statement of Income
Three months ended March 31, 2004 and 2003 4
Consolidated Statement of Changes in Shareholders' Equity
Three months ended March 31, 2004 and 2003 5
Consolidated Statement of Cash Flows
Three months ended March 31, 2004 and 2003 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 26
Item 4. Controls and Procedures 29
PART II OTHER INFORMATION 30
SIGNATURES 32
2
OLD NATIONAL BANCORP
CONSOLIDATED BALANCE SHEET
- ------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
(unaudited)
(dollars and shares in thousands) 2004 2003 2003
- ------------------------------------------------------------------------------------------------------------------------
Assets
Cash and due from banks $ 176,022 $ 210,980 $ 222,385
Money market investments 15,733 5,916 14,504
- ------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 191,755 216,896 236,889
Investment securities-available-for-sale, at fair value
U.S. Treasury 13,117 5,316 26,057
U.S. Government agencies and corporations 552,228 635,434 580,820
Mortgage-backed securities 1,298,932 1,633,788 1,298,881
States and political subdivisions 664,264 683,726 655,068
Other securities 140,579 119,647 145,514
- ------------------------------------------------------------------------------------------------------------------------
Investment securities - available-for-sale 2,669,120 3,077,911 2,706,340
Investment securities - held-to-maturity, at amortized cost
(fair value $205,812, $236,825 and $209,316 respectively) 204,406 236,825 210,905
Residential loans held for sale 17,895 52,999 16,338
Loans:
Commercial 1,614,516 1,690,403 1,618,095
Commercial real estate 1,830,532 1,871,861 1,849,275
Residential real estate 939,156 974,329 939,422
Consumer credit, net of unearned income 1,175,450 1,050,317 1,163,325
- ------------------------------------------------------------------------------------------------------------------------
Total loans 5,559,654 5,586,910 5,570,117
Allowance for loan losses (108,600) (83,993) (104,571)
- ------------------------------------------------------------------------------------------------------------------------
Net loans 5,451,054 5,502,917 5,465,546
- ------------------------------------------------------------------------------------------------------------------------
Premises and equipment, net 194,262 143,433 181,398
Goodwill 129,251 110,648 129,251
Other intangible assets 41,113 27,044 41,912
Mortgage servicing rights 12,319 10,464 14,659
Accrued interest receivable and other assets 348,159 346,039 350,658
- ------------------------------------------------------------------------------------------------------------------------
Total assets $ 9,259,334 $ 9,725,176 $ 9,353,896
========================================================================================================================
Liabilities
Deposits:
Noninterest-bearing demand $ 794,502 $ 727,077 $ 823,146
Interest-bearing:
NOW 1,587,353 1,397,363 1,612,145
Savings 467,575 514,758 441,427
Money market 593,222 594,104 608,177
Time 2,942,451 3,087,641 3,008,197
- ------------------------------------------------------------------------------------------------------------------------
Total deposits 6,385,103 6,320,943 6,493,092
Short-term borrowings 471,403 974,835 414,588
Other borrowings 1,533,202 1,364,946 1,624,092
Guaranteed preferred beneficial interests in subordinated debentures -- 165,042 --
Accrued expenses and other liabilities 128,765 156,373 106,634
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 8,518,473 8,982,139 8,638,406
- ------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity
Preferred stock, 2,000 shares authorized, no shares issued or outstanding -- -- --
Common stock, $1 stated value, 150,000 shares authorized,
66,449, 63,593 and 66,575 shares issued and outstanding, respectively 66,449 63,593 66,575
Capital surplus 578,650 522,404 581,224
Retained earnings 59,987 110,795 53,107
Accumulated other comprehensive income, net of tax 35,775 46,245 14,584
- ------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 740,861 743,037 715,490
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 9,259,334 $ 9,725,176 $ 9,353,896
========================================================================================================================
The accompanying notes to consolidated financial statements are an integral part
of this statement.
3
OLD NATIONAL BANCORP
CONSOLIDATED STATEMENT OF INCOME
- ------------------------------------------------------------------------------------
Three Months Ended
March 31,
(dollars and shares in thousands,
except per share data) (unaudited) 2004 2003
- ------------------------------------------------------------------------------------
Interest Income
Loans including fees:
Taxable $ 74,382 $ 84,955
Nontaxable 4,367 4,264
Investment securities, available-for-sale:
Taxable 19,893 25,982
Nontaxable 7,362 8,029
Investment securities, held-to-maturity, taxable 2,097 277
Money market investments 20 71
- ------------------------------------------------------------------------------------
Total interest income 108,121 123,578
- ------------------------------------------------------------------------------------
Interest Expense
Deposits 29,365 38,079
Short-term borrowings 990 2,574
Other borrowings 12,655 13,122
- ------------------------------------------------------------------------------------
Total interest expense 43,010 53,775
- ------------------------------------------------------------------------------------
Net interest income 65,111 69,803
Provision for loan losses 7,500 9,000
- ------------------------------------------------------------------------------------
Net interest income after provision for loan losses 57,611 60,803
- ------------------------------------------------------------------------------------
Noninterest Income
Trust and asset management fees 7,500 7,360
Service charges on deposit accounts 10,765 10,778
ATM fees 1,965 1,867
Mortgage banking revenue (320) 4,403
Insurance premiums and commissions 14,509 8,247
Investment product fees 3,185 2,678
Bank-owned life insurance 2,053 1,685
Net securities gains 1,985 2,730
Other income 3,986 3,172
- ------------------------------------------------------------------------------------
Total noninterest income 45,628 42,920
- ------------------------------------------------------------------------------------
Noninterest Expense
Salaries and employee benefits 49,269 41,660
Occupancy 4,851 4,521
Equipment 3,562 3,698
Marketing 2,358 2,427
Outside processing 4,970 4,192
Communication and transportation 2,969 3,119
Professional fees 3,088 2,416
Loan expense 1,467 1,379
Supplies 1,059 1,262
Other real estate owned expense 1,656 547
Other expense 5,204 4,944
- ------------------------------------------------------------------------------------
Total noninterest expense 80,453 70,165
- ------------------------------------------------------------------------------------
Income before income taxes 22,786 33,558
Income tax expense 3,277 7,298
- ------------------------------------------------------------------------------------
Net income $ 19,509 $ 26,260
====================================================================================
Net Income Per Common Share
Basic $ 0.29 $ 0.39
Diluted 0.29 0.39
- ------------------------------------------------------------------------------------
Weighted Average Number Of Common Shares Outstanding
Basic 66,359 66,889
Diluted 66,460 66,945
- ------------------------------------------------------------------------------------
Dividends Per Common Share $ 0.19 $ 0.18
The accompanying notes to consolidated financial statements are an integral part
of this statement.
4
OLD NATIONAL BANCORP
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------
Accumulated
Other Total
(dollars and shares Common Stock Capital Retained Comprehensive Shareholders'
in thousands) (unaudited) Shares Amount Surplus Earnings Income Equity
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002 63,856 $ 63,856 $ 528,379 $ 96,652 $ 51,823 $ 740,710
Net income -- -- -- 26,260 -- 26,260
Unrealized net securities losses,
net of $(2,659) tax -- -- -- -- (3,849) (3,849)
Reclassification adjustment for
gains included in net income,
net of $(1,116) tax -- -- -- -- (1,614) (1,614)
Net unrealized derivative losses
on cash flow hedges,
net of $(102) tax -- -- -- -- (159) (159)
Reclassification adjustment on
cash flow hedges,
net of $28 tax -- -- -- -- 44 44
Cash dividends -- -- -- (12,117) -- (12,117)
Stock repurchased (560) (560) (12,011) -- -- (12,571)
Stock reissued under stock
option and stock purchase plans 297 297 6,036 -- -- 6,333
- --------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2003 63,593 $ 63,593 $ 522,404 $ 110,795 $ 46,245 $ 743,037
====================================================================================================================
Balance, December 31, 2003 66,575 $ 66,575 $ 581,224 $ 53,107 $ 14,584 $ 715,490
Net income -- -- -- 19,509 -- 19,509
Unrealized net securities gains,
net of $15,922 tax -- -- -- -- 21,929 21,929
Reclassification adjustment for
gains included in net income,
net of $(835) tax -- -- -- -- (1,150) (1,150)
Net unrealized derivative gains
on cash flow hedges,
net of $235 tax -- -- -- -- 365 365
Reclassification adjustment on
cash flow hedges,
net of $31 tax -- -- -- -- 47 47
Cash dividends -- -- -- (12,629) -- (12,629)
Stock repurchased (468) (468) (9,613) -- -- (10,081)
Stock reissued under stock
option and stock purchase plans 342 342 7,039 -- -- 7,381
- --------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2004 66,449 $ 66,449 $ 578,650 $ 59,987 $ 35,775 $ 740,861
====================================================================================================================
The accompanying notes to consolidated financial statements are an integral part
of this statement.
5
OLD NATIONAL BANCORP
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
(dollars in thousands) (unaudited) 2004 2003
- --------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net income $ 19,509 $ 26,260
- --------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation 3,229 3,197
Amortization of other intangible assets 799 524
Net premium amortization on investment securities 2,175 2,773
Provision for loan losses 7,500 9,000
Net securities gains (1,985) (2,730)
Gains on sale of other assets (1,362) (3,737)
Residential real estate loans originated for sale (83,911) (261,559)
Proceeds from sale of residential real estate loans 82,857 264,499
(Increase) decrease in other assets 16,864 (11,428)
Increase in accrued expenses and other liabilities 6,778 43,862
- --------------------------------------------------------------------------------------------------------
Total adjustments 32,944 44,401
- --------------------------------------------------------------------------------------------------------
Net cash flows provided by operating activities 52,453 70,661
- --------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Purchases of investment securities available-for-sale (389,151) (580,903)
Proceeds from maturities, prepayments and calls
of investment securities available-for-sale 254,910 293,445
Proceeds from sales of investment securities available-for-sale 207,394 278,085
Purchases of investment securities held-to-maturity -- (236,846)
Proceeds from maturities, prepayments and calls
of investment securities held-to-maturity 6,242 --
Net principal collected from customers 6,992 116,977
Proceeds from sale of premises and equipment 806 249
Purchases of premises and equipment (16,261) (12,083)
- --------------------------------------------------------------------------------------------------------
Net cash flows provided by (used in) investing activities 70,932 (141,076)
- --------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Net increase (decrease) in deposits and short-term borrowings:
Noninterest-bearing demand deposits (28,644) (51,352)
Savings, NOW and money market deposits (13,599) 76,359
Time deposits (65,746) (143,344)
Short-term borrowings 56,815 56,486
Payments for maturities on other borrowings (156,559) (70,309)
Proceeds from issuance of other borrowings 54,543 201,600
Cash dividends paid (12,629) (12,117)
Common stock repurchased (10,081) (12,571)
Common stock reissued under stock option and stock purchase plans 7,381 6,333
- --------------------------------------------------------------------------------------------------------
Net cash flows provided by (used in) financing activities (168,519) 51,085
- --------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (45,134) (19,330)
Cash and cash equivalents at beginning of period 236,889 236,226
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 191,755 $ 216,896
========================================================================================================
Total interest paid $ 42,051 $ 55,490
Total taxes paid $ -- $ 1,735
The accompanying notes to consolidated financial statements are an integral part
of this statement.
OLD NATIONAL BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Old National Bancorp and its wholly-owned affiliates ("Old
National") and have been prepared in conformity with generally accepted
accounting principles and prevailing practices within the banking industry. Such
principles require management to make estimates and assumptions that affect the
reported amounts of assets, liabilities and the disclosures of contingent assets
and liabilities at the date of the financial statements and amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates. All significant intercompany transactions and balances have been
eliminated. Certain prior year amounts have been reclassified to conform with
the 2004 presentation. Such reclassifications had no effect on net income. In
the opinion of management, the consolidated financial statements contain all the
normal and recurring adjustments necessary for a fair statement of the financial
position of Old National as of March 31, 2004 and 2003, and December 31, 2003,
and the results of its operations for the three months ended March 31, 2004 and
2003. Interim results do not necessarily represent annual results.
NOTE 2 - IMPACT OF ACCOUNTING CHANGES
In December 2003, the Financial Accounting Standards Board ("FASB") revised SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." This statement requires annual disclosures in addition to those in
the original SFAS No. 132, which provides additional information regarding
assets, obligations, cash flows and net periodic benefit costs of defined
benefit pension plans. In addition, interim disclosure of the components of net
periodic benefit costs is required. The revised SFAS No. 132 is effective for
financial statements with fiscal years ending after December 15, 2003. Old
National adopted this statement as of December 31, 2003, and has included all
such required disclosures in Note 9.
In December 2003, the FASB revised FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities," which was initially released in
January 2003. FIN 46 provides guidance with respect to variable interest
entities and when the assets, liabilities, noncontrolling interest and results
of operations of a variable interest entity need to be included in a company's
consolidated financial statements. FIN 46 was effective for companies with
"special-purpose entities" as of December 31, 2003. Old National does not have
special-purpose entities. However, under this new guidance, Old National was
required to deconsolidate ONB Capital Trust I and ONB Capital Trust II as these
trusts no longer meet the definition of a related subsidiary under the terms of
FIN 46. This change also resulted in the remaining debt being disclosed in
"other borrowings" beginning with the period ending December 31, 2003, compared
to the separate disclosure on the balance sheet prior to that date. The effect
of this deconsolidation was an increase of $4.6 million to both assets and
liabilities with no impact to the results of operations. The effective date for
consolidation of all other entities was after March 15, 2004. Old National
consolidated various low income housing partnerships on March 31, 2004, for
which the impact on the results of operations and financial position was
immaterial.
Old National applies APB Opinion No. 25 and related Interpretations in
accounting for the stock option plan. Accordingly, no compensation costs have
been recognized. In accordance with SFAS No. 148, "Accounting for Stock-based
Compensation - Transition and Disclosure" and SFAS No. 123, "Accounting for
Stock-Based Compensation," Old National has presented in the table below net
income and net income per share adjusted to proforma amounts had compensation
cost for Old National's stock option plan been recorded based on the fair value
at the grant dates for awards under the plan. All per share data has been
adjusted for stock dividends, including a 5% stock dividend distributed to
shareholders on January 27, 2004.
7
- --------------------------------------------------------------------------------
Three Months Ended
March 31,
(dollars in thousands, except per share data) 2004 2003
- --------------------------------------------------------------------------------
Net income as reported $19,509 $26,260
Deduct total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects (1,663) (1,099)
- --------------------------------------------------------------------------------
Proforma net income $17,846 $25,161
================================================================================
Basic net income per share:
As reported $ 0.29 $ 0.39
Proforma 0.27 0.37
Diluted net income per share:
As reported $ 0.29 $ 0.39
Proforma 0.27 0.37
- --------------------------------------------------------------------------------
NOTE 3 - NET INCOME PER SHARE
Basic net income per share is computed by dividing net income by the
weighted-average number of common shares outstanding during each year, adjusted
to reflect all stock dividends. Diluted net income per share is computed as
above and assumes the conversion of outstanding stock options. The following
table reconciles basic and diluted net income per share for the three months
ended March 31:
- ------------------------------------------------------------------------------------------------
Three Months Ended Three Months Ended
March 31, 2004 March 31, 2003
(dollars and shares ----------------------------- -----------------------------
in thousands,
except per share data) Income Shares Amount Income Shares Amount
- ------------------------------------------------------------------------------------------------
Basic Net Income Per Share
Income from operations $19,509 66,359 $0.29 $26,260 66,889 $0.39
======= =======
Effect Of Dilutive Securities
Stock options -- 101 -- 56
- --------------------------------------------------- -----------------
Diluted Net Income Per Share
Income from operations
and assumed conversions $19,509 66,460 $0.29 $26,260 66,945 $0.39
================================================================================================
NOTE 4 - INVESTMENT SECURITIES
The market value and amortized cost of investment securities as of March 31 are
set forth below:
- ----------------------------------------------------------------------------
Amortized Unrealized Unrealized Fair
(dollars in thousands) Cost Gains Losses Value
- ----------------------------------------------------------------------------
2004
Available-for-sale $2,609,506 $68,873 $(9,259) $2,669,120
Held-to-maturity 204,406 1,406 - 205,812
- ----------------------------------------------------------------------------
2003
Available-for-sale $3,000,957 $80,157 $(3,203) $3,077,911
Held-to-maturity 236,825 - - 236,825
- ----------------------------------------------------------------------------
8
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses was as follows:
- ------------------------------------------------------------------------
(dollars in thousands) 2004 2003
- ------------------------------------------------------------------------
Balance, January 1 $ 104,571 $ 87,742
Additions:
Provision charged to expense 7,500 9,000
Deductions:
Loans charged-off 5,652 14,378
Recoveries (2,181) (1,629)
- ------------------------------------------------------------------------
Net charge-offs 3,471 12,749
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Balance, March 31 $ 108,600 $ 83,993
========================================================================
The following is a summary of information pertaining to impaired loans at March
31:
- ------------------------------------------------------------------------
(dollars in thousands) 2004 2003
- ------------------------------------------------------------------------
Impaired loans without a valuation allowance $ 22,137 $ 45,624
Impaired loans with a valuation allowance 71,913 225,780
- ------------------------------------------------------------------------
Total impaired loans $ 94,050 $ 271,404
========================================================================
Valuation allowance related to impaired loans $ 27,475 $ 62,003
- ------------------------------------------------------------------------
A loan is considered impaired under SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan, an amendment of FASB Statement No. 5 and 15" when based on
current information and events, it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. An impaired loan does not include larger groups of smaller-balance
homogeneous loans that are collectively evaluated for impairment, loans that are
measured at fair value or at the lower of cost or fair value, leases and debt
securities.
For the three months ended March 31, 2004, the average balance of impaired loans
was $92.8 million for which $0.1 million of interest was recorded. For the three
months ended March 31, 2003, the average balance of impaired loans was $287.3
million for which $10.7 million of interest was recorded. During the third
quarter of 2003, Old National revised its interpretation of impaired loans to
strictly follow SFAS No. 114. Previous to this change, Old National's
interpretation of impaired loans more conservatively included all problem
credits with a potential collateral deficiency in the event of default and
nonaccrual loans in larger groups of smaller-balance homogeneous loans. Had Old
National applied this interpretation in the prior year, impaired loans would
have totaled $96.7 million with a valuation allowance of $18.9 million rather
than $271.4 million with a valuation allowance of $62.0 million as reported at
March 31, 2003. No additional funds are committed to be advanced in connection
with impaired loans. Loans deemed impaired are evaluated primarily using the
fair value of the underlying collateral.
NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS
At March 31, 2004 and 2003, Old National had goodwill in the amount of $129.3
million and $110.6 million, respectively. During 2003, Old National performed
its annual goodwill impairment testing resulting in no impairment. At March 31,
2004, the community banking segment and the non-bank services segment had
goodwill of $70.9 million and $58.3 million, respectively. There was no change
in the carrying amount of goodwill by segment for the three month period ended
March 31, 2004.
Old National continues to amortize definite-lived intangible assets over the
estimated remaining life of each respective asset. At March 31, 2004, Old
National had $41.1 million in unamortized intangible assets compared with $27.0
million in unamortized identifiable intangible assets at March 31, 2003.
Indefinite-lived assets of $2.8 million were included in each year.
9
The following table shows the gross carrying amounts and accumulated
amortization for intangible assets as of March 31:
- --------------------------------------------------------------------------------
Gross Carrying Accumulated Net Carrying
(dollars in thousands) Amount Amortization Amount
- --------------------------------------------------------------------------------
2004
Amortized intangible assets:
Core deposit $ 5,574 $(3,198) $ 2,376
Customer business relationships 36,676 (2,544) 34,132
Non-compete agreements 1,100 (96) 1,004
Technology 1,300 (499) 801
- -------------------------------------------------------------------------------
Total amortized intangible assets 44,650 (6,337) 38,313
Unamortized intangible assets:
Trade name 2,800 -- 2,800
- -------------------------------------------------------------------------------
Total intangible assets $47,450 $(6,337) $41,113
===============================================================================
2003
Amortized intangible assets:
Core deposit $ 5,574 $(2,556) $ 3,018
Customer business relationships 19,720 (638) 19,082
Non-compete agreements 1,100 (42) 1,058
Technology 1,300 (214) 1,086
- -------------------------------------------------------------------------------
Total amortized intangible assets 27,694 (3,450) 24,244
Unamortized intangible assets:
Trade name 2,800 -- 2,800
- -------------------------------------------------------------------------------
Total intangible assets $30,494 $(3,450) $27,044
===============================================================================
Total amortization expense associated with intangible assets for the three
months ended was $799 thousand in 2004 and $524 thousand in 2003. The following
is the estimated amortization expense for the future years:
-------------------------------------------
Estimated
(dollars in thousands) Amortization
For the years ended: Expense
-------------------------------------------
2004 remaining $2,376
2005 3,065
2006 2,849
2007 2,386
2008 2,213
2009 2,122
Thereafter 23,302
-------------------------------------------
Total $38,313
===========================================
NOTE 7 - MORTGAGE SERVICING RIGHTS
Mortgage servicing rights derived from loans sold with servicing retained were
$12.3 million and $10.5 million at March 31, 2004 and 2003, respectively. Loans
serviced for others are not included in the consolidated balance sheet of Old
National. The unpaid principal balance of mortgage loans serviced for others at
March 31 was $1.737 billion in 2004 and $1.627 billion in 2003. At March 31,
2004 and 2003, the fair value of capitalized mortgage servicing rights, net of
valuation allowance, was $12.4 million and $10.5 million, respectively. Old
National's key economic assumptions used in determining the fair value of
mortgage servicing rights were a weighted average prepayment rate of 436 PSA and
a discount rate of 8.50% at March 31, 2004 and a weighted average prepayment
rate of 558 PSA and a discount rate of 8.50% at March 31, 2003.
10
The following summarizes the activities related to mortgage servicing rights and
the related valuation allowance at March 31:
- ----------------------------------------------------------------------
(dollars in thousands) 2004 2003
- ----------------------------------------------------------------------
Balance before valuation allowance, January 1 $ 15,790 $ 13,423
Rights capitalized 830 2,290
Amortization (1,725) (932)
- ----------------------------------------------------------------------
Balance before valuation allowance, March 31 14,895 14,781
- ----------------------------------------------------------------------
Valuation allowance:
Balance, January 1 (1,131) (2,056)
Additions to valuation allowance (1,940) (2,261)
Reductions to valuation allowance 495 --
- ----------------------------------------------------------------------
Balance, March 31 (2,576) (4,317)
- ----------------------------------------------------------------------
Mortgage servicing rights, net $ 12,319 $ 10,464
======================================================================
NOTE 8 - FINANCING ACTIVITIES
The following table summarizes Old National's other borrowings at March 31:
- --------------------------------------------------------------------------------
(dollars in thousands) 2004 2003
- --------------------------------------------------------------------------------
Old National Bancorp:
Medium-term notes, Series 1997 (fixed rates
3.50% to 7.03%) maturities July 2004 to
June 2008 $ 113,200 $ 43,200
Junior subordinated debentures (fixed rates
8.00% to 9.50%) maturities March 2030
to April 2032 150,000 --
SFAS 133 hedge and other basis adjustments 11,416 208
Old National Bank:
Securities sold under agreements to repurchase
(variable rates 1.12% to 2.69%) maturities
March 2006 to December 2008 298,000 183,000
Federal Home Loan Bank advances (fixed rates
3.59% to 8.34% and variable rates 1.92% to
2.12%) maturities April 2004 to October 2022 608,788 814,848
Senior unsecured bank notes (fixed rate 3.95%
and variable rates 1.32% to 2.12%) maturities
June 2004 to February 2008 190,000 160,000
Subordinated bank notes (fixed rate 6.75%)
maturing October 2011 150,000 150,000
Capital lease obligation 4,543 --
SFAS 133 hedge and other basis adjustments 7,255 13,690
- --------------------------------------------------------------------------------
Total other borrowings $1,533,202 $1,364,946
================================================================================
11
Contractual maturities of other borrowings at March 31, 2004, were as follows:
------------------------------------------------------------
(dollars in thousands)
------------------------------------------------------------
Due in 2004 $ 101,721
Due in 2005 195,082
Due in 2006 252,402
Due in 2007 160,034
Due in 2008 343,037
Thereafter 462,255
SFAS 133 hedge and other basis adjustments 18,671
------------------------------------------------------------
Total $1,533,202
============================================================
FEDERAL HOME LOAN BANK
Federal Home Loan Bank advances had weighted-average rates of 5.24% and 5.42% at
March 31, 2004, and 2003, respectively. These borrowings are secured by
investment securities and residential real estate loans up to 150% of
outstanding debt.
SUBORDINATED BANK NOTES
Subordinated bank notes qualify as Tier 2 Capital for regulatory purposes and
are in accordance with the senior and subordinated global bank note program in
which Old National Bank may issue and sell up to a maximum of $1 billion. Notes
issued by Old National Bank under the global note program are not obligations
of, or guaranteed by, Old National Bancorp.
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S SUBORDINATED DEBENTURES
ONB Capital Trust II issued $100 million in preferred securities in April 2002.
The preferred securities have a liquidation amount of $25 per share with a
cumulative annual distribution rate of 8.0% or $2.00 per share payable quarterly
and maturing on April 15, 2032. Proceeds from the issuance of these securities
were used to purchase junior subordinated debentures with the same financial
terms as the securities issued by ONB Capital Trust II. Old National guarantees
the payment of distributions on the preferred securities issued by ONB Capital
Trust II.
ONB Capital Trust I issued $50 million in preferred securities in March 2000.
The preferred securities have a liquidation amount of $25 per share with a
cumulative annual distribution rate of 9.5% or $2.375 per share payable
quarterly and maturing on March 15, 2030. Proceeds from the issuance of these
securities were used to purchase junior subordinated debentures with the same
financial terms as the securities issued by ONB Capital Trust I. Old National
guarantees the payment of distributions on the preferred securities issued by
ONB Capital Trust I.
Old National may redeem the junior subordinated debentures and thereby cause a
redemption of the trust preferred securities in whole (or in part from time to
time) on or after March 15, 2005 (for debentures owned by ONB Capital Trust I)
and on or after April 12, 2007 (for debentures owned by ONB Capital Trust II),
and in whole (but not in part) following the occurrence and continuance of
certain adverse federal income tax or capital treatment events. These securities
qualify as Tier 1 capital for regulatory purposes and the SEC registration
related to these securities has remaining funding capacity of $50 million.
In accordance with FIN 46, the outstanding junior subordinated debentures
related to these trust preferred securities were reclassified to "other
borrowings" at December 31, 2003, from the separate disclosure on the balance
sheet prior to that date.
12
CAPITAL LEASE OBLIGATION
On January 1, 2004, Old National entered into a long-term capital lease
obligation for a new branch office building in Owensboro, Kentucky, which
extends for 25 years with one renewal option for 10 years. The economic
substance of this lease is that Old National is financing the acquisition of the
building through the lease and accordingly, the building is recorded as an asset
and the lease is recorded as a liability. The fair value of the capital lease
obligation was estimated using a discounted cash flow analysis based on Old
National's current incremental borrowings rate for similar types of borrowing
arrangements. At March 31, 2004, the future minimum lease payments under the
capital lease were as follows:
------------------------------------------------------------
(dollars in thousands) Minimum
Lease
For the year ending: Payments
------------------------------------------------------------
2004 remaining $ 278
2005 371
2006 371
2007 371
2008 371
Thereafter 13,265
------------------------------------------------------------
Total minimum lease payments 15,027
Less amounts representing interest 10,484
------------------------------------------------------------
Present value of net minimum lease payments $4,543
============================================================
NOTE 9 - EMPLOYEE BENEFIT PLANS
RETIREMENT PLAN
The following table sets forth the components of the net periodic benefit cost
for Old National's noncontributory defined benefit retirement plan for the three
months ended March 31:
--------------------------------------------------------------------
Three Months Ended
March 31,
(dollars in thousands) 2004 2003
--------------------------------------------------------------------
Service cost $ 537 $ 486
Interest cost 975 846
Expected return on plan assets (851) (504)
Amortization of prior service cost 8 8
Amortization of transitional asset (108) (108)
Recognized actuarial loss 397 249
--------------------------------------------------------------------
Net periodic benefit cost $ 958 $ 977
====================================================================
STOCK OPTIONS
On February 2, 2004, Old National granted 0.3 million stock options to key
employees at an option price of $21.45, the closing price of Old National's
stock on that date. The options vest 100% on December 31, 2004, and expire in
ten years. On January 31, 2003, Old National granted 2.6 million stock options
to key employees at an option price of $21.71, the closing price of Old
National's stock on that date. The options vest 25% per year over a four-year
period and expire in ten years. If certain financial targets are achieved,
vesting is accelerated. Old National was authorized to grant up to 7.3 million
shares of common stock under the 1999 Equity Incentive Plan. At March 31, 2004,
Old National had 6.3 million of stock options outstanding.
Old National applies APB Opinion No. 25 and related Interpretations in
accounting for the stock option plan. Accordingly, no compensation costs have
been recognized. See Note 2 for proforma net income and net income per share
data.
13
NOTE 10 - DERIVATIVE FINANCIAL INSTRUMENTS
The following table summarizes the derivative financial instruments utilized by
Old National at March 31:
- ---------------------------------------------------------------------------------------------------------------------------------
2004 2003
----------------------------------------- -----------------------------------------
Estimated Fair Value Estimated Fair Value
Notional -------------------------- Notional --------------------------
(dollars in thousands) Amount Gain Loss Amount Gain Loss
- ---------------------------------------------------------------------------------------------------------------------------------
Fair Value Hedges
Received fixed interest rate swaps $1,068,096 $ 22,118 $ (5,877) $ 753,000 $ 26,957 $ (1,277)
Interest rate lock commitments 65,535 129 -- 130,813 1,446 --
Forward mortgage loan contracts 72,428 -- (81) 133,050 -- (698)
Options on contracts purchased 4,000 -- -- -- -- --
Loans held for sale warehouse 17,895 33 -- 52,999 718 --
Mortgage rate lock derivative 65,535 101 -- 130,813 197 --
Cash Flow Hedges
HELOC cash flow 100,000 2,073 -- 100,000 791 (61)
Pay fixed interest rate swaps 150,000 109 (468) -- -- --
Customer interest rate swaps 44,523 1,097 (69) 2,916 54 --
Customer interest rate swaps
with counterparty 44,523 69 (1,097) 2,916 -- (54)
Customer interest rate cap 15,300 -- (53) -- -- --
Customer interest rate cap
with counterparty 15,300 53 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total $1,663,135 $ 25,782 $ (7,645) $1,306,507 $ 30,163 $ (2,090)
=================================================================================================================================
For further information regarding derivative financial instruments, see Note 16
of the notes to the consolidated financial statements of the 2003 annual report.
NOTE 11 - INCOME TAXES
The following is a summary of the major items comprising the differences in
taxes computed at the federal statutory rate and as recorded in the consolidated
statement of income for the three months ended March 31:
--------------------------------------------------
2004 2003
--------------------------------------------------
Provision at statutory rate 35.0 % 35.0 %
Tax-exempt income (21.1) (13.1)
Other, net 0.5 (0.2)
--------------------------------------------------
Effective tax rate 14.4 % 21.7 %
==================================================
For the three months ended March 31, 2004, the effective tax rate was
significantly lower than for the same period of last year. The decrease in the
effective tax rate resulted from a higher percentage of tax-exempt income to
total income for the quarter ended March 31, 2004, compared to the quarter ended
March 31, 2003.
14
NOTE 12 - COMPREHENSIVE INCOME
- --------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
(dollars in thousands) 2004 2003
- --------------------------------------------------------------------------------------------------
Net income: $19,509 $26,260
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period, net of tax 21,929 (3,849)
Less: reclassification adjustment for securities gains realized in net
income, net of tax (1,150) (1,614)
Cash flow hedges:
Net unrealized derivative gains (losses) on cash flow hedges, net of tax 365 (159)
Less: reclassification adjustment on cash flow hedges, net of tax 47 44
- --------------------------------------------------------------------------------------------------
Net unrealized gains (losses) 21,191 (5,578)
- --------------------------------------------------------------------------------------------------
Comprehensive income $40,700 $20,682
==================================================================================================
NOTE 13 - COMMITMENTS AND CONTINGENCIES
LITIGATION
In the normal course of business, various legal actions and proceedings, which
are being vigorously defended, are pending against Old National and its
affiliates.
Among these are several lawsuits relating to activities during 1995 of First
National Bank & Trust Company, Carbondale, Illinois, ("First National"), which
was purchased by Old National in 1999. These lawsuits include one class action
brought by alleged third-party creditors of structured settlement trusts. The
lawsuits are pending against Old National Bank, as successor to First National,
and allege actual damages totaling approximately $31 million, as well as
unspecified punitive damages, and other damages and attorneys' fees. The cases
are pending against Old National Bank in the City of St. Louis, Missouri; St.
Clair County, Madison County and Cook County, Illinois; and U.S. Federal
District Court in Southern Illinois.
During the fourth quarter of 2003, Old National advanced steps to settle certain
litigation arising out of these claims and established a reserve of $10 million
for settlement. During the quarter ended March 31, 2004, Old National paid $8
million of this reserve to settle $10 million of the exposure. $16 million of
the estimated $31 million exposure has been ruled in favor of Old National at
the trial court level and is currently on appeal. The $2 million remaining in
the reserve for litigation settlement is deemed to be adequate to cover the
remaining $5 million of exposure. It is not expected that any future losses will
have a material impact on Old National's results of operations.
BUILDING COMMITMENT
On October 11, 2002, Old National entered into a $52 million contract awarded to
a company controlled by a director for the construction of its Evansville-based
main banking center and bank headquarters. Construction began on June 27, 2002,
and is expected to be complete in the third quarter of 2004.
CREDIT-RELATED FINANCIAL INSTRUMENTS
In the normal course of business, Old National's banking affiliates have entered
into various agreements to extend credit, including loan commitments of $1.520
billion, commercial letters of credit of $19.5 million and standby letters of
credit of $96.1 million at March 31, 2004. At March 31, 2003, loan commitments
were $1.362 billion, commercial letters of credit were $73.8 million and standby
letters of credit were $56.1 million. These commitments are not reflected in the
consolidated financial statements. No material losses are expected to result
from these transactions.
At March 31, 2004 and 2003, Old National had credit extensions of $72.4 million
and $49.1 million, respectively, with various unaffiliated banks related to
letter of credit commitments issued on behalf of Old National's customers. At
March 31, 2004 and 2003, Old National provided collateral to the unaffiliated
banks to secure credit extensions totaling $41.0 million and $12.5 million,
respectively. Old National did not provide collateral for the remaining credit
extensions.
15
NOTE 14 - FINANCIAL GUARANTEES
Old National holds instruments, in the normal course of business with customers,
that are considered financial guarantees in accordance with FIN 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." Standby letters of credit guarantees are
issued in connection with agreements made by customers to counterparties.
Standby letters of credit are contingent upon failure of the customer to perform
the terms of the underlying contract. Credit risk associated with standby
letters of credit is essentially the same as that associated with extending
loans to customers and is subject to normal credit policies. The term of these
standby letters of credit is typically one year or less. At March 31, 2004, the
notional amount of standby letters of credit was $96.1 million, which represents
the maximum amount of future funding requirements, and the carrying value was
$0.4 million.
Old National also enters into forward contracts for the future delivery of
conforming residential real estate loans at a specified interest rate to reduce
interest rate risk associated with loans held for sale. These forward contracts
are considered derivative instruments accounted for under SFAS No. 133. See
additional information in Note 10.
NOTE 15 - SEGMENT INFORMATION
Old National operates in three reportable segments: community banking, non-bank
services and treasury. The community banking segment serves customers in both
urban and rural markets providing a wide range of financial services including
commercial, real estate and consumer loans; lease financing; checking, savings,
time deposits and other depository accounts; cash management services; and debit
cards and other electronically accessed banking services and Internet banking.
The non-bank services segment combines the management and operations of trust,
asset management, insurance, brokerage and investment and annuity sales.
Treasury manages investments, wholesale funding, interest rate risk, liquidity
and leverage for Old National. Additionally, treasury provides other
miscellaneous capital markets products for its corporate banking customers.
In order to measure performance for each segment, Old National allocates
capital, corporate overhead and income tax provision to each segment. Capital
and corporate overhead are allocated to each segment using various
methodologies, which are subject to periodic changes by management. Income taxes
are allocated using the effective tax rate. Tax-exempt income is primarily
within the treasury segment, creating a tax benefit for this segment.
Intersegment sales and transfers are not significant.
Old National uses a funds transfer pricing ("FTP") system to eliminate the
effect of interest rate risk from the community banking and non-bank services
segments net interest income. The FTP system is used to credit or charge each
segment for the funds the segments create or use. The net FTP credit or charge
is reflected in segment net interest income.
The financial information for each operating segment is reported on the basis
used internally by Old National's management to evaluate performance and is not
necessarily comparable with similar information for any other financial
institution.
16
Summarized financial information concerning segments is shown in the following
table for the three months ended March 31:
- ---------------------------------------------------------------------------------------------------------
Community Non-bank
(dollars in thousands) Banking Services Treasury Other Total
- ---------------------------------------------------------------------------------------------------------
2004
Net interest income $ 70,191 $ 142 $ (1,909) $ (3,313) $ 65,111
Provision for loan losses 7,442 -- 58 -- 7,500
Noninterest income 15,030 23,963 4,099 2,536 45,628
Noninterest expense 59,470 21,161 599 (777) 80,453
Income tax expense (benefit) 4,401 955 (2,079) -- 3,277
Segment profit 13,908 1,989 3,612 -- 19,509
Total assets 5,731,111 121,665 3,276,565 129,993 9,259,334
- ---------------------------------------------------------------------------------------------------------
2003
Net interest income $ 70,212 $ 54 $ (1,460) $ 997 $ 69,803
Provision for loan losses 9,000 -- -- -- 9,000
Noninterest income 20,394 16,953 4,468 1,105 42,920
Noninterest expense 52,464 15,358 241 2,102 70,165
Income tax expense (benefit) 8,516 565 (1,783) -- 7,298
Segment profit 20,626 1,084 4,550 -- 26,260
Total assets 5,908,926 88,330 3,624,637 103,283 9,725,176
- ---------------------------------------------------------------------------------------------------------
NOTE 16 - SUBSEQUENT EVENTS
Subsequent to March 31, 2004, Old National entered into a Commitment Letter to
execute a Whole Loan Sale and Servicing Agreement to sell approximately $427
million of residential real estate loans with servicing retained. This
transaction is expected to be completed by the quarter ended June 30, 2004 and
is not expected to have a material impact on Old National's results of
operations.
17
PART I. FINANCIAL INFORMATION
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
EXECUTIVE SUMMARY
Net income for the quarter ended March 31, 2004, decreased significantly
compared to the quarter ended March 31, 2003, driven primarily by declining
interest rates and slow loan demand that resulted in significant decreases in
both the net interest income and mortgage banking revenue. In addition,
noninterest expense included charges for severance payments to three senior
executives who left the company during the quarter ended March 31, 2004 and an
increase in incentive expense compared to the quarter ended March 31, 2003.
As a result of management's balance sheet strategies, Old National's financial
condition showed a decrease in assets and liabilities at March 31, 2004,
compared to March 31, 2003 and December 31, 2003, reflecting heavy refinancing
of residential real estate loans during 2003, a reduction in the investment
portfolio, and a reduction of certificates of deposits and borrowed funds.
Management uses various indicators such as return on assets, return on equity
and asset quality ratios in order to evaluate the performance of the business.
These are discussed throughout this "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
FINANCIAL BASIS AND FORWARD-LOOKING STATEMENTS
This discussion analyzes Old National's results of operations for the three
months ended March 31, 2004 and 2003, and financial condition as of March 31,
2004, compared to March 31, 2003, and December 31, 2003.
This management's discussion and analysis contains certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements include expressions such as "expects,"
"intends," "believes," "anticipates," and "should," which are statements of
belief as to the expected outcomes of future events. Internal and external
factors that might cause such a difference include, but are not limited to,
market, economic, operational, liquidity, credit and interest rate risks
associated with Old National's business, competition, government legislation and
policies, ability of Old National to execute its business plan and implement the
"Ascend" project initiatives (see "Results of Operations" for further
information on the "Ascend" project), credit quality trends and the ability to
generate loans, and other matters discussed in this management's discussion and
analysis. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. Actual results could materially differ from those presented. Old
National undertakes no obligation to release revisions to these forward-looking
statements or reflect events or conditions after the date on which the forward
looking statement is made or to reflect the occurrence of unanticipated events.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The "Management's Discussion and Analysis of Financial Condition and Results of
Operations," as well as disclosures found elsewhere in this report, are based
upon Old National's consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires Old National
to make estimates and judgements that affect the reported amounts of assets,
liabilities, revenues and expenses. Material estimates that are particularly
susceptible to significant change in the near term relate to the determination
of the allowance for loan losses, the valuation of the mortgage servicing rights
and the valuation of goodwill and intangibles. Actual results could differ from
those estimates.
o Allowance for Loan Losses. The allowance for loan losses is maintained at a
level believed adequate by management to absorb probable losses inherent in
the consolidated loan portfolio. Management's evaluation of the adequacy of
the allowance is an estimate based on reviews of individual loans,
assessments of the impact of current and anticipated economic conditions on
the portfolio and historical loss experience. The allowance represents
management's best estimate, but significant downturns in circumstances
relating to loan quality and economic conditions could result in a
requirement for additional allowance in the near future. Likewise, an
upturn in loan quality and improved economic conditions may allow a
reduction in the required reserve. In either instance, unanticipated
changes could have a significant impact on results of operations.
18
The allowance is increased through a provision charged to operating
expense. Uncollectible loans are charged-off through the allowance.
Recoveries of loans previously charged-off are added to the allowance. A
loan is considered impaired when it is probable that contractual interest
and principal payments will not be collected either for the amounts or by
the dates as scheduled in the loan agreement. Old National's policy for
recognizing income on impaired loans is to accrue interest unless a loan is
placed on nonaccrual status.
o Mortgage Servicing Rights. Mortgage servicing rights are recognized as
separate assets when loans are sold with servicing retained. The total
price of loans sold is allocated between the loans sold and the mortgage
servicing rights retained based on the relative fair values of each. The
fair value of capitalized mortgage servicing rights is estimated by
calculating the present value of estimated future net servicing income
derived from related cash flows. Amortization of capitalized mortgage
servicing rights is determined in proportion to and over the period of
estimated net servicing income of the underlying financial assets.
Impairment of mortgage servicing rights exists if the book value of the
mortgage servicing rights exceed its estimated fair value. In determining
impairment, mortgage servicing rights are stratified by interest rates.
Critical assumptions used in determining fair value include expected
mortgage loan prepayment rates, discount rates and other economic factors,
which are determined based on current market conditions. The expected rates
of mortgage loan prepayments are the most significant factors driving the
value of mortgage servicing rights. Increases in expected mortgage loan
prepayments reduce estimated future net servicing cash flows because the
life of the underlying loan is reduced. Fair values, using estimated
mortgage loan prepayment rates, are derived from a third-party statistical
model. Negative adjustments to the value, if any, are recognized through a
valuation allowance by charges against mortgage servicing income. The use
of a valuation allowance enables the recovery of this value as market
conditions become more favorable.
o Goodwill and Intangibles. For purchase acquisitions, Old National is
required to record the assets acquired, including identified intangible
assets, and the liabilities assumed at their fair value, which in many
instances involves estimates based on third party valuations, such as
appraisals, or internal valuations based on discounted cash flow analyses
or other valuation techniques that may include estimates of attrition,
inflation, asset growth rates or other relevant factors. In addition, the
determination of the useful lives for which an intangible asset will be
amortized is subjective.
Under Statement of Financial Accounting Standards ("SFAS") No. 142
"Goodwill and Other Intangible Assets," goodwill and indefinite-lived
assets recorded must be reviewed for impairment on an annual basis, as well
as on an interim basis if events or changes indicate that the asset might
be impaired. An impairment loss must be recognized for any excess of
carrying value over fair value of the goodwill or the indefinite-lived
intangible with subsequent reversal of the impairment loss being
prohibited. The tests for impairment fair values are based on internal
valuations using management's assumptions of future growth rates, future
attrition, discount rates, multiples of earnings or other relevant factors.
Changes is these factors, as well as downturns in economic or business
conditions, could have a significant adverse impact on the carrying values
of goodwill or intangibles and could result in impairment losses affecting
the financials of the company as a whole and the individual lines of
business in which the goodwill or intangibles reside.
Management believes the accounting estimates related to the allowance for loan
losses; the capitalization, amortization and valuations of mortgage servicing
rights; and the valuation of goodwill and intangibles are "critical accounting
estimates" because: (1) the estimates are highly susceptible to change from
period to period because they require company management to make assumptions
concerning, among other factors, the changes in the types and volumes of the
portfolios, rates of future prepayments, valuation assumptions and anticipated
economic conditions, and (2) the impact of recognizing an impairment or loan
loss could have a material effect on Old National's assets reported on the
balance sheet as well as net income. Management has discussed the development
and selection of these critical accounting estimates with the Audit Committee of
the Board of Directors and the Audit Committee has reviewed the company's
disclosure relating to it in this Management's Discussion and Analysis.
19
RESULTS OF OPERATIONS
Earnings Summary
Old National reported net income of $19.5 million for the three months ended
March 31, 2004, a reduction of 25.7% from the $26.3 million recorded for the
three months ended March 31, 2003. On a diluted per share basis, net income was
$0.29 for the quarter ended March 31, 2004, compared to $0.39 for the quarter
ended March 31, 2003. Old National's return on average assets for the three
months ended March 31, 2004, was 0.84% and return on shareholders' equity was
10.68%, compared to the three months ended March 31, 2003, ratios of 1.11% and
14.03%, respectively.
Earnings for the three months ended March 31, 2004, were impacted primarily by
significant decreases in net interest income resulting from continued weak
commercial loan demand and declining interest rates, decreases in mortgage
banking revenue related to declines in values of mortgage servicing rights as
well as reduced new loan originations, increases to salary expense relating
primarily to severance payments to three senior executives who left Old National
during the quarter and an increase in incentive accruals over the quarter ended
March 31, 2003.
A company-wide program, "Ascend," was announced in late 2003 and, at March 31,
2004, was nearing the implementation phase. The project was conducted with the
assistance of EHS Partners and designed to be an intense evaluation of every
aspect of operations for expense reductions and revenue growth ideas. All
initiatives arising from the project are scheduled to be fully implemented over
the next 18 months and Old National is expecting to realize approximately
$55-$60 million in annualized pre-tax earnings, excluding one-time
implementation charges which will be recognized in the second quarter of 2004.
Approximately 65%-70% of the annualized benefit is expected to come from
efficiency improvement/cost reduction initiatives, including position
eliminations, with the remainder from revenue enhancement initiatives.
Net Interest Income
Net interest income is the difference between interest income earned on
interest-earning assets, such as loans and investments, and interest expense
incurred on interest-bearing liabilities, such as deposits and borrowed funds.
Net interest income and margin are influenced by many factors, primarily the
volume and mix of earning assets, funding sources and interest rate
fluctuations. Other factors include accelerated prepayments of mortgage-related
assets and the composition and maturity of earning assets and interest-bearing
liabilities. Net interest income and net interest margin in the following
discussion is presented on a fully taxable equivalent basis, which adjusts
tax-exempt or nontaxable interest income to an amount that would be comparable
to interest subject to income taxes using the federal statutory tax rate in
effect of 35% for all periods. Net income is unaffected by these taxable
equivalent adjustments as the offsetting increase of the same amount is made in
the income tax section. Net interest income included taxable equivalent
adjustments of $6.1 million and $6.4 million for the three months ended March
31, 2004 and 2003, respectively.
Taxable equivalent net interest income was $71.2 million for the three months
ended March 31, 2004, a 6.5% decrease from the $76.2 million reported for the
same period of 2003. The net interest margin was 3.37% for the three months
ended March 31, 2004, compared to 3.46% reported for the three months ended
March 31, 2003. The reduction in both net interest income and net interest
margin reflects a smaller portfolio of average earning assets and lower levels
of interest rates when compared to the three months ended March 31, 2003.
Average earning assets were $8.461 billion for the three months ended March 31,
2004, compared to $8.796 billion for the same period of 2003, a decrease of 3.8%
or $334.5 million. This decrease resulted primarily from reductions in
investment portfolio assets and residential mortgages.
The overall decrease in interest rates during 2003 and continuing into 2004 had
a significant impact on the mix and yield of earning assets. Driven by lower
rates, many of the company's residential real estate loans were refinanced in
2003, with the new loan production being sold into the secondary loan market,
shrinking the residential loan portfolio. Additionally, commercial and
commercial real estate loans did not grow appreciably during 2003 and the lack
of growth continued into the three months ended March 31, 2004, a result of both
continued weak loan demand in Old National's markets and more stringent loan
underwriting standards. In a continuation of a strategy begun during 2003, the
company reduced its investment portfolio assets in recognition of the narrow
spreads available on those assets in the current rate environment.
20
Provision for Loan Losses
The provision for loan losses is the charge to earnings that management
determines necessary to provide an adequate allowance for losses in the loan
portfolio. The provision for loan losses was $7.5 million for the three months
ended March 31, 2004, compared to $9.0 million for the three months ended March
31, 2003, a result of lower charge-offs during the quarter ended March 31, 2004.
Refer to "Allowance for Loan Losses and Asset Quality" section for further
discussion of non-performing loans, charge-offs and additional items impacting
the provision.
Noninterest Income
Old National generates revenues in the form of noninterest income through fees
and sales commissions from its core banking franchise and other related
businesses, such as trust and asset management, investment products and
insurance. This source of revenue has grown as a percentage of total revenue to
41.2% in the three months ended March 31, 2004, compared to 38.1% in the three
months ended March 31, 2003. Old National will continue to focus on noninterest
income revenue growth while carefully managing balance sheet risk positions to
ensure that Old National is well-positioned for the anticipated turnaround in
market conditions.
Noninterest income for the three months ended March 31, 2004, was $45.6 million,
an increase of $2.7 million, or 6.3% over the $42.9 million reported for the
three months ended March 31, 2003. Total fee and service charge income,
excluding gains on sales of securities, for the quarter ended March 31, 2004,
was $43.6 million compared to $40.2 million for the quarter ended March 31,
2003. Insurance premiums and commissions, the largest component of this category
of revenue, increased to $14.5 million for the three months ended March 31,
2004, compared to $8.2 million for the three months ended March 31, 2003.
Acquisitions of various insurance agencies beginning in the second quarter of
2003, accounted for $4.9 million of the increase. These increases were offset by
a decrease in mortgage banking revenue totaling $4.7 million. This decrease was
mostly attributable to a reduced level of originations for the quarter ended
March 31, 2004 compared to the quarter ended March 31, 2003, due to a lower
level of loan refinancing. Residential real estate loan originations for the
three months ended March 31, 2004, were $145.6 million resulting from 1,493
loans closed compared to $296.5 million resulting from 3,062 loans closed for
the three months ended March 31, 2003. Also during the quarter ended March 31,
2004, a net impairment charge was recognized on the mortgage servicing rights
asset of $1.4 million. This charge in addition to the reduced level of loan
originations resulted in negative mortgage banking revenue for the quarter ended
March 31, 2004.
Noninterest Expense
Noninterest expense for the three months ended March 31, 2004, totaled $80.5
million, an increase of $10.3 million, or 14.7% over the $70.2 million recorded
for the same period of 2003. Salaries and benefits, the largest component of
noninterest expense, totaled $49.3 million for the three months ended March 31,
2004, compared to $41.7 million for the three months ended March 31, 2003, an
increase of $7.6 million. This increase in 2004 resulted from $2.9 million in
severance expense related to three senior executives, including the chief
executive officer, who left the company during the quarter ended March 31, 2004,
$3.0 million directly attributed to acquisitions of insurance agencies that
occurred after the first quarter of 2003 and an increase of incentive expenses
of $2.0 million over the three months ended March 31, 2003.
All other components of noninterest expense totaled $31.2 million for the three
months ended March 31, 2004, compared to the $28.5 million for the three months
ended March 31, 2003, an increase of $2.7 million or 9.4%. Of this increase,
$1.0 million was directly related to the acquisitions of insurance agencies
during 2003 and $1.4 million resulted from write-downs of foreclosed real estate
during the quarter ended March 31, 2004.
As a part of "Ascend," Old National anticipates improvements in noninterest
expense at the program's completion by the end of 2005, however it is expected
that a significant charge for the initial phase of the implementation will occur
in the quarter ending June 30, 2004.
Provision for Income Taxes
Old National records a provision for income taxes currently payable and for
income taxes payable in the future, which arise due to timing differences in the
recognition of certain items for financial statement and income tax purposes.
The major difference between the effective tax rate applied to Old National's
financial statement income and the federal statutory tax rate is caused by
interest on tax-exempt securities and loans. The provision for income taxes, as
a percentage of pre-tax income, was 14.4% for the three months ended March 31,
2004, compared to 21.7% in the three months ended March 31, 2003. The decreased
effective tax rate in 2004 resulted from a higher percentage of tax-exempt
income to total income.
21
FINANCIAL CONDITION
Overview
Old National initiated balance sheet strategies beginning in the second half of
2003 to reduce the assets and liabilities of the company, including a reduction
in the investment portfolio and a reduction in certificates of deposits and
borrowed funds. Old National's assets at March 31, 2004, were $9.259 billion, a
4.8% decrease compared to March 31, 2003, and a 4.0% decrease compared to
December 31, 2003. Investments and loans decreased $441.2 million and $27.3
million, respectively, since March 31, 2003, and decreased $43.7 million and
$10.5 million, respectively, since December 31, 2003. Total liabilities declined
$463.7 million compared to March 31, 2003, and $119.9 million since December 31,
2003. Total shareholders' equity decreased $2.2 million from March 31, 2003, but
showed an increase over December 31, 2003, of $25.4 million due to changes in
the unrealized gains on investment securities.
Earning Assets
Old National's earning assets are comprised of loans and loans held for sale,
investment securities and money market investments. Earning assets were $8.467
billion at March 31, 2004, a decrease of 5.5% from March 31, 2003, and a
decrease of 2.4% since December 31, 2003. The reduction in earning assets is due
to a continuation of balance sheet strategies initiated by management during the
second half of 2003. Old National reduced its investment portfolio in light of
fewer attractive investment opportunities and the company's desire to reduce its
sensitivity to rising interest rates. Total loans decreased only slightly, which
can be attributed to continued weakness in commercial lending, partially offset
by growth in consumer loans. In addition, the decrease in total loans from March
31, 2004, compared to March 31, 2003, was also affected by the sales of $62.7
million of nonaccrual commercial and residential real estate loans during the
second and third quarters of 2003. Money market investments at March 31, 2004,
increased by $9.8 million from March 31, 2003, primarily attributable to
acquisitions that occurred after the first quarter of 2003.
Investment Securities
Old National has classified all investment securities as available-for-sale or
held-to-maturity on the date of purchase. The majority of Old National's
investment securities are classified as available-for-sale, which gives
management the flexibility to sell the securities prior to maturity, if needed,
based on fluctuating interest rates or changes in the company's funding
requirements.
At March 31, 2004, the investment securities portfolio was $2.874 billion
compared to $3.315 billion at March 31, 2003, a decrease of $441.2 million or
13.3%. Investment securities decreased $43.7 million at March 31, 2004, compared
to December 31, 2003, a decrease of 6.0%. Investment securities represented
33.9% of earning assets at March 31, 2004, compared to 37.0% at March 31, 2003,
and 34.2% at December 31, 2003. During the first half of 2003, Old National
increased the investment portfolio as a short-term alternative source of earning
assets to offset declining residential real estate and minimal commercial and
consumer loan growth. During the second half of 2003 and continuing into 2004,
Old National decreased the size of the investment portfolio and used the cash
flows generated by the declining investment portfolio to reduce borrowed funds.
Stronger economic activity and stronger commercial loan demand would likely
result in increased investments in loans and a reduction in the investment
securities portfolio.
The investment securities available-for-sale portfolio had net unrealized gains
of $59.6 million at March 31, 2004, compared to $77.0 million at March 31, 2003.
The decrease of $17.4 million was the result of higher market interest rates and
a smaller portfolio of securities available-for-sale at March 31, 2004.
Unrealized gains increased by $35.9 million due to somewhat reduced market
interest rates resulting in a higher unrealized gain at March 31, 2004, compared
to December 31, 2003.
The investment portfolio had an average life of 4.30 years at March 31, 2004,
compared to 3.59 years at March 31, 2003 and 4.86 years at December 31, 2003.
The average yields on investment securities, on a taxable equivalent basis, were
4.62% for the quarter ended March 31, 2004, compared to 4.99% for the quarter
ended March 31, 2003 and 4.70% for the quarter ended December 31, 2003. This
decrease was primarily due to prepayments of mortgage-backed securities and
calls of higher coupon agency securities that left lower coupon securities in
the portfolio.
22
Residential Loans Held for Sale
Residential loans held for sale were $17.9 million at March 31, 2004, compared
to $53.0 million at March 31, 2003, a decrease of 66.2%, and compared to $16.3
million at December 31, 2003. Residential loans held for sale are loans that are
closed, but not yet sold on the secondary market. The amount of residential
loans held for sale on the balance sheet varies depending on the timing of
movement of originations and loan sales to the secondary market. At March 31,
2004, residential real estate loan origination activity was down as compared to
March 31, 2003, primarily due to a reduced level of loan refinancing.
Commercial and Consumer Loans
Commercial and consumer loans are the largest classification within the earning
assets of Old National representing 54.6% of earning assets at March 31, 2004,
an increase from 51.5% at March 1, 2003, and 54.4% at December 31, 2003. At
March 31, 2004, commercial and commercial real estate loans were $3.445 billion,
a slight decrease of $117.2 million since March 31, 2003, and a decrease of
$22.3 million since December 31, 2003. During the third quarter of 2003, Old
National sold $48.2 million of non-performing commercial loans. Weak loan demand
in Old National's non-urban markets impacted commercial loan growth in 2003 and
continues into 2004.
At March 31, 2004, consumer loans, including automobile loans, personal and home
equity loans and lines of credit, and student loans, increased $125.1 million or
11.9% compared to March 31, 2003, and increased $12.1 million or 4.2% since
December 31, 2003, primarily due to enhancements to marketing and customer
contact programs.
Residential Real Estate Loans
Residential real estate loans, primarily 1-4 family properties, have decreased
in significance to the loan portfolio over the past five years due to higher
levels of loan sales into the secondary market, primarily to Federal Home Loan
Mortgage Corporation and Federal National Mortgage Association. Old National
sells the majority of residential real estate loans it originates as a strategy
to better manage interest rate risk and liquidity. These loans are sold with
loan servicing retained in order to maintain customer relationships and generate
noninterest income and fees. By using this strategy, Old National is able to
recognize an immediate gain in noninterest income versus a small net interest
income spread over a longer period of time. Old National sells the majority of
the residential real estate loans without recourse, currently having less than
1% of loans sold with recourse.
At March 31, 2004, residential real estate loans were $939.2 million, a decrease
of $35.2 million or 3.6% from March 31, 2003. Residential real estate loans
liquidated at high levels during 2003 due to the low interest rate environment
and the related boom in refinancing. Residential real estate loans were
virtually unchanged from December 31, 2003, to March 31, 2004, as new loans
originated and held on the balance sheet replaced the maturities and prepayments
of existing loans. Old National's residential real estate loan portfolio was
also affected by the sales of delinquent loans in the second and third quarters
of 2003. These sales were to improve credit quality and reduce the level of
non-performing loans and are not a part of Old National's ongoing strategy.
Delinquent residential real estate loans of $14.5 million were sold to
independent investors resulting in write-downs of $3.4 million recorded against
the allowance for loan losses. During 2003, Old National developed additional
mortgage products that fit within the company's interest rate risk profile that
will be retained by the bank. As a result of this strategy, Old National has
begun to see increased stabilization of residential real estate loans on the
consolidated balance sheet.
Allowance for Loan Losses and Asset Quality Administration
Old National monitors the quality of its loan portfolio on an on-going basis and
uses a combination of detailed credit assessments by relationship managers and
credit officers, historic loss trends, and economic and business environment
factors in determining its allowance for loan losses. Old National records
provisions for loan losses based on current and projected loans outstanding,
grade changes, mix of loans and expected losses. A detailed loan loss evaluation
on an individual loan basis for the company's highest risk loans is performed
quarterly.
Each month, problem loan reports are prepared and reviewed, which include
borrowers that show indications of being unable to meet debt obligations in the
normal course of business, and loans which have other characteristics deemed by
bank management to warrant special attention or have been criticized by
regulators in the examination process. Classified loans include non-performing
loans, past due 90 days and other problem loans while criticized loans, also
known as special mention loans, are loans that have potential weaknesses that
deserve management's close attention and require specific quarterly reviews by
the bank.
23
Assets determined by the various evaluation processes to be under-performing
receive special attention by Old National management. Under-performing assets
consist of: 1) nonaccrual loans where the ultimate collectibility of interest or
principal is uncertain; 2) loans renegotiated in some manner, primarily to
provide for a reduction or deferral of interest or principal payments because
the borrower's financial condition deteriorated; 3) loans with principal or
interest past due ninety (90) days or more; and 4) foreclosed properties.
A loan is generally placed on nonaccrual status when principal or interest
become 90 days past due unless it is well secured and in the process of
collection, or earlier when concern exists as to the ultimate collectibility of
principal or interest. When loans are classified as nonaccrual, interest accrued
during the year is reversed against earnings; interest accrued in the prior
year, if any, is charged to the allowance for loan losses. Cash received while a
loan is classified as nonaccrual is recorded to principal.
Old National analyzes on a quarterly basis the composition of the loan portfolio
to determine if there is any concentration of loans in any single industry
exceeding 10% of its portfolio, and has determined that no such concentration
exists as of March 31, 2004, as measured by Old National. In addition, Old
National has no exposure to foreign borrowers or lesser-developed countries.
Allowance for Loan Losses and Asset Quality
At March 31, 2004, the allowance for loan losses was $108.6 million, an increase
of $24.6 million compared to $84.0 million at March 31, 2003, and an increase of
$4.0 million compared to $104.6 million at December 31, 2003. As a percentage of
total loans held for investment, the allowance increased to 1.95% at March 31,
2004, from 1.50% at March 31, 2003, and 1.88% from December 31, 2003. The
significantly higher allowance for loan losses at March 31, 2004, compared to
March 31, 2003, was due to Old National's increased provision during 2003,
reflecting higher than normal losses in 2003. Loan collateral values in the
markets served by Old National have deteriorated and recent experience has
elevated the rate of expected future losses compared to earlier periods in 2003.
For the three months ended March 31, 2004, the provision for loan losses
amounted to $7.5 million, a decrease of $1.5 million from the three months ended
March 31, 2003.
Charge-offs, net of recoveries, totaled $3.5 million for the three months ended
March 31, 2004, the lowest level since the second quarter of 2002, and a
decrease of $9.3 million from the three months ended March 31, 2003. Net
charge-offs to average loans were 0.2% for the three months ended March 31,
2004, as compared to 0.9% for the three months ended March 31, 2003. The net
charge-offs were higher for the quarter ended March 31, 2003, primarily due to
the charge-off of a single commercial credit of $8.5 million.
Under-performing assets totaled $114.8 million at March 31, 2004, remaining
relatively unchanged from December 31, 2003, and significantly lower than the
$139.7 million at March 31, 2003. As a percent of total loans and foreclosed
properties, under-performing assets at March 31, 2004, were 2.06%, a reduction
from the December 31, 2003 ratio of 2.12% and the March 31, 2003 ratio of 2.47%.
Nonaccrual loans were $107.1 million at March 31, 2004, compared to $104.6
million at December 31, 2003, and $116.5 million at March 31, 2003. Management
believes that it has appropriately identified and reserved for loan losses
related to nonaccrual loans at March 31, 2004. Approximately $47.2 million of
nonaccrual loans less than thirty days delinquent were contractually performing
at March 31, 2004. Management will continue its efforts to reduce the level of
non-performing loans and may consider the possibility of additional sales of
troubled and non-performing loans, which could result in additional write-downs
to the allowance for loan losses.
While the level of nonaccrual loans has remained relatively unchanged over the
last three quarters, the total portfolio of loans identified by Old National as
problem credits continues to decline. Total classified and criticized loans were
$526.4 million at March 31, 2004, a decrease of $33.2 million from December 31,
2003 and a decrease of $126.0 million from March 31, 2003. While the absolute
level of classified and criticized loans at March 31, 2004, decreased,
management believes it has taken a prudent approach to the evaluation of
under-performing credits and the loan portfolio in general, both in
acknowledging the portfolio's general condition and in establishing the
allowance for loan losses.
24
Old National has been affected by weakness in the economy of its non-urban
markets, which has resulted in minimal growth of commercial loans and tighter
credit underwriting standards. Management expects that trends in nonaccrual
loans will be influenced by the degree to which the economy strengthens. The
longer the significant softness in manufacturing continues, the more stress it
puts on Old National's borrowers, increasing the potential for additional
nonaccrual loans.
The table below shows the various components of under-performing assets:
- ------------------------------------------------------------------------------------------
March 31, December 31,
(dollars in thousands) 2004 2003 2003
- ------------------------------------------------------------------------------------------
Nonaccrual loans $107,122 $116,547 $104,627
Renegotiated loans -- -- --
Past due loans (90 days or more) 2,334 14,112 5,120
Foreclosed properties 5,304 8,999 8,763
- ------------------------------------------------------------------------------------------
Total under-performing assets $114,760 $139,658 $118,510
==========================================================================================
Classified loans (includes non-performing loans,
past due 90 days and other problem loans) $321,328 $445,151 $343,943
Criticized loans 205,101 207,293 215,700
- ------------------------------------------------------------------------------------------
Total criticized and classified loans $526,429 $652,444 $559,643
==========================================================================================
Asset Quality Ratios: (1)
Non-performing loans/total loans (1) (2) 1.92 % 2.07 % 1.87 %
Under-performing assets/total loans and
foreclosed properties (1) 2.06 2.47 2.12
Under-performing assets/total assets 1.24 1.44 1.27
Allowance for loan losses/under-performing assets 94.63 60.14 88.24
- ------------------------------------------------------------------------------------------
(1) Items referring to loans are net of unearned income and include residential
loans held for sale.
(2) Non-performing loans include nonaccrual and renegotiated loans.
Premises and Equipment
Premises and equipment was $194.3 million at March 31, 2004, an increase of
$50.8 million or 35.4% since March 31, 2003, and an increase of $12.9 million or
28.4% since December 31, 2003. The increase is primarily due to the
construction-in-progress of Old National's Evansville-based corporate
headquarters and main banking center. The building is expected to be complete in
the third quarter of 2004 at which time depreciation will begin.
Goodwill and Other Intangible
The non-bank services segment acquired various financial services companies in
the second and third quarters of 2003, increasing goodwill to $129.3 million at
March 31, 2004, from $110.6 million at March 31, 2003. Also as a result of these
acquisitions, other intangible assets related to customer business relationships
increased to $41.1 million at March 31, 2004, from $27.0 million at March 31,
2003. Old National performs impairment testing of goodwill and other intangibles
on an annual basis. As of March 31, 2004 and 2003, there was no impairment.
Funding
Total funding, comprised of deposits and wholesale borrowings, was $8.390
billion at March 31, 2004, a decrease of 4.9% from $8.826 billion at March 31,
2003, and a decrease of 6.7% from $8.532 billion at December 31, 2003. Total
deposits were $6.385 billion at March 31, 2004, an increase of 1.0% compared to
March 31, 2003, and a decrease of 6.7% compared to December 31, 2003. Old
National experienced growth in demand deposits and other low cost transaction
accounts when comparing March 31, 2004 to March 31, 2003, due to the lower rate
environment and customer preference for transaction accounts. When comparing
March 31, 2004 to December 31, 2003, Old National's transaction accounts were
lower due to seasonal deposit declines. Old National experienced a reduction in
time accounts from March 31, 2004, compared to March 31, 2003 and December 31,
2003, due to the maturity of a group of higher interest rate certificates of
deposits during the first quarter of 2004.
Old National uses wholesale funding to augment deposit funding and to help
maintain its desired interest rate risk position. At March 31, 2004, wholesale
borrowings, including short-term borrowings and other borrowings, decreased
20.0% and 6.7% from March 31, 2003, and December 31, 2003, respectively.
Wholesale funding was increased during the first half of 2003 to finance
investment portfolio growth, offset a reduction in certificates of deposits, and
take advantages of favorable interest rates. During the second half of 2003 and
continuing into 2004,
25
wholesale borrowings decreased as the investment portfolio growth slowed.
Wholesale borrowings as a percentage of total funding was 23.9% at March 31,
2004 compared to 28.4% at March 31, 2003 and 23.9% at December 31, 2003. The
lower level of earning assets and stable levels of total core deposits during
the first quarter of 2004 reduced the company's reliance on wholesale funding.
Capital Resources and Regulatory Guidelines
Shareholders' equity totaled $740.9 million at March 31, 2004, essentially
unchanged from March 31, 2003, and an increase of 14.2% compared to December 31,
2003. A higher unrealized gain on investment securities was the primary
contributor to the increase in shareholders' equity from December 31, 2003 to
March 31, 2004.
Old National paid cash dividends of $0.19 per share for the three months ended
March 31, 2004, which decreased equity by $12.6 million, compared to cash
dividends of $0.18 per share for the three months ended March 31, 2003,
(restated for the 5% stock dividend distributed on January 27, 2004), which
decreased equity by $12.1 million. Old National purchased shares of its stock in
the open market under an ongoing repurchase program, reducing shareholders'
equity by $10.1 million during the first quarter of 2004 and $12.6 million
during the first quarter of 2003. Shares reissued for stock options and stock
purchase plans increased shareholders' equity by $7.4 million during the first
quarter of 2004 compared to $6.3 million during the first quarter of 2003.
Old National and the banking industry are subject to various regulatory capital
requirements administered by the federal banking agencies. Old National's
consolidated capital position remains strong as evidenced by the following
comparisons of key industry ratios.
- -------------------------------------------------------------------------------------------------------
Regulatory
Guidelines March 31, December 31,
Minimum 2004 2003 2003
- -------------------------------------------------------------------------------------------------------
Risk-based capital:
Tier 1 capital to total avg assets (leverage ratio) 4.00 % 7.53 % 7.56 % 7.35 %
Tier 1 capital to risk-adjusted total assets 4.00 11.08 11.31 10.96
Total capital to risk-adjusted total assets 8.00 14.76 14.95 14.65
Shareholders' equity to assets N/A 8.00 7.64 7.65
- -------------------------------------------------------------------------------------------------------
ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK MANAGEMENT
Inherent in Old National's balance sheet is market risk, defined as the
sensitivity of income, fair market values and capital to changes in interest
rates, foreign currency exchange rates, commodity prices and other relevant
market rates or prices. The primary market risk to which Old National has
exposure is interest rate risk. Interest rate risk arises because assets and
liabilities may reprice, mature or prepay at different times or based upon
different indices as market interest rates change. Changes in the slope of the
yield curve and the pace of changes in interest rates may also impact net
interest income and the fair value of the balance sheet.
Old National manages interest rate risk within an overall asset and liability
management framework that includes attention to credit risk, liquidity risk and
capitalization. A principal objective of asset/liability management is to manage
the sensitivity of net interest income to changing interest rates. Asset and
liability management activity is governed by a policy reviewed and approved
annually by the Board of Directors. The Board of Directors has delegated the
oversight of the administration of this policy to the Funds Management
Committee, a committee of the Board of Directors, which meets quarterly. In
addition, a second oversight committee, the Balance Sheet Management Committee
comprised of senior executive managers, provides guidance for the execution of
the activities.
Old National uses two modeling techniques to quantify the impact of changing
interest rates on the company, Net Interest Income at Risk and Economic Value of
Equity. Net Interest Income at Risk is used by management and the Board of
Directors to evaluate the impact of changing rates over a two-year horizon while
Economic Value of Equity is more useful for long-term interest rate risk. These
models simulate the likely behavior of the company's net interest income and the
likely change in the company's market value due to changes in interest rates
under various possible interest rate scenarios. Because the models are driven by
expected behavior in various interest rate
26
scenarios and many factors besides market interest rates impact the company's
net interest income and value, Old National recognizes that model outputs are
not guarantees of actual results. For this reason, Old National models many
different combinations of interest rates and balance sheet assumptions to best
understand its overall sensitivity to market interest rate changes.
Old National's Board of Directors, through its Funds Management Committee,
monitors the company's interest rate risk. The Funds Management Committee
establishes policy guidelines for the allowable change in cumulative net
interest income over a two-year period and the change in Economic Value of
Equity in an up or down 200 basis point instantaneous parallel change to the
yield curve (+/- 200 basis point yield curve shock). The current guideline for
Net Interest Income at Risk is +/- 5% of net interest income over a two-year
period in a 200 basis point shock to the yield curve. The current guideline for
the allowable fluctuation in Economic Value of Equity is +/- 12% in a 200 basis
point shock to the yield curve. In addition, Old National has included the
output of its rate risk model in up and down 50 and 100 basis point yield curve
shocks to provide a better understanding of Old National's sensitivity to market
interest rate changes.
At March 31, 2004 and 2003, Old National was slightly outside its policy of
Economic Value of Equity in a -200 basis point interest rate shock. Management
and the Funds Management Committee have determined that this is an acceptable
variance given the unusually low interest rates. The following table shows Old
National's market risk in various interest rate scenarios.
Interest Rate Risk /Static Balance Sheet Model
- ---------------------------------------------------------------------------------------
Estimated 24- Month Estimated Change
Interest Rate Cumulative Impact On in Economic
Change Net Interest Income Value of Equity
---------------------------------- ------------------------------
(basis points) Policy Actual Policy Actual
- ---------------------------------------------------------------------------------------
2004
+200 +/- 5.00 % -4.55 % +/- 12.00 % -8.43 %
+100 -2.01 -2.94
+50 -0.80 -1.61
-50 0.34 % -1.51 %
-100 -0.45 -3.21
-200 +/- 5.00 % -3.87 +/- 12.00 % -13.85
- ---------------------------------------------------------------------------------------
2003
+200 +/- 5.00 % -0.78 % +/- 12.00 % -2.15 %
+100 0.39 0.57
+50 0.42 0.44
-50 0.01 % -2.49 %
-100 -0.73 -5.04
-200 +/- 5.00 % -3.49 +/- 12.00 % -13.36
- ---------------------------------------------------------------------------------------
The company's rate risk model output depicted in the preceding table is based on
a static, or unchanged future balance sheet. Based on management's expected
balance sheet, which includes expected changes in the company's asset and
funding mix, Old National expects net interest income to be impacted positively
by the market's current expectation of gradually increasing interest rates
during 2004 and 2005.
Old National uses derivatives to manage interest rate risk in the ordinary
course of business. See Note 10 to the consolidated financial statements for a
discussion of derivative financial instruments. These transactions serve to
better balance the repricing of assets and liabilities in various rate change
scenarios and protect the company from changes in interest rates.
27
LIQUIDITY MANAGEMENT
The Funds Management Committee of the Board of Directors and the Balance Sheet
Management Committee establish liquidity risk guidelines and monitor liquidity
risk. The objective of liquidity management is to ensure Old National has the
ability to fund balance sheet growth and meet deposit and debt obligations in a
timely and cost-effective manner. Management monitors liquidity through a
regular review of asset and liability maturities, funding sources, and loan and
deposit forecasts to minimize funding risk. The company maintains strategic and
contingency liquidity plans to ensure sufficient available funding to satisfy
requirements for balance sheet growth, properly manage capital markets' funding
sources and to address unexpected liquidity requirements.
Old National's ability to raise funding at competitive prices is influenced by
rating agencies' views of the company's credit quality, liquidity, capital and
earnings. The senior debt ratings of Old National Bancorp and Old National Bank
at March 31, 2004, are shown in the following table.
SENIOR DEBT RATINGS
- ------------------------------------------------------------------------------------------------------------------
Standard and Poor's Moody's Investor Services Fitch, Inc.
---------------------------- ----------------------------- -------------------------
Long-term Short-term Long-term Short-term Long-term Short-term
- ------------------------------------------------------------------------------------------------------------------
Old National Bancorp BBB N/A Baa1 N/A BBB F2
Old National Bank BBB+ A2 A3 P-2 BBB F2
- ------------------------------------------------------------------------------------------------------------------
N/A = not applicable
On January 30, 2004, Fitch, Inc. lowered its ratings on Old National Bancorp and
Old National Bank to BBB and changed its outlook on Old National from "negative"
to "stable."
As of March 31, 2004 Old National Bank had the capacity to borrow $1.037 billion
from the Federal Reserve Bank's discount window. Old National Bank is also a
member of the Federal Home Loan Bank ("FHLB") of Indianapolis, which provides a
source of funding through FHLB advances. Old National also maintains
relationships in capital markets with brokers and dealers to issue certificates
of deposits and short-term and medium-term bank notes. In addition, at March 31,
2004, Old National had $660 million available for issuance under a $1 billion
global bank note program for senior and subordinated debt.
Old National Bancorp, the parent company, has routine funding requirements
consisting primarily of operating expenses, dividends to shareholders, debt
service, net derivative cash flows and funds used for acquisitions. Old National
Bancorp obtains funding to meet its obligations from dividends and management
fees collected from its subsidiaries and the issuance of debt securities. At
March 31, 2004 the parent company's other borrowings outstanding was $274.6
million, compared with $43.4 million at March 31, 2003. This increase in other
borrowings was driven by the issuance of $100 million of fixed-rate medium-term
notes and the reclassification of $161.9 million related to guaranteed preferred
beneficial interests in subordinated debentures, which was partially offset by
medium-term note maturities of $30 million. See Note 8 to the consolidated
financial statements for a discussion of the reclassification. Old National
Bancorp's debt scheduled to mature in the next 12-months is $3.2 million. These
debt obligations are expected to be met through current cash balances and
dividends from subsidiaries. Federal banking laws regulate the amount of
dividends that may be paid by banking subsidiaries without prior approval. For
further information regarding dividend restrictions, see Note 19 of the notes to
the consolidated financial statements of the 2003 annual report. At March 31,
2004, Old National had an SEC shelf registration in place for the issuance of
$200 million preferred securities by a series of Trusts. Old National has issued
$150 million of these securities, called trust preferred securities, and has the
capacity to issue an additional $50 million.
28
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures. Old National's principal
executive officer and principal financial officer have concluded that Old
National's disclosure controls and procedures (as defined in Exchange Act Rule
13a-14(c) under the Securities Exchange Act of 1934, as amended), based on their
evaluation of these controls and procedures as of the end of the period covered
by this Form 10-Q, are effective at the reasonable assurance level as discussed
below to ensure that information required to be disclosed by Old National in the
reports it files under the Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission and that such
information is accumulated and communicated to Old National's management,
including its principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
Limitations on the Effectiveness of Controls. Management, including the
principal executive officer and principal financial officer, does not expect
that Old National's disclosure controls and internal controls will prevent all
error and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within the company have
been detected. These inherent limitations include the realities that judgements
in decision-making can be faulty, and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people or by
management override of the controls.
The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be only
reasonable assurance that any design will succeed in achieving its stated goals
under all potential future conditions, over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.
29
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
ISSUER PURCHASES OF EQUITY SECURITIES
- ----------------------------------------------------------------------------------------------------
Total Number Maximum Number (or
of Shares Approximate Dollar
Total Average Purchased as Value) of Shares
Number Price Part of Publically that May Yet Be
of Shares Paid Per Announced Plans Purchased Under
Period Purchased Share or Programs the Plans or Programs
- ----------------------------------------------------------------------------------------------------
01/01/04 - 01/31/04 346,139 $21.31 346,139 2,965,183
02/01/04 - 02/29/04 94,100 21.28 94,100 2,867,307
03/01/04 - 03/31/04 27,500 22.36 27,500 2,854,710
- ----------------------------------------------------------------------------------------------------
Year-to-date 3/31/04 467,739 $21.55 467,739 2,854,710
====================================================================================================
NOTE: Old National announced on December 4, 2003, that the board of directors
approved the continuation of the company's stock repurchase program up to 5% of
the company's outstanding stock for 2004.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits filed as part of this report and exhibits incorporated herein
by reference to other documents are as follows:
Exhibit
Number
3 (i) Articles of Incorporation of Old National (incorporated by
reference to Exhibit 3(i) of Old National's Quarterly Report on Form
10-Q for the quarter ended June 30, 2002).
3 (ii) By-Laws of Old National, amended and restated effective April 22,
2004, are filed herewith.
4 Instruments defining rights of security holders, including
indentures.
Form of Indenture between Old National and Bank One Trust Company,
NA, as trustee (incorporated by reference to Exhibit 4.1 to Old
National's Registration Statement on Form S-3, Registration No.
333-87573, filed with the Securities and Exchange Commission on
September 22, 1999).
30
10 Material contracts
(a) Form of Severance Agreement for Thomas F. Clayton, Michael R.
Hinton, Daryl D. Moore and John S. Poelker, as amended, is filed
herewith.*
(b) Form of Change of Control Agreement for Thomas F. Clayton,
Michael R. Hinton, Daryl D. Moore and John S. Poelker, as
amended, is filed herewith.*
(c) Severance Agreement, between Old National and James A. Risinger,
is filed herewith.*
(d) Old National Bancorp 1999 Equity Incentive Plan (incorporated by
reference to Old National's Form S-8 filed on July 20, 2001).*
(e) Construction Manager Contract, dated as of May 30, 2002, between
Old National Bancorp and Industrial Contractors, Inc.
(incorporated by reference to Old National's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2002).
(f) Owner-Contractor Agreement, dated as of October 11, 2002, between
Old National Bancorp and Industrial Contractors, Inc.
(incorporated by reference to Old National's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2002).
(g) Summary of Old National Bancorp's Outside Director Compensation
Program (incorporated by reference to Old National's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2003).*
31.1 Certification of Principal Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Principal Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Principal Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
--------------
* Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K filed during the quarter ended March 31, 2004.
Old National filed a current report on Form 8-K dated February 18, 2004.
The purpose of this Form 8-K was to report the retirement of Old National's
Chairman and Chief Executive Officer, James A. Risinger.
Old National filed a current report on Form 8-K dated January 23, 2004. The
purpose of this Form 8-K was to report the transcript of the conference
call held by Old National for the fourth quarter 2003.
Old National filed a current report on Form 8-K dated January 22, 2004. The
purpose of this Form 8-K was to report Old National's results for the
fourth quarter 2003.
31
SIGNATURES
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 thereunto duly authorized.
OLD NATIONAL BANCORP
--------------------
(Registrant)
By: /s/ John S. Poelker
--------------------------------
John S. Poelker
Executive Vice President and Chief Financial Officer
Duly Authorized Officer and Principal Financial Officer
Date: May 10, 2004
32
EX-3.II
2
amendedbylawsonbc1qtr2004.htm
BY-LAWS OF OLD NATIONAL BANCORP
BY-LAWS
AMENDED AND RESTATED
BY-LAWS
OF
OLD NATIONAL BANCORP
ARTICLE I
Section 1. Name. The name of the corporation is Old National Bancorp ("Corporation").
Section 2. Registered Office and Registered Agent. The post-office address of the registered office of the Corporation is 420 Main Street, Evansville, Indiana 47705, and the name of its Registered Agent at such office is the Corporate Secretary or his designated representative.
Section 3. Seal. The seal of the Corporation shall be circular in form and mounted upon a metal die, suitable for impressing the same upon paper. About the upper periphery of the seal shall appear the words "Old National Bancorp" and about the lower periphery thereof the word "Indiana". In the center of the seal shall appear the word "Seal".
ARTICLE II
The fiscal year of the Corporation shall begin each year on the first day of January and end on the last day of December of the same year.
ARTICLE III
Capital Stock
Section 1. Number of Shares and Classes of Capital Stock. The total number of shares of capital stock which the Corporation shall have authority to issue shall be as stated in the Articles of Incorporation.
Section 2. Consideration for No Par Value Shares. The shares of stock of the Corporation without par value shall be issued or sold in such manner and for such amount of consideration as may be fixed from time to time by the Board of Directors. Upon payment of the consideration fixed by the Board of Directors, such shares of stock shall be fully paid and nonassessable.
Section 3. Consideration for Treasury Shares. Treasury shares may be disposed of by the Corporation for such consideration as may be determined from time to time by the Board of Directors.
Section 4. Payment for Shares. The consideration for the issuance of shares of capital stock of the Corporation may be paid, in whole or in part, in money, in other property, tangible or intangible, or in labor actually performed for, or services actually rendered to the Corporation; provided, however, that the part of the surplus of the Corporation which is transferred to stated capital upon the issuance of shares as a share dividend shall be deemed to be the consideration for the issuance of such shares. When payment of the consideration for which a share was authorized to be issued shall have been for which a share was authorized to be issued shall have been received by the Corporation, or when surplus shall have been transferred to stated capital upon the issuance of a share dividend, such share shall be declared and taken to be fully paid and not liable to any further call or assessment, and the holder thereof shall not be liable for any further payments thereon. In the absence of actua
l fraud in the transaction, the judgment of the Board of Directors as to the value of such property, labor or services received as consideration, or the value placed by the Board of Directors upon the corporate assets in the event of a share dividend, shall be conclusive. Promissory notes, uncertified checks, or future services shall not be accepted in payment or part payment of the capital stock of the Corporation, except as permitted by the Indiana Business Corporation Law.
Section 5. Certificate for Shares. Each holder of capital stock of the Corporation shall be entitled to a stock certificate, signed by the Chairman of the Board, the President, the CEO or a Vice President and the Secretary or any Assistant Secretary of the Corporation, with the seal of the Corporation thereto affixed, stating the name of the registered holder, the number of shares represented by such certificate, the par value of each share of stock or that such shares of stock are without par value, and that such shares are fully paid and nonassessable. If such shares are not fully paid, the certificates shall be legibly stamped to indicate that percent which has been paid, and as further payments are made, the certificate shall be stamped accordingly.
If the Corporation is authorized to issue shares of more than one class, every certificate shall state the kind and class of shares represented thereby, and the relative rights, interests, preferences and restrictions of such class, or a summary thereof; provided, that such statement may be omitted from the certificate if it shall be set forth upon the face or back of the certificate that such statement, in full, will be furnished by the Corporation to any shareholder upon written request and without charge.
Section 6. Facsimile Signatures. If a certificate is countersigned by the written signature of a transfer agent other than the Corporation or its employee, the signatures of the officers of the Corporation may be facsimiles. If a certificate is countersigned by the written signature of a registrar other than the Corporation or its employee, the signatures of the transfer agent and the officers of the corporation may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of its issue.
Section 7. Transfer of Shares. The shares of capital stock of the Corporation shall be transferable only on the books of the Corporation upon surrender of the certificate or certificates representing the same, properly endorsed by the registered holder or by his duly authorized attorney or accompanied by proper evidence of succession, assignment or authority to transfer.
Section 8. Cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be cancelled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so cancelled, except in cases provided for in Section 10 of this Article III.
Section 9. Transfer Agent and Registrar. The Board of Directors may appoint a transfer agent and a registrar for each class of capital stock of the Corporation and may require all certificates representing such shares to bear the signature of such transfer agent and registrar. Shareholders shall be responsible for notifying the transfer agent and registrar for the class of stock held by such shareholder in writing of any changes in their addresses from time to time, and failure so to do shall relieve the Corporation, its shareholders, directors, officers, transfer agent and registrar of liability for failure to direct notices, dividends, or other documents or property to an address other than the one appearing upon the records of the transfer agent and registrar of the Corporation.
Section 10. Lost, Stolen or Destroyed Certificates. The Corporation may cause a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to give the Corporation a bond in such sum and in such form as it may direct to indemnify against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed or the issuance of such new certificate. The Corporation, in its discretion, may authorize the issuance of such new certific
ates without any bond when in its judgment it is proper to do so.
Section 11. Registered Shareholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of such shares to receive dividends, to vote as such owner, to hold liable for calls and assessments, and to treat as owner in all other respects, and shall not be bound to recognize any equitable or other claims to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Indiana.
Section 12. Options to Officers and Employees. The issuance, including the consideration, of rights or options to directors, officers or employees of the Corporation, and not to the shareholders generally, to purchase from the Corporation shares of its capital stock shall be approved by the shareholders or shall be authorized by and consistent with a plan approved by the shareholders.
ARTICLE IV
Meetings of Shareholders
Section 1. Place of Meeting. Meetings of shareholders of the Corporation shall be held at such place, within or without the State of Indiana, as may from time to time be designated by the Board of directors, or as may be specified in the notices or waivers of notice of such meetings.
Section 2. Annual Meeting. The annual meetings of shareholders for the election of Directors, and for the transaction of such other business as the Chairman of the Board shall determine may properly come before the meeting, shall be held on such day that is not a holiday, as the Board of Directors may set by resolution, but not later than the end of the fifth month following the close of the fiscal year of the Corporation. Failure to hold the annual meeting at the designated time shall not work any forfeiture or dissolution of the Corporation, and shall not affect otherwise valid corporate acts.
Section 3. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Articles of Incorporation, may be called by the Board of Directors, the Chairman of the Board, CEO or the President and shall be called by the Chairman of the Board, CEO, President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of shareholders holding of record not less than one-fourth of all the shares outstanding and entitled by the Articles of Incorporation to vote on the business for which the meeting is being called.
Section 4. Notice of Meetings. A written or printed notice, stating the place, day and hour of the meeting, and in case of a special meetings, or when required by any other provision of the Indiana Business Corporation Law, or of the Articles of Incorporation, or these By-Laws, as now or hereafter amended, the purpose or purposes for which the meeting is called, shall be delivered or mailed by the Secretary, or by the officers or persons calling the meeting, to each shareholder of record entitled by the Articles of Incorporation, and by the Indiana Business Corporation Law, as now or hereafter amended, to vote at such meeting, as such address as appears upon the records of the Corporation, not less than ten (10) days nor more than sixty (60) days before the date of the meeting. Notice of any such meetings may be waived in writing by any shareholder, if the waiver sets forth in reasonable detail the purpose or purposes for which the meeting is called, and the time and place thereof
. Attendance at any meeting in person, or by proxy, shall constitute a waiver of notice of such meeting. Each shareholder, who has in the manner above provided waived notice of a shareholders' meeting, or who personally attends a shareholders' meeting, or is represented thereat by a proxy authorized to appear by an instrument of proxy, shall be conclusively presumed to have been given due notice of such meeting. Notice of any adjourned meeting of stockholders shall not be required to be given if the time and place thereof are announced at the meeting at which the adjournment is taken, except as may be expressly required by law.
Section 5. Addresses of Shareholders. The address of any shareholder appearing upon the records of the Corporation shall be deemed to be the latest address of such shareholder appearing on the records maintained by the Transfer Agent for the class of stock held by such shareholder.
Section 6. Voting at Meetings.
(a) Quorum. The holders of record of a majority of the issued and outstanding stock of the Corporation entitled to vote at such meeting, present in person or by proxy, shall constitute a quorum at all meetings of stockholders for the transaction of business, except where otherwise provided by law, the Articles of Incorporation or these By-Laws. In the absence of a quorum, any officer entitled to preside at, or act as secretary of, such meetings shall have the power to adjourn the meeting from time to time until a quorum shall be constituted. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting, but only those stockholders entitled to vote at the original meeting shall be entitled to vote at any adjournment or adjournments thereof unless a new record date is fixed by the Board of Directors for the adjourned meeting.
(b) Voting Rights. Except as otherwise provided by law or by the provisions of the Articles of Incorporation, every shareholder shall have the right at every shareholders' meeting to one vote for each share of stock having voting power, registered in his name on the books of the Corporation on the date for the determination of shareholders entitled to vote, on all matters coming before the meeting including the election of directors. At any meeting of the shareholders, every shareholder having the right to vote shall be entitled to vote in person, or by proxy executed in writing by the shareholder or a duly authorized attorney in fact and bearing a date not more than eleven months prior to its execution, unless a longer time is expressly provided therein.
(c) Required Vote. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the Indiana Business Corporation Law or of the Articles of Incorporation or by these By-Laws, a greater vote is required, in which case such express provision shall govern and control the decision of such question.
Section 7. Voting List. The Transfer Agent of the Corporation shall make, at least five days before each election of directors, a complete list of the shareholders entitled by the Articles of Incorporation, as now or hereafter amended, to vote at such election, arranged in alphabetical order, with the address and number of shares so entitled to vote held by each, which list shall be on file at the principal office of the Corporation and subject to inspection by any shareholder. Such list shall be produced and kept open at the time and place of election and subject to the inspection of any shareholder during the holding of such election. The original stock register or transfer book, or a duplicate thereof kept in the State of Indiana, shall be the only evidence as to who are the shareholders entitled to examine such list or the stock ledger or transfer book or to vote at any meeting of the shareholders.
Section 8. Fixing of Record Date to Determine Shareholders Entitled to Vote. The Board of Directors may prescribe a period not exceeding 70 days prior to meetings of the shareholders during which no transfer of stock on the books of the corporation may be made; or, in lieu of prohibiting the transfer of stock, may fix a day and hour not more than 70 days prior to the holding of any meeting of shareholders as the time of which shareholders entitled to notice of, and to vote, at such meeting shall be determined, and all persons who are holders of record of voting stock at such time, and no others, shall be entitled to notice of, and to vote at such meeting. In the absence of such a determination, such date shall be ten days prior to the date of such meeting
Section 9. Director Nominations; Corporate Governance and Nominating Committee.
(a) All nominations for election as Directors of the Corporation shall be made only by the Board of Directors in accordance with this Section. The Corporate Governance and Nominating Committee of the Board of Directors shall submit to the entire Board of Directors its recommendation of nominees for election as Directors of the Corporation not less than sixty (60) days prior to each annual or special meeting of shareholders at which Directors will be elected.
(b) The Board of Directors, after considering the recommendations of the Corporate Governance and Nominating Committee, shall have the sole authority for nominating persons to stand for election as Directors at any annual or special meeting of shareholders.
(c) The Corporate Governance and Nominating Committee of the Board of Directors shall consider appropriate candidates for election as Directors of the Corporation and shall recommend to the entire Board of Directors nominees for election as Directors in connection with any annual or special meeting of shareholders at which Directors are elected. The Corporate Governance and Nominating Committee also shall consider appropriate candidates and recommend to the entire Board of Directors persons to fill Director vacancies and newly-created directorships. In addition to the foregoing, and not by way of limitation, the Corporate Governance and Nominating Committee will be responsible for recruiting potential Director candidates, recommending changes to the entire Board of Directors concerning the size, composition and responsibilities of the Board of Directors and reviewing suggestions of shareholders regarding nominees for election as Directors. All such suggestions of shareholders must be submitted in writing
to the Corporate Governance and Nominating Committee at the Corporation's principal executive offices not less than one hundred twenty (120) days in advance of the date of the annual or special meeting of shareholders at which Directors shall be elected. All written suggestions of shareholders must set forth (i) the name and address of the shareholder making the suggestion, (ii) the number and class of shares owned by the such shareholder, (iii) the name, address and age of the nominee for election as director, (iv) the nominee's principal occupation during the five (5) preceding the date of the suggestion, (v) all other information concerning the nominee as would be required to be included in the proxy statement used to solicit proxies for the election of the nominee, and (vi) such other information as the Corporate Governance and Nominating Committee may reasonably request. A consent of the nominee to serve as a Director of the Corporation, if elected, must also be included with the written suggestion.
(d) The Corporate Governance and Nominating Committee has absolute power and discretion in carrying out its duties prescribed herein, including, but not limited to, recommending to the entire Board of Directors nominees for election as directors at any annual or special meeting of shareholders and accepting or rejecting suggestions of shareholders of nominees for election as Directors.
- All nominations and suggestions of shareholders with respect to nominees for election as Directors of the Corporation must be made in accordance with the provisions of this Section. Any suggestions of shareholders not made in accordance with this Section are not required to be considered by the Corporate Governance and Nominating Committee. Any nominations for election as Directors at any annual or special meeting of shareholders not made in accordance with this Section may be disregarded by the Chairman of the meeting, in his discretion, and, upon his instructions, the tellers or inspectors of shareholder votes may disregard all votes cast for each such nominees.
Section 10. Order of Business. The order of business and the items of business being conducted at all meetings of shareholders shall be as determined by the Chairman of the Board.
ARTICLE V
Board of Directors
Section 1. Election, Term and Number. The directors of the Corporation shall be elected, divided into classes and hold terms as provided in the Articles of Incorporation of the Corporation in effect from time to time. Except with respect to filling vacancies occurring on the Board of Directors, the number of directors of the Corporation to be elected by the holders of the shares of capital stock entitled by the Articles of Incorporation of the Corporation to elect directors shall be twelve (12), unless changed by amendment of this Section. The Board of Directors shall have the discretion to assign directors to individual classes as nearly equal in number as possible.
Section 2. Vacancies. Any vacancy occurring on the Board of Directors, whether caused by removal, resignation, death, incapacity, increase in the number of directors or otherwise, may be filled by the affirmative vote of not less than a majority of the remaining directors then in office, even though such directors remaining in office may constitute less than a quorum of the Board of Directors. The term of a director chosen to fill a vacancy shall expire at the end of the term for which the director's predecessor was elected or appointed or, in the case of an increase in the number of directors, shall expire at the end of the term of the class of directors in which the vacancy shall occur.
Section 3. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places, whether within or outside the State of Indiana, as may be fixed by the Directors, or in the absence of any action by the Board of Directors, by the Chairman of the Board. Such regular meetings of the Board of Directors may be held without notice or upon such notice as may be fixed by the Directors.
Section 4. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, CEO and the President, or by not less than a majority of the members of the Board of Directors. Notice of the time and place, either within or outside the State of Indiana, of a special meeting shall be served upon or telephoned or faxed to each Director at least twenty-four hours, or mailed, telegraphed or cabled to each Director at his usual place of business or residence at least forty-eight hours, prior to the time of the meeting. Directors, in lieu of such notice, may sign a written waiver of notice either before the time of the meeting, at the meeting or after the meeting. Attendance by a director in person at any such special meeting shall constitute a waiver of notice.
Section 5. Quorum. A majority of the actual number of Directors elected and qualified, from time to time, shall be necessary to constitute a quorum for the transaction of any business except the filling of vacancies, and the act of a majority of the Directors present at the meeting, at which a quorum is present, shall be the act of the Board of Directors, unless the act of a greater number is required by the Indiana Business Corporation Law, by the Articles of Incorporation, or by these By-Laws. A Director, who is present at a meeting of the Board of Directors, at which action on any corporate matter is taken, shall be conclusively presumed to have assented to the action take, unless (a) his dissent shall be affirmatively stated by him at and before the adjournment of such meeting (in which event the fact of such dissent shall be entered by the secretary of the meeting in the minutes of the meeting), or (b) he shall forward such dissent by registered mail to the Secretary of the Corporat
ion immediately after the adjournment of the meeting. The right of dissent provided for by either clause (a) or clause (b) of the immediately preceding sentence shall not be available, in respect of any matter acted upon at any meeting, to a Director who voted at the meeting in favor of such matter and did not change his vote prior to the time that the result of the vote on such matter was announced by the chairman of such meeting.
Section 6. Consent Action by Directors. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if prior to such action a written consent to such action is signed by all members of the Board of Directors or such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or committee.
Section 7. Removal of Directors. Any or all directors (exclusive of directors who may be elected by the holders of any one or more series of Preferred Stock) may be removed, with or without cause, only by (i) the affirmative vote of the holders of not less than two-thirds (2/3) of the outstanding shares of common stock of the Corporation entitled to vote in the election of directors, at a shareholders' meeting called for that purpose, or (ii) the affirmative vote of not less than two-thirds (2/3) of the actual number of directors elected and qualified and then in office.
Section 8. Dividends. The Board of Directors shall have power, subject to any restrictions contained in the Indiana Business Corporation Law or in the Articles of Incorporation and out of funds legally available therefore, to declare and pay dividends upon the outstanding capital stock of the Corporation as and when they deem expedient. Before declaring any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time in their absolute discretion deem proper for working capital, or as a reserve or reserves to meet contingencies or for such other purposes as the Board of Directors shall deem conducive to the interests of the Corporation and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.
Section 9. Fixing of Record Date to Determine Shareholders Entitled to Receive Corporate Benefits. The Board of Directors may fix a day and hour not exceeding 50 days preceding the date fixed for payment of any dividend or for the delivery of evidence of rights, or for the distribution of other corporate benefits, or for a determination of shareholders for any other purpose, as a record time for the determination of the shareholders entitled to receive any such dividend, rights or distribution, and in such case only shareholders of record at the time so fixed shall be entitled to receive such dividend, rights or distribution. If no record date is fixed for the determination of shareholders entitled to receive payment of a dividend, the end of the day on which the resolution of the Board of Directors declaring such dividend is adopted shall be the record date for such determination.
Section 10. Interest of Directors in Contracts. Any contract or other transaction between the Corporation or any corporation in which this Corporation owns a majority of the capital stock shall be valid and binding, notwithstanding that the directors or officers of this Corporation are identical or that some or all of the directors or officers, or both, are also directors or officers of such other corporation.
Any contract or other transaction between the Corporation and one or more of its directors or members or employees, or between the Corporation and any firm of which one or more of its directors are members or employees or in which they are interested, or between the Corporation and any corporation or association of which one or more of its directors are stockholders, members, directors, officers, or employees or in which they are interested, shall be valid for all purposes, notwithstanding the presence of such director of directors at the meeting of the Board of Directors of the Corporation which acts upon, or in reference to, such contract or transaction and notwithstanding his or their participation in such action, if the fact of such interest shall be disclosed or known to the Board of Directors and the Board of Directors shall authorize, approve and ratify such contract or transaction by a vote of a majority of the directors present, such interested director or directors to be counted in determini
ng whether a quorum is present, but not to be counted in calculating the majority of such quorum necessary to carry such vote. This Section shall not be construed to invalidate any contact or other transaction which would otherwise be valid under the common and statutory law applicable thereto.
Section 11. Committees. The Board of Directors may, by resolution adopted by a majority of the actual number of Directors elected and qualified, from time to time, designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in the resolution, the Articles of Incorporation, or these By-Laws, may exercise all of the authority of the Board of Directors of the Corporation, including, but not limited to, the authority to issue and sell or approve any contract to issue and sell, securities or shares of the Corporation or designate the terms of a series of a class of securities or shares of the Corporation. The terms which may be affixed by each such committee include, but are not limited to, the price, dividend rate, and provisions of redemption, a sinking fund, conversion, voting, or preferential rights or other features of securities or class or series of a class of shares. Each such committee may have full power to adopt a
final resolution which sets forth those terms and to authorize a statement of such terms to be filed with the Secretary of State. However, no such committee has the authority to declare dividends or distributions, amend the Articles of incorporation or the By-Laws, approve a plan of merger or consolidation even if such plan does not require shareholder approval, reduce earned or capital surplus, authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors, or recommend to the shareholders a voluntary dissolution of the Corporation or a revocation thereof. No member of any such committee shall continue to be a member thereof after he ceases to be a Director of the Corporation. The calling and holding of meetings of any such committee and its method of procedure shall be determined by the Board of Directors. A member of the Board of Directors shall not be liable for any action taken by any such committee if he is not a member of that commit
tee and has acted in good faith and in a manner he reasonable believes is in the best interest of the Corporation.
Section 12. Participation in Meetings by Telephone. A member of the Board or any committee thereof may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute presence in person at such meeting.
Section 13. Qualifications.
(a) A director of the Corporation, upon reaching 70 years of age, shall no longer qualify to serve as a director and shall, automatically and without the need for any resignation or other action, be deemed to have resigned from the Board of Directors effective immediately upon reaching such age. Any vacancy occurring in the Board of Directors by virtue of a director reaching 70 years of age shall be filled in accordance with these By-Laws.
(b) The Board of Directors may establish other qualifications for Directors in its Corporate Governance Guidelines.
ARTICLE VI
Officers
Section 1. Principal Officers. The principal officers of the Corporation shall be a Chairman of the Board, a CEO, a President, one or more Vice Presidents, a Treasurer and a Secretary. The Corporation may also have, at the discretion of the Board of Directors, such other subordinate officers as may be appointed in accordance with the provisions of these By-Laws. Any two or more offices may be held by the same person, except the duties of President and Secretary shall not be performed by the same person. No person shall be eligible for the office of Chairman of the Board who is not a director of the Corporation.
Section 2. Election and Term of Office. The principal officers of the Corporation shall be chosen annually by the Board of Directors. Each such officer shall hold office until his successor shall have been duly chosen and qualified, or until his death, or until he shall resign, or shall have been removed in the manner hereinafter provided.
Section 3. Removal. Any principal officer may be removed, either with or without cause, at any time, by resolution adopted at any meeting of the Board of Directors by a majority of the actual number of Directors elected and qualified from time to time.
Section 4. Subordinate Officers. In addition to the principal officers enumerated in Section 1 of this Article VI, the Corporation may have one or more Assistant Treasurers, one or more Assistant Secretaries and such other officers, agents and employees as the Chairman of the Board, CEO, President or the Board of Directors may deem necessary, each of whom shall hold office for such period, may be removed with or without cause, have such authority, and perform such duties as the Chairman of the Board, CEO, President, or the Board of Directors may from time to time determine. The Chairman of the Board, CEO, President, and the Board of Directors shall each have the power to appoint and to remove any such subordinate officers, agents or employees.
Section 5. Resignations. Any officer may resign at any time by giving written notice to the Chairman of the Board, Board of Directors, CEO, President, or to the Secretary. Any such resignation shall take effect upon receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 6. Vacancies. Any vacancy in any office for any cause may be filled for the unexpired portion of the term in the manner prescribed in these By-Laws for election or appointment to such office for such term.
Section 7. Chairman of the Board. The Chairman of the Board shall be chosen from among the Directors. The Chairman of the Board shall preside at all meetings of shareholders and at all meetings of the Board of Directors.
Section 8. Chief Executive Officer. One of the principal officers of the Corporation shall be designated as the Chief Executive Officer (CEO). The CEO shall have general responsibility for the overall affairs of the Corporation, subject to the control of the Board of Directors. In general, he shall perform all duties and have all the powers incident to the office of CEO and all such other duties and powers as, from time to time, may be assigned to him by the Board of Directors.
Section 9. President. The President shall perform all duties and have all the powers as, from time to time, may be assigned to him by the Board of Directors, Chairman of the Board, or CEO. Subject to the control and direction of the Board of Directors, Chairman of the Board, or CEO, the President may enter into any agreement and may execute and deliver any agreement, instrument or document in the name and on behalf of the Corporation.
Section 10. Vice Presidents. The Corporation shall have such Vice Presidents as the Board of Directors, Chairman of the Board, CEO or President may determine. The Vice Presidents shall perform such duties and have such powers as the Chairman, the CEO, the President or the Board of Directors may from time to time assign.
Section 11. Treasurer. The Treasurer shall perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned by the Chairman, CEO, President, CFO or the Board of Directors.
Section 12. Secretary. The Secretary shall keep or cause to be kept in the books provided for that purpose the minutes of the meetings of the shareholders and of the Board of Directors; shall duly give and serve all notices required to be given in accordance with the provisions of these By-Laws and by the Indiana Business Corporation Law; shall be custodian of the records and of the seal of the Corporation and see that the seal is affixed to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these By-Laws; and, in general, shall perform all duties incident to the office of Secretary and such other duties as may, from time to time, be assigned to him by the Chairman, the President or the Board of Directors.
Section 13. Salaries. The salaries of the principal officers shall be fixed from time to time to by the Board of Directors, and the salaries of any subordinate officers may be fixed by the Chairman, CEO or the President.
Section 14. Voting Corporation's Securities. Unless otherwise ordered by the Board of Directors, Chairman of the Board, CEO, President, any Executive Vice President or Senior Vice President, or the Secretary, and each of them acting alone, are appointed attorneys and agents of the Corporation, and shall have full power and authority in the name and on behalf of the Corporation, to attend, to act, and to vote all stock, or other securities entitled to be voted at any meetings of security holders of corporations, or associations in which the Corporation may hold securities, in person or by proxy, as a stockholder or otherwise, and at such meetings shall possess and may exercise any and all rights and powers incident to the ownership of such securities, and which as the owner thereof the Corporation might have possessed and exercised, if present or to consent in writing to any action by any such other corporation, or association. The Board of Directors by resolution from time to t
ime may confer like powers upon any other person or persons.
ARTICLE VII
Indemnification
Section 1. Indemnification of Directors, Officers and Employees. Every person who is or was a director, officer or employee of this Corporation or of any other corporation for which he is or was serving in any capacity at the request of this Corporation shall be indemnified by this Corporation against any and all liability and expense that may be incurred by him in connection with or resulting from or arising out of any claim, action, suit or proceeding, provided that such person is wholly successful with respect thereto or acted in good faith in what he reasonably believed to be in or not opposed to the best interests of this Corporation or such other corporation, as the case may be, and, in addition, in any criminal action or proceeding in which he had no reasonable cause to believe that his conduct was unlawful. As used herein, "claim, action, suit or proceeding" shall include any claim, action, suit or proceeding (whether brought by or in the right of this Corporation or such oth
er corporation or otherwise), civil, criminal, administrative or investigative, whether actual or threatened or in connection with an appeal relating thereto, in which a director, officer or employee of this Corporation may become involved, as a party or otherwise, (i) by reason of his being or having been a director, officer or employee of this Corporation or such other corporation or arising out of his status as such or (ii) by reason of any past or future action taken or not taken by him in any such capacity, whether or not he continues to be such at the time such liability or expense is incurred.
The terms "liability" and "expense" shall include, but shall not be limited to, attorneys' fees and disbursements, amounts or judgments, fines or penalties, and amounts paid in settlement by or on behalf of a director, officer or employee, but shall not in any event include any liability or expenses on account of profits realized by him in the purchase or sale of securities of the Corporation in violation of the law. The termination of any claim, action, suit or proceeding, by judgment, settlement (whether with or without court approval) or conviction or upon a plea of guilty or of nolo contendere, or its equivalent, shall not create a presumption that a director, officer or employee did not meet the standards of conduct set forth in this paragraph.
Any such director, officer or employee who has been wholly successful with respect to any such claim, action, suit or proceeding shall be entitled to indemnification as a matter of right. Except as provided in the preceding sentence, any indemnification hereunder shall be made only if (i) the Board of Directors acting by a quorum consisting of Directors who are not parties to or who have been wholly successful with respect to such claim, action, suit or proceeding shall find that the director, officer or employee has met the standard of conduct.
If several claims, issues or matters of action are involved, any such person may be entitled to indemnification as to some matters even though he is not entitled as to other matters.
The Corporation may advance expenses to or, where appropriate, may at its expense undertake the defense of any such director, officer or employee upon receipt of an undertaking by or on behalf of such person to repay such expenses if it should ultimately be determined that he is not entitled to indemnification hereunder.
The provisions of this Section shall be applicable to claims, actions, suits or proceedings made or commenced after the adoption hereof, whether arising from acts or omissions to act during, before or after the adoption hereof.
The rights of indemnification provided hereunder shall be in addition to any rights to which any person concerned may otherwise be entitled by contract or as a matter of law and shall inure to the benefit of the heirs, executors and administrators of any such person.
The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation as a director, officer, employee or agent of another corporation against any liability asserted against him and incurred by him in any capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Section or otherwise.
ARTICLE VIII
Amendments
The power to make, alter, amend, or repeal these By-Laws is vested in the Board of Directors, but the affirmative vote of a majority of the actual number of directors elected and qualified, from time to time, shall be necessary to effect any alteration, amendment or repeal of these By-Laws.
EX-10.A
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severanceform.txt
FORM OF SEVERANCE AGREEMENT
Exhibit 10 (a)
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement") is made and entered into by
and between Old National Bancorp (including all subsidiaries and affiliates)
(the "Company") and Full Name (the "Executive").
WHEREAS, the Company desires to assure continuity of its management, to
enable its executives to devote their full attention to management
responsibilities and to help the Board of Directors assess options and advise as
to the best interest of the Company and its shareholders without being
influenced by the uncertainties of their own situations, and to demonstrate to
executives the interests of the Company in their well-being and fair treatment
in the event of a termination without cause by the Company; and
WHEREAS, to that end, the Company desires to assure the Executive that
he will receive certain benefits in the case of the Executive's termination
without cause by the Company.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Executive and the Company agree as follows:
1. Term. The term of this Agreement shall begin on the date hereof and
shall continue until terminated (the "Term"). This Agreement shall automatically
terminate without notice or payments hereunder if the Executive shall resign,
retire, become permanently and totally disabled, or die, or the Company
experiences a "Change of Control" as defined in the Change of Control Agreement
between the Executive and the Company. Under no circumstance will the Executive
be entitled to benefits under this Agreement and the Change of Control
Agreement. Additionally, this Agreement shall terminate without further notice
or payments hereunder if the Company terminates the Executive for Cause (as
defined in Section 3(a)(i) hereof).
2. Termination of Employment; Resignation of Officer and Director
Positions. The Executive shall be relieved of any responsibilities with the
Company, and his employment relationship with the Company will cease and
terminate effective upon the Termination Date. The Executive resigns any and all
officer, director and other positions with the Company and its affiliates
effective upon the Termination Date.
3. Severance Benefit. (a) Subject to the receipt of the Release
contemplated by Section 9 hereof and the expiration of any applicable waiting
periods, the Company shall provide the Executive with the benefits set forth in
this Section 3 upon any termination of the Executive's employment by the Company
which occurs during the Term for any reason except the following:
(i) Termination for Cause
"Cause" shall be defined as (A) action by the Executive
involving willful misconduct or gross negligence materially
injurious to the Company, (B) the requirement or direction of
a federal or state regulatory agency having jurisdiction over
the Company, (C) conviction of the Executive of the commission
of any criminal offense involving dishonesty or breach of
trust, or (D) any intentional breach by the Executive of a
material term, condition or covenant of this Agreement;
(ii) Disability of the Executive, as determined under the policies
and procedures of the Company as in effect from time to time.
Termination pursuant to this Section 3(a)(ii) shall not affect
any rights which the Executive may have under any disability
policy or program of the Company;
(iii) Voluntary retirement of the Executive in accordance with
policies and procedures of the Company in effect from time to
time;
(iv) Resignation or termination of employment by the Executive for
a reason other than set forth in Section 3(b) hereof;
(v) In connection with or following a Change of Control; provided
that the Executive will receive benefits under a change of
control agreement or other similar agreement or plan; or
(vi) Death of the Executive.
(b) Subject to receipt of the Release contemplated by Section 9 hereof
and the expiration of any applicable waiting periods, the Company shall also
provide the Executive with the benefits set forth in this Section 3 if during
the Term the Executive terminates this Agreement after the happening of one or
more of the following events:
(i) Without the express written consent of the Executive, the
assignment of the Executive to any duties materially
inconsistent with his positions, duties, responsibilities, or
status with the Company as of the date hereof or a substantial
reduction of his duties or responsibilities, or any removal of
the Executive from, or any failure to reelect the Executive
to, any positions held by the Executive as of the date hereof;
(ii) A reduction by the Company in the compensation or benefits of
the Executive in effect as of the date hereof, or any failure
to include the Executive to other similarly situated employees
in any incentive, bonus or benefit plans as may be offered by
the Company from time to time; or
(iii) A requirement that without the consent of the Executive, the
Executive be based anywhere other than within fifty (50) miles
from his personal residence, except for required travel
pertaining to the Company's business in accordance with the
Company's management practices in effect from time to time.
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(c) Lump Sum Payment. Following receipt by the Company of the Release
contemplated by Section 9 hereof and the expiration of any applicable waiting
periods, the Company shall pay to the Executive a lump sum single payment, in
cash or cash equivalent funds, equal to the Executive's Week of Pay multiplied
by the greater of (i) fifty-two (52), or (ii) two times his Years of Service.
"Week of Pay" means Compensation divided by fifty-two (52). "Compensation"
means, as of the date of the notice of termination, the Executive's annual base
salary then in effect, plus the targeted cash incentive that the Executive would
have been eligible to receive in the year in which the Termination Date occurs.
"Years of Service" means the number of years of Service. A partial year will be
rounded up to the next year. Payment of accrued vacation at termination does not
extend the Executive Employee's Years of Service. Any lump sum payment hereunder
is in addition to monies already owed the Executive by the Company and is in
consideration for the covenants set forth in this Agreement and the Release
hereunder. Any earned but unpaid portion of the Executive's base salary, at his
then-effective annual rate, through the Termination Date plus any amounts due to
the Executive under the accrued vacation program of the Company due to him
through the Termination Date shall be paid to the Executive in the next payroll
check regardless of whether the Executive delivers the Release.
(d) Other Employee Benefits. Any benefits (other than severance)
payable to the Executive due to the termination of his employment shall be paid
to the Executive in accordance with the benefit payment provisions of the
applicable employee benefit plan.
(e) Company Vehicle. If the Executive has an assigned the Company
vehicle in accordance with the Company's Vehicle Policy and the Company owns the
vehicle, the Executive will be given the opportunity to purchase the Company
vehicle assigned to the Executive at a Fair Market Value to be determined by a
designated Corporate Accounting Manager. The purchase of the assigned vehicle
should be completed within fifteen (15) days following the Termination Date.
(f) Country Club and/or Private Club Membership. If the Executive has a
Club membership, of which monthly dues are normally paid by the Company, the
Company's responsibility for monthly club dues will cease at the end of the
month in which the Termination Date occurs. Individual Membership(s) held in the
Executive's name shall continue to be held as a private membership in the
Executive's name. Corporate Memberships may be assigned or transferred to the
Executive, if allowed by the club, at the sole discretion of the Company. If the
Company and the Executive agree to transfer a Corporate Membership to the
Executive, the Executive agrees to pay any and all transfer fees incurred as a
result of the transfer.
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(g) Notice of Termination. Any termination of the Executive's
employment for the reasons set forth in Section 3(a) (except for reason of the
Executive's death) or by the Executive for the reasons set forth in Section 3(b)
shall be communicated by written "Notice of Termination" to the other party,
delivered in a manner provided in Section 12(f) hereof. Any "Notice of
Termination" given by the Executive pursuant to Section 3(b), or given by the
Company in connection with a termination as to which the Company believes it is
not obligated to provide the Executive with the benefits set forth in this
Section 3, shall indicate the specific provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination. "Termination Date" for the purposes of
this Agreement shall mean the date on which such "Notice of Termination" is
given by the Executive or the date set forth as the Termination Date in a Notice
of Termination given by the Company.
4. Non-Solicitation. The Executive agrees that during the Term and for
a period of one (1) year following the termination of the Executive's employment
for any reason, the Executive shall not, directly or indirectly individually or
jointly, (i) solicit in any manner, seek to obtain or service, or accept the
business of any party which is a customer of the Company as of the date of the
Agreement, for banking, trust, insurance and investment services of the type
handled by the Company, (ii) solicit in any manner, seek to obtain or service,
or accept the business of any party which was a prospective customer of the
Company for banking, trust, insurance and investment services of the type
handled by the Company, (iii) request or advise any customers or suppliers of
the Company to terminate, reduce, limit or change their business or relationship
with the Company, or (iv) induce, request or attempt to influence any employee
of the Company to terminate his or her employment with the Company. For purposes
of this Agreement, the term "customer" shall mean a person or entity who is a
customer of the Company at the time of the Executive's termination of employment
or with whom the Executive had direct contact on behalf of the Company at any
time during the period of the Executive's employment with the Company. The term
"prospective customer" shall mean a person or entity who was the direct target
of sales or marketing activity by the Executive or whom the Executive knew was a
target of the Company during the one (1) year period preceding the Executive's
termination of employment or, in the event the Executive has been employed by
the Company less than one (1) year at the Executive's termination of employment,
during the period of the Executive's employment with the Company.
5. Covenant Not to Compete or be Employed by Competitors. (a) The
Executive hereby understands and acknowledges that, by virtue of his position
with the Company, he obtained advantageous familiarity and personal contacts
with the Company's customers, wherever located, and the business, operations and
affairs of the Company. Accordingly, during the term of this Agreement and for a
period of one (1) year following the termination of the Executive's employment
(A) which results in the payment of severance benefits under this Agreement or
(B) by the Company for cause as provided in Section 3(a)(i) hereof, the
Executive shall not, directly or indirectly:
(i) as owner, officer, director, stockholder, investor,
proprietor, organizer, or otherwise, engage in the same trade
or business as the Company, or in a trade or business
competitive with that of the Company; provided, however that
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the Executive is not restricted from owning less than five
percent (5%) of the outstanding securities of any class of any
entity that are listed on a national securities exchange or
trade in the over-the-counter market; or
(ii) as employee, agent, representative, consultant, independent
contractor, or otherwise, perform services for or render
assistance to or use or permit the Executive's name to be used
in connection with any other business, partnership,
proprietorship, firm, or competitive entity, organization, or
corporation, which services or assistance are related to, or
competitive with, the same trade, business, products, or
services as those of the Company; or
(iii) offer to provide employment (whether such employment is with
the Executive or any other business or enterprise), either on
a full-time or part-time or consulting basis, to any person
who then currently is, or who within one (1) year prior to
such offer or provision of employment has been, an employee of
the Company.
(b) The restrictions contained in this paragraph upon the activities of
the Executive shall be limited to the geographic area which is a fifty (50) mile
radius from the principal office of the Executive.
(c) As of the date hereof, the Company engages in the business of
banking, trust, insurance and investment services.
6. Confidential Information. (a) The Executive agrees (i) that all
Confidential Information is confidential and is the property of the Company,
(ii) not to disclose or give possession of any Confidential Information to any
person except authorized representatives of the Company, (iii) not to directly
or indirectly use any Confidential Information (A) to compete against the
Company, or (B) for the Executive's own benefit or for the benefit of any person
other than the Company, and (iv) to promptly return to the Company following the
termination of the Executive's employment, at the Company's main office, all
Confidential Information and other property of the Company, including but not
limited to, computers, computer disks, electronic data without regard to the
means of storage, credit cards, identification cards, badges, keys, and any
other physical or personal property belonging to the Company, and any copies,
duplicates, reproductions or excerpts of any of the foregoing, even if down
loaded or copied to the Executive's personal computer, personal data assistant
or other mechanism used for storing information. This Section 6 shall not
preclude the Executive from disclosure or use of information known generally in
the public domain other than through a breach of this Agreement or from
disclosure required by law or court order.
(b) The Executive understands, acknowledges and agrees that, during the
course of his employment with the Company, he gained and will continue to gain,
as a key employee of the Company, substantial information regarding and
competitive knowledge of and familiarity with Confidential Information of the
Company and that if the Confidential Information were disclosed or the Executive
engaged in competition against the Company, the Company would suffer irreparable
damage and injury. The Confidential Information derives substantial economic
value, among other reasons, from not being known or readily ascertainable by
proper means by others who could obtain economic value from its disclosure. The
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Executive acknowledges and agrees that the Company uses reasonable means to
maintain the secrecy of the Confidential Information.
(c) For purposes of this Agreement, the term "Confidential Information"
means any and all (a) materials, records, data, documents, writings and
information (whether printed, computerized, on disk or otherwise) relating or
referring in any manner to the business, operations, affairs, policies,
strategies, techniques, products, product developments or customers of the
Company which are not generally known or available to the business, trade or
industry of the Company or individuals who work therein or which are not
otherwise in the public domain, in either case not through a breach of this
Agreement, and (b) trade secrets of the Company (as defined in Indiana Code
24-2-3-2, as amended, or any successor statute).
7. Remedies. The Executive agrees that the Company will suffer
irreparable damage and injury and will not have an adequate remedy at law in the
event of any breach by the Executive of any provision of the Restrictive
Covenants (as defined below in Section 8 hereof). Accordingly, in the event of a
breach or of a threatened or attempted breach by the Executive of the
Restrictive Covenants, in addition to all other remedies to which the Company is
entitled under law, in equity, or otherwise, the Company shall be entitled to
seek injunctive relief and no bond or other security shall be required in that
connection. The Executive acknowledges and agrees that in the event of
termination of this Agreement for any reason whatsoever, the Executive can
obtain other engagements or employment of a kind and nature similar to that
performed for the Company and that the issuance of an injunction to enforce the
provisions of the Restrictive Covenants will not prevent the Executive from
earning a livelihood. The Restrictive Covenants are essential terms and
conditions to the Company entering into this Agreement, and shall be construed
as independent of any other provision in this Agreement, or any other agreement
between the Executive and the Company. The existence of any claim or cause of
action the Executive has against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the Restrictive Covenants.
8. Periods of Noncompliance and Reasonableness of Periods. The
restrictions and covenants contained in Sections 4 and 5 hereof (the
"Restrictive Covenants") shall be deemed not to run during all periods of
noncompliance, the intention of the parties hereto being to have such
restrictions and covenants apply for the full periods specified in Sections 4
and 5 hereof following the termination of the Executive's employment with the
Company. The Company and the Executive acknowledge and agree that the
restrictions and covenants contained in Sections 4 and 5 hereof are reasonable
in view of the nature of the business in which the Company is engaged and the
Executive's advantageous knowledge of and familiarity with the business,
operations, affairs and customers of the Company. Notwithstanding anything
contained herein to the contrary, if the scope of any restriction or covenant
contained in Sections 4 and 5 hereof is found by a court of competent
jurisdiction to be too broad to permit enforcement of such restriction or
covenant to its full extent, then such restriction or covenant shall be enforced
to the maximum extent permitted by law.
9. Release. (a) For and in consideration of the foregoing covenants and
promises made by the Company, and the performance of such covenants and
promises, the sufficiency of which is hereby acknowledged, the Executive agrees
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to release the Company prior to the receipt of any benefits under Section 3
hereof by the Executive. Such release to be substantially in the form attached
hereto as Exhibit A.
(b) The Executive agrees that the fact and the terms of this Agreement
shall be strictly confidential and that the Executive shall not divulge,
directly or indirectly, explicitly or implicitly, the fact or terms of this
Agreement to any person other than the Executive's spouse, attorney(s) and tax
advisor(s) or as otherwise required by law. The Executive further agrees that
for purposes of this Section 9, the Executive's spouse, attorney(s) and tax
advisor(s) are the Executive's agents and that a breach of these terms of
confidentiality by them, or any of them, shall constitute a breach by the
Executive.
(c) The "Company and its agents," as used in this Agreement, means the
Company, its subsidiaries, affiliated, or related corporations or associations,
their predecessors, successors and assigns, and the directors, officers,
managers, supervisors, employees, representatives, servants, agents and
attorneys of the entities above described, and all persons acting, through,
under or in concert with any of them.
10. No Reliance. The Executive represents and acknowledges that in
executing this Agreement, he does not rely and has not relied upon any
representation or statement by the Company and its agents, other than the
statements which are contained within this Agreement.
11. No Admissions. This Agreement shall not in any way be construed as
an admission by the Company and its agents of any acts of discrimination or
other improper conduct whatsoever against the Executive or any other person, and
the Company specifically disclaims any liability to or discrimination against
the Executive or any other person on the part of itself, its employees or its
agents.
12. Miscellaneous. (a) Further Assurances. Each of the parties hereto
shall do, execute, acknowledge, and deliver or cause to be done, executed,
acknowledged, and delivered at any time and from time to time upon the request
of any other parties hereto, all such further acts, documents, and instruments
as may be reasonably required to effect any of the transactions contemplated by
this Agreement.
(b) Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that neither party hereto may assign this
Agreement without the prior written consent of the other party. Notwithstanding
the foregoing, this Agreement may be assigned, without the prior consent of the
Executive to a successor of the Company (and the Executive hereby consents to
the assignment of the Restrictive Covenants under this Agreement to a purchaser
of all or substantially all of the assets of the Company or a transferee, by
merger or otherwise, of all or substantially all of the businesses and assets of
the Company) and, upon the Executive's death, this Agreement shall inure to the
benefit of and be enforceable by the Executive's executors, administrators,
representatives, heirs, distributees, devisees, and legatees and all amounts
payable hereunder shall be paid to such persons or the estate of the Executive.
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(c) Waiver; Amendment. No provision or obligation of this Agreement may
be waived or discharged unless such waiver or discharge is agreed to in writing
and signed by the Company and the Executive. The waiver by any party hereto of a
breach of or noncompliance with any provision of this Agreement shall not
operate or be construed as a continuing waiver or a waiver of any other or
subsequent breach or noncompliance hereunder. Except as expressly provided
otherwise herein, this Agreement may be amended, modified, or supplemented only
by a written agreement executed by the Company and the Executive.
(d) Headings. The headings in this Agreement have been inserted solely
for ease of reference and shall not be considered in the interpretation,
construction, or enforcement of this Agreement.
(e) Severability. All provisions of this Agreement are severable from
one another, and the unenforceability or invalidity of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
provisions of this Agreement; provided, however, that should any judicial body
interpreting this Agreement deem any provision to be unreasonably broad in time,
territory, scope, or otherwise, the parties intend for the judicial body, to the
greatest extent possible, to reduce the breadth of the provision to the maximum
legally allowable parameters rather than deeming such provision totally
unenforceable or invalid.
(f) Notice. Any notice, request, instruction, or other document to be
given hereunder to any party shall be in writing and delivered by hand,
telegram, facsimile transmission, registered or certified United States mail,
return receipt requested, or other form of receipted delivery, with all expenses
of delivery prepaid, as follows:
If to the Executive: If to the Company:
______________________ Old National Bancorp
______________________ Post Office Box 718
______________________ Evansville, Indiana 47705
ATTENTION: General Counsel
(g) No Counterparts. This Agreement may not be executed in
counterparts.
(h) Governing Law; Jurisdiction; Venue; Waiver of Jury Trial. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Indiana, without reference to the choice of law principles or rules
thereof. The parties hereto irrevocably consent to the jurisdiction and venue of
the state court for the State of Indiana located in Evansville, Indiana, or the
Federal District Court for the Southern District of Indiana, Evansville
Division, located in Vanderburgh County, Indiana, and agree that all actions,
proceedings, litigation, disputes, or claims relating to or arising out of this
Agreement shall be brought and tried only in such courts. EACH OF THE PARTIES
WAIVES ANY RIGHTS THAT IT MAY HAVE TO BRING A CAUSE OF ACTION IN ANY COURT OR IN
ANY PROCEEDING INVOLVING A JURY TO THE MAXIMUM EXTENT PERMITTED BY LAW.
(i) Entire Agreement. This Agreement constitutes the entire and sole
agreement between the Company and the Executive with respect to the termination
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of the Executive's employment and there are no other agreements or understanding
either written or oral with respect thereto, except that the Change in Control
Agreement dated January 1, 2004, by and between the Executive and the Company
shall continue in full force and effect, until otherwise terminated in
accordance with its terms.
(j) Construction. The rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement. Whenever in this Agreement a singular
word is used, it also shall include the plural wherever required by the context
and vice-versa. All reference to the masculine, feminine, or neuter genders
shall include any other gender, as the context requires.
(k) Attorneys' Fees. The prevailing party shall be entitled to
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) in connection with any legal action to
interpret or enforce any provision of this Agreement or for any breach of this
Agreement.
(l) Review and Consultation. The Company and the Executive hereby
acknowledge and agree that each (i) has read this Agreement in its entirety
prior to executing it, (ii) understands the provisions and effects of this
Agreement, (iii) has consulted with such attorneys, accountants, and financial
and other advisors as it or he has deemed appropriate in connection with their
respective execution of this Agreement, and (iv) has executed this Agreement
voluntarily. THE EXECUTIVE HEREBY UNDERSTANDS, ACKNOWLEDGES, AND AGREES THAT
THIS AGREEMENT HAS BEEN PREPARED BY COUNSEL TO THE COMPANY AND THAT HE HAS NOT
RECEIVED ANY ADVICE, COUNSEL, OR RECOMMENDATION WITH RESPECT TO THIS AGREEMENT
FROM THE COMPANY OR ITS COUNSEL.
(m) Taxes. All federal, state, local, and other taxes (including,
without limitation, interest, fines, and penalties) imposed upon the Executive
under applicable law by virtue of or relating to the transactions and the
payments to the Executive contemplated by this Agreement and any of plans shall
be paid by the Executive.
Full Name
- ---------
BY: ___________________________________ _____________________________
EXECUTIVE'S SIGNATURE DATE
Company Name
- ------------
BY: __________________________________ ____________________________
DATE
PRINTED NAME: ALLEN R. MOUNTS
POSITION: SVP, HUMAN RESOURCES
9
Exhibit A
---------
NOTICE
Various local, state, and federal laws prohibit employment discrimination based
on age, sex, race, color, national origin, religion, handicap, or veteran
status. These laws are enforced through the Equal Employment Opportunity
Commission (EEOC), the U.S. Department of Labor, the Indiana Civil Rights
Commission, and/or any other similar state entity, agency or commission. If you
feel that your decision to enter into the attached Release of All Claims was
coerced or is discriminatory, you are encouraged to speak with Allen Mounts
(812-464-1411) or other appropriate Old National Bancorp officials. You should
also discuss the language of this Release of All Claims with a lawyer of your
own choosing. In any event, you should thoroughly review and understand the
effect of this Release of All Claims before acting on it; therefore, please take
this Release of All Claims home and review it. You may take up to twenty-one
(21) days before signing this Release of All Claims.
10
RELEASE OF ALL CLAIMS
---------------------
FOR VALUABLE CONSIDERATION, including the payment to the Executive of
certain severance benefits, the Executive hereby makes this Release in favor of
Old National Bancorp (including all subsidiaries and affiliates) (the "Company")
and its agents as set forth herein.
1. The Executive releases, waives and discharges the Company and its
agents (as defined below) from all rights and claims arising out of the
Executive's employment relationship with the Company that are known or might be
known on the date of the execution of this Release including but not limited to,
discrimination claims based on age, race, sex, religion, national origin,
disability, veterans status or any other claim of employment discrimination
including claims arising under The Civil Rights Act of 1866, 42 U.S.C. Section
1981; Title VII of the Civil Rights Act of 1964; the Americans with Disabilities
Act; the Age Discrimination in Employment Act of 1967; the Federal
Rehabilitation Act of 1973; the Older Workers' Benefits Protection Act; the
Employee Retirement Income Security Act of 1974; the Indiana Civil Rights Act,
the Indiana Wage Payment and Wage Claims Acts, any Federal or State wage and
hour laws and all other similar Federal or State statutes; and any and all tort
or contract claims, including, but not limited to, breach of contract, breach of
good faith and fair dealing, infliction of emotional distress, or wrongful
termination or discharge.
2. The Executive further acknowledges that the Company has advised the
Executive to consult with an attorney of the Executive's own choosing and that
he has had ample time and adequate opportunity to thoroughly discuss all aspects
of this Release with legal counsel prior to executing this Release.
3. The Executive agrees that the Executive is signing this Release of
his own free will and is not signing under duress.
4. In the event the Executive is forty (40) years of age or older, the
Executive acknowledges that the Executive has been given a period of twenty-one
(21) days to review and consider a draft of this Release in substantially the
form of the copy now being executed, and has carefully considered the terms of
this Release. The Executive understands that the Executive may use as much or
all of the twenty-one (21) day period as the Executive wishes prior to signing,
and the Executive has done so.
5. In the event the Executive is forty (40) years of age or older, the
Executive has been advised and understands that the Executive may revoke this
Release within seven (7) days after acceptance. ANY REVOCATION MUST BE IN
WRITING AND HAND-DELIVERED TO:
Old National Bancorp
Attn: General Counsel
420 Main Street
Evansville, Indiana 47708
11
NO LATER THAN BY CLOSE OF BUSINESS ON THE SEVENTH (7TH) DAY FOLLOWING THE DATE
OF EXECUTION OF THIS RELEASE.
6. The "Company and its agents," as used in this Release, means the
Company, its subsidiaries, affiliated, or related corporations or associations,
their predecessors, successors and assigns, and the directors, officers,
managers, supervisors, employees, representatives, servants, agents and
attorneys of the entities above described, and all persons acting, through,
under or in concert with any of them.
7. The Executive agrees to speak well of and refrain from voicing any
criticism of the Company and its agents. The Company agrees to refrain from
providing any information to third parties other than confirming dates of
employment and job title, unless the Executive gives the Company written
authorization to release other information or as otherwise required by law. With
respect to the Company, this restriction pertains only to official
communications made by the Company's directors and/or officers and not to
unauthorized communications by the Company's employees or agent. This
restriction will not bar the Company from disclosing the Release as a defense or
bar to any claim made by the Executive in derogation of this Release.
PLEASE READ CAREFULLY BEFORE SIGNING. THIS RELEASE CONTAINS A RELEASE AND
DISCHARGE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY AND ITS AGENTS
EXCEPT THOSE RELATING TO THE ENFORCEMENT OF THIS RELEASE OR THOSE ARISING AFTER
THE EFFECTIVE DATE OF THIS RELEASE.
12
EX-10.B
4
changecontrolform.txt
FORM OF CHANGE OF CONTROL AGREEMENT
Exhibit 10 (b)
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (the "Agreement") is made as of the 1st day of
January, 2004, between OLD NATIONAL BANCORP, an Indiana corporation and
registered financial holding company under the Bank Holding Company Act of 1956,
as amended (the "Company"), and ______________ of the Company (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to assure continuity of its management, to enable
its executives to devote their full attention to management responsibilities
and, when faced with a possible Change in Control (as hereinafter defined), to
help the Board of Directors of the Company assess options and advise as to the
best interest of the Company and its shareholders without being influenced by
the uncertainties of their own situations, and to demonstrate to executives the
interests of the Company in their well-being and fair treatment in the event of
a Change in Control;
WHEREAS, to that end, the Company desires to assure Executive that he will
receive certain benefits in the case of the Executive's termination or a
significant change in the terms of the Executive's employment as a result of a
Change in Control; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat of or the occurrence of a Change
in Control, the Company desires to enter into this Agreement with the Executive.
NOW, THEREFORE, in consideration of the premises contained herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Executive and the Company agree as follows:
Section 1. Term
- ---------- ----
The term of this Agreement shall begin on January 1, 2004, and shall continue
until terminated as hereinafter provided.
Section 2. Benefits Upon a Change in Control
- ---------- ---------------------------------
(a) The Company shall provide the Executive with the benefits set forth in
Section 2(c) hereof upon any termination of the Executive's employment by
the Company during the two (2) year period following the first Change in
Control which occurs during the term of this Agreement for any reason
except the following:
(i) Termination of the Executive for Cause (as hereinafter defined) by the
Company. For purposes of the Agreement, "Cause" shall be defined as
(A) action by the Executive involving willful misconduct or gross
negligence materially injurious to the Company, (B) the requirement or
direction of a federal or state regulatory agency having jurisdiction
over the Company, (C) conviction of the Executive of the commission of
any criminal offense involving dishonesty or breach of trust, (D) any
material violation of any portions of the Company's Code of Ethics
which continues after written notice to the Executive that the
continuation of such conduct will result in the termination of the
Executive's employment with the Company for Cause, or (E) any
intentional breach by the Executive of a material term, condition or
covenant of this Agreement. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause unless
there shall have been delivered to the Executive a copy of a notice of
termination from the Company accompanied by a resolution duly adopted
by a majority of the Directors then in office, finding that in the
good faith opinion of the Directors, the termination of the
Executive's employment is for Cause, specifying the particulars
thereof in detail, and granting an opportunity, following a reasonable
period of time, for the Executive, together with the Executive's
counsel, to be heard before the Board of Directors;
(ii) Disability of the Executive, as determined under the policies and
procedures of the Company as in effect immediately prior to the Change
in Control. Termination pursuant to this Section 2(a)(ii) shall not
affect any rights which the Executive may have under any disability
policy or program of the Company;
(iii) Voluntary retirement of the Executive in accordance with policies and
procedures of the Company in effect immediately prior to the Change in
Control; or
(iv) Death of the Executive.
(b) Except in connection with the termination of the Executive's employment for
reasons set forth in Section 2(a)(i)-(iv) hereof, the Company shall also
provide the Executive with the benefits set forth in Section 2(c) hereof if
a Change in Control occurs during the term of this Agreement and the
Executive terminates the Executive's employment during the two (2) year
period following the Change in Control after the happening of one or more
of the following events:
(i) Without the express written consent of the Executive, the assignment
of the Executive to any duties materially inconsistent with the
Executive's positions, duties, responsibilities (including reporting
responsibilities), title, or status with the Company immediately prior
to the Change in Control or a substantial reduction of the Executive's
duties or responsibilities, or any removal of the Executive from, or
any failure to reelect the Executive to, any positions held by the
Executive prior to the Change in Control;
(ii) A reduction by the Company in the compensation or benefits of the
Executive in effect immediately prior to the Change in Control, or any
failure to include the Executive in any incentive, bonus or other
employee welfare or benefit plans as may be offered by the Company
from time to time to other similarly situated executives of the
Company;
(iii) A requirement the Executive be based at any location other than
within a fifty (50) mile radius of the location at which the Executive
was based immediately prior to the Change in Control, except for
required travel pertaining to the Company's business in accordance
with the Company's management practices in effect prior to a Change in
Control or with the prior written consent of the Executive;
(iv) Any purported termination of the Executive's employment for Cause as
defined in Section 2(a)(i) hereof or for disability without grounds;
(v) Any failure of the Company to obtain the assumption of the obligation
to perform this Agreement by any successor as contemplated in Section
7(b) hereof; or
(vi) Any material breach by the Company of any of the provisions of this
Agreement or any other material written agreement between the Company
and the Executive or any failure by the Company to carry out any of
its obligations hereunder or thereunder.
(c) Subject to Sections 2(a) and 2(b) hereof, within thirty (30) days of the
date of termination under Section 2(a) or 2(b) hereof, the Company shall
pay to the Executive the amounts provided in subsections (i) and (ii)
below, less any withholding therefrom under applicable federal, state, or
local income tax, other tax, or social security laws or similar statutes.
(i) A lump sum single payment in cash or cash equivalent funds in an
amount equal to the aggregate of the following:
(A) The Executive's base salary, at the then-effective annual rate,
through the last day of employment of the Executive, to the
extent not theretofore paid, plus any amounts due to the
Executive under any insurance, health, retirement, profit
sharing, or other employee welfare or benefit plan or the accrued
vacation program of the Company due to the Executive through the
last day of employment of the Executive; plus
(B) a lump sum single cash payment equal to 2.999 times (2 times for
Daryl D. Moore) the Base Amount (as defined in Section 280G of
the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder).
(ii) To the extent that any payment made to the Executive pursuant to
Section 2(a) or 2(b) hereof constitutes an "excess parachute payment,"
as such term is defined in Section 280G(b)(1) of the Internal Revenue
Code of 1986, as amended, or the Executive becomes subject to any
excise tax as a result of the acceleration of unvested stock options,
the Company shall pay to the Executive a lump sum single payment in
cash or cash equivalent funds in an amount equal to (x) the aggregate
dollar amount of excise taxes and any surtax the Executive becomes
obligated to pay on such "excess parachute payments", divided by (y)
one (1) minus the sum of the maximum marginal federal income tax rate
(for married individuals filing jointly) plus the maximum marginal
state income tax rate plus the maximum marginal local income tax rate
plus the excise tax rate applicable for the year in which the
Executive receives the payment provided under this Section 2(c)(ii),
it being the intent of this Section, that if the Executive incurs any
such excise tax or surtax with respect to the payments, such payments
to him shall be grossed up in full for such excise tax and surtax, so
that the amount he retains, after paying all applicable federal
income, surtaxes and excise taxes due with respect to payments to him
under this Section is the same as the amount he would have retained if
Section 280G of the Code and any applicable surtax had not been
applicable.
(d) "Change in Control" means the first occurrence of any of the following
events:
(i) the acquisition by any person, entity or "group" (as defined in
Section 13(d) of the Act), other than the Company, a subsidiary, and
any employee benefit plan of the Company or a subsidiary, of 25% or
more of the combined voting power of the Corporation's then
outstanding voting securities;
(ii) the persons who were serving as the members of the Board of Directors
immediately prior to the commencement of a proxy contest relating to
the election of directors or a tender or exchange offer for voting
securities of the Company (the "Incumbent Directors") shall cease to
constitute at least a majority of the Board of Directors (or the board
of directors of any successor to the Company) at any time within one
year of the election of directors as a result of such contest or the
purchase or exchange of voting securities of the Corporation pursuant
to such offer, provided that any director elected to the Board of
Directors, or nominated for election, by a majority of the Incumbent
Directors then still in office and whose nomination or election was
not made at the request or direction of the person(s) initiating such
contest or making such offer shall be deemed to be an Incumbent
Director for purposes of this clause (ii);
(iii) consummation of a merger, reorganization or consolidation of the
Company, as a result of which persons who were shareholders of the
Company immediately prior to such merger, reorganization or
consolidation, do not, immediately thereafter, own, directly or
indirectly and in substantially the same proportions as their
ownership of the stock of the Corporation immediately prior to the
merger, reorganization or consolidation, more than 50% of the combined
voting power entitled to vote generally in the election of directors
of (x) the merged, reorganized or consolidated company or (y) an
entity that, directly or indirectly, owns more than 50% of the
combined voting power entitled to vote generally in the election of
directors of the company described in subclause (x);
(iv) the shareholders of the Company approve a sale, transfer or other
disposition of all or substantially all of the assets of the
Corporation, which is consummated and immediately following which the
persons who were shareholders of the Company immediately prior to such
sale, transfer or disposition, do not own, directly or indirectly and
in substantially the same proportions as their ownership of the stock
of the Company immediately prior to the sale, transfer or disposition,
more than 50% of the combined voting power entitled to vote generally
in the election of directors of (x) the entity or entities to which
such assets are sold or transferred or (y) an entity that, directly or
indirectly, owns more than 50% of the combined voting power entitled
to vote generally in the election of directors of the entities
described in subclause (x);and
(v) the shareholders of the Company approve a liquidation of the Company.
(e) Any termination of the Executive's employment for the reasons set forth in
Section 2(a) hereof (except for reason of the Executive's death) or by the
Executive for the reasons set forth in Sections 2(b) hereof shall be
communicated by written "Notice of Termination" to the other party,
delivered in a manner provided in Section 6(k) hereof. Any "Notice of
Termination" given by the Executive pursuant to Section 2(b) hereof, or
given by the Company in connection with a termination as to which the
Company believes it is not obligated to provide the Executive with the
benefits set forth in Section 2(c) hereof, shall indicate the specific
provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for such
termination. "Date of Termination" for the purposes of this Agreement shall
mean the date on which such "Notice of Termination" is given.
Section 3. Payment of Certain Costs of the Executive
- ---------- -----------------------------------------
If a dispute arises regarding a termination of the Executive's employment
subsequent to a Change in Control or the interpretation or enforcement of this
Agreement and the Executive obtains a final judgment in favor of the Executive
from a court of competent jurisdiction or the claim is settled by the Company
prior to the rendering of a judgment by such a court, all legal fees and
expenses incurred by the Executive in contesting or disputing any such
termination or seeking to obtain or enforce any right or benefit provided for in
this Agreement or in otherwise pursuing the claim will be paid by the Company,
to the extent permitted by law.
Section 4. Covenant of Confidentiality; Surrender of Records
- --------- --------------------------------------------------
(a) The Executive shall keep confidential and not improperly divulge for the
benefit of another party or use for the benefit of the Executive, the
Company's confidential information including, but not limited to, business
secrets relating to the Company's finances, operations, and customer lists.
All of the Company's confidential information shall be the sole and
exclusive property of the Company. The covenants on the part of the
Executive contained in this Agreement are essential terms and conditions to
the benefits to be received by the Executive in the event of a Change in
Control, and shall be construed as independent of any other non-compete and
non-solicitation agreement or employment agreement entered into between the
Executive and the Company (each a "Prior Agreement"). This Agreement shall
not terminate, modify, amend or otherwise change any Prior Agreement and
such terms and conditions of any Prior Agreement shall remain in full force
and effect.
(b) Upon termination of the Executive's employment for any reason, the
Executive shall immediately surrender (or purge as it relates to electronic
copies) to the Company all Company records, notes, documents, forms,
manuals, or other written or printed material (including material in
electronic format), and all copies thereof, in the possession or control of
the Executive, which pertains to the business of the Company and which
would not be available publicly. The Executive agrees that all of the
foregoing shall be and remain the sole and exclusive property of the
Company.
Section 5. Termination
- ---------- -----------
This Agreement shall automatically terminate without notice to the Executive
upon the termination of the Executive's employment with the Company for any
reason prior to any Change in Control. This Agreement shall not create or
constitute an agreement, contract, understanding, commitment or arrangement for
the employment of the Executive by the Company. Accordingly, the Company
understands, acknowledges and agrees that the Executive has the right to
terminate the Executive's employment with the Company at any time for any
reason. Likewise, the Executive understands, acknowledges and agrees that the
Company has the right to terminate the Executive's employment with the Company
at any time for any reason. If the Executive's employment is terminated prior to
a Change in Control and the Executive reasonably demonstrates that such
termination (i) was at the request of a third party who has indicated an
intention or taken steps reasonably calculated to effect a Change in Control, or
(ii) otherwise occurred in connection with or in anticipation of a Change in
Control, then for all purposes of this Agreement, the Executive shall be deemed
to have been terminated by the Company following a Change in Control and shall
be entitled to the benefits set forth in Section 2(c) hereof.
Section 6. Miscellaneous
- ---------- -------------
(a) Binding Effect; Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that neither party hereto may assign this
Agreement without the prior written consent of the other party. Upon the
Executive's death, this Agreement shall inure to the benefit of and be
enforceable by the Executive's executors, administrators, representatives,
heirs, distributees, devisees, and legatees and all amounts payable
hereunder shall be paid to such persons or the estate of the Executive.
Because this Agreement is personal in nature, the Executive's right to
receive compensation and benefits hereunder shall not be assignable or
transferable, whether by pledge, creation of a security interest, or
otherwise and, in the event of any attempted assignment or transfer
contrary to this subsection, the Company shall have no liability to pay any
amounts so attempted to be assigned or transferred.
(b) Waiver; Amendment. No provision or obligation of this Agreement may be
waived or discharged unless such waiver or discharge is agreed to in
writing and signed by the Company and the Executive. The waiver by any
party hereto of a breach of or noncompliance with any provision of this
Agreement shall not operate or be construed as a continuing waiver or a
waiver of any other or subsequent breach or noncompliance hereunder. Except
as expressly provided otherwise herein, this Agreement may be amended,
modified, or supplemented only by a written agreement executed by the
Company and the Executive.
(c) Headings. The headings in this Agreement have been inserted solely for ease
of reference and shall not be considered in the interpretation,
construction, or enforcement of this Agreement.
(d) Severability. All provisions of this Agreement are severable from one
another, and the unenforceability or invalidity of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
provisions of this Agreement; provided, however, that should any judicial
body interpreting this Agreement deem any provision to be unreasonably
broad in time, territory, scope, or otherwise, the parties intend for the
judicial body, to the greatest extent possible, to reduce the breadth of
the provision to the maximum legally allowable parameters rather than
deeming such provision totally unenforceable or invalid.
(e) Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute one and the same agreement.
(f) Governing Law; Jurisdiction; Venue; Waiver of Jury Trial. This Agreement
shall be governed by and construed in accordance with the laws of the State
of Indiana, without reference to the choice of law principles or rules
thereof. The parties hereto irrevocably consent to the jurisdiction and
venue of the state court for the State of Indiana located in Evansville,
Indiana, or the Federal District Court for the Southern District of
Indiana, Evansville Division, located in Vanderburgh County, Indiana, and
agree that all actions, proceedings, litigation, disputes, or claims
relating to or arising out of this Agreement shall be brought and tried
only in such courts. EACH OF THE PARTIES WAIVES ANY RIGHTS THAT IT MAY HAVE
TO BRING A CAUSE OF ACTION IN ANY COURT OR IN ANY PROCEEDING INVOLVING A
JURY TO THE MAXIMUM EXTENT PERMITTED BY LAW.
(g) Entire Agreement. This Agreement constitutes the entire and sole agreement
between the Company and the Executive or any other party or parties with
respect to the Executive's employment following a Change in Control, and
there are no other agreements or understanding either written or oral with
respect thereto.
(h) Construction. The rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement. Whenever in this Agreement a singular
word is used, it also shall include the plural wherever required by the
context and vice-versa. All reference to the masculine, feminine, or neuter
genders shall include any other gender, as the context requires.
(i) Review and Consultation. The Company and the Executive hereby acknowledge
and agree that each (i) has read this Agreement in its entirety prior to
executing it, (ii) understands the provisions and effects of this
Agreement, (iii) has consulted with such attorneys, accountants, and
financial and other advisors as it or he has deemed appropriate in
connection with their respective execution of this Agreement, and (iv) has
executed this Agreement voluntarily. THE EXECUTIVE HEREBY UNDERSTANDS,
ACKNOWLEDGES, AND AGREES THAT THIS AGREEMENT HAS BEEN PREPARED BY LEGAL
COUNSEL TO THE COMPANY AND THAT HE HAS NOT RECEIVED ANY ADVICE, COUNSEL, OR
RECOMMENDATION WITH RESPECT TO THIS AGREEMENT FROM SUCH COUNSEL.
(j) Successors. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, share exchange, combination,
or otherwise) to all or substantially all of the business, assets, or
voting securities of the Company, by written agreement in form and in
substance reasonably satisfactory to the Executive, to expressly assume and
agree to perform this Agreement in the same manner and extent, and upon the
same terms and conditions, that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain
such agreement prior to the effectiveness of any such succession shall be a
material intentional breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment with the Company pursuant
to Section 2(b)(v) hereof. As used in this Agreement, the "Company" shall
mean the Company as hereinbefore defined and any successor to its business,
assets, or voting securities as aforesaid. The Company as referred to in
this Agreement shall also be deemed to include the affiliates of the
Company which employ the Executive.
(k) Notices. For purposes of this Agreement, notices, and all other
communications provided for herein shall be in writing and shall be deemed
to have been given (i) if hand delivered, upon delivery to the party, or
(ii) if mailed, two (2) days following deposit of the notice or
communication with the United States Postal Service by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
If to the Company: Old National Bancorp
Attn: General Counsel
P. O. Box 718
Evansville, Indiana 47705
or to such other address as either party hereto may have furnished to the other
party in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
IN WITNESS WHEREOF, the parties hereto have entered into, executed, and
delivered this Agreement as of the day and year first above written.
EXECUTIVE
_______________________________
OLD NATIONAL BANCORP
By:____________________________
EX-10.C
5
severancerisinger.txt
SEVERENCE AGREEMENT FOR RISINGER
Exhibit 10 (c)
RETIREMENT AGREEMENT
THIS RETIREMENT AGREEMENT (the "Agreement") is made, entered into and
effective as of the 26th day of February, 2004, by and between Old National
Bancorp (including all of its subsidiaries and affiliates) (the "Company") and
James A. Risinger (the "Executive").
WHEREAS, the Executive has been employed by the Company in various
positions since December 18, 1978, most recently in the capacity of Chairman and
Chief Executive Officer of the Company; and
WHEREAS, the Executive desires to retire from employment with the
Company and receive the benefits provided for in this Agreement; and
WHEREAS, the Board of Directors of the Company (the "Board") and the
Compensation Committee thereof (the "Committee") have approved this Agreement
and authorized its execution and delivery by the appropriate officer of the
Company;
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Executive and the Company agree as follows:
1. Termination of Employment; Resignation of Officer and Director
Positions. The Executive's employment with the Company will terminate by virtue
of Executive's retirement on March 31, 2004 (the "Retirement Date"). Effective
on the Retirement Date, the Executive will be relieved of all duties for and
responsibilities with the Company. The Executive hereby resigns any and all
officer, director and other positions with the Company effective on the
Retirement Date.
2. Lump Sum Payment. Following receipt by the Company of the Release
contemplated by Section 9 hereof (the "Release") and the expiration of any
applicable waiting periods provided therein but in no event sooner than March
31, 2004, the Company will pay $2,243,476 to the Executive in a single sum, in
cash or cash equivalent funds. Such payment will be in addition to amounts
otherwise owed to the Executive by the Company and is in consideration for the
covenants set forth in this Agreement and the Release. Any earned but unpaid
portion of the Executive's base salary, at his then-effective annual rate, plus
any amounts accrued by the Executive under the Company's accrued vacation
program through the Retirement Date will be paid to him on the payroll date that
coincides with or immediately follows the Retirement Date.
3. Other Employee Benefits. (a) Except as otherwise provided in this
Agreement, as of the Retirement Date, the Executive will be treated as having
satisfied the requirements for "retirement" under the employee benefit plans and
programs (other than the Company's employee pension and welfare benefit plans,
as defined in Section 3 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA Plans")) sponsored by the Company and in which the Executive
participates on the Retirement Date. Such plans and programs include, without
limitation, the 1999 Equity Incentive Plan of Old National Bancorp and the Old
National Bancorp Deferred Compensation Plan.
(b) ERISA Plans. Except as otherwise provided in this Agreement, the
Executive will be entitled to receive such benefits as are provided under the
ERISA Plans, subject to and in accordance with the applicable provisions
thereof.
(c) Grant of Restricted Stock. By and through this Agreement, the Board
and Committee hereby grant to the Executive 29,000 shares of restricted stock
for the "performance period" beginning January 1, 2004 and ended December 31,
2006. Such grant is (i) made under the Company's 1999 Equity Incentive Plan, and
(ii) intended to make up the benefits the Executive would have received under
the Company's tax-qualified plans for the plan year ended December 31, 2003 were
it not for the limits imposed thereon by the Internal Revenue Code of 1986, as
amended. Such grant is subject to the execution and delivery by the Company and
the Executive of a restricted stock agreement. Such agreement will (A) be
presented by the Company to the Executive as soon as administratively
practicable following the establishment by the Committee of the performance
goals for the 2004-2006 performance period (which is anticipated by the Company
to occur in June, 2004), (B) contain substantially the same terms and conditions
as the restricted stock agreements between the Company and other executives with
respect to the 2004-2006 performance period, and (C) not require the forfeiture
of the shares of restricted stock on the basis of the Executive's retirement or
his execution and delivery of this Agreement.
(d) Rescission of 2004 Option and Restricted Stock Grants. The
Executive understands, acknowledges and agrees that the grants to him of options
and restricted shares under the Company's 2004 long-term incentive plan will be
rescinded by the Board and/or the Committee and that he will have no rights to
receive any benefits in connection therewith.
(e) Full Vesting of Stock Options. By virtue of the Executive's
retirement, effective as of the Retirement Date the Executive shall become fully
vested with respect to all options to acquire stock in the Company heretofore
granted to Executive. Such options, which are identified as Options Numbered
00002852, 00003127, 00003302, and 00003624, respectively, entitle the Executive
to acquire 574,328 shares of the common capital stock of the Company to and
including the expiration dates in respect of such options, at the per share
prices established at the time of the grants of such options, as the number of
shares and prices in respect thereof may be adjusted from time to time based
upon the Company's declaration and payment of stock dividends and/or stock
splits. The Company from time to time shall provide the Executive with such
summaries pertaining to the Executive's options as the Executive reasonably may
request.
(f) Retiree Medical Benefits. By virtue of the Executive's retirement,
the Executive shall be eligible to participate in the Company's Retiree Medical
Insurance Plan, subject to and in accordance with the applicable provisions
thereof. The Executive shall make his election to participate in such insurance
plan in the manner and at the time or times required by such insurance plan.
(g) Company Vehicle. The Executive has been assigned a company-owned
vehicle in accordance with the Company's vehicle policy. On the Retirement Date,
the Company will transfer legal title to the company vehicle to the Executive
for no consideration.
2
(h) Country Club and/or Private Club Membership. If the Executive has a
personal Club membership, of which monthly dues are normally paid by the
Company, the Company's responsibility for monthly club dues will cease at the
end of the month in which the Retirement Date occurs. Individual memberships
held in the Executive's name shall continue to be held as private memberships in
the Executive's name. Corporate memberships will be retained by the Company.
4. Non-Solicitation. The Executive agrees that for a period of two (2)
years following the Retirement Date, the Executive shall not, directly or
indirectly individually or jointly, (i) solicit in any manner, seek to obtain or
service, or accept the business of any party which is a customer of the Company
as of the date of the Agreement, for banking, trust, insurance and investment
services of the type handled by the Company, (ii) solicit in any manner, seek to
obtain or service, or accept the business of any party which was a prospective
customer of the Company for banking, trust, insurance and investment services of
the type handled by the Company, (iii) request or advise any customers or
suppliers of the Company to terminate, reduce, limit or change their business or
relationship with the Company, or (iv) induce, request or attempt to influence
any employee of the Company to terminate his or her employment with the Company.
For purposes of this Agreement, the term "customer" shall mean a person or
entity who is a customer of the Company at the time of the Executive's
termination of employment or with whom the Executive had direct contact on
behalf of the Company at any time during the period of the Executive's
employment with the Company. The term "prospective customer" shall mean a person
or entity who was the direct target of sales or marketing activity by the
Executive or whom the Executive knew was a target of the Company during the one
(1) year period preceding the Retirement Date.
5. Covenant Not to Compete or be Employed by Competitors. The Executive
hereby understands and acknowledges that, by virtue of his position with the
Company, he obtained advantageous familiarity and personal contacts with the
Company's customers, wherever located, and the business operations and affairs
of the Company. For a period of two (2) years following the Retirement Date, the
Executive shall not, directly or indirectly:
(i) as owner, officer, director, stockholder, investor,
proprietor, organizer, or otherwise, engage in the same trade
or business as the Company, or in a trade or business
competitive with that of the Company; provided, however that
the Executive is not restricted by this Section 5 from owning
less than five percent (5%) of the outstanding securities of
any class of any entity that are listed on a national
securities exchange or trade in the over-the-counter market;
or
(ii) as employee, agent, representative, consultant, independent
contractor, or otherwise, perform services for or render
assistance to or use or permit the Executive's name to be used
in connection with any other business, partnership,
proprietorship, firm, or competitive entity, organization, or
corporation, which services or assistance are related to, or
competitive with, the same trade, business, products, or
services as those of the Company; or
(iii) offer to provide employment (whether such employment is with
the Executive or any other business or enterprise), either on
a full-time or part-time or consulting basis, to any person
3
who then currently is, or who within one (1) year prior to
such offer or provision of employment has been, an employee of
the Company.
The restrictions contained in this Section 5 on the activities of the
Executive are limited to the following geographic areas: a fifty (50) mile
radius from the following cities: Evansville, Terre Haute, Indianapolis and
Muncie in the State of Indiana; Louisville and Owensboro in the State of
Kentucky; Danville and Carbondale in the State of Illinois; St. Louis in the
State of Missouri; and Clarksville in the State of Tennessee.
As of the date hereof, the Company engages in the business of banking, trust,
insurance and investment services.
6. Confidential Information. (a) The Executive agrees (i) that all
Confidential Information is confidential and is the property of the Company,
(ii) not to disclose or give possession of any Confidential Information to any
person except authorized representatives of the Company, (iii) not to directly
or indirectly use any Confidential Information (A) to compete against the
Company, or (B) for the Executive's own benefit or for the benefit of any person
other than the Company, and (iv) to promptly return to the Company at the
Company's main office, all Confidential Information and other property of the
Company, including but not limited to, computers, computer disks, electronic
data without regard to the means of storage, credit cards, identification cards,
badges, keys, and any other physical or personal property belonging to the
Company, and any copies, duplicates, reproductions or excerpts of any of the
foregoing, even if down loaded or copied to the Executive's personal computer,
personal data assistant or other mechanism used for storing information. This
Section 6 shall not preclude the Executive from disclosure or use of information
known generally in the public domain other than through a breach of this
Agreement or from disclosure required by law or court order.
(b) The Executive understands, acknowledges and agrees that, during the
course of his employment with the Company, he gained as a key employee of the
Company, substantial information regarding and competitive knowledge of and
familiarity with Confidential Information of the Company and that if the
Confidential Information were disclosed or the Executive engaged in competition
against the Company, the Company would suffer irreparable damage and injury. The
Confidential Information derives substantial economic value, among other
reasons, from not being known or readily ascertainable by proper means by others
who could obtain economic value from its disclosure. The Executive acknowledges
and agrees that the Company uses reasonable means to maintain the secrecy of the
Confidential Information.
(c) For purposes of this Agreement, the term "Confidential Information"
means any and all (i) materials, records, data, documents, writings and
information (whether printed, computerized, on disk or otherwise) relating or
referring in any manner to the business, operations, affairs, policies,
strategies, techniques, products, product developments or customers of the
Company which are not generally known or available to the business, trade or
industry of the Company or individuals who work therein or which are not
otherwise in the public domain, in either case not through a breach of this
Agreement, and (ii) trade secrets of the Company (as defined in Indiana Code
24-2-3-2, as amended, or any successor statute).
7. Remedies. The Executive agrees that the Company will suffer
irreparable damage and injury and will not have an adequate remedy at law in the
event of any breach by the Executive of any provision of the Restrictive
4
Covenants (as defined below in Section 8 hereof). Accordingly, in the event of a
breach or of a threatened or attempted breach by the Executive of the
Restrictive Covenants, in addition to all other remedies to which the Company is
entitled under law, in equity, or otherwise, the Company shall be entitled to
seek injunctive relief and no bond or other security shall be required in that
connection. The Executive acknowledges and agrees that the Executive can obtain
other engagements or employment of a kind and nature similar to that performed
for the Company and that the issuance of an injunction to enforce the provisions
of the Restrictive Covenants will not prevent the Executive from earning a
livelihood. The Restrictive Covenants are essential terms and conditions to the
Company entering into this Agreement, and shall be construed as independent of
any other provision in this Agreement, or any other agreement between the
Executive and the Company. The existence of any claim or cause of action the
Executive has against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
the Restrictive Covenants.
8. Periods of Noncompliance and Reasonableness of Periods. The
restrictions and covenants contained in Sections 4 and 5 hereof (the
"Restrictive Covenants") shall be deemed not to run during all periods of
noncompliance, the intention of the parties hereto being to have such
restrictions and covenants apply for the full periods specified in Sections 4
and 5 hereof following the Retirement Date. The Company and the Executive
acknowledge and agree that the restrictions and covenants contained in Sections
4 and 5 hereof are reasonable in view of the nature of the business in which the
Company is engaged and the Executive's advantageous knowledge of and familiarity
with the business, operations, affairs and customers of the Company.
Notwithstanding anything contained herein to the contrary, if the scope of any
restriction or covenant contained in Sections 4 and 5 hereof is found by a court
of competent jurisdiction to be too broad to permit enforcement of such
restriction or covenant to its full extent, then such restriction or covenant
shall be enforced to the maximum extent permitted by law.
9. Release. (a) For and in consideration of the foregoing covenants,
promises and lump sum payment made and to be made by the Company, and the
performance of such covenants and promises, and the payment of such lump sum
amount, the sufficiency of which is hereby acknowledged, the Executive agrees to
provide a release to the Company in the form attached hereto as Exhibit A.
(b) The Executive agrees that the fact and the terms of this Agreement
shall be strictly confidential and that the Executive shall not divulge,
directly or indirectly, explicitly or implicitly, the fact or terms of this
Agreement to any person other than the Executive's spouse, attorney(s) and tax
advisor(s) or as otherwise required by law. The Executive further agrees that
for purposes of this Section 9, the Executive's spouse, attorney(s) and tax
advisor(s) are the Executive's agents and that a breach of these terms of
confidentiality by them, or any of them, shall constitute a breach by the
Executive.
(c) The "Company and its agents," as used in this Agreement, means the
Company, its subsidiaries, affiliated, or related corporations or associations,
their predecessors, successors and assigns, and the directors, officers,
managers, supervisors, employees, representatives, servants, agents and
5
attorneys of the entities above described, and all persons acting, through,
under or in concert with any of them.
10. No Reliance. The Executive represents and acknowledges that in
executing this Agreement, he does not rely and has not relied upon any
representation or statement by the Company and its agents, other than the
statements which are contained within this Agreement.
11. No Admissions. This Agreement shall not in any way be construed as
an admission by the Company and its agents of any acts of discrimination or
other improper conduct whatsoever against the Executive or any other person, and
the Company specifically disclaims any liability to or discrimination against
the Executive or any other person on the part of itself, its employees or its
agents.
12. Miscellaneous. (a) Further Assurances. Each of the parties hereto
shall do, execute, acknowledge, and deliver or cause to be done, executed,
acknowledged, and delivered at any time and from time to time upon the request
of any other parties hereto, all such further acts, documents, and instruments
as may be reasonably required to effect any of the transactions contemplated by
this Agreement. Additionally, the Executive shall make the appropriate Principal
Executive Officer certifications in the Company's Form 10-K for the year ended
2003.
(b) Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that neither party hereto may assign this
Agreement without the prior written consent of the other party. Notwithstanding
the foregoing, this Agreement may be assigned, without the prior consent of the
Executive to a successor of the Company (and the Executive hereby consents to
the assignment of the Restrictive Covenants under this Agreement to a purchaser
of all or substantially all of the assets of the Company or a transferee, by
merger or otherwise, of all or substantially all of the businesses and assets of
the Company) and, upon the Executive's death, this Agreement shall inure to the
benefit of and be enforceable by the Executive's executors, administrators,
representatives, heirs, distributees, devisees, and legatees and all amounts
payable hereunder shall be paid to such persons or the estate of the Executive.
(c) Waiver; Amendment. No provision or obligation of this Agreement may
be waived or discharged unless such waiver or discharge is agreed to in writing
and signed by the Company and the Executive. The waiver by any party hereto of a
breach of or noncompliance with any provision of this Agreement shall not
operate or be construed as a continuing waiver or a waiver of any other or
subsequent breach or noncompliance hereunder. Except as expressly provided
otherwise herein, this Agreement may be amended, modified, or supplemented only
by a written agreement executed by the Company and the Executive.
(d) Headings. The headings in this Agreement have been inserted solely
for ease of reference and shall not be considered in the interpretation,
construction, or enforcement of this Agreement.
(e) Severability. All provisions of this Agreement are severable from
one another, and the unenforceability or invalidity of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
provisions of this Agreement; provided, however, that should any judicial body
interpreting this Agreement deem any provision to be unreasonably broad in time,
6
territory, scope, or otherwise, the parties intend for the judicial body, to the
greatest extent possible, to reduce the breadth of the provision to the maximum
legally allowable parameters rather than deeming such provision totally
unenforceable or invalid.
(f) Notice. Any notice, request, instruction, or other document to be
given hereunder to any party shall be in writing and delivered by hand,
telegram, facsimile transmission, registered or certified United States mail,
return receipt requested, or other form of receipted delivery, with all expenses
of delivery prepaid, as follows:
If to the Executive: If to the Company:
James A. Risinger Old National Bancorp
411 Sandalwood Drive Post Office Box 718
Evansville, Indiana 47715 Evansville, Indiana 47705
ATTENTION: General Counsel
(g) No Counterparts. This Agreement may not be executed in
counterparts.
(h) Governing Law; Jurisdiction; Venue; Waiver of Jury Trial. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Indiana, without reference to the choice of law principles or rules
thereof. The parties hereto irrevocably consent to the jurisdiction and venue of
the state court for the State of Indiana located in Evansville, Indiana, or the
Federal District Court for the Southern District of Indiana, Evansville
Division, located in Vanderburgh County, Indiana, and agree that all actions,
proceedings, litigation, disputes or claims relating to or arising out of this
Agreement shall be brought and tried only in such courts. EACH OF THE PARTIES
WAIVES ANY RIGHTS IT MAY HAVE TO BRING A CAUSE OF ACTION IN ANY COURT OR IN ANY
PROCEEDING INVOLVING A JURY TO THE MAXIMUM EXTENT PERMITTED BY LAW.
(i) Entire Agreement. This Agreement constitutes the entire and sole
agreement between the Company and the Executive with respect to the Executive's
retirement and there are no other agreements or understanding either written or
oral with respect thereto. The parties agree that the (i) Change in Control
Agreement dated January 1, 2004, by and between the Executive and the Company,
together with its predecessor agreement and (ii) the Severance Agreement dated
January 1, 1996, by and between the Executive and the Company, will be
terminated effective as of the Retirement Date and of no further force or
effect.
(j) Construction. The rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement. Whenever in this Agreement a singular
word is used, it also shall include the plural wherever required by the context
and vice-versa. All reference to the masculine, feminine, or neuter genders
shall include any other gender, as the context requires.
(k) Attorneys' Fees. The prevailing party shall be entitled to
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) in connection with any legal action to
interpret or enforce any provision of this Agreement or for any breach of this
Agreement.
7
(l) Review and Consultation. The Company and the Executive hereby
acknowledge and agree that each (i) has read this Agreement in its entirety
prior to executing it, (ii) understands the provisions and effects of this
Agreement, (iii) has consulted with such attorneys, accountants, and financial
and other advisors as it or he has deemed appropriate in connection with their
respective execution of this Agreement, and (iv) has executed this Agreement
voluntarily. THE EXECUTIVE HEREBY UNDERSTANDS, ACKNOWLEDGES, AND AGREES THAT
THIS AGREEMENT HAS BEEN PREPARED BY KRIEG DEVAULT LLP, COUNSEL TO THE COMPANY,
AND THAT HE HAS NOT RECEIVED ANY ADVICE, COUNSEL, OR RECOMMENDATION WITH RESPECT
TO THIS AGREEMENT FROM THE COMPANY OR SUCH COUNSEL.
(m) Taxes and Other Amounts. All taxes (other than the Company's
portion of employment taxes) on the lump sum payment specified in Section 2
hereof and all other amounts payable to the Executive hereunder and under the
Company's ERISA Plans and other benefit plans and programs will be paid by the
Executive. The Company will be entitled to withhold from such payments and
benefits (i) applicable income, employment and other taxes required to be
withheld therefrom; (ii) amounts authorized by the Executive; and (iii) other
required or appropriate and customary amounts.
IN WITNESS WHEREOF, the Company, by its officer thereunder duly
authorized, and the Executive, have entered into, executed and delivered this
Agreement as of the day and year first above written.
EXECUTIVE
/s/ James A. Risinger
-------------------------------------------------
James A. Risinger
OLD NATIONAL BANCORP
By: /s/ Allen R. Mounts
--------------------------------------------
Printed: Allen R. Mounts
---------------------------------------
Title: SVP - Director of Human Resources
----------------------------------------
8
EXHIBIT A
---------
NOTICE
Various local, state, and federal laws prohibit employment discrimination based
on age, sex, race, color, national origin, religion, handicap, or veteran
status. These laws are enforced through the Equal Employment Opportunity
Commission (EEOC), the U.S. Department of Labor, the Indiana Civil Rights
Commission, and/or any other similar state entity, agency or commission. If you
feel that your decision to enter into the attached Release of All Claims was
coerced or is discriminatory, you are encouraged to speak with Allen Mounts
(812-464-1411) or other appropriate Old National Bancorp officials. You should
also discuss the language of this Release of All Claims with a lawyer of your
own choosing. In any event, you should thoroughly review and understand the
effect of this Release of All Claims before acting on it; therefore, please take
this Release of All Claims home and review it. You may take up to twenty-one
(21) days before signing this Release of All Claims.
This Release of All Claims was presented to James A. Risinger on
_________________, 2004; he has until ___________________, 2004 to consider this
Release.
Acknowledged by ________________________ ________________
James A. Risinger Date
____________________________________________________________
cc: James A. Risinger - Personnel File
Old National Bancorp - c/o Allen Mounts
A-1
RELEASE OF ALL CLAIMS
---------------------
FOR GOOD AND VALUABLE CONSIDERATION, including the payment to the
Executive of certain retirement and retirement-related benefits, the Executive
hereby makes this Release of All Claims in favor of Old National Bancorp
(including all subsidiaries and affiliates) (the "Company") and its agents, as
set forth herein.
1. The Executive releases, waives and discharges the Company and its
agents (as defined below) from all rights and claims arising out of the
Executive's employment relationship with the Company that are known or might be
known on the date of the execution of this Release, including but not limited
to, discrimination claims based on age, race, sex, religion, national origin,
disability, veterans status or any other claim of employment discrimination
including claims arising under The Civil Rights Act of 1866, 42 U.S.C. Section
1981; Title VII of the Civil Rights Act of 1964; the Americans with Disabilities
Act; the Age Discrimination in Employment Act of 1967; the Federal
Rehabilitation Act of 1973; the Older Workers' Benefits Protection Act; the
Employee Retirement Income Security Act of 1974; the Indiana Civil Rights Act,
the Indiana Wage Payment and Wage Claims Acts, any Federal or State wage and
hour laws and all other similar Federal or State statutes; and any and all tort
or contract claims, including, but not limited to, breach of contract, breach of
good faith and fair dealing, infliction of emotional distress or wrongful
termination or discharge.
2. The Executive further acknowledges that the Company has advised the
Executive to consult with an attorney of the Executive's own choosing and that
he has had ample time and adequate opportunity to thoroughly discuss all aspects
of this Release with legal counsel prior to executing this Release.
3. The Executive agrees that the Executive is signing this Release of
his own free will and is not signing under duress or undue influence.
4. The Executive acknowledges that the Executive has been given a
period of twenty-one (21) days to review and consider a draft of this Release in
substantially the form of the copy now being executed, and has carefully
considered the terms of this Release. The Executive understands that the
Executive may use as much or all of the twenty-one (21) day period as the
Executive wishes prior to signing, and the Executive has done so.
5. The Executive has been advised and understands that the Executive
may revoke this Release within seven (7) days after acceptance. ANY REVOCATION
MUST BE IN WRITING AND HAND-DELIVERED TO:
Old National Bancorp
Attn: General Counsel
420 Main Street
Evansville, Indiana 47708
NO LATER THAN BY CLOSE OF BUSINESS ON THE SEVENTH (7TH) DAY FOLLOWING THE DATE
OF EXECUTION OF THIS RELEASE.
A-2
6. The "Company and its agents," as used in this Release, means the
Company, its subsidiaries, affiliated, or related corporations or associations,
their predecessors, successors and assigns, and the directors, officers,
managers, supervisors, employees, representatives, servants, agents and
attorneys of the entities above described, and all persons acting, through,
under or in concert with any of them.
7. The Executive agrees to speak well of and refrain from voicing any
criticism of the Company and its agents. The Company agrees to refrain from
providing any information to third parties, other than confirming dates of
employment and job title, unless the Executive gives the Company written
authorization to release other information or as otherwise required by law. With
respect to the Company, this restriction pertains only to official
communications made by the Company's directors and/or officers and not to
unauthorized communications by the Company's employees or agent. This
restriction will not bar the Company from disclosing the Release as a defense or
bar to any claim made by the Executive in derogation of this Release.
PLEASE READ CAREFULLY BEFORE SIGNING. THIS RELEASE CONTAINS A RELEASE AND
DISCHARGE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY AND ITS AGENTS
EXCEPT THOSE RELATING TO THE ENFORCEMENT OF THIS RELEASE OR THOSE ARISING AFTER
THE EFFECTIVE DATE OF THIS RELEASE.
EXECUTIVE
/s/ James A. Risinger
-----------------------------------------
James A. Risinger
Date: February 26, 2004
-----------------------------------
OLD NATIONAL BANCORP
By: /s/ Allen R. Mounts
-----------------------------------------
Printed: Allen R. Mounts
-----------------------------------------
Title: SVP - Director of Human Resources
-----------------------------------------
Date: February 26, 2004
-----------------------------------------
A-3
EX-31.1
6
ceo302cert.htm
OLD NATIONAL BANCORP CEO 302 CERTIFICATION
FORM OF SECTION 302 CERTIFICATION
Exhibit 31.1
FORM OF SECTION 302 CERTIFICATION
I, Michael R. Hinton, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Old National Bancorp;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) for the registrant and have:
|
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this reported based on such evaluation; and
|
|
c) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
|
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
|
Date: |
May 10, 2004
- ------------------- |
By: |
/s/ Michael R. Hinton
---------------------------
Michael R. Hinton
President and Chief Operating Officer
(Principal Executive Officer) |
EX-31.2
7
cfo302cert.htm
OLD NATIONAL BANCORP CFO 302 CERTIFICATION
FORM OF SECTION 302 CERTIFICATION
Exhibit 31.2
FORM OF SECTION 302 CERTIFICATION
I, John S. Poelker, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Old National Bancorp;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) for the registrant and have:
|
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this reported based on such evaluation; and
|
|
c) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
|
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
|
Date: |
May 10, 2004
- ---------------------- |
By: |
/s/ John S. Poelker
------------------------
John S. Poelker
Executive Vice President and Chief Financial Officer |
EX-32.1
8
ceo906cert.htm
OLD NATIONAL BANCORP CEO 906 CERTIFICATION
ONB Section 906 Certification CEO
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Old National Bancorp (the "Company") on Form 10-Q for the quarter ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael R. Hinton, Chief Operating Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
- The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
By: /s/ Michael R. Hinton
Chief Operating Officer
(Principal Executive Officer)
May 10, 2004
EX-32.2
9
cfo906cert.htm
OLD NATIONAL BANCORP CFO 906 CERTIFICATION
ONB Section 906 Certification CFO
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Old National Bancorp (the "Company") on Form 10-Q for the quarter ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John S. Poelker, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
- The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
- The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
By: /s/ John S. Poelker
Chief Financial Officer
May 10, 2004
10-Q
10
onb10q0304.pdf
"UNOFFICIAL" PDF COPY OF 10-Q FOR MARCH 31, 2004
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